COVID-19 has brought work to a standstill for many people and caused widespread economic disruption. Although many states are beginning to reopen, the events of the past two months will have downstream ramifications on many businesses, including staffing needs.
In just the first nine weeks of the country’s response to COVID-19, 38.6 million U.S. workers filed for unemployment benefits. And a recent survey shows that 43% of HR professionals are considering putting staff on short-term furloughs.
For a concrete list of things to keep in mind as you're considering furloughs and layoffs, check out our free guide.
These decisions are further complicated by the ever-changing labor law landscape. Existing legislation — like the WARN Act — is now coming into play. But at the same time, the CARES Act introduced the Paycheck Protection Program (PPP) to help companies maintain staff on their payroll. Navigating layoffs and furloughs in this complex climate comes down to knowing your resources and planning — as best you can — for what lies ahead.
Now more than ever, employers must strike the right balance between taking care of their company and clients — and caring for their employees. Here’s how to handle COVID-19-driven layoffs and furloughs with compliance and compassion.
Comply With the WARN Act
The pandemic has complicated the application of existing laws, such as the WARN Act. This act mandates a 60 notice to employees before a mass layoff occurs for employers with 100 or more full-time employees with more than 6 months on the job. It’s typically triggered by a layoff or furlough of at least 50 employees who have been at a single site for 6 months or more.
The language of the WARN Act includes an exception for unforeseen business circumstances. Most experts agree that the WARN Act hasn’t been triggered yet because COVID-19 constituted an unforeseen business circumstance, which negates the Act’s requirements.
However, this won’t always be the case. “When COVID-19 first hit it was an unforeseen circumstance,” points out Jon Hyman, partner at Meyers, Roman, Friedberg and Lewis. “But as the pandemic goes on, it becomes harder to make that argument.”
Additionally, to trigger WARN, the projected layoff or furlough must last at least six months. “If you’re furloughing workers with an expected duration of less than six months, then it’s not a WARN triggering event,” Hyman says. Employers who carried out mass layoffs in response to COVID-19 are still within those six months.
As you move into the third and fourth months of a mass layoff or furlough, however, you should project ahead. “Where are you going to be in 2-3 months? Do you anticipate calling employees back, or do you expect layoffs to last longer?” Hyman asks. “At that point your layoff would trigger WARN.”
You need to determine if you can bring employees back within the six month period prescribed by the WARN Act, or if you need to send out the required notifications. If employees have been laid off or furloughed since April 1st, for example, and you don’t anticipate bringing them back by October 1st, then you should send WARN notices to those employees by early August.
Employers should also take steps to comply with the 60-day notice prior for any future mass layoffs, or they may be fined and obligated to pay any affected employees 60 days of pay.
Qualify for PPP Loan Forgiveness
New legislation in the CARES Act incentivizes small businesses to maintain employees on their payroll. The Paycheck Protection Program loan could help you meet your payroll needs without laying off or furloughing any employees. “Employers that apply for, receive and take the benefit are promising to maintain employees on their payroll,” says Robert Baker, a partner at Chartwell Law.
A PPP loan can provide up to 2.5 times your average monthly payroll, and the loan amount can be entirely forgiven once the program expires at the end of June. To convert the loan to a grant, at least 75% of funds must go towards payroll, while the rest can be put towards rent, mortgage or utilities. For the full loan amount to be forgiven, you must maintain your full staff at their normal rate of pay. If you have already laid off or furloughed employees, the PPP allows you to return them to your active payroll, Baker says.
Receiving PPP funds doesn’t prevent you from taking disciplinary action, however. “The act outlines that employers are still permitted to manage the workforce and address terminations for policy violations,” Baker says. Organizations receiving the funds won’t be required to maintain employees who aren’t performing up to standards or are guilty of harassing other employees, for example.
Communicate with Laid Off and Inactive Employees
Candid and honest communication with your employees is essential. When providing notice to employees who are being laid off or furloughed, be honest about the layoff being the result of the pandemic. Let those employees know if they’re eligible for rehire. “It’s a stressful time for employees,” Baker says. “It’s important for employers to do as much as they can to be available and ease their transition.”
When having the initial conversation, direct employees to the expanded unemployment resources under the CARES Act, Baker suggests. “Encourage employees to apply and answer the questions honestly,” he says. That way, when you receive the questionnaire regarding that employee’s eligibility, your responses will match and the benefit will be easier to receive.
Establish communication with employees after they have been laid off or furloughed, too. Provide regular updates regarding reopening, and ask employees what accommodations they might need to return to work. “Maintain a dialogue so you understand what’s going on in your employees’ lives,” Hyman says. “Continue to support them with the goal of returning them to work.”
And don't forget to download our free guide on layoffs and furloughs!