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Employment Law Update: Economic Headwinds: Navigating Layoffs with Care and Compliance

Date: October 2, 2025
When budgets tighten — whether due to a federal government shutdown, grant cuts, manufacturing slowdowns, or a dip in tourism — some employers face the difficult decision to reduce staff. If layoffs are on the table, approach them with empathy, clarity, and legal diligence. Consider these factors:
  1. Confirm layoffs are a last resort
  • First, explore furloughs, reduced hours, job sharing, and non-essential cuts.
  • Move to layoffs only when necessary for long-term stability.
  1. Assess WARN obligations
  • The federal Worker Adjustment and Retraining Notification Act (WARN) generally requires 60 days’ notice for certain mass layoffs or plant closings at employers with 100+ full-time employees.
  • Check state laws where employees work. Some states, including Maryland, Virginia, and New York, may trigger notice at lower thresholds under specific conditions.
  1. Communicate with compassion and clarity
  • Both departing and remaining employees need information.
  • Departing employees: Deliver the news privately (in person or via video), be direct and respectful, and thank employees for their contributions.
  • Remaining employees: Hold a candid meeting about what is changing, why, and how workloads and priorities will be managed to help stabilize morale.
  1. Prepare pay, severance, and unemployment details
  • Departing employees will have questions about final pay, severance, benefits, and unemployment. Be prepared.
  • Final pay: Follow state deadlines. For example, Virginia requires final pay on or before the next regular payday.
  • Severance: Not generally required, absent a contract, but can ease transitions. Outline pay, COBRA continuation, and any outplacement support in a clear written agreement.
  • Unemployment: Provide instructions for filing with the state agency (e.g., the Virginia Employment Commission, D.C. Office of Unemployment Compensation and Maryland Unemployment Insurance) and issue any required notices, such as Virginia’s VEC-B-29, at separation.
  1. Use a valid release when offering severance
  • Include a release of claims in the separation agreement.
  • For employees age 40 and older, covered employers must ensure compliance with the Older Workers Benefit Protection Act (OWBPA).
  • The OWBPA requires: plain language, 21-day review (45 days for layoffs of two or more individuals along with decisional unit information), advice to consult counsel, and a 7-day revocation period.
  1. Consult experienced counsel early
  • Talk with experienced counsel about the need to reduce the number of employees, the reason for the need, the positions needed in the future, and how the employees designated for layoff were selected.
  • Review the group to be laid off to ensure that unintentional patterns based on protected classes do not exist.
  • Document legitimate nondiscriminatory reasons for layoff and the criteria used to determine which positions were selected for layoff.
  • Coordinating timing, messaging, and documentation with legal guidance reduces risk and helps protect your organization.

Layoffs are never easy - but they can be handled with dignity, consistency, and compliance. For tailored guidance on WARN analysis, agreement drafting, and implementation planning, contact your employment lawyer at Whiteford, Taylor & Preston. We are here to help.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.