Over the past month, mass layoffs — particularly in the tech industry — have dominated the news. In particular, companies that experienced significant growth during COVID have been forced to scale back as the economy weakens. Amazon plans to cut 10,000 jobs worldwide, Meta laid off 11,000 employees, and Twitter laid off nearly half of its workforce. Most recently, AMC Networks announced its plans to lay off 20% of its workforce after CEO Christina Spade stepped down from her position. Faced with rising interest rates and high inflation, mass layoffs can quickly and efficiently cut costs, but many of these companies risk violating labor laws by engaging in mass layoffs.
What Is a Mass Layoff?
According to the Worker Adjustment and Retraining Notification (WARN) Act, a mass layoff must meet at least one of the following criteria:
At least 50 employees are laid off during a 30-day period if the laid-off employees make up at least one-third of the workforce.
500 employees are laid off during a 30-day period if the laid-off employees make up at least one-third of the workforce.
500 employees are laid off during a 30-day period, regardless of how large the workforce is.
An entire work site is closed down, and at least 50 employees are laid off during a 30-day period.
Mass Layoffs Risk Labor Law Violations
The WARN Act was established in 1988, and it protects workers from mass layoffs without sufficient notice. The WARN Act requires companies that meet specific requirements to provide a minimum of 60 days' notice before the layoffs will occur.To qualify, the company must have more than 100 employees. The layoffs must affect at least 500 employees at one location or 30% of the on-site workers. Five former Twitter employees filed a federal suit against the company earlier this month. The plaintiffs claimed Twitter violated the WARN Act by not giving 60 days' notice when it laid off 3,700 employees.At this point, it’s unclear whether Twitter violated the WARN Act since there are too many unknown variables. For instance, it’s unclear whether laid-off employees will continue to receive their pay or benefits for 60 days.
The Downsides to Company-Wide Layoffs
Whether or not Twitter violated the WARN Act, companies that engage in mass layoffs put themselves at risk. It’s a difficult situation because if the economy suddenly takes a turn for the worst, many businesses will be forced to engage in sudden layoffs. For most businesses, labor costs are their biggest expense, so mass layoffs can be the fastest way to reduce the budget. However, widespread layoffs can also hurt your company in the long run.Not only does it cause emotional distress for the employees who are laid off, but it can also hurt the morale of the employees you chose to keep. Plus, companies that engage in mass layoffs are often less competitive in the market. When the economy turns around, they may not have the resources and staff necessary to compete.
ABOUT THE AUTHOR
Joseph Camberato
Founder & CEO
Joe Camberato is the CEO and Founder of National Business Capital. Beginning in 2007 out of a spare bedroom, Joe and his team have financed $2+ billion for businesses nationwide. He’s made it his calling to deliver the educational and financial resources businesses need to thrive.
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