Managing Furloughs and Layoffs Under Wisconsin Law

Wisconsin employers may decide to convert furloughed employees to permanent layoffs when business conditions change, but doing so raises important legal and practical questions. Employers must understand how furloughs differ from layoffs, when notice is required under Wisconsin’s Business Closing and Mass Layoff law, how federal WARN may apply, and what steps reduce the risk of disputes and penalties.

This guide explains those concepts in plain language and provides a framework for employers planning workforce reductions involving furloughed workers.

Furloughs vs. Layoffs: Core Legal Differences

Before changing employment status, employers need a clear grasp of what distinguishes a furlough from a layoff under Wisconsin-related guidance.

What Is a Furlough?

In general terms, a furlough is a temporary, unpaid leave where an employee remains employed but does not work or receive wages for the furlough period. The Universities of Wisconsin, for example, describe a furlough as a temporary unpaid required leave that constitutes a leave of absence; the employee does not report for work and does not earn a wage. A furlough is explicitly not a layoff, non-renewal, or termination.

• The employment relationship continues.
• Employees typically retain eligibility for certain benefits depending on plan rules.
• The expectation is that work will resume at a later time.

Furloughs are often used when employers foresee short-term financial or operational disruptions but intend to bring employees back.

What Is a Layoff?

A layoff usually involves a cessation of employment at the employer’s initiative, triggered by circumstances such as a lack of work, loss of funds, or organizational changes. Laid-off employees are no longer actively employed and normally lose eligibility for employer-sponsored benefit plans, subject to continuation rights like COBRA under federal law.

Key layoff characteristics include:

• Employment is terminated, either permanently or for an extended period.
• Wages and most benefits stop as of the separation date.
• Recall may be possible, but is not guaranteed.

Wisconsin statutes governing the classified service illustrate typical layoff grounds: reduction in force due to stoppage or lack of work or funds, or material changes in duties or organization.

Why the Distinction Matters

This distinction is important because legal obligations change when a furlough becomes a layoff. Extended or indefinite furloughs may be treated as a termination by some jurisdictions, which can trigger layoff-related notice and benefit rules. Once an employer decides not to bring furloughed employees back, the situation should be treated as a layoff for compliance purposes.

Can Employers Lay Off Furloughed Employees?

Employers generally may terminate or permanently lay off employees while they are on furlough if business conditions deteriorate or long-term restructuring becomes necessary. However, the decision should be deliberate and documented, with attention to notice obligations and nondiscrimination principles.

Assessing Business Need

Common reasons for converting furloughs to layoffs include:

• Persistent revenue decline or loss of major clients.
• Closure of a facility, department, or location.
• Automation or reorganization eliminating job functions.
• Long-term changes in market demand that make previous staffing levels unsustainable.

Before making the decision, employers should review projections, alternatives to layoff such as reduced hours or job sharing, and the broader impact on operations and compliance.

Legal Foundation for Layoffs in Wisconsin

Although many private sector decisions are driven by business needs, Wisconsin law provides examples of how layoff authority is structured. For state classified employees, Wisconsin statutes allow layoff for reduction in force due to lack of work or funds, or material changes in duties or organization, and require consultation with the appropriate director before implementing a layoff plan. This model underscores two principles useful for private employers:

• Layoffs should be grounded in legitimate economic or organizational reasons.
• Planning and documentation are critical to ensure compliance and consistency.

Wisconsin Business Closing and Mass Layoff Requirements

When furloughed employees are converted to layoff status, employers must evaluate whether Wisconsin’s Business Closing and Mass Layoff law applies. This law, administered by the Department of Workforce Development, imposes specific notice obligations on covered employers.

Which Employers Are Covered?

In Wisconsin, employers that operate a business enterprise in the state and employ 50 or more persons generally must provide written notice 60 days before implementing a business closing or mass layoff. Certain entities, including federal or state government, their political subdivisions, charitable or tax-exempt organizations, and independent contractors, are excluded from coverage.

What Counts as a Business Closing?

A business closing triggers notice obligations when there is a permanent or temporary shutdown of an employment site or of one or more facilities or operating units at an employment site or within a municipality, affecting 25 or more employees (excluding “new” or “low-hour” employees).

In the context of furloughed workers, closing a facility and laying off most or all employees there may qualify as a business closing, requiring notice if thresholds are met.

What Counts as a Mass Layoff?

A mass layoff is a workforce reduction that is not a business closing but meets one of the following thresholds at an employment site or within a single municipality (excluding new or low-hour employees):

• At least 25% of the employer’s workforce or 25 employees, whichever is greater; or
• At least 500 employees.

If an employer transitions a large group of furloughed employees to permanent layoff status and those thresholds are met, the action may be a mass layoff under Wisconsin law.

Notice Requirements Under Wisconsin Law

Covered employers must provide 60 calendar days’ advance written notice before implementing a business closing or mass layoff. Notice must be given to several parties, including affected employees, certain government officials, and in some cases unions.

For employees, the notice should include, among other elements:

• The name and address of the employment site where the closing or mass layoff will occur.
• The expected date the business closing or mass layoff will begin and the employee’s separation date.
• Whether the action is permanent or temporary, with estimated duration if temporary.
• The schedule of separation, including job titles of affected positions and names of the employees currently holding those jobs.

If the entire employment site is to be closed, the notice must state that as well.

Consequences of Failing to Provide Notice

Employers that implement a business closing or mass layoff without required notice may face significant consequences. Affected employees can recover up to 60 days of back pay and benefits for each day that notice was required but not provided. In addition, if an employer fails to give timely notice to the highest official of a municipality, the State may assess a civil penalty of up to $500 per day for each day notice was required but not given.

These remedies make timely planning and accurate threshold analysis critical when converting furloughs to layoffs.

