The Legalities: Can a Company Layoff and Hire at the Same Time?

April 8, 2024

Laying employees off is never a pleasant experience. At times, layoffs are necessary for a business to maintain continuity through lean times. However, there may be instances when a company may need to lay off employees while bringing new employees on board at the same time. Before you undertake this staffing conundrum, it is important to understand what a business legally can and cannot do and how best to communicate the workforce changes to your staff.

Hiring People to Replace Former Employees

An employer cannot lay off an employee in a specific position and then immediately fill that same position with a new hire. If that is the route an employer takes, then the employee’s termination cannot be classified as a layoff. Doing so could open an employer up to wrongful termination lawsuits, which can be difficult to defend against.

A company can legally lay off and hire employees simultaneously when these employment actions do not overlap on the same job or position. For example, if the company is experiencing a reduction in business and no longer needs an operations manager but does need to hire more sales or service professionals to bring in new business, it can legally lay off and hire employees simultaneously.

What is a Layoff?

Before proceeding with layoffs and potential new employee hires, it is important to understand what a layoff is and how it differs from other forms of employee separation.

Layoffs are generally a reduction in force. A layoff should include many employees being let go at one time or within close time. Layoffs can be temporary or permanent, and they can occur across multiple departments within a business or just in one.

Performance or behavior issues with employees should not be dealt with through layoffs. This process should not be an excuse to get rid of a troubled employee.

However, in mass layoffs, it is common practice and sense to eliminate the positions of lower-performing employees and those with behavioral issues first. Just understand that a business cannot immediately fill the same position with another person.

What is the difference between being fired and laid off?

Employees who lose their jobs because of performance, attendance, or behavioral issues are fired. Their position is not being eliminated—their employment with the company is.

When external realities cause companies to reduce their workforce to save money or reduce overhead, this is typically a layoff.

What is the difference between being furloughed and laid off?

There is a big difference between being furloughed and laid off. Usually, furloughed workers are still employees of the company but are removed from the payroll as their work hours are temporarily eliminated (frozen). Most of the time, furloughed workers retain their employment rights, benefits, seniority, and status within their former employer and position.

Laid-off workers are no longer employees and lose their healthcare and retirement benefits along with their jobs.

Communicating Business Strategy

Companies should inform the remaining employees that layoffs took place and the reasons behind them. If possible, present this news in person, such as in an all-staff meeting. For large, remote, or widely dispersed teams, a video conference may be appropriate.

Lay the groundwork with clear communications, explain why a reduction in force is happening, and be as transparent as possible with training.

Follow up the initial announcement with a detailed email to all employees that reinforces what was shared in the meeting. Team leaders, management, and supervisors should pull their teams together to check in, ask if there are any questions, and remind the team to practice self-care. Survivor’s guilt in the wake of layoffs is a real phenomenon employers shouldn’t ignore.

Consider these tips for how leaders of many industries should communicate with their remaining team members:

  • Spell out the layoff processes so employees know what those who are being laid off will be experiencing and what the impact on the team will be.
  • Listen to your team’s concerns, let them vent, and acknowledge their fears with compassion and authenticity.
  • Describe a future vision for employees, their roles, the team, and the company as a whole.

Communication for Former Employees and New Hires

Employers should address these five areas in the layoff meeting with the employee:

  • Explain the business rationale for the layoffs — and theirs specifically.
  • Provide the employee a written letter with all the relevant information, including the effective date and an explanation of the impact on their benefits (e.g., how they will be discontinued).
  • Explain the details of their severance package - if a severance is being offered.
  • Tell them about any outplacement services your company or an organization in your area offers.
  • Lay out their next steps, such as returning company equipment.

Avoiding Wrongful Termination Claims

If a company starts hiring within six months after layoffs, there could be an argument that the layoffs were merely an excuse for getting rid of employees for illegal reasons. These complaints could have merit if:

  • Specific positions that were previously eliminated are now being filled again
  • The replacements for these positions are younger, less experienced or of a different race, gender, or disability status, for example

However, unless an employer's policy states otherwise or there is a collective bargaining agreement in place, an employer is not obligated to rehire former employees.

Workplace Morale

Another big risk employers face is turnover, which is associated with either customers or current employees leaving.

A crisis is a period of great uncertainty and stress for the remaining staff from the moment their colleagues are let go. They could be worried about their own jobs and personal finances. If a laid-off colleague was a good friend or frequent collaborator on work projects, they could be missing that individual and their camaraderie in the workplace.

However, even as a business recovers and starts adding back employees, their stress can continue. Your employees may have to take on an increased workload – including more jobs or responsibilities outside their normal routine – for a while. They have to adjust to potentially new business models or processes or restructured teams – changes that may not be welcome to them. They also have to adapt to new hires and, in some cases, help to train them.

Freeburg & Granieri, APC Legal Assistance

Should you suspect that your layoff was motivated by unlawful factors, the legal team at Freeburg & Granieri, APC is available to review the details of your case. Take proactive steps to address any concerns by arranging a complimentary and confidential consultation without delay.

Contact us to initiate a private and secure discussion regarding your circumstances. Our consultation aims to equip you with the necessary insights and choices for progressing forward.

Final Thoughts

Businesses must adhere to legal and ethical standards while maintaining open communication with their workforce when navigating the complexities of layoffs and new hires. Understanding the distinctions between layoffs, firings, and furloughs is fundamental to ensuring transparency and fairness throughout the process.

Effective communication strategies not only mitigate the impact on morale but also foster trust and resilience within the remaining team. By prioritizing compliance, empathy, and clear communication, businesses can navigate workforce changes with integrity and minimize the risk of legal disputes or adverse effects on employee well-being.

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