According to the federal WARN Act, employers with 100+ employees must provide a 60-day advance notice of plant closing or mass layoffs. Any failure to do so requires the employee to pay ‘back pay’ along with benefits for the period of the violation. Instead of giving employees the standard 60-day notice required by WARN Act, companies are now opting for ‘Stealth Layoffs’ to pay employees to disappear immediately.
This may seem like a smart legal maneuver, however, it’s a shift in how HR handles the ‘human’ part of Human Resources.
A legal loophole to rid of lame ducks
A disgruntled employee sitting on 60 days of notice still has access to sensitive data. This is a liability for many CTOs who aren’t willing to risk exposure or theft. With stealth layoffs, companies can swiftly neutralize the risk of IP theft.
Moreover, when departing employees stay in the office for two months, they naturally spend their time networking. This often takes a bad turn once the employees starts venting out in the office. This can infect employees who were meant to be retained, leading to an unnecessary wave of resignations.
Surprisingly, some employees prefer an immediate exit. Employees see it as being paid to look for a job for 60 days than trying to work a job that no longer exists. It also allows a clean mental break and more productive time spent in job search.
Are there any risks to this stealth layoff model?
The model seems efficient when you think of company culture, however, it comes with its slew of traps. States like New York, California and New Jersey have laws that are stricter than federal law. Many require 90 days or have different definitions of ‘pay in lieu’ that could lead to harsh penalties.
When a company fires hundreds of employees via an email or cuts their Teams access within minutes, the remaining employees take note. It often leads to a culture where loyalty is replaced by mistrust.
If you choose the stealth layoffs route, the communication to those staying in the company is as important as the package for those leaving.
The WARN Act is designed to provide workers a healthy transition period. In 2026, this transition is being funded rather than workers. For HR professionals, the stealth layoff model is powerful, however, it must be wielded with transparency for employees you wish to retain.
Subscribe to The HR Digest for more insights on workplace trends, layoffs, and what to expect with the advent of AI.
