June 2009 - Employee Furloughs

DUFF, WHITE & TURNER, L.L.C.
Attorneys And Counselors At Law

EMPLOYEE FURLOUGHS

As discussed in our April Issue of the Month, the South Carolina General Assembly recently passed two joint resolutions, known as the flexibility bills, to address the significant budgetary issues faced by South Carolina school districts. One of the bills, H.3352, gives districts the ability to furlough teachers for up to five (5) non-instructional days during the 2008-09 and 2009-10 school years, provided that district administrators are furloughed for twice the number of days teachers are furloughed. The implementation of a furlough, however, raises a number of issues and practical considerations about which districts need to be aware.

It should first be noted that the term "district administrator" is not defined in H. 3352. As a result, the State Department of Education (Department) issued a guidance memorandum on May 7, 2009, specifying how the Department believes the term should be interpreted. The Department concluded that the term generally is meant to include only district-level administrators, not building-level administrators. Thus, for every day a teacher is furloughed, district-level administrators must be furloughed for at least two days. A school district is free, however, to choose to include building-level administrators in the group of administrators who will be furloughed two days for every one day teachers are furloughed.

Questions also arise with regard to those employees who fall into the category of "teacher" for furlough purposes. The Department previously has given guidance on this issue in a December 19, 2008, memorandum, which addressed a Fiscal Year (FY) 2009 proviso. That proviso, Proviso 1.52, prohibited furloughs of "instructional personnel." In the 2008 memorandum, the Department defined instructional personnel generally as those personnel whom the Department has determined are eligible for the National Board certification stipend. This definition is useful in determining which employees should be considered teachers under the terms of H. 3352.

As to classified employees, H. 3352 does not address whether they may or may not be furloughed. FY 2009 Proviso 1.52 stated that "no instructional personnel or support staff as classified by the State Department of Education may be furloughed," leaving it unclear whether this furlough prohibition applied only to instructional support staff, such as teaching assistants, or all classified employees. H. 3352 does not address furloughs of classified employees, other than for those classified employees who are identified as district-level administrators, such as certain employees in the finance or operations offices. The assumption, therefore, would be that school districts may furlough any classified employee, unless the classified employee is under an employment agreement of some type that does not allow for the district to furlough that employee.

Another issue that arises with regard to furloughs relates to payment of retirement contributions for any furlough days imposed. Since the passage of H.3352, the legislature included a proviso in its FY 2010 Appropriations Act (Proviso 1.50) related to furloughs which suggests that school districts would be responsible for paying both the employer and employee contribution for any employee benefit, such as state retirement, where "coverage would otherwise be interrupted" as a result of nonpayment. This language had been included in FY 2009 Proviso 1.52. Based on Proviso 1.52, the State Retirement System has taken the position that the employer must pay both the employer and employee portion of the retirement contribution. This issue remains unsettled, however, because the language in FY 2010 Proviso 1.50 suggests that school districts would only have to pay the retirement contribution for furloughed employees if participation in the Retirement System would be discontinued if a contribution was not made for the furlough day. This is not the case, in that employees do from time to time take leave without pay, such as when an employee takes a sick leave day but has exhausted his/her accumulated sick leave. In those cases, no retirement contribution is made for the day taken without pay, and the employee's participation in the Retirement System is not discontinued.

Also under FY 2010 Proviso 1.50, before implementing a furlough during the 2009-10 school year, the chair of the district board of trustees must certify that all fund flexibility has been utilized and that the furlough is necessary to avoid a year-end deficit and a reduction-in-force. Additionally, the superintendent must report the actions taken by the school district to avoid a year-end deficit. These two items are to be sent to the State Superintendent and to the Chairs of the Senate Finance Committee and the House Ways and Means Committee. A similar certification and report requirement was found in FY 2009 Proviso 1.52. In the previously referenced memorandum issued by the Department in December 2008, the Department indicated that the certification required by FY 2009 Proviso 1.52 must simply state that "all fund flexibility provided by the General Assembly has been utilized by the district and that the furlough is necessary to avoid a year-end deficit and a reduction-in-force." The Department added that the superintendent's report should outline the specific actions taken to avoid a year-end deficit and recommended that the report include specific dollar amounts, budget information, and any other relevant information. The Department also noted that it is not required to "approve" the report, but merely to receive it as documentation that the Proviso requirements have been met.

School districts should be aware that employees who are furloughed may be eligible for unemployment compensation; in most cases, however, it is unlikely that unemployment benefits would be awarded. Specifically, an employee who still earns at least $326 per week during the week in which the furlough is imposed is not eligible to receive unemployment benefits. Thus, an employee who is furloughed for one day during a given workweek is likely to earn at least $326 and not be eligible for benefits. However, if an employee is furloughed for an entire week, earning $0 that week, the employee may be eligible for benefits. It should be noted, however, that the first week of unemployment benefits eligibility is considered a "waiting week" and the employee will not be eligible to receive benefits until the waiting week has passed and further unemployment eligibility arises due to additional furlough days being imposed. However, the $326 salary provision would still apply during any week that subsequent furlough days are imposed.

Should you have questions about the implementation of furloughs in your school district, please feel free to contact this firm.