Furlough

How furloughs work

Furloughs come in a few forms:

• Full furlough: employees stop working entirely for a period, such as four or eight weeks, then return.
• Rolling furlough: groups take turns, for example one week off per month on a rotation.
• Reduced schedule: everyone works fewer hours or days, such as a four-day week with a matching pay cut.
• Unpaid furlough days: a set number of unpaid days spread across the year, common in government and higher education.

The employer typically sets a planned return date, keeps the employment relationship in place and, depending on plan terms, keeps health coverage active. Employees on full furlough usually cannot do any work during that time, including answering email.

Furlough vs layoff

A furloughed employee is still employed and expected back. A layoff is a separation, with or without a possibility of recall. That difference affects benefits, final pay, seniority and the employee's relationship with the company.

In practice, furloughs sometimes turn into layoffs when the business does not recover. That transition triggers its own obligations: final pay under state law, COBRA if coverage ends, and potentially WARN notice. Under the federal WARN Act, a temporary layoff that lasts more than six months counts as an employment loss, so a furlough that runs longer than planned can create a notice obligation the employer did not expect. Under WARN, a furlough originally announced as six months or less that is extended may also require notice at the time of extension.

Pay rules for exempt employees

Furloughs are simpler for hourly employees: they are paid for hours worked. Salaried exempt employees are harder. Under the FLSA salary basis test, an exempt employee who does any work in a workweek must generally receive their full weekly salary for that week. So:

• Full-week furloughs without pay are generally allowed, as long as the employee does no work at all that week.
• Partial-week unpaid days can break the salary basis test and put the exemption at risk, with limited exceptions for public employers.
• A prospective salary reduction, set in advance for business reasons, is generally allowed if the new salary still meets the minimum salary level for exemption.

A manager asking a furloughed exempt employee to "just check email" during an unpaid week can turn that week into a paid week. Make the no-work rule explicit and turn off system access if needed.

Benefits and unemployment

Whether health coverage continues depends on the plan's eligibility terms, such as a minimum number of hours. Many employers amend plans or pay premiums to keep coverage in place during short furloughs. If coverage is lost because hours are reduced, that is a COBRA qualifying event.

Furloughed employees are often eligible for unemployment insurance for full weeks without work, and sometimes partial benefits for reduced hours. Many states also run work-sharing (short-time compensation) programs, which pay partial unemployment benefits to employees whose hours are cut under an approved employer plan. These can make a reduced-hours furlough far less painful for employees. Eligibility and rules vary by state.

Using furloughs well

Furloughs keep trained people attached to the company, which is the main argument for them. In a contact center or warehouse where training a new hire costs weeks of pay and supervisor time, bringing back trained staff is far cheaper than rehiring. That argument weakens the longer a furlough runs: people take other jobs, and hourly workers in particular cannot wait months without income.

Set a clear end date, communicate weekly, and if you are furloughing by group, use documented criteria so selections do not fall disproportionately on protected groups. If the furlough becomes permanent, treat it as a reduction in force, with the selection review and notices that involves.