Life sciences employers have been impacted by various market forces in the last several years, and the recent economic turbulence is only adding to the challenges they face.

Many employers in this space have implemented, or are considering, reductions in force (RIFs) to meet these headwinds. Indeed, one industry source cataloged 187 layoffs among biotech companies in 2024—a 57 percent jump compared to 119 layoffs in 2022. That trend appeared to accelerate in the first quarter of 2025, as that same industry source tallied sixty-seven layoffs. A leading consulting firm noted that 30 percent of life sciences senior executives surveyed would focus on cost-cutting initiatives in 2025, including layoffs.

Life sciences employers planning RIFs may want to develop a planning matrix that addresses key employment law compliance issues, as well as considerations that are specific to the industry. This article provides an overview.

Quick Hits

• Life sciences employers planning RIFs may want to develop a planning matrix that addresses key employment law compliance issues, including federal and state WARN Act requirements and industry-specific considerations.
• Employers may want to ensure they have created defensible and analytical selection criteria for layoffs, ensuring decisions are based on legitimate, nondiscriminatory business justifications and supported by credible evidence.
• Conducting a statistical review of preliminary layoff decisions can help employers identify and address any potential disparate impact on certain demographic groups.

1. Consideration of WARN Act and Mini-WARN Requirements

Any reduction in force should take into account federal and state laws that regulate layoffs. The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers to provide employees sixty days’ advance notice prior to a “plant closing” or “mass layoff.” A plant closing or mass layoff can be triggered with as few as fifty employment losses at a “single site of employment.”

Moreover, many states have similar plant-closing laws as well, often referred to as “mini-WARN” laws. Some of these laws are not mandatory but rather encourage voluntary compliance, while others contain requirements that, for the most part, follow the federal WARN Act requirements. However, several states’ mini-WARN laws have lower thresholds for employment losses and thus are triggered more easily than the federal WARN Act. These include Maryland (fifteen employees) and Illinois, Iowa, and Wisconsin (twenty-five employees). The Maine law can require severance in certain situations, while California’s law varies from the WARN Act in several ways. New Jersey law requires ninety days’ notice, and, in some cases, the payment of severance. Thus, before conducting the RIF planning process, employers may want to take into account the impact federal WARN Act and state mini-WARN laws may have on the reduction in force well in advance.

2. Developing Defensible Selection Criteria

To defend its layoff decisions, an employer will want to be able to identify legitimate and nondiscriminatory business justifications, backed by credible evidence, as the basis for its RIF employee selections and terminations.

• Position or Group Elimination. In some cases, the reason for a decision is easily established, and there is little basis for second-guessing any “selections,” as all of the employees in a specific position or group are terminated. For example, a biotech company might eliminate all research positions working on a particular oncology molecule if early clinical stage results are poor. This type of elimination is the easiest to defend, as all employees are usually affected and there is no basis for an employee to argue he or she was treated unfairly or differently than employees in other demographic categories. Thus, defending selection decisions for these reasons primarily requires explaining and documenting the business rationale for position or group eliminations.
• Selections Among Employees in Like Jobs. Employers often will select some but not all employees in a specific position or job classification (for example, a reduction in force affecting 10 percent of employees holding the role “Research Scientist I”). Because the employer is picking and choosing between employees, keeping some and discharging others, the decision can be subject to challenge by employees who believe an impermissible factor may have driven the decision (i.e., age, race, gender, etc.). As such, employers may want to consider utilizing business-based criteria to guide the decision-making. The factors considered can include subjective and objective factors. Factors an employer might utilize include performance, skill sets, tenure, location, or other criteria important to the department involved. (Note that the criteria need not be the same for each group or department.) For example, human resources likely values different skills and proficiencies as compared to product development. Many employers will weigh each factor in a matrix that produces an overall “score” for each employee and then “stack rank” each employee from highest- to lowest-ranked, and ultimately choose the lowest-ranked employees for layoff. By creating such a (relatively) scientific process, the employer will have created valuable evidence of a fair and nondiscriminatory method for its decision-making. While the initial decisions might wisely be considered attorney-client privileged, subject to review by employment counsel, in the event of a charge of discrimination or demand, the employer often benefits from maintaining final documents in a discoverable and nonprivileged format that can be shown (if needed) to employees and their counsel. These documents often form the basis for the company’s defense—proof of the legitimate and nondiscriminatory reasons for the selection.

