Look closely at the terms of the layoff. I doubt that you can invoke a FMLA leave after a layoff notice is received. Will her medical benefits be carried through the term of her pregnancy? If she does not accept the layoff terms, will her coverage be terminated? Be sure you are sitting down when you find out how much her COBRA coverage will cost. Is she over 40? If so, there are certain additional rights that apply. She would be entitled to information about who else was laid off, their ages, etc. Her pregnancy cannot be a reason for her layoff, legally anyway but IMHO companies will be categorizing their employees potential health risks and will gladly nuke enough other employees to avoid a discrimination claim. How many weeks severance will she get? Does she have copies of her past performance reviews? You might find that accepting the settlement in order to keep medical coverage is the best you can make of a bad situation.