Employee Benefit Guidance & Compliance Solutions

Employers that are looking to change furloughs into permanent layoffs need to be sure that they are doing so in accordance with regulations set by COBRA and the Worker Adjustment and Retraining Notification (WARN) act. It is important to stay in compliance with the WARN Act and COBRA to ensure your security from fees!

When the WARN Act Applies:

The WARN Act requires covered employers to provide at least 60 calendar days’ advance written notice of a worksite closing affecting 50 or more employees, or a mass layoff affecting at least 50 employees and one-third of the worksite’s total workforce or 500 or more employees at a single employment site during any 90-day period.

An employment loss is defined as a situation where an employee:

  • Is terminated, other than a discharge for cause, voluntary departure, or retirement.
  • Has been laid off for more than six months.
  • Suffers a reduction in hours of work of more than 50 percent during each month of any six-month period.

If furloughed employees have been on a temporary layoff or had significantly reduced hours for six months, and there has been a mass layoff or plant closing as defined by the WARN Act, an employer may have to comply with the act’s notice requirements. But, it is important to note, not all employment loss requires 60 days’ notice. For example, furloughs expected to last less than six months do not trigger the WARN Act.

If a WARN Act notice for the temporary furlough wasn’t provided, then the employer would be in violation of the act if the furlough lasted more than six months unless the following conditions are met:

  • It can show that it clearly announced at the outset that the furlough would last less than six months.
  • The reason for the extension was not reasonably foreseeable at the outset.
  • Sufficient notice was provided when it became reasonably foreseeable that an extension of the furlough beyond six months was necessary.

The COBRA Act

If an employer required employees who were furloughed to pay more for coverage than active employees, this would have been considered a loss of coverage under the COBRA regulations. COBRA continuation coverage rights would have applied, triggering a COBRA election notice requirement. COBRA rights do not necessarily arise when an employer switches from a furlough to a permanent layoff unless the employer has maintained health coverage at the active-employee rate during the furlough and does not wish to do so when the permanent layoff occurs.

COBRA notices should be done properly to avoid any compliance issues and fees from the IRS. Check out our great blog posting on COBRA Compliance, to learn more.

Wrapping it Up

If you’re having trouble with changing your furloughs into permanent layoffs within the regulation of WARN and COBRA, please contact us at any time! We are always available to help and can answer any questions you may have. PF Compass works with clients who primarily reside up and down the Eastern Corridor. We work with all types of businesses, large and small, across a wide range of industries. Over the years we have created a reputation for providing quality group benefits and unmatched service for all our clients. As a result, we are proud to say that many of our clients have become loyal and continue to work with us for years to come.

 

 

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