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When the coronavirus pandemic first hit the United States, a combination of stay-at-home orders, drops in consumer demand and widespread illness forced businesses across the country to shutter, restrict operations or otherwise alter their plans.
These necessary measures had devastating consequences: Many businesses had to lay off or furlough their employees. Although things are not “back to normal,” we aren’t in quite the same situation we were in March and April of 2020. Whether you had to furlough your employees due to the pandemic or you're a small-business owner dealing with other types lay offs and furloughs, here are the basics of rehiring employees.
Layoff vs. furlough
The main difference between layoffs and furloughs is that if you furlough an employee, you technically still employ them. As a result, these employees may still have access to benefits (depending on the rules of your company’s group health plan) and will expect to return to work at some point. Layoffs are when the employer cuts ties with the employee completely.
A furlough is a temporary reduction in pay and/or hours. There is no set definition of the terms of a furlough — the employer sets those terms depending on their financial and business needs.
A furloughed employee is still technically employed. Their hours and pay will be reduced (typically down to zero) for a finite amount of time, such as two weeks, a month or longer. It’s important to refer to your group health plan documents to see if this employee would be eligible to remain on your company’s plan. If they are not eligible, COBRA coverage should be offered.
Furloughed employees may be entitled to unemployment benefits, despite still technically being employed.
A layoff is when a business terminates an employee for reasons outside of their performance — for example, because the pandemic has made it impossible to keep them on.
Although layoffs can be temporary or permanent, the idea is that you sever ties with an employee completely with no concrete plans to rehire them. That means no salary, no benefits and no further connection between the two parties.
Bringing back furloughed workers
Because furloughed workers are still your employees, the process for bringing them back as full-time workers is fairly straightforward. This is the benefit of furloughing workers as opposed to laying them off. Yes, it may be more expensive up front, as you may have to continue paying them benefits, but the tradeoff is immediate recall.
Many recommend that you give your furloughed workers at least a week of warning that you’re asking them to return to work. Notify them via email of their re-start date, and include important information and updates such as changes in their schedule, work hours, compensation, benefits, job duties and other terms and conditions of employment.
If some of those changes could be considered “adverse actions” (such as reducing salary), explain your business reasons for the changes. Asking someone to return from furlough to a substantially reduced paycheck without warning invites conflict between your employees and your business.
In the case of the pandemic, communicating to your employees how your business has changed over the last several months — new safety precautions, hygiene and cleaning practices, distance requirements, etc. — is a crucial step.
Furloughed workers concerned that their workplace puts them at unnecessary risk for contracting the novel coronavirus may be able to make the case that their employer is putting them in “imminent danger” as outlined by the Occupational Safety and Health Administration (OSHA). Address potential health hazards, and employees will be less likely to make a complaint with OSHA and/or have a case for refusing to return to work.
Prepare to answer any questions your recalled employees have, or to be flexible if they cannot restart right away. For example, some people may have relocated due to the pandemic or taken another position, temporary or otherwise.
If you did not terminate the employee, their paperwork — such as I-9s — remains valid and you won’t need to have your furloughed employees fill out new documents. You may need to run another background check, depending on your industry and/or state. Ensure you have authorization from that employee to run this background check, if necessary.
If a furloughed employee refuses to return
If an employee that you’ve furloughed refuses to return to work, you can terminate their employment. You may have to report this refusal to the Department of Labor, since this worker may have forfeited their ability to collect unemployment by refusing your offer.
Rehiring laid-off workers
The process of bringing back an employee that you’ve laid off is a bit more complex than one you furloughed.
If you laid off employees due to the pandemic, attempting to rehire those same workers should be your first course of action. For one, rehiring those you laid off reduces your liability and the chances that a former employee has a case for wrongful termination.
Rehiring your old employees also reduces the amount of time you’ll need to spend onboarding your hires, who are already familiar with your practices and culture. It can be a boon to company morale as well.
If you aren’t able to bring back your entire workforce at once, base your decisions on the ones you do bring back on non-discriminatory business decisions.
Notify them of the job opportunity
Reach out to your laid-off workers by email or other written communication to let them know that you’d like to rehire them. As with furloughed workers, presenting laid-off workers with flexibility around a re-start date is good practice. Be prepared for this employee to potentially turn down your offer due to having taken another job or other concerns.
Treat them as a new hire
When you rehire a laid-off worker, remember that you are essentially forming a new employment relationship. Therefore, you’ll need to treat this worker as a new hire from a paperwork standpoint.
In all likelihood, you’ll need to have a rehired worker fill out a new I-9, W-4 and other tax documentation. They may also need to sign new contracts, offer letters, nondisclosure agreements, acknowledgments of receipt of the employee handbook and anything else you’d ask a new employee to review and complete.
One area where you may be likely to treat a rehired employee as one with whom you have a prior relationship: tenure, PTO and paid sick leave. Many state and local statutes require that employers grandfather in an employee’s prior tenure for vacation policies, for example. If you aren’t required to, you may want to grant that same tenure anyway as a show of good faith.
Communicate what has changed
As with furloughed workers, you should communicate the following to your rehired workers:
Any changes in schedule, work hours, supervision, compensation, benefits, job duties and other terms of employment.
New safety precautions and practices such as temperature-taking, disinfecting shared surfaces and requirements around distancing.
If working remotely, requirements around meetings, check-ins, availability and other aspects of staying connected while working apart.
That employment is still at will, and you may continue to make changes to their role as your business needs change. Additionally, a future furlough or layoff is still possible if the economics of employing them full-time don’t work in the near future (such as once the business’s PPP loan runs out).
If they refuse
Some employees that you seek to rehire may not want to return. Perhaps they’ve moved on to another company or they are still not comfortable returning to your place of business for fear of illness. Unfortunately, if it’s the latter reason, the Department of Labor asks that you report this refusal to them as well as to your relevant state workforce agency (in some states, this is required by law). Refusing to return to work means the employee will lose their supplemental federal unemployment benefits; it may also mean they’ll lose state unemployment benefits, though some states are carving out exceptions to this rule in light of the pandemic.
PPP loan forgiveness
If you’ve taken out a PPP loan, loan forgiveness depends primarily on whether you use at least 60% of that loan on payroll costs (and the other 40% on eligible expenses like rent, utilities and mortgage interest) as well as whether you use that loan within 24 weeks of receiving it.
You can and should use your PPP funds to rehire or recall workers. Under the terms of the PPP Flexibility Act, you had until December 31, 2020, to bring back all of the workers you laid off or furloughed in order to be eligible for full forgiveness.
Keep in mind: In the short term, bringing back a hire is not quite as expensive as what you pay them because doing so increases your loan forgiveness. Each employee that you don’t bring back means less of your PPP loan is forgiven. During the covered period of your loan, take advantage of this and offset some of your costs while ramping up your ability to meet the demand that does exist.
If you attempt to rehire or recall workers and they refuse your offer, this will not affect your forgiveness levels. Be sure that you have made a written offer in good faith to rehire the employee for the same salary/wage and number of hours they had previously and that you have a written rejection from the employee as proof.
If your financial situation hasn’t improved by the time your PPP loan runs out, you are not required to keep employees on staff if you can’t afford it. You can lay off or furlough these employees again if necessary.
A version of this article was first published on Fundera, a subsidiary of NerdWallet.