What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
Employment & Labour Law
There are certain notification and consultation obligations that apply where an employer is planning to implement a collective redundancy. A collective redundancy means the dismissal for reasons unconnected to the individual employee (usually interpreted as meaning redundancy) over any period of 30 consecutive days, of at least:
- 5 persons in an establishment normally employing more than 20 and less than 50 employees;
- 10 persons in an establishment normally employing at least 50 but less than 100 employees;
- 10% of the number of employees in an establishment normally employing at least 100 but less than 300 employees; or
- 30 persons in an establishment normally employing 300 or more employees.
In relation to the information and consultation obligations on an employer, the key points are that (i) consultation with employee representatives should take place at the earliest opportunity, and in any event, at least 30 days before the first notice of dismissal is given, (ii) the obligation to commence consultation also triggers an obligation to notify the Minister for Jobs, Enterprise and Innovation; and (iii) collective redundancies cannot take effect until 30 days after the date of notification to the Minister for Jobs, Enterprise and Innovation.
An employer with at least 10 employees must notify the Ministry of Manpower within 5 days of the employee receiving notification of his/her retrenchment if 5 or more employees are retrenched within any 6-month period beginning 1 January 2017. A failure to notify within the required period is an offence and the employer may be liable on conviction to penalties, including a fine not exceeding S$5,000 and to other potential penalties.
The Ministry of Manpower and the Tripartite Alliance for Fair and Progressive Employment Practices (“TAFEP”) (see the Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment (the “Tripartite Retrenchment Guidelines”)) have also advised employers to carry out the following before retrenching:
- Research government assistance schemes to support the restructuring;
- Obtain employment facilitation for employees;
- Consider available alternatives such as redeployment, temporary layoffs (subject to some mandatory conditions), implementing a shorter work week;
- Take a long term view of manpower needs;
- Consult with the relevant trade unions if employees are unionised;
- Not discriminate against employees and make selections based on objective factors such as the ability to contribute to the company’s future business needs;
- Treat affected employees with dignity and respect; and
- Consider having a longer retrenchment notice period (i.e. in excess of that provided for under the EA) for all affected employees.
If employers still wish to implement their retrenchment exercise, they are advised to communicate their intentions early to their employees and before public notice of the retrenchment is given.
Other additional considerations include whether employees should be given retrenchment benefits. In this regard, employers should refer to prevailing norms on the provision and quantum of retrenchment benefits.
There are no restrictions on an employer’s ability to collectively dismiss its employees. However, the Worker Adjustment and Retraining Notification (WARN) Act requires covered employers to provide 60 days’ notice in advance of covered plant closings and mass layoffs to: 1) the affected workers or their representatives (e.g., a labor union); 2) the dislocated worker unit in the state where the layoff or plant closing will occur; and 3) to the local government.
In general, employers are covered by the WARN Act if they have 100 or more employees, excluding employees who have worked fewer than six months in the last 12 months and not counting employees who work an average of fewer than 20 hours a week.
A covered plant closing is defined as the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees excluding any part-time employees.
A covered mass layoff is defined as a layoff that does not result from a plant closing, but which will result in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer‘s active workforce.
Even if a single mass layoff or plant closing does not trigger the WARN Act’s collective dismissal requirements, an employer also must give the 60-day WARN Act notice if the number of employment losses for two or more groups of workers, each of which is fewer than the minimum number needed to trigger notice, reaches the threshold level, during any 90-day period, of either a plant closing or mass layoff.
In addition to the federal WARN Act, many states have implemented their own collective dismissal notification statutes, known as “mini-WARN” laws. The state mini-WARN laws often mirror the federal statute, but may provide additional protections such as increasing the notice period or lowering the minimum thresholds for providing notice. For example, Illinois, Iowa, and New Hampshire, New York, and Wisconsin’s “mini-WARN” acts apply to layoffs of as few as 25 employees.
As mentioned before, redundancy dismissal could be of individual (objective/individual redundancy) or collective nature (collective layoff/redundancy).
