Businesses experiencing a loss of revenue may be forced to lay off employees.
When a business experiences, or anticipates, a decline in revenue, it is often faced with the reality that it must cut costs, which in turn often leads to staff layoffs. Before a business decides to terminate an employee, the supervisor should check the employee’s employment contract, if applicable, as well as the laws of the jurisdiction where the business is located to ensure that both are followed to avoid future litigation. Laws vary from jurisdiction to jurisdiction as to what a business must legally do when deciding to terminate an employee. Additionally, the employee’s employment contract, or company policy, may entitle the employee to severance pay or continuing benefits that must be considered before deciding to terminate an employee.
During times of economic hardship, some layoffs may turn into 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 terminate an employee for any reason, without the need to justify the termination. As a general rule, an “at-will” employee is also not entitled to severance pay when he is subject to termination. However, a laid-off worker may be entitled to receive unemployment insurance benefits when he is laid off.
Upon termination, the employee may be entitled to receive advice on the benefits to be received.
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 the rules of the contract before making the decision to fire an employee. For example, many union contracts require the employer to make termination decisions based solely on seniority. While an individual employment contract cannot determine who should be terminated first, it can provide the employee with a number of onerous termination benefits that the employer must consider.
Once the decision to terminate an employee has been made, the employer must notify the employee. This is often referred to as “getting a pink receipt.” Along with the official notification of her dismissal, the worker may be entitled to receive advice on the benefits that he will receive, as well as the employment services that the company offers to dismissed workers. While small businesses may simply give the worker a “pink ticket,” larger companies often offer training, counseling or other programs to help employees adjust to layoffs.