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How to Layoff Employees Legally

14 September
by Josh Hrala
8 minute read

Layoffs and reductions in force can be stressful for everyone involved, especially so for HR, the department that will have to oversee the event both legally and emotionally. And while we've covered the latter quite a bit, how do you layoff employees legally? What does HR need to know about the laws surrounding a RIF or layoff?

That's what we're going to dig into today.

Here's how to layoff employees legally in a way that will protect your business while also extending the most benefits to those let go:

How to Layoff Employees Legally: Step One

The first step in any layoff event is to actually select the employees that will be impacted.

Employee selection can seem extremely difficult, but it doesn't have to. Top HR leaders agree that the best way to handle layoff employee selection is to make a criteria that can be used to examine employees and make the right choice.

This will largely depend on your company, though all selection criteria should examine how the employee impacts the goals of the business. This means that you cannot make a criteria based on age, race, or anything that isn't connected to the business' goals.

"Several factors can be used in deciding the selection process, including seniority, performance, job classification or job knowledge and skills," reports the Society for Human Resource Management (SHRM).

"However, an organization should not consider criteria such as leave status or protected conduct (i.e., whistle-blower)."

We have an entire guide on employee selection that you can read here. If you're short on time, feel free to download our criteria list here:

You can download our guide for selecting employees to layoff here.

How to Layoff Employees Legally

How to Layoff Employees Legally: Review, Review, Review

The second (and third) step of the layoff process revolves on reviewing your selected employees to make sure you can legally lay them off and if there are any special rules that govern how you do so.

For example, the Older Workers Benefits Protection Act (OWBPA) governs how employees over the age of 40 are let go from an organization. You need to make sure you are following all of these rules when letting go employees in this group.

You can read all about the OWBPA in detail here, but here's a very brief rundown:

  • Impacts workers over the age of 40
  • If one person is being impacted, a consideration period of 40 days must be given
  • If more than one person is impacted, 45 days of consideration must be given
  • A 7-day revocation period must be given
  • If during the event is a RIF or voluntary program, the organization must publicly identify the employees being let go and give - in writing - the job titles, ages, and other details of those being let go to the affected employees

The OWBPA is just one example of how there are special rules for individuals in what's called a 'protected group' or 'protected class.'

How to Layoff Employees Legally

"Protected classes include individuals who are members of a certain race, color, ethnicity, national origin, religion, gender, genetic information, age (40 or over), those with a disability or those who have veteran status," SHRM continues.

"States may have additional protected classes, such as sexual orientation, marital status or smokers."

Since there are so many protected classes, it makes sense that you will likely have to change your layoff policy every now and then to make sure you follow all of the rules set by the local, state, and federal government.

This is where your legal team comes into play. During a RIF or layoff, you need to work closely with your legal team to ensure that you are complying with all local, state, and federal laws. Please note that we are not lawyers. Always double and triple check with your counsel to ensure your event will go over smoothly.

How to Layoff Employees Legally: Review, Review, Review (Again)

As you can see, the layoff process is all about reviewing who you are letting go and then adapting your process to fit the legal requires that govern that group.

In the last section, we talked about workers over the age of 40 and what means for your event. Now, it's time to get into the WARN Act, which - based on how large your operation is, what state it's in, and other details - may or may not be something you need to worry about.

Again, we've written extensively on WARN Acts. You can read our entire guide here or download our checklist here:

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First what is the WARN Act anyway?

In short, the Worker Adjustment and Retraining Act (WARN Act) was enacted in 1988 to protect workers and their families by making sure organizations give 60 days notice - if applicable - of a mass layoff or plant closing.

"In general, employers are covered by WARN if they have 100 or more employees, not counting employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week," writes the US Department of Labor.

"Private, for-profit employers and private, nonprofit employers are covered, as are public and quasi-public entities which operate in a commercial context and are separately organized from the regular government. Regular Federal, State, and local government entities which provide public services are not covered."

The WARN Act also has special regulations based on what state you do business in. All of these rules and regulations can become quite confusing, which is why it is important, again, to speak and work closely with your legal team during a reduction event.