Collective layoffs shall be understood as the extinction of employment contracts based on economic, technical, organizational or production reasons where, in a period of 90 days, the extinction affects at least (i) 10 workers in companies that employ less than 100 workers; (ii) 10 percent of the number of workers in the company in those employing between 100 and 300 workers; or (iii) 30 workers in companies that employ more than 300 workers (some legal provisions must be taken into consideration while computing the number of employment terminations). If the legal thresholds above mentioned are not met, the employer will have to comply with the individual redundancy dismissal procedure.
To this effect, please note that different procedures must be complied with whether the redundancy is of individual or collective nature (in this latter case, a consultation period with the workers’ legal representatives must be complied with).
In case of collective redundancies, employers are obliged comply with Article 29 of the Labour Law which provides that employers can proceed with collective redundancies to the extent dismissal is based on either:
- Economic reasons,
- Technological development,
- Re-organization of the work.
Pursuant to the Article 29/2, dismissals are considered collective if they extend to:
- 10 employees if the total number of employees is between 20 and 100,
- 10% of the employees if the total number of employees is between 101 and 300,
- At least 30 employees if the total number of employees is 301 or more.
In the case of collective redundancy, employers must according to the Article 29/1 notify the trade union representatives, the regional directorate of the Ministry of Labour and Social Security and the Turkish Labour Authority 30 days prior to initiating a collective dismissal. In case a collective labour agreement is in force in relation to the relevant workplace, a meeting must be held between the trade union representatives and the employer following completion of the above notification for the purpose of preventing the collective dismissal decision or reducing the number of employees to be dismissed and adverse effects of the collective dismissal on the employees.
Colombian labor Law provides that in case an employer unilaterally and without just cause terminates the employment agreement of a given number of employees and in a specific period of time it will be incurring in collective termination or mass lay-off. Collective terminations without authorization from the Ministry of Labor (which is not easy to be obtained) have no effect, and therefore the employer would be liable for all salaries or benefits it might not have paid to the employees during the relevant period.
If the authorization from the Ministry of Labor is obtained, the employer may proceed to terminate the employment agreements by paying the corresponding severance (indemnification) for termination without just cause provided in the law.
In the event that the employees are terminated by mutual consent (instead of unilaterally by the employer) the employer will not need to request the authorization from the Ministry of Labor. In such case it is customary that the employers pay to the employees being terminated, a bonus at least equivalent to the value of the indemnification (to be attractive for the employees to agree on the termination by mutual consent).
Swiss labour law provides specific procedural requirements for mass redundancies (see art. 335d et seqq. of the Swiss Code of Obligations).
One speaks of a mass redundancy if an employer gives notice to a certain minimum number of employees (at least 10 employees) of a business normally encompassing more than 20 employees within 30 days and for reasons not pertaining personally to the affected employees.
An employer intending to make such mass redundancy must inform (in writing and with a copy to the cantonal labour office) and consult the organisation that represents the employees respectively the employees themselves. In order to enable them to safeguard their interests, the employer must give the employees at least the opportunity to formulate proposals on how to avoid redundancies, limit their number and/or mitigate their consequences (see art. 335f of the Swiss Code of Obligations). Failure to consult the employees leads to the wrongfulness of the notices given respectively to compensation claims in an amount of up to two month’s salary per employee (see art. 336 et seqq. of the Swiss Code of Obligations).
An employer still intending to make a mass redundancy must inform the cantonal labour office accordingly.
Finally, an employer normally employing at least 250 employees is also obliged to issue a social plan respectively reach an agreement with the employees on how to avoid redundancies, limit their number and/or mitigate their consequences (see art. 335h et seqq. of the Swiss Code of Obligations).
In a redundancy situation, precedent requires that courts apply a strict standard in determining the validity of dismissals. Specifically, a court is required to consider the following four factors in this determination:
- the necessity of reducing personnel,
- the necessity of dismissal as the method of reducing personnel (as opposed to relocation, solicitation of voluntary retirement, etc.),
- the appropriateness of the process for determining which employees will be dismissed, and
- the appropriateness of the termination proceedings, including providing reasonable explanation to the dismissed employees.
