Individual and collective redundancy
Redundancy is a potentially fair reason for dismissal but the dismissal will also need to be effected in a fair way (see below) or the redundancy dismissal may be unfair.
The employer must pay particular attention to the grounds invoked to support the redundancies. Indeed, a redundancy must be based on a real and serious cause, otherwise the courts will rule that the redundancy is unfair (see What are the remedies for dismissal in violation of these restrictions? and What are the consequences of non-compliance by the employer? below).
Another restriction deals with the redundancy of protected employees (e.g. staff representatives, works council members, staff delegates, union delegates, etc.). A protected employee's redundancy is subject to the prior authorisation of the labour inspector. In the event where a protected employee is made redundant without the authorisation of the labour inspector or in spite of the Labour inspector's refusal, the redundancy will be considered null and void. The employee will be entitled to claim reinstatement and compensation for his/her lost salary.
Specific protection also applies with respect to certain categories of employees, such as pregnant employees and employees who are on sick leave as a result of a work-related illness or accident.
Blue-collar employees: a blue-collar employee can only be dismissed for economic reasons or due to his or her behaviour or lack of professional skills or qualifications.
White-collar employees: as a general rule, there is no obligation for the employer to justify its decision to dismiss a white-collar employee.
Depending on the sector-level collective bargaining agreement(s), a multiple dismissal can be made subject to certain restrictions (e.g. reassignment of the affected employees to other departments, a ban on new hires, etc.).
According to the applicable statutory procedure, the employer must respect various obligations before proceeding with a collective dismissal:
- information and consultation of the employee representatives;
- no dismissals during a cooling-off period, during which time a social plan is negotiated;
- establishment of a redeployment committee to provide outplacement services to the dismissed employees.
First of all, the employer must comply with the formalities of the special proceeding regulated by the Portuguese Employment Code.
In addition, and apart from the general legal requirements to recourse to a redundancy procedure (explained in question "What is redundancy?"), with regard to the termination of work positions, the employer is currently not entitled to dismiss any employees if:
- the grounds for the redundancy procedure have been caused by the employer's or the employee's own fault (i.e., if the grounds of the redundancy procedure were specifically engendered and aimed to enable the termination of the employment contract of a certain employee);
- it is possible to assign the redundant employee to a vacant position compatible with the employee's professional category;
- there are fixed-term employment agreements in force for the redundant position; and
- the redundant employee has been transferred, in the three month period preceding the beginning of the redundancy procedure, to the terminated position. In this event, the employee will be entitled to reoccupy his/her previous position (should it still exist), with the same base remuneration.
Please be aware that, following the financial aid requested on the beginning of 2011, the Portuguese government agreed to change some aspects regarding the removal of work position dismissal. Therefore the restrictions mentioned above may be altered in the near future.
The restrictions on the employer's ability to make an employee redundant are generally regulated in the German Protection against Termination Act (KSchG).
This Act generally applies on all employees who have continuously worked for their employer for more than six months ("statutory probation period") and if their employing business premises employ more than 10 employees, excluding trainees. Part-time workers do not count in full, employees with up to 20 working hours per week are counted with 0.5 and employees with up to 30 working hours per week are counted as 0.75. All employees with more than 30 working hours per week are counted with 1.0.
Outside the scope of this Act, no "social justification" is needed, which means that a termination is permissible provided that is not grossly unfair, which is only in very rare circumstances.
If the KSchG is applicable, the termination must have a "social justification", i.e. the employer must have a special reason for each termination which is accepted by the Act. Three reasons are possible:
- The first group of reasons are reasons that relate to the employee's person (termination due to personal reasons). Examples of this type might be long-term illness, frequent short-term illness or if a driver loses his driving license. All these reasons are not the employee's fault, and therefore German labour jurisdiction has set relatively high preconditions for each reason which must be fulfilled in order for the termination to be effective.
- The second group of reasons are reasons that relate to the employee's conduct (termination due to reasons of behaviour). This type covers all kinds of breaches of duties arising from the employment relationship (e.g. not presenting a medical certificate in case of illness in time, not following the superior's directions and also - under certain preconditions - bad performance). All these reasons are generally the employee's fault; the "behaviour" which is affected can theoretically be changed by the employee. Therefore, these types of reasons require a prior warning to the employee in order to inform him about the misbehaviour and to give him the possibility to change the behaviour. Without prior warning, which the employer must prove in front of the court, the termination will be invalid. The warning need not be in writing, but this is strongly recommendable in order to be able to prove it later on if necessary.
- The third group of reasons are compelling business requirements excluding the possibility of continuing to employ the person elsewhere within the company (termination due to operational reasons). This is the type which can be called "redundancy" in Germany. For more information on this type of reasoning for termination, please see What is redundancy.
The general rule is that - in the absence of a works council - the termination itself is effected by simply handing over an original notice letter which has to be signed by a person with the power to legally represent the company.
Such a notice letter has to be drafted very carefully and will not refer to the reason for the termination, but will simply state that the employment relationship will end with effect by a certain date (after expiration of the notice period). It is not legally required to state the reason for the termination, and if it is stated, the employer will later on not be able to refer to another reason which may sometimes be necessary in the course of the legal procedure.
Should a Works Council exist, the Works Council must be heard prior to handing over the notice letter to the employee (see What are the employer's obligations in the redundancy process? and Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?).
Except in case of a termination for cause (without notice), in any case of an ordinary termination the notice period has to be obeyed which must be determined in line with the respective contract, the statutory provisions and any collective agreements if applicable. The employee is obliged and entitled to work during their notice period, but the employer has the right to unilaterally release the employee from his work (however, by continuing to pay the salary until the notice period expires).
The statutory minimum notice period depends on the duration of service and can be taken from the following table:
|Duration of Service||Duration of Notice Period|
|Up to 2 years||4 weeks prior to the 15th or the end of a calendar month|
|More than 2 years||1 month prior to the end of a calendar month|
|More than 5 years||2 months prior to the end of a calendar month|
|More than 8 years||3 months prior to the end of a calendar month|
|More than 10 years||4 months prior to the end of a calendar month|
|More than 12 years||5 months prior to the end of a calendar month|
|More than 15 years||6 months prior to the end of a calendar month|
|More than 20 years||7 months prior to the end of a calendar month|
There is generally no requirement to consult with the affected employee prior to handing over the termination letter. Only in the exceptional case of a "dismissal on grounds of suspicion" the employee himself has to be heard prior to giving him/her the notice letter.
Some types of employees have special protection against termination, and in such cases ordinary terminations are only permissibly after following special procedural rules (in general a permit by an official authority is required) and if certain material prerequisites are fulfilled. This mainly covers disabled persons, members of the works council or another Employee Representative Body, pregnant women, women on maternity leave, men or women during parental leave.
There are no such restrictions provided that:
- the redundancy situation is genuine; and
- the employee concerned was not unfairly selected for redundancy. In this regard, unfair selection will arise if either:
- the selection for redundancy resulted wholly or mainly from one of the automatically unfair reasons for dismissal e.g. pregnancy, race or age; or
- he/she was selected for redundancy in contravention of an agreed procedure (with a trade union) and there were no special reasons justifying departure from the procedure.
In general, Spanish labour law is very protective of employees and labour courts are very reluctant to rule in favour of employers unless the merits of the case are very clear. Therefore, an employee may not be dismissed (without negative consequences for the employer) unless there exists a specific legally recognised basis.
Employee representatives receive special protection from dismissal. Specifically, they cannot be dismissed based on the activities carried out in the exercise of their representation (or within one year from the date on which their representation ends). Such employees also have preferential job retention rights in the event of the suspension or termination of the employment relationship due to economic, technological, production or organisational reasons (whether collective or individual). A representative is also entitled to return to the company in the event of wrongful dismissal (unless he/she prefers to leave).
The Statute of Workers also affords special protection to employees dismissed under certain maternity/paternity-related circumstances. Such dismissals would be considered null (reinstatement would be mandatory) if no legal reasons exist for fair termination.
It is important to stress that in Spain, a specific procedure established by law must be followed when an employer intends to perform either individual or collective redundancies.
In this regard, the collective dismissal procedure triggers the obligation to produce and provide the employee representatives with thorough documents evidencing the reasons for the collective dismissal. Likewise, a mandatory period of negotiation with the employee representatives must take place (see Under what circumstances is an employer obliged to consult with employee representatives/works councils etc? below).
An employer must give persons affected by individual dismissals for objective reasons prior notice of 15 calendar days. The notice must be in writing and include a detailed explanation of the circumstances leading to the dismissal.
Payment of the statutory severance must be provided at that time. Statutory severance is equivalent to 20 days of salary per year of employment, subject to a maximum of 12 months of salary, unless higher severance has been agreed in the employment contract. The notice must also be given to employee representatives. If the 15 calendar day period of notice is not respected, the employer must pay compensation equivalent to the salary corresponding to the defaulted period.
The dismissal of individuals (other than 'dirigenti') employed under open-term employment agreements is subject to stringent restrictions. Indeed, such agreements can only be lawfully terminated when a just cause or justified grounds exist:
- "Just cause" means any serious breach, which renders continuation of the employment impossible, even on a temporary basis (such as, for example, theft, serious insubordination vis-à-vis the employer, unjustified refusal to follow the employer's instructions, and any other employee's behaviour which seriously undermines the trust relationship with the employer);
- "Justified grounds" means either (a) a less serious breach by the employee (e.g. serious negligence, material damages to machinery and equipment, unjustified and repeated absences), or (b) an objective reason relating to the employer's need to reorganise its production activities or labour force (e.g. redundancies).
Whenever a dismissal is due to just cause or subjective justified grounds, a specific disciplinary procedure must be followed by the employer before ordering the dismissal.
Irrespective of the reason on which it is based, the dismissal must be ordered in writing and must be communicated with the express indication of the reasons on which it is grounded. Should the latter requirements be not satisfied, the dismissal would be null and void.
The dismissal of individuals qualified as dirigenti (i.e. executives) is not regulated by the same statutory provisions which govern the termination of lower-level employees. Pursuant to law, dirigenti can be terminated at will by the employer, provided that a notice period is granted (except in case of termination for "just cause").
However, the National Collective Labour Agreements applicable to dirigenti in the main business sectors have introduced a principle whereby dirigenti are entitled to compensation for damage in the event that their dismissal is not duly justified.
In the absence of any useful indication given by the National Collective Labour Agreements in order to understand whether or not a dismissal can be considered justified, reference must be made to the interpretation given by case law precedents. According to these, a dirigente's dismissal is deemed justified only if it falls within the scope of the following conceptual areas:
- objective reasons related to the employer's economic, organizational and production-related needs; or
- subjective reasons related to the dirigente's behaviour (i.e. facts relating to the dirigente's professional performance and/or private life capable of undermining the necessary fiduciary relationship). Only in the case of very serious misconduct (which renders the continuation of employment impossible), the dirigente can be dismissed for "just cause". Whenever a dismissal is due to subjective reasons, a specific disciplinary procedure must be followed by the employer before ordering the dismissal.
Pursuant to Dutch law, the employer can terminate an employment agreement:
- by giving a notice of termination, using a dismissal permit - if and when required - to be obtained from the work placement branch of the Employee Insurance Agency (UWV);
- by requesting the Subdistrict Court to rescind the employment agreement;
- by reaching an agreement with the employee to terminate the employment agreement with mutual consent;
- with immediate effect based on an urgent cause as provided for in Dutch law; or
- with immediate effect during the probationary period.
Notice of termination:
According to Dutch employment law, every employer can issue a unilateral notice of termination. However, under normal circumstances (i.e. no urgent cause), a dismissal permit will be required. Pursuant to the Extraordinary Labour Relations Decree - Buitengewoon Besluit Arbeidsverhoudingen 1945, (BBA) - if an employer obtains a dismissal permit, this means that the employment agreement can be terminated, taking into account the applicable notice period.
In order to obtain a dismissal permit, the employer must give all relevant information to the UWV. The reasons for which the employer applies for a dismissal permit must be duly described and can be divided into two categories:
- business/economic reasons; and
- personal performance reasons.
In practice, it takes approximately six to eight weeks before a dismissal permit is issued. If the UWV is not convinced that the employer has reasonable grounds for termination, the dismissal permit will be denied. In this case redundancy permission is denied, e.g. if the employer cannot convince the court that it has done its utmost to re-employ the employee in a different position within the company or within another company in the company group. If the dismissal permit is issued, the employer can terminate the employment agreement by observing the applicable notice period.
The UWV can make the dismissal permit subject to the condition that within a period of 26 weeks after the dismissal permit has been granted, the employer will not employ a new employee to carry out the same activities as the employee whose position has become redundant without having offered the position to the dismissed employee first.
The UWV does not have the authority to grant the employee a severance payment at the expense of the employer. After a dismissal permit has been issued and the employer has given notice, an employee may however commence proceedings, stating that the dismissal is manifestly unreasonable, because the consequences of the dismissal for him are too serious compared to the employer's interests and therefore, that the employer should pay damages.
In such proceedings, appeal is possible up to the Supreme Court. In many of these cases the Subdistrict Court formula is applied to calculate damages. (See 'What compensation is an employer obliged to pay to redundant employees?').
Requesting the Subdistrict Court to rescind
The employer can file an application to the Subdistrict Court in order to request that the employment agreement is rescinded. If a Subdistrict Court decides to rescind the employment agreement, it can allow a severance payment to the employee, which is usually based on the Subdistrict Court formula.
It is possible that a Subdistrict Court decides that an employment agreement should not be rescinded. In practice, proceedings with the Subdistrict Court take approximately eight to 14 weeks from start to finish. The employee or the employer can appeal against the Subdistrict Court's decision. It should be noted that in the case of a collective dismissal pursuant to the Collective Redundancy Notification Act(WMCO), a Subdistrict Court judge may decide that the UWV is more suitable to decide on the dismissals. (See 'What are the employer's obligations in the redundancy process?')
Parties are free to agree on the termination of an employment agreement. In practice, the terms of the termination are laid down in a settlement agreement. It is common practice that parties use the Subdistrict Court formula in order to reach an agreement on a severance payment.
If the employer has taken the initiative to terminate the employment contract for reason of redundancy, the employee will be eligible for unemployment benefits, regardless of the way the employment contract has ended (by giving notice of rescission by the Subdistrict Court judge or by termination with mutual consent laid down in a settlement agreement).
Prohibitions of termination
Pursuant to Dutch employment law, there are a number of situations in which it is prohibited for the employer to terminate the employment contract by giving notice. This includes, for example, during the illness and pregnancy of an employee and during the time an employee is a member of the works council.
In the event such a prohibition of termination exists, and the employer wants to make the employee, who falls under the scope of such a prohibition, redundant, a termination by giving notice can be nullified by the employee, even if the UWV has granted a dismissal permit. If the employer has filed a request to the Subdistrict Court to rescind the employment contract for economic reasons, the court is likely to refuse such a request if a prohibition of termination is applicable.
The employer must observe a notice period of, in principle, between one and four months, depending on the employee's years of service.
This statutory notice period, laid down in article 7:672 DCC, calculated as follows:
- up to five years of service - one month
- from five up to 10 years of service - two months
- from 10 up to 15 years of service - three months
- from 15 years of service onward - four months
The statutory notice period to be observed by the employee is one month.
Parties may deviate from the statutory notice period in writing. However, the notice period to be observed by the employer must then be twice as long as the notice period to be observed by the employee.
If the employer has obtained a dismissal permit from the UWV, one month is deducted from the notice period, as long as at least one month notice period remains.
There are certain groups of employees who are specially protected against termination with notice or termination of the employment relationship and who (subject to a few exceptions, e.g. liquidation of an employer) cannot be dismissed in the redundancy process. During the protection period, the employer may only terminate the current terms and conditions of work and payment in relation to these employees. These groups include an employee who:
- is pregnant
- will reach retirement in no more than four years
- is a member of the works council in the state enterprise
- is a member of the management of the company trade union
- is a member of the company's trade union, authorised to represent such union towards the employer or a body or a person performing activities in labour law cases
- is a member of a special negotiating body or a European works council
- is a member of the special negotiating body, of the representative authority or employees' representative in a European company
- is a social labour inspector
- is called up to active military service, substitute service, basic military service or military training
- is a member of a works council
- is a member of a special negotiating body, a representative authority or employee representative in a European cooperative
- is a member of a special negotiating body, a representative authority or employee representative in the supervisory board of a company created from a cross-border merger of companies.
The employee may be dismissed only due to reasons prescribed by the Labour Code. The reason for termination must be objectively given at the time when the employee is being dismissed. There are also restrictions which protect certain categories of employees against dismissal (for more information, please see Which persons are protected against dismissal in a special way, if any?).
If an employee has at least one year's continuous employment and is dismissed by reason of redundancy, then the employee may bring a claim in the Employment Tribunal for unfair dismissal see ('Is there any statutory protection against dismissals?').
Blue-collar employees: if the termination of the employment contract is not based on economic grounds or due to the employee's behaviour or lack of professional skills/qualifications, the employee can claim damages of up to six months' salary (on top of his/her regular notice period or compensation in lieu thereof).
White-collar employee: N/A.
The restrictions on a multiple dismissal will depend on the provisions applicable at sector level (e.g. the collective bargaining agreements could provide that if the applicable procedure is not followed, employees can claim twice their compensation in lieu of notice/severance pay).
If the employer fails to follow the applicable information and consultation procedure, the employees can commence legal proceedings asking the labour court to order the employer to restart the collective dismissal procedure. In that case, the employment contracts cannot be terminated and all employees will continue to receive their regular salary until the end of the (new) procedure.
If the redundancy procedures are not carried out in accordance with the rules set forth in the Portuguese Labour Code, the dismissal will be deemed unfair by a Labour Court. This is provided that a lawsuit is brought by the employee within two months (or six months for collective dismissals) from the day following the date of termination of the employment agreement.
If this is the case, the employee will be entitled to:
- receive all the payments he/she should normally have earned (back pay, including salary, holidays, legal subsidies, etc.), from the month preceding the commencement of the legal suit until the final ruling of the court (including appeals, if any), deducted from the amounts the employee has received during this period, if any; and
- choose between a severance compensation for unlawful dismissal or to be reinstated in his/her former employment.
If the employee chooses the first alternative - severance compensation for unlawful dismissal - the court will graduate the amount between 15 and 45 days of base salary (and the seniority bonus, if any) for each full year of seniority or a fraction thereof, with a minimum limit of three months compensation. The above-referred graduation will depend on the amount of the base salary and level of unlawfulness of the dismissal.
With regard to senior executive officers, i.e. employees carrying out management duties, and in companies employing up to a maximum of nine workers, if the employee chooses to be reinstated, the employer may oppose such an option, provided the employer alleges and proves that the reinstatement would be seriously harmful to the company's activity. The court may rule in favour of the opposition should the grounds be deemed sufficient. In that case, instead of reinstatement, the employee will be entitled to a compensation which will vary between 30 and 60 days of base remuneration and seniority bonus (if any) per each year of service, with a minimum limit of six months.
This increased compensation is also due with regard to employees' representatives and pregnant employees. Employers are not allowed to oppose the reinstatement of pregnant employees.
Subject to the above, please note that employees may also choose to file a preliminary injunction order against the company seeking immediate (albeit provisional) reinstatement.
Preliminary injunction orders filed by employees' representatives or pregnant employees will only be overruled if the court concludes that it is likely that the dismissal will be held lawful in the subsequent legal action.
Within three weeks after receiving a notice letter each employee has the right to file a lawsuit with the competent labour court claiming that the termination is invalid and therefore the employment relationship has not been terminated.
The invalidity of a termination may result from formal mistakes or - if the KSchG applies - from no reasons existing which are accepted by the KSchG. If the employer has terminated without obeying the formal requirements or without obeying the restrictions set by the KSchG, there is no financial remedy of administrative fine falling due. The one and only legal consequence is that the court will decide that the termination is invalid, and therefore the employment will continue, i.e. the employee to be "reinstated".
