Layoffs are not illegal under California or Federal labor laws, and they are a common way for companies to shrink the workforce. A company may have several reasons to reduce the number of employees on its payroll. Perhaps the company went through a period of growth, and the workforce expanded to match the rising revenue. But that has since declined, so the company needs to cut a percentage of the workforce just to stay viable.
It is often frustrating for workers who lose their jobs in a layoff. They do not feel like they have done anything wrong. Even so, their livelihood is being taken away from them. But financially the company may have little choice – and may proceed as long as it is done fairly and not in a discriminatory fashion.
Protected classes
The company must consider protected classes when doing layoffs. California and Federal law recognize many protected classes, including, for example, race, religion, national origin, physical and mental disability, and sexual orientation. Workers in protected classes can be laid off; it’s not illegal to include them, but if the layoff will disproportionately affect one group over all the others, it could be seen as discrimination.
For example, gender is a protected class. If the layoff is applied fairly and equally to both male and female workers, then there is no gender issue. But if the company lays off 10% of its workforce and 100% of those workers are women, then the employees might claim that it is just gender discrimination. In fact, those workers may think that the layoffs were just an excuse to illegally fire people on the basis of their sex and had little to do with the company’s financial position.
Employers must take the various protected classes into account and develop a process for determining layoffs that is based on as objective non-discriminatory criteria as possible. By obtaining input from supervisors and calibrating how to select those who will remain, the company can reduce the likelihood of making decisions that can be challenged. The company should consider what skill sets are necessary to retain and evaluate who has those skills.
Advance Notice
In addition, the company must consider whether it has notice obligations under the Federal WARN Act and/or California’s mini-WARN Act. If those statutes apply to the layoff, the company may have to provide at least 60 days advance notice of the layoff.
With careful planning an employer can avoid significant risk while accomplishing its objective of reducing the size of its workforce.
