FAQs on Unemployment Insurance and Furloughs

For most states, a reduction of 20 percent or more in hours would be enough to indicate that an individual is unemployed and would not be disqualified from establishing a benefit year and claiming weeks of unemployment compensation. This is with the understanding that with the 20 percent or more in reduction, the individual earns less than the state’s definition of “partial unemployment.” 

If an employee is paid the equivalent of their full UI weekly benefit amount for a week, they would be considered not to be unemployed for the week; some states have different guidelines for defining partial unemployment. We recommend you review each state UI law.

Many states are flexible with the requirements about whether separation was indeed “involuntary” or not. Still, the fact remains that a voluntary quit is disqualifying or a basis for a challenge. Due to the overwhelming number of applications, many employees are finding it difficult to get claims filed and started.

The UI cash payment is only a temporary partial replacement. An employee should continue working as they may still be covered under the company health care plan, pension (if available), and continue to accumulate wage payments to qualify for Medicare, future unemployment compensation, and Social Security. 

Usually, exempt employees should not receive a difference in weekly pay even though their hours may vary. Some options include putting in a formal salary reduction, or a partial week furlough provided that it is not for an extended period of time, and does not vary depending on business volume. An exempt employees’ salary should not go below the salary level needed to establish the exemption under the FLSA, even if they have a scheduled reduction.

Employers can keep employees on their health insurance at the time of a furlough and can require the employee to pay the employee portion, or the employer can choose to pay for both the employer and employee portion; this option may need a plan amendment.  

Dependent on the wording of the plan amendment, the furlough could initiate COBRA, and the employee may need to make payments for continuation under COBRA, or the employee can find insurance through the private market that may be subsidized under the Affordable Care Act.

An employer can lay off an employee even if the employee is currently on FMLA or paid leave under the FFCRA. If the employees stay on payroll amid the layoff, the employee may be able to argue for continuing rights under those programs if they return to compensated employment.

The employer is obligated to continues payments as long as the 401(k) plan continues to be in effect. The employer can mend or suspend these types of obligations, but the terms of each plan should be reviewed.

If the employer offers suitable work and the employee refuses, it should be disqualifying and result in a halt or delay in benefits. Each state is different, and state laws should be reviewed.

Employers have other options, such as providing sabbaticals or furloughs as ways to maintain employment while decreasing payroll costs. You can also consider looking into other cost items. For example: eliminating merit increases, temporarily suspending bonus programs, or consider removing benefits such as parking programs or optional travel expense reimbursement.