Layoffs and Plant Closings: Know Your Rights

Layoff notice requirements, severance, and laid-off workers' legal rights.

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If you've lost your job in a layoff, you are no doubt concerned about your finances, benefits, and finding new work. There is help available to laid-off workers from the government, in the form of unemployment compensation. But your former employer has legal obligations as well. This article explains your legal rights in a layoff, including what your former employer is required to do for you. (For more information on unemployment compensation and continuing your health coverage after a layoff, check out Nolo's Collecting Unemployment Benefits area and Nolo's article Your Rights When You Leave Your Job.)

Severance and Final Paychecks

For most laid-off workers, money is the biggest concern. You are entitled to receive your final paycheck within time limits set by state law. Some states give employees who have been laid off or fired a right to receive their paychecks quickly, sometimes at the same time they lose their jobs or a day or two later. Other states allow employers to wait until the next regularly scheduled payday to cut a final check. To check your state's law on final paychecks, see Nolo's article Chart: Final Paychecks for Departing Employees.

A number of states require employers to cash out a departing employee's accrued vacation time (but not sick time) and include it in the employee's final paycheck. Some states, such as California, give all employees this legal right, while other states require employers to pay out unused vacation time only if their policies or practices provide for it. To find out how your state handles this issue, contact your state labor department. (You can find a list of links at www.dol.gov, the official website of the federal Department of Labor.)

Generally, employees who lose their jobs in a layoff have no automatic right to severance pay (unless their state's law requires it as part of a notice requirement for a large layoff; see "Notice Requirements," below). However, if your employer has a policy of paying severance to all employees (or at least all employees who are laid off or otherwise lose their jobs through no fault of their own), you may be legally entitled to expect a severance payment. This is because a court could interpret a past policy like this as a contract giving you the right to severance -- even if your company doesn't have a written policy on the topic -- because your company has made a regular practice of paying severance to all employees who lose their jobs. If you think you may have a legal right to severance that your former employer is not honoring, you should consider talking to an employment lawyer.

Benefits

If you have been receiving health insurance coverage through your employer, you have a legal right to continue those benefits for at least 18 months. A federal law called Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees (and their dependents) the right to continue their health insurance coverage for a period of time after losing their jobs. Although Congress subsidized part of the premium cost for employees for a couple of years, that subsidy has expired. This means employees are once again responsible for paying the full cost of continued health care, at the group rate negotiated by their former employer. 

Notice Requirements

The federal Worker Adjustment and Retraining Notification Act (WARN) requires larger employers to give employees notice 60 days before an impending plant closing or mass layoff that will result in job losses for a specified number or percentage of employees. Employers who don't comply with this notice requirement may have to pay workers for every day of notice they didn't receive. Under similar state laws, laid-off workers may be entitled to some severance or benefits continuation, as well.

WARN applies only to employees with 100 or more employees, and only if there is a plant closing or mass layoff. The law defines these terms as follows:

  • A plant closing is the permanent or temporary shutdown of a single employment site or one or more facilities or operating units with a single site, which results in job loss for 50 or more employees (not including those who work fewer than 20 hours per week) during a 30-day period.
  • A mass layoff is a reduction in force that results in job loss at a single employment site, during a 30-day period, for (1) 500 or more employees (not including those who work fewer than 20 hours per week), or (2) 50 to 499 employees (not including those who work fewer than 20 hours per week), if the laid-off employees make up at least one-third of the employer's active workforce.

The law also covers staged plant closings or layoffs, which are defined the same as above but occur in stages over a period of 90 days. This rule is intended to prevent employers from getting around the law's requirements by conducting a series of smaller layoffs.

There are some exceptions to the notice requirement. If, for example, an employer closes a temporary facility or the layoffs result from a strike or lockout, the employer doesn't have to provide notice. And employers may give less than 60 days' notice in some circumstances, including when the layoff is the result of a natural disaster or business circumstances that weren't reasonably foreseeable 60 days in advance.

More than half of the states also have laws that require employers to give notice of a layoff. Some of these laws apply to smaller employers (or smaller layoffs) than the federal WARN Act. And some require employers to do more than provide notice. For example, Connecticut employers that permanently shut down or relocate their facility out of state must pay to continue their former employees' health insurance for 120 days, In Maine, employers that discontinue business operations or relocate at least 100 miles away must pay one week of severance for each year of employment to employees who have been with the company for at least three years. To learn about your state's rules, contact your state labor department.

Additional Information

For additional information on employee rights, get Your Rights in the Workplace, by Barbara Repa (Nolo), or visit Nolo's Lawyer Directory to view personal profiles of employment law attorneys in your geographic area.

by: , J.D.

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