Workforce reductions are a harsh reality in Corporate America, with nearly 700,000 layoffs announced in the first half of 2025. Whether it’s a layoff or furlough, reductions in force (RIFs) are never easy, but with the right strategy, HR professionals can help organizations navigate this difficult process with care and empathy. Understanding the key legal frameworks – including federal and state notification requirements, anti-discrimination statutes, collective bargaining agreements and benefits rules – is critical to reducing risk and supporting both affected employees and remaining teams.
Layoffs vs. Furloughs: Why the Difference Matters
At the outset, employers should be clear on the nature of the employment action. A layoff is typically a permanent separation – an elimination of the employee’s position that will cause a COBRA event and may trigger notice obligations under the Worker Adjustment and Retraining Notification (WARN) Act.
A furlough, by contrast, is generally a temporary, unpaid leave or reduction in hours during which the employee technically remains employed. While furloughs may also affect benefits and implicate WARN, they offer greater flexibility and may preserve long-term workforce relationships.
WARN Act Compliance and Its State Counterparts
The WARN Act requires covered employers to provide 60 days’ advance notice before conducting a mass layoff or plant closing. An employer is covered by WARN if it has 100 or more full-time employees, or in some cases, 100 or more employees, including part-time. Mass layoff thresholds vary but may be triggered by as few as 50 employees at a single site, depending on the total workforce size. Crucially, WARN looks at layoffs within a rolling 90-day window to prevent staggered reductions that skirt the law. When WARN is triggered, notice is required not only to the impacted employee or relevant union representative, if any, but also to certain state and local government entities.
In lieu of advance notice, employers may provide pay and benefits for the 60-day period. However, failing to comply can lead to back pay liabilities, benefits coverage costs and civil penalties.
HR professionals must also understand their state’s “mini-WARN” laws, which may have stricter thresholds or broader definitions of who must be notified. As of July 2025, 14 states have their own WARN laws, which impose different or more expansive requirements than the federal law: California, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, New Hampshire, New Jersey, New York, Tennessee, Vermont, Washington (eff. July 27, 2025) and Wisconsin.
Navigating Collective Bargaining Agreements
Where unions are involved, collective bargaining agreements (CBAs) often address how layoffs may occur. Employers must be familiar with their management rights under the CBA and also be aware of other provisions regarding “bumping” rights (which may allow senior employees to displace junior ones), recall rights, and notice requirements. They must also, upon request, bargain with the union over the effects of a layoff decision.
Reducing Risk: Discrimination and FMLA
The Equal Employment Opportunity Commission advises employers to proactively analyze whether layoff criteria disproportionately impact protected groups such as older workers or employees with disabilities. Objective, well-documented and consistently applied criteria can help defend against disparate impact or retaliation claims. Special care is needed for employees on or recently returned from Family and Medical Leave Act (FMLA) leave. Employers must show that such individuals would have been laid off regardless of their leave status.
Benefits and Compensation: Avoiding Hidden Pitfalls
Layoffs and furloughs also affect employee benefits and trigger certain legal obligations for employers to consider. Layoffs typically end health and welfare coverage, triggering COBRA and other conversion or portability requirements, while furloughs may allow coverage to continue depending on plan terms and hours worked. Employers subject to the Affordable Care Act’s Employer Shared Responsibility provisions must also evaluate how furloughs affect full-time status under Internal Revenue Service measurement methods, as this influences health coverage obligations.
Large-scale RIFs may trigger partial retirement plan terminations, requiring 100% vesting for impacted participants. While laid-off employees may be eligible for retirement distributions upon layoff, furloughed employees, who are expected to return to work, generally are not.
Employers should also review employment agreements, deferred compensation arrangements, severance packages, and incentive or equity plans to determine whether affected employees are entitled to payments and assess the impact of the RIF on outstanding equity awards and bonuses. Careful attention to these issues is necessary to avoid potential compliance risks under the Employee Retirement Income Security Act (ERISA) or Section 409A of the Internal Revenue Code.
Strategic Planning and Communication
Effective workforce reductions require strategic planning. HR leaders play a pivotal role in shaping how reductions are perceived – not just by those leaving, but by those who remain. Clear, honest communication can help preserve morale, protect the employer’s brand, and reduce the risk of litigation.
As layoffs continue to rise in 2025, staying compliant and compassionate isn’t just best practice – it’s essential for risk management.
Molly Keppler is a partner at Stinson LLP. She may be reached at molly.keppler@stinson.com.
Grant Mulkey is of counsel at Stinson LLP. He may be reached at grant.mulkey@stinson.com.
Lisa Rippey is of counsel at Stinson LLP. She may be reached at lisa.rippey@stinson.com.