Can you be laid off because you “make too much money”?

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Can you be laid off because you “make too much money”?

It was heard that an employer is going to “lay off” all the employees who have been here the longest because they make more money, so they can hire all new and pay them less money. Is this legal?

Asked on March 28, 2012 under Employment Labor Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

As long as it's not back-door or stealth age discrimination it's legal.

First, as an initial caveat: if any employee has an employment contract or agreement, he or she may only be terminated in accordance with its terms.

Employees who do not have contracts may generally be terminated for any reason--including to save money by eliminating the highest salaries.

However, that said, if either the actual reason for the layoffs, or their effect, is to discriminate against a protected category, that may be illegal employment discrimination. Higher-paid employees are often, due to seniority, experience, years of service, etc., the older employees. The law, however, protects employees over age 40 from being targeted for termination or other adverse job action. Therefore, if the real effect of the purported salary-based layoffs is to eliminate employees aged 40 and over, that could be a case of age-related discrmination. If any affected employees believe this is the case--e.g. only older staff have been laid off--they should consult with employment law counsel to see if they may have a claim.


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