What to Do When You Are Laid Off: A Legal and Financial Checklist

The First 48 Hours Matter

Being laid off is one of the most stressful events in a person's working life. In the immediate aftermath, it can be hard to think clearly about anything beyond the emotional impact. But the decisions you make in the first few days and weeks after a layoff have lasting consequences for your finances, your legal rights, and your career trajectory. This checklist walks you through the critical steps in order of priority so you can protect yourself during a vulnerable time.

Review Your Severance Agreement Carefully

If your employer offers a severance package, do not sign it immediately. In most cases, you are not required to sign on the spot, and many agreements include a review period of 21 days or more, especially if you are over 40, as required by the Older Workers Benefit Protection Act.

Severance agreements typically include a lump sum or continued salary payments, continuation of certain benefits, and a general release of claims. That release is the most important part to understand. By signing it, you are giving up your right to sue your employer for any claims arising from your employment, including potential discrimination, wrongful termination, or unpaid wage claims. Before signing, consider the following:

• Is the severance amount fair? There is no legal requirement for employers to offer severance unless it is specified in your employment contract or company policy. Common benchmarks range from one to two weeks of pay per year of service, but this varies widely.
• What are you giving up? Read the release of claims carefully. Make sure you understand every right you are waiving.
• Are there restrictive covenants? Some severance agreements include or reinforce non-compete, non-solicitation, or non-disclosure clauses. Understand how these will limit your future employment.
• Can you negotiate? Severance offers are often negotiable. You may be able to secure additional pay, extended benefits, or modifications to restrictive clauses, especially if you have leverage such as knowledge of company practices or potential legal claims.

Apply for Unemployment Benefits Immediately

Do not wait to apply for unemployment insurance. Most states have a one-week waiting period before benefits begin, and processing can take additional time. Apply through your state's unemployment office website within the first week of your layoff. You will need your Social Security number, your employer's name and address, your dates of employment, and your reason for separation.

Unemployment benefits vary by state but typically replace about 40 to 50 percent of your previous weekly earnings, up to a state maximum. Benefits usually last 26 weeks, though extensions may be available during periods of high unemployment. Your employer may contest your claim, particularly if they characterize your departure as a resignation or termination for cause. If your claim is denied, you have the right to appeal, and you should exercise that right promptly.

Address Your Health Insurance

Losing employer-sponsored health insurance is one of the most immediate financial concerns after a layoff. You have two primary options:

COBRA Continuation Coverage

The Consolidated Omnibus Budget Reconciliation Act allows you to continue your employer's group health plan for up to 18 months after a qualifying event like a layoff. The catch is that you must pay the full premium yourself, including the portion your employer previously covered, plus a 2 percent administrative fee. This makes COBRA expensive, often several hundred dollars per month for individual coverage and well over a thousand for family plans. You have 60 days from the date you lose coverage to elect COBRA, and coverage is retroactive to the date of the qualifying event.

Marketplace Plans Under the ACA

Losing employer coverage qualifies you for a Special Enrollment Period on the Affordable Care Act marketplace. You have 60 days from the loss of coverage to enroll in a marketplace plan. Depending on your income during the period of unemployment, you may qualify for premium tax credits that significantly reduce your monthly cost. For many laid-off workers, a marketplace plan is substantially cheaper than COBRA, especially with subsidies.

Understand Your Non-Compete Agreement

If you signed a non-compete agreement during your employment, review it carefully now. Non-compete enforceability varies dramatically by state. Some states, like California, refuse to enforce non-competes in most employment situations. Others, like Florida, enforce them routinely. Key factors include the geographic scope, the duration, and whether the restrictions are reasonable in relation to the employer's legitimate business interests.

If your non-compete is broadly written, it may not be enforceable. If it is narrowly tailored, you may need to plan your job search around its restrictions. An employment attorney can give you a quick assessment of whether your non-compete is likely to hold up and what your practical risks are for taking a position with a competitor.

Secure Your Final Paycheck and Accrued Benefits

State laws govern when your employer must issue your final paycheck. In some states, such as California, it is due immediately upon termination. In others, the employer has until the next regular payday. Check your state's final paycheck law and follow up if payment is late. Your final paycheck should include all regular wages earned through your last day of work, any accrued but unused paid time off if your state or company policy requires payout, commissions or bonuses that were already earned, and reimbursement for outstanding business expenses.

Manage References and Your Professional Reputation

Before you leave, clarify with your employer what they will say when contacted by prospective employers. Most companies have a policy of confirming only dates of employment and job title, but individual managers may say more. If possible, get a written reference or LinkedIn recommendation from a trusted colleague or supervisor before the relationship cools.

Take Care of Your Emotional Health

A layoff is a loss, and it is normal to grieve. The financial pressure, the disruption to your daily routine, and the uncertainty about the future all take a toll. Lean on your personal support network, maintain a structured daily routine, and consider professional counseling if the stress becomes overwhelming. Taking care of yourself is not a luxury during this time; it is a practical necessity that keeps you sharp for the job search ahead.

Stay Organized

The weeks after a layoff involve a flood of paperwork: severance documents, unemployment forms, insurance applications, and job search records. Keeping everything organized reduces stress and helps you meet critical deadlines. Tools like CaseCraft Prep Kits and SafeClaim can help you centralize your documents, track important dates, and ensure nothing falls through the cracks during this transitional period.