One of the ways they could make it legal would be to announce that everyone in the company will be receiving a 20% cut in pay, which is what 40 hours at a 32 hour pay rate would come out to. They would have to adjust your hourly or weekly (if you're salary) rate to reflect this. But if it comes down to a choice between a 20% pay cut or a 20% reduction in the workforce, I'd take the cut, because you don't know for sure if you're going to be in that remaining 80% or not. Your employer is simply trying to avoid layoffs and figures that this is the lesser of two evils, which is a good thing, because it means that they value all of you.
