Furlough vs Layoff – What’s the difference in California labor law?

The difference between a layoff and a furlough in California is whether the employee still has a job.

A furlough is temporary and can involve a cut in hours, reduced pay, or an unpaid leave of absence.

A layoff is permanent. Workers are terminated, though, for no fault of their own. They are entitled to unemployment, though not any other employment benefits.

What is a furlough?

A furlough is a temporary strategy to reduce a company’s costs while keeping its employees. If you are furloughed in California, you are still technically employed. However, you may be subjected to a:

• pay cut,
• reduction in hours worked,
• change from full-time to part-time status, or
• leave of absence without pay.

Both exempt and non-exempt employees can be furloughed.

Non-exempt workers are often put on so-called zero-hour schedules. You would still be employed. However, due to the lack of work, you would not be scheduled to work any hours during the furlough period.

Exempt employees who have been furloughed in California cannot be required to work. If you work at all, the Fair Labor Standards Act (FLSA) entitles you to a workweek’s worth of pay.¹ This also means that a furlough for an exempt, salaried employee has to be in weekly increments.

While you may not receive all of your wages – or any of them – you still receive other employee benefits. This can include:

• health insurance, and
• life insurance.

You would also maintain your accumulated paid time off (PTO). Some employers may let you use PTO while furloughed to make some money. This is rare, though, as the point of the furlough is to cut costs.

You may be entitled to unemployment benefits as well.

Furloughs are temporary. However, they may last for months. While a company furlough is a cost-saving strategy for the company, it can leave workers in a predicament. Without work, you may not be making any money. It is not uncommon for furloughed workers to switch jobs while they have been furloughed.

Many employees were furloughed during the coronavirus pandemic and shutdown, especially in the hospitality industry. Companies did this during the economic downturn in order to stop paying wages without having to go through the rehiring process when they opened back up.

What does it mean to be laid off?

A layoff is a permanent, faultless termination of your employment. If you have been laid off in California, you no longer have a job at your now-former employer.

Generally, you will be entitled to unemployment benefits. You may also be entitled to a payout of your PTO if your state’s laws allow for it. This can cover any of your accumulated:

• vacation time,
• sick time, and
• personal time.

You may also be offered a severance package while you are not legally entitled to one. This can provide some financial stability. It also may provide job training for a career switch. Severance packages may also provide continued healthcare for several months.

If you do not receive a severance package or it does not include healthcare coverage, you will likely be eligible for continued coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA allows you to keep your employer-provided healthcare coverage. If your company has 19 or fewer employees, you can get healthcare coverage through the California program Cal-COBRA.

However, you generally have to pay your former employer’s share of the premium. You may also be eligible for health benefits under the Affordable Care Act (ACA), also known as Obamacare. A layoff is generally a qualifying life event that opens a special enrollment period for a new health plan.

In some industries, temporary layoffs are common. In these cases, your employer will lay you off, but to rehire you in the near future. This is especially common in seasonal businesses.

When is it a mass layoff?

Under California’s WARN Act, a mass layoff occurs if 50 or more employees are terminated in a 30-day period. Employers conducting a mass layoff must warn their employees and certain government entities at least 60 days before laying off employees.

Employers who do not provide this advance notice and that are not exempted from the Act’s requirements must provide back pay for the period of time during which the warning was not given. Employers may also have to pay employees a $500 civil penalty for each day of the violation.²

Am I entitled to unemployment benefits after a furlough vs layoff?

One of the key differences between a layoff and a furlough is the availability of unemployment benefits. Generally, if you are a laid-off employee, you are entitled to unemployment benefits in California. If you are a furloughed employee, you likely will not be.

You should discuss your eligibility for unemployment insurance benefits with your human resources department before being let go.

Am I entitled to severance pay?

In California, you are generally not legally entitled to severance pay. However, some employers choose to provide it voluntarily.

Additional Resources

For more information, refer to the following:

• Worker Adjustment and Retraining Notification (WARN) Information for Employers – Information by California’s EDD (Employment Development Department).
• Rapid Response Services for Laid-off Workers – Discussion and contact information by the U.S. Department of Labor.
• The layoff survival guide: What to do before, during and after – Guide by the Washington Post.
  
• What To Do After Being Laid Off – Article by the Harvard Business Review.
• A Practical Guide to Getting Laid Off – Piece from Vox.

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Legal references