Layoffs and Jewish Law

With layoffs constantly in the news, it is worthwhile discussing what Jewish law has to say about how to do it properly. R. Aaron Levine discusses layoffs in his book Case Studies in Jewish Business Ethics, pp. 249-263.

R. Levine discusses two main issues: notice and severance.

I. Notice

Click here to read moreRegarding notice, he quotes three views. According to the Divrei Malkiel (Choshen Mishpat 3:51), an employer must retain an employee until the end of a payroll cycle. Therefore, if the employee is paid every two weeks, the employer must retain him until the end of the two-week payroll period. However, he has no obligation to retain him after that period is over and may terminate his employment immediately on a pay day.

The Chazon Ish (Bava Kamma 23) holds that an employer must give an employee sufficient time to find another job, which is thirty days at a minimum unless there is a prevailing local custom.

And a Tel Aviv beis din (Piskei Din Rabbaniyim 3:282-283) ruled that thirty-day notice is always required.

II. Severance

Regarding severance, R. Levine quotes the Sefer Ha-Chinukh (no. 481) who compares a slaveowner's obligation upon releasing a Jewish slave to that of an employer on termination of an employee's job. A slaveowner has to give a departing slave a number of different types of gifts, intended to be financial assistance as he begins to make his way on his own. Similarly, writes the Sefer Ha-Chinukh, an employer should give a departing employee money as initial financial assistance. However, this seems to be a minority view.

Generally, though, an obligation to give severance pay depends greatly on common practice within each industry. Common practice is assumed to be mutually agreed upon by employer and employee unless they explicitly agreed to something else. Therefore, if it is standard in an industry for employers to give one week's pay for every year employed as severance pay, that is obligatory on the employer unless the employee signed a contract stating differently. And if it is standard to give no severance, that is also technically acceptable even if it not recommended.

This is also the conclusion that R. Michael J. Broyde reached in a ruling published as "Severance Pay and Jewish Law" in Tradition 37:4, Winter 2003 (link - PDF).