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Furloughs, Layoffs, and Other Staffing Reductions

This page provides resources and information on the layoff process for Washington local governments, including options for reducing staff, examples of procedures, and other related documents.

Overview

During economic downturns, local governments often find themselves in the position of needing to reduce their workforce. This page explores various ways a local government can reduce its staffing. Although permanent layoffs may be the most recognizable way in which to reduce staffing, other options, like furloughs, reduced hours, job sharing, or early retirement incentives can sometimes be a better fit.

Permanent Layoff

A permanent layoff is a final separation from employment and is also known as a “reduction in force.” The employment position is eliminated, and the employer does not intend to replace it.

Permanent layoffs often occur because of a downturn in revenue forecasts, lack of available work, or a combination of the two. A permanent layoff is distinct from terminating or firing an employee for unsatisfactory performance.

For information on employee terminations, visit MRSC’s webpage Employee Terminations.

Temporary Layoff

A temporary layoff can provide both the employer and employee with greater flexibility than a permanent layoff if, in the future, conditions warrant a return to work.

 Furloughs: One common form of temporary layoffs, furloughs consist of a complete stoppage of work for a fixed period of time (e.g., two weeks) or reduced work hours over a period of time (e.g., one day off a week for a year).

Standby: This form of temporary layoff is available by request through the Washington State Employment Security Department (ESD) for both full and part-time employees who expect to return to work within four to eight weeks (if approved by the employer). For more information on standby status, see the ESD webpage, Temporary layoffs and furloughs.

SharedWork: While not a layoff, ESD also offers the SharedWork program, which allows employers to reduce hours by as much as 50% while their employees collect partial benefits to replace a portion of any lost wages. The purpose of the program is to help employers prevent layoffs and keep their workforce intact during an economic setback.

Authority to Layoff

The decision to reduce staffing levels because of the budget is a decision of the legislative body. Local government legislative bodies—whether it be the city/town council, the county commission, or the special purpose district board of directors—have the power to create, fund, and eliminate positions through adoption of the budget or a budget amendment.

Agency policies often delegate the authority to furlough to the executive or administrator. For example, Newcastle's Personnel Policies, Sec. 10.7 authorizes the city manager to lay off employees for lack of work, reorganization, budget restrictions or other changes.

Both furloughs and layoffs of unionized employees may trigger obligations to bargain unless the collective bargaining agreement (CBA) authorizes the employer to implement layoffs or furloughs when deemed necessary. Employers will need to review their CBAs to determine their obligation to bargain furloughs and layoffs.

Employee Pay, Benefits, and Leave Accrual After Layoffs

What happens to employee pay and benefits once an employee is laid off, either permanently or temporarily? Are they entitled to continued health benefits, unemployment benefits, and a cash-out of leave accruals? The sections below explore each of these areas for those employees who are both permanently and temporarily laid off.

Pay

Permanently laid off employees are not eligible for continued pay since they are no longer employed by the agency.

Temporarily laid off employees generally do not receive their regular pay when they are furloughed, as their work hours have changed as a result of the furlough.

Non-exempt employees (those that are subject to the minimum wage and overtime requirements of the Federal Labor Standards Act and the Minimum Wage Act) are paid for only their time worked, so they would be paid according to their reduced furlough schedule.

The general rule for exempt employees is that, because they are exempt from overtime rules, they “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.” 29 CFR § 541.602.

However, public employers are treated differently than private employers in this regard. Pursuant to Washington State law:

Deductions from the salary of a public employee for absences where authorized by law due to a budget-required leave of absence will not disqualify the public employee from being paid on a "salary basis" except in the workweek in that the absence occurs and for which the public employee's pay is accordingly reduced.

WAC 296-128-533(1)(c).

In other words, exempt employees do not automatically lose their exempt status if they are furloughed for less than a full work week. Rather, they lose their exempt status only for that specific week where pay was reduced. See 29 CFR. § 541.710(a) and the U.S. Department of Labor’s (DOL) Fact Sheet #70: FAQs Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues.

Exempt employees can voluntarily reduce their weekly schedule by one or more full days, which would then reduce their pay. The exempt employee may not perform any work during their unpaid furloughed day.

Health Benefits

Employees who are permanently laid off are entitled to a temporary extension of health coverage (called continuation coverage) under the federal COBRA program.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage in the event of a layoff when the health benefits would otherwise end.