An employee who claims to be entitled to a statutory redundancy payment may refer a claim to the Employment Appeals Tribunal.
An employee whose position has been made redundant may bring a claim for unfair dismissal that he has been unfairly dismissed contrary to the Unfair Dismissals Acts. This claim may be brought before a Rights Commissioner or directly to the Employment Appeals Tribunal. The Tribunal is composed of a nominee of employer's organisations, a nominee of the Irish Congress of Trade Unions and a lawyer Chairman.
Under the Unfair Dismissals Acts 1977 to 2007, a dismissal is deemed to be unfair unless the employer can establish its fairness. Redundancy is a defence to unfair dismissal provided that the employer can establish to the satisfaction of the Tribunal /Rights Commissioner that there is a genuine redundancy situation and that the selection of the person to be made redundant was fair.
If an employer fails to establish to the satisfaction of the Tribunal that an employee has been fairly dismissed, the Tribunal can make certain orders in favour of the dismissed employee. The Tribunal can award either compensation representing the actual or prospective loss suffered by the employee (capped at two years' remuneration) or reinstatement or re-engagement.
Where an employee has been dismissed as one of a number of exceptional collective redundancies the cap on compensation is four years' remuneration for an employee who had less than 20 years' service on the date of the dismissal and five years' remuneration for an employee who had more than 20 years' service. An appeal lies from the decision of the Rights Commissioner to the Tribunal, from the Tribunal to the Circuit Court and from the Circuit Court to the High Court.
As an alternative to a claim for unfair dismissal, an employee whose position has been made redundant may bring a claim of wrongful dismissal to the Circuit Court or High Court. A claim of wrongful dismissal is a claim that the employer failed to provide appropriate notice to the employee of termination of his employment. If successful, the court may award damages amounting to pay in respect of the employee's notice period.
Where there is a dispute as to the redundancy process and/or redundancy payments, the employer and/or the affected employees or their trade union may refer the dispute to the state's industrial relations bodies under the Industrial Relations Acts 1946-2004. These bodies are the Labour Relations Commission, which includes the Rights Commissioner service, and the Labour Court.
An employee whose position is to be made redundant may apply to the High Court for an injunction to restrain his/her purported dismissal. If granted, the effect of the injunction would be to restrain the employer from dismissing the employee until the matter has been fully heard by the High Court. To obtain an injunction, the employee must establish that there is a fair question to be tried at a full hearing, that the balance of convenience favours the granting of the injunction and that damages would not adequately compensate the employee.
An injunction application may be brought on the basis that the contract of employment was not validly terminated (e.g. no or no proper notice was given), that the person making the decision to dismiss lacked the authority to do so, or that the dismissal procedure was unfair or otherwise not in accordance with statutory requirements. The interlocutory/preliminary injunction application is heard by the High Court at short notice based on affidavits rather than oral evidence.
In line with the voluntarist nature of industrial relations in Ireland, Rights Commissioner and Labour Court decisions are generally not enforceable. However, in certain circumstances one or both parties will be expected to abide by the Rights Commissioner or Labour Court determination. Where the decision of a Rights Commissioner is appealed to the Labour Court, the Labour Court's determination will be binding on the parties. Where employees refer a dispute directly to the Labour Court, the Labour Court will consider the matter on condition that the employees agree in advance to abide by the court's decision.
The Labour Court may issue an enforceable determination on a dispute referred to it under the Industrial Relations (Amendment) Act 2001 as amended by the Industrial Relations (Miscellaneous Provisions) Act 2004. Under these Acts, where it is not the practice of the employer to engage in collective bargaining negotiations and the internal dispute resolution procedures normally used by the parties concerned have failed to resolve the dispute, the Labour Court may issue an enforceable determination on the dispute. The determination may be enforced by the Circuit Court. The determination of the Labour Court can be appealed on a point of law to the High Court.
Employees affected by an individual dismissal for objective reasons may challenge the dismissal in labour courts, which may consider the dismissal:
If the reasons alleged for the termination are proven and found sufficiently serious and relevant.
If the reasons alleged have not been proven by the employer or are insufficient. In this case, the employer (unless the dismissed employee is an employee representative, in which case it would be his/her decision) may choose between: (a) reinstating the employee to the previous position and paying the employee the salary accrued from the date of dismissal until the date of reinstatement or (b) paying severance depending on the date the employee was hired (please see What are the "benefits" or "legal advantages" of an employment continuing over certain time periods?).
Amounts paid below or up to the statutory severance compensation which correspond to unfair dismissals will be tax free.
If the legal formalities have not been complied with (i.e. the statutory severance has not been offered to the employee together with the notice), the dismissal will be declared as unfair.
If (i) the employer has breached the employee's constitutional rights; (ii) the dismissal is considered discriminatory; or (iii) the dismissal affects individuals who are afforded special protection (e.g., pregnant women, persons on maternity/paternity leave, persons on leave for childcare).
If a labour court declares the dismissal null, the employer must reinstate the employee to the prior position and pay the salaries accrued from the date of dismissal until the date of the reinstatement.
An employer must follow a formal procedure (negotiation) for a collective dismissal. Otherwise, the employees will claim before the courts the nullity of the dismissals and the reinstatement of the employees will be mandatory.
Any employee (including dirigenti) dismissed may bring a legal action if he/she deems that his/her dismissal was not properly justified.
The action before the Labour Court must be preceded by an out-of-court challenge of the dismissal (within 60 days of the dismissal).
After this, should the employee intend to start a formal dispute against the employer, he/she has to file the claim before the Labour within 270 days.
According to the previous regime, employees had five years from the challenge of the termination order to commence a legal dispute.
In the event that the dismissal of an employee (other than dirigente) is found unjustified by the court, the consequences for the company are different, depending on whether it is staffed with more or less than 15 employees per production unit (or more than 60 employees as a whole).
As to the latter case, the employer would be ordered to reinstate the employee in his/her previous position and to pay him/her damages amounting to total compensation accrued between the date of the dismissal and the date of the reinstatement plus social security charges.
Please be advised that, according to the law, such damages cannot be lower than five months' salary. Please be also advised that, without prejudice to the right to the aforesaid indemnity for damages, the employee can elect to waive the reinstatement and request the payment of an additional 15 gross months' salary (without social security charges) instead.
On the contrary, should the employer be staffed with less than 15 employees, in case of successful proceedings on the side of the employee, the company would have to either:
- re-employ him/her; or
- pay him/her an amount ranging from a minimum of 2.5 and a maximum of six months of his/her (last) all inclusive salary.
In the event that the dismissal of a dirigente is found to be unfair - according to the National Collective Labour Agreements for dirigenti in the main business sectors - he/she is entitled to receive a rather considerable amount as compensation for damages (so-called "additional indemnity"). This is payable on top of the mandatory severance amounts.
Such additional indemnity is automatically increased depending on the dirigente's age and professional seniority. The additional indemnity is calculated on the basis of the same criteria used for the indemnity in lieu of notice (please see below). However, it is not subject to the payment of social security charges.
If an employee is dismissed by the employer giving notice, but the UWV has not issued a dismissal permit to the employer, then the employee can either invoke the nullity of the dismissal within six months and claim continuation of payment and/or reinstatement, or accept the termination as such and claim damages.
If the employer has not observed the prohibitions of termination (See 'What restrictions are there on an employer's ability to dismiss an employee?') the employer will not be liable for damages. However, the employer can, for two months after the notice of termination, invoke grounds for nullification of the termination and subsequently claim continuation of payment and/or reinstatement.
If an employee is dismissed and the applicable notice period has not been observed by the employer, the employee can hold the employer liable for compensation. Pursuant to article 7:677 paragraph 2 DCC, a party who gives notice with effect from a day earlier than the day applicable between the parties will be liable for damages, unless notice is given for urgent cause in conformity with the requirements for such notice. The damages will be equal to the fixed amount of the salary, with respect to the period during which the employment agreement should have continued, if the applicable notice period had been observed.
If the employer has filed a request to the Subdistrict Court to rescind the employment agreement, and the court has denied this request, then the employment agreement has not legally terminated. The employee can claim continuation of payment of salary and/or reinstatement.
Dismissing a protected employee would mean unlawful dismissal. Unlawful dismissal, although effective, means that an employee can claim certain damages in a labour court. (see: 'Under which circumstances may the employee who has been dismissed file a lawsuit? What can be the target of such lawsuit?'). An employer's remedy would be to revoke a declaration of intent to terminate an employment contract. However, employee consent is required for such declaration to be effective.
The employee may dispute the termination of the employment relationship before the courts no later than two months from the day when the employment relationship in question should have come to an end as a result of such a termination. If the employee notifies the employer that he/she insists on the continuation of his/her employment after its termination, and the termination is subsequently declared void by the court, the employee is entitled to compensation equivalent to the salary from the date of notification to date the employment is validly terminated (or reinstated).
As of 1 January 2012, the court has the so called discretionary power of a judge concerning the amount of the compensatory salary. Where the period covered by the compensatory salary exceeds six months, the judge will be entitled to reasonably reduce the amount of the compensatory salary.
Redundancy is defined under s.139(1) of the Employment Rights Act 1996 as a dismissal which is 'wholly or mainly attributable' to the employer:
- Ceasing or intending to cease carrying on the business for which the employee was employed;
- Ceasing or intending to cease carrying on the business at the place where the employee is employed; or
- A reduced requirement for work of the particular kind for which the employee was employed.
According to Article L.1233-3 of the French Labour Code (referred to as the "Labour Code"), a redundancy (or dismissal on economic grounds) is "a dismissal decided by the employer for one or more reasons that are not related to the employee, which result from the elimination or transformation of a position, or a modification, refused by the employee, of an essential element of the employment contract, notably due to economic difficulties or technological changes" .
Where an employer invokes economic difficulties to support the redundancy, the legitimacy of the redundancy is dependent on the real and serious nature of the economic difficulties at the time of the redundancies.
The real and serious nature of the economic difficulties is assessed at company level and not at site level. With regard to group companies, the economic difficulties are assessed based on the group's line of business, in which the company operates. Companies operating in the same line of business located abroad are also taken into account in the case of international groups.
In general, the loss of a market, a slowdown in sales or lower turnover or profits during the year prior to the redundancy do not qualify as economic difficulties.
In addition, the courts have established a third economic ground, which could also give rise to redundancy proceedings. In essence, the courts have considered that where redundancy proceedings are necessary to safeguard competitiveness, the redundancy proceedings are founded on a real and serious ground.
The necessity for the company to make employees redundant in order to safeguard the competitiveness of the company is assessed either at company level or based on the group's business sector.
The courts are not empowered to restrict the company's choice of possible solutions to safeguard the competitiveness of the company or of the group's business sector.
Better management or the interests of the company invoked by a financially healthy company are not considered valid grounds to demonstrate that the restructuring is necessary to preserve the company's competitiveness.
 Significant Laws:
The Social Modernisation Law (Loi de Modernisation Sociale) of 17 January 2002 amended the collective redundancy procedures. This new Social Modernisation Law was introduced to reinforce employee protection (redeployment obligation, collective redundancy plan instead of a "social plan") against collective redundancies.
More recently, the Social Cohesion Law (Loi de Cohesion Sociale) of 18 January 2005 introduced the principle of forward-looking Labour force and skills management with a view to anticipating and forestalling collective redundancies (Article L.2242-15 of the Labour Code).
An employer can decide to carry out an individual dismissal(s), a multiple dismissal or a collective dismissal (mass layoff).
- No specific procedure needs be followed for an individual dismissal.
- The formalities for multiple dismissals are defined in collective bargaining agreements concluded at sector level (if any). The competent joint committee will determine the specific procedure to be followed.
- The rules governing collective dismissals are defined at national level.
A collective dismissal or mass layoff is defined as any unilateral dismissal on grounds which are unrelated to the employee's person, effected over an uninterrupted period of 60 days, of:
- at least 10 employees in undertakings that employed more than 20 but less than 100 people on average during the calendar year immediately preceding the dismissal; or
- at least 10 per cent of the workforce in undertakings that employed at least 100 but fewer than 300 people on average during the calendar year immediately preceding the dismissal; or
- at least 30 employees in undertakings with at least 300 employees on average during the calendar year immediately preceding the dismissal.
Portuguese law does not provide for a specific definition of the term redundancy. Notwithstanding, besides the theoretical possibility of entering into several individual separation agreements with each of the employees, the restructuring and downsizing of a given company may only be carried out by means of two alternative "redundancy" procedures. Both of these procedures fall into the concept of "dismissals with objective reasons" as opposed to "dismissal on subjective i.e. disciplinary reasons".
Dismissals with objective reasons have to be grounded on market, structural or technological reasons, as follows:
- Termination of the work position (section 367 of the Portuguese Labour Code)
The Portuguese Labour Code defines termination of the work position as the termination of (one to four) employment agreements enacted by the employer within a three-month period, and based on the need to lose a certain position, whether this loss is based on market, structural, or technological reasons.
In companies employing 49 employees or less, this procedure may only be followed in respect of one employee. In companies employing more than 49 employees, this procedure may be adopted to terminate a maximum of four employees. In technical terms, a separate procedure has to be followed for each affected employee.
Should these thresholds be exceeded, a collective dismissal procedure will have to be initiated.
- Collective dismissal (section 359 of the Portuguese Labour Code)
Collective dismissals are defined as the multiple termination of employment agreements carried out at the employer's initiative, whether simultaneously or successively over a period of three months. Collective dismissals involve a minimum of two or five employees, depending on whether the company employs up to 49 workers or above that number, respectively. In all cases such redundancies must be based on the closing down of one or several of the company's business units or a staff reduction due to market, structural or technological reasons.
In view of the above, the essential criteria to determine which of these two redundancy procedures will have to be followed depends on the number of affected employees.
The Portuguese Labour Code defines market, structural and technological reasons, as follows:
- Market reasons: reduction of the company's activity, determined by the foreseeable decrease in demand of goods or services or as a result of a supervening legal or practical impossibility of placing those goods or services on the market (e.g. overruling of a legal permit to trade certain goods).
- Structural reasons: economic/financial instability, change of activity, restructuring of the productive organisation or replacement of the dominant products.
If, for instance, due to financial instability, the Portuguese HR department of a company is closed down and its duties are taken over by the HR department of a foreign parent company, a collective dismissal procedure may be executed in order to terminate the employment agreements of those employed in that department.
- Technological reasons: changes in the employer's manufacturing techniques or procedures, automation of the manufacturing, control or cargo transport instruments, as well as the computerisation of services or automation of the means of communication.
With regard to market and structural reasons, Portuguese case law has strengthened these concepts and has accepted the principle that a company does not have to register losses in order to be able to proceed with a redundancy procedure. It is, however, essential that a direct relation between the underlying reasons and the dismissals is established.
Nonetheless, Labour Courts will not control if the measure is adequate and reasonable from a management perspective and shall merely assess if the stated grounds are true and if all legal requirements have been duly complied with and are able to sustain the downsizing decision.
There is no statutory definition of redundancy in German labour law, but effectively the term "termination for operational reasons" has a similar meaning. Such termination is generally subject to three preconditions and corresponding with this a labour court will review this type of termination in three stages:
- The first precondition is that an entrepreneurial decision must have resulted in the lapse of employment possibilities. The entrepreneurial decision may be based on external or internal reasons. External reasons include a decrease in turnover and internal reasons include a reorganisation exercise or an outsourcing exercise. In general, the entrepreneurial decision is "free" and can not be reviewed by the court in detail, as this would mean that the court would be entitled to pass or change economic decisions which is not the case. The entrepreneur is at any time free to decide that his business shall be closed down. The court will only review whether the entrepreneurial decision is not completely wilful, irrational or unreasonable. In cases where the entrepreneurial decision results in the lapse of employment possibility opportunities, the first precondition will be fulfilled. For example, if an employer decides to outsource the controlling department to an external company and not to continue this function in its company, the employment possibilities for all the employees working in the controlling department have lapsed. In another example, if turnover has decreased by 50% and therefore production must be decreased by 50%, the employment possibilities for 50% of the people in the production department will lapse.
- The second precondition is that no other employment possibilities must exist for the employees affected in stage 1 within the whole company of the employer. The employer will have to check whether there are any free workplaces within the whole company, i.e. anywhere in business premises of the company within Germany or even abroad which the affected employees are able to take according to their knowledge, skills and abilities. If the employees must be trained for the other workplace, training that does not exceed three months is accepted by the court; only in cases where the training would take longer than three months, the free workplace need not be taken into account. For example, if a German GmbH has business premises in Munich, Hamburg and Berlin, and in Munich three people are being made redundant according to stage 1, the employer will have to review whether there are any free workplaces for these employees in Munich, Hamburg or Berlin. If the GmbH has free workplaces in its business premises in Paris which fit to the employees' skills and abilities, they have to be reviewed. However, the employer does not generally have to review free workplaces at other group companies outside the GmbH. If there are no free workplaces fitting to the employees' skills and abilities, the second precondition is fulfilled.
- The third precondition is the so-called "social selection". In the case of the above mentioned example, the result of the first stage was only that 50% of the employment possibilities (workplaces) in the production department will lapse. In this stage the employer does not know which individual employee can be made redundant, i.e. will have to leave the company. This question will be determined in detail by the social selection which is described under How must employees be selected?.
The result of the social selection is that the younger people with shorter duration of service will have to leave, while the older people with longer duration of service will be entitled to stay. If the employer follows this scheme it will know who must legally be terminated, and then - unless any social plan or the like is applicable - no severance payment or other financial remedy will have to be paid (see What compensation is an employer obliged to pay to redundant employees? below).
However, a lot of companies merely do not want to lose the younger and higher performers and maintain the older but often lower performers. In this case it is often terminating - contrary to the social selection - people, who are not the "correct" ones according to the social selection process. If these employees are filing a lawsuit, they would be successful, and in order to avoid a court decision bringing those employees back, the employer will again accept to pay a - voluntary - severance payment.
The Redundancy Payments Acts 1967 to 2007 define "redundancy" as follows. An employee shall be taken to have been dismissed by reason of redundancy if, for one or more reasons not related to the employee concerned, the dismissal is attributable wholly or mainly to:
- the fact that the employer has ceased or intends to cease to carry on the business for the purpose of which the employee was employed by him, or has ceased or intends to cease, to carry on that business in the place where the employee was so employed;
- the fact that the requirements of that business for employees to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish;
- the fact that the employer has decided to carry on the business with fewer or no employees whether by requiring the work for which the employee has been employed (or had been doing before his dismissal) to be done by other employees or otherwise;
- the fact that the employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should, from then on, be done in a different manner for which the employee is not sufficiently qualified or trained; or
- the fact that the employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should, from then on, be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained.
Furthermore, an employee shall not be taken to be dismissed by reason of redundancy if:
- the dismissal is one of a number of dismissals that, together, constitute collective redundancies;
- the dismissals concerned were effected on a compulsory basis;
- the dismissed employees were, or are to be, replaced at the same location or elsewhere in the state, (except where the employer has an existing operation with established terms and conditions) by:
- other persons who are, or are to be, directly employed by the employer; or
- other persons whose services are, or are to be, provided to that employer in pursuance of other arrangements;
- those other persons perform, or are to perform, essentially the same functions as the dismissed employees; and
- the terms and conditions of employment of those other persons are, or are to be, materially inferior to those of the dismissed employees.
Under Irish legislation proposed dismissals are deemed to be "exceptional collective redundancies" rather than "redundancies" if the factors listed above are present. This provides that a dismissal by reason of compulsory collective redundancy, shall not be deemed a redundancy, where the dismissed employees are replaced by new workers effectively doing the same job and performing the same tasks and where the new workers' terms and conditions of employment are materially inferior. Where employees are dismissed in the case of an "exceptional collective redundancy" situation, it is open for them to claim unfair dismissal.
