More U.S. workers are being handed pink slips as the Fed pumps the economic brakes in a bid to slow inflation, with layoff announcements spiking in September.
Job cuts rose 46% from August to nearly 30,000 in September. Workers suddenly out in the cold may wonder about their rights when they lose their jobs and what steps they should take upon being dismissed — key issues that are easy to overlook in the heat of a difficult moment but that can seriously impact a person’s immediate financial prospects after a layoff.
“Most employees don’t realize how much is at stake with a layoff or separation that is for a cause that’s not misconduct,” said New York City employment attorney Christopher Q. Davis. “There is a lot of money and rights at stake that most people don’t think about, and there really is a lot that could go wrong.”
Most workers in the U.S. are employed under “at will” agreements that allow the employee or employer to terminate the arrangement at any time, for any reason, so long as it’s not discriminatory.
Still, there are state and federal laws that may entitle workers to compensation and benefits if they’re dismissed. And even if a company is not legally required to pay a terminated worker severance, it could have a policy in place that helps tide laid-off workers over until they land a new job.
Make sure you’re eligible for unemployment
One of the first things a laid-off worker should do is ensure they are entitled to unemployment benefits through their state’s department of labor. Generally, if employees lose their job through no fault of their own, they can file for unemployment compensation. However, companies will sometimes unfairly challenge workers’ unemployment eligibility, according to Davis.
“Make sure that the company is acknowledging that your termination is unemployment-qualifying,” he said. “That’s something that can be discussed. Say, ‘Hey, you’re not going to challenge my eligibility.’”
If the employee has committed an act of misconduct, they would not be entitled to unemployment benefits.
“A lot of people go through the unemployment process without calling for help. It’s self-advocacy,” Davis said.
If you are part of a mass layoff
If your job loss is a result of an entire facility closing — for example, if a company shuts down a manufacturing plant, resulting in widespread layoffs — the company must provide at least 60 days’ notice under The Worker Adjustment and Retraining Notification (WARN) Act.
“If you’re laid off and the company does not provide notice, you should contest,” Davis said.
What’s more, if you’re the victim of a mass layoff and believe you’ve been discriminated against, consult a lawyer. “With mass layoffs, things are put together haphazardly and layoffs are riddled with bias,” Davis said.
It’s illegal for companies to fire people based on protected characteristics, such as race, age or sex, or to fire someone in retaliation for protected activity, such as reporting misconduct or organizing a union.
Ask for a complete list of everyone who was laid off, including their titles and ages, to determine if the action was discriminatory. “If it disproportionately impacts a protected class, then there could be a case for discrimination,” Davis said.
Can I get severance pay?
Workers in the U.S. have a fairly flimsy government safety net to support them after a layoff, and often have little access to information regarding their rights when an employer lowers the boom.
Companies aren’t required by law to pay workers severance, unless it’s been negotiated as part of a contract or executive compensation package. However, many employers have policies that entitle former workers to compensation and benefits.
“Just because someone has been fired or released from work, it doesn’t give them any type of rights to severance or an exit package. There is no entitlement to that,” said Laura Reathaford, a Los Angeles-based employment attorney at Lathrop GPM.
But laid-off workers can negotiate exit packages if they are offered.
“If you are offered an exit package, then you have the right to review it and consult with a lawyer about the terms,” Reathaford said.
Most exit packages require that the employee, in exchange for additional compensation and benefits, give up their right to sue the employer or to publicly speak negatively about them. It’s up to the employee to decide if they want to accept the terms, Reatherford emphasized.
“What you’re giving up as an employee, in exchange for money, is the right to sue your employer for anything,” she said. “If the employer does not want to give you more money, you have the right to walk away and not sign the agreement.”
How about health insurance?
Under COBRA, workers are generally able to extend their health insurance coverage for a period of time, but may be required to pay the entire premium for coverage, which would otherwise be terminated along with the employee. That could mean a hefty premium increase.
“Ask your employer when your medical insurance ends, understand your COBRA rights and how much it will cost to maintain your medical benefits post termination,” said Carrie Hoffman, an employment attorney at Foley & Lardner in Texas.
Workers may also be entitled to compensation for unused vacation days, depending on the state.
For example, in California employees who accrue paid time off that they don’t use are required by law to be paid out for that time in their employer’s final paycheck.
By contrast, “Other states are ‘use it or lose it,’ meaning if the employee has not used their vacation, once employment ends they are not entitled to a payout,” said California employment attorney Anthony Zaller.
Rules of thumb
Certainly, a productive employee who has engendered goodwill from their employer may ask for a positive reference or access to resources, like career counseling, that could help them land a new job. Some employers voluntarily pay for job-search consulting services.
“It’s always worth asking the question and having a candid conversation about what you want and need. Asking for severance is perfectly fine — so is asking for assistance finding a new job and a positive letter of recommendation,” Reathaford said.
Added Hoffman: “Despite how unpleasant it may be to have been terminated, I always recommend not burning bridges and trying to work with, as opposed to against, whatever that situation is. Theoretically, there could be opportunities within the company. Ask if you are eligible to be rehired.”
In other words, mine your employer for information, and try to leave on a positive note.
“Don’t exhibit poor behavior on your way out. Keep your professionalism intact,” said Monster.com career expert Vicki Salemi.