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Some of the Legal Pitfalls of Furloughs for Employers

November 19, 2009
Some legal pitfalls of furloughs for employers include:

Employee classification: Salaried executive or administrative employees classified as “exempt” under the federal Fair Labor Standards Act can allege the company essentially treats them as hourly employees if their rate of pay varies too much with fluctuations in hours worked.

Work off the clock: Also a violation of the Fair Labor Standards Act, this can include work that nonexempt hourly workers accomplish in the office or from home by e-mail or mobile devices during furlough days, or any hours worked at a time when the employer understands they are not being paid.

Unemployment insurance: If a furlough lasts for at least one complete pay period, some employers may have to determine whether portions of their workforce become eligible for unemployment compensation.

Floor pay rate: On rare occasions, truncated workweeks or furloughs and proportional pay cuts—for example, one week off out of a two-week pay period and an accompanying 50 percent loss of pay—may move employees to a rate of pay temporarily below the minimum $455 per week or $23,700 per year in pay allowed under law for exempt employees.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.