3. Statistical Review

Employers may want to consider conducting a statistical review of preliminary layoff decisions to determine whether the layoff decisions have a “disparate impact” on employees in a certain demographic characteristic (i.e., gender/age/race, etc.). Without delving into all the details, a disparate-impact analysis generally looks at the demographic characteristics of selected employees compared to those not selected and determines whether that outcome is reasonably likely by chance. However, if the likelihood of the actual selections becomes so small as to be statistically unlikely (for example, an employer with a 50/50 split in male and female accountants selects 90 percent of women for discharge), there could be a problem with the selection criteria or the application of those criteria. Note that a statistical variance does not establish gender discrimination in this example, as there may be many other nondiscriminatory reasons that contributed to the variance. Nevertheless, a significant statistical variance often warrants further review. Thus, many employers may find it to be a useful exercise to review the statistical analysis, explore any variances that are statistically significant, identify nondiscriminatory reasons for the statistical variance, and “pressure test” the proposed decisions to help ensure that the application of the selection criteria was fair and appropriate.

Even though the Trump administration has sought to eliminate the use of disparate-impact liability under civil rights laws, this statistical-analysis step remains prudent for several reasons: (i) while President Trump’s executive order may prevent the U.S. Equal Employment Opportunity Commission (EEOC) from prosecuting disparate-impact cases against employers, former employees can still likely sue for disparate impact, based on their own private right of action; (ii) the executive order does not directly eliminate disparate-impact rules arising under state law; and (iii) perhaps most important, a statistical analysis can help identify red-flag pockets of the organization that may be more vulnerable to disparate-treatment liability.

4. OWBPA Disclosures

In most instances, employers conducting layoffs will offer severance to impacted employees in return for their release of any claims they may have related to their discharge. Care, however, must be taken under the federal Age Discrimination in Employment Act (ADEA), as employers must adhere to special rules under the Older Workers Benefit Protection Act (OWBPA) to obtain enforceable releases of claims. In the context of a “group” (i.e., two or more employees) termination of employment, the OWBPA requires employers to provide employees age forty and over with (among other things): forty-five days to consider the offer of severance, seven days to revoke any acceptance of the offer, advising such employees to consult with counsel before executing the agreement, and certain written disclosures to inform the eligible individuals of the following:

• any class, unit, or group of individuals covered by such program, any eligibility factors for such program, and any time limits applicable to such program; and
• the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.

To comply with these obligations, employers may want to include in the disclosure the scope of the “decisional unit” (i.e., the group of employees which the employer considered in making layoff selection and retention decisions, which itself can be difficult to determine) and the eligibility or selection criteria.

Courts require “strict compliance” with these requirements. However, as the OWBPA regulations are neither entirely clear nor consistent, compliance with the standards can be difficult. These federal OWBPA rules, however, do not apply to employees under the age of 40.

5. Multistate Releases

One size does not fit all in the case of release language. Not only do employers need to be aware of OWBPA obligations, but a number of states in the last several years have issued heightened obligations necessary for legally enforceable releases. Because of the varied nature of these obligations, employers may consider developing releases that comply with all state laws in which employees are affected.

6. Protection of IP

Of particular interest to any life sciences employer is the protection of the employer’s intellectual property and relationships after a reduction in force. Typically, affected employees, like those retained, will possess confidential information, such as product or drug development plans, or perhaps impacted employees developed important relationships with suppliers or customers. As such, employers may want to consider how best to protect their trade secrets and relationships, which they often do through existing agreements signed at the outset of employment (such as nondisclosure, nonsolicit, and noncompete agreements). Depending on the circumstances and the state involved, those agreements may or may not be fully enforceable. For example, in Massachusetts, certain noncompete agreements entered into on or after October 1, 2018, are not enforceable if the employee was dismissed via a layoff. Because of these intricacies, employers concerned about the impact of a layoff on these key employer assets might consider what steps they can take to further their protection as it relates to a reduction in force, including potentially building in new or enhanced protections in severance agreements.

7. Implementation

Lastly, life sciences employers undertaking the difficult step of a layoff may want to consider carefully how the RIF is implemented. Not only do layoffs impact the affected employees in a significant way, they also affect those employees retained and the business itself in the marketplace, especially in the hypercompetitive life sciences space. As such, employers often will develop a communication plan for affected employees, those who are retained, and external audiences. Further, employers may want to be mindful of wage-payment obligations, as many states have specific requirements regarding how and when wages must be paid upon termination of employment.

Conclusion

The above are some of the primary workstreams employers consider as they prepare for and structure reductions in force. Of course, there are others that may need to be addressed, including severance plan development, consideration of unionized employee dismissals (if any), tracking plans for the receipt of signed separation agreements, outplacement plans, public relations concerns, and continuation of health benefits under COBRA, to name a few.