In Spain, redundancy refers to the termination of job positions based on economic, technical, organisational and production reasons. The Statute of Workers (SW) is the main regulation governing redundancies in Spain.
Under Spanish law, there are two types of redundancies for restructuring purposes:
- Individual dismissal due to objective reasons (article 52 of the SW):
The criterion for individual dismissals based on economic, technical, organisational or production reasons is strictly numerical. Dismissals are individual if, within a period of 90 days, the number of affected employees does not reach the following thresholds:
- 10 employees in companies with fewer than 100 employees;
- 10 percent of the workforce in companies with between 100 and 299 employees;
- 30 employees in companies with 300 or more employees.
When the abovementioned thresholds are exceeded, a procedure called "collective dismissal" must be followed. A mandatory negotiation period must be carried out with employee representatives in order to discuss the collective dismissal causes and how to diminish or mitigate the effects of the collective dismissal. Nevertheless, the Labour Market Reform states that approval from the labour authorities is no longer required to carry out collective dismissals and, therefore, the employer may proceed with the terminations even if no agreement is reached with the employee representatives.
The Labour Market Reform states that the government will enact a regulation which should develop the new legal framework for collective dismissals in Spain. Although the text of the Labour Market Reform states that the developing regulation should have been prepared before 12 March 2012, the regulation is not yet available.
Redundancy represents an objective justified ground for terminating an employment agreement and arises due to the employer's business and/or technical and/or organisational need to suppress one or more job positions.
Normally, redundancy is due to circumstances such as the employer's decision to cease its activity or part of it or the employer's decision to reorganize the company's structure having a direct impact on employees' positions.
Redundancy means that the employer decides to dismiss a number of its employees, based on the fact that it has more employees than necessary to carry out the employer's work.
Polish law does not define redundancy. In practice this term refers to both individual and collective redundancies which are carried out by employers who have 20 or more employees for reasons not related to employees, e.g. economic or organisational reasons, or the employer's bankruptcy. The Collective Redundancies Act dated 13 March 2003 regulates the specific procedure of collective redundancies, including specific consultation and information obligations.
A collective redundancy occurs on the termination of employment contracts (for reasons not related to employees) of at least:
- 10 employees, where the employer employs fewer than 100 employees;
- 10% of employees where the employer employs at least 100 but no more than 300 employees;
- 30 employees where the employer employs 300 or more employees
within a period not exceeding 30 days. This number also includes the number of employees whose contracts are terminated by mutual consent of the parties (if at least five), but for reasons not attributable to employees.
Some of the above provisions (e.g. related to severance pay) also apply to individual redundancy. Individual redundancy occurs if an employer that employs 20 or more employees terminates an employment contract with at least one employee for reasons not related to the employee, provided that these are the sole reasons for redundancy, where the total number of dismissed employees within a period not exceeding 30 days does not exceed the number indicated above for collective redundancy.
Redundancies regulations allow the employer to terminate the employment contracts or at least change the conditions of work and pay of some categories of employees specially protected against dismissals.
The Czech Labour Code does not provide a specific definition of the term redundancy. However, the employee may be dismissed due to redundancy provided that he/she becomes redundant owing to the decision of the employer to change the activities (tasks), plant and equipment, to reduce the number of employees for the purpose of increasing labour productivity (efficiency) or to introduce other organisational changes (restructuring).
Employees who are dismissed by reason of redundancy are entitled to a statutory redundancy payment (SRP), if they have been continuously employed for at least two years. There are certain circumstances where an employee, who would normally be eligible for the SRP, does not receive it, for example, where an employee unreasonably refuses a suitable alternative position within the organisation.
The SRP is calculated using a formula method set out in s.162(2) of the Employment Rights Act 1996, and is based on age, length of service and pay:
- 1.5 x gross weekly pay for each complete year of employment after the age of 41
- 1 x gross weekly pay for each complete year of employment between 22 and 40; and
- 0.5 x gross weekly pay for each complete year of employment under the age of 22.
For the purposes of calculating the formula set out above, the gross weekly pay is currently (2011) capped at £400 and the maximum number of years' service which can be taken into account is 20 (s.162(3) Employment Rights Act 1996).
Note that the employee may be entitled to an enhanced redundancy payment by virtue of his or her contract of employment or other policies operated by the employer.
Employees who are made redundant must receive severance pay in accordance with their length of service and the provisions of the relevant collective bargaining agreement.
The employee receives statutory severance pay in the event where the severance pay provided for by the collective bargaining agreement is lower than statutory severance pay or where no collective bargaining agreement applies to the company. As of one year of service within the company, severance pay provided for by statute is calculated as follows: one fifth of monthly salary per year of service plus two fifteenths of monthly salary per year after ten years' service.
Indemnity in lieu of notice
The duration of the notice period is provided for by the relevant collective bargaining agreement. Where no collective bargaining agreement applies to the company, the duration of the notice period is as follows:
- where the employee has less than six months' service, the duration of his/her notice period is set according to the common practice in the company or field;
- where the employee has at least six months and less than two years' service, he/she benefits from a one-month notice period; and
- where the employee has two years' service or more, his/her notice period lasts two months.
If the employer wishes to release the employee from the obligation to work during his/her notice period, this must be expressly stated in the redundancy letter and the employer will still have to pay the employee the salary he/she would have received had he/she worked during the relevant period.
Indemnity in lieu of paid holidays
The employee is entitled to receive an indemnity in lieu of paid holidays, which he/she has accrued but not taken upon termination of the employment contract.
Employees who are dismissed in the framework of a collective dismissal are entitled to receive the following amounts:
Notice or compensation in lieu thereof
Employees can, at the employer's discretion, be dismissed with notice or compensation in lieu thereof, corresponding to the salary due for the duration of the notice period (including all benefits in kind to which the employee is entitled).
The notice period is different for blue-collar and white-collar employees:
- White-collar employees: for white-collar employees who earn less than €31,467 gross per year, the duration of the notice period is three months for each commenced five-year period of employment (the "statutory minimum"). For employees who earn more than €31,467 gross per year, the notice period is determined by the parties at the earliest upon termination or, in the absence of an agreement, by the courts.
The current trend is to grant at least one month's notice per year of employment. However, it should be noted that the notice period may not be shorter than the statutory minimum. With respect to the termination of contracts entered into as from 1 January 2012, please see 'What are the statutory minimum notice periods in your jurisdiction?'.
- Blue-collar employees: for blue-collar employees, the notice period can be determined either at industry level or by law. Thus, the applicable notice periods vary from one sector to another. In the absence of a sector-level notice period, employees with less than 20 years' seniority must be given at least 28 days' notice while employees with 20 years' seniority or more must receive at least 56 days' notice. With respect to the termination of contracts entered into as from 1 January 2012, please see 'What are the statutory minimum notice periods in your jurisdiction?'.
Special compensation in the event of a collective dismissal
Employees who are dismissed in the framework of a collective dismissal are entitled to special compensation of up to approximately €500 gross per month for up to four months following the termination of their employment contract. This compensation is in addition to unemployment benefits, provided the employee is entitled to receive such benefits.
In the event of a collective dismissal, the employer must set up a redeployment committee to provide outplacement services. All employees registered with the redeployment committee are entitled to receive redeployment compensation, paid in monthly instalments. This compensation amounts to three months' salary for employees below the age of 45 on the date on which the intention to proceed with a collective dismissal is announced and six months' salary for employees 45 years of age or older on this date.
The redeployment compensation replaces, in whole or in part, the notice period or compensation in lieu of notice to which the employee would otherwise be entitled. In other words, if the employee is entitled to three/six months' notice or less, the employer must pay redeployment compensation equivalent to three/six months' remuneration.
If the employee is entitled to more than three/six months' notice, the redeployment compensation is included in the compensation in lieu of notice, the first three/six months of which are paid on a monthly basis. The remaining compensation in lieu of notice is paid afterwards.
The employer can only claim reimbursement for that portion of the redeployment compensation in excess of the normal notice period or compensation in lieu thereof for blue-collar employees who are entitled to less than six months' notice. Reimbursement must be claimed from the unemployment authorities.
A blue-collar employee (45 years of age or older) is entitled to 56 days' (eight weeks') notice. The employee receives redeployment compensation corresponding to six months' (26 weeks') remuneration, paid monthly. The employer can claim back 18 weeks' remuneration from the unemployment authorities.
A white-collar employee is entitled to nine months' notice or compensation in lieu thereof equivalent to nine months' salary. The employee receives redeployment compensation corresponding to six months' remuneration, paid monthly. At the end of the period covered by the redeployment compensation, the employee receives three additional months' remuneration as compensation in lieu of notice. No reimbursement can be claimed in this case.
All employees aged 45 or older upon termination are entitled to outplacement at the employer's expense (in certain sectors, this cost is borne by a sector-level fund). Depending on the programme, the cost of outplacement can vary from €2,500 (excluding VAT) to €10,000 (excluding VAT) per employee.
As indicated above, in the framework of a collective dismissal, it is common practice for the employee representatives and the employer to negotiate particular measures in order to mitigate the consequences of the restructuring. A social plan usually includes measures such as:
- longer notice periods or more compensation in lieu of notice
- special end-of-service premiums
- additional unemployment benefits
- early retirement
Such additional compensation usually amounts to approximately 40% of the statutory severance package for white-collar employees and 200% for blue-collar employees
Portuguese law currently makes a distinction between employment contracts entered into before and after 1 November 2011.
Employment contracts entered into before 1 November 2011
Redundant employees will be entitled to receive a severance compensation amounting to one month's (30 days') base remuneration and seniority bonus, if any, per each year of seniority (the fraction is calculated on a pro rata basis), with a minimum limit of three months' salary and seniority bonus.
The applicable formula to calculate this compensation is the following:
[(Monthly base salary + seniority bonus) × Y (number of complete years of seniority)] + [(monthly base salary + seniority bonus) / 12 × M (number of months regarding uncompleted years working for the company)].
Employment contracts entered into on or after 1 November 2011
Redundant employees will be entitled to receive severance compensation amounting to 20 days base remuneration and seniority bonus, if any, per each year of seniority (the fraction shall be calculated on a pro rata basis), with no minimum limit.
The severance compensation will however have the following maximum caps:
- The amount taken into account for the compensation may not be higher than the one corresponding to 20 times the national minimum wage;
- The total amount of the compensation may not exceed 12 times the monthly base remuneration and seniority bonus, if any; and
- The total amount of the compensation may not be higher than 240 times the national minimum wage.
The payment of the severance compensation for contracts entered into on or after 1 November 2011 will be split between the employer and a special fund financed by the employer. The terms of this fund have not yet been regulated by law.
In any of the abovementioned cases, the acceptance of the severance payment by the employees implies that they have accepted the dismissal and that they will only be able to dispute the validity of the dismissals in court, provided that they return the compensation received.
Please be aware that, following the financial aid requested at the beginning of 2011, the Portuguese government agreed to change some aspects of severance compensation. Therefore the regulations mentioned above may be altered in the near future.
It is very important to know that in German labour law no statutory claim for a severance payment exists, no "basic award", no "compensatory award". There are, however, only some exceptions:
- The employee may have a contractual claim for a severance payment if this has been agreed in the employment contract or in any addendum to the employment contract.
- Sec. 1 a KSchG contains a legal claim for a severance payment, but this claim only comes into existence if the employer offers the severance payment in the termination letter and if the employer bases his termination on operational reasons. In the procedure of Sec. 1 a, KSchG has some advantages for the employee if he applies for unemployment benefits, but in practice it is very seldom done.
- If more employees are made redundant and if a works council exists, a social plan must be negotiated under certain preconditions. Regularly in a social plan a legal claim for a severance payment is contained.
However, despite the fact that there is no statutory severance claim in German labour law, more than 80% of all lawsuits end up by paying a certain severance payment to the employee. Why? The reason for this is that - as already described in What are the remedies for dismissal in violation of these restrictions above - if the court declares the termination as invalid, the employment relationship will continue, i.e. the employee will return and continue to work. And - since the employment relationship has never expired - he will be entitled to receive his salary for the whole time of the lawsuit.
A first-instance lawsuit may regularly take between six and nine months, sometimes up to 12 months. Then a second-instance is possible which may take another nine to 12 months. Therefore, the risk for the employer is to be obliged to pay the salary to the employee up to 24 months backwards. And this risk is increasing with each month the lawsuit takes. Therefore, employers are often prepared and willing to achieve a court settlement in a lawsuit which ensures the employment ends as opposed to paying a certain sum of money as a, voluntary, severance pay.
The "rule of thumb" of the courts according to which such, voluntary, severance payments are being calculated is generally 0.5 monthly gross salaries per year of employment. Example: 10 years of employment and €5,000 gross monthly salary = €25,000 severance pay (0.5 × 5,000 × 10). But be careful, since there is no legal claim for the severance payment, the amount of the severance pay is always up to negotiations between the parties, and both parties must agree in order to be able to conclude such a settlement.
The 0.5 factor is generally often suggested by the courts and by the employers, while employees often demand the factor 1.0, and then an agreement is achieved anywhere in the middle. This may also be the reason why statistics show that the average factor for all severance payments being paid in Germany in 2006 (no later figures were available up to now) is 0.77.
Statutory redundancy payments
Under the Redundancy Payments Acts, employees with more than two years' continuous employment with the employer who are dismissed for redundancy may be entitled to a statutory redundancy payment. Employment is taken as being continuous unless terminated by dismissal or by the employee voluntarily leaving the employment.
The statutory payment is intended to compensate the redundant employee for loss of security, seniority and other benefits which he/she had in the employment. The payment is calculated as follows:
- two weeks' pay for each year of reckonable service with the employer from the date on which the employee attained 16 years of age; plus
- one week's pay.
For the purposes of this calculation, a week's pay is capped at €600. The following absences, if they occur during the three years before the date of termination of employment, are not allowable as reckonable service:
- absence for more than 52 consecutive weeks by reason of an occupational accident or disease;
- absence for more than 26 consecutive weeks by reason of any other illness;
- absence by reason of lay-off by the employer; and
- absence by reason of a strike in the business or industry in which the employee concerned is employed.
A statutory redundancy payment is tax-free. An employer is entitled to a rebate of 60% of the statutory lump sum provided that due notice of dismissal is given to the employee and the statutory forms are used.
An employee is not entitled to a statutory redundancy payment if the employer has offered the employee suitable alternative employment and the employee has unreasonably refused to accept the employment. The reasonableness of the employee's refusal is usually determined from the employee's point of view. In practice, it is generally difficult for an employer to rely on this provision.
Ex gratia termination payments:
In addition to statutory redundancy payments, employees in Ireland usually receive enhanced termination payments, the amount of which depend on the relevant industry and sectoral norms and custom and practice in the employment. Ex gratia payments are typically based on a formula related to a number of weeks' pay for each year of the employee's service. Ex gratia redundancy payments are taxable, however, they qualify for special tax treatment and may be exempt or qualify for some tax relief.
As answered in What restrictions are there on an employer's ability to dismiss an employee?, the statutory severance payment for individual redundancies is equivalent to 20 days' salary per year of employment, with a maximum limit of 12 months of salary. However, the severance will be higher if the dismissal is considered unfair by the courts pursuant to a challenge filed by the employee (please see section What are the "benefits" or "legal advantages" of an employment continuing over certain time periods?).
The minimum statutory severance payment in case of collective dismissal is also equivalent to 20 days of salary per year of employment, subject to a maximum of 12 months of salary. Prior to the Labour Market Reform, employee representatives usually demanded severance payments higher than the minimum statutory severance payment in the course of the mandatory negotiations. The statutory severance payment for unfair dismissal was often taken as a minimum reference value.
In a collective dismissal procedure, affected employees who are older than age 55 are granted an additional benefit consisting of contributions made by the employer to the social security by means of a special agreement until the employee reaches age 63 (or 61 if the collective dismissal was due to economic causes).
Upon dismissal, all employees are entitled to receive the following treatment:
- the severance indemnity (so-called "TFR"). This is a deferred salary accrued in the employer's financial statements or in complementary pension funds during the term of the employment and amounts approximately to one monthly salary per each year of service. It is, in particular, equal to the amount resulting from adding up the all-inclusive remuneration, e.g. including bonuses, fringe benefits – paid to the employee for each year of service, divided by 13.5; and
- some minor termination indemnities (such as the indemnity in lieu of unused holidays and permits and the accrued pro-rata 13th and 14th, if any, monthly salaries).
Should the dismissal be grounded on a reason other than 'just cause' (i.e. any serious breach, which renders continuation of the employment impossible, even on a temporary basis), the employee is also entitled to:
- a notice period, the duration of which varies according to the employees' seniority and professional level and is established by the applicable National Collective Labour Agreement. If the employer exempts the employee from working during the notice period, the employee must receive a corresponding indemnity in lieu of notice, which is equal to the normal salary (including social security charges) that would have been paid during the notice period.
In calculating the indemnity in lieu, reference must be made to the total compensation, including fringe benefits and the variable portion of the remuneration (the latter having reference to the average paid in the three years preceding termination).
The Subdistrict Court formula
The Association of Dutch Sub-District Court Judges (the Association) has developed the so called Subdistrict Court formula (the Formula) for use in determining the amount of severance payment to be granted to an employee whose employment contract is rescinded. Under the relevant statutory provision, sub-district courts may award fair compensation to either of the parties in such a situation, although in practice it is often only awarded to employees.
The purpose of the formula is to create more uniformity in the manner in which the judges calculate the compensation. Although they are not legally required to apply the formula, they almost always do so.
In practice, parties also apply the formula to determine the amount of the severance payment, if a termination with mutual consent is agreed upon.
Amendment of the formula
On 30 October 2008, the Association decided to amend the formula as from 1 January 2009. For the purpose of this we will only discuss the amendment which has the most impact on the amount of the severance payment, i.e. the calculation of the employee's number of years of service.
According to the formula, severance pay is calculated by multiplying the employee's number of years of service (A) by his gross monthly salary (B) and a correction factor (C). C is in principle equal to one if the reason for the rescission cannot be blamed on one of the parties and does not fall within the employee's "sphere of risk", and there are no other special circumstances. This can be applicable in the event of a reorganisation for business reasons. In practice, C fluctuates between zero and two.
Under the old formula, the years of service for the relevant employee were calculated as follows:
- up to the age of 40, the years of service counted for one
- from the age of 40 up to the age of 50, the years of service counted for 1.5
- from the age of 50 years onward, the years of service counted for two.
Under the current formula, the years of service for the relevant employee are calculated as follows:
- up to the age of 35, the years of service count for 0.5
- from the age of 35 up to the age of 45, the years of service count for one
- from the age of 45 up to the age of 55, the years of service count for 1.5
- from the age of 55 years onward, the years of service count for two.
This change is intended to reflect the improved employment opportunities for young people while continuing to protect older employees.
To illustrate the impact of the amendment, here is an example.
Mr. X has been working for the ABC Company for years. Due to severe economic circumstances, the company is forced to undertake a restructuring, as a result of which Mr. X will be made redundant. As the company informed its employees in February 2009 about the restructuring, the current formula is applicable.
The details of his case are as follows:
- Date of birth: 26 September 1950
- Date of employment: 1 January 1994
- Termination date : 1 November 2009
- Gross monthly salary: €3,000
- C-factor: one
Calculation of severance payment based on the old formula
- 16 years of service (round up)
- 40 - 50 years: seven years of service (round up)
- 50 years onward: nine years of service (round down)
A: (7 × 1.5) + (9 × 2) = 28.5
Severance payment: 28.5 × 3,000 × 1 = €85,500 gross
Calculation of severance payment based on the current formula
- 16 years of service (round up)
- 35 - 45 years: two years of service (round up)
- 45 - 55 years: 10 years of service
- 55 onward: four years of service (round down)
A: (2 years × 1) + (10 years × 1.5) + (4 years × 2) = 25
Severance payment: 25 × 3,000 × 1 = €75,000 gross
The Subdistrict court can freely lower or raise the severance payment (by raising or lowering the correction factor) if, for example, it is of the opinion that one of the parties has misbehaved, the employee's labour market position is very unfavourable, or the financial position of the company is very poor.
