Disciplinary Layoff or Suspension? What HR Needs to Know to Stay Compliant

Layoffs typically occur due to business reasons, like plant closings, budget cuts, or lost contracts, that result in staff becoming redundant. However, when the reason is due to employee discipline issues, employers may opt to use a disciplinary layoff as a less permanent form of involuntary termination.

This article explores what a disciplinary layoff is, when to consider using one, the potential legal risks to consider, and its impact on your workforce.

A disciplinary layoff is a temporary layoff without pay that is issued to an employee as a consequence of misconduct or violation of company policy. It is a corrective action layoff that serves as a punitive measure, but stops short of permanently firing the employee.

In many ways, a disciplinary layoff is similar to a suspension without pay or a disciplinary suspension, but it’s typically categorized under layoff policies instead of standard disciplinary action procedures.

For example, if an employee is chronically late despite multiple warnings, HR may decide to implement a disciplinary layoff by removing them from the work schedule for a set period of time without compensation. This measure holds the employee accountable while giving them an opportunity to correct their behavior.

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While a disciplinary layoff and a suspension without pay might look similar on the surface, because both involve temporarily removing an employee from the workplace due to a behavioral or policy violation, they are handled quite differently in practice and policy.

A disciplinary suspension is typically part of an organization’s formal employee discipline process. It is often used as a short-term corrective action, clearly documented in the employee handbook or HR policies.

During a suspension, an employee remains on the payroll as an active employee, but may not receive pay depending on the company’s policies. Suspensions are often measured in days, rather than weeks, and are generally accompanied by a performance improvement plan or further corrective action.

A disciplinary layoff, on the other hand, may fall under your organization’s layoff protocols instead of its disciplinary policies. This means it might be treated similarly to other types of layoffs in terms of HR systems by potentially affecting employee benefits, unemployment eligibility, access to company resources, and how the event is recorded for compliance and reporting purposes.

In many cases, employees under a disciplinary layoff are considered temporarily separated from the company. Depending on local laws, this can carry different legal and tax implications. Always consult legal counsel before implementing any form of punitive layoff or suspension, even in at-will employment states.

Another key difference is how each action is perceived internally and externally. A disciplinary suspension may suggest the employer intends to retain the employee after the suspension period, whereas a disciplinary or corrective action layoff may signal a more serious breach of conduct and a higher risk that the employee will not return.

Implementing a disciplinary layoff can expose your company to legal risks, especially if your company policies and processes lack clarity or consistency.

Key legal risks include:

• Wrongful discipline claims: If the employee argues that the layoff was unfair or discriminatory.
• Breach of contract: If the disciplinary steps contradict any employment agreements or union policies.
• Inconsistent enforcement: Uneven application of employee discipline may lead to bias or favoritism claims.

Yes, an employee can challenge a disciplinary layoff, especially if they believe that it was applied unfairly, discriminatorily, or in violation of company policy or employment law.

If the employee feels that the disciplinary layoff was unjustified, such as lacking proper documentation, skipping progressive discipline steps, or seeming to single them out unfairly, they may raise concerns through internal channels like HR or a union representative (if applicable). In cases where internal resolution fails, employees have the right to pursue legal remedies.

Common reasons an employee might challenge a corrective action layoff include:

• Allegations of discrimination: If the employee believes that they were targeted based on race, gender, age, disability, or any other protected class under federal or state law.
• Retaliation: If the layoff occurred shortly after the employee engaged in protected activity, such as reporting harassment, unsafe work conditions, or wage violations.
• Breach of contract: If the terms of employment (either in a formal contract or a collective bargaining agreement) outline specific disciplinary procedures that weren’t followed.
• Lack of due process: If the employer failed to provide warnings, conduct a fair investigation, or allow the employee to respond to the allegations prior to imposing the punitive layoff.

In these cases, an employee might file a formal complaint with external agencies such as the Equal Employment Opportunity Commission (EEOC) or Department of Labor (DOL), or even initiate a lawsuit for wrongful discipline or termination depending on how the layoff is classified.

This is why it’s critical for HR teams to treat a disciplinary layoff with the same level of legal care and documentation as a termination. Employers must ensure that policies are applied consistently, disciplinary actions are clearly justified, and all communications with the employee are well-documented.

Failing to do so can lead to costly legal battles, damaged employer reputation, and a demoralized workforce.

Implementing a fair and effective disciplinary layoff starts with having thorough company policies and procedures in place. To protect your business and treat employees fairly through any disciplinary suspension or punitive layoff, make sure that your company layoff policy is:

• Clearly documented: Define what behavior may lead to a disciplinary layoff, and outline its specific process.
• Progressive: Reserve layoffs for repeated or serious misconduct, not minor issues.
• Legal and compliant: Regularly review company policies with legal counsel.
• Reasonable in duration: Extended unpaid leave can increase resentment and attrition.

Ultimately, a disciplinary layoff should serve as a last-chance tool to help an employee learn from their mistakes and succeed, not as a workaround for termination.

A disciplinary layoff can be a powerful but risky disciplinary tool. It allows you the chance to correct inappropriate employee behavior without resorting to immediate termination. But if misapplied, it can lead to legal trouble, workforce disruptions, and employee turnover.

Here are the key takeaways:

• Disciplinary layoffs are unpaid, temporary removals from work due to employee misconduct or policy violations. Unlike terminations, they offer the employee a chance to improve and return to work.
• While similar to suspensions without pay, disciplinary layoffs fall under layoff protocols rather than disciplinary policies, potentially impacting payroll status, benefits, and compliance reporting.
• Employers face legal risks with disciplinary layoffs, such as wrongful discipline claims, breach of contract, and perceived bias, especially if policies are unclear or inconsistently applied.
• To reduce legal exposure, employers should use clear, consistent, and well-documented discipline procedures, consult legal counsel, and align layoff actions with company policies and labor laws.
• Employees can challenge disciplinary layoffs, particularly if they suspect discrimination, retaliation, breach of contract, or lack of due process. This may involve internal complaints, union support, or legal action via the EEOC or other agencies.
• For disciplinary layoffs to be effective and fair, they should be used sparingly, reasonably, and transparently as part of a progressive discipline strategy, rather than as a loophole to avoid termination.

Need more guidance? Click below to speak with one of our experts and discover how Careerminds’ industry-leading outplacement services can support your organization and your workforce through the delicate layoff process.