Suing your employer as part of a mass layoff is probably not going to get you anywhere. Instead, you will likely end up wasting your time and money. In addition, you may also end up hurting your reputation and future employment prospects.
Even after 10+ years of being unemployed, hearing about mass layoffs is still jolting. It brings to the surface suppressed memories from the 2008-2009 global financial crisis. In 2009 alone, I counted seven rounds of layoffs at my firm.
I tried to hire one of my closest friends at the time who just had a baby. Lehman Brothers laid him off with roughly $25,000 in unpaid corporate card expense reimbursements. Unfortunately, he didn’t make a good impression on my Aussie colleague so he never got hired. Mostly due to his pride, our relationship deteriorated after.
Ultimately, I survived the layoffs. Then in 2012, I asked to be included in the next round of layoffs so I could receive a severance package. In retrospect, getting laid off was one of the best things that could have happened to my life. But at the time, the decision was suspect.
Mass Layoffs At Twitter And The Fervor That Followed
When Elon Musk decided to lay off over 3,500 Twitter employees after his acquisition, social media went nuts. The overriding feedback was Elon illegally laid off thousands of employees without due warning.
Here’s what Lisa Bloom, a trial lawyer tweeted that received over 163K likes and 41K retweets.
Hey Twitter employees getting laid off tomorrow! IMPORTANT INFO from a CA employment attorney (me): CA’s “WARN” law requires Twitter to give you 60 days notice of a massive layoff. A layoff of 50+ employees within a 30 day period qualifies. I know you didn’t get that notice.
This WARN law applies to all California employers of 75+ employees, which obviously includes Twitter with its thousands of employees. Purpose of the law is to give laid off employees time to figure out how to handle this disruption. And Elon completely ignores it.
Employers like Twitter who violate the WARN Act face civil penalties of $500/day for each violation. With thousands of employees, this could be significant, though maybe not to Elon.
Employees laid off in violation of the WARN Act receive back pay at the employee’s final rate or 3 year average of compensation, whichever is higher. Twitter would also be liable for workers’ medical expenses that would have been covered under an employee benefit plan.
Twitter will be liable for all of these (civil penalties, lost compensation, lost medical and other benefits) & attorneys’ fees for the 60 days it failed to give workers notice. This flagrant violation of workers rights is outrageous. Who’s in for a class action? LET’S DO THIS!
Good Points, But Missing Some Situations
Lisa makes important points about the WARN Act and the penalties employers face if it is not followed. As a lawyer who fights for victims of discrimination, harassment, and abuse (according to bio), Lisa is obviously passionate about what is transpiring at Twitter. It is also good for business.
However, let me share why I believe joining a class action lawsuit to sue Twitter for “unlawful” termination is a net negative. The same goes for laid off employees at Facebook and other companies announcing mass layoffs.
California Is An At Will Employment State
Most employees in California are considered to be “at-will” employees. At-will employees are free to quit their jobs at any time. No employer can force a California employee to keep working at a job they don’t want. Slavery was abolished on December 6, 1865 when the 13th amendment was established.
At the same time, an employer is free to lay off an employee at any time for any lawful reason – or even no reason at all.
Maybe you drank too much at the company holiday party and said you hated French Bulldogs. Unfortunately, your boss is the President of the French Bulldog Society of San Francisco. Therefore, he decides to lay you off before bonus season.
Every American employee must abide by its state’s employment laws. There may be exceptions. But for the most part, if you work in an at-will state, you can be let go at any time.
All states in the U.S., excluding Montana, are at-will. Most do have exceptions, but the states of Florida, Alabama, Louisiana, Georgia, Nebraska, Maine, New York, and Rhode Island do not allow any exceptions. Here’s more information about at-will states.
At-Will Employment Exceptions
To be thorough, here at exceptions to employment at will:
- Public-sector employees, most of whom are protected by civil service laws and/or by a “memorandum of understanding” between their union and the agency that addresses discipline and termination.
- Employees represented by unions and covered by a collective bargaining agreement that contains a “just cause” standard for termination.
- Employees (usually executives) who have written employment contracts requiring “good cause” for termination.
- Employees whose employers have said or done things that overcome the presumption of employment at will.
You may think having a private sector job is the best way to make a lot of money. But public-sector employees with more protection and life-long pensions might be even better.
WARN Act Notification And An Employee’s Options
Folks are fired up that thousands of Twitter employees got laid off without proper warning. They want blood and vengeance! But here’s the scenarios folks who have never experienced a layoff may be missing.
Let’s say you are told on June 1 you are laid off. You work at a firm with over 1,000 employees and are a part of a mass layoff of over 100 people. As a result, WARN Act conditions apply where you legally should receive two months of pay as severance at minimum.
If you’re in the office, HR or your manager hands you a severance package with all the details. If you’re laid off remotely, you get the details in an e-mail. You have several options:
1) You can sue your employer for laying you off with a severance package.
