Furlough, Leave Without Pay (LWOP), Layoff or Termination

No matter the difference between them, if you are affected, it’s a challenge.

Now days we hear a lot of these words buzzing around. Even though they are in everyone’s ear, it doesn’t mean it’s very clear what each of them mean. Thus, we decided to write an article about them, and bring some clarity to what’s behind the curtain.

Furlough

A furlough is unpaid day(s) off of work, which can be either voluntary or mandatory. They are used to make a reduction in scheduled hours in order to minimize employer costs and thus save the money.

Some companies that are doing furloughs are letting employees use their paid vacation days. At some companies, furloughed workers can apply their paid vacation to their furlough start date, for example.

If you are furloughed, the continuation of your benefits, including paid vacation time, depends on your employee benefits plan. For example, you could keep your employer-sponsored 401(k) contributions, but you won’t be able to make yours to it.

Even though the employee is furlough, there is a very good chance that the person will be returned to the old job once the market conditions improve. A furlough is meant to be a temporary unpaid period, but there are no definite answers of when a furlough needs to end. Employers implement a furlough only if they plan to recall the workers, usually within one year. The Paycheck Protection Program, known as PPP, also incentivizes certain employers to hire back their employees and not lay them off.

Non-exempt employees are eligible to take a furlough in daily increments or weekly. Again, this would be for unpaid time for hours not worked.

Exempt employees, including faculty, are eligible to take weekly furloughs under the condition that they do not perform any work in that week. Federal law generally holds that exempt employees who do any work in a given week must be paid their full salary for that week. This would include checking work emails or answering or making work related phone calls.

Leave Without Pay

According to Office of Human Resources Management, leave without pay (LWOP) is an approved temporary absence from duty in a non-pay status and is requested by an employee. The term does not cover a suspension, furlough, an absence for which leave has not been approved, or non-pay status during hours or days for which an employee would be compensated on an overtime basis.

Technically, there is a small difference between Furlough and Leave without pay (LWOP). While in furlough, companies have tendency to offer employees more benefits and there is a much better chance for personnel to come back to work.

The other dark side of LWOP is that sometimes the consulting companies reach out to it as a mean to bench a consultant when there are no projects to work on. In these kinds of situations, it’s common that consultants look for other job opportunities, and eventually move on. The good news for the companies is they don’t need to be worrisome about severance pay, compared to dealings with exempt employees.

Layoff

Compared to furlough and leave without pay, layoff is a more drastic action by an employer. Layoff is a reduction in workforce without any specifics about re-opening or filling the position.

Sometimes employers reach out to layoffs in order to change direction of their business, size down operation due to mergers and acquisitions (M&A), or simply to replace the non-productive workforce.

The better side of the medal is that full time employees usually have a right on severance package. That should bring at least some comfort while making future career plans.

Termination

This is the ugliest word on the list. While most people use the terms “laid off” and “terminated” interchangeably to describe dismissal from employment, there is in fact a legal difference between the two.

Termination occurs when an employer irrevocably breaks its’ contract of employment with an employee. An employer may terminate the employee for cause, in which case the employer may dismiss the employee on the spot, or, if no cause or reason is alleged, then the employer must provide the employee with reasonable notice of the termination or a severance pay.

Employees fired for the cause are ineligible to collect unemployment benefits. They may need to quickly find another job to maintain their financial fitness.

If an employer lays off an employee without proper contractual obligations, then the lay-off may be deemed as a termination.


Photo by Rene Böhmer