Sad situation.

H1B status is a vulnerable to job security. Once he lost his job and still stays here, he is out of status. After 911, BCIS issued a "zero tolerance policy". Meaning you cannot have gap between status transfer. Now, this policy has been lifted might indicate there is a grey room for status transfer.

Apprarantly, this is not your friend's case here if he is not waiting to trasnfer to F1 or some other status. This will of course affect the VO's decision if he goes for visa application next time unless he has very good resaons to sell to the VO. It'd be better for him to leave now, and come back with a valid US visa later. But he needs good reasons before he goes for visa application.