Testing Positive: How Furloughed Employees can Capitalize on Suspended Employment During the COVID-19 Pandemic

Photo Credit: https://nypost.com/2020/08/09/does-someone-doing-my-job-while-im-furloughed-mean-i-am-laid-off/ (last visited November 19, 2020).

Written By: Michelle Fleenor
Member, American Journal of Trial Advocacy

          The word “furlough” and its heavy implications have proven a harsh reality for many employees during the 2020 year.  Particularly, the introduction of COVID-19 into the American workforce was expected to and has caused a significant downturn in business.[i] Due to the pandemic, companies across the country have responded with crisis management tactics, many of which have affected the normal day-to-day employment practices.[ii]  One of these tactics in particular is the “furlough.”[iii] Defined generally by the United States Code Annotated, a furlough “means the placing of an employee in a temporary status without duties and pay because of lack of work or funds or other nondisciplinary reasons.”[iv]  Restated, furloughing is a nondisciplinary suspension of workers implemented in order to respond to business concerns; a period during which the employee is not compensated.  Furloughs are generally implemented by companies experiencing emergency situations such as a “decline in demand, the need to close a facility for repairs, or an urgent need to reduce expenditures.”[v]  Prior to COVID-19, courts have considered furloughs in the context of governmental and specifically U.S. Postal Service workers, in which courts have decided whether an employee should still be a recipient of medical leave while subjected to furlough procedures.[vi]

          Why, then has the furlough recently become a means of responding to COVID-19?  According to the Harvard Business Review, the furlough has become a more popular and well-regarded means of managing employment practices during the coronavirus pandemic.[vii]  Rather than engaging in extensive layoffs during uncertain economic times, the furlough allows companies to minimize staffing costs while maintaining employee morale.[viii]  Specifically, by implementing furloughs, businesses can control and reduce expenditures for hourly wages, either by establishing a practice “of  reduced hours, or, as is more common now, . . . leaves that can last as long as the company needs.”[ix]  Despite the fact that employees are placed on leave without pay, furloughs establish a culture with intent to return to work that creates a more positive outlook for non-working employees when compared to layoffs.[x]

          Along with an intent to return to work, what other positive effects rest on the employee experiencing a furlough?  For one, employees may be entitled to unemployment benefits while furloughed.[xi]  To successfully achieve these benefits though, the employee must do its part in understanding “the anticipated duration of the furlough, how to apply for unemployment benefits, any changes in regular benefits during the furlough, how their vacation entitlements will be calculated when they return, and the method of recall.”[xii]  Likely, the most crucial task for the furloughed employee to both understand and opt into is registering for unemployment benefits.  Doing so gives the individual the opportunity to obtain financial redress during the pandemic.[xiii]  For an individual to successfully achieve this form of compensation, they must register with the particular state unemployment office in which they worked to determine whether they are eligible to receive benefits.[xiv]

          An additional aspect of successfully capitalizing on unemployment benefits comes from an employee’s understanding of the Coronavirus Aid, Relief, and Economic Security Act,[xv] hereinafter the CARES Act. While the most popular and publicized portion of the CARES Act is founded in Section 2102[xvi] (regarding distribution of stimulus checks), furloughed employees also have the ability to obtain additional unemployment benefits under Section 2104 of the Act.[xvii]  Under this provision, States may request to enter into an agreement with the Secretary of Labor which purports to increase unemployment compensation benefits due to the crisis caused by the pandemic.[xviii]  Moreover, Section 2014 indicates that for covered individuals, unemployment insurance benefits may be collected at the regular rate relative to the State in which the individual lives.[xix]  These regular state unemployment insurance benefits will then be available to the individual through December 31, 2020.[xx]  Additionally, the individual is eligible to receive an weekly $600 federal benefit through July 31, 2020 under the Act.[xxi]

          Aside from unemployment benefits, furloughs do not prevent the employee from seeking work elsewhere, thereby mitigating the effects of unemployment.[xxii]  Furloughed employees may find themselves financially burdened due to their lack of work, even with unemployment benefits.  Therefore, in order to respond to their personal financial needs, workers are able to seek compensation elsewhere in the job market.[xxiii]  An article published by CNBC promotes this job search method of employees because a furlough is “not a binding contract that the employer who you worked for will rehire you.”[xxiv]  Therefore, individuals may seek a new full-time or part-time employment depending on their needs during the furlough.

