How To Run A Layoff Legally And Humanely, Including The WARN Act Rules

Most layoffs go wrong in the week before anyone is told. The decision gets made, a list gets drafted, and the legal checks that should shape the list happen after the calendar invites are already sent.

A reduction in force is one of the few leadership moments where process matters as much as intent. Done carefully, it protects the people leaving and the people staying. Done in a hurry, it can trigger back-pay liability, invalid severance releases and a reputation problem that follows the company into its next hiring cycle.

Check the WARN Act, federal and state

The Worker Adjustment and Retraining Notification Act requires covered employers to give advance written notice of a plant closing or mass layoff. Under the federal law, coverage generally begins at 100 full-time employees, and the notice period is 60 calendar days. The statute defines "plant closing" and "mass layoff" by the number of employees affected at a single site within set time windows, and it can aggregate smaller cuts made over a rolling period.

Notice is not a single email. The federal rule requires it to go to each affected employee (or their union representative), to the state's dislocated worker unit, and to the chief elected official of the local government where the site sits. An employer that skips required notice can owe back pay and benefits for each day of the violation, along with possible civil penalties.

There are limited exceptions, including for unforeseeable business circumstances and for a faltering company actively seeking financing that notice would have scuttled. They are narrow and fact-specific. Do not plan around them without counsel.

Several states have their own versions of WARN, often with lower headcount thresholds, longer notice periods or broader definitions of a covered event. A company well under the federal threshold can still be covered at the state level, and remote employees may count toward the site they report to. Map where every affected person works before you settle on dates.

Build the list and the release defensibly

Selection criteria should be written down before names are attached: eliminated roles, discontinued projects, a business unit being closed. Then run a disparate-impact review. If the list falls disproportionately on employees over 40, on one gender, or on people who recently took protected leave or raised a complaint, you need to understand why before you finalize it.

Severance is usually paid in exchange for a release of claims. For employees aged 40 and over, federal law sets specific conditions for a valid waiver of age discrimination claims under the Older Workers Benefit Protection Act. The release must be written in plain language, advise the employee to consult a lawyer, and give a set period to consider and a further period to revoke after signing. In a group layoff, the consideration period is longer and the employer must disclose the job titles and ages of those selected and not selected within the decisional unit.

Miss any of those elements and the age-claim waiver may not hold, even if the employee signed and cashed the check. The EEOC publishes a detailed question-and-answer guide on these waivers; your counsel should check the agreement against it.

Handle final pay, benefits and equity

State law controls when final wages and, in many states, accrued vacation must be paid. Some states require payment on the last day. Confirm the rule in every state where an affected employee works and set up payroll accordingly.

If you offer a group health plan and are large enough to be covered by COBRA, departing employees must receive notice of their right to continue coverage. Many states have similar continuation laws for smaller employers. Decide in advance whether the company will subsidize premiums for a period as part of severance.

Equity needs its own explanation. Tell each person how many options have vested, how long they have to exercise after termination under the plan, and whether the board is extending that window. Many employees learn about the exercise deadline only after it has passed.

Run the day itself with care

Tell affected people first, individually or in small groups, by a manager they know, with HR present. Keep the conversation short and clear: the decision is final, it is a business decision, here is what you will receive and here is who to contact. Have the written package ready so no one waits for paperwork.

Then address the remaining team the same day. Explain what changed, why, and what it means for the roles that stay. Skipping this conversation is how a layoff turns into a wave of voluntary departures.

What to do before you announce

Count affected employees by site and check federal and state WARN coverage. Write selection criteria, then review the list for disparate impact. Have counsel review the release against OWBPA requirements. Confirm final pay timing by state, COBRA and state continuation notices, and option exercise windows. Prepare individual packets, a manager script and a message for the people who stay.

This is general information, not legal advice. Speak to a qualified attorney in your jurisdiction before acting on any of it.

Sources

U.S. Department of Labor — WARN Act Compliance Assistance

EEOC — Understanding Waivers of Discrimination Claims in Employee Severance Agreements

U.S. Department of Labor — Continuation of Health Coverage (COBRA)