Was firing an over-reaction?

I think it's an important point.

I've worked in countries/companies with very different Labour Laws and found that the difference between theory (= law) and practice can be huge. The culture also comes into play: in some places you are safer even when the law is less protective.

That's for firing ONE person though. When trying to lay off MANY people in tough economic times then Labour Laws do matter (for good or bad - not my point here).