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Layoff or Furlough? What Maryland Employers Need to Know

| September 17, 2020

Employers hate firing employees. But sometimes, there are extreme circumstances that force employers to make tough decisions, including whether to let go of some of its workforce.

To help handle these situations, some employers will furlough a portion or all of its workers. But businesses need to take the decision to furlough workers just as seriously as they would a decision to layoff workers.

To reduce any potential legal or financial liability when making this decision, a business should consider consulting with a Maryland employment attorney. If you find yourself wondering if it’s better to layoff or furlough your employees and what that means for your business, don’t hesitate to contact the Law Firm of J.W. Stafford.

What’s the Difference Between a Furlough and a Layoff?

As a general rule, a furlough is a period of time where a worker does not work and does not get paid, but remains technically employed. A furlough is basically the same thing as unpaid leave in that there is an expectation by both the employer and employee that the employee will resume working and getting paid after the furlough ends.

The exact details of how a furlough works will depend on the nature of the employment relationship. For instance, the existence of a collective bargaining agreement or any applicable employer policies may control how long the furlough lasts and any benefits employees will continue to receive.

In contrast, a layoff is a permanent termination of employment. This means there is no right for the employee to resume working for the employer. Absent an agreement or policy that states otherwise, a laid-off employee will no longer get paid or receive benefits (subject to COBRA coverage requirements).

Employer Advantages When Furloughing Employees

There are several advantages to furloughing workers, as opposed to laying them off.

First, because of the expectation that a furloughed employee will return to work, the employer can reduce its workforce and payroll costs without worrying about the expense and hassle of hiring new employees. 

Second, a layoff is an all-or-nothing proposition while a furlough is adjustable. For example, a furlough can be partial in that it lasts one day a week. But an employer has the option to expand the furlough to more days off each week.

Third, employees may have the option of still getting paid during their furlough by using accrued paid vacation or paid leave days.

Fourth, when properly implemented, a furlough may be better for employee morale because it can reassure them that once the reason for the furlough is gone, they will have a job to come back to.

What Maryland Employers Need to Remember When Furloughing Employees

Despite its advantages, employers must fully understand what it means to furlough an employee. This includes the legal and practical consequences. Below is a discussion of some of these considerations.

First, employers must take care not to rely too much on furloughs. Furloughs should also be implemented as fairly as possible. If a furlough goes too long, an employee may quit and look for another job. And a furlough that doesn’t fairly apply to all workers might create resentment in the workforce.

Second, employers may still need to pay for employee benefits (such as health insurance and retirement), even if those employees aren’t receiving a regular paycheck.

Third, if a collective bargaining agreement covers the workers subject to the furlough, the terms of the furlough may be subject to negotiation with a union.

Fourth, if workplace policies allow it, a furloughed employee may still receive his or her full paycheck as a result of paid time off they’ve built up over the years.

Fifth, a furloughed employee may still count against employee thresholds when it comes to the application of anti-discrimination laws or damage caps in employment lawsuits.

Sixth, special notice requirements may exist concerning the furlough, such as those in the WARN Act. The WARN Act requires employers with 100 or more full-time employees to provide at least 60 calendar days of written notice in specific situations, such as a plant closing or mass layoff.  Furloughs that go longer than six months may count as a layoff under the WARN Act.

Need Additional Guidance About Your Business’ Layoff or Furlough? Let a Maryland Employment Attorney Help

Deciding whether to layoff or furlough your employees can be a difficult decision to make. You obviously want to take care of your workers as much as you can. However, you have your business to think about. And the last thing you want to do is deal with a legal problem that requires the service of a Maryland employment defense lawyer. 

Should you need to consult with a Maryland employment attorney concerning your layoff or furlough plans, consider contacting the Law Firm of J.W. Stafford.  We can answer any questions you might have and make sure you’re doing everything you can to not just help your workers, but protect your organization.