Labor Relations News and Views
A Polular Alternative to Layoffs
By Brian W. Kronick
League Labor Relations Counsel
Genova, Burns, & Veronia
Local governments across New Jersey are facing a crisis as the recession deepens and unemployment continues to grow. Mayors and local government officials are desperately seeking ways to balance their budget while continuing to provide much needed services to residents. Throughout New Jersey, the state and local governments are implementing hiring freezes, wage freezes, reduced employee workweeks, furloughs, and other alternatives to avoid the necessity of layoffs. These alternatives, if not implemented correctly, can have legal repercussions under Civil Service law, the Employer-Employee Relations Act, the Fair Labor Standards Act and other laws, so proceed carefully.
In general, a public employer may institute layoff actions for economic, efficiency or other related reasons. A public employer’s decision to institute layoffs is a non-negotiable managerial prerogative. However, the effect of instituting layoffs on employment conditions may be mandatorily negotiable. For civil service jurisdictions, the Civil Service Act and its regulations govern the layoff process. The regulations provide that appointing authorities shall lessen the possibility of layoffs by offering and implementing voluntary alternatives. Such alternatives include granting leaves of absence without pay, voluntary furloughs, voluntary reductions in work hours, optional temporary demotional title changes or other appropriate action. Appointing authorities are required to consult with affected negotiations representatives prior to offering alternatives to layoffs and during the pre-layoff process as many of the alternatives are negotiable. Indeed, employee participation in the alternatives is voluntary. Non-civil service jurisdictions are not confronted with the civil service regulatory scheme and can address layoffs or alternatives to layoffs as may be provided by ordinance, resolution, policies, procedures or collective negotiation agreements.
Civil service regulations permit an appointing authority to establish a voluntary furlough program. Pursuant to the regulation, the appointing authority submits to Civil Service a voluntary furlough program no later than 30 days prior to the planned implementation of the program. The proposal specifies the departments to be affected, employees or titles to be affected, a summary of consultations with the affected negotiations representatives concerning the program and the voluntary furlough program administrator for the appointing authority. The appointing authority can not implement a voluntary furlough program unless the program has been approved by the Commission. The appointing authority may suspend or terminate the voluntary furlough program at any time upon 30 days written notice of such suspension or termination to the Commission, all affected employees and labor negotiations representatives.
The regulations also require voluntary employee participation in the furlough program. The regulations provide that an employee who wishes to participate in the program shall request, in writing, approval for such participation from the appointing authority. The employee shall not be permitted to take the voluntary furlough until the employee has received approval by the appointing authority. In addition, the manner in which the employee proposes to use the voluntary furlough is to be contained in the request, and may be equivalent of no more than 30 work days in a calendar year, and may consist of one or more of the following: (i) shorter work days; (ii) intermittent days off; or (iii) consecutive days off. An appointing authority may deny an employee the opportunity to participate in the program if it determines that participation would be detrimental to public health, safety or welfare or would result in increased costs due to increased overtime, the need to appoint additional employees or the loss to that appointing authority of anticipated revenue.
Consequently, a reading of the civil service regulations indicates that the individual employee would have to elect to participate in the program, would be required to submit an individual request to the appointing authority to participate in the program and would have to indicate when and how the individual employee wishes to use the furlough. Non-civil service jurisdictions are not encumbered by this regulatory scheme when implementing furloughs. However, in either civil service or non-civil service jurisdictions, the effects of furloughs need to be negotiated with the bargaining representatives.
