The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

How To Legally Lay Off Employees

Layoff decisions are never easy, and they are complicated by legal considerations. An employer who uses discriminatory means to decide which employees will be laid off may be leaving themselves open to a lawsuit. Fortunately, an employer who carefully strategizes can conduct layoffs while remaining within the law.

Don’t Discriminate

The employer’s reasons for layoffs cannot in any way relate to the worker’s gender, race, religion, disability or age. In some states, employers also cannot make layoff decisions based on sexual orientation or other characteristics. When making layoff decisions, it’s best to use criteria that are not related to any legally protected class.

Have Good Reason

In order to conduct layoffs legally, the employer must have a solid business reason for doing so. A rapid decline in sales or overstaffing are legitimate reasons for laying off employees. The organization needs to have plenty of evidence to support their decision to lay off workers. This will protect them in the event that a disgruntled employee decides to sue.

Review Contracts and Bargaining Agreements

The employment of some workers may be based on a contract. Other workers may be part of a union. The employer needs to carefully review all effective contracts and bargaining agreements to determine what kind of rules may apply to layoffs. Violating one of these agreements is asking for a lawsuit.

Review Applicable Laws

If an employer is considering a mass layoff or is shutting down an entire plant or other facility, their decision may fall under the Worker Adjustment and Retraining Notification Act. This legislation stipulates that an employer with more than 100 workers must provide them with 60 days written notice in advance of the layoff. Some states have enacted similar laws that apply to organizations with fewer employees, so it makes sense to get familiar with the applicable statutes.

Make Layoff Criteria

For the employer who is doing away with an entire department or a whole factory, establishing criteria is a simple matter. The employer who is faced with making adjustments across the entire organization needs to find criteria that makes sense for the company’s future and that is non-discriminatory. Objective cuts that are based on worker seniority or productivity numbers are typically reliable. Fact based layoff decisions are easier to defend in court, should this become necessary. Begin considering criteria well in advance of the layoff to be certain that it is not discriminatory.

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