Laid Off vs. Fired vs. Terminated: Differences & What to Do

When people are let go from a job, they often characterize their sudden change in working circumstances as being laid off, fired, or terminated. While these terms are sometimes used interchangeably, they aren't as synonymous as they may seem. In fact, the implications can make a big difference in the employee’s outlook and the employer’s responsibilities.

Being fired or laid off is a stressful time in a person's life. Grappling with the unknowns stemming from an abrupt termination can be overwhelming, and many of us aren't in the right headspace to dive into the differences. However, it's essential to understand them because they will impact your job search going forward.

Termination is a legal term that refers to the end of an employee's duration with a company. Though it sounds like an Arnold Schwarzenegger catchphrase, being terminated in the workplace relates to both voluntary and involuntary terminations of employment. Voluntary is best understood as an employee deciding to leave a job or end a contract via resignation. Switching careers or taking time for yourself to focus on family? You have voluntarily quit your job. According to Investopedia, this is different from being fired or laid off, as the employee, not the employer, makes the decision.

The actions of being fired or laid off fall into the involuntary category. In either case, the company has chosen to end your employment; however, the reason is key to understanding the difference between them. If a company has decided to fire you, it is generally "for cause" — meaning it was related to unsatisfactory work performance or bad behavior. With a layoff, a company suspends and often terminates workers for reasons other than their work performance. While layoffs once described temporary losses of jobs, over time, it has morphed into meaning a permanent loss of work.

As you can see, the verbiage makes a big difference and will affect how hiring managers will perceive your departure in future job searches. In broad strokes, a layoff is an unfortunate business decision unrelated to your performance, while being fired was for something that was within your sphere of control.

Depending on whether a worker is laid off or fired can, for example, affect the following:

• Their eligibility for unemployment benefits
• Whether or not they receive a negotiated severance package
• Their future employment prospects

Termination of employment is a blanket term that refers to the end of an employee’s contract with a company, whether they are terminated by their own decision or that of their employer, through a notice of termination.

An employee may decide to take a voluntary termination because, say, they have found a new job, want to start their own business, need a break from the working life, and so on. An employee deciding to leave is often required to give notification — usually at least two weeks — to their company, in written or verbal form.

Or the employee might decide to leave the job because they feel they have no other choice. This could be because they are laboring under difficult work conditions or suffering from harassment, low wages, or a sudden change in work location.

In the case of a constructive dismissal, where a boss may give an ultimatum of “quit or else,” the employee might be eligible for some compensation or benefits if they can prove that their employer’s actions were illegal.

An involuntary termination involves an employer firing, dismissing, or laying off an employee.

Generally speaking, being laid off is the result of a business decision made by the company and is not the employee's fault. But being fired or terminated for cause is related to an employee’s work performance and can be viewed as their fault, not the company’s.

Some of the reasons an employee can get fired or dismissed from a job include:

• Poor work performance
• A bad attitude
• Not fitting in with a certain corporate culture
• Dishonest or inappropriate behavior
• A job or management change that makes employee work performance suffer

Since at-will contracts govern most of the working arrangements in the United States, employers can often dismiss employees for almost any reason at any time. However, since being fired can affect how difficult it is for a person to land another job, it is a good idea to ask the employer how they will characterize the dismissal so that an appropriate response can be formulated for future job searches.

While being fired can torpedo the chances of receiving unemployment benefits, a worker does have options if they can prove wrongful dismissal, usually after consulting an employment lawyer. For example, companies cannot fire staff for:

• Refusing to work more hours than specified in contracts
• Becoming a whistleblower to industry regulators
• Taking a leave of absence
• Reporting an incident or person to the human resources department
• Discriminatory reasons, such as religion, race, age, gender, disability, or nationality

If the dismissed employee wins or settles a wrongful termination court case, they could get repayment of money damages, negotiate an appropriate settlement package, and even get their job back, if that’s what they wish.

Even though layoffs may not be merit-based, or dependent on employee performance, they still hurt all the same. Also known by the euphemisms downsizing, rightsizing, or smartsizing, the reasons for layoffs include:

• An operation has been shut down or relocated, eliminating work positions
• To cut staff and save money
• To boost earnings in anticipation of economic uncertainty
• Restructuring of the organization
• Mergers or buyouts

At one time, layoffs were not a common occurrence. In 1979 fewer than 5% of Fortune 100 companies announced them, but 15 years later, that number had risen to 45%. A survey of 2,000 American companies from 2008 to 2011 (during the recession and immediately afterward), reveals that 65% of these companies reported layoffs. Today, major layoffs are an everyday news item, used as a way of tightening the corporate belt at the workers’ expense.

