Published by the Connecticut Business and Industry Association
The U.S. labor market is experiencing its sharpest contraction since the early pandemic years. Many major corporations have announced expansive layoffs in response to slowing economic growth and automation. Through September 2025, employers have eliminated roughly 950,000 jobs, with projections suggesting that job losses will exceed one million by year end. This will be the highest total since 2020 and closely mirrors the disruptive employment patterns seen in the mid-2000s when early waves of automation reshaped industrial and administrative work.
In the past several months, layoffs have accelerated across nearly every major sector. Amazon eliminated 14,000 positions in late October, citing operational realignments following pandemic-era overexpansion. General Motors announced layoffs affecting 1,700 employees, with hundreds more placed on temporary furlough as production slows. In the media sector, Paramount confirmed plans to reduce its workforce by 10%, while UPS disclosed an extraordinary 48,000 job cuts as it streamlines delivery operations amid declining shipment volumes. Target has shed approximately 1,800 employees, Nestlé announced 16,000 layoffs, and Lufthansa cut 4,000 jobs to address mounting operational costs in its European network. Energy companies are also scaling back. ConocoPhillips expects to cut 20–25% of its workforce, while Intel will eliminate roughly 15%, and Microsoft has already reduced headcount by 9,000. Even long-stable consumer brands such as Procter & Gamble have begun to adjust, announcing 7,000 layoffs, representing about 6% of their workforce. The trend is global as well. Novo Nordisk, the pharmaceutical giant, announced plans to reduce its workforce by 9,000 employees, or about 11% of its workforce, as it faces increased competition in the obesity and diabetes drug markets.
In response to this contraction in the labor market, the Federal Reserve implemented two 25 basis point rate cuts this year with the goal of increasing overall investments and raising the demand for human capital. However, the outlook in the labor market remains bleak. Many companies have not only laid off large amounts of their workforce but have also completely frozen or dramatically slowed future hiring. Economists have suggested the stalling labor market may be a recessionary indicator. Further, the government shutdown, and potentially massive layoffs to take place in the public sector reinforce the concerns about the outlook of the United States labor market.
LEGAL ISSUES IN LAYOFF ADMINISTRATION
Generally, employees in the United States are “at-will” meaning employers may terminate their employment without cause and without a legitimate business reason. However, there are still legal constraints that ensure employers do not terminate employees on an improper basis. In the context of layoffs, these constraints prohibit an employer from having discriminatory reasons for selecting the employees who will be laid off.
A cornerstone of layoff compliance is the Worker Adjustment and Retraining Notification Act (“WARN Act”). The WARN Act requires employers with 100 or more full-time employees to give 60 days’ written notice before executing a “mass layoff.” A mass layoff is defined as one affecting 500 or more employees, or 50 to 499 employees if they represent at least 33% of the workforce at a single site. Violations may result in back pay and benefits for all affected employees, along with civil penalties.
Employers must also ensure that layoffs do not violate public policy or anti-discrimination laws. Termination decisions cannot be based on retaliation for exercising legal rights, whistleblowing, or other protected activities. Federal statutes such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (“ADEA”) and the Americans with Disabilities Act (“ADA”) collectively prohibit terminations that discriminate on the basis of race, color, religion, sex, national origin, age or disability.
To ensure compliance, employers should establish clear, documented objective criteria for layoff selections, such as objective performance metrics, required skill sets, or seniority. But be realistic. If your current staff lacks the required skills but still performs well, is it really required? Applying these criteria consistently while maintaining detailed records of how each decision is made will provide protection in the event a disgruntled employee files a discrimination or retaliation claim. Employers should also perform a disparate impact analysis, which is a statistical review that identifies whether a layoff disproportionately affected employees in protected categories, regardless of whether that affect was intentional. While disparate impact alone may not be against the law, it opens up the door to potential litigation.
For employees that are 40 years or older, the Older Workers Benefit Protection Act (“OWBPA”) imposes additional requirements when offering severance in exchange for a waiver of claims. Individuals must be given at least 21 days (or 45 days if it is a group layoff) to consider the agreement, along with a 7-day revocation period during which the individual may revoke the acceptance of the severance agreement. The severance agreement must explicitly reference the ADEA, advise the employee to consult with an attorney, and, if a group layoff is involved, include disclosures identifying the decisional unit (work group) from which the laid off employees were selected, and ages and job titles of both selected and non-selected workers.
Employers must also comply with final paycheck laws, which often vary from state to state. Some jurisdictions require payment of all wages, including accrued vacation, on the day of termination, while others allow payment on the next scheduled payday, or somewhere in between. Failing to comply with these timing rules can result in statutory penalties and wage claims.
Finally, the manner in which the layoff is communicated is significant. Employers should consider having meetings with the affected employee that include both the manager as well as an HR representative – assuming these roles exist. In the meeting, the affected employee should be provided with a general explanation of the business rationale for the layoff. If there is any required documentation, such as the WARN notice or COBRA continuation information, such information can be distributed at this time. However, if personalized documentation is provided, such as a severance agreement, that should be distributed one on one. Also discuss general unemployment eligibility and local program that might help the workers to find new jobs. If the layoff is short term, explain that and encourage your employees to reapply when openings arise.
BEST PRACTICES FOR LAWFUL AND ETHICAL LAYOFFS
Navigating a large-scale layoff requires legal precision and organizational consistency. Employers can minimize risks and maintain morale by integrating these best practices that promote transparency, consistency and fairness.
- Plan and document thoroughly. Before announcing layoffs, develop a comprehensive plan that includes selection criteria, affected departments, and compliance checkpoints. Documentation should demonstrate the decision is driven by legitimate business needs, such as cost reduction, and the process was uniformly applied.
- Consider conducting a disparate impact assessment. Using demographic data, analyze whether the proposed layoffs disproportionately affect employees in a protected class. If patterns emerge, reassess the selection criteria or consider alternatives to reduce the risk of a discrimination claim. Seek legal counsel before taking any of these steps.
- Communicate early and clearly. Whenever possible, provide advance notice beyond the statutory requirements. Transparent communication can preserve goodwill throughout a difficult process. Employees who understand the economic rationale are less likely to perceive the layoff as arbitrary or discriminatory. But balance this with the likelihood that some (and maybe the best) employees will resign shortly after the announcement is made.
- Review all severance agreements for compliance. Ensure the agreements meet OWBPA and ADEA standards for older workers and that language is clear. Use legal counsel to assure the agreement meets your needs and complies with the law.
- Coordinate internally and externally. Legal, HR, and communications teams should work in alignment to maintain consistent messaging and ensure compliance across locations. Follow the same strategy even if all these departments are one and the same in your smaller organization. Public statements should avoid revealing confidential employee information while reassuring stakeholders about the company’s long-term stability.
CONCLUSION
The surge in layoffs across 2025 underscores a period of economic recalibration rather than collapse, but it also highlights the enduring importance of legal compliance and ethical leadership in workforce management. As companies from Amazon to Intel downsize to remain competitive, every employer must navigate a maze of employment laws designed to safeguard fairness and dignity in the workplace. With careful planning, documentation, and communication, organizations can manage necessary reductions responsibly while protecting both their legal standing and their reputation.
Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
