Can I Lay Off My Furloughed Employees?

Legal considerations employers need to be aware of

By Katrina Styx | Last updated on January 24, 2023

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Sometimes, a business finds itself faced with such unique business circumstances that it needs to temporarily reduce its workforce for a period of time. But what happens when furloughed workers become permanent layoffs? Employers can permanently lay off workers who are on furlough or temporary layoff, but there are some legal considerations they need to be aware of in order to avoid an employment law violation. Joseph E. Gumina, an employment and labor attorney in Milwaukee, shares some advice for employers considering these types of reductions.

Furloughed Employees

A  furlough is a specified period of mandatory time off work. Employees are typically unpaid while on furlough, although they may be required to use their paid vacation time. If a business’s circumstances change while employees are on a furlough, the employer can terminate or permanently lay off those employees. “However, the employer has to remember that the same general rules and legal considerations apply to terminating a furloughed employee as they would for any other type of termination or adverse employment action that an employer might take against an employee,” Gumina says. The most important considerations are disparate impact and disparate treatment. “If the employer is eliminating or laying off a whole category of employees, it becomes less of an issue,” Gumina notes. “But if the employer decides to be selective of who they determine who would be subject to layoff, then federal law and state law discrimination rules apply.” Employers need to be careful that layoffs do not disproportionately impact any protected class of employees. Employers also need to be careful if they’re selecting specific employees. “I warn employers not to ‘cherry pick’ an employee for layoff [thinking] you can scoot them out the door, [having] never addressed their performance or behavioral issues while they were at work,” Gumina says. “But you decide now, this is a good time, ‘I can just terminate them and not have to worry about it.’ That’s not necessarily true for an employer.” Another key for employers considering layoffs is the number of people affected. Depending on how many employees an employer has, the employer may be subject to the federal Worker Adjustment and Retraining Notification Act (WARN), Wisconsin’s Business Closing and Mass Layoff Law, or both. Both laws have notice requirements directing employers to provide a 60-day notice to employees affected by a mass layoff. “Under Wisconsin law, the threshold is just 25 employees,” Gumina explains, “so if you lay off 25 affected employees while they’re on furlough, there may be an issue as to whether you owe those employees a federal WARN Act or advance notice under Wisconsin law that they’re going to lose their job.”

Temporary Layoffs

Temporary layoffs are instituted when an employer needs to reduce its payroll in the near term but intends to recall workers at an unknown future date. Generally, the same job termination rules apply to temporary layoffs as furloughs. The employment relationship between management and employees is also a factor. “Employees that are on temporary layoff, many times, have the expectations that they’re coming back to work,” Gumina says. “And, obviously, it’s disappointing when they find out that they are not coming back to work. Oftentimes you’ll see employees file claims because they didn’t expect the employer to take the action that the employer did.” The solution is communicating to employees the reason for the temporary layoff as well as the real prospects for returning to work. “If it looks good, tell them it looks promising,” Gumina says. “If it doesn’t look promising or you just don’t know, then that’s OK. Tell them that you don’t know and you may not be able to call them back. If you can, you will, but there’s no guarantees. A lot of times, honesty and being truthful with employees works. It’s the best friend for an employer.”

Avoid Legal Pitfalls by Contacting an Attorney

In either case, employers will also need to consider any employment contracts when considering a workforce reduction. “You want to make sure that those agreements are reviewed before any decision is made,” Gumina says. Employers avoid these and other legal pitfalls by consulting with an experienced employment attorney before taking action. “I receive a lot of phone calls from clients who take an action and call me after the fact,” Gumina says. “And I always think, ‘If you would pick up the phone and if we could have a 15- or 20-minute conversation about what you were planning to do and how to do it, you could have avoided nearly all of the issues that you now face.’ “So the best advice I have for employers is to be strategic in your decision making, understand all of the legal ramifications associated with your decision, and consult with legal counsel to make sure that there’s not any hidden liabilities or potential liabilities that you may not be aware of.”

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