In the wake of tough economic times, many companies are exploring alternative cost cutting methods. One method is requiring employee furloughs. Employers are using required furloughs rather than terminations as a cost-cutting measure. If you are thinking about using a furlough at your company remember the following rules regarding non-exempt and exempt employees:
- Non-exempt employees must be paid only for actual hours worked.An employer may send non-exempt employees home as a cost-cutting measure without worrying much about the legal problems. You will need to review any contracts, including collective bargaining agreements, your company may have with non-exempt employees before implementing a furlough to ensure that you are not violating any of the provisions contained within the agreement.
- Exempt employees must receive full salary for any week in which work is performed, without regard to the number of days or hours worked.If any exempt employee does not receive full salary for every workweek in which the employee performs any work, exempt status is lost and the employee is entitled to overtime pay. In general, furloughs for exempt employees should be scheduled in full workweek increments to protect an employee’s exempt status.
These should be considered general rules. If you have specific questions about implementing a furlough plan please contact your attorney.