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What Does It Mean To Be Laid Off?

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In a Nutshell

Being laid off from work can happen to anyone regardless of their skill or job performance. Learn how you can navigate the uncertain time between when you are let go and the time you are hired for your next job by applying for unemployment and other benefits you qualify for. Also, find out how to use the time at your disposal to ready yourself for new employment.

Written by the Upsolve Team.  Reviewed by Attorney Andrea Wimmer
Updated July 19, 2021


Even perfect employees can be laid off. Layoffs often happen when a company needs to cut costs, and they increase during economic recessions and depressions. From 2019 to 2020, the number of unemployed people doubled. The economic effects of the coronavirus pandemic and worries about company finances caused layoff rates to skyrocket. 

In this article, we’ll help you understand what a layoff is and give you tips on how to stay financially afloat if you’ve recently been laid off from your job.

Being Laid Off - The Basics 

There are different ways employers can “let go” of employees. Employees can be fired, laid off, or furloughed. These terms each mean something different. 

A furloughed employee is someone who has been placed on temporary leave. They are still considered an employee and are entitled to keep their benefits, but they usually do not receive a paycheck while furloughed. Employers usually intend to bring furloughed employees back. 

By contrast, when an employee is laid off, they are generally no longer considered an employee and they lose their benefits. Layoffs are often permanent but sometimes they are seasonal or temporary, until a company gets back on its feet or its needs change. Unemployment insurance statistics show that permanent layoffs are more common than temporary layoffs. One recent exception occurred during the coronavirus pandemic when temporary layoffs skyrocketed. Unfortunately, many businesses closed permanently because of the pandemic, even though they hoped that their layoffs were temporary. 

Business owners often intend to call laid-off employees back to work, but they are not able to because of business problems. For example, the automobile industry had record high mass layoffs during the 2007-2009 recession. (The Bureau of Labor Statistics defines a mass layoff as an event with 50 or more unemployment claims from the same place that lasts at least 31 days and spans at least five weeks.) Permanent layoffs can feel a lot like getting fired but these two processes are distinct. 

Similar to a layoff, when an employee is fired, they are no longer an employee. Getting fired is a permanent termination. When an employee is fired “for cause” this means that an employee was let go because they did something that their employer perceived as wrong. If an employee does not agree with the firing, they can consult an attorney and see if they have a case for wrongful termination. 

If you have been fired, you know that you won’t be returning to your previous position. If you’ve been laid off, it’s possible that you may be asked to return but you shouldn’t count on such an offer. Instead, treat the job separation as permanent so that you can put all your effort into seeking a new, ideally better, job. 

Why Do People Get Laid Off? 

Employers lay off people because of company problems or business needs. Being laid off is not a reflection of your skills or capabilities, it’s a reflection of the employer’s situation and/or priorities. For instance, if a company has financial difficulty and lays people off or decides to restructure its finances through a Chapter 11 bankruptcy—it’s the company’s skills, money, or capabilities that are lacking, not yours. Sometimes a company shutdown or downsizing can’t be prevented. 

The economy, innovation, and the availability of supplies also affect layoffs. For instance, a semiconductor shortage recently caused Ford to “idle” manufacturing plants and temporarily lay off employees. The layoffs lasted longer than expected. Some employees were called back to work and some of the layoffs were made permanent as part of a workforce reduction strategy.

The workers who didn’t go back weren’t let go because of poor performance but because Ford didn’t have the skill or capability to keep everyone employed while dealing with the shortage. Ford may not have had the capability to pay everyone and remain profitable. Or, the company may have chosen to stop using its money for labor and instead invest in other areas. 

Businesses are generally free to make their own financial decisions. If they decide to lay off people to save money or because they want to invest in new production lines or products, they can. The reasons for layoffs are endless. Layoffs are business decisions, not reflections of employees. 

What To Do If You Are Laid Off

If you experience a layoff, there are three important things you should pay attention to immediately:

  1. Benefits and severance pay

  2. Health insurance

  3. Unemployment benefits

If you just got laid off and don’t know what to do, start by researching these three opportunities. 

Benefits And Severance Pay

Some companies offer severance pay to employees who’ve been laid off. Be sure to review the terms of your severance package. Even if you didn’t receive a severance package, you may be able to cash out your unused vacation pay and any other personal time off that you may have accrued. Availability of this opportunity will depend on company policies. Talk to the human resource department about unused sick time, vacation time, retirement benefits, and 401(k) plans.

Health Insurance

If you benefitted from employer-provided insurance coverage while you were employed, you may be able to keep your current healthcare coverage, but your employer won’t be chipping in anymore. This means that you’re now stuck with the full bill. You should receive a COBRA notice if your employer had more than 20 employees for most of the year. This letter will explain your rights and how you can continue your current healthcare plan, even if you were laid off. 

COBRA is the abbreviation for the Consolidated Omnibus Budget Reconciliation Act, a law that passed in 1985. It allows people to stay on their healthcare plan if they’ve been laid off from their job. The COBRA notice should arrive within two weeks of your last day, and you’ll only have 60-days to opt in, so take care not to miss that deadline. Be sure to call your human resource department to discuss healthcare coverage if you have questions. 

You can also apply for healthcare through the Affordable Care Act (ACA), even if it’s not an open enrollment period. Those who’ve had a change in job status can apply for coverage outside the open enrollment period, as a layoff is a change in job status. Be sure to review your ACA healthcare options if the COBRA payments are unrealistic. 

Unemployment Benefits

File for unemployment benefits as soon as possible. In some states, there may be a waiting week or other time-related eligibility requirement that you’ll need to meet before you can start collecting checks. Many states are several weeks behind in administering unemployment benefits. Each state has its own rules for unemployment, so take time to review your state’s requirements. Normally, you are required to report your job search every week to claim unemployment, but many requirements changed with COVID-19 under the CARES Act

As of mid-2021, many states are ending CARES Act exceptions and payments. The U.S. Department of Labor has a listing of state labor offices for every state where you can find information on filing unemployment in your state.

Plan Your Transition

There are also four things you should do after you’ve looked at your severance package, figured out your healthcare, and filed for unemployment.

  1. Update your resume.

  2. Take time to address your emotions and manage change. 

  3. Think about your future goals.

  4. Review your finances.

Being unemployed gives you time to update your resume, review your accomplishments, and work on your LinkedIn and social media profiles. Networking with co-workers from your former employer and others will open doors to more opportunities and future employment.

Looking for a job can feel like a job in itself. Be sure to take time to care for yourself and your emotions. Some people experience a sense of freedom when they’re laid off, but others experience a sense of loss. Take time to grieve, but do something every day that helps you get one step closer to your goals. Make a plan for your future, think about where you’d like to be and what you need to do to get there. 

You’ll also need to take time to review your finances. Losing a job means losing income, so you’ll likely need to do some restructuring. Take a look at your budget and determine your necessary expenses. See if a debt management plan can help you through tough times. 

Let’s Summarize...

If you were laid off from work, it’s best to consider it a permanent separation and to start looking for a new job. Layoffs are often unexpected events that can be scary and frustrating. Even if you worked hard and performed well, it will still take some time for you to adjust to new schedules, finances, and career transitions. Take time to understand your legal rights and be sure to apply for unemployment. Use your free time to review your job history, assess your goals, upgrade your skills, and refresh your resume. Your layoff could lead to a better job opportunity and a fresh new start.



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer

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Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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