'It’s Physical, How Depressing It Is': Life As A Furloughed CRE Employee
“It took two months to get unemployment,” said Denise Blackstone, a Texas-based lease administrator for a healthcare company that owns upward of 600 physical therapy clinics around the U.S. “My application was denied in the beginning, I don’t know why. Maybe because I just moved to Houston, but I’ve been working in the state of Texas for decades as a real estate lease analyst. I’ve had the same job title for over 25 years.”
Blackstone had never in her career been furloughed before. Now her story is one that is being repeated across America. According to the U.S. Labor Department’s latest jobs report, as of May, more than 15 million Americans were on furlough.
What CRE Has Learned About Furloughs
In other industries, furloughing isn't so new: The U.S. government has furloughed workers during government shutdowns for decades, and as recently as last fall, General Motors made headlines when it furloughed thousands of Canadian employees amid a United Auto Workers strike.
But since March, property owners and brokers especially have come to know the term all too well, as their tenants and clients in the office, retail, hospitality and travel industries have furloughed workers by the millions.
In real estate, companies including Knotel, Convene, Sonder, Realogy, Trump Properties, U.S. mall owner Simon Properties and firms across the construction industry have all utilized the process. In the UK, real estate firms reported that 27.9% of their collective workforce was furloughed between May 18 and 31.
"In my 22 years in the search business, this is the first time that I’ve ever experienced a furlough situation," Kaye/Bassman Managing Director Jeff Wittenberg said. "Where it's been commonplace in other industries, we just haven't seen it in CRE or construction."
At first, the term was a foreign concept to many people in CRE. (It’s Dutch, actually — from verlof, or 'leave.') But by just a few weeks into the spring, there was a widespread understanding of its definition: a mandatory suspension from work without pay with — at least during the coronavirus pandemic — no time limit.
Over the past few months, it has become clear there is more to learn: The furlough scheme is deeply paradoxical. In some senses, it is a win-win, allowing employees to keep benefits and help employers and staff get back to work quickly when the pandemic passes. But in other ways, as Blackstone and countless others have found, it can be a Kafkaesque process of waiting in limbo, unable to access benefits to which you are entitled. For some, it has even come to mean being unsure if you have been laid off without knowing it.
Furlough schemes are also riddled with ambiguity. Any commercial real estate employee new to the concept who Googled "what is a furlough?" would have encountered a few widely shared assumptions: It is temporary, in that it is expected that furloughed employees will return to their jobs. Also, typically, furloughed employees keep their benefits, including healthcare, during the furlough period, in addition to being able to claim unemployment.
But in the U.S., health and other benefits may or may not remain in place. And although some companies may specify how long the furlough is for, they are not required to do so. Yes, employees — cut loose for an unknown amount of time — can seek work elsewhere, but at some companies, workers may violate the terms of their furlough by seeking a new job in their field. On the other hand, in some states, to collect unemployment they are required to be actively job searching.
"Every state law might be different as it relates to this, so there isn’t one universal rule,” Wittenberg said.
Furloughs can be on-again, off-again. (Nonexempt employees may take furloughs in increments as small as one day, while exempt employees must take increments of one week, per information distributed by media company Gannett to its thousands of furloughed employees.) In some ways, this is a positive. Meanwhile, it can make claiming the prorated benefits for time furloughed comically convoluted.
Perhaps the most jarring lesson has been that, just as decades ago the term "layoff" usually meant temporary leave from a job until its meaning gradually changed, the term "furlough" may be going the same way.
Keith Hall, a Georgetown professor who served as commissioner of the Bureau of Labor Statistics during the 2008 recession articulated the anxieties of many when he told MarketWatch, "Companies don’t have to honor it. They can switch from a furlough to layoff."
Perhaps some suspected it.
"The people that have been furloughed do not take it well,” said Chris Papa, who manages TBG's national real estate search practice as well as its West Coast offices. "It causes a lack of loyalty, and they’re definitely looking. It’s a weird way of firing people, in a way."
Not So Temporary After All
During the government furloughs we have heard about for decades, government employees cannot be fired or replaced without process. These public employees have a right to return to that position if they want it and if it still exists at the end of the shutdown.
However, these safeguards don’t exist in other industries. Where there were regulations that, at minimum, required some notice if a furlough were to evolve into a layoff, in many states those requirements have been rolled back due to the extenuating circumstances of the pandemic.
This realization has been gradually sinking in.
In a May 7 survey, 77% of laid-off and furloughed employees felt confident they would get their jobs back within six months. Just a month later, a report from the University of Chicago’s Becker Friedman Institute predicted that 42% of all jobs lost during the first six weeks of the coronavirus pandemic — 11.6 million of the jobs lost by April 25 — will become permanent, either due to companies cutting back or companies going under altogether.
Following a June 29 Challenger Gray survey, Challenger said in a statement: “19.5 million Americans are receiving unemployment benefits, down only slightly from peak claims, suggesting companies are slow to return workers to their jobs. This also suggests these workers may not get those jobs back."
OYO, an India-based hospitality chain of leased and franchised hotels, homes and living spaces that saw rapid growth before the pandemic, announced via a companywide email at the end of June that it would lay off "a large majority" of its thousands of furloughed employees around the country.
According to OYO, employees on furlough have been receiving 15% of their base pay from the company in addition to their continued healthcare benefits and whatever unemployment they claim, and in the aforementioned email, they also announced that four months of outplacement services would be available if desired to all employees regardless of employment status, to support employees who wanted to search for other jobs as furloughs continue and layoffs loom.
