In practice, the money you save long-term by reducing headcount is one or two orders of magnitude larger than the money you pay out in severance. Losing your reputation and a lot of legal fees over (basically) pennies tends not to be sound business.

There's a reason corporations almost always settle lawsuits (if they aren't dismissed).

I'm not sure the rep damage actually spreads that far and given a hard enough push the business will be more than willing to spend a little bit of reputation for survival.