Page 20 - BusinessWest August 18, 2025

Avoiding Layoff Pitfalls
The Ins and Outs of a Legally Compliant Reduction in Force
BY JOHN GANNON, ESQ.
Last month, on Independence Day, President Trump signed into law the
One Big Beautiful Bill Act (OBBB), a nearly 1,000-page bill addressing sig-
nificant federal tax and spending policies. According to the White House,
the OBBB will act “as a catalyst for job creation, domestic investment, and
long-term growth.”
But critics are not so sure the legislation will boost job growth. Indeed,
many are concerned that deep spending cuts to social safety net programs
such as Medicaid and food stamp benefits, coupled with the end of tax credits
tied to clean energy, will cause many Americans to lose their job. One study
estimates that 1.22 million jobs could be lost in 2029 due to Medicaid and
SNAP cuts.
Given these deep spending cuts, coupled with what seems like daily (and
sometimes hourly) uncertainly over foreign tariffs, the Trump administration
is leading many businesses to consider cutting labor costs, even if only for the
short term. In light of this, employers need to understand the legal and practi-
cal ramifications when implementing a reduction in force (RIF), which is a more
formal term for layoffs. Key aspects include understanding the relevant legal risks,
selecting employees fairly, and providing proper communication and support.
Legal Issues
To start, employers need to be able to provide legitimate, business-based rea-
sons for implementing a workforce reduction. These typically involve economic
considerations, such as the loss of key contracts or higher material costs, but
could also be the product of a department or company-wide reorganization. What-
ever the reason(s), businesses need to be able to explain in crystal-clear terms
why people are losing their jobs.
There are also a host of employment laws that businesses need to be cogni-
“Employers need to be able to provide legiti-
mate, business-based reasons for implement-
ing a workforce reduction. These typically
involve economic considerations, such as the
loss of key contracts or higher material costs,
but could also be the product of a depart-
ment or company-wide reorganization.”
zant of when implementing a RIF. In a large-scale workforce reduction, the most
important of these laws is the Worker Adjustment and Retraining Notification
(WARN) Act, which requires 60 days notice to all affected employees in the event
of a mass layoff or plant closing.
The penalties for failure to comply with WARN are steep. WARN Act viola-
tions include back pay and benefits for up to 60 days for each affected employee,
civil penalties of up to $500 per day of violation, and potential attorneys’ fees for
successful lawsuits. Needless to say, determining whether the WARN Act applies
is always step number one when businesses are considering a RIF.
Next, employers must ensure that the selection criteria used to determine
who will be included in the RIF are
non-discriminatory and based on
legitimate business needs. This means Reduction
Continued on page 21 >>
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AUGUST 18, 2025
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