Disciplinary Layoff: A Brief Guide for HR

Layoffs typically occur because of business reasons, such as a plant closing, contract loss, or some other financially impactful move that renders workers redundant. However, sometimes companies may use a layoff as a form of punishment instead of a firing. This is called a disciplinary layoff, and it can have its ups and downs.

To help HR leaders better understand the impact of using a disciplinary layoff event, we’ve decided to create a brief guide that goes over what exactly a disciplinary layoff is and some things HR should consider before implementing one.

Let’s get started with the basics.

In short, a disciplinary layoff is when an organization temporarily lays off an employee because they broke a company rule or regulation. It’s a disciplinary action that punishes the employee without firing them. You can also think of a disciplinary layoff as a form of suspension.

Here’s an example:

Say that someone is routinely late for their shift. After warning the employee multiple times, they still come in late. Instead of firing the individual and permanently removing them from the workforce, an HR leader may decide to instead lay them off for a period of time where they will be unpaid.

This can help retain a staff member while also (hopefully) correcting their behavior.

It should be noted early on that any time you hold a layoff event (whether it’s a disciplinary action or a business move) you should always speak with your legal counsel to ensure that you are following all local, state, and federal laws. We are not lawyers!

With that said, a disciplinary layoff might be the right course of action for your business. After all, it allows you to retain staff members for the most part. But, on the other hand, holding an event like this can also cause problems.

Like we mentioned above, you always need to consider the legal side of a layoff, especially when it comes to disciplinary ones.

“A potential danger of giving a disciplinary layoff to an employee is that the worker might bring legal action against you if he feels that the layoff is unjust,” reports Gregory Hamel for Chron.

“For instance, if the employee contends that he didn’t violate the rules, or thinks that a manager is discriminating against him, he could attempt to sue. Legal proceedings can be costly even if they do not result in damages.”

This is important. Just like when you fire someone or hold a layoff event, you have to be able and ready to prove that whatever move you made was a justifiable one.

Many companies – even ones in ‘at will’ states – have policies on paper that detail how someone is fired. Maybe there’s a three-strike policy or different levels of punishment from being verbally warned, to a written warning, to a meeting, and then an eventual firing.

The same should be true for your disciplinary layoff strategy. If you are using a disciplinary layoff to enforce a rule that someone broke once (unless it was a huge rule violation), you’re probably going to end up in hot water.

“To institute a disciplinary layoff, you’ll likely have to follow a specific procedure, depending upon your company’s policies and the terms of your employee’s contract,” reports Van Thompson from AZCentral.

“This might include warning the employee or other forms of progressive discipline prior to laying him off. You’ll also likely have to document the specific reasons for the layoff, and when the employee returns, complete even more paperwork addressing how the employee can improve his job performance.”

But legal action isn’t the only downside.

One of the biggest benefits of a disciplinary layoff is that you can retain your staff member. However, using a disciplinary layoff can oftentimes cause that worker to start looking for a job elsewhere.

This is exactly what you were trying to avoid in the first place, but put yourself in the worker’s shoes. If you broke a rule and were laid off for a period of time with no pay, would you want to risk that happening again?

Obviously, the hope is that the person learns from the action and decides to simply follow the rules. But there is no way of knowing if they will stick around during the disciplinary layoff. They may jump ship right away.

If they do, you could end up creating more work for your workforce because they now have to pick up the slack left by the laid off employee. This happens even if you retain the employee.

So, before you use a disciplinary layoff, you need to look at the team that will be impacted by the move and make sure that they can handle the increased workload for the time when the employee is absent. If they can’t, you may lose revenue and create even more turnover because a whole team is suffering because of the actions of one of them.

As you probably already know, an increased level of turnover is never a good thing because it forces you to then search for new talent and then train that talent to fulfill the role to the best of their ability.

“High turnover can be costly to businesses because it takes time and effort to recruit, hire and train new workers,” Hamel continues for Chron.

“In small businesses, owners may be responsible for training new hires, which can divert time from other important tasks.”

When it comes to disciplinary layoffs, you have to consider how your business operates to ensure that a use them is the right thing to do.

You should also make sure you have a solid policy on file that goes over how the disciplinary layoff will work, what an employee is entitled to during the event, and how you will still fulfill your workload with a person removed from a team.

At the end of the day, you need to make sure that you are actually retaining the staff member and that your layoff isn’t for such a long period of time that you start to increase your turnover rate.

And, finally, you have to make sure your policy is legally ironclad. To do so, we recommend working very closely with your legal counsel every time a disciplinary layoff event occurs to ensure that you are complying with all local, state, and federal laws.

Want to learn more about layoffs? Check out our layoff guide here:

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Josh Hrala

Josh is an HR journalist and ghostwriter who's been covering outplacement and offboarding for over six years. Before pivoting to the HR world, he was a science journalist whose work can be found in Popular Science, ScienceAlert, The Huffington Post, Cracked, Modern Notion, and more.