In case of collective redundancies, employees are entitled to severance pay of:
- one months' pay - when employed for less than two years;
- two months' pay - when employed for between two and eight years;
- three months' pay - when employed for more than eight years.
Severance pay cannot exceed the equivalent of 15 times the minimum national wage on the date of termination of an employment contract (currently, this cap is PLN 20,790 - about €4,740). These limits do not apply if higher severance pay was agreed, e.g. in employment contracts or internal remuneration regulations.
The same severance must be paid to an employee in case of individual redundancy.
Furthermore, an employee remains entitled to regular remuneration within a termination notice period as well as other benefits dealing with employment. If a three-month termination notice period applicable to indefinite-term employees is shortened, employees are entitled to compensation for the remainder of the notice period.
If the employment relationship of the employee is terminated due to redundancy, the employee is entitled to receive a severance payment of at least three times his/her average earnings, unless a larger amount is agreed with the employee or determined by the employer.
As of 1 January 2012, the amount of the severance payment varies according to the term of the employment as follows:
- One month's average earnings if the employment lasts less than one year;
- Two months' average earnings if the employment lasts more than one, but less than two years; and
- Three months' average earnings if the employment lasts at least two years.
A redundancy dismissal will be unfair unless the procedure followed by the employer is reasonable in all the circumstances. A fair procedure typically involves:
- Consideration of the pool of employees to be affected by the redundancies;
- Applying objective selection criteria consistently within that pool;
- Considering whether or not there are any alternative jobs available and offering these to the potentially redundant employees;
- Considering volunteers for redundancy; and
- Consulting with the employee in relation to the proposed redundancy and his/her selection.
There are three types of redundancy procedure, based on the number of redundancies implemented and the number of employees within the company:
- the redundancy of a single employee, where no collective redundancy plan (plan de sauvegarde de l'emploi) and consultation of the works council are required, except for consultation on the selection criteria for the order of redundancies;
- the redundancy of fewer than 10 employees, on which the works council must be consulted and where no collective redundancy plan is required;
- the redundancy of 10 employees or more within a company employing at least 50 people, which requires the consultation of the works council and the implementation of a collective redundancy plan.
Certain obligations apply however to the three procedures.
a) Selection criteria for the order of redundancies
Please refer to How must employees be selected? below.
b) Internal redeployment obligations
Economic grounds alone are not sufficient for the redundancy proceedings to be deemed legitimate and justified. For the redundancy proceedings to be deemed legitimate and justified, the employer is also obliged, prior to making any of its employees redundant, to do its utmost to redeploy the affected employees to other positions within the company or group, irrespective of the number of redundancies and the headcount.
Accordingly, an employer must attempt to redeploy the affected employees within the company or group during the project stages of the restructuring up until notification of the redundancy.
Article L.1233-4 of the Labour Code provides that an employee may only be made redundant if his/her redeployment within the company or group to a position in the same professional category or a lower professional category proves to be impossible.
Nevertheless, the prior redeployment obligation is an "increased obligation to use diligence" and not an obligation to achieve results.
The employer must also be able to demonstrate:
- that there were no available positions corresponding to the employee's profile, which could have been put forward in order to avoid his/her redundancy; or
- that the employee refused the positions put forward. The employer's redeployment initiatives must be carried out before the affected employees are notified of their redundancy.
Where the employer fails to respect its internal redeployment obligations, the redundancy is considered unfair and employees may take civil action to obtain damages for the loss incurred.
c) Redeployment programme
Employees can benefit from redeployment measures, whose terms and conditions of execution and content differ based on the size of the company:
- redeployment leave if the company has at least 1,000 employees;
- otherwise, a personalised redeployment programme (contrat de sécurisation professionnelle).
Pursuant to Article L.1233-71 of the Labour Code, each employee facing redundancy must be offered redeployment leave (congé de reclassement) by the employer in:
- companies and sites employing at least 1,000 employees ;
- groups (as defined by Article L.2331-1 of the Labour Code), whose companies employ at least 1,000 employees and whose head office is located in France; and
- companies and groups employing at least 1,000 employees in the European Union and subject to French law regarding European works councils (Article L.2341-1 of the Labour Code).
This measure applies regardless of the number of redundancies.
The employer must inform and consult the works council regarding the implementation of redeployment leave during the meetings organised as part of the information and consultation procedure on the contemplated redundancies. In this respect, the employer must provide the works council with information regarding the duration of the redeployment leave and the outplacement services to be offered to the employees facing redundancy.
The employer must inform the employees regarding the redeployment leave programmes following the last meeting of the works council (or site works council) as part of the information and consultation procedure on the contemplated redundancies. In practice, the employer may provide the employees with a document outlining the terms of the redeployment leave.
The employer must state in the redundancy letter that the employee is entitled to take redeployment leave. The employee has eight days from receiving the redundancy letter to notify the employer if he/she accepts to take part in the redeployment leave programme. If the employee fails to reply, he/she shall be considered to have refused to take part in the redeployment leave programme. If the employee accepts, the redeployment leave shall start at the end of the eight-day deadline.
Redeployment leave is designed to allow the employee to undertake training and benefit from job hunting assistance provided by the French employment center (Pôle Emploi). As part of the redeployment leave, the employee may also take the necessary steps to have his/her previous professional experience accredited.
The employer generally sets up a redeployment office, which is run either by an external service provider or by employees appointed by the employer.
A career assessment and guidance meeting is held at the start of the redeployment leave. The aim of this meeting is to establish a career plan for the employee and how to implement it.
If it is not possible to establish a career plan for the employee during this meeting, and where necessary, the employee may be entitled to an in-depth skills, motivation and professional experience assessment (bilan de compétences) This is carried out by an outplacement firm at the start of the redeployment leave, with a view to determining his/her future career development and, if applicable, his/her training needs.
Following the career assessment and guidance meeting or the in-depth assessment, the redeployment office provides the employer and the relevant employee with a document setting out the type of measures and duration thereof required to favour the employee's redeployment.
On the basis of this document, the employer prepares a document setting out the duration of the redeployment leave, the services provided by the redeployment office, the salary paid during the period exceeding the notice period (where applicable) and the employee's undertakings during the redeployment leave. The redeployment leave lasts between four and nine months. If the employee expressly agrees, the leave may be shorter than four months. The redeployment leave may be terminated early if the employee:
- finds a job during the redeployment leave; or
- does not comply with his/her obligation to attend the training sessions.
The employee takes the redeployment leave during his/her notice period, from which the employee is released. If the redeployment leave lasts longer than the notice period, the notice period must be extended until the end of the redeployment leave. This means that during the redeployment programme, the notice period is suspended and the employee is obliged to participate in the initiatives implemented by the redeployment office.
The employee continues to receive his/her normal salary due during the notice period.
The redeployment leave is financed by the employer. Nevertheless, the staff representatives taking part in the collective negotiations may also contribute in accordance with a national multi-industry agreement.
During the redeployment leave, the employer pays the employee a monthly allowance amounting to at least 65% of the average gross salary received by the employee during the 12 months preceding his/her redundancy notification. This monthly allowance should not be lower than 85% of the monthly minimum wage (SMIC).
The employee receives a pay slip each month specifying his/her salary and maintains his/her rights with regard to social security benefits (illness, maternity, disability, death), work-related accidents and retirement benefits throughout the duration of the redeployment leave.
During the redeployment leave, the employee must observe the arrangements agreed with his/her employer and the employment centre (duration of leave, attending training, etc). If the employee fails to do so, the redeployment leave is terminated.
"Contrat de sécurisation professionnelle" - CSP
The employer is obliged to offer each employee facing redundancy the option to take part in a personalised redeployment programme (contrat de sécurisation professionnelle), which involves a professional skills assessment financed by the unemployment fund.
If the CSP is not offered to the employee, the employer will be required to pay compensation amounting to two months' salary to Pôle emploi, based on the last 12 months worked.
This system entitles employees, who so wish, to benefit from measures of psychological support, orientation, coaching, training and assessment of professional skills, destined to favour their redeployment. If necessary, these measures may be implemented and funded namely by the use of the rights the employee has acquired up until the date of termination of his/her employment contract pursuant to the right to individual professional training (under certain conditions).
The employer must offer the CSP to the employee who is made redundant during the preliminary meeting or following the last meeting of the works council (or site works council) as part of the information and consultation procedure on the contemplated redundancies. Once offered, the employee has 21 days' "préfix" in which to accept or refuse the CSP. If the employee does not reply within this period, he/she is assumed to have refused.
If the employee refuses the CSP, the employer follows the redundancy procedure by sending the redundancy letter.
In the event that the employee accepts the "contrat de sécurisation professionnelle", his/her employment contract shall be considered terminated by mutual agreement of both parties, without notice period or compensation in lieu of notice. This common consent termination does however entitle the employee to severance pay provided for by law or collective bargaining agreement and to challenge the economic grounds.
A Specific Redeployment Benefit (Allocation Spécifique de Reclassement) is paid to the employee by unemployment fund for a maximum period of 12 months. The benefit corresponds to 80% of the reference salary during the entire period of the CSP.
As regards the procedure for an individual redundancy
a) Individual pre-redundancy meeting
The employer must summon the employee to a pre-redundancy meeting by registered post with acknowledgment of receipt or by hand-delivered letter in return for a signed release.
The employer must specify in the summons letter that it is contemplating making the employee redundant, the time and place of the meeting and the possibility for the employee to be accompanied during the meeting by a staff member of his/her choice.
The employer must allow five working days to elapse between the first presentation of the summons letter to the employee and the date of the meeting.
Where the employee has been duly summoned to the pre-redundancy meeting, but decides not to attend, the employer is free to continue the redundancy proceedings.
During the meeting, the employer must inform the employee of the economic grounds having led to his/her contemplated redundancy. The employer must also present the employee with all internal redeployment opportunities, if any, or otherwise explain the absence thereof. Furthermore, the employee must also be provided with the applicable redeployment programme (i.e. either redeployment leave or "contrat de sécurisation profesionnelle") to which he/she is entitled.
b) Notifying the employee of the redundancy
The employer may only notify the employee of his/her redundancy after all redeployment measures in the company or group have failed.
When only one redundancy is contemplated and when the concerned employee does not have executive status, the employer must wait seven working days before sending the redundancy letter to the employee.
When only one redundancy is contemplated and when the concerned employee has executive status, the employer must wait 15 working days before sending the redundancy letter to the employee.
The redundancy letter must be sent by registered letter with acknowledgment of receipt and must specify the grounds for the redundancy. If the grounds for the redundancy are not specified or are inadequate or vague, the courts will deem that the redundancy is not based on real and serious grounds and is consequently unfair.
Moreover, in the event of litigation arising from an employee's redundancy, the courts will systematically refuse to consider any grounds alleged by the employer other than those contained in the redundancy letter, even if adduced by evidence.
The notice period starts on the day of the first presentation of the letter to the employee by the postal service. The employer may release the employee from the obligation to perform his/her notice period.
The redundancy letter must remind the employee of his/her right with regard to the redeployment programme.
Moreover, the redundancy letter must inform the employee facing redundancy that he/she is entitled to a one-year rehiring priority with effect from the termination of his/her employment contract. The employee may inform the company of his/her decision to take advantage of this rehiring priority at any time during the year following his/her redundancy. If the employee notifies the employer that he/she wishes to take advantage of the rehiring priority, the employer must inform him/her of all available positions matching his/her professional profile.
c) Notification of the Regional Company, Competition, Consumption and Labour Directorate (Directions Régionales des Entreprises, de la Concurrence, de la Consommation, du Travail et de l'Emploi - DIRECCTE)
The DIRECCTE must be provided with the following information within eight days of the notification of the redundancy:
- information on the company, including its name, business activity, address of the head office and of the site concerned by the redundancy (if relevant), and headcount; and
- information on the redundant employee, including his/her full name, nationality, date of birth, sex, address, position and date of redundancy notification.
Procedure for collective redundancies involving between two and nine redundancies
In addition to the general obligations and the procedure for an individual redundancy above, the following rules apply where between two and nine people are being made redundant.
a) Information and consultation of the works council
b) Redundancy letter
The same rules as those described under 'Notifying the employee of the redundancy' apply, with the exception that the employer must wait seven days before sending the redundancy letter to the employee, irrespective of his/her status (i.e. executive or non-executive).
Procedure for collective redundancies of 10 or more
a) Information and consultation of the works council
b) Collective redundancy plan
The employer must establish a collective redundancy plan (plan de sauvegarde de l'emploi) if the company employs at least 50 people.
Pursuant to Article L.1233-61 of the Labour Code, the validity of the collective redundancy plan must be assessed based on the size and financial situation of the company or group and the redeployment opportunities available within the company or group.
For instance,if a group company faces a difficult financial situation and the main business of the group also faces tough competition resulting restructuring , case law indicates that a collective redundancy plan will be valid if it specifies:
- that redeployment offers are to be made within the group; and
- that external redeployment measures are offered involving the financing of redeployment assistance or training.
(Supreme Court, November 18, 1998, Bull Civ. V n°501).
Redeployment measures are very important since the sanctions imposed in the event of an invalid collective redundancy plan are severe.
It should be noted that if a collective redundancy plan is deemed insufficient, the redundancy proceedings will be considered null and void and the redundancy of the affected employees will therefore also be found null and void.
Accordingly, the employees in question may either request that they be reinstated or, alternatively, claim damages for a minimum amount of one year's salary. However, employee reinstatement is not mandatory if it has become impossible, particularly due to the site closure or if there is no position available that would enable the employee to be reinstated.
c) Individual pre-redundancy meeting
No individual pre-redundancy meeting is required, except for protected employees.
d) Information of the DIRECCTE
The Departmental Employment and Vocational Training Directorate must be informed throughout the information and consultation procedure. It notably verifies the regularity of said procedure and the validity of the collective redundancy plan.
 Created by the law dated 28 July 2011, the 'Contrat de sécurisation professionnelle' has replaced the 'contrat de reclassement personnalisé' since 1 September 2011.
 1,000 employees on payroll corresponds to the average number of employees working in the company or group during the 12 months preceding the works council's first meeting as part of the information and consultation procedure.
An employer who intends to proceed with a collective dismissal must abide by the following procedure.
Step one: information and consultation
The employer must submit a report to the employee representatives on the works council (or, if none, the committee for prevention and protection at work, or the trade union delegation, or if none, the employees themselves), stating its intention to proceed with a collective dismissal. The report should contain, among other information, the reasons for the collective dismissal, the expected number of dismissals and the period over which the dismissals will most likely be carried out. A copy of this report must also be sent to the director of the Sub-regional Employment Office.
The employer must prove that it has met with the employee representatives or, if none, the employees themselves to discuss its intention to proceed with a collective dismissal. To this end, the employer must give the employee representatives or the employees themselves an opportunity to ask questions about the intended collective dismissal and to formulate suggestions in order to avoid or reduce the number of dismissals or mitigate the impact of the redundancies by taking appropriate measures. The employer must examine the employees' questions and suggestions and provide answers thereto.
However, the employer has the final say on whether a collective dismissal will take place as well as how many employees will be dismissed and in which areas. It should be noted that the employee representatives must be informed and consulted before the employer officially takes the decision to proceed with a collective dismissal.
Step two: notification of the decision to proceed with a collective dismissal
After having consulted the employee representatives, as described above, the employer must inform the local employment authorities, by registered mail, of its decision to proceed with a collective dismissal. In this statement, the employer must confirm that the above information and consultation procedure has been carried out. In addition, the employer must make a copy of this notice available to the employee representatives and post it on the company's premises.
Step three: cooling-off period
During a 30-day cooling-off period (possibly extended to 60 days) from notification of the decision to proceed with a collective dismissal, no notices of termination may be sent. This period is intended to negotiate a social plan, containing particular measures to mitigate the employment-related consequences of the collective dismissal (such as additional premiums, outplacement, early retirement, etc).
Step four: request for recognition as an undertaking in the process of restructuring
If the social plan provides for early retirement at an age below the normal age for early retirement (currently 58 or 60, depending on the sector and date of the collective bargaining agreement, although this threshold will be raised in the coming years, as the legislation is currently being amended), the employer must obtain recognition as an undertaking in the process of restructuring. A request to this effect must be submitted to the federal Ministry of Employment.
Step five: dismissals
After the cooling-off period and once a redeployment committee has been set up, the employees concerned may be dismissed.
As a general note, employers are obliged to comply with the formal procedures provided by law, and pay the statutory or the agreed severance compensation to the redundant employees.
Moreover, and where applicable, the employer has to consult the employees' representatives or the employees themselves, and shall negotiate in good faith with such representatives.
If only a few number of employees have to be terminated (for the relevant numbers please see later), there are only two simple steps:
- Hearing of the works council - if so exists - according to Sec. 102 German works council Constitution Act. The works council must be informed about the details of the reasons for the intended termination, so that it has a complete picture about the background and can decide in full knowledge whether it declares its consent or it objects. However, even if the works council objects, the employer is entitled to effect the termination, the main difference is only that the statement of objection by the works council must be attached to the termination in case of an objection, and thus the employee gets to know the arguments for the objection very easily. The time period for the works council for this hearing is one week in the case of an ordinary termination, and three days in the case of a termination for cause without notice.
- Handing over of termination letter. In the second step, the termination letter must be handed over to the employee. The letter must be signed by a person competent for signing legal documentation on behalf of the company, alternatively it can also be signed by the head of human resources who has a special right to sign documentation as regards to personnel. This letter must be handed over to the employee or it must be put into the employee's letter-box. It is not recommended to send the letter by registered mail, and the letter should never be sent by regular mail, because it will not able to prove later (if necessary) that the employee has received the letter.
If a higher number of employees are to be made redundant within a period of 30 calendar days, there are two additional important duties for the employer. A "higher number of employees" can be determined according to the following table (see Sec. 17 KSchG):
|Number of employees in the business premises||Number of employees to be dismissed in order to fulfil the precondition "higher number"|
|20 employees or fewer||Not regarded a "higher number". No additional requirements.|
|More than 20 and fewer than 60||More than 5 employees|
|At least 60 and fewer than 500||10 % of the employees or more than 25 employees|
|At least 500||30 employees or more|
- The first of the additional duties is to file a notification with the Employment Exchange which is called "mass dismissal announcement". This must be done at least one day before the termination letters are handed over to the employees. This is more or less a formality, but without fulfilling this precondition the terminations will not be effective. According to current German labour law jurisdiction, this will not render the terminations null and void, but their effect - to terminate the employment - will be postponed to a later date after the announcement has been made. Additionally, the time period between filing the mass dismissal announcement and the expiration of the employment (i.e. the end of the notice period) must be at least one month.
- In business premises with a works council, the employer has, upon fulfilment of the above minimum figures, to negotiate with the works council about a reconciliation of interests and a social plan. These two documents (which are in practice often combined in one document as part A and part B) have the legal quality of Works Agreements. As a guide, in the reconciliation of interests, the intended personnel measures and their consequences on the personnel are described in detail, while the social plan contains instruments to compensate the disadvantages which the affected employees suffer from the measures as described in the reconciliation of interests. In case of a mass dismissal, the most important factor to compensate the disadvantage (i.e. termination) of the employees is nearly always a severance payment which will be calculated according to a formula which is described in the social plan.
