A layoff is the reduction in the number of workers due to changes in DEMAND for the firm’s PRODUCTs or changes in MANAGEMENT strategy but not due to cause. Layoffs can be temporary or permanent. Historically they were most often associated with changes in BUSINESS CYCLES. As the economy grew, so did EMPLOYMENT; but as the economy declined, workers would be laid off. In the 1990s, a decade of continually growing GROSS DOMESTIC PRODUCT, many companies reduced their number of employees. A new language evolved, with many colorful and cynical words and phrases to describe being laid off, including “attrit,” “ax,” “given the boot,” “canned,” “get bounced,” “get the pink slip,” “housecleaning,” and “riffed.” During this period, many companies experienced new challenges, often in the form of global competitors. In response, executives jettisoned divisions or products that did not compete effectively and flattened management hierarchies. One manager of a fiberglass factory described how there had previously been seven layers of management between him and the CHIEF EXECUTIVE OFFICER, and now there were only three layers. Executives chanted the mantra “lean and mean” to support their decisions to lay off middle-management people and outsource functions that had previously been handled by employees. In UNION work environments, layoffs are addressed in the labor-management CONTRACT and are almost always based on SENIORITY; workers with the most seniority are the last to be laid off and the first to be rehired. Occasionally union and nonunion groups will agree to adjust hours rather than lay off people. After September 11, 2001, many employees, particularly in airline- and tourism-related markets, faced the choice of cutting back hours or facing mass layoffs. Cutting back hours provides employment for people and also retains skilled workers for when the economic situation turns around. It usually means workers get to retain their benefits, but it also means these workers are not unemployed and therefore not eligible for UNEMPLOYMENT benefits. In addition to unemployment-benefit rules, two sets of federal laws affect layoffs. The WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT (WARN) requires employers covered by the act to provide 60-day advance notice of large-scale employment loss, generally resulting from plant closings and mass layoffs. WARN became law in 1989, and in general it applies to companies and nonprofit groups with 100 or more employees. Hourly, salaried, and managerial workers are all entitled to notification under WARN. In addition, if the sale of a business results in mass layoffs or plant closings, the parties to the sale must give WARN notice to the state dislocated worker unit and the local government where the employment site is located. WARN provides a variety of exceptions, including when a company is faltering or suffering unforeseeable business circumstances or in the event of a natural disaster. Failure to give notice can lead to penalties, including back pay and benefits for the period of violation of the act. Many states have WARN-like disclosure laws alerting workers to the possibility of layoffs. TRADE-ADJUSTMENT ASSISTANCE (TAA) refers to government- sponsored training programs and supplemental cash unemployment compensation provided to workers who lose their jobs due to increased foreign COMPETITION. TAA grew out of programs intended to aid Americans who were dislocated when the European Community (now the EUROPEAN UNION) was established. The first assistance program was authorized in the Trade Expansion Act of 1962; however, no assistance was actually provided until 1969. It was not until the Omnibus Trade and Competitiveness Act of 1988 that significant funding was committed to TAA. Under TAA, workers may petition the U.S. secretary of labor for assistance. The secretary must certify that workers have been or are threatened with job losses, that the sales or production or both of the firm in question have decreased absolutely, and that increased IMPORTS of articles like or directly competitive with those made by the workers or the firm for which the workers provide essential goods or services “contributed importantly” to job separation or decline. The most visible trade-adjustment assistance program is NAFTA-TAA. Between 1994 and 1997, almost 100,000 American workers were certified for trade-adjustment assistance. This number was often used to show the adverse impact of the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA), but TAA certification does not necessarily mean workers have been displaced, only that there is the potential for workers to lose their jobs due to imports. In the first three years of NAFTA, slightly more than 12,000 workers received NAFTA-TAA. Many workers who have lost their jobs are encouraged by state officials to apply for TAA, thereby reducing the state costs for unemployment compensation.
See also OUTSOURCING; REDUCTIONS IN FORCE.