How to Layoff Employees Legally

Here's a brief tip sheet that can help you better understand the WARN Act. First, determine if the WARN Act applies to you. If it does, here's what generally happens next:

  • Large-scale layoffs require 60 days notice
  • Inform impacted workers if the layoff is permanent or temporary
  • If temporary, give dates as to the duration of the event
  • Notify employees of their expected separation date
  • Clearly explain the recall process

Once you have the WARN Act figured out, you are well on your way to ensuring that you have a legally compliant layoff process.

The next steps are all about severance and benefits that you can help smooth out the process for your organization and the individuals being let go.

How to Layoff Employees Legally: The Benefits

When you are letting someone go from your organization, it is benefitial to you and your bottom line that you handle it with compassion.

Imagine that you are the one being let go. How would you feel if the place that you have worked for a number or years suddenly kicked you to curb with no help? You'd probably be very upset and tell just about everyone you saw about what happened.

As an HR leader, you want to avoid this by doing all that you can to ensure that the layoff process goes as smoothly as possible for your worker.

The first step is crafting a rock solid severance agreement.

What is a severance agreement?

A severance agreement is a legal contract between an employer and an outbound employee that explains in detail the terms and conditions of their termination. If the employee agrees to the terms, they can sign off on the documents stating that they will not pursue legal action against the employer in exchange for a severance payment, which is usually determined by the employee's salary.

Severance agreements, in most states, are not legally required (again always double check), but they are a great way to not only protect your organization legally but also help your employee get through their unemployment period. In short, a severance agreement should be a win-win for everyone involved.

You can read all about severance agreements here and also what special rules are set by the OWBPA here. Want to quickly download our severance agreement guide? Simply click here:

Download our severance agreement guide here.

Alongside severance agreements, employers should also consider offering outplacement services to their exiting staff members.

Outplacement is a service that companies can use that gets their workers back to work in a new role faster than if they performed the job search alone. The best outplacement services combine online tools with expert coaches to help workers find a role quickly and efficiently.

You can learn all about outplacement here. Also, if you do not have outplacement and would like to learn more, check out our pricing guide here:

Download the pricing information for our outplacement programs here.

Once you have your benefits all figured out, it's time to actually hold the layoff event.

How to Layoff Employees Legally: The Actual Event

It may seem like the actual event is the hardest part of the layoff process at first. However, after doing so much planning and reviewing, this part of the process will go by very quickly.

We have created a ton of tools to help with the layoff process from start to finish, which we will go through quickly here.

How to Layoff Employees Legally

The first step is to alert the organization that a layoff is coming. You can do so with a letter or memo. Make sure you always alert staff members of a layoff via a form of communication that they will see. For example, if your organization typically uses email to receive company news and alerts, email will work for your layoff notification.

Writing a layoff letter can be tough, too, but we have you covered. Download our sample here and customize it to fit your organization's needs:

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Next, you need to hold a layoff meeting where you will present the severance agreement and explain outplacement services while also explaining all of the details that of the event.

We highly recommend using a layoff script to keep yourself on track during this meeting since it can so easily go off the rails.

You can download our script below and also learn how to customize it here.

Download Our Layoff Script Here!

After the layoff meeting concludes, you can collect the keys and other things that they employee may have that are owned by the organization.

Once that is completed, you're done! You have successfully and legally held a layoff event.

You should always make sure that you do everything in your power to ensure that the event goes over smoothly both publicly and internally. The biggest downside to layoffs is that they can tarnish your employer brand and cause employees to find new roles even if they weren't impacted by the event personally.

If you follow all of the steps above and remember to treat your laid off staff members with the respect they deserve, you can seriously help your chances of holding a layoff event that isn't viewed negatively by your retained staff members who you are relying on to get your business back on track.

How to Layoff Employees Legally: The Takeaways

We've covered a lot here today! From the very first step of selecting employees to reviewing them legally to actually holding the event.

The layoff process can seem daunting, but remember to take your time, review your selected employees over and over, and - when it comes time to actually hold the event - treat staff members the way you want to be treated by extending them the best severance and outplacement services you can.

At the end of the day, always check with your legal counsel to ensure that you are complying with all local ,state, and federal laws.

Want to learn more about how to layoff employees legally and compassionately? Check out our resource library for a ton of layoff guidance:

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