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What Exactly Is A Layoff And What Does It Mean (Legally)?

While the term “layoff” is routinely used when discussing the workplace, the exact concept of what it means is subject to some confusion.  Sometimes known by the term “downsizing”, a layoff is also frequently associated with the word “termination” in the minds of employees, as in modern times an employee who has been laid off often does not return to work.  To make matters more confusing, a layoff is sometimes called a “reduction in force”, “rightsizing”, “workforce reduction”, “workforce optimization”, or any number of additional terms.  Generally these are all euphemisms for what is in essence a layoff:  a temporary suspension or permanent cessation of employment of an employee or group of employees due to certain positions being cut, dwindling finances, or work not being available.

Layoffs should be differentiated from terminations.  A termination is a voluntary or involuntary cessation of an employee’s employment due to either the decision of the employee or the employer.  When the employee makes the decision, it is usually called a resignation.  When the employer makes the decision, it is known as being fired.  The reasons for a termination generally concern lack of performance, dishonesty, habitual lateness, theft, insubordination, etc., as opposed to a layoff where the employee’s specific actions usually have little to do with the cessation of employment. Workers who have been laid off can almost always collect unemployment from the State.

Employers should be careful not to call a termination a layoff when in fact the employee is being fired.  While employers sometimes attempt to soften the blow of being fired by calling it a “layoff”, it is generally best to be honest as to the reason for terminating an employees and avoid confusion, as any subterfuge can come back to bite the employer should an employee decide to sue over the termination.  Understandably such honestly may affect an employee’s ability to use the employer as a reference.

Employers should also realize that laying off an employee does not immunize the employer from legal liability for employment discrimination or harassment.  If a motivating reason for “laying off” an employee is the employee’s race, gender, disability, national origin, ancestry, or sexual orientation, the employee may be able to claim unlawful discrimination in the exact same manner as they could if they were fired, even if the “layoff” is only termed temporary.  An employee’s “protected activity” (ie., union activity, reporting of illegal activity) also cannot be a motivating factor for laying them off.  Viewed more broadly, any employment actions including cutting of hours, reduction of benefits, or transfer of position should be carefully analyzed as to motive and the characteristics of the employees affected.

Layoffs become more complicated if the employer is a large organization.  The WARN act requires employers with more than 100 full-time employees to give affected employees at least 60 days advance written notice of an intended plant closing or mass layoff.  The WARN act can be complicated, and employers planning such an action are well advised to discuss with legal counsel.

In today’s climate layoffs have become commonplace, with employer’s streamlining their businesses or simply unable to support certain employees.  Employers or employees facing such a situation should take some time to investigate the legal ramifications of such an event.

For more information on employment law