I’ve Just Received a Layoff Notice. What Should I Do?

May 24th, 2023

Coming off record low unemployment rates, businesses are increasingly shedding workers across the economy, affecting employees at companies ranging from 3M to Twitter to Yankee Candle. Fortunately, the law affords laid off individuals certain rights and protections, as summarized below: 

1. Am I Entitled to Severance?

In many countries, terminated employees are entitled by law to specified amounts of severance pay. (France, for instance, requires employees be paid one fourth their monthly salary for each year of service up to ten, one third for each year beyond that.) The United States takes a different approach. With limited exceptions applicable to employees (1) covered by Employee Retirement Security Act (“ERISA”) governed severance plans provided by some, mostly larger employers as an employee benefit, (2) having an employment agreement containing contractual severance, (3) in a union shop governed by a collective bargaining agreement with such protections, and (4) over the age of 40 (discussed below), nobody is legally owed a dime in severance.

2. If I’m Offered Severance, Should I Accept It?

Although not required to do so, most employers offer those laid-off severance pay as a matter of course, in exchange for their signing a comprehensive release of legal claims arising from the employment relationship. Businesses do this for practical financial reasons, not out of the goodness of their hearts. They see severance agreements as cheap insurance against expensive lawsuits. 

Before agreeing to accept the severance being offered, it’s important to ask yourself whether co-workers spared the axe were more appropriate candidates for layoff. Did they have lower levels of ability? Shorter tenures with the company? A history of employment misconduct? In such instances, the layoff may constitute “pretext” under the law, meaning a mask for unlawful action. 

In addition, it’s important to ask a series of other questions. 

• Did you report to management or a government agency any violations of law or breaches of contract in the period preceding your termination? If so, you may have legal claims under state and federal whistleblower protection laws, including the Minnesota Whistleblower Act.
• Are you a member of a legally protected class of employees? The law prohibits discrimination on the basis of race, religion, gender, age, disability, national origin, sexual orientation and other characteristics. 
• Did you recently seek time off for medical reasons or in conjunction with the birth or adoption of a child? The law provides certain protections for such individuals.
• Were you about to vest in some right or benefit, such as eligibility to participate in a pension plan? If so, ERISA’s Section 510 may provide you with additional legal protections.

Employers sometimes use layoffs as a cover to get rid of workers who do not “fit in” with some preferred demographic, or who are seen as excessively expensive owing to medical costs. If you suspect that this happened to you, it is important to speak with an experienced employment law attorney before accepting any severance.

3. Am I Entitled to Written Notices or Severance Pay?

The federal Worker Adjustment Retraining Notification Act (“WARN Act”) requires employers provide employees at least 60 days advance notice of their termination if they are let go as a result of a plant closing or a “mass” layoff, meaning one affecting 50 or more workers. While advance notice is helpful in planning and seeking out alternative employment, the WARN Act provides no right to separation or severance pay.

The federal Older Worker Benefit Protection Act (“OWBPA”), by contrast, requires employers pay terminated employees 40 years old and above “consideration in addition to anything of value to which the individual is already entitled” as a condition of waiving age discrimination claims. In group terminations, the OWBPA requires employers provide all employees, not just older ones, a notice listing the ages both of all people laid off and those retained within the group of employees considered for layoff (the “decisional unit”). The OWBPA also requires employers to provide terminated employees 40 and older at least 21 days (45 days in group layoffs) in which to decide whether to accept or reject the offered severance. Through these measures, Congress intended to help employees make an informed decision as to whether age may have played a factor in their selection for termination. Failure to abide by the OWBPA’s notice and disclosure requirements will void any release of claims under the federal Age Discrimination in Employment Act (“ADEA”).

4. What About Health Insurance?

Most Americans obtain health insurance through their employment. Under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), employers must inform employees upon termination for any reason of their right to remain on the employer’s health insurance plan for a period of up to 18 months. This right may be exercised within 60 days of the end of employment. Under COBRA, the employee is responsible for paying both the employer and employee portions of the insurance premium, which in many cases will render the insurance unaffordable in comparison to policies available on the Affordable Healthcare Act Exchange. As part of a severance negotiation, employment attorneys are sometimes able to negotiate the employer’s payment of the full COBRA cost, in addition to additional compensation of claims where evidence of unlawfulness has been identified. 

Special Note on Age Discrimination

As a matter of practical experience, workers aged 40 and above tend to be laid off in greater numbers than their younger counterparts. This results in part from the fact that older, more tenured employees typically earn higher salaries than new or recent, generally younger hires. A financially struggling company may decide that to remain in business, it’s necessary to reduce the largest single expenditure for most businesses: payroll. This economic rationale may not fly where a targeted older worker has superior value based on skill and experience. This is easiest to quantify for commission-based sales employees, but may be the case for any number of other professions. 

Finally, some organizations select for termination older employees who reach upper managerial levels for potentially discriminatory reasons, including to make room for younger workers or meet diversity goals. The law protects not just women and racial minorities. Discrimination against white males, sometimes referred to as “reverse discrimination,” is equally unlawful. Proving discrimination is seldom easy, but if you feel you’ve been fired or demoted for a discriminatory reason, make sure to contact an employment lawyer. Contact Halunen Law today for a complimentary consultation.

Halunen Law’s employment law group is a team of tenacious attorneys dedicated to ensuring employee rights and protections. If you’ve been wrongfully terminated, have faced discrimination, sexual assault, or harassment, or have been retaliated against for reporting illegal workplace activity, contact our office today. We’ll assess your case and determine your best path toward seeking justice. We represent clients on a contingency basis, so there is no cost unless we win.

Watch Charles’ interview on CBS News Minnesota’s Good Question segment: “What are your rights if you’re laid off?”