          Despite the advantages of a new job search, furloughed employees should verify two essential terms before delving into new employment: (1) whether potential conflicts with current employers exist and (2) how new-found employment impacts his/her unemployment benefits.[xxv]  Regarding conflicts, furloughed employees should address any potential new job offers with employers to avoid any relevant conflicts.[xxvi]  Notably, employers may have issues with jobs that are “direct competitor[s]” with the employer or jobs offering additional health benefits to those already being received by furloughed employees.[xxvii]  Regarding the effects on unemployment benefits, because having another job effectively reduces the need for the full amount of unemployment benefits, an individual is required to disclose weekly earnings to their state unemployment office.[xxviii]  Disclosure does not necessarily mean that one will be denied unemployment benefits entirely, but that the full amount of benefits may be offset against the employee’s current compensation under other employment.[xxix]

          In considering the foregoing, the furloughed employee should not find himself distraught by the economic effects of the pandemic, but instead take charge of the advantageous financial avenues by seeking unemployment benefits and separate employment.

[i]Laura K. Latham et. al. Mitigating Employment Law Risks as COVID-19 (Coronavirus) Spreads. https://www.pillsburylaw.com/en/news-and-insights/mitigating-employment-law-risks-as-covid-19-coronavirus-spreads.html (last visited November 1, 2020).

[ii] Sandra J. Sucher and Shalene Gupta. How to Make Furloughs More Humane. Harvard Business Review. https://hbr.org/2020/04/how-to-make-furloughs-more-humane. (April 24, 2020).

[iii] Id.

[iv] 5 U.S.C.A. § 7511 (2016).

[v] 14 Emp. Coord. Personnel Manual § 21:34 (2020).

[vi] See Caballero v. U.S. Postal Serv., 34 M.S.P.R. 263 (1987); Mitchell v. Dep’t of Transp., No. NY-0752-07-0171-I-1, 2008 WL 2962227 (M.S.P.B. Aug. 1, 2008).

[vii] See Harvard Business Review, supra note 3.

[viii] Id.

[ix] See Harvard Business review, supra note 3

[x] Jennifer Liu. What to know about looking for a new job while you’re furloughed. CNBC.com. https://www.cnbc.com/2020/05/29/what-to-know-about-looking-for-a-new-job-while-youre-furloughed.html (May 29, 2020).

[xi] 14 Emp. Coord. Personnel Manual § 21:34 (2020).

[xii] Id.

[xiii] How do I File for Unemployment Insurance? U.S. Department of Labor. https://www.dol.gov/general/topic/unemployment-insurance (last visited November 1, 2020).

[xiv] Id.

[xv] Coronavirus, Aid, Relief, and Economic Security Act, Pub. L. No. 116–136, 134 Stat. 281 (2020).

[xvi] See Pub. L. No. 116–136 § 2102, 134 Stat. 281, 313 (2020).

[xvii] See Pub. L. No. 116–136 § 2104, 134 Stat. 281, 318 (2020).

[xviii] Id.

[xix] Id.

[xx] Id.

[xxi] Id.

[xxii] See Liu, supra note 11.

[xxiii] Id.

[xxiv] Id.

[xxv] Id.

[xxvi] Id.

[xxvii] Id.

[xxviii] Jennifer Liu. Does having a side hustle affect your unemployment benefits?. CNBC.com. https://www.cnbc.com/2020/05/15/does-having-a-side-hustle-impact-your-unemployment-benefits.html (May 15, 2020).

[xxix] Id.

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