Green’s Dictionary of Slang

lay back v.

also lay low, lay up

1. [1940s+] to have sexual intercourse.

2. [1960s+] (US black) to relax.

3. [1960s+] to do nothing specific, to pass time (e.g. in prison).

In phrases

lay (back) in the cut (v.) [cut n.1 (12a)] [1960s+] (US black)

1. to relax.

2. to lie in ambush, whether actually or fig.