Hundreds of thousands of people in the United States and the UK across nearly every industry are without work as companies struggle to stay afloat in the face of the coronavirus pandemic. As a result of the current sweeping emergency, businesses deemed nonessential and ordered by state and federal governments to drastically reduce operating hours or cease all together are laying off, furloughing, or cutting the pay of up to 90% of their workforces. Airlines and hotel chains, as well as several large retail companies, are each reporting furlough numbers in the tens of thousands with tentative announcements that further layoffs are a likely possibility.
On Monday, Macy’s and Gap announced they would be furloughing the “majority” of their 125,000 and 80,000 respective workers. L Brands, which owns Victoria’s Secret and Bath & Body Works, as well as Nordstrom made similar announcements last week, reports the New York Times. Last week, new unemployment benefit filings surging well beyond 3.3 million nationwide, and this is before counting employees from these companies who may file when they no longer have to work as of 5th April.
For scale, the worst week for jobless claims during the Great Recession was 665,000. Last week, claims totalled five times that amount. On 24th March, the Federal Reserve Bank of St. Louis estimated that United States unemployment levels could reach up to 32% as a result of coronavirus-related layoffs. Just four weeks ago, unemployment was at 3.5%. “We may well be in a recession,” Federal Reserve Chair Jerome Powell told NBC’s Today show. “The first order of business is to get the virus under control and then resume economic activity.”
But amid all of the actions taken by various companies, the mass number of furloughed employees has caused some confusion as to what exactly this means.
Furloughing employees is essentially committing to a temporary layoff such as an involuntary leave or modified working hours without pay, usually for a specified period of time. Some companies have announced that its employees will be furloughed for six weeks, while others did not announce a set time frame. Aside from a global pandemic like this one, furloughs are typically used during reorganizations or when a location shuts down when it is unclear which employees will be retained. The idea behind furloughing employees is that, once it is safe to resume regular hours and customer capacities, employees will be able to return to their jobs making the transition back to normalcy quicker and simpler.
Despite the confusion surrounding zero-hour contracts, furloughed employees do, in fact, qualify for unemployment benefits. It is not a question of whether you have a job, it is about whether you are able to work at that job. Regardless of whether you have a job, if your employer is offering you zero hours, you qualify for unemployment benefits.
Given how hard the retail and hospitality industries have been hit in the short month or so that large portions of the population have been ordered to shelter in place and avoid public places unless absolutely necessary, it is likely that companies may not recover right away – if at all – when this is over, which could force some of these furloughs to become eventual layoffs.