For Employers, Layoffs Are Not the Only Answer
As the spread of COVID-19 in the United States worsens and disrupts the economy, many business owners are looking for answers on how to keep their business afloat. As employers attempt to wade through the current uncertainty, they will be looking for ways to cut costs, and many companies are opting to terminate their employees. However, there are alternatives to layoffs that help employers with their bottom lines while maintaining their workforce and taking care of their employees in this crisis.
Furloughs or Temporary Layoffs
A furlough is a temporary layoff of employees until the employer is in a position to bring the employees back to work. Employees are placed on unpaid leave and may apply for unemployment benefits during the furlough period, but have the peace of mind that they will be recalled to work when circumstances permit. With the security of future employment, business can retain the goodwill of its employees while navigating an uncertain and financially difficult period. Though permanent layoffs must comply with the WARN Act (see below), short-term furloughs up to 30 days typically do not implicate the WARN Act.
Furloughs involving hourly employees are easy to navigate because the employees simply aren’t clocking in for work. However, exempt salaried employees who do not clock in are entitled to full pay for any workweek in which they work any amount of time, so it is important for employers to instruct salaried employees to refrain from all work during a furlough.
In addition, furloughed employees may be entitled to medical benefits if offered, depending on your insurance policy. Check with your broker before implementing any furlough.
Reducing Work Time
The most seamless alternative to layoffs is a reduction of work hours for employees. Reduction can be working fewer hours each workday or eliminating workdays entirely by moving to, for example, four-day workweeks. Employees whose hours are reduced may be entitled to unemployment benefits. This provides employers with financial flexibility while allowing employees to keep working and earning most of their regular income.
Unpaid Vacation Time
Utah state laws do not require employers to provide vacation time to employees. However, if your company has a policy providing unpaid vacation time, you can utilize that to your advantage by requesting employees utilize their vacation time during the COVID-19 crisis. This assists the company by eliminating payroll costs for those employees using unpaid vacation time, while allowing the company to retain the employee. While the employees will lose out on some pay, it allows them to retain their employment. An important caveat is that the FFCRA prohibits employers from requiring employees to utilize accrued paid time off or vacation time if an employee qualifies for paid sick leave under the FFCRA.
The WARN Act
The federal Worker Adjustment and Retraining Notification Act (“WARN Act”) requires that businesses who lay off employees in large numbers must provide written notice to the laid off employees 60 days before the layoff occurs. Employers must comply with the WARN Act if:
- They are closing an entire site and such closure results in more than 50 employees being laid off during any 30-day period;
- They are not closing an entire site, but the layoff will result in:
- More than 500 employees being laid off during any 30-day period; or
- Between 50 and 4999 employees being laid off and they make up at least 33% of the employer’s total workforce.
The WARN Act does, however, have exceptions to the 60-day notice requirement, including “unforeseeable business circumstances” that are outside the employer’s control, which include specifically, among others, an unanticipated and dramatic major economic downturn and a government-ordered closing of an employment site. A WARN Act exception also applies for natural disasters, under which COVID-19 may apply. In each of these exceptions, employers are only required to give as much notice as is practicable, including, in some cases, notice after the layoffs.
Layoffs May Be Necessary
Despite the alternatives, some businesses may need to make the difficult decision to lay off some, or all, of their employees. The recently-enacted Family First Coronavirus Response Act (“FFCRA”) requires that an employer provide paid emergency leave under the Family Medical Leave Act (“FMLA”) at two-thirds pay of the employee’s regular rate (though this is capped at $200 per day and $10,000 total). Additionally, the FFCRA requires mandatory paid sick leave up to 80 hours for full-time employees or the average of hours worked over a two-week period for part-time employees. If an employer is unable to afford these potential costs, layoffs may be the most prudent decision. Always consult with legal counsel before implementing layoffs.
While there is no easy answer in these uncertain times, there are steps employers can take to alleviate their financial circumstances while retaining their employees. Clyde Snow’s attorneys are available to discuss these alternatives with you and help determine which course of action is best for your business.