What Is a Zero Layoff Policy?

A zero layoff policy dictates that no employees shall be terminated as a result of business-based purposes dictated by the economy. This policy does not exempt termination as a result of poor performance or other violations of the employment contract, such as ethical lapses.

Such policies are enacted in recognition that the welfare of employees should not be harmed due to economic factors that are out of their control. A zero layoff policy may also be referred to as a "no layoffs policy."

Key Takeaways

  • A zero layoff policy is a form of protection offered to employees, should the company's business decline as a result of a weakening economy.
  • The policy means that employees won't be terminated due to circumstances beyond their control, such as a recession.
  • However, an employee can still be let go for poor performance, ethical violations, or behavior that would result in termination regardless of the state of the economy.

How a Zero Layoff Policy Works

A zero layoff policy means that an employer will do everything in its power to avoid terminating employees when the economy falls into a recession. This may include salary cuts, cuts to benefits, natural attrition, moving employees to part-time schedules, or other cost-cutting means.

A zero layoff policy runs contrary to the current habit of treating employees like free agents, almost devoid of any sense of loyalty on both sides. Such a policy is seen by some as a throwback to times of greater paternalism among employers. Having a zero layoff policy has a positive effect on employee morale, especially during rough economic times, as employees do not have to fear being unemployed. Companies that employ zero layoff policies frequently find themselves in lists of top places to work.

Special Considerations

A zero layoff policy is especially evident in recessionary times when most companies will cut headcount in order to improve their financial position. Companies that employ a zero layoff policy tend to treat employees like investments. They hire carefully and tend to train their employees to cover a variety of jobs.

Zero Layoff Policy Examples

As of the third quarter of 2020, the following companies have never laid off an employee. Some have been able to maintain a zero layoff policy due to steady growth and lean operating principles, as well as engendering a sense of teamwork among employees that makes occasional belt-tightening more palatable. However, as the impact of COVID-19 drags on, some of the companies have warned that layoffs may end up happening.

  • Southwest Airlines: The low-cost airline believes that its zero-layoff policy contributes to its winning attitude. It has managed to avoid layoffs and furloughs even amid the impact of COVID-19 on its industry but has said that without more government help, it will have to make cuts.
  • NuStar Energy: Despite the volatility of the energy industry and impact from COVID-19, this San Antonio, Texas, company has maintained a zero layoff policy.
  • Nucor: This steel company has grown since 2009 and has long had a no-layoff policy. But amid the COVID-19 pandemic, the company has had to restructure its operations in Alabama and reduce the workforce by over 200. Nucor has said it has offered to hire those employees in other segments of the company.
  • Publix: This Southern grocery store chain is consistently ranked among the best places to work in America and features a zero layoff policy. The company has hired thousands of more people during the pandemic.