It is generally legal for employers to lay off employees based on the economic needs of the business. However, not all layoffs are legal.
There is no law requiring employers to give notice beforehand, so most employees work at will, meaning they can be terminated without notice at any time. It is generally permissible for an employer in financial trouble to reduce jobs. However, that does not mean every layoff is legal. Certain types of layoffs may not affect employees with contracts. Employees cannot be laid off for discriminatory or retaliatory reasons.
In The Event Of A Contract
If you have an employment contract that changes the at-will relationship, you might not belong to the majority of employees who work at will. A contract that says that you may be fired only if you commit a crime or if you commit gross financial misconduct against the company is not at-will employment. Even if your employer's reason for firing you was perfectly reasonable, you can sue if you are terminated for reasons other than those specified in your contract.
It is possible to still have an implied contract even if there is no written or oral contract saying you can only be fired for specified reasons: a contract that is neither written nor explicitly stated but rather implied by your employment circumstances. A company's employee handbook that stipulates that employees may not be terminated without good reason, for example, might imply that such termination is non-negotiable. However, this type of implied contract will not help you much if you lose your job. Employers are generally allowed to lay off workers if they are facing financial hardship.