There is no material difference in the legal requirement for large numbers of dismissals compared with that for a single dismissal. The employer would need to prove the necessity of reducing such a large number, but generally the same rules apply.
As for procedural requirements in case of termination of employment of 30 or more employees due to redundancy, please see Question 10.
There are no specific additional legal requirements regarding redundancies. However, if the termination of employment is made without cause or without reasonable cause and fairness to an employee, the employee would be entitled to file a claim in the Labour Court against the employer for damages for unfair termination. Therefore, the employer would need to give careful consideration to the necessity and reasons for the large number of dismissals prior to invoking the termination exercise and implement a fair procedure (using fair criteria) for the selection of employees whose employment would be terminated.
The process of dismissal for redundancy depends on the category of the employee. Broadly speaking, employees can be categorised either as a workman or a non-workman. A ‘workman’ is any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, but does not include any such person who is employed mainly in a managerial or administrative capacity; or who, being employed in a supervisory capacity, draws wages exceeding INR 10,000 (USD 144 approx.) or performs functions mainly of a managerial nature.
The Industrial Disputes Act, 1947 (ID Act) regulates redundancies of workmen category employees. Redundancy of non-workmen category is regulated by the State-specific Shops and Establishments legislations.
As per the ID Act, in case of commercial establishments and manufacturing units (engaging less than 100 workmen) the process of dismissal entails providing at least 1 month notice of termination or pay in lieu thereof; payment of a severance compensation and a post facto intimation to the labour authorities. The principle of ‘last in first out’ needs to be followed unless there are justifiable reasons in writing to deviate from such principle. In case of manufacturing units engaging 100 or more workmen, a prior approval from the labour authorities is required apart from providing a 3 months’ notice or pay in lieu and payment of a severance compensation.
The State-specific Shops and Establishments legislations which primarily prescribe the notice period for termination (which is typically 1 month or pay in lieu thereof) govern the dismissal of non-workmen category employees.
Apart from these regulations, the employment contracts and company policies on redundancies would need to be followed.
In case of mass redundancies, employers often opt for a more amicable route such as voluntary retirement schemes. This helps in bringing down numbers subject to the severance package being generous.
Other aspects to bear in mind include the settlement agreements with worker unions which if any would require consultation prior to implementation of dismissals.
There are no specific legal requirements regarding redundancies. Employment contracts and company policies on redundancies would need to be followed.
An important aspect to consider is that there are certain areas of the economy which have strong and powerful unions. In these areas there could be collective agreements which require fulfilling a certain procedure before the execution of dismissals such as dealing the process in a two – party negotiation (between employers and employees) or three party negotiation (between employers, employees and representatives of the Executive Power).
An employment contract must be terminated individually. There are no special provisions for collective redundancies.
A large number of dismissals or redundancies can only be undertaken when certain conditions and legal procedures stipulated in LCL are met.
A. The mass redundancies refer to the termination of at least 20 employees, or less than 20 but accounting for at least 10% of the total number of the employees.
B. Legal reasons shall be satisfied, such as the employer is under restructuring according to the enterprise bankruptcy law, or encounters serious difficulties in production and business operation, or changes the products; or makes important technological update, or adjusts the methods of its business operation, or considerable changes in the objective economic situation mean the performance of the employment contract is unable to be continued.
C. Legal procedure must be complied with, for example, the employer shall make an explanation 30 days in advance to the trade union or to all its employees, solicit their opinions and report the final redundancy plan to the labour administration.
D. All employees being laid off must receive severance payment from the employer involved according to LCL.
E. The employer shall take the service year of the employee, the term of his/her contract and his/her family’s needs into consideration when it decides the priority of employees to be kept.
The Swedish Co-Determination at the Workplace Act (“CDA”) does not make a distinction between different kinds of redundancies. Thus, the rules concerning redundancies are always triggered, irrespective if one employee or a larger amount of employees are affected.
