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As the coronavirus pandemic causes employment uncertainty for some Iowans, here are answers to frequently asked questions about furloughs.
Q. What is the difference between a furlough and a layoff?
A. For the purposes of unemployment insurance, Iowa Workforce Development treats them the same. However, an employee likely will need to certify they remain in communication with the employer about returning to work.
Q. Why would a company opt for furloughs over layoffs?
A. A furlough is a method of payroll cost-cutting in which the employee does not separate from the employer and retains a psychological tie to the employer, as well as their benefits and tenure/longevity.
It can be a reduction in hours with no pay for hourly employees (salaried employees are treated differently under the Fair Labor Standards Act.
Alternatively, it can be - for both salaried and hourly employees - an unpaid leave of absence for a typically quantifiable period of time. However it is done, it must be handled in a non-discriminatory selection process.
Furloughs may preserve morale by allowing employees to stay connected to their employer. However, a furloughed employee may be less productive upon return to work or use their furlough time to find another job.
Q. If I'm furloughed, can I get unemployment compensation either from the state or now from the federal relief bill?
A. Where you have worked for the past 18 months will determine how and for what you qualify. In most cases, people not self-employed will qualify for a normal unemployment claim based on the wages they have earned and been reported by their previous employers.
People who are self-employed, 1099, gig economy workers, not-for-profit workers, private contractors or those requesting an extension of benefits in most cases should qualify under the Coronavirus Aid, Relief and Economic Security, or CARES, Act.
Iowa Workforce Development is waiting for final guidance from the U.S. Department of Labor on how the CARES Act will fully function.
Q. If I'm furloughed, do I still qualify for workplace benefits such as health care coverage during the time I'm not being paid?
A. Typically yes, but employers should verify with their insurance carrier or third-party administrator. Under some plans, an employee considered 'not working” may result in a separation that could trigger the need to provide health insurance coverage extension through COBRA.
In addition, if the employee has to pay part of the health insurance premium, the employer should make arrangements to handle that during the furlough.
During a furlough the employer typically allows the employee to retain other paid leaves that are accrued for use after the employee returns to work, and retain their tenure/longevity for benefits accrual.
Q. If I'm furloughed and not being paid, what happens with 401(k) matches from my employer - do they continue?
A. It depends. Employers that make either mandatory (safe harbor) or discretionary contributions may or may not be able to change those during a plan year, based on the plan's terms. Employers should check with the plan administrator.
Q. Let's say I'm given a month of furlough. When I return, is the company required to give me my same job back?
A. Not unless there is a contractual protection, such as a collective bargaining agreement, that requires job restoration.
In an at-will employment situation, the employer can terminate the employee at any time for any reason as long as it is not an illegal reason - discriminatory or retaliatory.
If an employee is furloughed and then the employer institutes a reduction in force due to economic reasons, the employee has no right to job restoration.
If an employee's job doesn't exist any longer due to business reasons when the furloughed employee is called back, the employer can offer the employee a different position earning less than she or he earned before or on a different shift than previously worked.
However, if the change in the employee's working terms and conditions are substantial enough under Iowa law, the employee could reject the offer of re-employment and still may qualify for unemployment benefits for 'quitting with good cause attributable to the employer.”
Sources: Amy Reasner, lawyer and president of Lynch Dallas PC in Cedar Rapids; Iowa Workforce Development Deputy Director Ryan West; and the Office of U.S. Sen. Chuck Grassley.
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