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Layoffs vs. furloughs: The important differences workers need to know

Twenty/20

Up to 50% of American businesses are currently laying off or furloughing employees or are considering doing so because of the coronavirus, according to an employer survey conducted from March 20-26 by Challenger, Gray & Christmas. The Fed estimates that the pandemic could result in up to 47 million people either losing their jobs or being temporarily out of work.

But a job loss isn't always straightforward. Some workers have been laid off or fired, for example, while others have been furloughed. It may not be clear what, exactly, each term means, and how it can affect your ability to file for unemployment benefits or keep your health insurance coverage. Here's what you need to know.

Furloughed vs. fired vs. laid off

Here is a breakdown of some common terms attached to job losses and what they mean:

  • If an employee is fired, that means an employer terminates your employment, generally in response to some sort of malfeasance on the employee's part.
  • If an employee quits, that means an employee has voluntarily left their job for any reason.
  • If an employee is laid off, that means an employer terminates an employee often as a cost-cutting or downsizing measure, or because there isn't enough work to be done to justify keeping the employee. Typically, the termination is permanent.
  • If an employee is furloughed, that means an employer places an employee on an extended, unpaid leave of absence. Furloughs may or may not have set duration. Most workers will not receive a paycheck and may not have access to benefits, though some do. When a furlough ends, employees may return to their positions.

Your eligibility for things like benefits and insurance coverage can hang on which category your job loss falls into. Which state you live in, and to a larger extent, your employer, are also determining factors. 

"It depends on the company," says Pamela Loprest, a senior fellow and labor economist at the Urban Institute. "An employer can still pay for an employee's health insurance, but sometimes they don't. It really just depends."

For some workers, being furloughed may mean that they lose their paychecks but keep their health insurance. For others, it may mean that they lose both, at least temporarily. It's at an employer's discretion.

Answers to some frequently asked questions about unemployment

Can I look for a new job?

Yes. You can always look for a new job whether or not you're furloughed, have been fired, or are still employed. Under normal circumstances, those receiving unemployment benefits are required to look for a new job in order to keep getting assistance.

Can I work if I've been furloughed?

Maybe. You can't do any work for your current employer, not even checking your email, since that counts as work, and if you do any type of work as a salaried employee, your company will need to pay you for the entire day. 

Furloughed employees may be able to get other temporary jobs for other employers, assuming that doesn't conflict with company rules or regulations. But if you've been furloughed, expect to return to work at some point, says Scott Colbert, chief economist at Missouri-based Commerce Trust Company.

"It's expensive to rehire and retrain people," Colbert says. For that reason, he says, "it's a smart business decision" for companies to furlough workers rather than lay them off.

Can I file for unemployment?

You can file for unemployment if you were laid off, downsized, furloughed, or otherwise lost your job through no fault of your own. You typically can't file if you quit your job or were fired for some type of misconduct, like breaking company rules (though there are exceptions).

Gig workers and freelancers, who are generally self-employed, can also qualify for unemployment benefits under the recent stimulus package that was signed into law.

VIDEO2:2502:25
How to collect unemployment benefits

Video by David Fang

If I was forced to quit due to the virus, do I qualify for unemployment?

The coronavirus has brought up situations in which people were effectively forced to quit their jobs. Say, for example, you quit to avoid on-the-job exposure to the virus because you have underlying health issues. In those cases, you're likely to qualify for unemployment benefits, Loprest says.

Do I get to keep my health insurance and other benefits?

The answer depends on your employer. If you were laid off or furloughed, you might be able to keep your benefits and insurance for some time, either through a severance package or other means.

If you quit or were fired, then your insurance coverage generally will not carry over, unless otherwise stipulated in a severance package. COBRA is an option, which will allow you to continue your existing coverage for up to 18 months, but depending on your plan and provider, it can be prohibitively expensive. Otherwise, you'll likely need to find coverage somewhere else

As for other benefits, like a 401(k) match, Colbert says that you're likely out of luck. "If you're not getting paid, you're probably not going to get your 401(k) match," he says.

When can I go back to work?

If you quit your job, were fired, or got laid off, you'll probably need to look for a new position, perhaps a remote job or a side hustle you can do from home. The situation for furloughed workers is different. Colbert says that he expects employers to start bringing furloughed workers back to work within a couple of months. 

"By June, we could see [work restrictions] begin to be lifted," he says. "I think it'll be sooner than people think. I'm optimistic."

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