Reality Check: California Labor Law and the Dreaded Furlough

Sacramento, CACalifornia labor law is designed to protect workers from unfavorable behavior on the part of employers. The problem: recent efforts by the State of California to mandate furloughs as a means to save money serves as an affront to California state labor law and the very statutes the state sponsored in the first place. And now, the private sector is getting in on the game, which could further erode California labor employment law.

There is little doubt that the State of California is in fiscal trouble and drastic measures were needed. However labor unions disagree with the mandated furlough—time off without pay—and have been litigating against the state, and the Governor's office in an attempt to try to force a reprieve.

Last month the California Correctional Peace Officers Association became the latest labor organization to file a petition against the state and the office of Governor Arnold Schwarzenegger, in a bid to have the furloughs reversed.

The problem is that private industry has caught the furlough bug as a means to save money and protect the bottom line in a worsening economy. It's the 'in thing right now,' according to labor insiders. 'Furlough' is the new buzzword and it appears as if everyone is jumping on the bandwagon.

The idea is not new. The manufacturing industry has been relying on the furlough for years, but under a different name: 'annual shutdown.' Manufacturers will often shut down the assembly line and send everyone home for a week or two, usually over Christmas when inventory is high and people aren't buying. Annual shutdowns in the manufacturing sector for a week or two are fairly common.

But now the idea has caught on in non-manufacturing sectors. It was announced early in the New Year that Gannett, the newspaper-publishing giant, would require all employees to take a week's furlough sometime within the first quarter. That's a week off without pay, and one un-named Gannett journalist referred to the mandated furlough as "banishment."

Furloughs have been lauded as one way to fight the recession, and to spread the pain around. Employees who agree to a furlough in an effort to avoid layoffs are helping protect jobs for their fellow workers. President Obama said as much when he remarked about "the selflessness of workers who would rather cut their hours than see a friend lose their job."

However, more often than not it's a case of employers forcing the furlough on employees who can least afford the dip in pay, such as a single mother. And there's been talk of some healthy, and profitable companies enacting furloughs, whether they are needed or not, because they can. They've decided to catch the wave, save some money and increase profit and returns on investment at the same time. And they're doing it on the backs of their employees, some of whom can least afford the loss of income.

But it could backfire on them. At least in California, according to state labor law—and it could nip at the heels of other employers in other states, as well.

One area in which there could be a problem, labor experts suggest, is when the furlough affects salaried employees who are normally exempt from overtime. As most know, the State of California dramatically lowered the exemption threshold for computer workers, for example, to an annual salary of $75,000. Employees at that level, many of whom have written contracts, may have a claim if their salary falls below that amount, such as might be the case through a mandated furlough.

Additionally, if the salary falls below $75,000 as the result of the furlough, the employer may lose his overtime exempt status for that employee. That employee could have an overtime claim for the remainder of the year.

There are other issues that could trigger violations in labor laws, according to experts. An employee furloughed from the workplace should not be required, or feel compelled to do any work from home. Were a non-exempt employee work as such, the law requires that he be paid for the hours worked.

And what about a salaried, overtime-exempt employee who is furlough for, say a week? That employee should not do a lick of work while at home. Emails, text messaging, the reading of reports…nothing. Were that employee to perform even a few hours of work from home, according to labor law she should be paid for the entire week.
Even if a worker is disciplined for electing to work while on furlough, that worker must be paid, according to labor law.

Obviously, if an employee were mandated to work unpaid overtime in an effort to make up for the furloughed time off, that too is a no-no.

"In some cases, employers are doing what they have to do to survive in a bad economy," says Lewis Maltby, the president of The National Workrights Institute in comments to MSNBC. "But in some cases, greedy employers are trying to squeeze work out of employees without paying them for it."

The state of California's finances notwithstanding, the Governor's gambit that the furlough will stem the fiscal bleeding could run into a brick wall with California labor law. Employers buying into the furlough should be careful to heed California labor employment law. Those that do not could expect lawsuits from disgruntled employees who feel taken advantage of by employers openly thumbing their noses at California state labor law.