While some states have so-called “mini-COBRA” laws that apply to employers with less than 20 employees, Washington State does not have this type of program. For more information on COBRA, visit the DOL’s COBRA webpage and the Washington State Office of Insurance Commissioner’s COBRA webpage.

It may be helpful to prepare a reference sheet for separated employees to explain what happens to healthcare and insurance benefits upon separation. See, for example, Snohomish County’s Separation of Employment reference sheet.

Employees who are temporarily laid off—through furlough or otherwise—may be entitled to continued health coverage under the local government plan if agency policy provides for continued coverage. Some policies provide uninterrupted health insurance benefits and paid agency premiums for a certain period of time. See, for example, Olympia’s workforce management plan, Policy 24, Sec. 4.2.4, which provides for continued health insurance benefits and paid city premiums during a furlough of three or fewer consecutive months.

Unemployment Benefits

Permanently laid off employee may be eligible for unemployment benefits through ESD.

As explored under the previous section, temporarily laid off employees are considered partially unemployed and are sometimes eligible for unemployment benefits. Employees can receive unemployment benefits while in standby status or while participating in the SharedWork program.

However, some furloughed employees—such as those whose work schedule is reduced by one day a week—are not eligible for unemployment benefits. ESD determines unemployment benefits on a weekly basis and those employees whose furlough results in their work hours being reduced to one less day a week will not have a sufficient reduction in weekly pay to qualify.  

For more information, visit the ESD’s Unemployment Benefits webpage.

Accrued Leave

When a permanent layoff occurs, an employer must pay out accrued leave in accordance with its personnel policies at the time of separation of employment.

It is common to provide for pay out of unused accrued vacation leave, but not sick leave. See, for example:

  • Kirkland Municipal Code Sec. 3.80.090 and Sec. 3.80.100 – Offers pay for unused accrued vacation leave, not to exceed a maximum of 240 hours; sick leave cash out only for PERS 1 employees.
  • Kitsap County Personnel Manual Ch. 8 (See sections F.7.a and G.5.) – Offers pay for all unused accrued vacation leave but no sick leave cash out.
  • Pierce County Code Sec. 3.58.050 – Payment Upon Separation. Offers a percentage of sick leave payout for two categories: (1) separation from service due to death, retirement, or disability (payout ranges from 25% to 75%); and (2) separation from service for any other reason receives 10% payout, with both categories not to exceed 200 days.

A temporary layoff is not considered separation from employment so there is no requirement to cash out accrued leave. Agencies can choose to allow employees to utilize their accrued paid leave while in temporary layoff status, although that approach would reduce any cost savings from the furlough.

Note that unionized employees may be entitled to use their accrued leave during temporary layoffs under the CBA. In addition to not typically allowing use of accrued leave during a temporary layoff, most policies also provide that paid leave does not accrue during a temporary layoff.

Examples of policies that address use of paid leave during furlough days:

Process for Laying Off Employees

To eliminate confusion for laid off employees, agencies should consider adopting a policy detailing the reasoning and process behind the layoffs. Topics to detail in a layoff policy include the order of positions to be laid off, notification to employees, expectations of being placed in an alternative position, reinstatement or recall, and accrual/cessation of benefits.

The following are examples of policies related to layoffs:

Agencies may also want to utilize separation agreements that can clarify expectations and release the agency from claims. For example, see:

Early Retirement Incentive Programs

Another staffing reduction approach available to public agencies is an early retirement incentive program. Under these programs, the agency offers employees a financial payment in exchange for voluntarily leaving public service, either through resignation or retirement.

Prior to adopting a retirement incentive program, the agency should conduct a cost-benefit analysis that demonstrates the short- and long-term benefits of any early retirement benefit (i.e., the cost savings over time). The benefit should be reasonable and not unreasonably exceed what the participants’ total compensation package would have been had they not participated in the early retirement program.

A retirement incentive program should outline who qualifies, how the financial incentive is calculated, and any restrictions or limitations on when the early retirement incentive can occur. Here are a few example policies:

Employees who opt-in to an early retirement program should enter into an agreement with the agency so that all parties are on the same page. See, for example, the Timberland Regional Library's Retirement Incentive Agreement (2020)

Employees should contact the Washington State Department of Retirement Services (DRS) to discuss the possible benefit reduction if they choose to retire early. See DRS’ webpage on Early Retirement.

Recommended Resources 


Last Modified: March 06, 2026