However, a notification to the Swedish Employment Service (“ES”) must be made when at least five employees are affected by a redundancy. This also applies if the total number of terminations are expected to be 20 or more during a 90-day period. The notice period to the ES is two months if up to 25 employees are affected, four months if 26-100 are affected and six months if more than 100 are affected.
The LSA allows an employer to execute a mass lay off of its employees for business reasons under stringent requirements. The following requirements must be satisfied.
- Urgency. An urgent business necessity is required to lay off employees, such as a drastic business downturn, accumulated business deficits or threatened or impending bankruptcy where layoffs are unavoidable. In this regard, an employer that enjoys business surplus in a financial sense may not easily satisfy the “urgent business necessity” requirement. Conversely, an employer experiencing accumulated business losses could be deemed to have met the above requirement. However, even though an employer’s financial statement does not show a loss, if an employer suffers a drastic decline in business performance and such decline is projected continuously in the future, the employer may be deemed to satisfy the “urgent business necessity” requirement. There is no formula or rule in ascertaining whether an employer has satisfied the business necessity requirement. Such determination can only be made on a case-by-case basis.
- Last Choice. Best efforts must have been made by the employer to avoid layoffs, such as implementation of voluntary retirement plan, temporary leaves of absence, termination of subcontractors, freeze of new hire and overtime work, job transfers, etc.
- Fair Selection Criteria. Reasonable and fair criteria must be set up to select the employees to be laid off. In general, when deciding whom to lay off, the employer consider various factors such as the employee’s age, the period of continuous service, position, rank, job evaluation, attitude, career and career prospects, expertise, competency, family support obligations, the employee’s assets, the assets owned by other members of the employee’s family, the employee’s state of health, the possibility of change of occupation, the benefit or disadvantage to the company; and the status of employee (e.g., regular or temporary).
- Notice and Consultation. The employer must provide 50 days’ advance notice to the employees’ representative (or labour union if a labor union representing the majority of the employees is organized) and discuss in good faith on the measures to be taken by the employer to avoid layoffs and the selection criteria for the layoffs.
Under the LSA, layoffs satisfying the above statutory requirements would be deemed to be a termination with just cause. Since massive layoff based on business necessity is a kind of dismissal, the employer must give employees at least 30 days’ advance notice to individual employee.
In addition, a 30 days’ advance report to the Ministry of Employment and Labor must be made in general if the employer intends to layoff at least 10% of its employees.
If the employer intends to hire a new employee within 3 years of the layoff to do the same job for which the laid off employee were responsible, the employer is obligated to rehire such employee upon her request.
Redundancies must comply with additional requirements including the necessity to chose the potentially dismissed employees via application of selection criteria which in essence tend to protect the most fragile individuals.
Besides, employers must carry out consultation procedures whose content is determined by the number of layoffs and the size of the company. The timeframe typically ranges from one to four months. An interesting feature is that consultation deadlines are now effective (pursuant to a law dated 13 June 2013) which gives employers better planning capacities.
Finally, if a company of 50+ employees contemplates laying off 10+ employees, it must set up a redundancy plan (negotiated with unions or discussed with the Works Council) containing inplacement and outplacement measures and have this plan approved by the Labour Authorities. This administrative process (also due to the 2013 law) resulted in a decrease of litigation rates.
There are additional rules that apply to large number of dismissals. It is the employer’s general duty to consult the works council when large number of dismissals are planned and inform them about changes affecting the business. If all or most of the employees are negatively affected by the reorganisation, the works council can request a social plan and can also call in an administrative tribunal in order to compel the employer to produce a social plan. As defined in section 45a of the Labour Market Promotion Act, the local Employment Market Service must be notified if the employer wishes to dismiss, within a 30-day period:
- At least five employees in businesses with more than 20 and less than 100 employees
- At least 5 per cent of employees in businesses with 100 to 600 employees
- At least 30 employees in businesses with more than 600 employees, and
- At least five employees aged 50 or over for businesses of any size.
Dismissals declared within a 30-day waiting period are void.
