What are the finer points of approaching layoffs?

Q. We will be experiencing staff reductions for the first time. We are a nonprofit healthcare organization in New Jersey with approximately 600 employees. We do not know how many people will be affected by the layoff yet, but I want to know if there are state or federal laws that I should be aware of, as well as any policies. Do we need to reduce by seniority or can we reduce by performance, or for budgetary reasons? Can we lay off someone if it is not cost effective to continue that particular position?  – Nancy, New Jersey