Coronavirus: Layoff Considerations

april 06, 2020 | coronavirus
closed business note on door

Protecting Your Employees During Coronavirus 

Layoffs are hard in the best of times and now particularly tough in the middle of unprecedented economic and social uncertainty. Employers face impossible decisions and employees out of work are looking at a bleak job market given the number of businesses shutting their doors, at least temporarily. Employers are having to choose whether or not to send employees home temporarily or permanently until the situation improves. For those weighing that difficult decision, here is some information that may help.   

Frequently Asked Layoff Questions During Coronavirus:


Layoff Considerations

What do I need to consider before laying off employees? 

An employer’s first consideration should be doing what is best for their employees in both the short and long term. In contemplating termination, you have to determine whether the layoffs would be temporary or permanent. A temporary layoff would allow employees to immediately apply for unemployment benefits under the coronavirus relief bill and leave open the possibility to bring them back once business returns to something like normal.

However, there are no firm notions as to when or even if normal will return, and employers have to consider permanent reductions should the current situation run on for months. Permanent layoffs come with their concerns, namely worries about having to hire and train a new set of workers in the future and the possible negative perception or impact on your brand. Workplaces that meet certain criteria would also have to worry about triggering the WARN Act with permanent layoffs, which might necessitate notice to workers being laid off.  

Given all these potential issues, it might be worth exploring all alternatives, including altered, staggered work schedules and reduced hours, before choosing to lay off employees. Employers can now apply for SBA Disaster Loans as well as loans under the Payroll Protection Program to cover any shortfalls in meeting payroll and expenses, help to prevent layoffs. Employers are also entitled to a refundable payroll tax credit for up to 50 percent of payroll for businesses partially or fully suspended or who have seen a 50 percent decline in business receipts. 

How do I decide between a leave of absence and a shutdown due to a lack of work?

Figuring out how to handle a sharp downturn in business and an inability to pay all employees is a challenge. Forcing some employees to take an unpaid leave of absence might save you money while remaining open, but it can place them in a tough spot financially, and you are still incurring the fixed costs of running a business, even with a skeleton crew. A shutdown may be more painful in the short term, but it might ultimately be the best for all involved. A case by case analysis needs to be done based on your financial situation.

Communicating Layoffs

What am I required to tell employees that are being laid off?

Under the Fair Labor Standards Act, most employers are not required to provide employees with notification in the case of layoffs. That said, it behooves any employer to have an honest conversation with employees being laid off and to provide them with a layoff letter outlining the reasons, in the interest of transparency. Consult a LegalShield attorney for advice on the layoff process applicable in your state.

Writing temporary layoff letters or layoff letters – what are the requirements?

Most employers aren’t required to provide notification to an employee of a layoff, provided that they are an at-will employee and not under a contract (and that the layoffs don’t fall under the provisions of the WARN Act.) 

However, it is a good practice to give employees a layoff letter. A layoff letter should outline the reasons and the criteria for the layoff and the terms of any severance that may be provided. It’s important that any layoff letter not open up the company to legal liability for discrimination, so in addition to not using discriminatory criteria, make sure that the language used in the letter is avoiding any such implication by consulting a lawyer.


How can I shield myself from liability down the road?

In handling layoffs, employers should be clear and honest about the reason for layoffs and should approach them from a fair and non-discriminatory manner. That means outlining your criteria to ensure that layoffs wouldn’t disproportionately affect groups protected under federal employment discrimination laws, and making adjustments to your guidelines if they do. If you have questions as to whether your layoffs may run afoul of anti-discrimination laws, it’s best to talk with an employment attorney at a LegalShield firm.

Will I face legal challenges if I use performance-based criteria?

Provided that your criteria for layoffs are fair and non-discriminatory, you shouldn’t face legal challenges. As discussed above, if layoffs don’t disproportionately affect a protected group and any letters or notices are clear that the layoffs are based on factors beyond documented performance on the job.

Furlough vs Layoffs

What’s the difference between a furlough and a layoff?

While both terms indicate a period of inactivity for workers, there are differences between the two. Furloughed workers are sent home without pay for a period of time but remain on the books as employees. This allows the furloughed individual to continued access to the health care benefits unless the loss in hours causes them to be dropped from their group health plan. Furloughed employees can also apply for unemployment benefits. 

Laid-off employees, on the other hand, are officially separated from their employer until they may be hired back (should that ever occur.) They are entitled to any final pay, vacation, and other payouts due upon exiting the company. Though they may be able to stay on with the group health plan through COBRA, that cost will come out of pocket. Laid-off workers can apply for unemployment and look for other work.


What do I have to follow/ do in accordance with the WARN act?

Under the provisions of the WARN Act, employers with more than 100 employees are required to provide 60 days’ notice if there are to be layoffs of more than 50 employees, or if said employees are to have their hours reduced by more than 50 percent. There are exceptions to this rule for layoffs shorter than six months, as well as in instances when the company is beset by “unforeseen business circumstances”. With our changing circumstances, if your company falls into the category covered by the WARN Act, ask questions of your lawyer before any layoffs.

Programs and Resources

Are there programs/resources I can use instead of laying off employees?

Some may try to avoid layoffs by introducing alternatives that allow the entire workforce to stay in place. Work-sharing is an option whereby employees take a reduction in both hours and pay in order for everyone to stay employed. In addition, those employees may apply for pro-rated unemployment benefits. 

Employers can also consider temporary cuts to non-essential benefits to preserve cash. And potentially those moving to remote work may at least save on utility bills for their offices. There is also the option of applying for an SBA Disaster Loan for the money needed to make payroll during this period.

Unpaid Leave

What steps do I need to take in order to place an employee on temporary unpaid leave?

If you’re placing employees on temporary unpaid leave, you would do well to communicate that decision clearly in advance. Seek legal advice on the proper wording to ensure that you’re not terminating the employee while also not giving a binding offer for return to work or guarantee of coming back.  Consider offering employees placed on leave an Unemployment Compensation Notice, as well as information on how to apply for unemployment benefits during this period. 

Unemployment Benefits

Should I encourage my employees to apply for unemployment?

Employers should encourage all eligible employees to apply for unemployment benefits, particularly during this time when finding new employment may prove challenging. Under the CARES Act, unemployment benefits are increased by $600 a week for up to four months — much-needed assistance for those unable to work during the pandemic.

No one wishes to deal with layoffs and unemployment, but the economic realities of the moment are forcing employers into unpleasant decisions. Working through employment rules about layoffs can be difficult however a LegalShield small business plan provides you access to lawyers with the knowledge to guide you through these rough times

LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal or medical advice. Please contact a medical professional for medical advice or assistance and an attorney for legal advice or assistance.

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