Companies experiencing a loss of revenue may have to lay off employees.
When a company experiences, or anticipates, a reduction in revenue, it is often faced with the reality that it must cut costs, which in turn often leads to staff layoffs. Before a company decides to fire an employee, the supervisor must check the employee’s employment contract, if applicable, as well as the laws of the jurisdiction where the company is located to ensure that both are followed to avoid future litigation. Laws vary from jurisdiction to jurisdiction as to what a company must legally do when it decides to fire an employee. In addition, the employee’s employment contract, or company policy, may entitle the employee to severance or continuing benefits that must be considered before deciding to terminate an employee.
During times of economic hardship, some layoffs may become layoffs.
Some jurisdictions legally protect workers more than others. In the United States, employment is generally considered “at will” unless the parties enter into a written employment contract. In an “at will” situation, a supervisor can dismiss an employee for any reason, without the need to justify the dismissal. As a rule, an employee “at will” is also not entitled to severance pay when he or she is subject to a layoff. A dismissed worker may, however, be entitled to receive unemployment insurance benefits when he has been made redundant.
Upon termination, the employee may be entitled to receive advice on the benefits they will receive.
For employees who have an employment contract, or are part of a union that has a general contract with the employer, the employer must consider all rules of the contract before making a decision to dismiss an employee. For example, many union contracts require the employer to make dismissal decisions based on seniority alone. While an individual employment contract cannot determine who should be laid off first, it can provide the employee with a number of onerous layoff benefits that the employer must consider.
Once a decision has been made to dismiss an employee, the employer must notify the employee. This is often known as “getting a pink slip”. Along with official notification that they are being laid off, the employee may be entitled to receive advice on the benefits they will receive, as well as any employment services the company offers to the laid-off workers. While small businesses may simply hand the worker a “pink voucher,” larger companies often offer retraining, counseling, or other programs to help employees adjust to layoffs.