COVID-19 Client Alerts:
Requirements for Layoffs and Reduced Schedules
Employers use a variety of terms when an employee’s employment ends, including “lay off,” “fire,” “discharge,” or “terminate.” For legal purposes, these terms essentially mean the same thing. Importantly, if an employer completely eliminates an employee’s scheduled hours in a pay period, this is the same as a termination or lay off.
Regardless of the term used, when employees’ employment ends, whether they are laid off, fired, discharged, or their hours are completely eliminated in a pay period, they must be paid all of their wages, including accrued and unused vacation, immediately at the time of separation. Employers in this situation cannot wait to pay employees their final wages at the next scheduled payday, even if the employer is planning to schedule the employee to work in a later pay period.
These final wages need to be paid to the terminated employee at the place where the termination occurs. If the employee previously authorized direct deposit prior to the termination, the Labor Commissioner believes that authorization is immediately void upon termination. Direct deposit of final wages is allowed only, according to the Labor Commissioner, if the employee voluntarily authorizes the direct deposit of final wages; however, the deposit must still be immediate with the termination.
Employers contemplating layoffs will also need to consider whether any of the affected employees are unionized in which a collective bargaining agreement is relevant, have employment contracts with specific termination provisions, or are commissioned employees who may have commissions due and owing to them after the termination.
Some employers may also be considering reducing employees’ hours or furloughing employees, in which they are forced to take unpaid leave. Note that an elimination of hours for an entire pay period is not a “furlough.” It is a termination.
Generally, a reduction in hours is allowed, but special attention needs to be paid if the workforce is unionized or has employment agreements that define work schedules.
Furloughs also present unique issues for exempt employees, who generally must be paid a monthly salary of two times the state’s minimum wage. An employee generally only earns a true salary if the employee earns their full weekly salary in any workweek they perform any work. However, the Labor Commissioner allows employers to reduce their exempt employees’ number of scheduled work days within a week with a corresponding reduction in salary, to address severe economic challenges. These workweek/salary reductions should not be adjusted too often, nor should the reduced salary bring the employee below the exempt-salary threshold.
Copyright © 2020, Murphy Austin Adams Schoenfeld LLP. All rights reserved. Please be assured that we make every effort to make certain that the information contained in this alert is current at the time this email was delivered. Because laws and legislation are constantly changing, please contact us if you are unsure whether this material is still current. Nothing contained herein should be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended to be for general information purposes only. We assume no liability in connection with the use of the information contained in this article. Given the rapidly evolving nature of legal and governmental responses to the COVID-19 pandemic, unfolding events likely will supersede many of the issues discussed in these updates. We encourage you to contact our lawyers directly for the most current information and counsel regarding legal and governmental responses to the COVID-19 pandemic. Please contact us to answer any questions you may have.