• Downsizing refers to a company’s decision to terminate employees, usually to become more viable and operate more effectively.

Downsizing involves cutting back on staff to become more viable and/or operate a business more effectively. Usually done in response to financial hardship, downsizing is a voluntary attempt to reduce expenses by trimming payroll.

The term downsizing has come to refer to a range of activities, from layoffs and hiring freezes to mergers of organizational units. Whether referred to as downsizing, reorganization, or “rightsizing,” these activities have an effect not only on the employees being let go, but also on those who remain.

In general, an employer is free to lay off or terminate employees as necessary due to business conditions, as long as the terminations are done in a non-discriminatory manner.

If an employer is large enough, and the layoffs will affect enough workers, the employer must comply with the provisions of the Worker Adjustment and Retraining (WARN) Act, and any applicable state law versions.

If the WARN Act requirements do not apply, employers are not required to give a specific amount of advanced notice for a layoff.