The Law of Alternative Work Arrangements: Furloughs, Reduced Work Weeks & Flexible Work Arrangements

Layoffs are not the only option for corporations facing the need to cut costs. Alternatives include mandatory furloughs, reduced work weeks and flexible work arrangements; however, employers must implement these strategies while keeping state and federal wage-and-hour laws in mind.  Leila Narvid, an attorney in Payne & Fears LLP’s San Francisco office, quoted extensively in an article on TheGlassHammer.com, discusses the legal pitfalls of implementing such programs.

For example, mandatory work furloughs may be difficult to implement with “exempt” employees (those who are exempt from the wage-and-hour regulations covered by the Fair Labor Standards Act and other state laws).  “If any exempt employee performs any work during a work week,” Narvid says “that person must receive his or her entire salary for that week.”  Thus, failure to pay an exempt employee for a week where any work is performed — even very minimal work — can jeopardize that employee’s exempt status.  Narvid recommends that employers should inform exempt employees that absolutely no work is authorized during the furlough period without advance permission.

Narvid also cautions that employers must be careful when implementing a reduced work week for reduced wages so that the reduced wage does not bring the employee’s salary below the required threshold amount — $455 per week under federal law, and higher in some states.  “The least risk is taken by reducing the pay of exempt employees without dictating the hours they work,” Narvid suggests.  Finally, Narvid explains that while flexible working arrangements are gaining popularity, employers must carefully review their policies to ensure compliance with wage-and-hour laws, such as the FLSA, many of which were not designed to be flexible or to facilitate the practical concerns of the modern-day employer and employee.  However, if legislation currently pending in Congress is passed, Working Family Flexibility Act, then state and federal regulators will be forced to clarify labor and employment laws that affect flexible work arrangements.

All employers should review their policies, handbooks and employment contracts before implementing any of the alternatives to layoffs.