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Discrimination, Benefit Issues to Watch When Returning Furloughed Workers

Oct. 16, 2020, 8:01 AM

Many employers, confronted with significantly diminished revenue and a need to implement cost-cutting measures due to the Covid-19 pandemic, elected to furlough employees (placing them an unpaid, temporary leave of absence) in lieu of terminating their employment.

Now, as states begin to lift stay-at-home orders and business restrictions, there are several issues employers must be mindful of when recalling furloughed employees back to active employment—either remotely or in the office.

Mitigating Discrimination Risk

As my colleagues shared in an Insight in June, there are a wide scope of potential risks under federal, state, and local anti-discrimination laws employers face when determining which employees should return, when, and how. Employers must ensure that they have a legitimate, non-discriminatory reason for choosing which employees will return to active employment to avoid a class or collective action.

The best way to avoid claims is to develop an in-depth return-to-work plan acknowledging many of the same considerations as reduction in force planning, such as the job functions and skills necessary and the criteria, subjective or objective, used in selecting employees.

A crucial component of this plan is the identification of those tasked with selecting employees for recall, with additional written guidance detailing the selection criteria, and how to best support and document decisions.

Employers ought to have their preliminary list of employees selected for recall reviewed and possibly revised by higher-level decision makers to ensure the selection criteria were applied fairly. Employers should also consider retaining counsel to conduct a disparate impact analysis to ascertain whether a particular class is disproportionately impacted, and, if so, to ensure that the selections can be justified by legitimate, non-discriminatory business reasons.

Employers should also ensure that any return-to-work plan does not exclude older workers or others at an increased risk from Covid-19, including those with pre-existing conditions, as such conduct could violate the Age Discrimination in Employment Act and/or the Americans with Disabilities Act.

Finally, employers must also carefully evaluate recall decisions to avoid claims of wide-scale discrimination based on gender or related protected classes, including pregnancy or parental leave. Many employees, most often women, may still be balancing childcare responsibilities without consistently reliable options, which could impact their work performance, travel availability, or ability to return to work at all.

Communicating With Returning Employees

Employers should notify employees who are being recalled from furloughs at least a week prior to the expected return to work date in writing or confirmed in writing following an initial verbal notification. This will help ensure that employees have an opportunity to make childcare, transportation, and other arrangements related to their return.

Ideally, the written return-to-work communication should include the same information that an offer letter would include. This is particularly important if employees will be returning with modified working schedules or roles, or if bonus, commission, or other compensation plans have been modified.

Return-to-work communication should remind employees their employment remains at-will, that they remain subject to existing confidentiality agreements and restrictive covenants, and any terms and conditions of employment not specifically addressed in the letter remain consistent with the terms of the original offer letter.

Finally, any communication should advise employees that if they decide not to return to work, to notify the employer as soon as possible.

Benefits Issues

Applicable large employers should be aware of how breaks-in-service following a rehire of furloughed employees affect eligibility provisions and waiting periods under the employer’s group health plan.

If benefits continued during the furlough, potential employee “catch-up” payments are needed if the employer paid employee premiums during this period. For most employers, if an employee returns to service after a period of 13 consecutive weeks (or 26 consecutive weeks if the employer is an educational institution) without being credited any hours of service, the employee may be treated as a new hire for eligibility purposes.

If the returning employee is deemed a continuing employee, the employee should be offered coverage as of the first day they are credited with an hour of service or as soon as administratively practicable. Employers may also use a rule of parity instead of the 13-week break-in-service rules to determine whether an employee is eligible for an offer of coverage.

It is also important for employers to review the impact of adjustments to compensation on benefit contributions and eligibility and remind returning employees to review these changes and resume contributions to retirement plans.

Employers may also want to consider benefit design changes to address the Covid-19 pandemic, such as adopting/expanding telehealth benefits, providing Covid-19 diagnosis and testing as an excepted benefit, and adopting/expanding back-up child-care benefits.

Finally, employers should review recordkeeping issues and reporting issues, and deferred compensation plans subject to Internal Revenue Code Section 409A.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Genevieve M. Murphy-Bradacs is senior counsel in the Employment, Labor & Workforce Management practice in the New York office of Epstein Becker Green. She represents clients in employment disputes and discrimination claims in state and federal courts, before state and federal administrative agencies, and at arbitration hearings.

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