Furloughs Vs. Layoffs: When Temporary Job Loss Becomes Permanent

Illustration of a male employee walking out of an office following a layoff.

In order to react to economic uncertainties, some companies conduct furloughs vs. layoffs, putting some employees on forced temporary leave from their jobs. This may be a result of slowdowns where workers aren’t needed, a business restructure, or economic conditions affecting profitability. The benefit of furloughs vs. layoffs is that when business picks up, and the need for these employees returns, they will be brought back to work.

However, there are occasions when furloughs become layoffs. When a company’s business continues to decline or other changes to the business eliminate the need for certain roles, those furloughed may not be asked back. In those cases, the employees are laid off.

For companies that find themselves in this situation, there are a number of legal, financial, and reputational issues to consider as you proceed with any necessary workforce changes. Here are four major areas to pay attention to if you need to permanently lay off your furloughed employees. 

Furloughs Vs. Layoffs: How to Manage the Transition

1. Prepare timely WARN notices

For companies with 100 or more full-time employees, the federal Worker Adjustment and Retraining Notification (WARN) Act requires 60-days notice before a layoff—unless the layoff is a temporary furlough that lasts six months or less due to an unforeseen circumstance, such as a pandemic. 

“Employers who’ve made workforce changes really do need to keep an eye on forecasting, asking, ‘Where do we think we’re going to be 30, 60 and 90 days from now?’” said Sabrina Shadi, attorney and partner at law firm BakerHostetler. 

Many states also have mini WARN Acts, which often have stricter requirements regarding the size and type of businesses affected by WARN notice requirements and the time periods by which these notices need to be provided. Because of the advance notice required, you’ll want to research the requirements and understand them before the need arises. 

A gray-haired Asian HR director works through reports to determine the impacts of furloughs vs layoffs.2. Make furlough and layoff selections fairly and legally

When conducting layoffs or furloughs, employers must ensure that the workforce change does not disproportionately affect any protected groups. The same rules apply when you’re turning some furloughs into permanent layoffs. Keep in mind that characteristics protected by the U.S. Equal Employment Opportunity Commission (EEOC) include “race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, disability, age (40 or older) or genetic information (including family medical history).”

As you decide which employees will be laid off, make sure the criteria you use are objective, fair, and measurable. If, despite using nondiscriminatory selection criteria, you find that some protected groups are disproportionately affected, adjust your list. The EEOC recommends considering “alternative layoff criteria, such as employees’ profitability, productivity, or expertise.”

Some states have protected classes in addition to the federal ones, so make sure to follow your state laws. In addition, any union contracts or individual employment contracts regarding employee terminations will also need to be considered when making layoff decisions.

3. Offer outplacement services and other career transition support

Layoffs can have negative impacts on an organization’s employer brand, which can be felt across every level of the company. This is especially true when employees who previously anticipated returning to work are let go permanently. Considering how quickly news and poor company reviews can spread online, it is now more important than ever to support exiting employees as they make career transitions. 

Offering outplacement programs that include effective, meaningful services such as one-on-one career coaching and personal resume review can help employees land new jobs significantly faster by equipping them with targeted career advice as well as short- and long-term career development plans. Displaced employees who are offered outplacement are much more likely to retain a positive view of their former employer and much less likely to share negative sentiments about their former employer with others, whether in person or online. 

A male furloughed employee sits at his laptop with his head in his hands after learning he's been laid off.Many organizations conducting layoffs may also choose to extend health care benefits and provide generous severance pay to give affected employees a softer landing. Providing exiting employees with positive references, whether through LinkedIn recommendations or more formal letters, can also help retain positive relationships and, if circumstances allow in the future, leave the door open for the hire of boomerang employees.

Understanding the Impacts of Furloughs Vs. Layoffs

From this article, you may understand how furloughs and layoffs share certain requirements and have some that differ. Preparing for the possibility of layoffs after furloughs is a worthwhile effort that will save your organization from additional challenges during a time that can put a strain on resources.

INTOO’s outplacement program helps employees transition to new jobs through an unlimited number of hours of one-on-one, on-demand coaching from premier career counselors, resume reviews, and other career services. Learn more about how our outplacement program can benefit your company when you’re transitioning employees.

INTOO Staff Writer

INTOO staff writers come from diverse backgrounds and have extensive experience writing about topics that matter to the HR and business communities, including outplacement, layoffs, career development, internal mobility, candidate experience, succession planning, talent acquisition, and more.

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