Mass terminations may trigger enhanced statutory notice of termination and other requirements. Such requirements vary by jurisdiction. For example:
- Ontario: If 50 or more employees are terminated in any period of four weeks or less, then the group notice provisions of the Employment Standards Act, 2000 (the ‘ESA’) apply instead of the individual notice requirements. Where group notice applies, the employer must give notice to the employee of between eight and 16 weeks, depending on the number of employees terminated. The employer must also give notice to the Ministry of Labour. In addition, statutory severance pay requirements may apply (see Question 5).
- Federal: If 50 or more employees are terminated in a four week period, then in addition to the individual notice and statutory severance to which the employees may be entitled, notice of 16 weeks or more must be provided to the federal Ministry of Labour, and to other entities specified by statute.
- Québec: If an employer terminates 10 or more employees in the same establishment in a two month period, notice of eight weeks or more must be provided to the Minister of Employment and Social Solidarity with copies posted in the workplace and provided to the employment standards Commission.
- Alberta: If 50 or more employees are terminated in a four week period, then in addition to the individual notice to which the employees may be entitled, notice of four weeks or more must be provided to the Employment Standards Program Delivery, Alberta Labour.
- British Columbia: If an employer intends to terminate 50 or more employees at a single location in a two-month period, then in addition to the individual notice to which the employees may be entitled, the employer must give written notice of group termination to each employee affected. The employer must also notify the Minister of Labour and any trade union that represents the employees. The length of the required notice is set out in applicable legislation and varies depending on the number of employees affected.
The mass/group notice of termination provisions in applicable legislation are subject to specified exceptions.
Special procedures need to be followed in the case of a collective dismissal.
A “collective dismissal” is defined as a mass lay-off on technical and economic grounds involving, over a 60-day period:
- at least 10 workers in companies employing on average between 20 and less than 100 workers in the calendar year preceding the collective dismissal;
- at least 10% of the workers in companies employing on average between 100 and less than 300 workers in the calendar year preceding the collective dismissal; and
- at least 30 workers in companies employing on average 300 workers or more during in the calendar year preceding the collective dismissal.
The legislation on collective dismissals only applies to “companies” having employed at least 20 workers on average during the calendar year preceding the collective dismissal. For the purposes of this legislation, a “company” is defined as a technical operation unit, being derived from economic and social criteria. Such technical operation unit does not necessarily coincide with the legal entity.
Prior to making any decision on the collective dismissal, the employer must inform and consult the works council (or the trade union delegation, in the absence of a works council, or the committee for prevention and protection at work, in the absence of a trade union delegation). In the absence of any worker representative body, the employer must inform and consult the workers directly. Specific information must be provided so that the worker representatives or workers are fully informed. Authorities also have to receive specific information. The employer must then organise one or more consultation meetings with the worker representatives. The applicable legislation does not provide for a specific number of meetings to be held. The employer must analyse the questions, arguments and counter-proposals of the worker representatives and provide them with answers (the so-called “Renault” procedure).
Once the employer considers that he has properly completed the abovementioned procedure, worker representatives are invited to a subsequent consultation meeting, during which the employer will formally confirm his intention to carry out a collective dismissal. On the same day, the employer must also notify the authorities again. No redundancies may be implemented during a 30-day period (which can be extended to 60 days) following this notification.
In addition, in the case of a collective dismissal, case-law confirmed that there is no legal obligation to agree on a social plan, but negotiations must be conducted between the parties (except if a plan for early retirement is to be agreed).
The statutory procedure applicable to collective redundancies must be followed by the employer if the latter one contemplates terminating at least 7 employees within a period of 30 days or 15 employees within a period of 90 days based on an economic reason.
When such threshold is reached, the employer must comply with prior information and consultation requirements with the staff delegates and Joint Works Council (still in place until the next social elections scheduled in 2018 and replaced by the staff delegation thereafter).
The employer must enter into prior negotiations with the employee representatives in order to come to an agreement relating to the establishment of a social plan. The social plan is a written agreement signed by the employer and the employee representatives, which contains the results of the negotiations.
