It has been nearly one month since the “New York on PAUSE” Order was implemented to combat the effects of the COVID-19 pandemic. Yesterday, Governor Cuomo announced that the Order will be extended until May 15, 2020, requiring non-essential businesses across New York to remain closed for at least an additional month. With these ongoing restrictions, employers continue to navigate the evolving legal landscape with the understanding that business interruptions may not be as temporary as initially anticipated. To stay afloat amidst these disruptions, companies may have to make difficult business decisions, including implementing layoffs, furloughs, and pay reductions for some of their employees. Below are questions and answers that can help New York employers determine which strategies best fit their business goals while ensuring compliance with the law during this unprecedented time.
What is the difference between a layoff and furlough?
A furlough is a temporary and unpaid leave during which the employee remains on the employer’s payroll in an unpaid status. By contrast, a layoff can be permanent or temporary and is a separation of an employee for a reason unrelated to the employee’s performance. An employer who furloughs an employee generally intends to retain that employee and bring the employee back to work after a certain amount of time (e.g., the pandemic) passes. When employees are laid off, however, the employment relationship fully terminates. As discussed below, there are also legal differences between the two concepts. One of the most significant differences is that employers who implement large layoffs may be required to provide notice to employees under the federal and New York Worker Adjustment and Retraining Notification (WARN) Acts, whereas notice is generally not required for short-term furloughs.
Layoffs and the New York WARN Act
How do I know if my company is required to issue a WARN notice under New York law?
Private sector employers in New York State that employ 50 or more employees must provide WARN notice 90 days before:
- closing a plant, i.e., the permanent or temporary shutdown of a single site of employment that results in employment losses of 25 or more full-time employees in a 30-day period;
- implementing a layoff that affects 33% of its workforce (at least 25 full-time employees) during any 30-day period;
- implementing a layoff that affects 250 workers from a single employment site during any 30-day period;
- relocations, i.e., the removal of all or substantially all of the industrial or commercial operations of an employer to a different location 50 miles or more away, for at least 25 employees; or
- covered reductions in work hours, i.e., a reduction in work hours of more than 50% during each month of any consecutive six-month period that impacts 33% of its workforce (at least 25 employees) or at least 250 employees at an employment site.
Note that New York employers with 100 or more employees may also be covered by the federal WARN Act.
Who must receive WARN Act notice?
Under the New York WARN Act, notice must be provided to affected employees, representatives of affected employees, the New York State Department of Labor (NY DOL), and the applicable local workforce investment board. Given the current COVID-19 pandemic, the NY DOL is strongly encouraging employers to submit their WARN notices by email to WARN@labor.ny.gov.
Additionally, the federal WARN Act requires that notice be provided to the chief elected official of the municipality where the establishment is located (e.g., the Mayor of New York City for establishments located in New York City) and the State Dislocated Worker Unit (the NY DOL).
When should notice be provided under WARN for layoffs due to the COVID-19 pandemic, and what should be stated to the NY DOL?
If your business has 50 or more employees and is forced to close, or lay off at least 25 employees in a 30-day period, you should provide the required notices as soon as possible and identify the circumstances that required the closure or layoff. While the NY DOL has not suspended the notice requirement due to the COVID-19 pandemic, the NY DOL has advised employers to provide as much information as possible about the circumstances of the company’s closure or layoffs so that the NY DOL can determine if an exception to the WARN Act applies. Additional information about the required notices is available at the NY DOL’s website.
My company is not required to provide notice under the federal WARN Act. Does it still need to comply with the New York WARN Act?
Yes, if it falls within the definition of an “employer” under the New York WARN Act, i.e., a private sector business with (i) 50 or more employees (excluding part-time employees) within New York State, or (ii) 50 or more employees that work in the aggregate at least 2,000 hours per week within New York State. Since New York’s WARN Act is more expansive and has more stringent protections than the federal WARN Act, any entity that falls within this definition should comply with the New York WARN Act’s requirements.
Must employees be paid during a furlough?
No, employers are not required to pay employees who are furloughed. However, it is important to keep in mind that salaried employees must be compensated for the entire workweek if the employee performs any work during the workweek. This means that even if the employee performs one hour of work, he or she must receive pay for the entire workweek, or the salary exemption could be lost. Given this requirement, companies that use a furlough should take steps to ensure that exempt employees are not required to work, and do not work, during any furlough period. These steps may include, for example, restricting the furloughed employee’s access to work emails or calls or instructing the furloughed employee’s supervisor and co-workers not to contact the employee for work-related reasons while the employee is on furlough.
Must all employees be furloughed or can a company choose to furlough a portion of employees?