2) You can ask your employer if you can still work a little bit longer and receive your WARN Act pay after you are done, even though you are no longer wanted.
3) You can stop working, collect your WARN Act pay, and go look for a new job, travel, or relax.
Which scenario would you choose? The rational person would choose either option two or option three. The misinformed or irrational person would choose option one.
Option #2: Ask To Stay On Longer
If your login and access aren’t shut off immediately after being told your services are no longer needed, you can always ask your boss if you can work longer to tie up loose ends.
For example, for the benefit of the firm, you might want to finish and ship a project. You may want to finish introducing your clients to your remaining colleagues. Or you might argue to stay through to the closing client dinner so the transaction goes through.
The benefit of working a little longer is that it gives you more time to prepare for what’s next. You will make more money and get to contribute more to your tax-advantaged retirement accounts. There’s a possibility of changing your employer’s mind. Finally, you could negotiate better severance package terms.
Ideally, you would engineer your layoff so you can better control your future. This is what I did. At the beginning of 2012, I asked to get laid off with a severance. In return, I agreed to stay for as long as it took to train my junior colleague to minimize business impact. Since my bosses and I had a good working relationship, they agreed.
After I left the office I got three more months of pay as part of the WARN Act, a severance check, and my deferred compensation paid out on its vesting schedule (3-5 years).
If all your access gets immediately shut off after being told you are part of a mass layoff, then option two is unavailable. As an at-will employee, you have to accept your situation. You will get paid out your WARN Act pay, which usually equals between one to three months of pay.
Option #3: Stop Working And Enjoy Your Freedom
The vast majority of employees will accept they got laid off and use their time to either look for a new job or relax. After a layoff, there will definitely be a mourning period where you may feel shocked, saddened, and afraid. But these feelings will fade as you accept reality and land new opportunities.
For laid off Twitter employees, they will receive three months of severance, which is one month more than required by the California WARN Act law. As a result, if laid off employees don’t change their spending habits, they will be able to survive just fine for the next three months.
If a laid off Twitter employee were to find a new job the next day with a competitor, they will earn double salary for three months. That’s right. You can double dip just like how public sector early retirees with pensions still get to earn pension income after finding a private sector job.
In the Twitter layoff example, the real discretionary severance is only one month of pay. The reason why is because two months of pay is required by law for a mass layoff in California.
When I got laid off in San Francisco, I got three months of WARN Act pay plus 33 weeks of pay and all my deferred cash and stock compensation. My previous firm was generous to me after 11 years of service. It helped I wasn’t going to a competitor and that I was willing to stay to provide a smooth transition.
Option #1: Sue Your Employer
The chances of a disgruntled employee winning a lawsuit against an employer who offered above the mandatory WARN Act pay as severance is tiny. The only people who are guaranteed to win are the lawyers.
Let’s say you go through the lawsuit. Unless the lawyer is taking on the case pro bono, you will have to pay a fee. When you likely lose, it will get out you were part of a class action lawsuit that sued their employer in an at-will state.
Employers are highly allergic to employees who’ve sued employers. Therefore, all things being equal, your chances of getting another job will also decline once your employer finds out about your history.
Rightly or wrongly, future employers may think you are simply not worth the risk if you sued an employer in an at-will state. Your employer might start wondering whether you will sue them because a colleague inadvertently insulted your culture, told a bad joke, or touched your shoulder.
Hence, if you plan to sue your employer for laying you off, make sure the reward is worth it. Worst case, if you are blackballed, the lawsuit reward must pay enough so you never have to work again. Best case, the lawsuit award pays you a life-changing amount and you get to pivot into a different industry.
Come To A Mutual Agreement Instead
Unfortunately, by the time you are laid off it’s mostly too late. You need to lay the groundwork while still employed to have any leverage.
Instead of suing your employer, come to a mutual agreement where both parties win. Neither side wants to get into a protracted and costly lawsuit that may damage both party’s reputations.
The more thoughtful and forward thinking you are, the easier it is to come to a mutual agreement. If you decide to one day quit your job, you saddle your old colleagues with more work. Trying to find your replacement may take months.
Elon Musk’s takeover of Twitter was happening for half a year because he tried to negotiate a lower price. As a result, employees had plenty of time to prepare for what was likely next, layoffs or a reorganization.
You could sue your employer for not treating you nicer after your years of service. But it is unlikely you will win if your employer is offering you WARN Act pay in an at-will state. In such a scenario, it’s best to move on and look forward to brighter days.
Reader Questions And Actions To Take
Do you think the laid off Twitter employees have a case? If so, why or why not? Have you ever sued your employer for wrongful termination and won? If so, how did that affect your future employment prospects?
If you want to negotiate a severance, check out How To Engineer Your Layoff. The book as helped thousands of readers walk away with tens of millions from their jobs since 2012.
For more nuanced personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009.
Suing Your Employer For Laying You Off Is Probably A Bad Move is written by Financial Samurai for www.financialsamurai.com