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Preparing Your Business and Employees for Temporary Layoffs

Tuesday, March 24, 2020
Authored by Robert Bernstein and Elizabeth Rice, Laner Muchin

Temporary layoffs are an option for employers who have temporarily stopped operating their businesses because of mandatory shutdowns (such as the mandatory shutdowns imposed by the Illinois government for dine-in restaurants, bars, theaters, gymnasiums, shelter in place, etc.) or who need to temporarily reduce their workforce during the COVID-19 pandemic. 

Temporary layoffs occur for a temporary, finite or undefined period of time (depending on the business circumstances), with the expectation that the employee will be brought back to work after that period, although depending on how things are structured, that may not be guaranteed.
Employer Intent: Temporary layoffs are a good option for employers who would like to attempt to keep as many of their employees as possible but are either temporarily closed and/or need to reduce their workforce due to the COVID-19 pandemic.
Notice to Employees: Temporary layoffs of less than 6 months do not fall under the federal WARN Act, so no notice would be required in this scenario on the federal level.  Additionally, the federal WARN Act includes an exception from the notice requirement for layoffs due to unforeseen business circumstances, which most likely would include circumstances like COVID-19.  While the Illinois state WARN Act does not contain this exception, many state Departments of Labor have stated, informally, that COVID-19 will except employers from the notice requirement.  Due to the uncertainty here, provided that your personnel action is covered under a WARN Act, we recommend giving as much notice to employees as possible under the business circumstances.  Employees should receive written notice, identifying the date on which the temporary layoff expires and explaining the reason why less than 60 days’ notice was given.
Benefits:  Employees are typically entitled to unemployment benefits for the period in which they are laid off.  In Illinois, the one-week waiting period for unemployment benefits has been waived due to the COVID-19 pandemic.  You should notify your employees at the time of communicating the layoff decision that they can apply for unemployment benefits.  Consult your group health insurance plan documents and insurance broker/consultant to determine how long your employees who are not working may remain covered by your group health plan.  If coverage is not available during the layoff, employees who were covered by the plan will be eligible for COBRA benefits to continue their health insurance coverage.  Employers should notify their employees of these benefits and the opportunity to elect COBRA.  Finally, keep in mind that if an employee is laid off after the FFCRA goes into effect (April 2, 2020), they may be entitled to the benefits mentioned above in the Furlough section under the FFCRA during the timeframe that they are still actively employed.
Pay:  Employees will not be paid while laid off, except for any pay due for work already completed before the temporary layoff.  You must allow your employees to use any accrued sick time pursuant to the City of Chicago or Cook County Sick Leave Ordinances (or other state or local paid sick leave ordinances), before the layoff becomes effective, so long as they have qualifying reasons to take such time under a paid sick leave ordinance.  Prior to the effective date of the layoff, you may also allow employees to use any other sick time, vacation time, or PTO that is part of your company policy (and depending on how your policies are written and/or the law in the particular state or municipality, you may have to do so).
Employee Work Visa Status: Temporarily laid-off employees with work visas may be treated as though they are on unpaid leave in order to avoid loss of visa status.  However, you must provide H-1B workers on layoffs with the same benefits and working conditions as your U.S. citizen employees on layoffs.
Additional Considerations:  You must be careful about which employees you choose to temporarily lay off.  Make sure you are choosing employees in a nondiscriminatory manner to avoid potential liability.  Additionally, if you do not want the federal WARN Act (and possibly state WARN Acts) to apply, temporary layoffs should last no more than 6 months.  If the temporary layoff extends beyond 6 months, the federal WARN Act (and possibly a state WARN Act) may apply, and additional notice requirements may apply.
Disclaimer: This article is intended to provide helpful information and should not be considered legal advice.  Please consult your labor and employment attorney or your immigration attorney, depending on the issues involved, to discuss advice as to the individualized circumstances pertaining to your issues or situations.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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