Furloughs: Another Way to Cut Labor Costs

By Donald Sears  |  Posted 2009-06-12 Print this article Print

There are plenty of companies--including Dell, HP, Nokia and others--who have used work furloughs to help reduce labor expenses and avoid more layoffs these days. Given the state of things, it would seem that given the choice, most of us would take the unpaid time off rather than be thrown into the ocean of unemployment.

When times are good, many of us would love to have more time off--albeit with pay. It's a whole lot different when you're counting on having that paycheck to cover your expenses and you've been told, it's not going to be there for a week, a month or even a few days.

Given the challenges many are facing already with benefits depleting, health care costs rising and foreclosures by the minute, it appears furloughs are raising an eyebrow with a fair amount of labor and legal experts.

And Uncle Sam doesn't necessarily have a straight answer--as labor laws can vary across states--and because a lot of this is unprecedented. That's what Eve Tahmincioglu at MSNBC.com discovered while researching for her recent article Furloughs Raise Questions About Worker Rights. From the article:

[M]any labor experts say it's created a "Wild, Wild West" in the workplace, with many employees and employers unclear on what such furloughs will mean to morale, productivity and adherence to the nation's labor laws.

"The stakes are high," says Barbara Poole, president of EmployAid, an online resource for employees and HR executives. "The entire dynamic between workers and employers has been turned upside down, and the rules are being made up as we go along."

One of the very interesting items Tahmincioglu discovered is that salaried and exempt from overtime employees may become eligible for overtime if they are asked to be furloughed less than a week, so many companies are simply making a full week of furloughed time off.

But then there's this from the same article:

These restrictions apply only if an employer makes the furloughs mandatory. If your managers ask you to voluntarily take off one day during a week, then the overtime exemption is not jeopardized.

That raises the question of what is "voluntary" in a corporate environment where almost every worker fears being laid off?

"If I can be fired at any time, I suppose that if my employer suggests that I take a break for a month, I am likely to do that, as a job preservation strategy, so as not to force the employer's hand and make her terminate me," says Mark Risk, an employment attorney.

On top of that, here's more potential problems for your employer: You cannot be expected to work at all during that furlough--not even one BlackBerry response or one phone call. Expect productivity to come to a complete halt.

You may also be eligible for unemployment depending on how long the furlough lasts. And if you get laid off right after the furlough period, you may be entitled to upwards of 60 days of pay.

There are obvious benefits to costs in doing so, but at what price? The lesser of two evils is the furlough, but it's not without its share of issues for you, the employer and the legal system.

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