Eyewitness News obtained the letter Baumann & Sons Buses, Inc., which serves 34 school districts across Long Island, sent to its workers.
The letter states the company can no longer pay the workers because the school districts are not paying the company.
"Although we regret having to do this, we have no choice," the letter states. Medical benefits for all the workers end at midnight Tuesday.
"It's a terrible situation to have your medical benefits cut off in the middle of a pandemic," said Local 1205 Union President Dan DeCrotie.
DeCrotie said he is working with state and federal union leaders to figure out if the school districts are required to continue paying Baumann & Sons under the federal stimulus bill which passed last week.
"We're all trying to get clarification," he said.
Glenn Smith, the attorney for Baumann & Sons, said the company wants to continue paying its workers.
"This isn't about a company trying to keep money from its employees," he said. "Obviously, if you don't have it coming in, you can't have it going out the door."
Smith said he believes the federal stimulus bill should provide a flow of money to the school districts which should be directed to Baumann & Sons, so the company can in turn pay its workers.
"We want to work with the unions and the districts to get the money turned back on," he said.
Both Smith and DeCrotie said it's in the best interest of the school districts to continue paying Baumann & Sons or the districts may not have enough bus drivers when the school year resumes.
"You need to keep these people employed or they will go elsewhere," DeCrotie said. "If they want these drivers back, you've got to show your support at this time and keep them on the payroll."
Eyewitness News spoke with one of the laid off drivers. She wanted to remain anonymous, but said she is scared about what this means for her family.
"We live with the fear of someone in our family getting sick and not having insurance coverage to deal with the situation," she said.
She said she hopes politicians get involved.
"We need people to care about us. We need to pay our bills too," she said.
Smith said officials in the Commack School District and the Malverne School District have agreed to continue paying Baumann & Sons, so drivers and workers in those districts will continue to receive a paycheck.
Baumann & Sons said it hopes to rehire all the laid off workers once the school year resumes.
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