Layoffs

Layoffs are a possibility even in good economic times. As an at-will employee, your employer can end your job for any legal reason.

This page gives a broad overview of layoffs. Federal and state laws govern how an employer can lay you off and what options you have. State layoff laws vary, so you should consult an employment lawyer in a city near you to give you the best advice about your situation.

What Is a Layoff?

A layoff is a temporary or permanent loss of your job for a reason other than your performance. Typical reasons you could get laid off include the following:

• Seasonal closures
• Cost-cutting in response to lower demand
• Exiting a line of business
• Restructuring due to a buyout or bankruptcy

When your company lays you off, you lose your wages and benefits. But you’ll likely qualify for unemployment benefits. It’s in your best interest to start researching your state’s unemployment insurance program right away.

You also get to keep what you invested in the company 401k or other retirement plan. Laid-off employees also often receive a severance package.

Layoffs are only sometimes involuntary. Early retirement is a package your company may offer to workers close to retirement, allowing you to retire while receiving a full pension. Other benefits may also be included in an early retirement offer.

A buyout is like early retirement, except your company offers it to younger workers who aren’t close to retirement. Buyouts often include a severance agreement, ongoing health insurance, and job search benefits.

What’s the Difference Between a Lay Off and Termination?

The main difference between a layoff and termination is why you lost your job. In a layoff, your job loss is unrelated to your performance.

When your employer fires you, it’s often because of poor performance or misconduct. While you’re eligible for unemployment if your company lays you off, you’re likely not eligible for unemployment if your company fires you.

What’s a Furlough?

A temporary layoff or furlough is when your employer puts your job on hold for a short time. It’s a way for your employer to temporarily lower costs.

A furlough comes with the understanding that the company will recall you later. Although you don’t receive a paycheck, you keep your job title, benefits, and seniority. In some states, you may be eligible for unemployment benefits while on furlough.

Furloughs can also take other forms, such as:

• A reduction in hours
• A requirement that you must take a certain amount of unpaid vacation
• A requirement to take additional unpaid days off around a holiday

Companies often use furloughs when it doesn’t have enough work for their staff. For example, your company may furlough you while it closes the plant where you work for repairs.

Furloughs offer some advantages to your employer. They allow your employer to avoid termination and severance pay. Knowing that you’ll return to work also gives you peace of mind. But keep in mind that a furlough can become permanent if the situation that led to your furlough doesn’t reverse.

How Should Companies Lay Off Employees?

Companies need to have fair processes that retain vital employees while avoiding wrongful termination lawsuits. When deciding who to lay off, your employer must use a selection process that doesn’t discriminate against protected classes. For example, they cannot lay off all employees of a certain national origin, race, or sexual orientation.

Companies typically make layoff decisions using the following criteria:

• Seniority: Laying off the employees with the shortest tenure
• Employee status: Laying off freelancers, contract workers, and temp workers hired through staffing agencies first, followed by contingent and part-time workers
• Merit-based: Using employee performance to decide who to keep
• Skills-based: Using employee skills to decide who to keep

The more objective the criteria, the safer a company typically is from lawsuits. But decisions like cutting everyone who does not have certain skills could mean laying off a large amount of older workers, which can invite claims of age discrimination.

What’s the Worker Adjustment and Retraining Act?

The Worker Adjustment and Retraining Notification Act (WARN Act) is a federal law that ensures employees receive advance notice in the case of a mass layoff.

A mass layoff is a reduction in force that is not a plant closing but results in an employment loss at a single site of at least 33% of active employees and at least 50 employees within a 30-day period. WARN excludes part-time employees from this definition. It also applies to plant closures of a single employment site that results in at least 50 or more employees being laid off.

Your employer may also have to give you 60 days’ notice before the layoff. Your employer must also provide you with information regarding your rights and options.

If the layoff doesn’t meet the definition of a mass layoff, then your employer does not have to give you notice under WARN. However, some states have laws that require notice in certain situations. For example, California has a version of WARN called the Cal-WARN Act with notice requirements for businesses there.

My Company Laid Me Off. What Should I Do?

If you get laid off, there are several things you should do.

First, check your employment contract if you have one. It may have protections regarding severance and benefits in the case of a layoff. You can also try to negotiate a better severance package.

If your employer doesn’t continue providing you with healthcare benefits, check into COBRA, a federal program that allows you to continue receiving health insurance benefits for 18 to 36 months in certain circumstances.

You should also look into what happens to your 401k if you have one. You may be able to leave it with your former employer. You can also transfer it to your new employer or an individual retirement account (IRA).

The most important thing is to look into your state’s requirements for unemployment benefits. Specific unemployment insurance rules, such as when you can file an initial claim, vary by state. Be sure to file for unemployment as soon as you are eligible.

Talk to an Employment Lawyer if You Need Help

Getting laid off is an emotional and financial blow. State laws governing layoffs and unemployment benefits vary. You should consult an employment law attorney in a city near you for help in your specific situation. A lawyer can determine if your company violated your legal rights and take action.