It doesn't sound harsh to me based on the circumstances. She can still file for unemployment. Even if she were still working but got a pay reduction she could file for unemployment. Keep in mind the PPP loans have changed everything since the main purpose of them is to retain your staff. Employers are furloughing their employees so that they can bring them right back on when the funds from their loans come in, but it is simply not feasible for many employers to just keep paying people until that time comes. If there were no loan they would just lay her off with a complete termination and no expectation of a future job. Your experience is the world we live in now.