Wyatt Employment Law Report

Considerations When Severing Employment Relationships With Furloughed Employees

By Marianna J. Michael

As a result of COVID-19, employers have been forced to take a hard look at employment levels. Many employers have furloughed employees. Furloughing an employee is distinguishable from terminating an employee. A furloughed worker is still considered an employee, but they have been forced to take a temporary break from work without pay or had their work hours significantly reduced. This permits employers to cut costs without ending the employment relationship, and in most cases permits the employee to receive unemployment benefits.

However, as COVID-19 continues to cause problems and the speed of recovery remains uncertain, many employers will be forced to make the more difficult decision of formally ending employment relationships with some employees. Many employers will terminate individuals already on furlough. Employers need to be aware that the same rules that govern the “normal” termination of an employee apply to terminating an employee on furlough. Considerations employers should take into account include the following:

  • WARN Act: While furloughing employees did not trigger notice requirements under the WARN Act, employers who are permanently laying off employees now need to consider whether these employment losses trigger any obligations under WARN. Generally, an employer may have a duty to provide advance notice under WARN if 50 or more full-time employees will be laid off at a single site of employment in a 90-day rolling period. For more detail on the WARN Act, click here.
  • Health Benefits: Since the end of employment corresponds with the end of employer provided insurance, employers should see that terminated employees receive COBRA notices with regard to participation in any group health plan, as well as notices of the termination of coverage and conversion rights, if any, with regard to other benefits.
  • PTO Benefits: If employees do not exhaust PTO Benefits prior to termination, employers must determine whether applicable law or policy requires payout of those remaining benefits.
  • Severance Pay: Employers may have an obligation to pay severance under an employment agreement or severance plan or policy. A severance agreement, including a full release, should also be contemplated to minimize future litigation risk in appropriate cases.
  • Notice of Termination: Employers should follow their state laws and internal policies regarding notices of termination and whether they need to be in writing.

If you have any questions or concerns, please contact a Wyatt, Tarrant & Combs Labor & Employment attorney.

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