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Unintended Consequences of Furloughing Employees

By Michael J. Gore

Many employers are rightfully concerned with how best to manage the implications of the COVID-19 crisis on their business, with some considering “furloughing” their employees as a way to mitigate the financial impact.

While this trend is increasing in popularity, there are a number of unintended consequences associated with furloughing employees that businesses should consider in the decision-making process. For example, issues may arise regarding non-compete agreements or employee exemptions, such as:

  • High-level employees who are often subject to written employment agreements may nevertheless be entitled to pay during a furlough.
     
  • A furlough could result in a violation of an employee’s agreement, and a contract’s breach is traditionally a defense to an action to enforce a non-compete. Therefore, if the employer later seeks to enforce a non-compete or other restrictive covenants against a former employee, the employer may be hindered in its ability to protect the business.
     
  • Employees who are traditionally exempt under the Fair Labor Standards Act (FLSA), may fall out of an exemption if the employee is no longer paid a salary. A furlough could cause exempt employees to now become non-exempt under the FLSA.

The failure to consider the unintended consequences of furloughs or any layoffs could significantly impact your business beyond COVID-19.

Contact us at info@jonesfoster.com with questions or to request more information.

About Jones Foster

Jones Foster is a commercial and private client law firm headquartered in West Palm Beach, Florida. Established in 1924, the Firm has served as an integral part of South Florida’s growth and prosperity for nearly a century. Through a relentless pursuit of excellence, Jones Foster delivers original legal solutions that help clients, colleagues, and the community to move forward. The Firm’s attorneys focus their practice in Real Estate, Litigation & Dispute Resolution, Private Client Services, Corporate & Tax, and Land Use & Governmental. For more information, please visit www.jonesfoster.com.

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