Personal Finance

Your boss said, 'You're furloughed.' What does that mean exactly?

Key Points
  • Amid the coronavirus pandemic, Google searches for, "What does furlough mean?" are up more than 5,000% over the last 30 days. 
  • Here's everything you need to know about the practice. 

In this article

Empty desks and chairs in a high key cafeteria room with no people during corona virus pandemic.
Giulio Fornasar

Samantha Costanza was furloughed in March by her company, which designs merchandise for Broadway shows, all of which are now closed due to the coronavirus pandemic

"I had not heard of the term 'furlough' before, and assumed it had an equal meaning to 'laid off,'" said Costanza, 25.

These days a lot of people are hearing that word for the first time, and feeling the same confusion. Google searches for, "What does furlough mean?" are up more than 5,000% over the last 30 days. 

Basically, a furlough is defined as a temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions at the specific employer or in the economy as a whole. These involuntary furloughs may be short or long term, and many of those affected may seek other temporary employment during that time.

"Furlough," derives from the dutch word, "verlof," which means "leave of absence," usually in regard to soldiers or prison inmates, said John Sullivan, a professor at San Francisco State University who studies furloughs. "In the employment context, it's an offshoot of an old railroad and airline term for a time period without work," he added. 

Most recently, furloughed workers have been associated with government shutdowns, said Lisa Baranik, assistant professor of management at the University at Albany. The 2013 shutdown, she said, led to 850,000 federal workers being furloughed. 

In most cases around the coronavirus pandemic, the term typically refers to a mandatory, temporary unpaid leave of absence. Companies use them during recessions as an alternative to lay-offs, because it allows them to bring workers back quickly when the economy starts to heal. The length of the leave varies, "depending on how long the downturn lasts," Sullivan said. "But almost always it's at least a year." 

However, some furloughed workers never return to their jobs, he said. 

"Companies like Tesla will come back and end the furloughs while many retailers like Macy's will never return to their current level of employment, because of Amazon's dominance," he said. 

Lay-offs have been more common than furloughs, said Sandra Sucher, a professor of management practice at the Harvard Business School. During the Great Recession, she said, fewer than 1% of employees were furloughed while 1 in 5 were let go. 

"The reason they were rare is that it was legally easier to lay off an employee in the U.S., than to furlough them," said Sucher, adding that states have different requirements for furloughed workers. 

Macy's furloughs most of remaining workforce

Yet the coronavirus pandemic has triggered a flood of furloughs. 

"It certainly appears to be a record number, by far," Sullivan said. 

There's no federal law requiring companies to offer benefits to their furloughed workers, Sullivan said. "And continuing benefits is much less common now that benefits have gotten so expensive," Sullivan said.

Still, some firms have done so. For example, Best Buy announced this week it will furlough more than 50,000 employees, but it will continue to pay for their health-care costs over the next three months. With its theme parks shuttered, Disney has also furloughed more than 40,000 workers, who are also guaranteed to keep their health insurance for a year.

In the meantime, the $2.2 trillion relief package Congress passed in March allows furloughed workers to collect unemployment checks. That's worked out for Costanza.

"Much to my surprise, I'm actually making more money on unemployment than I would have with my usual salary," she said.

During their furlough, workers are also free to look for other jobs, Sullivan said, but warned that they can run into some hurdles.

"The new employer will fear that they will quit the minute their original firm calls them back," he said. 

Disney World to furlough 45,000 workers

And it's not just financial stress that furloughed workers contend with, Baranik said. She explained that they miss out on the positive feelings they get from going to work, such as "believing they have control over their lives."

Those setbacks can be long-lasting.

"Workers who are furloughed experience burnout and dissatisfaction well after the furlough has ended," Baranik said.

Costanza's boss originally told her she'd be furloughed for four weeks, but she expects that timeline to grow.

"It's difficult to stay hopeful about a return to work when it's apparent that there are still weeks, if not months, before nonessential businesses can reopen and social distancing rules are relaxed," she said. 

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