When budgets tighten—whether because of a federal government shutdown, grant cuts, manufacturing slowdowns, or a dip in tourism—some employers face the difficult decision to reduce staff. If layoffs are on the table, approach them with empathy, clarity, and legal diligence.
Key considerations
Consider these factors in connection with potential layoffs:
Confirm layoffs are a last resort: First, explore furloughs, reduced hours, job sharing, and nonessential cuts. Move to layoffs only when necessary for long-term stability.
Assess WARN obligations: The federal Worker Adjustment and Retraining Notification Act (WARN) generally requires 60-days’ notice for certain mass layoffs or plant closings at employers with 100+ full-time employees. Check state laws where your employees work. Some states—including Maryland, Virginia, and New York—may trigger notice at lower thresholds under specific conditions.
Communicate with compassion and clarity: Both departing and remaining employees need information. For departing employees, deliver the news privately (in person or via video), be direct and respectful, and thank them for their contributions. For employees who are staying on, hold a candid meeting about what is changing, why, and how workloads and priorities will be managed to help stabilize morale.
Prepare pay, severance, and unemployment details: Departing employees will have questions about final pay, severance, benefits, and unemployment. To be prepared:
- Follow state deadlines for final pay. For example, Virginia requires final pay on or before the next regular payday.
- Severance isn’t generally required absent a contract, but it can ease transitions.
- Be sure to outline pay, COBRA continuation, and any outplacement support in a clear, written agreement.
- For unemployment, provide instructions for filing with the state agency (e.g., the Virginia Employment Commission, D.C. Office of Unemployment Compensation, and Maryland Unemployment Insurance) and issue any required notices, such as Virginia’s VEC-B-29, at separation.
Use a valid release when offering severance: Include a release of claims in the separation agreement. For employees age 40 and older, covered employers must ensure compliance with the Older Workers Benefit Protection Act (OWBPA). The OWBPA requires plain language, 21-day review (45 days for layoffs of two or more individuals along with decisional unit information), advice to consult counsel, and a seven-day revocation period.
Consult experienced counsel early: Talk with experienced counsel about the need to reduce the number of employees, the reason for the reduction, the positions needed in the future, and how the employees designated for the layoff were selected. Review the group to be laid off to ensure that unintentional patterns based on protected classes do not exist. Document legitimate, nondiscriminatory reasons for layoff and the criteria used to determine which positions were selected for layoff. Coordinating timing, messaging, and documentation with legal guidance reduces risk and helps protect your organization.
Takeaways
Layoffs are never easy, but they can be handled with dignity, consistency, and compliance. For tailored guidance on WARN analysis, agreement drafting, and implementation planning, contact your employment lawyer at Whiteford, Taylor & Preston. We are here to help.
Mary Elizabeth “Betsy” Davis is a partner at Whiteford, Taylor & Preston, L.L.P., and can be reached at bdavis@whitefordlaw.com.