Question: The COVID-19 pandemic has negatively impacted my business and I have to make hard decisions about staffing.  What do I need to know about furloughing or laying off employees?

Answer: Sadly, given the ongoing COVID-19 pandemic, many businesses are forced to make the difficult decision to let employees go.  Upon recognizing the need to make staffing adjustments, an employer should evaluate the job positions that are critical to business continuation, and which job positions to eliminate or merge.  Next, identify the employees that currently fill the jobs that will be eliminated or merged and decide who will be subject to layoff.  It is important to use objective criteria in making these decisions in a non-discriminatory manner.  Factors such as seniority, job performance, and flexibility of skill set may help guide these decisions.  Once the employer has decided who will be laid off, it is a good idea to have the list reviewed by counsel or a trusted executive or colleague.  If an employer is closing a plant or laying off a large number of employees, the employer should determine if the timing and notice requirements of the Worker Adjustment and Retraining Notification (“WARN”) Act apply.

Sometimes employers “furlough” employees with the expectation the employees will return to their jobs when economic conditions improve.  However, the Division of Labor Standards Enforcement takes the position that a furlough that extends beyond the pay period when the furlough begins, or a furlough that exceeds 10 days, is treated like a termination of employment for purposes of providing furloughed employees with their final pay.  If staffing reductions are indefinite, employers should classify the action as a layoff and follow the procedures described below.

After making the layoff decision, an employer should meet in person with the employee, if possible.  If COVID-19 related stay-at-home orders make an in-person meeting impossible or inadvisable, the next best option is to schedule a one-on-one video conference with the employee.  Conduct the videoconference in a professional setting free of distractions.  Prepare a checklist to review with the employee during the meeting, and be prepared to answer questions the employee may have about unemployment benefits, job references, health insurance continuation, 401(k) plans, and other benefits.  Discuss the logistics of returning employer keys and other property.  Be honest about the economic reasons for the layoffs, let the employee know that you appreciate the employee’s work, and that they are eligible for rehire.  Confirm this information in writing since the employee may be upset and have difficulty retaining the information.

Have the employee’s final pay ready to pay the employee on the layoff date, including all wages owed up to the layoff date plus accrued but unused vacation and PTO.  Failure to timely pay final wages may result in owing the employee a waiting time penalty equivalent to the employee’s daily rate of pay for each day the wages remain unpaid, up to a maximum of thirty days.

Give the employee the “For Your Benefit: California’s Programs for the Unemployed” pamphlet and a Notice of Change in Relationship, available via the California Employment Development Department’s website.  If the employee receives health insurance, and the employer has 20 or more employees, the employer must also provide the Health Insurance Premium Payment Notice to Terminating Employees, available on the California Health and Human Services Agency’s website.

Advance planning, respect, and empathy can help make these difficult layoffs a little less painful.