With layoffs hitting many high-paying sectors such as technology and finance, HENRYs should be aware of their rights and be prepared for the day when their turn might come.
One such protection that most people are unaware of is the federal WARN Act (Worker Adjustment and Retraining Notification) which requires companies going through mass layoffs to provide their employees with at least 60 days of notice before they are let go.
During this time, you are legally entitled to your full pay and benefits under federal law and have a financial runway to prepare for your next job or start an early retirement.
In addition to having federal WARN Act protection, many states also have their own WARN Acts which offer even stronger protection to their employees, such as getting you paid 90 days of salary and benefits while also collecting unemployment benefits.
In this day and age, all employees have to plan for the day when it’s their turn to get laid off. Company loyalty is dead.
You do not want to be caught unexpectedly like a deer in headlights when your turn comes to go out the door. The more you plan ahead for a layoff and understand your rights, the better mentally prepared you will be to take control of the situation and get paid to head out the door.
How The Federal WARN Act Protects You
The federal WARN Act was originally enacted in the 1980s to protect employees from layoffs so they have time and training to prepare to find another job while receiving their paychecks and benefits during the transition period.
All employers with more than 100 full-time employees, whether they are public or private, for-profit or non-profit, are subject to the federal WARN Act.
Under federal law, the WARN Act is triggered during a “mass layoff” or “plant closing” defined as:
- 50 or more employees (making up at least 33% of the company) are laid off in a 30-day period (a “mass layoff”)
- 500 or more employees (regardless of company size) are laid off in a 30-day period (a “mass layoff”)
- Closing down an office location and laying off 50 or more employees in a 30-day period (a “plant closing”)
If you are working for a company with more than 100 employees in the US, then you are protected by the federal WARN Act and your employer must give you a minimum 60-day heads up in writing before letting you go.
During those 60 days, you are legally entitled to your full salary and benefits and will still be on your company’s payroll but are no longer considered to be “employed.”
Hence, in addition to getting WARN Act pay for 60 days, you are also eligible to immediately apply for unemployment benefits during this time so you can maximize the amount of money you will receive after you leave your job.
Your State May Get You Paid Even More
While the federal WARN Act covers employees nationally, many states have passed their own mini-WARN Acts that have even stronger protections for employees working in their states.
If you work in a state with its own mini-WARN Act such as California, New York, or New Jersey, then you will be covered by the stronger state protections over the federal WARN Act.
For example, the New York WARN Act applies to all companies within the state with 50 or more employees (compared to 100 or more for the federal WARN Act), and a layoff of just 25 employees (compared to 50) will trigger the act.
Most importantly, the New York WARN Act requires 90 days’ notice compared to 60 days’ notice for the federal WARN Act.
That means if you work in New York and get caught in a mass layoff, then should be entitled to 90 days of salary and benefits from your employer while also collecting up to ~$2k a month ($504 a week) in unemployment benefits because you are no longer employed.
For example, a friend of mine was laid off in one of the rounds at a tech company based in NYC and he was notified 90 days before his termination date, which satisfies as his WARN Act period, before his severance package (that he negotiated) kicked in. During those 90 days, he did not go to work but was still on the company’s payroll and kept his full benefits including COBRA health insurance.
He could also immediately file for unemployment benefits the day he was notified that he was going to be terminated in 90 days (since he is considered “unemployed” during his Warn Act period), which means that for a couple of months, he got an additional ~$2K a month of income on top of his normal salary!
This ability to double dip your WARN Act paychecks and unemployment paychecks (and maybe even triple dip if you also receive a severance package on top of everything else) provides a valuable runway and cash flow for you to survive until you find another job.
Another helpful benefit of the States with their own WARN Act is companies often publicly announce their layoffs months in advance to satisfy the notice period.
For example, New York WARN notices are pretty detailed and tell you how many employees will be affected by the planned layoff, the total number of employees at each office location, and when the layoffs will start and end.
A quick search on the internet for “[your state] WARN notice” could give you a heads-up months in advance if your company is planning a mass layoff so you can be best prepared if your name is on the list.
WARN Act Pay Is Not The Same As Severance Pay
Another key thing to note is that WARN Act pay (which is legally required) is not the same as severance pay, which is optional at your employer’s discretion and can be negotiated.
Don’t confuse the 2-3 months of WARN Act pay you are legally entitled to as your severance payment, especially if you have been working at your company for a good length of time.
Severance pay is typically 2-3 weeks for every year you’ve worked and paid on top of WARN Act pay if it’s triggered. Your severance package includes a mix of cash payments and other benefits such as paid COBRA health insurance for a period of time and the vesting of any deferred compensation or stock options on their original schedules.
For example, an employee in NYC who has worked at a company for 5 years and gets let go in a big round of layoffs could get 12 weeks of WARN Act pay, 10-15 weeks of severance pay, and have healthcare insurance fully covered during that time. On top of they will get ~$2K a month in unemployment benefits for up to 6.5 months or until they find another job, whichever comes first.
That provides at least a 6+ month financial runway to find another job, travel the world, or transition to something new!
Most large companies with established HR departments have basic guidelines for determining severance pay for most employees who are not in senior management. However, you’ll likely never find the information in any employee handbook because your company doesn’t want you to know how much you can get paid for getting let go!
Regardless of your company’s standard set of severance package terms, there is always room for negotiation, especially if you hold a key position or have a long tenure within your organization.
Therefore, it helps to speak to other colleagues who have gotten laid off in the past to understand what they’ve gotten as part of their severance package so you to use it as a guideline when you negotiate your own.
Plan Ahead During Turbulent Times
If you’re a HENRY and work for someone else, always keep in the back of your mind that no matter how important you may be or how good you are at your job, you are always replaceable.
During turbulent economic times, you always want to be prepared both mentally and financially to be let go. Job security is no longer a thing in this day and age.
The more you plan ahead by aggressively saving and building F You money when times are good, while also knowing your legal rights and having a plan, the less concerned you will be about the possibility of a layoff.
In fact, at some point in your financial journey, you may not even care if your name is next on “the list” since you’ll happily get paid to walk out the door and move on to the next phase of your professional life.
Sometimes a layoff is just a blessing in disguise that forces you to change. Most people that I know who have been laid off are in a better place than before. WARN Act pay, unemployment benefits, and a severance package are just icing on the cake for leaving your current job to do something new.
Lastly, remember that the WARN Act pay, unemployment benefits, and severance only apply if you are laid off, not if you quit your job or get fired for cause. Any time you plan on leaving your job, think about getting laid off so you can collect a few additional months of paychecks and benefits along with any deferred compensation you may have.
If you are going to change jobs at least a few times over your working life, knowing the rules can help you maximize the amount of money you collect each time you switch jobs. A few months of additional paychecks every couple of years, along with deferred compensation and other benefits, can add up to hundreds of thousands over an entire career.
I encourage all HENRYs to strive to achieve financial freedom during their working lives. The more of a financial cushion you can build, the less you will ever have to worry about being laid off. It’s much more pleasant and less stressful working a job that you are not dependent on!
Give yourself the option to hang up the gloves and live it up in early retirement or continue making maximum money.
Take control of your professional life and work on your own terms, and if you ever get laid off or decide it’s time to start another chapter of your life, make sure to get paid while you head out the door.