Furloughs, Layoffs & Reductions in Force: The Distinctions Impacting Employee Benefits and Employment Laws

Many employers are making the difficult decision to place employees on a temporary furlough or to implement more permanent layoffs or a reduction-in-force.  Employers should be aware of the impact these actions have on the employee benefit programs offered to the affected employees. 

The chart below illustrates the impact of furloughs, layoffs and reductions in force on retirement plans, welfare benefit plans and employment law rights and responsibilities. For purposes of the chart, a “furlough” is a temporary, unpaid leave of absence during which an employee remains on the employer’s “W-2” roster with no separation of the employment relationship; a “layoff” is a complete termination of employment where there may (or may not) be an expectation that the employee will be rehired when economic conditions improve; and a “reduction in force” is similar to a layoff (with respect to the employment termination) but a RIF carries a connotation of permanency, or a lowered expectation of future rehire.