The negotiations shall at least cover ways and means of:
- avoiding collective redundancies or reducing the number of workers affected;
- mitigating the consequences of the redundancies by recourse to social measures aimed at, inter alia, redeploying or retraining the workers made redundant; and
- granting financial compensation.
Before negotiations start, or at the very latest at the beginning of the negotiations, the employer must inform the employee representatives in writing of the proposed collective dismissal and must provide them with the following information: reasons for the proposals; number and description of employees affected; number and description of employees usually employed; period of time within which the dismissals are proposed; method of selecting employees to be dismissed; and proposed method of calculating the amount of any redundancy payment.
The employer must send a written notification of the contemplated redundancies to the Employment Administration (ADEM), as well as a copy of the above-mentioned notification before the negotiations start. The Employment Administration will then forward the written notification to the Labour and Mines Inspectorate (Inspection du Travail et des Mines).
The employer and the employee representatives must come to an agreement relating to the establishment of a social plan within fifteen (15) days from the start of negotiations.
At this stage, if the parties have come to an agreement, they must enter into the social plan. After the signing of the social plan, the employer is entitled to notify each employee of their redundancy on an individual basis.
If the parties have not come to an agreement within the 15-day time period, the parties must jointly refer the matter to the National Conciliation Office (Office National de Conciliation) with a view to initiate a conciliation process.
Notification of termination can be performed on an individual basis after the signature of the social plan or after the conciliation process has ended. Any notification of the dismissal to the employees before the signature of the minutes is null and void.
The Employment Agency must be notified by the employer if mass layoffs are planned.
Furthermore, if a works council is in place, the works council has to be heard (this applies to every dismissal regardless of the number of employees to be made redundant).
Besides, the economic committee has to be informed about economic affairs of the company.
If the mass layoff constitutes an operational change, the employer is obliged to try to negotiate a reconciliation of interest and to negotiate a social plan with the works council. While the reconciliation of interest deals with the question if an operational change should take place at all, which scope the operational change is going to have and when the operational change is going to take place, the social plan states the amount of compensation for economic disadvantages that the employees are entitled to.
When planning the operational change, the employer has to consider the time (negotiating with the works council) and the costs (compensation).
The FLL dedicates a full chapter to this matter (Title 7, Chapter 8). The only reasons for which an employer can dismiss a large number of employees together (collective terminations) are described on article 434 of the FLL, as follows:
- Force majeure or any unforeseeable event not imputable to the employer, or the employer’s physical or mental incapacity or death, the necessary, immediate and direct consequence of which is the end of work;
- The known and obvious failure of the business to cover costs;
- Exhaustion of the subject matter of an extractive industry;
- The cases referred to in article 38. The employment relationships for mining and mineral extractions that exhaust the minerals or for the restoration of abandoned or paralyzed mines, can be employed for a determined time or project or for the investment of a determined capital; and
- Insolvency proceedings instituted by creditors or in a lawfully declared bankruptcy.
For a large number of dismissals or a shutdown, the employees are entitled to a full severance payment equal to that of an employee terminated without a justified cause, except in the case of introduction of machinery and equipment, in which case the employees will be entitled to 4 months of integrated salary.
Pursuant to article 437 of the FLL, to dismiss a large number of employees in a lawful manner, the number of jobs in a business or establishment and the lists ranking workers on the basis of qualifications, job category and seniority, shall be taken into account so that workers with the least seniority are the ones first affected.
Employers regularly employing at least 20 employees in Finland shall comply with the Act on Cooperation within Undertakings (the "Cooperation Act"). The most important principle of the Cooperation Act is that companies are not entitled to make any final decisions on redundancies or major business decisions resulting to them before fulfilling their cooperation consultation obligations in accordance with the Cooperation Act. The obligations include arranging cooperation consultation negotiations during which the matters are discussed with the employees that are concerned, or their representatives.
Employers regularly employing less than 20 employees fall outside of the scope of the Cooperation Act and only have a rather simple consultation obligation. Such employer planning to dismiss an employee on collective ground has to discuss the reasons for terminations with the employee as early in advance as possible. If many employees are to be dismissed, a joint discussion may be held.