In tough economic times, many employers have to make cuts to their payroll in order to survive. Sometimes they announce these cuts as a “furlough” rather than a layoff. What does that actually mean? And what difference does it make for employees who are out of work or facing reduced hours after a furlough?
What Is a Furlough?
Traditionally, a furlough was considered a leave of absence, usually granted to someone serving in the military or on a missionary assignment. In the employment context, employers often use the term for what is essentially a temporary layoff or reduction in employee work hours.
When a furlough involves reduced hours (rather than no work at all), some employers allow their employees to customize the arrangement. For example, an employer might require workers to take a total of four days off per month but allow them to choose the timing of those days.
How Is a Furlough Different From a Layoff?
Although different employers use different terms, a furlough is usually considered a temporary situation. Employers may hope to rehire laid off workers when and if they can, but there’s no guarantee of that outcome.
In contrast, it's generally understood that furloughed employees will return to work (or to full-time work if their hours were reduced) when the situation changes, without having to go through the hiring process again. Furloughs are a way for employers to cut payroll costs quickly while retaining their trained staff.
Sometimes furloughs come with a definite end date, such as for seasonal workers. Other times, employers simply furlough their employees with the expectation that they'll come back to work under certain conditions.
Can I Keep My Benefits When I’m Furloughed From My Job?
Generally, you’ll continue to accrue any sick days or other paid time off that your employer normally provides while you’re on furlough. Many employers also continue to provide benefits like health and life insurance for furloughed employees. But when the furlough doesn’t have a definite end date, employers simply may not be able to keep this beyond a certain period of time.
When you're still working but your hours have been reduced, you might no longer be considered a full-time employee for purposes of some benefits. Check with your employer for details. If you've lost your employer-provided health insurance because of a furlough, you may be able to get COBRA continuing coverage or a policy available under the Affordable Care Act.
Do I Have a Right to Notice Before Being Furloughed?
Under law, large employers must give 60 day's advance notice of a mass layoff that will last at least six months, except in certain situations. (Learn more about the requirements and exceptions in the WARN Act.)
Do Wage and Hour Laws Restrict Furloughs?
Under federal wage and hour laws, employers may typically cut an employee’s hours or pay, as long as the employee still receives at least minimum wage for the hours actually worked. So furloughs don't present wage and hour issues for most employees. However, different rules apply to employees who are “exempt” from overtime and other wage and hour requirements.
To qualify as exempt, the employee must perform a certain type of work and earn a base salary of at least $844 per week (as of 2025). Employers do not have to pay exempt employees overtime, but they generally can’t reduce their weekly pay. (See White Collar Exemptions Under the FLSA for more on exemption eligibility requirements.)
Exempt employees are entitled to their full weekly salaries for any week in which they perform any work. So if an employer instructs an exempt employee to work four days a week instead of five, the employee is still entitled to the same weekly salary. If the employer cuts the employee’s pay to account for the reduction in hours, it will lose the exemption status for that employee. This can lead to the employer owing large amounts in unpaid overtime, if the employee regularly works more than 40 hours per week.
Can I Be Furloughed If I Have an Employment Contract?
An employer may also be limited in its furlough or layoff decisions by the terms of an employment contract. For example, if you have a written contract promising employment for a certain period of time at a certain salary, your employer may not be able to cut your hours or pay. Employment contracts can also be formed orally—for example, if your employer made certain promises to you in person about not cutting your hours or pay.
In some states, your employer may be bound by the terms of its employee handbook or other written policies or practices. Check your employee handbook or policy manuals to find out if there are any such restrictions on furloughs or reduced hours.
Can You Receive Unemployment Benefits While on Furlough?
In many cases, you can qualify for unemployment compensation if you've been furloughed. If you're still performing occasional work for your employer, you might qualify for partial unemployment benefits in certain states.
Because unemployment eligibility is determined on a state-by-state basis, you should contact your state unemployment insurance office for more information.
Contact a Lawyer
If your employer has furloughed or laid off employees in violation of the law, contact an experienced employment attorney to discuss your legal options.