Order of layoff: Overview, definition, and example
What is order of layoff?
Order of layoff refers to the criteria and process an employer follows when reducing its workforce due to economic conditions, restructuring, or other business needs. This clause specifies which employees will be laid off first, how decisions are made, and whether seniority, performance, or other factors are considered.
For example, in a unionized workplace, layoffs may be conducted based on seniority, meaning employees with the least tenure are laid off first, while longer-serving employees are retained.
Why is order of layoff important?
An order of layoff clause is important because it ensures fairness, transparency, and compliance with labor laws or collective bargaining agreements. It helps prevent discrimination claims and disputes by outlining objective criteria for workforce reductions.
For businesses, having a clear layoff policy helps manage risk, uphold employee rights, and ensure compliance with legal and contractual obligations. This clause is commonly found in employment agreements, union contracts, and workforce reduction policies.
Understanding order of layoff through an example
A manufacturing company faces financial difficulties and needs to reduce its workforce. The company’s collective bargaining agreement includes an order of layoff clause, stating that employees with the shortest tenure in each job category will be laid off first. This ensures that layoffs are based on objective criteria rather than personal preferences.
In another case, a software company restructures its workforce and decides to lay off employees based on performance evaluations rather than seniority. The layoff policy specifies that employees with the lowest performance ratings over the last two years will be let go first.
Example of an order of layoff clause
Here’s how an order of layoff clause might appear in a contract:
“In the event of a workforce reduction, layoffs shall be conducted in the following order: (i) temporary and probationary employees, (ii) employees with the lowest seniority within the affected job classifications, and (iii) employees identified based on documented performance evaluations. The Employer shall comply with all applicable labor laws and collective bargaining agreements when implementing layoffs.”
Conclusion
An order of layoff clause ensures that workforce reductions are conducted fairly, lawfully, and based on clear criteria, helping employers minimize disputes and protect employee rights. This provision is particularly useful in unionized workplaces, large organizations, and industries subject to employment regulations, ensuring that layoffs are handled consistently and transparently.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.