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Davis Brown Employment and Labor Law Blog



Benefits During a Furlough or Layoff - April 30, 2020

Amidst the COVID-19 pandemic, we have fielded a number of questions regarding the terminology used during temporary inactive periods for an employee during the pandemic, specifically: is it a furlough or layoff? 


Generally, for the purposes of Iowa Workforce Development and all other legal purposes, it’s all potato, potahto, furlough, layoff. What matters is whether it is temporary or permanent. 


As you navigate welfare benefits with your brokers, you should make sure you’re working from the same dictionary.


Temporary or permanent?

A temporary layoff or temporary furlough is a short-term inactive period at work whereas a permanent layoff or furlough is a termination. However, that definition doesn’t hold true with everyone - benefits brokers have indicated that informally, many insurance carriers assume that a layoff is permanent while a furlough is temporary. While working with your benefit groups, whether that’s your representative or the carriers’ home office, make sure that you specify whether this is a temporary process or permanent to avoid any confusion.


What is temporary?

In general, there is specific rule regarding how long an employee can be “temporarily” off work when he or she is not on FMLA or some other legally mandated leave. However, the longer the time period an employee is off work, the less likely the employee will be considered active or will continue to qualify for benefit programs. 


Wellmark, a major health insurer in Iowa, has indicated that it will not enforce full-time hours worked requirements for employees in order to be covered by health insurance policies through June 16. 


In other words, if an employee has been on a temporary layoff and hasn’t met the minimum hours’ requirement to qualify for health insurance, Wellmark has indicated they will not terminate coverage through June 16. However, other health insurance plans differ. Note that life and disability products differ as well. Some insurance providers are waiving hours requirements through May 30 which seems to be fairly common and some are tagged to the date the furlough/layoff began, such as 30 or 60 days. Therefore, it is extremely important that you coordinate directly with your broker and insurance providers regarding what it means when employees are on any leave, other than something like FMLA, that extends beyond a single month. 


As noted, there is no specific date or timeframe by which you can say this is now a permanent layoff. Depending upon your industry, if significant time passes, even if employees are considered to be temporarily laid off, you may be required to re-run background checks, do specific certifications, check licensure, and complete some skills training before the employee returns to work. 

 

Healthcare

An extended absence in the healthcare industry will likely require you to re-run SING background checks. Remember, an employee simply being off from work does not mitigate the healthcare employer’s obligation to continue to check the debarred provider lists every month. Debarred provider issues would also be a concern for any employer who works under federal contracts.


Temporary becomes permanent

There are several issues to consider if your temporary layoff becomes permanent. 


Unused Paid Time Off

Some employer policies specify that unused paid time off is paid out when an employee is terminated. In Iowa, time must be paid by the next regular payday after termination. 


State law can impact payment of paid time off. Some states require time be paid out upon termination regardless of the employer’s policies so you need to check not only your internal policies but also your state law. 


Iowa employers are allowed to not pay out unused paid time off (sick, vacation, personal days, or any type of time) upon termination but Iowa law requires employers to provide a clear statement to employees of this policy for it to be effective. 


When reviewing your policies about paid time off payouts, note whether you have any policies regarding termination of layoffs or failure to recall. Some employers have policies where severance is automatically provided if a layoff becomes permanent. You may need to amend these policies, at least temporarily, to avoid significant budgetary issues if there is a business downsizing and employees become permanently laid off. 


Benefits

There may be some conversion rights and other shifting of benefits if an employee is moved from temporary layoff to permanent layoff. If you have been carrying the employee’s health insurance during the temporary layoff, upon notice of termination, a COBRA notice would be required but there are also conversion and portability potentials for health insurance. You should notify employees not only of COBRA but of their conversion and portability rights. This information can typically be obtained from your broker and you should check if your insurance company sends COBRA forms directly to terminated employees. 


Abandoned personal property

Especially with a public health concern, an employee may choose to never return to the workplace which leaves the issue of what to do with their personal property. While something like a t-shirt or pair of tennis shoes can likely be thrown away if the employee doesn’t come to pick it up, other more substantive property requires a specific process. In a future post, we will review this process and the issue of abandoned personal property.


Data Security

If you didn’t do it when implementing temporary layoffs, anticipating that perhaps the layoff would be a week or two, make sure that you handle all of your data security issues when terminating employees. Shut down employee access to computer systems, deactivate passwords, and notify any other entities that the employee had system access to so they can monitor and audit external access. Make sure you get credit cards that have been issued to the employee back to your office. If credit cards or similar items are not returned, coordinate with your financial institution or credit card company to make sure inappropriate charges do not show up on your accounts. 


Consider for rehire

While no one wants to turn a temporary layoff into a permanent termination, sometimes business needs require it, particularly if layoffs are longer than 30 or 60 days. If you are hoping to bring the employees back even though there has been an extensive layoff, ask for current and updated contact information, ask that they contact you if and when they are available for work, and reach out to those people on your list if you have positions to fill.



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