Should the appointing authority require all employees to take a furlough day without the individual employee agreeing to do so, this would likely be considered an involuntary furlough. Involuntary furloughs are not contemplated under the regulations and have been found to violate the civil service regulations and the Employer-Employee Relations Act when not negotiated with the bargaining representatives. In In the Matter of Union County, 17 NJPER 448 (¶22214, 1991), the Public Employment Relations Commission (PERC) temporarily restrained the county from implementing an involuntary furlough program. The county unilaterally announced a five day involuntary furlough program that would affect the police department. The PBA and SOA filed unfair practice charges contesting the unilateral application of the furlough program. The issue presented to PERC was “is the county’s unilateral action permitted by the Civil Service Act, N.J.S.A. 11A:1-1 et seq., and its managerial prerogatives under the Employer-Employee Relations Act or is it violative of the Civil Service Act and the county’s duty to negotiate under the Employer-Employee Relations Act?” PERC explained that “the Commissioner of Personnel has already determined, under the facts of this case, that the statutes and regulations governing layoffs do not appear to permit the county’s program for involuntary temporary furloughs.” Thus, PERC determined that “[g]iven these factors, this case centers not on the non-negotiable subject of layoff decisions, but rather on the mandatorily negotiable subjects of work year, annual compensation, and unpaid leaves of absence.” PERC noted that “[i]t is important to emphasize that the county’s plan is not a situation where an appointing authority closes an entire department for a certain period of time, in which case bumping and other procedures are not necessary. Rather, employees are scheduled for these ‘temporary layoffs’ or ‘furloughs’ at the discretion of their department heads, presumably on a staggered basis.”
However, while involuntary furloughs have been held to violate civil service regulations and the Employer-Employee Relations Act, a department-wide shut down on a specific day(s) has been found not to violate either the civil service regulations or the Employer-Employee Relations Act. In In the Matter of State of New Jersey and CWA, 18 NJPER 50 (¶23021, 1991), the CWA filed a scope of negotiations petition identifying the issue as “[i]s the action announced in Acting Commissioner William G. Scheuer’s September 12 and November 8, 1991 notices to DOP employees mandatorily negotiable?”. The Acting Commissioner adopted a furlough program whereby the entire department would be shut down on eight specific days. PERC held that the DOP was not required to negotiate over its decision to shut down the DOP. PERC stressed that its holding was limited to the facts, where there was a complete shut down that affected all employees. PERC explained that “a case in which many employees were ordered not to work, but a department remained open might prompt a different analysis.” Additionally, PERC noted that “given a departmental shutdown, a majority representative still has a role to play in representing employees’ interests and that a non-negotiable decision may still give rise to severable issues which must be negotiated upon demand or which may be contested through grievances claiming contractual violations.” PERC explained that “[f]or example, a case in which the majority representative disputed the financial need to reduce personnel costs could result in its receiving the financial data which allegedly prompted the employer’s action. Similarly, the majority representative may negotiate over such obviously negotiable matters as implementing procedures, the dates and amounts of payroll deductions, and the substitution of paid leave days for days lost due to a shut down.”
Thus, one answer to the dilemma of implementing voluntary furloughs while at the same time having to negotiate with the bargaining representative is to leverage the necessity of layoffs against the need for reduced work hours, reduced compensation and unpaid leaves of absence. Indeed, it is in both parties interest to keep employees employed and avoid having to impose layoffs.
While mandatory furloughs and reduced hours are popular alternatives to layoffs, they can also be legally problematic if not implemented properly for employees who are exempt from wage and hour laws. U.S. Department of Labor regulations provide that “[d]eductions from the pay of an employee of a public agency for absences due to a budget-required furlough shall not disqualify the employee from being paid on a salary basis except in the workweek in which the furlough occurs and for which the employee’s pay is accordingly reduced.” 29 C.F.R. §541.70. This regulation establishes that public employees that are placed on a furlough due to budget reasons only lose FLSA exempt status for the week in which the furlough occurs. Based on the applicable regulation and case law, a public employee on a furlough will only lose exempt status under the FLSA for the week in which the furlough occurs. The public employee will remain FLSA exempt for the weeks in which the furlough does not occur.
Although layoffs are occurring at a record-setting pace, furloughs are a popular alternative being considered by public employers. However, layoffs, furloughs, or other alternatives to layoffs being considered by public employers can present legal obstacles if not implemented correctly under Civil Service law, the Employer-Employee Relations Act, the Fair Labor Standards Act and other laws so proceed with caution and legal guidance.
This article was originally published in New Jersey Municipalities magazine. Vol. 86, No. 4, April 2009