Attorney Melissa Murray speaks with the Massachusetts Municipal Human Resources association during a May 14 webinar.

As cities and towns grapple with the loss of revenue and impending fiscal crisis due to COVID-19, many may find the need to look at workforce reduction as a means of balancing shrinking budgets.

Should the need arise, it’s important to understand the distinctions between layoffs, furloughs, and reductions in force – terms that are frequently used interchangeably, though their meanings are quite different. Understanding this can lead to more thoughtful planning.

Generally, a layoff is an unpaid separation or termination of an employee without any identified or foreseeable expectation of rehire or return (although Massachusetts has certain reinstatement rights for laid-off civil service employees). While a layoff can be temporary or carry with it the possibility of recall, it is not believed to be as certain as when employees are furloughed. When an employee is laid off, he or she must be paid all earned wages, including vacation time, at the time of the layoff.

Furloughs (also referred to as “standby status”) are a temporary period of unpaid (either voluntary or involuntary) leave, offering an alternative to layoffs that allow you to retain staff you cannot afford to pay. During a furlough, an employee remains on the payroll but is not permitted to perform any work, and there is usually a mutual expectation that the employee will return to work at the end of the furlough period.

The Office of the Attorney General has confirmed that an employer may “furlough” an employee without terminating the employment relationship. A furloughed employee may maintain his or her health insurance, vacation time, creditable service for retirement, and other benefits. A furlough does not trigger a payout of earned wages because the employment relationship continues.

A reduction in force (RIF) occurs when a position or positions are eliminated without the intention of replacement. It is a permanent reduction and can be done for financial reasons, when an organization is going through a reorganization, or when a decision is made to stop providing a service or product. A RIF can be done by termination or attrition, or a layoff can turn into a RIF.

Often reductions in force and layoffs are used interchangeably (or layoffs are viewed as the means of accomplishing a reduction in force) because the result is the same: someone loses their job.

Unemployment benefits
Furloughed employees are eligible for unemployment benefits if the furlough is due to the COVID crisis. Although an employment relationship continues, such individuals are considered unemployed due to lack of work and are placed in what is called “standby status.”

Standby status is meant to help both employers and their employees in situations where the unemployment is expected to be temporary. Additionally, an employee may be eligible for partial employment benefits if they continue to work but their hours are reduced.

Standby status
On March 16, the Massachusetts Department of Unemployment Assistance enacted emergency regulations (set forth at 430 CMR 22.00) to assist employees in obtaining unemployment benefits. As part of these regulations, the DUA created a “standby status,” which includes individuals who are temporarily unemployed because of a lack of work due to COVID-19, but have an expected return-to-work date.

The standby status designation relieves the employee of the normal requirement to search for work provided that the individual maintains contact with their employer and remains available for any suitable work offered by the employer.

Furloughed employees are not eligible for EPSL and EFMLEA leave. While furloughed employees are not technically separated from employment, an employee’s eligibility for Emergency Paid Sick Leave and Emergency Family and Medical Leave Expansion Act (EFMLEA or FMLA+) leave, under the DOL regulations, is predicated on the employer having work available for the employee to perform.

Bargaining and contractual obligations
Is there an obligation to bargain with unions over layoffs, furloughs and reductions? In most cases, at least impact bargaining will be required if these decisions will affect unionized employees. While an employer may not always need to bargain over the decision to lay off employees, an employer must bargain over the impacts of implementing that decision.

If contemplated reductions will involve or impact unionized employees, it’s important to provide sufficient notice of the contemplated reductions to give the union a reasonable opportunity to exercise its rights to bargain. Impacts of layoffs might include criteria for selection for layoffs (if not already established by law or contract), possible alternatives to layoffs, and the economic impacts of layoffs on employees.

Employers are advised to review all applicable policies and agreements to make sure they are clear on the parties’ rights and responsibilities. Collective bargaining agreements may contain specific bargaining requirements and restrictions that must be observed. State and federal laws and regulations should also be reviewed, in light of COVID-related legislation being passed and financial incentives available to certain employers for maintaining pre-COVID-19 staffing levels.

In the face of layoff notices, unions are within their rights to request information; it is important that employers respond quickly and fully to requests for relevant information.

Plan and document
The first and most important step in contemplating staff reductions is proper planning. Gather information that demonstrates and supports the need to make staff reductions, and make sure this information is clear and can be easily understood and shared when discussing the need to reduce payroll costs.

Consult collective bargaining agreements and personnel bylaws or ordinances regarding the authority for layoffs or reductions in force, and be clear on what your rights and obligations are generally and with specific groups. Consult labor counsel with questions on collective bargaining issues, civil service rights (including hearing and notice requirements), and notice requirements.

Doing this homework is the first step in minimizing risks of liability. In addition, take time to consider alternatives, so you can demonstrate that you have acted fairly and considered options for minimizing layoffs or furloughs.

Use objective criteria in your selection process, and document all steps taken, information presented and all communication – formal and informal – with union leadership. Anticipate questions or concerns, and prepare or discuss responses with supervisors in advance. Work with supervisors to give them the tools they need, and advise against making stray comments. Where appropriate, consider offering a severance to certain staff members in exchange for a release.

Written by Melissa Murray, Tim Norris and Brett Sabbag, attorneys at Norris, Murray & Peloquin, LLC.