[author: Talia L. Delanoy]
For some industries, and in particular, construction, periods of slow work are inevitable. When no work is available, many employers place their employees on “furlough” – an unpaid, non-working status, but still on the Company “books” – because the employer doesn’t want to deal with terminating and re-hiring the employee. In California, an employer may temporarily furlough but only if the furlough is truly short-term. Under longstanding guidance from the California Division of Labor Standards Enforcement (DLSE) which was confirmed by the Ninth Circuit Court of Appeals in Hartstein v. Hyatt Corporation, the label of “furlough” or “temporary layoff” is not decisive; what matters is the lack of a specific return-to-work date within that pay period. As such, a furlough that extends beyond the length of the employer’s regular pay period is considered a termination or “layoff” for wage-and-hour purposes.
What this means:
- If a furlough lasts longer than the payroll cycle, the law treats the employment relationship as having ended.
- As a result, the employer must comply with final wage requirements, including:
- Paying all final wages immediately at the time the furlough becomes a termination; and
- Paying all accrued but unused vacation/PTO as part of final wages.
- Failure to issue final wages on time can trigger significant waiting time penalties, of up to 30 days at the employee’s daily rate of pay, under Labor Code section 203.
Why the rule exists:
California law requires that employees be paid on regular paydays in full. A prolonged furlough—with no work performed and no wages issued—violates these timing rules unless the employment relationship has ended. To avoid that conflict, the DLSE and CA courts treat furloughs longer than a pay period as a separation.
