Definition of Layoff

Mary Gormandy White
Reasons for Layoffs

Are you looking for the definition of layoff? When you lose your job, it's important to distinguish between whether or not you were laid off or if your employment was terminated for a different reason. This information is important if you are applying for unemployment benefits or other types of financial assistance, and will also prepare you to accurately answer inquiries about why you left your last job when you start interviewing for new positions.

About the Definition of Layoff

Several situations can lead to worker "layoffs". In simple terms, a layoff can be definite as a temporary or permanent termination of employment of one or more workers for a reason other than discipline or inability to perform the essential functions of the job.

One of the defining characteristics of a layoff is that employees who are laid off experience job loss through no fault of their own. The reason for termination has to do with economic conditions impacting the business or a change in the company's business model rather than anything to do with employee performance or behavior.

Factors that lead to employee layoffs can include:

  • Insufficient work for employees to
  • Lack of funds to pay workers
  • Inability to obtain materials necessary to perform work
  • Plant and location closings
  • Discontinuation of particular products or services
  • Shutting down a particular department
  • Combining jobs
  • Automation of processes
  • Outsourcing work to independent contractors
  • Sending part or all of business operations overseas
  • Seasonal fluctuations in work

Relevant Facts Impacting Layoffs

Employee Status

In order to experience a layoff, you must have employee status. When companies no longer need, or chose not to utilize, the services of people who have been working with them as independent contractors, the definition of layoff is not met. If the company is not withholding or paying taxes on your behalf, you are not classified as an employee. If you are not certain of your status, a good test is to look at the type of income documentation you receive from the company. If you receive a 1099 rather than a W-2 at the end of the year, you are not classified as an employee.

Temporary Layoffs

If you experience a temporary layoff, when you apply for unemployment you will be required to provide an estimated time that you expect to be able to return to work. This information will be verified with your employer, and it will be your responsibility to notify your unemployment counselor or case manager if the layoff becomes permanent, is extended, or if you are able to return to work sooner than expected.

Severance Packages

Many people have the misperception that employers are required to provide severance packages to workers who are terminated for a reason that meets the definition of layoff. While it is true that some companies do provide severance to workers who have been laid off, it is a fact that there is no legal obligation for them to do so in virtually every situation. The only time severance is required is when laid off workers are eligible for protection under the Age Discrimination in Employment Act (ADEA) and agree in writing, under compliance with all applicable regulations, to waive their rights to protection under this law.

Communication and Notice Requirements

In some situations, such as those involving a plant closing mass layoff, must be communicated to employees in advance under the regulations set forth by the Worker Adjustment and Retraining Notification Act (WARN). In other situations where layoffs do not fall under the jurisdiction of the WARN act, the decision to layoff employees can be made and communicated to employees without notice.

Following a Layoff

If you experience a layoff, there is a good chance that you may be eligible for unemployment benefits. Requirements for qualifying for unemployment vary from one state to another, so the only way you can be certain of your eligibility is to submit an application. To be considered for benefits, you will need to complete the application process specified by your state and provide all necessary documentation.

Definition of Layoff