Companies may furlough some and not all employees. However, it is important to ensure that there is a sound and legitimate business reason for choosing which individuals and/or departments will be furloughed, and to clearly communicate that reason to the furloughed employees. For example, if a specific group or department is not receiving any work due to the COVID-19 pandemic, an employer could consider furloughing the entire group or department until normal business operations resume. Ensuring a sound and legitimate business reason for furlough decisions will minimize the risk of discrimination claims by employees who may believe that they were selected for furloughs for discriminatory reasons.
Will a furlough trigger WARN Act notice in New York?
While there are some exceptions, furloughs of less than six months generally do not trigger WARN obligations. If a furlough exceeds six months, it is generally considered to be an “employment loss” under the New York and federal WARN Acts unless the extension beyond six months was caused by business circumstances that were not reasonably foreseeable at the time of the initial furlough. In these circumstances, notice should be given at the time it becomes reasonably foreseeable that the extension beyond six months will be required.
Will a furlough impact employee benefits?
Possibly, depending on the terms of your company’s benefit plans. For example, if your benefit plans apply only to full-time employees, placing an employee on furlough may trigger a loss of benefits. To minimize this impact, your company could consider extending benefits to furloughed employees, or paying for the employee’s portion and the company’s regular contribution to the furloughed employees’ health insurance premiums. It is also important to check how a furlough may impact other benefits and policies, such as pension plans and vacation policies.
Reductions in salary
Can companies temporarily reduce the salary of hourly workers?
Yes, so long as the employer ensures compliance with wage and hour obligations, including ensuring that hourly workers are paid for all hours worked and are paid at least the minimum wage. Such workers should also be provided with advance notice of changes to their pay or workweek schedules. New York State’s new hire pay rate form can be used to notify employees of pay changes, and must be given in both English and the employee’s primary language. The New York State notices are available in various languages at https://labor.ny.gov/formsdocs/wp/ellsformsandpublications.shtm.
Can companies temporarily reduce the salary of salaried workers?
Companies may reduce employees’ salaries provided the following requirements are met:
- The reduction should be “prospective,” i.e., it should not occur within a pay period in which the employee has performed work, and should be implemented in future pay periods during which the employees have performed no work.
- The reduction should be “bona fide,” i.e., it does not reduce an exempt employee’s salary to the functional equivalent of an hourly wage (compensation based on the quality or quantity of work).
- Salary exemption thresholds must be met ($1,125 per week/$58,500 per year in New York City; $975 per week/$50,700 per year in Nassau, Suffolk, and Westchester counties; and $885 per week/$46,020 per year in the rest of New York State).
The U.S. Department of Labor (U.S. DOL) has stated that a predetermined regular salary reduction, not related to the quantity or quality of work performed, will not result in loss of the exemption, as long as the employee still receives the minimum salary threshold ($1,125 per week in New York City/ $975 per week in Nassau, Suffolk, and Westchester counties; and $885 per week in the rest of New York State). On the other hand, deductions caused by day-to-day or week-to-week determinations of a business’s operating requirements constitute impermissible deductions. According to the U.S. DOL, “[t]he difference is that the first instance involves a prospective reduction in the predetermined pay to reflect the long term business needs, rather than a short-term, day-to-day or week-to-week deduction from the fixed salary for absences from scheduled work occasioned by the employer or its business operations.” The key point is to determine the salary adjustments in advance and to document that decision in a written policy that is sent to employees in advance of the policy’s implementation. It is also recommended that salary adjustments be made on a company-wide or department-wide basis.
Do companies need to provide employees with notice of the pay reduction?
Yes, in New York, employers must provide employees with written notice of any reduction in wage rate, in both English and the employee’s primary language. The NY DOL has stated that electronic notice is acceptable so long as there is a system where the employee can acknowledge receipt of the notice and print out a copy of the notice. To confirm compliance with this requirement, employers should ask the employee to sign or e-sign the pay reduction notice. If the employee cannot sign (or e-sign) the notice, employers should consider sending the notice via email with a “read receipt.” Sample notices are available at the NY DOL’s website.
If an employee is laid off, will the employee be eligible to receive unemployment benefits?
Generally, yes. However, any dismissal or severance pay that the employee receives within 30 days of the employee’s last day of employment, whether as a lump sum or in payments made over a period of time, may affect the employee’s unemployment benefits, and the time within which the employee receives benefits, under New York law.
Moreover, the Families First Coronavirus Response Act (FFCRA), signed into law on March 18, 2020, provides additional flexibility for state unemployment insurance agencies to respond to the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, implemented on March 27, 2020, expands states’ ability to provide unemployment insurance for many workers impacted by the COVID-19 pandemic, including workers who are typically not eligible for unemployment benefits. See US: New federal coronavirus response act provides paid leave requirements for some employers, US: Critical COVID-19 labor and employment issues for employers, US: DOL answers questions on new federal sick and family leave, issues new posters and announces limited amnesty, and US: DOL issues key federal paid leave rule, extends leave to certain employees under stay-at-home orders for summaries of key leave provisions of the FFCRA.