Employee Termination and Layoffs

Employee Termination

Termination of employment refers to the end of an employee’s work with a company. An employee may be terminated from a job of their own free will or following a decision made by the employer.

An employee who is not actively working because of an illness, leave of absence, or temporary layoff is still considered employed if the relationship with the employer has not been terminated formally with a notice of termination.

Termination of employment is an employee’s departure from a job and the end of an employee’s duration with an employer. Termination may be voluntary on the employee’s part, or it may be at the hands of the employer, often in the form of dismissal (firing) or a layoff. Dismissal or firing is usually thought to be the fault of the employee, whereas a layoff is usually done for business reasons (for instance a business slowdown or an economic downturn) outside the employee’s performance.

Firing carries a stigma in many cultures, and may hinder the jobseeker’s chances of finding new employment, particularly if they have been terminated from a previous job. Jobseekers sometimes do not mention jobs from which they were fired on their resumes; accordingly, unexplained gaps in employment, and refusal or failure to contact previous employers are often regarded as “red flags”.

How Voluntary Termination Works?

An employee may voluntarily terminate their employment with a company. An employee who decides to terminate employment with a company usually does so when they find a better job with another company, retire from the labor force, resign to start their own business, or take a break from working.

Voluntary termination of employment could also be a result of constructive dismissal, also called constructive discharge. This means that the employee left the company because they had no other choice. They could have been working under significant duress and difficult working conditions at the employer—which could include a too-low salary, harassment, a new work location that is farther than the employee can reasonably commute, increased work hours, and so forth.

A forced discharge of an employee, whereby they are given an ultimatum to quit or be fired, also falls under constructive dismissal. In these cases, if the employee can prove that the employer’s actions during the worker’s tenure with the company were unlawful, they may be entitled to some form of compensation or benefits.

An employee who voluntarily leaves an employer may be required to give advance notice to the employer, either verbally or in written form. Most industries usually require a two-week advance notice of an employee’s termination. In some cases, the employee gives notice at the time that they terminate, or they give no notice at all, such as when an employee abandons the job or fails to return to work.

How Involuntary Termination Works?

Involuntary termination of employment occurs when an employer lays off, dismisses, or fires an employee.

(i) Layoffs and downsizing

Companies decide to lay off workers or downsize their organizations to lower their operating costs, restructure their organizations, or because they no longer need an employee’s skill set. In a layoff, employees are usually let go through no fault of their own, unlike workers who are fired.

(ii) Getting fired

An employee is usually fired from a job as a result of unsatisfactory work performance, poor behavior or attitude that does not fit with the corporation’s culture, or unethical conduct that violates the company’s policies. According to at-will employment laws recognized in some states, a company may dismiss without warning any employee who is performing poorly or violating some form of the company’s rules. In fact, the company does not need to give a reason for the employee’s termination.

(iii) Illegal dismissals

Although employment-at-will contracts do not require an employer to warn or give a reason for a dismissal, an employer cannot fire a worker for certain reasons. An employee who refuses to work more than the hours specified in the contract who takes a leave of absence, reports an incident or a person to the Human Resources department, or whistleblows to industry regulators cannot be fired for these reasons. An employer who discharges an employee for exercising their legal rights has done so unlawfully and may be liable for wrongful termination in the courts.

Other illegal dismissals occur when an employer lets an employee go for discriminatory reasons such as religion, race, age, gender, disability, or nationality. An employer who has been found guilty of wrongful termination may be required to compensate the wronged employee and/or reinstate them into the company.

(iv) Termination for cause

Other than at-will conditions of employment, an employer could fire an employee for a specific cause. A termination-for-cause clause may require the employer to put the employee on an improvement schedule, of 60 or 90 days, during which the employee is expected to improve their work ethic. If the employee has not improved by the end of the probationary period, they could be terminated for cause and dismissed with prejudice.

In some cases, an employer may dismiss an employee without prejudice. This indicates that the employee was let go for reasons other than incompetence, insubordination, or misconduct in the workplace. In such situations, the employee may be rehired for a similar job in the future.

Termination Compensation

In most cases where an employee who has worked with a given company for at least three months and has their employment involuntarily terminated, the employer may provide them with a notice of termination and/or termination pay (or severance pay). A company that offers severance does so following an agreement made privately with the employee or because severance is specified in its employee handbook.

 Under the Fair Labor Standards Act (FLSA), a company is not mandated to provide severance packages.

Also, employers are not required by federal law to give the terminated employee a final paycheck immediately. However, state laws may operate differently in this regard and may mandate that the employer must not only immediately provide the affected employee with a final paycheck, but also include accrued and unused vacation days.

Special Considerations: the Coronavirus

As of April 2020, millions of workers have been laid off as businesses struggle with government-ordered stay-at-home orders during the coronavirus pandemic. Some companies have furloughed workers, a move that is meant to be a temporary arrangement until the company can reopen. The CARES Act makes unemployment compensation available not just to those who have been laid off, but to furloughed employees as well as part-time workers, freelancers, independent contractors, and the self-employed—workers not usually eligible for unemployment benefits.

Employee Layoff

A less severe form of involuntary termination is often referred to as a layoff (also redundancy or being made redundant in British English). A layoff is usually not strictly related to personal performance, but instead due to economic cycles or the company’s need to restructure itself, the firm itself going out of business or a change in the function of the employer (for example, a certain type of product or service is no longer offered by the company and therefore jobs related to that product or service are no longer needed). One type of layoff is the aggressive layoff; in such a situation, the employee is laid off, but not replaced as the job is eliminated.

In an economy based on at-will employment, such as that of the United States, a large proportion of workers may be laid off at some time in their life, and often for reasons unrelated to performance or ethics. Employment termination can also result from a probational period, in which both the employee and the employer reach an agreement that the employer is allowed to lay off the employee if the probational period is not satisfied.

Often, layoffs occur as a result of “downsizing“, “reduction in force“ or “redundancy“. These are not technically classified as firings; laid-off employees’ positions are terminated and not refilled, because either the company wishes to reduce its size or operations or otherwise lacks the economic stability to retain the position. In some cases, a laid-off employee may eventually be offered their old position again by their respective company, though by this time they may have found a new job.

Some companies resort to attrition (voluntary redundancy) as a means to reduce their workforce. Under such a plan, no employees are forced to leave their jobs. However, those who do depart voluntarily are not replaced. Additionally, employees are given the option to resign in exchange for a fixed amount of money, frequently a few years of their salary. Such plans have been carried out by the United States Federal Government under President Bill Clinton during the 1990s, and by the Ford Motor Company in 2005.

However, “layoff” may be specifically addressed and defined differently in the articles of a contract in the case of unionised work.