Therefore, the social plan (which is not a statutory provision, but an agreement between the employer and the works council) is the most important exception from the principle that there is no claim for a severance payment in German law.
Finally, note the following divergence in practice which is the result of the above-described legal requirements - if an employer closes down business premises with more than 20 employees completely and there is a works council, it has to negotiate a social plan and the employees will receive severance payments. If there is no works council in the same situation, there is no social plan and the employees will receive no severance payment and no financial compensation at all. This is accepted by German law because it is based on the fact that the people have not elected a works council even though they would have been entitled to (in business premises with more than five employees).
Each employee whose position is to be made redundant must be given proper notice of redundancy. Notice of redundancy must be given in writing. Proper notice is the greater of contractual notice, statutory notice or, in the absence of a contractual term as to notice, reasonable notice.
Statutory notice entitlement is based on length of service as follows:
- 13 weeks' to two years' service: one week's notice;
- two to five years' service: two weeks' notice;
- five to 10 years' service: four weeks' notice;
- 10 to 15 years' service: six weeks' notice;
- 15 or more years' service: eight weeks' notice.
"Reasonable notice" is a common law concept. What constitutes reasonable notice generally depends on the particular employee's status. For senior employees in particular, where there is no written contract of employment, consideration must be given to what constitutes an appropriate period of notice. What is "reasonable notice" for a management employee will be quite different to that for an entry-level employee.
Concurrently with statutory/contractual notice, where an employee has at least two years' continuous service, it is necessary to serve him/her with completed Part A of notice of redundancy form RP50 at least two weeks prior to the date of termination of employment. Upon the date of termination, the employee must sign the RP50 form and receive his/her statutory redundancy payment.
While an employee is on protective leave (e.g. maternity leave), any purported termination of employment shall be void. Notice of termination may only be issued to the employee at the end of the period of protective leave.
The employer's main obligation in a redundancy process is to respect and follow the dismissal procedure provided by law (individual or collective), negotiate in good faith in the case of a collective measure and pay the mandatory severance or the higher compensations and benefits agreed with the employees in connection with the collective dismissal procedures.
The Labour Market Reform obliges companies that carry out collective dismissal to pay contributions to the Public Treasury provided that the following requisites are met:
- it employs more than 500 employees itself or within a group of companies;
- the collective dismissal affects employees who are 50 years old or older; and
- even if objective causes exist, the company or the group of companies of which it forms part had profits in the two financial years preceding the collective dismissal.
Amounts paid to the Public Treasury as contributions for carrying out such collective dismissals will be fixed annually and will depend on several variables: the company's total number of employees, the number of affected employees who are 50 years or older, or the percentage the company's profits may represent on the company's income.
Depending on the circumstances, employees in Italy can be dismissed either on an individual or on a collective basis.
In particular, individual dismissals shall be implemented by:
- employers staffed with 15 or fewer employees (under all circumstances); or
- employers staffed with more than 15 employees when they need to dismiss fewer than five employees in a period of 120 days.
Collective dismissals shall be, on the contrary, implemented by employers who are staffed with more than 15 employees and, due to a reduction, transformation or cessation of activity, need to dismiss at least five employees in the same province and in a period of 120 days. Collective dismissals are regulated under the Law no. 223/1991 which contains mandatory social provisions aimed at facing cases of dismissals due to redundancy of personnel and/or to cessation of activity and directed to protect, as far as possible, the employees involved in the dismissal.
Such procedure involves the payment by the employer of certain costs to the Italian social security administration in order to grant the dismissed employees unemployment compensation for a certain period after the dismissal. At the same time, it allows the involved employees to be included in certain lists, which aim to facilitate their re-employment.
The rules and regulations governing the collective dismissal procedure are very detailed and, in general terms, provide for the starting of a "negotiation stage" between the employer, the works council and the competent external Trade Unions, in order to agree management of the redundancies. Negotiations should come to an end within a maximum of 75 days.
Pursuant to the WMCO, which is based on an EC 1975 directive, the employer must notify the relevant trade unions and the Employee Insurance Agency (UWV) of his intention to terminate at least 20 employees who work in the same UWV working district, within a period of three months. All relevant trade unions should be contacted.
After this notification, a period of one month must pass before the UWV will deal with the employer's requests for dismissal permits. This provides the employer and the relevant trade unions with an opportunity to discuss the possibility of limiting the number of dismissals and/or to agree on a social scheme.
An employer making collective redundancies must follow a specific procedure in relation to trade unions, or where there are none, consultations with employee representatives and the regional labour office. This includes:
- Written notification, supplying the information required by law, of the intention to dismiss must be given to trade unions at least 30 days before the planned redundancy, i.e. service of a notice of termination on employees. Employee representatives, if there are no unions, have the same rights as unions.
- The employer must notify the regional labour office of the intended redundancy (first notification). The notification must specify information required by law and it can be served on the same day as the union notification is served.
- Within 20 days from the date of the first notification, the employer and trade unions need reach an agreement on how to dismiss and, specifically, how to select employees, the succession and dates for redundancy, and the obligations of the employer to the employees. Employee representatives are to be notified if there are no unions. If the employer and trade unions fail to agree or if there are no trade unions, the employer alone makes the decision by issuance regulations after consultations with employee representatives.
- If there is an agreement, or regulations on a collective redundancy are established, a subsequent notification to the regional labour office (second notification) needs to be served by the employer (specifying information required by law). A copy of the second notification is to be sent to trade unions, or employee representatives, who can provide the regional labour office with their opinion on collective redundancy – which, nevertheless, does not affect redundancies (i.e. by holding up redundancy).
- A notice of termination can be served on an employee after the second notification is served on the regional labour office, or after the date of concluding an agreement with the trade unions, or issuing regulations.
- Employment cannot be terminated earlier than after 30 days from the date the second notification is served on the local labour office, or earlier than after 30 days from the date the agreement with trade unions is concluded, or regulations as described previously are issued.
Additionally, apart from the above redundancy procedure, if an agreement on redundancies is not concluded with trade unions, the trade unions must be separately consulted on termination of every employment for an indefinite period, if the employee is a union member, or the union undertook to represent the employee.
The trade union must be given written notice of the intention to terminate employment and be given reasons why. The union has five days to present an opinion and any reservations. After considering the union's opinion, or if the opinion has not been delivered on time, the employer is to alone decide on termination of the employment.
Regardless of the above procedure, it may be required to inform/consult a works council (if any) in particular situations provided by law (see: 'Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?').
When terminating the employment relationships with employees during the collective redundancies due to the employer's bankruptcy or liquidation, in general the provisions on special protection against dismissal as well as provisions on consultation obligation in the event of termination of an indefinite term employment contract do not apply.
An employer intending to carry out individual redundancy should follow general rules regarding termination of an employment contract provided for in the Polish Labour Code (see: 'Is there a particular form required for termination?; Is there any statutory protection against dismissals?').
As for employees who are under special protection against dismissal, an employer has the same possibilities as during the collective redundancy. (What restrictions are there on an employer's ability to dismiss an employee? What compensation is an employer obliged to pay to redundant employees?).
As regards individual redundancies, Polish provisions establish a group of employees who are protected but whose employment contract can be terminated during the redundancy process. They can also be made redundant during individual redundancy unless the trade unions lodge an objection within 14 days of the notification of the intended termination. In such situation, an employer can only terminate terms and conditions of work and payment in relation to such employees.
The redundancy of the employee must be objectively given in order to terminate the employment in a valid manner. Thus, there must be certain decisions of the employer to change the activities (tasks), plant and equipment, to reduce the number of employees for the purpose of increasing labour productivity (efficiency) or to introduce other organizational changes (restructuring). The form of such a decision is not prescribed by law, but it is highly recommended to adopt such a resolution in a written form, especially for the purpose of evidence, which may be required in a potential court dispute with the employee.
A special procedure regarding the mass dismissal also applies under the Czech Labour Code. Mass dismissals are considered a termination of employment for organizational reasons where, within 30 calendar days, the employer terminates at least:
- 10 employees, in the case of an employer with 20 to 100 employees, or
- 10% of employees, in the case of an employer with 101 to 300 employees, or
- 30 employees, in the case of an employer with more than 300 employees.
The Labour Code specifies, in detail, the procedure to be applied in the course of a mass dismissal. The employer is required to provide information and documents related to the mass dismissal to a competent trade union body/employee council or affected employees, and to deliver a written report on its decision on the mass dismissal, and on the outcome of the negotiations with these representatives of the employees to a competent Labour Office.
Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?
Where 20 or more redundancies are proposed within 90 days or less at the same establishment, employers are required to consult with either elected employee representatives or a Trade Union, if recognised by the employees affected, with a view to reaching an agreement under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992.
Note that the definition of redundancy for the purposes of collective consultation is slightly wider than that for eligibility for a statutory redundancy payment.
For more detail on collective consultation, see How does the consultation procedure work?
In accordance with the provisions of Articles L.2323-15 et seq. of the Labour Code, the employer must inform and consult the works council on the restructuring and collective redundancies projects.
In accordance with Article L.1233-28 of the Labour Code, "employers that contemplate carrying out collective redundancies are obliged, where the number of redundancies amounts to at least ten over a thirty-day period, to call a meeting of and consult the works council accordingly to this part" of the Labour Code.
No decision is deemed to be taken by the employer prior to the consultation of the works council/staff representatives.
This obligation is not applicable in the case of termination of work positions, although the employer is bound to deliver a copy of both the initial communication and the dismissal notice to the employees' representatives, who are merely entitled to issue a grounded opinion on the objective reasons alleged and on the legal requirements of the redundancy procedure.
Within the scope of a collective dismissal procedure, consultation is always mandatory provided that a works council, a trade union committee or an ad hoc employees' representative committee exists at the relevant company.
In such cases, consultation is enacted by means of a mandatory, albeit non-binding, opinion issued by the works council on the projected dismissal, as well as through the information and negotiation phase within the collective dismissal procedure, as explained in How does the consultation procedure work?
There are approximately three types of measures which may trigger the requirement for the employer to negotiate with the works council and which give the works council a Right of Co-determination:
- co-determination in social matters.
- co-determination in personnel matters.
- co-determination in economic matters.
With regards the question of redundancy, which is being discussed here, this is the latter alternative of co-determination rights, and therefore will focus on this one here.
In companies with regularly more than 20 employees, the employer is obliged to inform the works council comprehensively, and in time, about intended "operational changes" which may trigger disadvantages for the personnel or for substantial parts thereof. Additionally, the employer is obliged to negotiate with the works council about the intended operational changes. In companies with more than 300 employees, the works council is for statutory reasons entitled to call in an external adviser whom the employer has to pay.
The following measures are regarded as "operational changes": decrease or complete closure of the whole business premises or of substantial parts thereof, relocation of the whole business premises or of substantial parts thereof, amalgamation with other business premises or split-up of business premises, fundamental changes to the organisational structure of the business premises, of the purpose of the business premises or of the assets of the business premises, implementation of fundamentally new working methods or production procedures.
In the case of such operational changes, the employer is obliged to follow the consultation process which will be described in How does the consultation procedure work?.
It depends on whether the employer concerned has a works council in place and then on whether the works council agreement provides for such consultation.
In the event of collective redundancies the following will apply. The Protection of Employment Acts 1977-2007 define "collective redundancies" as dismissals effected by an employer for one or more reasons not related to the individual concerned where in any period of 30 consecutive days the number of such dismissals is:
- at least five in an establishment normally employing more than 20 and less than 50 employees;
- at least 10 in an establishment normally employing at least 50 but less than 100 employees;
- at least 10% of the number of employees in an establishment normally employing at least 100 but less than 300 employees; and
- at least 30 in an establishment normally employing 300 or more employees.
The term "establishment" means an employer or a company or a subsidiary company or a company within a group of companies which can independently effect redundancies.
Where an employer proposes to implement collective redundancies, it must put in place an arrangement to provide for the appointment of employee representatives of the affected employees. The employer must then inform and consult with those representatives.
The employees may choose not to appoint representatives and to instead be consulted directly. For the purpose of the consultation process, the employer must supply the employees or their representatives with all relevant information relating to the proposed redundancies including:
- the reasons for the proposed redundancies;
- the number and descriptions or categories of employees whom it is proposed to make redundant;
- the number of employees and descriptions or categories normally employed;
- the period during which it is proposed to effect the proposed redundancies;
- the criteria proposed for the selection of the workers to be made redundant; and
- the method for calculating any redundancy payments other than statutory redundancy payments.
The employer must consult in good faith with employees or their representatives on:
- the possibility of avoiding the proposed redundancies, reducing the number of employees affected by them or mitigating their circumstances by recourse to social measures such as, for example, help to redeploy or retrain employees made redundant. On these matters, the employer must not merely consult with the employee representatives but must also negotiate with them; and
- the basis on which it will be decided which employees will be made redundant.
An employer who proposes to create collective redundancies must provide prescribed information, including the information provided to employees or their representatives, in writing to the Minister for Enterprise, Trade and Employment. The employer must provide a copy of the notification sent to the Minister to the employees or their representatives.
In the case of collective redundancies, the employer must inform and consult with employees' representatives. The information and consultation process must be commenced as soon as possible and at least 30 days before the first notice of dismissal is given. No dismissal may be implemented nor any notice of termination issued within the 30-day period.
Even where redundancies do not constitute collective redundancies within the meaning of the Protection of Employment Acts, where employees are being selected for redundancy from a group of employees, the employer must take reasonable time to meet with those employees who are potentially affected and their representatives in order to inform them of the proposed redundancies and to allow them to make their views known.
A consultation/negotiation period with the employee representatives is always mandatory for collective dismissals.
This obligation is not applicable to individual dismissals based on redundancy reasons, although the employer must deliver a copy of the dismissal notice to the employee representatives (for information purposes).
Whenever a collective dismissal is implemented (i.e. employers who are staffed with more than 15 employees, due to a reduction, transformation or cessation of activity, need to dismiss at least five employees in the same province and in a period of 120 days), a "negotiation stage" among the employer, the works council and the competent external Trade Unions shall be carried out, in order to agree management of the redundancies. Negotiations should come to an end within a maximum of 75 days, irrespective of whether an agreement has been reached between the parties.
In the event the employer intends to make 20 or more employees redundant, (see 'What are the employer's obligations in the redundancy process?') the employer must consult with the relevant trade unions at such a moment in time that the trade unions can still exercise influence on the employer's decision-making.
The employer also has the obligation to give the works council the opportunity to render its advice regarding the intended decision of the employer to restructure, pursuant to the Works Councils Act, at such a moment in time that the works council's advice can still have a substantial effect on the employer's decision.
If the employer has not established a works council, but does have an employee representative body or a staff meeting, they should be given the opportunity to render their advice regarding the intended decision of the employer to restructure, pursuant to the Works Councils Act, if the restructuring leads to the redundancy, change of duties or terms of employment of at least a quarter of the employees.
An employer, who employs 20 or more employees and intends to carry out collective redundancy is obliged to comply with specific obligations in relation to employee representatives, if there are no trade unions operating at such employer (see: 'What are the employer's obligations in the redundancy process?').
- The creation of a works council imposes notification and consultation obligations on the employer:
- to inform the works council of the activities and economic situation of the employer and of envisaged changes in this scope; and
- to inform and consult in the scope of (i) status, structure and envisaged changes in employment and activities aimed at maintaining a level of employment and (ii) activities that may cause significant changes in the organisation of work or in the bases of employment.
Therefore, if intended collective or individual redundancy results in any of the above, an employer is obliged to inform or inform and consult the works council, depending on the case.
The employer is required to consult the notice of termination of employment and the immediate termination of employment with the trade union organisation (if any).
Moreover, where a notice of termination or immediate termination of an employment relationship concerns a member of the trade union organisation during the member's term of office, or for a period of one year afterwards, the employer must ask the trade union organisation for its prior consent to such a notice of termination or immediate termination.
If the trade union organisation has not refused to give its prior consent in writing within 15 days of the day when the employer asked for it, the trade union will be considered to have given its consent. Where the trade union organisation refuses to give its consent, the notice of termination or immediate termination of the employment relationship is thereby made void.
However, if the other conditions for giving notice of termination or immediate termination are met, and the court rules that the employer cannot be justly expected to employ such an employee any further, the notice of termination or immediate termination of the employment relationship shall be valid.
If the procedure of mass dismissal takes place (please see What are the employer's obligations in the redundancy process?), the employer is required to report the following information to the trade union organisation and the work council or the affected employees at least 30 days prior to serving notices to the employees:
- the reasons for mass dismissals
- the number of employees to be made redundant and the jobs affected
- the total number of employees employed by the employer and the job composition
- the period within which mass dismissals are planned to take place
- the criteria proposed for selecting employees to be made redundant
- severance payments and, if relevant, other rights of the employees being made redundant.
There is no obligation upon the employer to reach agreement with either the elected employee representatives or Trade Union in respect of collective redundancy consultation.
The works council does not have the right to veto the employer's project and its opinion is not binding on the employer.
However, the works council has the power to significantly delay and obstruct the information and consultation process, which must be finalised prior to the implementation of the project under discussion. For instance, the works council can ask for additional information and documents and can refuse to give its opinion on the basis that it has not been sufficiently informed.
The employer must prove that it has met with the employee representatives or the employees themselves to discuss its intention to proceed with a collective dismissal. To this end, the employer must give the employee representatives or the employees themselves an opportunity to raise questions about the intended collective dismissal and to formulate suggestions in order to avoid or reduce the number of dismissals or mitigate the impact thereof by taking appropriate measures. The employer must examine the employees' questions and suggestions and provide answers thereto.
Consequently, to delay the process, the employee representatives could claim that they have not been sufficiently informed by the employer. Therefore, in practice, it is essential for the minutes of the works council meetings to precisely mention all questions raised by the employee representative in order to ensure that the same questions are not asked repeatedly in an attempt to prolong the process.
However, as indicated above, the employer has the final say on whether a collective dismissal will take place, how many employees will be dismissed and in which areas. The employee representatives or the employees themselves, as the case may be, have no veto in this respect.
Under Portuguese law, the role of the employees' representatives is rather limited within the scope of both redundancy procedures, as they are not entitled to oppose the dismissals and/or to halt the execution of the procedure (they may, however, strike and protest as usual).
Hence, employees are the only parties who have the right to individually challenge the validity and lawfulness of the redundancy procedures before the Labour Courts.
The employees' representatives, on the other hand, are merely entitled to issue non-binding opinions on the grounds alleged by the employer and to participate in the information and negotiation phase of the collective dismissal procedure. Their role is to negotiate the adoption of alternative measures to the intended dismissals, such as:
- a work suspension; and/or
- a work reduction; and/or
- the professional conversion and reclassification of the employees concerned; and/or
- early retirements and pre-retirement agreements, etc.
If no agreement is reached, the employer is free to proceed with the dismissal of the employees.
The works council can not stop the redundancy procedure in Germany, but there are a lot of possibilities to extend or postpone the procedure. This is the reason why it is not possible to answer the question how long a redundancy procedure will take if a works council exists. It can be one or two weeks, but it can also be six or nine months, or even longer.
The individual possibilities for the works council to postpone the procedure are contained in question 8 where the consultation process is described in detail.
If an employer does not comply with the provisions of a works council agreement or a collective agreement, the trade union or employees' representatives concerned could refer the matter to the Labour Relations commission or the Labour Court. Alternatively, they could bring an application to the Irish High Court to restrain the redundancy process pending compliance by the employer with the prescribed process.
In the event of collective redundancies the trade union/employees' representatives could refer the matter to the Minister for Jobs, Enterprise and Innovation.
Prior to the Labour Market Reform, it was very unlikely that the labour authorities would authorise the dismissal if no agreement with the employee representatives was reached during the negotiation period for the collective dismissal procedure. The representatives' negotiating position during negotiations was therefore quite strong and employers usually agreed on a much higher severance payment than that established by law. However, as explained above in What compensation is an employer obliged to pay to redundant employees?, the Labour Market Reform has diminished employee representative's negotiation strength in collective dismissal procedures.