Interaction with Federal WARN Act

Wisconsin’s law operates alongside the federal Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act generally requires employers with 100 or more full-time employees to provide at least 60 days’ notice of certain mass layoffs or plant closings affecting specified numbers of employees.[10]

Both regimes may be relevant when furloughed employees are being permanently let go, particularly in medium and large organizations.

Key WARN Concepts for Employers

Under federal guidance, WARN:

• Applies to covered employers, usually those with 100 or more full-time workers.[10]
• Requires notice of qualifying plant closings or mass layoffs, which are defined by employee count and percentage thresholds.[10]
• May not be triggered if a reduction in hours or layoff lasts six months or less, or if work hours are not reduced by 50% in each month of any six-month period.

When furloughs become permanent and exceed six months, the situation may move within WARN’s scope, making it important to treat the change as a layoff and assess coverage.

Planning a Transition from Furlough to Layoff

Once an employer concludes that furloughed employees cannot be returned to work, a structured transition plan helps minimize legal risk and employee confusion.

Step 1: Confirm the Employment Status Change

Employers should formally determine that a furlough will end and that certain positions will be eliminated. This requires:

• Identifying which roles are affected and why.
• Documenting business reasons (e.g., financial loss, facility closure).
• Ensuring the decision is not based on protected characteristics and is consistent with equal employment opportunity principles.

Step 2: Analyze Notice Thresholds

Next, the employer should calculate whether the layoffs of furloughed employees will reach Wisconsin’s business closing or mass layoff thresholds and whether WARN is implicated.[10]

• Count affected employees at each site and within each municipality.
• Determine if the action is a shutdown (business closing) or a substantial workforce reduction (mass layoff).
• Evaluate federal WARN thresholds for plant closings and mass layoffs.[10]

If thresholds are met, the employer must plan and issue timely written notices.

Step 3: Prepare Legally Compliant Notices

Notices should be drafted to satisfy statutory requirements, clearly explaining:

• The nature of the action – closing, mass layoff, or both.
• The expected dates of separation and whether the action is permanent.
• The number of affected employees and the layoff schedule.
• Contact information for a company representative who can answer questions.

Employers should coordinate state and federal notices to avoid conflicts or omissions.

Step 4: Communicate with Furloughed Employees

Because furloughed employees may have anticipated a return to work, communication should be clear and respectful. Employers can:

• Explain that the furlough period is ending and describe the decision to implement layoffs.
• Clarify the effective date of separation and how it affects pay and benefits.
• Provide information about any severance, outplacement assistance, or support resources.

Written communication should align with formal notice requirements, but managers may also want to follow up verbally to answer questions.

Practical Considerations and Risk Management

Beyond statutory compliance, employers should consider broader practical and risk-management issues when converting furloughs to layoffs.

Benefits and Final Pay

Furloughed employees often retain certain benefits. Once they are laid off, employers must manage the termination of coverage and provide information about continuation rights. Wisconsin’s labor law materials note that employers in the state must provide written notice of plans to cease providing health care benefits to affected parties, covering employees, retirees, and dependents, at least 60 days before benefits end. This requirement can intersect with layoff timing and should be planned alongside closing or mass layoff notices.

Documentation and Fair Criteria

To reduce the risk of claims, employers should:

• Use objective criteria for selecting which furloughed employees will be laid off.
• Document the application of those criteria and retain records.
• Ensure decisions are consistent with anti-discrimination and retaliation laws.

Transparent reasoning and consistent application can help defend decisions if challenged.

Coordination with Internal Policies

Even where statutes do not mandate specific processes, many organizations maintain internal policies governing temporary layoffs, furloughs, and reductions in force. Wisconsin’s human resources handbook for state employees, for example, describes temporary layoff plans with specified elements and requires written notice to affected employees a set number of days before the effective date. Private employers can benefit from similarly structured internal procedures to ensure consistency and predictability.

Frequently Asked Questions (FAQs)

Can I permanently lay off employees who are currently furloughed?

Yes. Employers generally may convert furloughed workers to permanent layoffs when business conditions require long-term staff reductions, provided they comply with applicable notice, discrimination, and contract rules.

Does Wisconsin treat furloughs as layoffs?

No. Wisconsin guidance, including policies from universities, treats furloughs as temporary unpaid leaves of absence and explicitly states that a furlough is not a layoff, non-renewal, or termination. However, if a furlough becomes indefinite or is converted to permanent separation, layoff rules may apply.

When do I have to give 60 days’ notice in Wisconsin?

Covered employers (those with 50 or more employees) must provide 60 calendar days’ written notice before a business closing or mass layoff that meets statutory thresholds for affected employees and relevant officials.

What happens if I do not provide required notice?

Employers that fail to provide required notice of a business closing or mass layoff may be liable for up to 60 days of back pay and benefits to affected employees, and may face civil penalties of up to $500 per day for failing to notify municipal officials.

How does the federal WARN Act fit into this?

The federal WARN Act requires employers with 100 or more full-time employees to provide 60 days’ notice before certain plant closings and mass layoffs.[10] Employers must analyze both WARN and Wisconsin law when making large-scale layoffs, including those involving furloughed employees.

Key Takeaways for Wisconsin Employers

• Furloughs preserve employment while temporarily suspending work; layoffs end the employment relationship.
• Employers can lay off furloughed employees, but should treat the change as a formal separation with appropriate documentation.
• Large-scale layoffs may trigger Wisconsin’s Business Closing and Mass Layoff law, requiring 60 days’ written notice and exposing employers to back pay and penalties if ignored.
• The federal WARN Act may apply to bigger employers, especially when plant closings or mass layoffs reach federal thresholds.[10]
• Careful planning, accurate headcount analysis, and clear communication reduce legal risk and support fair treatment of employees.

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Author

medha deb

 

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

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