California employers facing economic issues can furlough workers under certain circumstances. A furlough, or reduction in hours, offers a more palatable alternative to layoffs for many companies.
Review the factors to consider before furloughing employees in California.
Deciding on a furlough arrangement
Companies may either require workers to take unpaid days off or reduce their weekly work hours. The furlough can apply to all employees or omit certain employees who perform essential business functions.
Maintaining employee exemption
If the company furloughs exempt employees, they must ensure that they continue to pay these workers a regular salary. Failure to do so can result in the loss of their exemption, which would require the employer to pay hourly wages and overtime. In California, many companies opt for a full-week furlough since the state labor commissioner does not mandate payment of salary to exempt employees who do not work for an entire week.
Considering Work Sharing
With this program, companies can allow furloughed workers to collect unemployment benefits. The California Work Sharing Program does not require the employer to fire or lay off the employee for benefit eligibility.
Companies must tell workers about the furlough in writing and include the applicable dates. This notice should include details about Work Sharing and the state Notice to Employee as to Change in Relationship form.
Furloughs must also follow the guidelines of the federal Fair Labor Standards Act. Closely adhering to California and U.S. regulations can limit liability for employee claims that arise during this type of reduction in hours. Successful worker lawsuits can result in civil penalties, back wages and legal costs.