Employee representatives are entitled to bring a collective claim challenging the employer's collective dismissal decision.
Individual dismissals for objective reasons may be declared null if notice of the dismissal is not duly provided to the employee representatives, as it operates as a control mechanism for the numeric thresholds mentioned in What is redundancy? above.
As a matter of fact, employees' representatives/works councils/Trade Unions have no right to actually halt the collective dismissal procedure. According to Italian law, irrespective of the outcomes of the negotiations, the collective dismissal procedure shall have to be considered completed within a maximum of 75 days from its commencement.
If the employer has not given the works council the opportunity to render its advice in conformity with the provisions of the Works Councils Act, the works council may request that the Subdistrict Court decides this obligation must be fulfilled and that the employer is obliged to suspend the implementation of his decision (at least) until then.
If the works council has rendered negative advice against the intended decision of the employer to reorganise/restructure, the employer is obliged to suspend its implementation for a period of one month. During this period, the works council may lodge an appeal with the Enterprise Chamber of the Amsterdam Court of Appeal.
The test which the Enterprise Chamber must apply is whether, in weighing the interests involved, the employer could reasonably have arrived at the decision in question. If the answer to this question is negative, the Enterprise Chamber can, at the works council's request, grant the following relief:
- order the employer to retract the decision in whole or in part, as well as to reverse certain designated consequences of the decision
- enjoin the employer from performing acts implementing or bringing about the implementation of the decision or parts thereof.
The works council therefore is not only able to delay the intended reorganisation, but also to obstruct it completely by bringing the case successfully to the Enterprise Chamber. Case law shows that the Enterprise Chamber exercises restraint in attaching the latter consequence. However it also shows that the Enterprise Chamber does not shrink from obligating the employer to renege on its intended decision in cases where the employer has not followed the correct procedural guidelines as laid down in the Works Councils Act and in cases where the employer is not able to substantiate its intended decision.
With regard to the trade unions and their possibilities to halt or effect an intended reorganisation:
With regard to dismissals which fall within the definition of a collective dismissal set forth in the Collective Redundancy Notification Act (WMCO) (see 'What are the employer's obligations in the redundancy process?'), the employer must give information to and consult with the relevant trade unions.
The same obligation may be imposed by a collective bargaining agreement, regardless of whether a collective dismissal within the meaning of the above Act is involved. Even if no such obligation actually exists, it is often advisable for the employer to consult with the trade unions prior to taking action. During the course of these consultations, the possibility of drawing up a social plan should be high on the agenda.
After the employer made the required notification on the basis of the WMCO, a request for a permit to effect a collective dismissal will only be considered by the Employee Insurance Agency (UWV) after one month has elapsed from the notification of the proposed dismissal.
If an employer wrongly failed to make the required notification on the basis of the WMCO, this will lead to a delay of two months instead of one month, from the time that the notification ultimately occurs.
Another right that can be used by the trade unions to try to delay or alter a decision of the employer to reorganise is that of collective action, including strike action. There is no specific legislation in the Netherlands which covers the right to take collective action, including the right to strike, which has, for the main part, evolved from case law and been greatly influenced by international treaties during the last few decades.
The European Social Charter, which was ratified by the Netherlands in 1980, is of particular importance in this respect. In 1986 the Dutch Supreme Court held that Article 6(4) of the Charter, which recognises the right of employers and employees to take collective action, including strikes, in the event of a breakdown in negotiations, must be considered as binding on all persons and as having direct effect in the Netherlands.
Both employees' representatives and Works Councils participate in the redundancy process under particular conditions (see: 'Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?') and they do not have the right to block the redundancy process provided that an employer follows the mandatory procedure.
The same applies to trade unions operating at the employer. However, there is one exception. Trade unions are entitled to block individual redundancy of special groups of employees, whose employment contracts can be terminated during the redundancy process, unless the trade unions submit an objection within 14 days of the notification of the intended termination. In such a situation, an employer can only terminate terms and conditions of work and payment in relation to such employees.
The Czech Labour Code stipulates that the employer is required to consult the dismissals with the trade union organisation or the affected employees. The consultations are, in practice, rather only the fulfilment of the statutory obligation, and no real agreement on the consent of the trade union organisation is required. However, the trade union organisation or the affected employees may obstruct the consultations.
Czech Labour Code is stricter regarding the termination of the employment of a member of the trade union organisation during the member's term of office, or for a period of one year afterwards, where the prior written consent of the trade union organization is required. The trade union organisation has the right to refuse to grant such consent.
Where the trade union organisation refuses to give its consent, the notice of termination or immediate termination of the employment relationship is thereby made void. However, if the other conditions for giving notice of termination or immediate termination are met, and the court rules that the employer cannot be justly expected to employ such an employee any further, the notice of termination or immediate termination of the employment relationship shall be valid.
Employers should consult with trade union representatives, if a Trade Union is recognised by the employer in respect of the affected employees, or with elected employee representatives otherwise. Consultation should begin in 'good time' and last at least 30 days where 20-99 redundancies are proposed, and at least 90 days where there are proposed redundancies of 100 or more.
For the purpose of the consultation, the employer should disclose in writing to the trade union or employee elected representatives the following:
- Reasons for the redundancy proposals;
- The number and descriptions of employees likely to be affected;
- The total number of employees within the descriptions given above;
- The proposed method of selecting the employees;
- The proposed method of calculating the amount of any redundancy payments to be received (in addition to the statutory redundancy payment);
- The number of agency workers working temporarily for and under the supervision and direction of the employer;
- The parts of the employer's organisation in which those agency workers are working; and
- The type of work those agency workers are carrying out.
The consultation must be undertaken with a view to reaching agreement and should include considerations as to how to:
- Avoid the redundancies;
- Reduce the number of affected employees; and
- Mitigate the consequences of the redundancies.
Redundancy of fewer than 10 employees (i.e. no collective redundancy plan required)
Members must be given written notification to attend. They must be provided with all the relevant information on the redundancies (Article L.1233-31 of the Labour Code):
- the economic, financial or technical motivations for the collective redundancy plan
- the number of contemplated redundancies and the professional categories concerned by the plan
- the selection criteria to determine the order of redundancies
- the tentative schedule for the implementation of the redundancies.
b) Purpose of the meeting
The Labour Code does not set the number of meetings that must be held. However, one meeting may suffice if the works council gives its opinion after it.
During this meeting, the works council must be informed and consulted on the points above. The minutes of that meeting must be sent to the competent administrative authority.
Redundancy of ten or more employees
As indicated in the section Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?, the information and consultation procedure can be divided into two main steps:
- the presentation of the reorganization project, i.e. the note to the works council on the economic aspects; and
- the procedure on the Collective Redundancy Plan (in order to discuss the "Plan de sauvegarde de l'emploi" itself). Both procedures can be conducted simultaneously. However, the procedure is deemed completed only once the works council has given its opinion within the scope of both consultation procedures.
Legally speaking, one works council meeting must take place on the reorganization project and two or three under the Collective Redundancy Plan procedure, provided that the works council has all necessary information in due time. In reality, however, it is likely that more meetings will need to take place to enable the works council to issue its opinion.
The works council is entitled to be assisted by a chartered accountant during the consultation procedure.
Once management has addressed the issues raised by the staff representatives, a vote should be held in order to allow the staff representatives to express their opinion and comment on the proposed measures. However, the staff representatives' opinion is not binding on the employer. The works council's opinion on the contemplated restructuring must be forwarded to the DIRECCTE.
Moreover, if the restructuring leads to significant changes in the employment positions, it is also necessary to inform and consult the health, safety and working commission committee (CHSCT). It must be informed 15 days before the meeting.
Termination of work position:
- Initial information:
This procedure begins with a written communication sent by the employer to the works council (or, in its absence, to the trade union committees) and to the affected employees (as well as to the respective trade union, should the employees be unionised) identifying:
- the underlying reasons for the termination of the work position and the business unit to which this position belongs to; and
- the need to dismiss the employees assigned to the redundant position and their professional category.
Failure to send this communication will invalidate the procedure and may lead the redundant employee to challenge the dismissal in court.
- Opinion of the employees:
Within 10 days after the initial communication has been served, the employees' representatives and the employees themselves (as well as the respective trade union, if the employees are unionised) may prepare and issue an opinion concerning
- the grounds alleged by the company in order to carry out this procedure;
- the legal requirements set out by law ;
- the criteria adopted by the employer to select the redundant employees; and
- to suggest the adoption of alternative measures so as to reduce the harmful effects of the dismissal.
Any of the parties who have received the initial communication may, within three business days from the date of receipt of the same, request the intervention of the relevant services of the Labour Ministry to confirm that there are no employment agreements in force for the redundant position and that, given the number of employees affected, the collective dismissal procedure would not be applicable. In addition, these official services will also confirm whether the criteria for the selection of the employees was duly applied and complied with. These services will then have seven days from the date they receive this request, to prepare and issue a report on those matters.
The employer is only entitled to proceed with the dismissals after five days from the end of the period granted to the employees' representatives and the employees to issue their opinion (or from the date of receipt of the report prepared by the Labour Authorities or the end of the term to do so).
The dismissal decision has to include:
- a description of the grounds for the termination of the work position;
- confirmation that such grounds have not been caused by the employer's own fault;
- confirmation that it is not possible to assign the redundant employees to a vacant position compatible with their professional category;
- confirmation there are no term employment agreements in force for the redundant position;
- if alternative measures were offered, reference to the refusal of the employees to accept such offer;
- proof that the criteria for the selection of the employees were validly followed, in case the employees' representatives or the employees themselves have challenged the same;
- amount, means, time and place of payment of the severance compensation and all other labour-related credits that become due on the date of termination of the employment agreement; and
- date of termination of the agreement.
This decision has to be communicated to the employees' representatives, to the redundant employees and to the Labour Authorities with the due prior notice period.
Please be aware that, following the financial aid requested on the beginning of 2011, the Portuguese government agreed to change some aspects regarding termination of work position. Therefore the procedural regulations mentioned above may be altered in the near future.
A collective dismissal procedure may be summarised as follows:
- Opinion of the Employees' Work Committee
As a preliminary procedure, and if a works council exists within the company, the employees' representative must be consulted by the employer about the intended collective dismissal. The works council may issue a written opinion on the matter within 10 days.
Failure to comply with this provision is considered a serious misdemeanour, which may trigger the application of a fine that will vary depending on the company's turnover and guilt (negligence or wilful misconduct).
- Initial information:
An employer who intends to carry out a collective dismissal procedure is bound to inform the works council or, in its absence the trade union representatives of the affected employees (if any), in writing of its intention to proceed with a collective dismissal.
This information must include:
- a description of the grounds for the collective dismissal
- a map of the company's personnel, discriminated by its organisational departments
- criteria that will be used to select the employees to be dismissed
- an indication of the number of employees to be dismissed and their respective professional categories
- an indication of the period of time during which the employer intends to proceed with the dismissal
- an indication of the method of calculation of a possible general compensation to be granted to the employees, in addition to the mandatory severance compensation set forth by law.
- Negotiation period:
According to section 361 of the code, a five-day period will follow where the employer and the employees' representative must meet to try to reach an agreement on the dimension and effects of the measures to be adopted. They must also try to agree on the application of other measures that may reduce the number of employees to be dismissed, such as:
- work suspension; and/or
- work reduction; and/or
- the professional conversion and reclassification of the employees; and/or
- early retirement and pre-retirement agreements, etc.
- Final decision:
In the absence of an agreement avoiding the execution of the collective dismissal, the employer is still required to inform in writing each employee to be dismissed, of the final termination decision. This must include an express reference to the grounds and date of termination of each employment agreement and indicate the amount of the severance compensation and the method and place of payment.
This decision cannot, however, be given before 15 days have lapsed from the date the initial information required for a collective dismissal was given. . If a decision is taken before this period elapses, the procedure may be held invalid and the employees may claim that they were unlawfully dismissed.
On the date the final decision is given to the employees, the employer is required to send the Labour Ministry copies of the minutes of the meetings held in the negotiation period, as well as a list of the affected employees, mentioning, in relation to each of them their name, address, date of birth and employment with the company, situation before the social security, profession, category and salary. It must also describe the measure that has been specifically applied to each one (e.g. dismissal, execution of separation agreements, reduction of work, suspension of work etc.) and the planned implementation date (a copy of this list must also be sent to the employees' representatives).
If the minutes have not been drafted during the negotiation phase, the employer must explain why and describe the reasons for not having been able to reach an agreement with the employees' representatives, as well as the final position of the parties.
In the absence of the entities referred to above, the employer must inform each of the affected employees of its intention to proceed with the collective dismissal , in writing. The affected employees may, within five business days, appoint among themselves an ad hoc representative committee, composed of a maximum of three or five persons, depending on whether the intended dismissal is projected to include up to five employees or above. If such an ad hoc committee is not elected, the intention notice will not have to include the information described above.
Failure to deliver the intention notice with the aforementioned information to the employees' representatives is a ground to challenge the validity of the collective dismissal.
Simultaneously, a copy of the notice and of the relevant elements of information must be filed with the relevant services of the Labour Ministry.
The purpose of this negotiation phase is to reduce the harmful social effects of a collective dismissal. Usually, when there are no alternatives to the dismissal, these negotiations are mainly focused on the amount of severance payment that will be granted to the employees.
However, in recent years employees' representatives have been more interested in other matters, such as outplacement programmes, maintenance of the health insurance policy for a certain timeframe and preferential rights in case of future admissions, etc.
Both the employer and the employees' representative structure may choose to be assisted by an expert (usually an employment lawyer) during the negotiation meetings. In addition, minutes of these meetings shall have to be drafted with an express reference to the approved issues, if any, as well as to the parties' divergent understandings, including their opinions, suggestions and proposals.
A representative from the Labour Ministry will also intervene in these meetings, although with a role limited to ensuring the formal and material regularity of the meetings and to promote an agreement if possible. The Labour Ministry does not have the power to stop a collective dismissal procedure, which may only be voided in court by the affected employees.
Failure to schedule and hold the information and negotiation meetings are grounds to deem the collective dismissal procedure void.
Also note that in certain cases (especially in the Lisbon area) the labour authorities have understood that this negotiation period is not required if no representative ad hoc committee is appointed by the affected employees, which is frequently the case.
The following checklist may provide a guideline through the whole consultation procedure in case of redundancy. The steps with numbers are collective employment law steps; the steps without numbers are individual employment law steps.
BetrVG = German Works Council Constitution Act
KSchG = German Protection against Termination Act
|1||Sec. 92 Subsec. 1 BetrVG||Involvement of Works Council regarding personnel planning|
|2||Sec. 106 Subsec. 2 BetrVG||Information of Economic Committee|
|3||Secs. 111 Sent. 1 BetrVG,
17 Subsec. 2 Sent. 1 KSchG
|Information of Works Council regarding Operational Change|
|4||Sec. 17 Subsec. 3 Sent. 1 KSchG||Sending a copy of the Information to Employment Exchange|
|5||Secs. 111 Sent. 1 BetrVG,
17 Subsec. 2 Sent. 2 KSchG
|Counselling with Works Council about Operational Change|
|6||Sec. 112 BetrVG||Proceedings on Reconciliation of Interests (agreement, or at least attempt to)|
|7||Sec. 112 Subsec. 1 Sent. 2 and Subsec. 4 KSchG||Agreement on social plan|
|8||Sec. 17 Subsec. 1 Sent. 1 KSchG, Sec. 17 Subsc. 3 Sent. 2 and 3 KSchG||Filing of Mass Dismissal Announcement with Employment Exchange by attaching statement of the Works Council or by substantiation of the information and presentation of the status of counselling|
|9||Sec. 17 Subsec. 3 Sent. 6 KSchG||Copy of Announcement to Works Council|
|10||Sec. 20 Subsec. 3 Sent. 1 KSchG||Hearing of employer and Works Council by the Employment Exchange (potentially)|
|11||Sec. 20 Subsec. 1 KSchG||Decision of the Employment Exchange (only in case of a 'blocking period')
Negotiation of potential cancellation agreements with the affected employees
|12||Sec. 102 BetrVG||Hearing of the Works Council with regard to the notice letters including social selection
Handing over of the notice letters one week after the hearing and by obeying the 'free period' according to Sec. 18 Subsec. 4 KSchG (90 days after Announcement)
The procedure described above will always apply if the consultation procedure works well, i.e. if the Works Council does not try to delay the procedure.
The first possibility for the Works Council to delay is in step 3. The Works Council may argue that the information and documentation presented is not sufficient. Then it can ask the employer (even several times) to present more information. There are some rules to follow in this step: the employer need not produce special documentation for the Works Council and the employer need not hand over original documents to the Works Council etc.
Then the Works Council may delay the procedure at step 5. Counselling about the operational change means that the Works Council must have the right to present alternative measures or ideas which may serve the employer's plans in the same way, but which are better for the employees from a social perspective. Usually, the Works Council is not really able to present equal alternatives, but it may request more than one meeting to discuss potential alternatives.
With regard to step 6, it is only necessary to attempt to agree on a Reconciliation of Interests. If no agreement can be achieved in one to two meetings, both parties may state that the negotiations have not been successful. Then there is no real negative legal effect for the employer, so there is also no real possibility to delay in this step.
Thirdly, the last and most important possibility for the Works Council to delay the procedure is at step 7. Should no agreement on a social plan be achieved, the social plan may be 'enforced' by either party. If the operational change is merely the dismissal of employees, such enforcement of the social plan is only possible if the following figures are fulfilled:
|Number of employees in the business premises||Number of employees to be dismissed in order to fulfil the precondition 'higher number':|
|Less than 60 employees||20 % of the employees, but at least 6|
|At least 60 and less than 250 employees||20 % of the employees, but at least 37|
|At least 250 and less than 500 employees||15 % of the employees, but at least 60|
|At least 500 employees||10 % of the employees, but at least 60|
Additionally, in new companies the possibility to enforce a social plan is not applicable in the first four years of its existence. This does not apply on new companies which have been founded in connection with the legal reorganisation of companies or groups of companies.
Enforcement of a social plan means the following procedure:
|1||Sec. 112 Subsec. 2 Sent. 1 BetrVG||If no agreement is reached on the social plan, employer or Works Council may apply to the Federal Employment Agency for mediation.|
|2||Sec. 112 Subsec. 2 Sent. 2 BetrVG||If mediation is not applied or the attempt at mediation is unsuccessful, employer or Works Council may submit the case to the conciliation committee.|
|3||Sec. 76 Subsec. 2 Sent. 1 BetrVG||Employer and Works Council have to agree on an independent chairman of the conciliation committee.|
|4||Sec. 76 Subsec. 2 Sent. 2 BetrVG||If no agreement can be reached on a chairman, he shall be appointed by the labour court.|
|5||Sec. 76 Subsec. 2 Sent. 1 BetrVG||Employer and Works Council have to agree on the number of assessors for both sides (same number for employer side and Works Council side).|
|6||Sec. 76 Subsec. 2 Sent. 3 BetrVG||If no agreement can be reached on the number of assessors on both sides, the number shall be determined by the labour court.|
|7||Sec. 112 Subsec. 3 Sent. 1 BetrVG||Employer and Works Council submit proposals to the conciliation committee for settlement of differences on Reconciliation of Interests and social plan.|
|8||Sec. 112 Subsec. 3 Sent. 2 and 3 BetrVG||Meeting(s) of the conciliation committee in order to achieve an agreement between employer and Works Council.|
|9||Sec. 112 Subsec. 4 BetrVG||If no agreement can be achieved - decision by the conciliation committee about the social plan. In taking this decision, the conciliation committee shall have due regard to the interests of the establishment and of the employees concerned as reasonably assessed.|
|10||Sec. 76 Subsec. 5 Sent. 4 BetrVG||Employer or Works Council may make an appeal to the labour court on the grounds that the conciliation committee has exceeded its powers, but only within two weeks of the date of notification of the decision.|
As you can see from this table, the enforcement procedure provides the Works Council with a variety of possibilities to further delay the consultation process, especially in steps 4, 6, 8 and 10.
