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Mandatory Furloughs – The Risks of Using Them in Connecticut

Posted in Human Resources (HR) Compliance, Wage & Hour

One of the latest fads in employment law has become a peculiar side effect of this recession — the increase in the usEmpty officee of mandatory furloughs.

What are they? Well, in simple terms, they are orders from an employer to an employee that they take a day (or multiple days) off without pay. In doing so, the employee is to refrain from working.

An excellent post up this morning on the HR Daily Advisory site, runs through the risks of using furloughs, particularly for exempt employees.  Indeed, the title is particularly apt – "Attractive, but Legally Tricky".

There are plenty of traps for employers to fall into. An employer, for example, may decide to reduce salaries by 20% and then reduce workweeks by one day a week.  The post suggests that in general, this approach may not work because of the Department of Labor’s pronouncement that "reducing exempt employees’ work schedules with a corresponding reduction in salary because of lack of work violates the salary basis test."

The post does suggest a ray of hope, though:

The DOL further clarified that an employer may make a "fixed" and "permanent" decision to reduce the hours and corresponding pay for exempt employees. For instance, an employer could reduce the work schedule for the year from 52 five-day workweeks to 47 five-day workweeks and 5 four-day workweeks, and also reduce the pay of exempt employees as a result of the shortened workweeks.

The linchpin of the distinction between this permitted approach and the impermissible hours reduction is the permanence of the schedule reduction as contrasted to a temporary reduction in the normal scheduled workweek to address a short-term work slowdown or temporary economic conditions.

So, for employers considering using mandatory furloughs as a way to keep their workforce intact through this recession, be careful and cautious.