COVID-19 & Your Business: Frequent Questions

What is the difference between furlough and a lay-off?

Generally speaking, there is not a sharp legal distinction between a furlough and a lay-off, except perhaps in certain situations involving governmental employment or employment covered by a collective bargaining agreement. For typical private-sector employment, a company may say that it is “furloughing” employees to communicate that the employer is temporarily laying off employees, with the general expectation that the employees can be recalled to work at a later time. The employees are not paid, and no work is done. Depending on the terms of the employer’s benefit plans, some employment benefits may be continued. Companies say they are “laying off” employees when an employer lets go of employees because the employer can no longer afford to pay them, their business is down, or other economic reasons, and there is no expectation or requirement that the employee be re-hired. Regardless of which term is used, employers should consider adding that there is no guarantee of recall and that all employees remain “at will.”

In connection with a furlough or temporary lay-off, employers should be mindful that employees should perform no work while on furlough status, check benefit plans as to eligibility and other requirements, review State and local laws regarding employee notification, consider whether paid time off should or must be paid to employees depending on employer policies and State and local law, and consider whether WARN obligations may be triggered at some point if the furlough continues. If less than the entire workforce is furloughed, employers should also review decision making to guard against discrimination claims.

Last updated April 9

These materials are made available by Jackson Walker for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.