Against this, some companies are finding ways to avoid layoffs, which can include:

• Instituting shorter workweeks
• Offering extra days of unpaid leave
• Reducing overtime
• Putting a freeze on hiring, promotions, and pay raises
• Providing voluntary termination packages
• Temporarily stopping new hires and filling vacant positions
• Wage and benefit cuts
• Getting rid of part-time staff and contractors

There are a few ways that a layoff could be a wrongful termination in disguise. For example, a company might have a legitimate economic reason to lay off employees, but then use this as an excuse to rid themselves of a particular worker they find troublesome. The person might have a disability that needs to be accommodated, have complained of sexual harassment, or exercised a legal right, such as filing a workmen’s compensation claim.

If, after consulting an employment lawyer, the employee can show they were selected for layoff for illegal reasons, they might be eligible for compensation.

Another reason for wrongful termination can be how workplace demographics are affected. If laid-off employees are part of a protected group, such as African Americans or Muslims, and the action compromises the demographic makeup of the workplace, then the employer can be seen as discriminatory, even though race or religion may not have been part of their decision in making layoffs.

An employee with a company for at least three months who has been laid off and received a termination notice may be eligible to receive severance pay. While a company isn’t required by law to provide termination pay, they will if it was negotiated as part of the employee work contract.

To get a severance package, some companies will ask employees to sign a release of claims to minimize the chance of litigation over wrongful dismissal. The legal document might also include other clauses, such as one for “disparagement,” stopping the employee from talking badly about their former employer.

Since getting laid off can be a highly charged emotional situation, an employee may feel pressured to sign the release immediately. However, it is a good idea to take a deep breath and take advantage of the time allowed under the law to thoroughly review the agreement and consult an employment lawyer about its fairness.

The employee might also be offered outplacement services, helping them to find another job. While federal laws don’t make companies give laid-off employees their final check immediately, state laws differ and may not only require the check to be paid immediately but may also require including accrued and unused vacation days.

Also, if someone has lost a job through “no fault of their own,” they are likely eligible to receive unemployment benefits. Each state administers its own unemployment program, so you should contact a local office to check your status.

Visit the U.S. Department of Labor site for more information on termination benefits, including continued health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA can give workers who have gone through involuntary and voluntary job losses access to continued group health benefits for limited periods of time, perhaps requiring them to pay the premium for coverage.

A fired employee will probably not receive unemployment benefits, severance packages, or outplacement services since they are treated as authors of their own misfortunes.

Were you recently laid off or fired? Either one can feel like the bottom has dropped out underneath you. It's beyond cliché but worth repeating: "When you've hit rock bottom, there's nowhere to go but up." Eventually, you'll pick yourself up, dust yourself off, and start applying for jobs again. Though it's an unsavory topic to dwell on, you should expect that hiring managers will ask about the recent gap in your resume. How do you explain it?

Below, we've outlined ways to answer some of the toughest interview questions when searching for a new job.

Many of us view being fired as a scarlet letter and fear the judgment that it elicits.

Don't. Here's why: prospective employers aren't asking this question to catch you off guard. They're asking because they want to understand the events that led to the termination itself.

As mentioned above, there are many reasons why someone is involuntarily terminated, some worse than others. In any case, the hiring manager wants to see how you coped with a difficult time and how you learned from the experience. Being honest and taking responsibility for the situation can flip a potential red flag into an anecdote that shows professionalism and personal growth. Take ownership of past mistakes, explain how they made you a better person, and tactfully transition to describe where you are today.

Above all, don't let your mistakes define you in a bad light. Remaining positive will go a long way to impressing the interviewer.

As opposed to the circumstances that precipitate being fired, the events that lead someone to get laid off are usually large-scale, such as an entire department being laid off due to budget cuts.

Unlike being fired, you won't have to explain why your performance or attitude lead to this result. However, shying away from the truth or lying about how everything went down is not advisable either. The hiring manager may pick up on your dishonesty and, as a result, will view you through the wrong lens. As mentioned above, employers have been more understanding about layoffs in the job market ever since the Great Recession. This sentiment has only increased after the large-scale layoffs and furloughs rocked most industries during the pandemic and beyond, most recently in the tech space.

Own your story — use it to craft your professional narrative. Explain what you learned from the experience and how it set you up for success. Plus, letting the hiring manager know you have nothing to hide will have a ripple effect across the entire interview, setting you up to get a callback and hopefully land the job offer.

Losing a job can be a traumatic, life-altering event, so it is important to be clear about what kind of termination you have experienced — whether it’s a layoff or firing. Find out about all your legal options, perhaps by consulting an employment lawyer, to ensure the termination was handled legally and that there isn’t a basis for a wrongful dismissal claim.

Were you recently laid off or fired and trying to get back on your feet? Joblist can help you step back into employment.