See 'Under what circumstances is an employer obliged to consult with employee representatives/work councils etc' in relation to the consultation requirements arising in the context of collective redundancies.
Furthermore, if the employer recognises a trade union(s), the employer will have to comply with the consultation requirements set out in any written collective agreement(s) with the trade union(s) concerned.
Even where redundancies do not constitute collective redundancies within the meaning of the Protection of Employment Acts, where employees are being selected for redundancy from a group of employees, the employer must take reasonable time to meet with those employees who are potentially affected and their representatives in order to inform them of the proposed redundancies and to allow them to make their views known.
As previously indicated, consultation/negotiation with employee representatives is only mandatory for collective dismissal procedures.
- The company must communicate the commencement of the negotiation period with the employee representatives to the labour authorities.
- The negotiation period with the employee representatives may not last for more than 30 calendar days for companies with at least 50 employees, or 15 calendar days for companies with fewer than 50 employees. Nevertheless, an agreement may be reached at any time before the end of that term.
- Employers who carry out a collective dismissal affecting more than 50 employees must offer a "relocation plan" through authorised relocation agencies. The plan must last at least six months and include training and orientation measures, personalised attention to the affected employees, etc.
- Minutes of meetings with employee representatives summarising the parties' positions and analysed documents must be produced.
- According to the experience in collective dismissals prior to the Labour Market Reform, the most relevant issues discussed during the negotiation period (that will also be part of the labour plan) include:
- the amount of the severance payments
- the number of affected employees and the selection of individuals (in the event of restructuring)
- the schedule for implementing the employment terminations
- pre-retirement plans are negotiated in some cases (i.e., payment of partial wages and social security contributions until the date of retirement)
- employment offers in other companies/premises of the group
- outplacement services
- granting a preferential right to employees made redundant, according to which they will be re-employed in case of new hire process.
In practice, the most important point is the amount of the severance payment.
Should the parties reach an agreement, it must be approved by the majority of the employees' legal representatives.
- Upon termination of the negotiation period, the company will communicate the result of the negotiations carried out to the labour authorities. If the parties reach an agreement, the company will provide the labour authorities with a complete copy of the agreement. If no agreement is reached, the company will communicate its decision to the labour authorities and the employee representatives.
- Once the labour authorities are informed about the redundancies, in order to terminate each of the employment contracts in the collective dismissal context, the Labour Reform Market obliges the employer to follow the procedure for individual dismissals due to objective reasons, as explained above in Individual and collective redundancy, What restrictions are there on an employer's ability to dismiss an employee?
Nevertheless, a minimum of 30 days must have elapsed between the date the negotiation with the employee representatives started and the date that the dismissals become effective.
- The role of the labour authorities is limited to verifying that the negotiation period was duly carried out and to providing recommendations to the parties of the negotiation.
Within the frame of collective dismissal procedure, the employer must inform the employees' representatives in writing concerning its decision/intention to dismiss redundant employees and provide information in a specific letter (the "written information") with reference to:
- the reasons for redundancies, with particular reference to the economics governing the company's decisions;
- the reasons why it is impossible to avoid redundancies;
- the number and the job titles of the redundant employees as well as of all the staff members;
- the timetable for redundancies; and
- any measures planned in order to limit the social consequences of said redundancy.
After the above step, the collective dismissal procedure is divided into two further phases:
Negotiation must begin within seven days of the receipt of the written information - if requested by the employees' representatives - and such a negotiation should be completed within 45 days of the date of receipt of the written information (or 23 days if the number of redundant employees is lower than 10).
The company must provide the Provincial Labour Office (PLO) with a written notice of the outcome of said negotiation. Should the collective dismissal concern business units located in several provinces in the same region, such notice will also be sent to the Regional Labour Office. Should the collective dismissal concern business units located in several regions, such notice should be sent to the Ministry of Labour as well.
Should an agreement with the trade unions be reached, the company will be entitled to immediately start the dismissal process. Failing any agreement, the procedure goes into Phase II.
The PLO/Ministry of Labour will call the company and the employees' representatives for a final negotiation lasting up to an additional 30 days (15 days if the number of the employees involved is lower than 10). Should no agreement be reached, the company can then proceed with the redundancies.
The dismissal notice must be given- to each employee - in writing, in line with the employee's notice period.
The PLO must be given a written list of the redundant employees, their job descriptions and positions within the company, their ages and family loads and a detailed description about the way in which the mandatory selection criteria have been applied. Indeed, should the dismissals involve some and not all the employees, the following mandatory selection criteria have to be taken into account - at the same time - when choosing the employees to be made redundant:
- technical and production-related needs of the employer;
- employees' family circumstances (i.e. dependants); and
- employees' length of service.
The consultation process starts when the employer has the intention to dismiss collectively at least 20 employees (in small companies the employer could however also be obliged to consult the works council when fewer than 20 employees become redundant; under the Dutch Works Councils Act the works council should be consulted regarding each decision that leads to an important cutback in personnel).
Article 25 Subsection 2 of the Dutch Works Councils Act prescribes that the employer presents the decision in writing to the works council. In his notification the employer should mention:
- the number of redundancies;
- the intended termination dates;
- the criteria for selecting the redundancies; and
- the manner in which the redundancy payments are being calculated (in practice very often laid down in a social scheme).
After this notification, the employer is obliged to convene at least one meeting with the works council in which the intended decision is being discussed.Unless the decision of the employer is in conformity with the advice from the works council, the employer is obliged to suspend the implementation of his decision by at least a month (see 'What rights do representatives/Works Councils have to halt or otherwise affect the process?').
During the redundancy process, an employer must follow a specific consultation procedure (see: 'What are the employer's obligations in the redundancy process?').
The Czech Labour Code does not set forth the content of the process of consultations, it only defines the consultation as the negotiation between the employer and the employees, the exchange of views and explanations with an objective of reaching an agreement. The employer must arrange for a consultation to take place sufficiently in advance and in an appropriate manner so that the employees can express their views on the basis of the information supplied and so these views can be taken into account before a certain measure is implemented by the employer. In consultation, the employees have the right to be provided with a reasoned answer (reply) to their views.
In practice, the consultations are held in the form of meetings between the representatives of the employer and the employees (members of the trade union organisation).
Employers must be selected fairly and consideration must be given to the pool of employees to be included in the redundancy process. When considering the pool of employees, the employer must ensure that the pool is not too narrow and ideally should be agreed with the employees.
In addition, the employer should consider the selection criteria to be applied. If the employer already has an agreed practice in place, then this should be used. A score sheet is commonly used, against which individual employees can be assessed and those with the lowest cumulative score are put forward for redundancy. It is important for the criteria to be as objective as possible and applied consistently.
Where an employer is unable to redeploy its employees internally, it is required to define the criteria that shall be applied to govern the order of the contemplated redundancies.
In principle, the criteria defining the order of redundancies are defined by both the Labour Code and the relevant Collective Bargaining Agreement, where applicable. In addition, it should be noted that the criteria selected to determine the order of redundancies may only be fixed after the employer has consulted with the works council and/or the staff delegates on this issue.
Pursuant to Article L.1233-5 of the Labour Code, an employer must determine the order of redundancies based on the following legal criteria:
- the number of dependants, in particular for single parents
- the employee's length of service
- the employee's situation, which would make finding new employment particularly difficult, notably for disabled and old employees
- the employee's skills assessed in light of his/her professional category.
However, the reference to skills assessed in light of the employee's professional category assumes that the employer uses a grading system based on objective criteria, which is in place prior to the proposed collective redundancies.
The above criteria must be applied on a professional category basis. Case law defines a professional category as all employees in a company performing similar duties and with comparable professional training (Supreme Court, February 13, 1997, La Samaritaine v La Samaritaine's works council).
Accordingly, where an employer wishes to eliminate a position, the criteria selected to determine the employee to be made redundant must be applied within the professional category of the eliminated position. Where the employer foresees eliminating all of the positions within a professional category, it is no longer necessary to select criteria to determine the order of the redundancies.
Furthermore, the order of the redundancies must be assessed at overall company level and not merely at site level.
Finally, it is possible to provide that an employee who volunteers to leave can be made redundant, in order to avoid making redundant an employee who may be redeployed. However, it is important that the relevant employee comes to a voluntary decision to leave. It is not possible to make redundant an employee who does not volunteer to leave and who would not have been selected for redundancy pursuant to the application of the order of redundancies or who does not fall within the professional category affected by the redundancies.
Where the employer fails to respect the order of redundancies or provide the employees with information regarding the criteria selected for the order of redundancies, employees may take civil action to obtain damages for the loss incurred.
The Anti-Discrimination Acts must be respected.
The Belgian Anti-Discrimination Acts, which came into effect on 10 May 2007, contain an exhaustive list of grounds on which discrimination is prohibited: age, sexual orientation, marital status, ancestry/parentage, capacity, religious convictions or beliefs, political convictions, trade union affiliation, language, actual and/or future state of health, disability, ethnic origin, gender, race, skin colour or nationality. This legislation must be respected when selecting the employees to be dismissed.
Section 360 of the Portuguese Labour Code sets forth that the initial communication sent to the employees' representatives or to the ad hoc committee elected directly by the employees has to include a reference to the underlying criteria regarding the selection of the dismissed employees.
Although the legal framework does not provide for any additional guidance on these criteria, Portuguese case law provides that the employer is not allowed to choose subjective criteria and that they have to be based on objective circumstances. This includes the employees' seniority, performance duly evaluated by the employer in accordance with objective items, amount of the salary received, skills and qualifications etc.
In addition, these criteria are only relevant in order to differentiate the treatment given to employees with the same work position. For example, where a business unit manager is being dismissed, the employer does not have to allege any criteria so as to justify the reasons for keeping its receptionist.
Also, if the employer intends to close a given business unit and terminate the employment agreements of all employees engaged there, it does not have to disclose any criteria to justify the selection of those employees, in detriment to employees of other units.
Termination of work position
Section 368 of the Portuguese Labour Code currently sets forth the criteria which have to be adopted by the employer in order to select the dismissed employees.
Assuming that within the same business unit or department there are several work positions with identical functions, the employer is bound to apply the following criteria, in the following order, so as to select the employees that will be dismissed:
- inferior seniority in the work position
- inferior seniority in the professional category
- lower rank class of the professional category
- inferior seniority in the company.
Likewise, this criteria is only applicable for employees with the same work position, e.g. to select which of the two secretaries in the same business unit will be subject to the redundancy procedure.
Please be aware that, following the financial aid requested on the beginning of 2011, the Portuguese government agreed to change the regulations on the criteria to select the redundant employees (which will probably become identical with the regulations applicable for the collective dismissal). This means the regulations on this matter may be altered in the near future.
The selection of employees for termination during a redundancy process is made on the basis of a so-called "social selection" in Germany. This social selection exercise has to consider four different social criteria:
- age of the employee
- duration of service
- maintenance duties (family status/marriage and number of children)
- potential disability
In practice, the social selection is often made by using schemes where you grant a certain number of points for each social criterion, and at the end the employee(s) with the lowest number of points must be terminated while the employee(s) with the highest number of points must be maintained.
The employer has a certain right to determine the type of the point scheme, i.e. there is no point scheme regulated by law. However, the point scheme must be "well weighted", and this may be reviewed by the labour courts. If a works council exists, the works council has a right of co-determination.
One example for a point scheme (this one has already been accepted by the German Federal Labour Court) is as follows:
- Age: 1 point per year.
- Durations of service: 1 point per year, if more than 10 years 2 points per exceeding year.
- Maintenance duties: 4 points for a spouse, 4 points per child.
- Disability: 5 points in case of a disability of up to 50 %, 1 point for each 10 % more.
Irish law does not stipulate the selection criteria which must be used by an employer in effecting redundancies. Rather, in line with the employer's general duty to act reasonably in implementing redundancies, the employer's obligation is to use fair selection criteria. What constitutes fair selection criteria depends on the circumstances surrounding the redundancy plan.
Many employers use the "last in, first out" rule, often referred to as "LIFO". LIFO is commonly applied as a selection formula for redundancy by employers in Ireland. There has been some commentary that LIFO selection criteria should be approached with caution as it may be discriminatory under the Employment Equality Acts 1998 to 2008 on the grounds of age discrimination.
However, to date the Irish Courts and Employment Tribunals have not made any determinations to this effect and many employers continue to apply LIFO believing it to be a fair and objective means of selection which rewards longevity of service. In any event, the application of LIFO should be approached with caution and it is essential that the employer is able to objectively justify the criteria chosen and the manner in which those criteria were applied.
Under Spanish law no concrete criteria are provided to select the affected employees, when the measure does not affect the entire workforce (i.e. closing). In any case, the criteria established by the employer must be objective and not discriminatory. Likewise, employee representatives have a preferential right to retain their position.
In this respect, during the negotiation of a collective dismissal, some employees may volunteer to be dismissed under the offered conditions. Only if the number of volunteers is lower than the number of employees which need to be dismissed, will the employer select employees in order to cover that difference.
Within the frame of a collective dismissal procedure, the selection criteria of the employees to be dismissed are preferably determined in the agreement with the trade unions, if any, taking into account the employer's technical and production-related needs. However, if no agreement is reached, when choosing the employees to be made redundant, reference must be made to the following mandatory criteria, at the same time:
- technical and production-related needs of the employer;
- employees' family loads; and
- employees' length of service.
Within the frame of individual dismissal, the employer - in principle - does not have to apply mandatory social criteria provided for by applicable law in order to identify the individual/s to be terminated. However, the relevant choice has to be "reasonable" in light of the employer's needs and, therefore, it has to be grounded on a general principle of fairness and good faith.
Even if the employer does not have to specify the individual reasons/criteria on which it grounds the relevant termination and instead must just explain the main reason which justifies the termination e.g. the impact of a reorganisation process, it is still advisable to borrow the mandatory selection criteria established by Italian law for collective dismissal procedure. It is also advisable to take into consideration others (such as, for example, the individual's compensation) in order to give evidence that the reasons for the individual's dismissal are grounded on objective criteria, rather than on unfair discriminatory reasons. Indeed, the individual reasons/criteria should be demonstrated by the employer in the event of litigation and/or upon the terminated individual's request.
In regard to the selection of employees in the case of a collective dismissal, the Dismissals Decree (Ontslagbesluit) and the Policy Rules on the assessment of Dismissal Permits (Beleidsregels Ontslagtaak UWV) are relevant.
The Dismissals Decree provides in article 4:2 a scheme for the selection for redundancy due to economic reasons. As from the 1 March 2006, the proportionality principle (afspiegelingsbeginsel) applies to all requests for termination permits, which are based on commercial reasons.
Applying the proportionality principle
The Policy Rules on the Assessment of Dismissal Permits determine for schemes how the proportionality principle must be applied. According to these rules, the proportionality principle is applied as follows:
Firstly, the categories of exchangeable positions of the relevant company (i.e. positions which are mutually comparable and equivalent, based on their nature, content, level, salary and circumstances) have to be determined.
Secondly it is has to be determined how many full-time equivalents (FTEs) within each category of exchangeable positions have to be cut.
Thirdly the cutback in FTEs has to be distributed evenly over the different age groups within each of the categories of exchangeable positions.
As a result, an employer cannot simply apply the "last in first out" principle to its employees. The whole group of employees must first be divided into several categories of exchangeable positions, and then the "last in first out" principle can be applied to each of these categories separately, but only within each separate age group.
Criteria for issuing a dismissal permit
When the UWV assesses the application for a dismissal permit based on redundancy, it considers three assessment criteria:
- Did the employer argue the economical reasons for redundancy convincingly?
- Did the employer apply the correct selection for redundancy?
- Did the employer argue convincingly that there were not any options for re-employment?
If the economical reasons have been argued convincingly, the Employee Insurance Agency (UWV) then assesses if the correct selection for redundancy has been applied. The main rule here is the application of the proportionality principle.
There are a few exceptions in which the UWV does not apply the proportionality principle, mainly when it concerns a non-replaceable employee or when an employee has a weak position in the labour market. After the selection for redundancy has been assessed, the UWV looks at the options for re-employment. When all three criteria have been met, a termination permit is issued.
ABC Company has a workforce of 200 employees on April 1 2009. In the category of exchangeable positions 'salesman', there are twelve employees. These employees will have to be classified into five age groups:
|Age 15-24||Age 25-34||Age 35-44||Age 45-54||Age 55 and up||Total|
|three employees||four employees||0 employees||two employees||three employees||12 employees|
The category exchangeable positions 'salesman' will have to be decreased by four employees. The division into percentage terms will be as follows:
|Age 15-24||Age 25-34||Age 35-44||Age 45-54||Age 55 and up||Total|
|(25% × 4)||33,33% × 4)||0% × 4)||(16,66 × 4)||(25% × 4)|
After rounding these numbers, the division over the age groups will be as follows:
|Age 15-24||Age 25-34||Age 35-44||Age 45-54||Age 55 and up||Total|
|One employee||One employee||No employees||One employee||One employee||Four employees|
In each age group, the employee with the least years of service will be eligible for dismissal. Within each age group, the principle of seniority is therefore being applied.
The provisions of Polish law do not indicate particular criteria for selecting employees for redundancy. Such criteria can include, for example, fulfillment of employee duties, seniority, ability to find a job and personal or family situation of an employee.
The selection of the employees to be dismissed is up to the employer. The Labour Code does not provide for any criteria to be met by the employer in connection with the dismissals of the employees, however, the selection of the employees may not be discriminatory.
However, if the mass dismissal rules apply, the employer is required to inform the trade union organisation/work council or the affected employees and the Labour Office about the criteria proposed for selecting employees to be made redundant.
Where an employer is in breach of its obligations under s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992, an application can be made to the Employment Tribunal for a protective award. The maximum award the tribunal can make is up to 90 days' normal gross pay per affected employee, and this is penal in nature rather than compensatory.
Employees who are made redundant may also bring a claim in the Employment Tribunal for unfair dismissal (see 'Is there any statutory protection against dismissals?') and the Employment Tribunal can order payment of damages currently of up to £68,400, in addition to the statutory redundancy payment.
Redundancy not based on real and serious grounds
A redundancy, which is not based on real and serious grounds, constitutes unfair redundancy. The same sanction applies if the employer does not comply with its internal redeployment obligations. The court may request that the employee be reinstated.
If the employee or the employer refuses the reinstatement, the court awards damages to an employee with at least two years' service, for unfair redundancy amounting to at least six months' salary (there is no maximum amount provided for by law). Where the employee has less than two years' service, damages may also be awarded, but there is no minimum set amount.
In practice, the amount of damages depends on the employee's situation at the time of the court decision, which may sometimes take place two or three years after the redundancy. If the employee is still unemployed in spite of active job seeking, the amount of damages awarded may be very high. On average, between six and 12 months' salary are awarded as damages. In exceptional cases, 24 months' salary may be awarded. The damages awarded mainly depend on the employee's age, length of service and employability.
Non-compliance with redundancy procedures
Where the employer fails to comply with the redundancy procedure, the court may award the employee damages for the loss incurred.
Where the employer fails to comply with the redundancy procedure, the court may award the employee damages or an indemnity for the loss incurred depending on the length of service.
Where an employee with at least two years' service is made redundant without complying with the redundancy procedure, the courts award the employee an indemnity according to his/her prejudice. However, this indemnity is only available if the employer has failed to comply with the procedure and there is a real and serious ground for the dismissal.
