COVID Update on Layoffs, Furloughs, & Terminations

Published April 13, 2020

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Employers are faced with making tough business decisions in order to maintain operations during the COVID-19 pandemic.  Layoffs, furloughs and terminations are being considered as options to cut back on costs by reducing payroll expenses. The terms can often be used interchangeably, while actually having very different meanings.


  • A layoff is a temporary separation from payroll when there is not enough work available and the employer intends to recall the person when work becomes available again.
  • Employees can typically collect unemployment benefits while on an unpaid layoff.
  • The employer may allow employees to maintain benefit coverage for a defined period of time.
  • Employers should use non-discriminatory methods when selecting which employees to lay off.


  • A furlough is a temporary, unpaid leave of absence.
  • Furloughs require employees to work fewer hours or take a certain amount of unpaid time off.
  • An employer may require all employees to go on furlough, or it may exclude some employees who provide essential services.
  • Employees may qualify for unemployment benefits.
  • Employers should use caution when furloughing exempt employees to ensure compliance under the Fair Labor Standards Act (FLSA). Under the FLSA, exempt employees must receive the full salary for any week in which the employee performs any work.

Reduction in Force (RIF)

  • A RIF occurs when a position is eliminated without the intention of replacing it.
  • A layoff may turn into a RIF or the employer may immediately reduce their workforce.
  • Employees who are part of a RIF should apply for unemployment benefits.

Pay Cuts and Reduced Hours

  • Employers cannot reduce wages lower than the minimum wage in their state.
  • Pay cuts must not discriminate against legally protected categories.
  • Employers cannot reduce weekly hours for exempt employees and must pay exempt employees the same amount for each pay period in which they work, regardless of how many hours they work. Employers can, however, have exempt employees work fewer pay periods while paying them the full salary for each pay period.
  • Employees may no longer be eligible for the employer’s health insurance if their hours are reduced significantly, which would then make them eligible for COBRA health insurance.  

Many states have amended their unemployment insurance benefits to provide flexibility for employees who have experienced job loss or reduction of hours due to COVID-19. Some of these changes may leave certain employees making more money with unemployment insurance than their previous wages, making it difficult for employers to bring back their workforce once business returns to normal. Employers may report employees who refuse a job offer to the applicable state unemployment office.




We’re here to help.
The MCM COVID-19 Solutions Group is committed to keeping you informed during this challenging time. Please contact for more information and a member of the MCM COVID-19 Solutions Group will be in touch.



You should consider consulting your legal counsel regarding these matters as well as any union contract considerations. Nothing in this document should be construed as providing tax advice.  Please consult with your own professional tax advisor.  In addition, this document represents the information that we have up to the date the presentation was made and cannot be relied upon for additional updates beyond that date. 

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