What Is the Difference Between a Furlough and a Lay-Off?

by Employers Council Staff

Compensation,  Hot Topics

In the past few months, many employers temporarily ceased operations with the expectation of bringing all employees back to work  after a short time. Many employees were told they were being furloughed and not laid off. The difference between being furloughed and laid off was often irrelevant for employees at that time, as the process for applying for unemployment was the same for both. Now that three months have passed, employees and employers are beginning to wonder, what is the difference between a furlough and a lay-off? In many states, including Arizona and Utah, there is no legislation defining the difference. In Colorado there is.

In Colorado, a furlough does not qualify as employment separation triggering the requirement to pay out earned vacation pay if it is a bona fide furlough. A bona fide furlough is:

  • caused by a full or partial shutdown of employer operations, and
  • planned and genuinely expected to not be longer than 30 days OR any longer than the duration of a state of emergency declared by the state or federal government that required the shutdown.

Any disruption of employment that does not meet the requirements of both (1) and (2) qualifies as a separation and triggers the requirement to pay out all earned vacation pay. If a furlough starts as a bona fide furlough, but then ceases to qualify, including when any plans change such that any requirement of part (1) or (2) is no longer satisfied, the requirement to pay out vacation pay is triggered   Example: When an employer’s plans change and employees will no longer be brought back within the timeframe of (2) above.

In other states, the employer is going to need to determine if there is a requirement similar to Colorado. If there is none, like in Arizona and Utah, at some point, the employee must either come back to work or the position must be terminated, vacation leave must be paid out, and COBRA notices must be provided. If employees get tired of waiting they could file claims for vacation pay with state labor or employment divisions. Now that you know the difference between a furlough and a lay-off or separation, let Employers Council know if you need more assistance.

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Employers Council Staff