One U.S. employee who was furloughed by OYO in April told Bisnow they were given the impression that they were laid off not via notice from their supervisors or from HR but via calls and emails from the outplacement agency, which appeared to be part of their severance package — a severance package the company had not yet formally extended.
"I did reach out to HR that morning," the employee said, asking to remain anonymous because they do not know if they will return to the company. "I received an email from an outplacement team yesterday and a phone call this morning, so I said, 'Hey, I would like to hear from you what’s going on, because apparently I'm laid off and have no idea about anything that's going on.'"
According to the employee, this interpretation of the outplacement agency's outreach is not an anomaly.
"Everyone that I know of within the company in different regions of the U.S. is under the impression they’re not coming back," the employee said.
Meanwhile, according to OYO, HR decisions about any changes to furlough status have yet to be finalized and will be communicated with employees individually if needed.
But no matter what services or benefits a company may be extending to try to ease the burden of a furlough, the anxiety of uncertainty can become overwhelming. One April survey even found that furloughed employees may be even more anxious and unhappy than employees who were laid off.
Furloughs A Win-Win?
As much of a rollercoaster as it may be, the OYO employee said they still prefer a furlough over the alternative: being laid off with so many other Americans back in early spring.
"To be let go back in April and now be looking for a job, I’m sure that severance would've been running out or run out already. It gives me time to look for my next role instead of just jumping into something because I have to pay the bills," they said.
Recruiter Jeff Wittenberg at Kaye/Bassman told Bisnow this is part of why he thinks furloughs have been a “win-win” for companies and employees — even in the event that they do end in termination.
Employees get to keep their benefits and collect unemployment for a few extra months at the least, while companies get to keep their talent on the line without paying them and spare themselves the pain of hiring if they bring workers back.
It is a win, in theory — especially for low-wage workers who stood to make more on pandemic unemployment than they did before. When benefits do kick in, the federal government added $600 a week to the regular benefits provided by each state, and most states offer just over six months of unemployment compensation. But eventually, it does stop, and after four months, the federal government is phasing out the extra boost.
Likewise, in the UK, furloughed workers are paid 80% up to a cap of £2,500 per month. But as the summer progresses and the coronavirus threat theoretically wanes, the government will shift more of the responsibility onto companies, and by the end of October, the governmental support for furloughed employees is slated to conclude. There are concerns many struggling companies will lay off staff without the security of government-backed cash, though under current UK employment laws, companies have to give 45 days' notice before cutting roles. In the U.S., companies generally have more flexibility.
In both countries, the support is designed to be a safety net during the most challenging period. For many Americans, however, unemployment benefits in an overburdened system failed to kick in for weeks or longer.
Flaws In The System
That was the case for Blackstone, and her experience is not unique.
Some states rely heavily on the involvement of employers. In Georgia, for example, companies must refile for their furloughed workers’ benefits every week, and if companies don’t stand up to the test, employees fall through the cracks. Meanwhile, while some families wait months for their checks to come, some people are being overpaid (and subsequently penalized), and some people who didn’t request money are receiving payments.
After Blackstone’s unemployment application was denied, she appealed, and eventually it was approved, but she has not heard about nor received back pay for the initial two months, and the appeal process was arduous because the unemployment office wouldn’t pick up the phone.
“I sat on hold for three hours,” she said. “It’s old-style government: You can’t email them. All my paperwork I had to fax. I heard the state of Texas hired a lot of people to start picking up the phones and things like that, but to get to the person that you need is hard.
“I have friends and parents who helped me, but it’s very depressing. It’s physical, how depressing it is. … Economically, it’s going to be years before our country comes back from this.”
As for when Blackstone will be back at her job, she said she feels confident that when they get the clinics up and running, they will bring back furloughed corporate office workers like herself. “They don’t give you a timeline or anything, but my boss just says, ‘As soon as I can hire people back, you’re the first call I’m going to make.'"
The problem remains, it is anyone’s best guess when that will be.
Necessary Flexibility For Uncertain Times
“We’re dealing with a situation of the unknown,” Wittenberg said. “Laying off employees requires a significant process, as does hiring new staff. The pain of not only letting people go but then rehiring them is really disruptive, and potentially you run the risk of them not being around.”
Meanwhile, he said, a furlough is relatively seamless.
“By contrast, a furloughed employee can come and go fairly easily,” Wittenberg said.
“I think the optics of furloughing — it’s the step one, really. Some companies kind of ease into this. Even before furloughs, that might mean compensation reductions, and then furloughs, and then termination. Some companies have just gone straight to the termination. Every company’s different, and companies have to do what they think is best for their organization,” he said.
“Ultimately what we are seeing is that picture has not come into focus and remains blurry," he continued. "Companies really did start to feel the pinch to their profitability, and then ultimately, we are seeing companies let people go. But I do think graduating instead of going straight to termination, it’s just better for everybody.”
Meanwhile, Blackstone is waiting for that call.
“We’ll know when we know. I can see that they’re hiring the physical therapists back,” she said.
Plus, she added, the corporate employees who were not furloughed took a 20% cut of their pay, and as of mid-June, their full compensation was restored. Blackstone said that’s a notice to her that things are looking up.
“I was really hoping to be back in July,” she added. “But then you have this second wave, and who knows what that's going to do.”