Layoffs and Plant Closings: Know Your Rights

Learn when laid-off workers have the right to final checks, severance, unemployment, and advance warning—including notice of mass layoffs during the COVID-19 pandemic.

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.

Final Paychecks After a Layoff

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 on the day 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.

In a number of states, employers must include a departing employee's accrued vacation time (but not sick time) in the employee's final paycheck. Some states, such as California, give all employees this legal right; other states only require employers to pay out unused vacation time 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.)

Severance Pay

Generally, employees who lose their jobs in a layoff have no automatic right to severance pay. However, there are a few exceptions:

  • Mass layoff severance. In a few states, employers are required to provide a small amount of severance as part of a large layoff or plant closing. See "State Warn Laws," below.
  • Employer policies or practices of paying out severance. If your employer has a policy of paying severance to all employees (or at least to all employees who are laid off or otherwise lose their jobs through no fault of their own), you might be legally entitled to a severance payment. Courts sometimes interpret a regular history of paying out severance as a contract—or promise by your employer—to pay severance to all laid off employees.
  • Your employment contract promises severance. Most employees work at will, meaning that they aren’t guaranteed employment for a particular period of time. However, employers do use employment contracts with certain employees, and these contracts might promise severance in the event the employee is laid off.

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.

Health Benefits

If you have been receiving health insurance coverage through your employer, you might 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. However, employees are responsible for paying the full cost of the premium, at the group rate negotiated by their former employer. COBRA applies to employers with 20 or more employees, but some states have similar laws that might apply to smaller employers. (For more information see our article on your rights when you leave your job.)

Federal WARN Act

The federal Worker Adjustment and Retraining Notification (WARN) Act 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. If an employer fails to give the required notice, the employees can collect wages and benefits for every day that notice is late, up to 60 days.

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 60-day-notice requirement, including when a layoff or plant closing was due to:

  • a strike or lockout
  • the completion of a project, if employees knew when they were hired that their employment would be temporary
  • a natural disaster, such as a hurricane or flood; or
  • business circumstances that were not "reasonably foreseeable" 60 days before the layoff.

In the case of exceptions for natural disasters or unexpected business circumstances, the employer must give as much notice as is practicable. (29 U.S.C. §§ 2101-2109.)

Do Employers Have to Give Layoff Notice During the COVID-19 Pandemic?

For purposes of exceptions to the WARN Act's 60-day notice requirement, federal regulations (at 20 C.F.R. § 639.9) give some examples that might qualify as unforeseeable business circumstances, including:

  • a major, unexpected, and dramatic economic downturn; and
  • when the government has ordered an employment site closed without advance warning.

These examples would probably apply to mass layoffs that happened at the beginning of the COVID-19 pandemic and/or right after emergency orders directed nonessential businesses to close. But as the economic fallout from the pandemic became more predictable, businesses are less likely to qualify for this exception. A class-action lawsuit against Enterprise Rent-A-Car claimed that it violated the WARN Act by failing to give any advance notice before a mass layoff in late April 2020—more than a month after the company had furloughed employees due to business losses from the pandemic.

State WARN Laws

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.

Unemployment Benefits

In all states, employees who are laid off are eligible for unemployment benefits, as long as they meet other eligibility requirements. To learn more, see our state articles on collecting unemployment benefits.

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.

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