Furloughs aren't just for blue-collar workers anymore

The furlough, once mostly a cost-saving tool for blue-collar industries, has spread across the economy as employers large and small struggle to pare down.

Furloughs - defined as temporary reductions in work hours and subsequent loss of pay - have reached the white-collar world, the public sector, even the nonprofit arena.

Locally, employers including International Paper, The Virginian-Pilot, the city of Portsmouth and the Virginia Symphony Orchestra have resorted to furloughs in the past year.

"There is no silver bullet, no one cost-cutting solution that will get at the issue of surviving during a severe recession," said Mike Anderson, the human resources director of The Virginian-Pilot Media Cos.

The Pilot is requiring employees to take six unpaid days off this year, including this Friday for many workers. That's equal to about a 2 percent pay cut.

Seventeen percent of businesses have adopted mandatory furloughs this year, according to a survey last month of 141 U.S. companies by Watson Wyatt, a global consulting firm.

Furloughs offer some positives among the array of cost-crunching strategies: Workers usually retain their jobs. The reduction in pay isn't permanent. And they get more time off to compensate for the loss.

But furloughs pose dicey legal issues. And, if imposed often enough and for too long, they can threaten retention.

As of last week, Norfolk Southern Corp. had 1,625 workers on furlough, or 6 percent of its unionized staff, spokesman Robin Chapman said.

"We put a lot of effort into recruitment and training for our employees," said Harold Mobley, the Norfolk-based railroad's vice president for labor relations. "Obviously, we want to keep them for the long term. But when business levels don't justify having as many employees as we normally have, we have no choice but to right-size the work force.... Because of the pay and benefits we offer, I think there's a big incentive for our employees to return."

And most do, he said.

The furloughs at the Virginia Symphony came in the form of three canceled concerts.

Concertmaster Vahn Armstrong and his wife, assistant concertmaster Amanda Armstrong, said that amounted to a loss this season of three weeks' income. Coupled with an already contracted week off in April, they missed one month's salary.

That led the Armstrongs to refinance their mortgage and put off repairs on their Norfolk house, including a new roof. They felt fortunate in landing a weeklong gig with the Florida Orchestra in Tampa, which coincided with their children's school break, and enjoyed the beach between rehearsals.

"That will be our vacation this year," Amanda Armstrong said. "I think we did manage to make lemonade out of the lemon of not getting paid. What we really worry about is the future."

Furloughs can vary in terms of who is affected, how many days they must take off and when they miss work.

At International Paper's Franklin plant, for instance, three paper machines were shut down for two weeks in March and another machine was idled for three weeks. Most of its employees did not work during that period.

Earlier this year, Portsmouth mandated five furlough days to be taken sometime between February and June and two unpaid holidays - Presidents Day and Memorial Day. Public safety and emergency personnel were exempted. The City Council last week approved a 2009-10 budget that did not include additional furloughs.

At The Pilot, managers specified six furlough days for all workers, including Presidents Day, Good Friday and Dec. 24. A few employees work on those days and take another day off, Anderson said, to ensure that the newspaper gets out.

Portsmouth will save $770,000 for the seven days, spokeswoman Dana Woodson said. The Pilot's president and publisher, Maurice Jones, declined to say how much the newspaper would save. An International Paper spokesman did not respond to an e-mail.

Barry Hirsch, who holds the Usery Chair of the American Workplace at Georgia State University, defines a furlough as "a partial reduction in hours" that is temporary. No comprehensive statistics exist on their frequency, Hirsch said.

"In normal times," he said, "furloughs are a terrible idea." They can harm a firm's reputation, depress morale and lead workers to switch jobs.

Furloughs these days offer a palatable way to cut labor costs while retaining workers, Hirsch said. "Everybody knows everybody is in trouble."

The legal issues entwined with furloughs start with unions.

In a unionized workplace, furloughs generally must be approved by the work force. That's what happened at the symphony. The musicians agreed to give up that income "to keep the ship afloat," said Carla Johnson, the president and executive director.

Even in non union offices, employees are eligible to be paid for time worked if they as much as check e-mail or make a work call on a furlough day.

"Employers need to be careful that they do not violate wage and hour law by winking and nodding and making the employees think that you may have to take the call but we're still not going to pay you for that," said John Phillips, an Atlanta attorney who writes the "Word on Employment Law" blog.

It's trickier for "exempt," or managerial, employees. If they work any part of a week, they usually are eligible for a whole week's salary, said Scott Kezman, a Kaufman & Canoles attorney.

However, Phillips said, employers can use strategies to avoid paying them if they're off for a day, for instance asking them to tap into their bank of unpaid leave.

Usually, the furloughed employee returns to full hours.

Stihl Inc., for instance, announced earlier this year that it would reduce hours for some workers. The Virginia Beach-based power-tool manufacturer has since restored some to full-time hours and will probably do so for the rest, spokeswoman Anita Gambill said.

That doesn't always happen.

Regulator Marine, a boat manufacturer in Edenton, N.C., furloughed about 60 people late last year as business soured, President Joan Maxwell said. About half were rehired in January. The others were laid off.

"That, to me, has been the hardest part of the whole economic downturn," Maxwell said. "People have had to look into the faces of good employees and tell them that their job has been eliminated."

She foresees better days: "It is my hope that we and the other manufacturers will be able to rehire many of these people, because they are very talented."

 Pilot writer Jen McCaffery contributed to this report.

Philip Walzer, (757) 222-3864, phil.walzer@pilotonline.com

Teresa Annas, (757) 446-2485, teresa.annas@pilotonline.com