Furloughed employees generally do not get paid for the time they are not working, though they remain employed and usually keep some benefits. Hourly workers are paid only for hours actually worked. Salaried (exempt) workers must be paid their full weekly salary for any week in which they do any work at all. Federal employees are entitled by law to back pay after a government shutdown; private-sector workers usually are not. Most furloughed workers can file for unemployment.
Hourly vs. Salaried Pay During a Furlough
The Fair Labor Standards Act treats the two groups very differently. If you are non-exempt (hourly), you are paid only for hours you actually work.1United States Department of Labor. Fact Sheet #70: Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues A full furlough means no wages. A reduced schedule means you are paid only for the hours you put in.
Exempt (salaried) employees are protected by the salary basis rule. If you perform any work at all during a workweek, your employer owes you the full weekly salary for that week.1United States Department of Labor. Fact Sheet #70: Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues Pay can only be skipped for weeks in which you do zero work. That is why most employers structure salaried furloughs in full workweek blocks.
Why Any Work in a Furlough Week Means Full Pay
Under the salary basis test, an employer cannot dock an exempt employee’s pay for partial-week absences the employer caused.2eCFR. 29 CFR 541.602 – Salary Basis If you are ready and willing to work but your employer has no work for you, that time cannot reduce your pay. The only clean way to avoid paying is to furlough you for the entire week with no work performed.
“Any work” is broad. The Department of Labor says employees who perform part or all of their normal duties during a furlough day are working.1United States Department of Labor. Fact Sheet #70: Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues Answering an email, joining a short call, or reviewing a document from home all count. If your manager asks you to check in briefly during a furlough week, you are owed your full salary for that week.
Repeated improper deductions have a further consequence. An employer that habitually violates the rule can lose the exemption for the affected employees, which means owing overtime for all hours over 40.2eCFR. 29 CFR 541.602 – Salary Basis If you are salaried and furloughed, the safe move is to disconnect entirely and document any request to work.
Back Pay After the Furlough Ends
Private Sector
No federal law requires a private employer to pay you retroactively for time you did not work. Some employers do so voluntarily, and some union contracts require it, but the decision belongs to the employer. If you are covered by a collective bargaining agreement, check it for furlough provisions.
Federal Employees
The Government Employee Fair Treatment Act of 2019 requires that any federal employee who is furloughed or excepted from furlough during a shutdown receive pay for the entire lapse period, at their regular rate of basic pay, as soon as practicable after the shutdown ends.3GovInfo. Government Employee Fair Treatment Act of 2019 The law applies to every future shutdown, and the payment counts toward retirement benefits.
Filing for Unemployment Benefits
Furloughed workers are usually eligible for unemployment insurance because they are out of work through no fault of their own. There is no federal unemployment program; each state runs its own with its own eligibility rules and benefit amounts.4USAGov. Unemployment Benefits You file with your state’s unemployment agency, which uses your earnings history to determine qualification and weekly amount.
Most states impose a one-week waiting period, so your first payment covers the second week you are out of work.5U.S. Department of Labor. State Unemployment Insurance Benefits You must generally be able and available to accept work while collecting.
Several things can reduce or complicate your payments:
- Required PTO payouts during the furlough may count as income and reduce your weekly benefit.
- Earnings from a temporary job must be reported. States reduce your benefit based on gross earnings, though not dollar for dollar; every state applies an earnings disregard that ignores some part-time wages before reducing your payment.
- If you later receive back pay covering weeks you also collected unemployment, you will likely have to repay those benefits.
Shared Work Programs for Reduced Hours
If your employer is cutting hours rather than furloughing you outright, a shared work program (also called short-time compensation) may apply. Roughly 30 states operate these programs, which let employers reduce hours across a group of workers instead of laying some off.6U.S. Department of Labor. Short-Time Compensation Fact Sheet
You collect a prorated unemployment benefit matching the percentage of hours you lost, on top of wages for the hours you still work.6U.S. Department of Labor. Short-Time Compensation Fact Sheet You keep your health and retirement benefits through your employer, and unlike regular unemployment, shared work participants are not required to search for other jobs while enrolled.
Health Insurance
Your coverage does not automatically end when a furlough starts. Many employers continue group health insurance during a furlough, but with no paycheck to deduct from, you will typically need to arrange direct payments for your share of the premium. If a payment is late, the employer can drop coverage after written notice, so track the deadlines.
If your coverage is terminated because of the furlough, a reduction in hours is a qualifying event under COBRA.7Office of the Law Revision Counsel. 29 U.S. Code 1163 – Qualifying Event COBRA continues the same plan for up to 18 months, but you can be charged up to 102 percent of the total premium, which includes your former share, your employer’s former share, and a 2 percent administrative fee.8U.S. Department of Labor. Continuation of Health Coverage (COBRA) For many people that is several times what payroll deductions cost. A marketplace plan through healthcare.gov may be cheaper depending on your furlough-period income.
Retirement, PTO, and 401(k) Loans
Contributions to a 401(k) stop during a furlough because there is no paycheck to deduct from, and employer matching contributions stop with them. You cannot make voluntary contributions during this time because plan contributions must come from compensation. PTO accrual usually pauses for the same reason, and some employers require you to use accrued PTO before or during the furlough.
If you have an outstanding 401(k) loan, the IRS allows a plan to suspend repayments during a leave of absence lasting up to one year.9Internal Revenue Service. Retirement Plans FAQs Regarding Loans When you return, you must make up the missed payments by increasing the monthly amount or paying a lump sum at the end, so the loan is still fully repaid within the original five-year term. Missing the make-up leaves the balance treated as a taxable distribution, plus a 10 percent early withdrawal penalty if you are under 59½. Confirm with your plan administrator before the furlough begins that your plan allows suspension.
Taking Another Job While Furloughed
Federal law does not stop a furloughed private-sector employee from taking another job, but your employment agreement might. Non-compete clauses, confidentiality agreements, and outside-employment policies remain in force because the employment relationship is still intact. Review anything you signed at hiring and check your employee handbook before accepting temporary work, especially with a competitor.
Federal employees remain government employees during a furlough and are still bound by ethics rules. Agencies generally require prior approval before any outside employment, and approval can be denied for conflict-of-interest or security reasons.
If you collect unemployment while working elsewhere, you must report all gross earnings. Earning above your state’s threshold in a given week can wipe out that week’s benefit.
When a Long Furlough Becomes a Layoff Under WARN
A furlough that keeps getting extended can turn into a covered layoff. Under the Worker Adjustment and Retraining Notification (WARN) Act, a furlough lasting longer than six months is treated as an employment loss, the same as a permanent layoff.10Office of the Law Revision Counsel. 29 U.S. Code 2101 – Definitions WARN applies to employers with 100 or more full-time employees and requires 60 days of written advance notice before a plant closing or mass layoff.11Office of the Law Revision Counsel. 29 USC 2102 – Notice Required Before Plant Closings and Mass Layoffs
If a furlough was initially expected to last six months or less but conditions force an extension, the employer must give WARN notice as soon as it becomes reasonably foreseeable the furlough will exceed six months.12U.S. Department of Labor. Worker Adjustment and Retraining Notification Act Frequently Asked Questions Without proper notice, the furlough is treated as an employment loss from day one, which can entitle affected workers to up to 60 days of back pay and benefits.13eCFR. 20 CFR Part 639 – Worker Adjustment and Retraining Notification Worth tracking if your furlough keeps getting extended with no clear return date.