To Layoff or Furlough – that is the question!

Cares Act and Tough Decisions

April 23, 2020

At the end of March, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted which included the:

As of April 17, the PPP loan funds ran out and now we await news of what’s next. To read about is expected to come with additional PPP loan funds, click here. This is a wait and see situation, but there is likely something else in in the works since many businesses continue to need financial aid.

As with my homemade hummus, double dipping is not allowed into the PPP and Employee Retention Credit. Here is a good article comparing the PPP and Employer Retention Credit which may be able to help you determine which is best for your business, providing additional funds are approved for the PPP.

Are you currently faced with having to make decisions related to layoffs and/or furloughs? You may even find that you need to terminate someone for performance right now. Included in a grid which summarizes the key characteristics of furloughs, layoffs, and reductions in force as well as some key things to remember during the decision process.

Layoff or Furlogh
Type Temporary Permanent Continued Employment Voluntary Involuntary Eligible for Unemployment
Furlough x x x x
Layoff x x x x
RIF* x x x

*Reduction in Force

PAUSE BEFORE ACTION: Decisions about layoffs or furloughs even in non-COVID times are never easy. It is always a good idea to step back and be thoughtful to be sure you are making the best decision(s) for the long term. Don't forget that when times get better, you will need to resume operations. Recruiting is expensive and time-consuming! The benefits of not making staffing changes may very well outweigh the costs. Consider finding creative ways to keep your staff productive and employed, even if it means you give them less hours. Your efforts will not only instill loyalty from your team, but will save you recruiting costs and the precious time it takes to find and train new employees.

TIMEFRAME: Those on furlough should be brought back to work within 1 year. If communicated as a temporary layoff, those employees are typically brought back to work within 6 months. In either case, do not guarantee future employment, either verbally or in writing since those employees may hold you to it! Reductions in Force (RIFs) are permanent separations.

DOCUMENTATION: Reasoning for employee separations should be well-documented to prevent claims of discrimination and for reference in the future. Written agreements/documents should be issued for any type of employee separation, whether temporary or permanent. Expedition HR can help with ensuring the correct verbiage is included on the separation documents as well as guide you with the specific words to use when you are delivering the news in these situations. Planning in detail what you will say will make the meeting smoother and will prevent you saying something you will regret or unnecessarily overexplain!

CAUTION! If you have a problem employee who is not meeting performance requirements, don’t call it a layoff only to get it off your plate! Your time will be well-spent to complete the necessary documentation and communicate the termination accurately to the employee. Why? Here are a couple reasons:

  • This is the most honest and most transparent thing to do for your employee.
  • It will eliminate your responsibility to hire them back into the same role at a later date.

If you find yourself in this situation, Expedition HR can walk you through next steps to minimize your risk and headaches in taking care of the situation.

BENEFITS: Layoffs and furloughs may result in the employee being COBRA-eligible as of the date their benefits end. I recommend reaching out to your benefits broker for assistance. They can guide you on state specific requirements on continuing benefits for separated employees during the pandemic.

But…what do I say?

Communication is KEY when dealing with employee separations.You need to communicate not only to the affected employee(s) but to the rest of the staff. Be prepared ahead of time with exactly what you will say when you speak with those affected as well as when you will make the announcement to the rest of the team. This will vary depending on the type of separation (layoff vs termination for cause, for example). I encourage scripting the verbiage to ensure you stay on track, avoid getting into areas of risk, and so that you share ONLY the appropriate amount of information.

3 Tips for what to say during employee separations:

  1. OUT WITH IT! Say what is happening first – don’t dance around it. You can give as much information as you see fit but remember, you need only to tell them what is happening to them at that time. You could tell the employee that everyone in their same position is also being laid off, if applicable. For example, “Jim, we are here because today you are being laid off. We have made the tough decision to lay off all of our vacation rental customer service agents due to the decline in business as a result of COVID-19.” Many say too much. For example, they share who was and was not laid off and that upsets the departing employee and then they want to know WHY WHY WHY?! You can be sincere and fair without disclosing all the details.

  2. SAY THANK YOU! Express thanks – there is always a place for gratitude. Of course, if they are a great employee, tell them so! “Thanks for the great work you have done for us. You are such a valuable member of the team and we hope that circumstances change soon so that we can work together again.” If they are not your favorite employee or they did not do a great job, you can (and should!) still thank them for the work they did. You don’t need to call it good or great work, just thank them for the work. “Thanks for the work you did for us. We wish you the best of luck.” Notice there is no reference to “good work.” This would be appropriate if their work was not good or just mediocre.

  3. PROVIDE INFORMATION/RESOURCES

    • Documentation: Provide a letter clearly stating what is happening with their position - ensure it is signed and dated. Ensure you tell them what they should expect if they are called back to work, if applicable, such as the timeframe for returning, etc.
    • Unemployment: Let them know if this separation makes them eligible for unemployment and direct them to the state unemployment filing website.
    • Benefits: Tell them when their insurance benefits end and about COBRA eligibility. Share any other benefit-related information such as 401k, Paid Time Off, employee stocks, or anything else your company offers for which they would need information.