Furloughed: Suddenly Millions of Workers Have Time Off

Soldiers and prisoners aren’t the only ones getting furlough notices these days. State and local governments, companies both large and small, universities and even hospitals have also been sending people on temporary leaves of absence …unpaid leaves of absence.

“It’s the latest wrinkle in employers trying to save on wages,” says John Stapleford, a senior economist with Moody’s Economy.com. “It’s almost as if employers had a collective eureka moment, and have suddenly discovered the option of furloughing employees.”

There’s no question that the sad state of the economy is behind all these temporary layoffs and reduced hours. Employers these days, with production and sales lagging, and healthy profits only a memory, may find themselves needing to cut expenses. Labor, or at least some labor, is often seen as expendable.

As of March, the number of people working part time, rather than full time, because of slack business conditions was 6.9 million—which a spokesperson at the Bureau of Labor Statistics (BLS) called “an astonishing number.” (That’s about 5 percent of the total workforce.) In addition, 1.6 million workers were unemployed due to temporary layoffs.

Last week, the BLS announced that the average workweek for nonfarm payrolls fell in March by 0.1 hour to 33.2 hours—the lowest level since 1964, when businesses started providing workweek estimates. (See the BLS report “The Employment Situation: March 2009.” Scroll to Table A-5 for involuntary part-time work due to business conditions and Table B-2 for data on average weekly hours.)

Jennifer Berman, managing director of CBIZ Human Capital Services, says that this social phenomenon of employees having to take unpaid leave has little precedent. “We’re seeing a huge percent increase in furloughs over any time period prior to this,” she says.

Furthermore, the temporary layoffs seem to be affecting every sector of the economy, not just certain fields, like construction and tourism, where seasonal demand for labor has long been the norm.

Indeed, the list of furloughing employers includes the state of California, where most workers have been asked to stay home the first and third Friday of each month through June 2011.

The list includes the Gannett newspaper chain, where nearly all workers were required to take one week off without pay at some point in the first quarter of this year.

It includes all the auto manufacturers—certain General Motors and Ford manufacturing plants have been closed for weeks on end—and a good number of businesses related to automobiles, such as Michelin North America and the United States Steel Corporation. Even AARP recently announced that its employees must take a week of unpaid leave before the end of July.

There’s no template for how furloughs work. In some cases, all employees share the pain equally. In others, employees may be selected for furlough based on tenure, performance record or on the profitability of their individual departments. Some employers, such as the Universities of Maryland and Baltimore, are basing their furloughs on salary level—the higher paid you are, the more days off without pay you are being asked to take. In some cases, a furlough may last for a finite period of time, say a week, a month or even a few hours on specific days. In other cases, the time span may be indefinite.

Generally, if you are furloughed, whatever health and other benefits you have with your employer stay intact. But unless you are in a union that has a firm contract with the employer, just about anything and everything is fair game.

As for collecting unemployment insurance, the details will be determined by the state in which you live. Check with your home state’s unemployment insurance office, call the U.S. Department of Labor’s hotline, 1-877-872-5627 toll-free, or visit the Labor Department’s unemployment Web site for information on what you need to do to collect.

It may require patience. Some furloughed employees, notably in California, have reported difficulties in filing and collecting for unemployment insurance—because the employees in the office of unemployment have themselves been furloughed.