If there is no real and serious ground for the dismissal, then the only remedy is damages. If the employer has failed to comply with procedure, this will be included within the amount of damages awarded.
For employees with less than two years' service, non-compliance with the procedure is compensated by the payment of damages, evaluated by the courts, depending on the loss suffered by the employee up to a maximum of one month's salary.
Reimbursement of unemployment benefits in the event of unfair redundancy
If the court considers that an employee was unfairly made redundant, it orders the employer to reimburse all or part of the unemployment benefits paid to the redundant employee during the period between his/her redundancy and the court's decision (up to a limit of six months' unemployment benefits per employee).
Order of redundancies
Where the employer fails to respect the order of redundancies or fails to provide the employee with information regarding the criteria selected for the order of redundancies, the employee may take civil action to obtain damages for the loss incurred.
Failure to offer the redeployment programme
Where the employer fails to offer the "contrat de sécurisation professionnelle" redeployment programme, the employee may take civil action to obtain damages for the loss incurred.
Failure to offer the "contrat de sécurisation professionnelle" redeployment programme provided for by French law in the redundancy letter exposes the employer to the payment of a fine to the French employment centre (Pôle emploi) amounting to two months of the employee's gross average salary over the past 12 months.
Non-compliance with rehiring priority obligations
If the employer does not observe legal provisions relating to the rehiring priority, the courts award the employee damages amounting to at least two months' salary if the employee has a minimum of two years' service within the company.
Failure to inform the Regional Company, Competition, Consumption and Labour Directorate
Failure to inform the Regional Company, Competition, Consumption and Labour Directorate within eight days of the notification of the redundancy is both a civil and criminal offence. The employer may be ordered to pay a maximum fine of €750 per employee. In this case, the courts must award the employee an indemnity corresponding to the loss incurred.
Failure to consult the works council
Under French law, the breach by the head of the company or a duly empowered representative of their obligations towards the works council is a criminal offence known as a "délit d'entrave". Délit d'entrave includes the following acts:
- failure to inform and consult the works council regarding the contemplated redundancy project
- failure to inform and consult the works council regarding the criteria for the order of redundancies
- failure to comply with the specific procedure applying to the redundancy of protected employees.
This offence is punishable by a (rather theoretical) maximum of one year's imprisonment and/or by a maximum fine of €3,750 (two years' imprisonment and/or €7,500 in case of repeated offences) for the head of the company and/or by a maximum fine of €18,750 (€37,500 in case of repeated offences) for the company itself.
If the employer does not strictly follow the applicable procedure for a collective dismissal, the employees can take legal action asking the labour court to order the employer to restart the procedure. In that case the employment contracts cannot be terminated until completion of the (restarted) procedure, and the employees will be entitled to receive their salary until the end of this procedure.
Please refer to answers in What are the remedies for dismissal in violation of these restrictions? above.
For the consequences of non-compliance with the preconditions of a fair and legally valid termination, please see What restrictions are there on an employer's ability to dismiss an employee?
For the consequences of non-compliance with the consultation process with the works council please see the following:
- With regard to the co-determination rights of the works council regarding social matters, the employer is not allowed to implement measures before the consultation process has been finalised. If the employer nevertheless starts to implement any measures, the works council has the right to file a lawsuit in which the court shall decide if the employer is forbidden to implement the measures. In urgent cases, this is even possible in a very quick procedure by injunctive relief.
- With regard to the co-determination rights of the works council regarding general personnel matters, nearly the same applies. The personnel measure (e.g. hiring of people, dislocation of people, etc.) may not be implemented before the works council has declared its consent. If the employer contravenes, the works council may again file a similar lawsuit. If the works council has objected and the employer is of the opinion this objection is not valid, because it is not based on acceptable legal ground, the employer may file a lawsuit claiming that the court should replace the works council's consent in its decision. In the case of urgent operational needs (which must be proved at a later stage), the measure may be implemented by the employer preliminarily, but then the employer must file the legal procedure described above within three days.
- With regard to the co-determination rights of the works council regarding the personnel matter of a termination (Sec. 102 German Works Council Constitution Act), if the employer contravenes, i.e. does not hear the works council prior to a termination or if the hearing is not complete or wrong, this renders the termination null and void (!) as one formal prerequisite of the termination is not fulfilled.
- With regard to the co-determination rights of the works council regarding economic matters (inter alia redundancy), there is a very special situation in Germany. In some cases the employer commences to implement a redundancy measure without having negotiated and agreed with the works council on a reconciliation of interests and a social plan. In these cases employers start the redundancy measure with handing over to the works council the hearing letters according to Sec. 102 German Works Council Constitution Act, and the works council has one week to respond (see above). During this period, works councils usually try to file a lawsuit for injunctive relief claiming that the court shall declare it is forbidden for the employer to implement the redundancy, i.e. to hand over the notice letters. According to procedural rules, these lawsuits will never get to the German Federal Labour Court, the reason being that the different Regional Labour Courts in the German Federal States have decided differently on this issue. Courts in the north of Germany tend to accept the claim of the works council and prevent the employer from handing over the notice letters; courts in the south of Germany tend to do the opposite. The reason for not accepting the claim of the works council is that there is a special regulation in Sec. 113 German Works Council Constitution Act stating that if an employer commences redundancy without having tried to achieve a reconciliation of interests with the works council, the employees have a statutory claim for "disadvantage compensation". The southern courts argue that this provision proves that it must in theory be possible for the employer to contravene. However, in December 2008, the Regional Labour Court in Munich has, for the first time, accepted the works council's claim to prevent the employer by injunctive relief from handing over the notice letters. So it may be that the history of jurisdiction will in this aspect change over the next few years.
Furthermore, there are fines and penalties provided for in the various pieces of redundancy legislation. For example, an employer who fails to comply with its obligations to inform and consult under the Protection of Employment Acts will be guilty of an offence and may be liable to a fine of up to €5,000 Where collective redundancies are effected by an employer before the expiry of the 30-day consultation and notification period, the employer will be guilty of an offence and may be liable to a fine of up to €250,000.
Within the frame of a collective dismissal procedure, in case the employer (i) does not comply with the mandatory requirements and procedures; or (ii) does not adhere to the selection criteria, then the dismissal(s) can be challenged by the single employees concerned (even if an agreement has been executed with the Trade Unions), pursuant to the usual remedies.
In the case of a positive outcome of a legal action brought against the employer, the employee will be entitled to be reinstated in his/her previous position and to the payment of damages amounting to the salary accrued between the date of dismissal and the date of reinstatement (such indemnity must not be less than five months' salary). Without prejudice to the entitlement to the aforesaid indemnity, the employee can elect to waive the reinstatement and request payment of an additional 15 months' salary.
In addition to the above, the employer's infringement of both the information and negotiation requirements involved in the collective dismissal procedure could constitute "anti-union conduct" for the purposes of article 28 of Law No. 300/70. Pursuant to such article, the trade unions may seek a court order addressed to the employer with the aim of preventing or delaying the dismissals . The court order, if not complied with by the employer, leads to criminal liability.
Within the frame of an individual dismissal, any employee dismissed may bring legal action if he/she deems that his/her dismissal was not properly justified pursuant to the usual remedies.
In the event the dismissal of an employee (other than dirigente) is found unjustified by the court, the consequences for the company are different, depending on whether it is staffed with more or less than 15 employees per production unit (or more than 60 employees as a whole).
In the latter case, the employer would be required to reinstate the employee in his/her previous position and to pay him/her damages amounting to total compensation accrued between the date of the dismissal and the date of the reinstatement plus social security charges (such indemnity must not be lower than five months' salary). The employee can also elect to waive the reinstatement and ask instead for the payment of an additional 15 gross months' salary (without social security charges).
If there are fewer than 15 employees, and the employee issues proceedings, the company would have to either (i) re-employ him/her or (ii) pay him/her an amount ranging from a minimum of 2.5 and a maximum of six months of his/her (last) all inclusive salary.
In the event the dismissal of a dirigente is found to be unfair - according to the National Collective Labour Agreements for dirigenti in the main business sectors - he/she is entitled to receive a rather considerable amount as compensation for damages (so-called "additional indemnity") which is payable on top of the mandatory severance amounts. Such additional indemnity is automatically increased depending on the dirigente's age and professional seniority.
If an employer wishes to dismiss at least 20 employees due to economic reasons, within a timeframe of three months, it has to take the Collective Redundancy Notification Act (WMCO) into account. The Employee Insurance Agency (UWV) must supervise compliance with this act.
According to article 3 of the WMCO, the employer must notify the relevant trade unions and the labour authorities of his intention to terminate at least 20 employees who work in the same UWV working district. All relevant trade unions should be contacted. If the employer does not comply with the WMCO and does not notify the relevant trade unions, the UWV will, in principle, not handle the request for redundancy and therefore not grant any termination permits (article 7 subsection 1 WMCO).
As a result of that, in principle the employment agreements cannot be terminated. If the employer makes the required notification after all, the UWV will consider the request for a dismissal permit only after a delay of two months instead of the regular one month (see 'What rights do representatives/Works Councils have to halt or otherwise affect the process?').
It speaks for itself that a dismissal permit will not be granted if the employer is not able to convince the UWV of the economic necessity of the intended dismissals.
If a contract of employment is terminated by giving notice, the employee may always file, within six months after the termination, a legal action alleging that the termination was 'obviously unreasonable', even in cases where the employer has obtained permission from the UWV and observed the proper notice period.
Termination will be deemed obviously unreasonable if either no reason, a mere pretext, or a false reason is given, or if the hardship endured by the employee is disproportionate to the employer's interests. Termination can also be deemed obviously unreasonable if the employer has not followed the correct procedural guidelines or has not provided the employee with adequate termination payment.
In such an event, the employee may claim compensation in an amount to be determined by the court. Although by its very nature this compensation differs from that which is paid when an employment contract is rescinded, it is often - but certainly not always - determined in accordance with the formula.
The consequences of an employer failing to comply with provisions related to termination of an employment relationship are governed by general rules provided in the Labour Code which specify the damages an employee can claim (see: 'Under which circumstances may an employee who has been dismissed file a lawsuit? What can be the target of such lawsuit?').
In addition to damages, non-compliance with the provisions regarding termination of an employment contract is an offence punishable by fine ranging from PLN 1,000 to PLN 30,000 (about €230 to €6,907). Only individuals can be fined, i.e. management board members or other persons representing an employer.
If the employer does not meet the requirements set forth by the Labour Code and the employee is dismissed without compliance with these rules, the employee may in particular claim the invalidity of the termination of his/her employment relationship. Moreover, certain sanctions (fines) may also be imposed by the state authorities, namely by the Labour Inspectorate.
Under French law, employers must comply with a specific procedure when making protected employees redundant.
Following the information and consultation procedures on the contemplated redundancies, the employer must summon the protected employee to a meeting. During this meeting, the employer may present the protected employee with redeployment measures. After this meeting, the employer must consult the works council regarding the redundancy of the protected employee, except for trade union representatives or Employment Tribunal members.
Subsequently, an authorisation request must be addressed to the Labour Inspectorate outlining the reasons for the redundancy. The minutes of the works council meeting, during which the protected employee's redundancy was discussed, must be attached, where applicable. The Labour inspectorate carries out an investigation, which involves holding meetings with the employer and the protected employee.
The Labour inspector has up to two months to reach a decision after receiving the authorisation request. Notification of the Labour inspector's decision must be communicated to the employer and the protected employee. The absence of a reply from the Labour inspector is treated as a refusal to authorise the redundancy.
Where the Labour inspector refuses to authorise the employee's redundancy, the employer is under the obligation to retain the employee.
An appeal against the Labour inspector's decision may be lodged before the Employment Minister or the Administrative Tribunal within two months following notification of the decision. However, the Labour inspector's decision continues to apply if an appeal is lodged.
In the event where the appeal overrules the Labour inspector's refusal to authorise a staff representative's redundancy, the employer must address a second authorisation request to the Labour inspector. The Labour inspector must authorise the redundancy, except where a change of circumstances warrants a second refusal.
If the appeal overrules the Labour inspector's authorisation of the redundancy, the relevant employee is entitled to claim his/her reinstatement to the same position within two months of the ruling's notification. The employee is entitled to receive damages for the loss incurred during the period between his/her redundancy and reinstatement.
Tax implications of severance compensation
The compensation paid within the scope of a redundancy procedure is exempt from social security contributions and from income tax (and withholding obligation) within the following limit:
(regular remunerations subject to taxation received in the last 12 months × 14 : 12) × employee's rounded up seniority × 1,5.
Starting from 1 January 2012, the Portuguese government intends to change the limit as follows:
(regular remunerations subject to taxation received in the last 12 months × 14 : 12) × employee's rounded up seniority × 1.
Hence, an offer of 1.5 months of remuneration per each year of seniority (or one month if the government intention follows through) shall not be subject to taxation. The exceeding amount, however, will be subject to the normal personal income tax withholding rates and social security contributions.
Execution of separation agreements
Within the scope of a redundancy procedure, it is rather frequent that the parties' negotiations are aimed at executing separation agreements.
It is rather difficult to determine what could be considered fair compensation, as far as the employee is concerned, for the termination of the employment agreement where a negotiation is held.
Although the current market practice varies from sector to sector and according to the qualification of the employees, compensation packages between 1.2 and 2.5 months of remuneration (which may also include bonuses and other payments that are not a part of the base salary) are fairly common.
Nonetheless, compensation packages corresponding to 1.5 months of remuneration per each year of seniority are generally considered fair within a negotiation, especially in respect of employees with longer years of service or where the employees fear that a redundancy procedure may be an option for the employer.
The tax implications of compensation agreed to in individual separation agreements are the same as in respect of severance payments within redundancies. The social security exemption (with the abovementioned caps) is, however, limited to situations where employees terminated by mutual agreement have no access to unemployment benefits.
There is a substantial difference for employees terminated by mutual agreement, with regard to the access to unemployment benefits. Hence, an employee whose agreement is terminated as a result of a unilateral decision of the employer (e.g. redundancy procedures) is always entitled to receive the unemployment benefits, provided s/he has a salary record of 450 days during the previous two years and files the necessary documents with social security.
However, termination by mutual agreement would only give the employees the same right if the employer states to social security that there were grounds to proceed with a collective dismissal or termination of the work position and that the mutual agreement was just an alternative to such redundancy procedures. In that case, the termination of employment would not be deemed to be voluntary, ie at the employee's instigation, and the dismissed employee may access unemployment benefits.
One should note, however, that the employer is only entitled to use this option with regard to a maximum of three employees or 25% of its personnel, whichever is higher, in a reference period of three years (if the company employs up to 250 employees) or 62 employees or 20% of the personnel, whichever is higher, but with a maximum limit of 80 employees (if the company employs more than 250 employees).
Outside these thresholds, the employee may receive the unemployment subsidy. However, if social security conducts an investigation and detects that these maximum limits were not respected, the employer may have to reimburse social security for all the amounts granted to the employee on that account.
The dismissal decision within the scope of both redundancy procedures does not produce effects immediately. Such a decision, with an express reference to the relevant grounds, must be sent, in writing, to each employee to be dismissed with a prior notice period of 15 days for employees with less than one year of service, 30 days for employees with one to five years of service, 60 days for employees having served between five and 10 years and 75 days for longer-term employees.
Failure to comply with this prior notice period does not determine the immediate termination of the contracts and implies that the employer shall pay the remuneration corresponding to the prior notice period in fault. In other words, the employment agreements will be in force until the end of the prior notice period provided by law.
On the other hand, all credits resulting from the termination of the employment contracts, including the severance payment, shall be calculated and paid until that date. The employer may determine that the employees do not have to render their work further to the decision, but it will be liable for the payment of all the remuneration that becomes due until the term of the prior notice.
Failure to pay all outstanding credits, including the severance compensation, until the end of the prior notice period invalidates the collective dismissal procedure.
Employees' rights during the prior notice period
During the prior notice period, the employee has the right to use a time credit corresponding to two days of work per week, without prejudice to his/her salary.
This time credit may be divided among all or some of the weekdays, at the employee's choice. Nevertheless, the employee must inform the employer of his/her intention to use the time credit, with a prior notice of at least three days, except if there is a justified reason.
Furthermore, the employee is further entitled to unilaterally terminate his/her agreement, by means of serving a three business day prior notice. In this event, the employee does not have to serve the general prior notice period of 30 or 60 days (depending on whether s/he has a seniority of up to two years or higher, respectively) and shall maintain the right to receive the severance payment.
No. I think everything has been mentioned already in the above questions.
None other than as set out above.
Tax aspects: Since 2009, any amount paid in collective dismissal procedures in excess of the severance compensation which may correspond to unfair dismissal is taxable. In the event that employee representatives negotiate higher amounts than those mentioned, it is very common that employees negotiate under "net amounts" terms. This practice would entail an extra cost for the employer, as it would be obliged to make the corresponding grossing-up on the net agreed amounts.
Unofficial negotiations: as it has been already explained, the Labour Marker Reform has introduced very relevant changes in the collective dismissal proceedings in Spain. Both employers and employee representatives require time to adapt to the new rules. Nevertheless, it is reasonable to conclude that, in light of the reform, employee representatives have lost bargaining power in negotiating higher severance compensations than those established in the Statute of Workers.
Lack of employee representatives: in the event of a collective dismissal procedure, if there are no representatives of the employees in the work centre, employees must grant representation and negotiation powers to either (i) three employees of the company as chosen by majority or (ii) a group of three members chosen by the most representative trade unions in the company's sector.
Within the frame of a collective dismissal procedure, under certain circumstances, and in particular when the number of employees to be dismissed is high or within an area with a high unemployment rate, the employer's decision to reduce the headcount may trigger serious consequences for the employer due to the social impact of the decision.
There is always the risk that the collective dismissal is followed by a series of legal actions started by the employees.
Therefore, typically to minimize the risk of legal disputes, employers try to reach an agreement with trade unions involving the payment of incentives to employees (and sometimes outsourcing services). This can limit, but not remove, the risk of legal disputes. The amount of such incentives (which are not subject to the payment of social security charges) will depend on many factors (including geographical areas, level of salaries, and age and seniority of employees) and on the legal and contractual position of the employer.
Against payment of such incentives, employees are normally requested to sign individual agreements whereby they officially and conclusively waive their right to challenge the dismissal.
In the most serious cases where the collective dismissal can provoke considerable social problems, alternative solutions are sometimes suggested, and even supported, by trade unions and authorities concerned in order to mitigate the social impact.
Typically the collective dismissal procedure (even if already officially started) is revoked and the employer negotiates the use of social instruments such as CIGS program (i.e. measures aimed at reducing the social impact of the business crisis, which puts employment levels at risk, and is designed to cut down the number of the redundant employees; during the CIGS the employees involved keep their employment - even if they are not requested to work - and are granted a monthly compensation). This may help the employer improve its economic situation or, in the worst-case scenario, will simply postpone the dismissal to a later date.
None other than set out above.
According to Polish law if, after the redundancy process, an employer hires employees in the same work category, it should employ the employee with whom the employment relationship was terminated during the collective redundancies. The above applies only if the redundant employee notifies his/her intention to take up the employment at the employer within one year after the termination of his/her employment relationship. The employer should re-employ the employee within 15 months from the date of terminating his/her employment relationship during the collective redundancies.
Regardless of the course of employment contract termination, an employer is always obliged to issue an employment certificate. Failure to comply with this obligation is an offence punishable by fine ranging from PLN 1,000 to PLN 30,000 (about €230 to €6,907). Only individuals can be fined, i.e. management board members or other persons representing an employer. Moreover, an employer must also grant an employee outstanding holiday leave during a notice period and pay a holiday allowance if an employee does not use the entire holiday leave.
These pages may contain information of general interest about current legal issues, but do not give legal advice.