Most employees work at will, which means their employers can lay them off or fire them at any time, for any reason that isn't illegal. An employer that's struggling financially is generally free to cut jobs as the circumstances dictate. But that doesn't mean every layoff is legal. Employees with contracts may be protected from certain kinds of layoffs. And, employees can't be laid off for reasons that are discriminatory or retaliatory.
Although most employees work at will, you might not be one of them if you have an employment contract changing the at-will relationship. For example, if you have a two-year contract, stating that you can be fired only for committing a crime or for gross financial malfeasance against the company, you aren't an at-will employee. If you are fired for any reason other than the ones specified in your contract, you can sue -- even if your employer's reason for letting you go was perfectly reasonable.
If you don't have a written or oral contract saying you can only be fired for specified reasons, you might still have an implied contract: a contract that is neither written nor stated explicitly, but is instead implicit in the circumstances of your employment. For example, if you have been told that employees are only fired for good cause, and your company's employee handbook says the same thing, that might create an implied contract that you may not be terminated absent good cause. In a layoff situation, however, this type of implied contract won't help you much. Financial hardships generally supply the necessary good cause to allow an employer to let workers go.
Learn more about Wrongful Termination and Layoffs.
The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers who conduct certain large-scale layoffs or plant closings to give employees a certain amount of advance notice, in most circumstances. If you didn't get the required notice, and your employer doesn't fall into one of the law's exceptions, then you may be entitled to pay for every day of notice you should have received, up to 60 days. Note that the WARN Act doesn't prohibit employers from laying employees off; it requires only that they provide advance notice or pay for failing to do so. Many states have similar laws. (For more on the WARN Act, see Layoff Laws.)
Even if an employer has good financial reasons to lay off employees, the layoff might be illegal if it has a disproportionate effect on certain groups. For example, if a layoff rids a company of most of its female employees or all of its workers over the age of 60, that could well be illegal discrimination.
There are a few ways this might happen. If an employer intends to discriminate, it might include one or many protected employees in the layoff group. For example, if a company has one employee from Afghanistan, whose manager includes him in the layoff intentionally, out of prejudice, that employee could make a discrimination claim. Intentional discrimination might also take place against a group of employees. For instance, if a company's managers were told to include all employees with disabilities in the layoff group, whether or not they meet the criteria for losing their jobs, that would be discriminatory.
Sometimes, a company doesn't intend to discriminate, but its layoff criteria screen out disproportionate numbers of members of a protected group. If, for example, a company asked managers to rank employees according to their innovation and willingness to learn new things, managers might screen out disproportionate numbers of older employees based on stereotypes about age. This might result in illegal discrimination.
Learn more about Discrimination in the Workplace.
Just as an employer could discriminate against one employee by selecting that employee for layoff, an employer can retaliate against an employee the same way. For example, an employer might tell managers to include every employee who has used FMLA leave in the last two years on the layoff list, or to get rid of employees who have filed discrimination or harassment complaints. Even if the employer has a legitimate need to trim staff, it can't use that excuse as a reason to fire employees for these types of illegal reasons. If an employee loses his or her job because the employee has exercised a legal right or complained of illegal conduct, even if that job loss happens in the context of a large layoff, the employee has a legal claim for wrongful termination.
As you can see, there are many reasons why a particular layoff might be illegal. If you believe you were terminated illegally, even if it was part of a larger layoff, you should consider consulting with an experienced employment lawyer. A lawyer can review the facts of your case and help you figure out whether you have a wrongful termination claim.