The Innovation Sector is currently being impacted by mass layoffs. In December 2022, a real estate startup made its third round of staff cuts, laying off more than 300 people. Throughout the year, the layoffs have affected other large companies. In these cases, there are already those who see layoffs as a trend in startups.
The term layoff, derived from the English language, refers to the temporary suspension of an employment contract, either due to a lack of financial resources to pay salaries, or due to a lack of work/activity that occupies the company’s entire workforce.
Faced with an unfavorable economic scenario, companies seek to adopt measures that do not compromise their operations, but which can keep them financially solvent, avoiding major impacts on their activities, either with the increase in costs caused by severance pay or the loss of investments in skilled labor.
The layoff consists of the temporary reduction of normal working hours or the suspension of employment contracts on the company’s initiative, for a period of two to five months, which cannot be extended, a situation already provided for in article 476-A of the Consolidation of Labor Laws (CLT).
In view of the current economic scenario, we conclude that layoffs are a possible mechanism for companies to use as a way of dealing with crises, without the need for mass layoffs.
However, although supported by the CLT, a legal analysis of the specific case is recommended in order to effectively analyze the feasibility of the layoff, with a view to the company’s financial recovery and preventing future labor issues.
