Reductions in Hours, Furloughs, and Layoffs During COVID-19

A lot of employers are having hard conversations right now. A part of those conversations inevitably includes employment decisions. Many companies are trying to decide what is best both for their employees and their companies during this uncertain time. The three big options we’ve seen from our clients is a potential reduction in hours due to decreased demand, furloughs, and layoffs. This post will address areas employers should consider when determining the best option for the business and its employees.

Employment Agreements

Employment agreements are not widely used. However, employers should review any employment agreements entered into with employees to ensure it is not violating any terms of the agreements. Agreement may include notice provisions where employers are required to provide a certain notice before a layoff occurs. They may include severance provisions. Be sure to carefully review agreements and contact your legal counsel if you have any questions regarding the agreement and potential changes in employment.

PTO/Sick Leave

If an employer chooses to reduce an employee’s hours rather than a layoff, the employee will continue to be entitled to use PTO/sick leave in accordance with any policies put in place by the employer and state and federal laws (including the recently passed FFCRA). However, if an employer elects to furlough or layoff employees, the employer should review their state laws and internal policies on pay-out of PTO/sick leave on termination. Some states have specific laws regarding the pay-out of PTO during temporary layoffs. For example, Oregon requires employers to pay-out PTO/sick leave if there is a reasonable expectation that the temporary layoff will last for more than 35 days and the employer has a policy in place to pay-out PTO at termination. Each state has unique laws, so be sure to check your own states requirements when making layoff decisions.

Unemployment Benefits

Many, if not all, states have expanded unemployment benefits. Further, under the CARES act, individuals that are eligible for state unemployment benefits can also be entitled to an additional $600.

An employee may be eligible for partial unemployment benefits if their hours are reduced. Typically, the rule of thumb is that the employee must be making less than their maximum benefit amount to receive any unemployment. For exempt employees, remember, if they work part of the week they must be paid their full salary for the week–see this blog post for more information.

Furlough or laid-off employees may also be eligible for unemployment benefits. Typically, to be eligible for benefits the worker must search for work. Most states have suspended this requirement so long as the employee stays in touch with their former employer or they make reasonable search efforts given the current status of businesses/the economy.

WARN Notice

The Federal WARN Act requires employers with 100 or more full-time workers to provide written notice at least 60 calendar days in advance of mass layoffs. WARN is not required if mass layoff is caused by business circumstances that were not reasonably foreseeable at the time the 60-day notice would have been required. The COVID-19 crisis rapidly advanced and many businesses did not reasonably foresee that a mass layoff would occur 60 days ago. Even though WARN may not apply given the foreseeability, employers should carefully consider WARN’s requirements before mass layoffs.

In addition to the Federal WARN Act, many states have mini-WARN acts that also require compliance. California has temporarily suspended its mini-WARN act notice requirements for layoffs related to COVID-19. Be sure to review your state’s laws in relation to notice requirements for layoffs before making any layoff decisions.

Every business is different. SBH is here to assist you during this uncertain time. We have attorneys licensed in Washington, Oregon, and California. If you have questions, you can reach me at mvaniman@sbhlegal.com or 503-595-6107.