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The difference between being laid off and furloughed

On Behalf of | Oct 3, 2023 | Business & Commercial Law

Employers in New York and elsewhere can choose to reduce their workforce in an effort to save money or meet other goals. Companies may choose to either furlough their excess staff or lay them off in an effort to cut costs on a temporary or permanent basis.

An overview of a furlough

A furlough involves cutting an employee’s hours during the year or telling an employee to take a sustained period of unpaid leave. During the leave period, furloughed workers may still be entitled to vacation days, health insurance coverage and other benefits. This is because they still have a relationship with their employers and are still technically on the payroll. In addition, the fact that they are still on the payroll means that they can look forward to eventually returning to work at some point in the future.

What it means to lay employees off

The key difference between a furloughing and laying off workers is that a layoff constitutes a full termination of their employment. Typically, layoffs are conducted when workers need to be let go for financial as opposed to performance reasons. In some cases, layoffs are temporary, and workers can expect to be rehired in a few weeks or months. From a business & commercial law standpoint, those who are laid off are generally not entitled to benefits or other perks from their employers while they aren’t working.

Companies are allowed to terminate employees for almost any reason, which is why they may prefer them to furloughs. Firms that engage in furloughs must adhere to state employment laws, which may require them to keep track of vacation time or other benefits that might accrue. Furthermore, organizations may want to ensure that they are not using furloughs as a form of constructive dismissal.