What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
Employment & Labour Law (2nd Edition)
Layoffs or terminations for redundancy may also be referred to as “terminations for managerial reasons.” The Labor Standards Act (“LSA”) sets forth the requirements for a lawful layoff (collectively, the “Layoff Requirements”). Please note that –as a general proposition – satisfying the Layoff Requirements is more difficult than the just-cause requirement for individual terminations. The Labor Relations Commission (“LRC”) and the courts also tend to review layoff case with greater scrutiny than individual terminations, due to the larger number of employees involved in layoffs.
The Layoff Requirements are as follows:
- An imminent managerial necessity for the layoff must exist (e.g., severe financial strain over a period of time without a reasonable prospect of improved financial conditions);
- The employer must make best efforts to avoid the layoff;
- The employer must establish reasonable and fair criteria regarding those to be laid off;
- The employer must consult in good-faith with the employee representative or labor union (if majority union exists) on matters related to the layoff;
- Advance notice must be provided at least 50 days before the scheduled layoff date to the employee representative or labor union (if majority union exists) and good faith consultation in connection thereto; and
- The employer must submit a report to the Ministry of Employment and Labor (“MOEL”) if, in principle, 10% or more of the workforce is being laid off.
If the number of employees in the workplace are between;
- 20 and 100, and at least 10 employees,
- 101 and 300, and at least 10% employees,
- 301 and more, and at least 30 employees,
will be dismissed on the same date or different dates in one month, such dismissal will be defined as collective redundancy.
In case of a collective redundancy, the employer shall make a notification in writing to (i) the workplace union representative, (ii) the Regional Social Security Directorate, and (iii) Turkish Employment Agency. The notification should contain information regarding the date and cause of termination and the number of dismissed employees. The notice for termination shall be effective after thirty days following the notification made to the Regional Social Security Directorate.
If there is a union representative(s), then a consultation (which should then be documented) shall take place between such representative(s) and the employer, relating to the matters of whether it is possible to eliminate the collective dismissal, to lower the number of employees to be dismissed, and to minimise the negative effects. However, if the employer does not have a collective bargaining agreement or a union membership, a notification to the Regional Social Security Directorate and Turkish Labour Institution is sufficient.
Specific information and consultation rules apply in case of collective redundancy according to the Collective Dismissal Notification Act. These rules apply when 20 or more employees are dismissed within a period of three months.
An employer must inform or consult the trade unions, involve the works council if present, notify the UWV (Dutch Employee Insurance Agency), observe a one-month waiting period, apply for dismissal permits or terminate the employment contracts with mutual consent and give notice.
The notification of trade unions must be done timely as to allow for timely consultation. The advice of the works council must be requested in writing and in sufficient time for the council to impact the planned decision significantly.
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.
There are additional obligations set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) if an employer proposes to dismiss 20 or more employees within a 90 day period or less.
The employer will be required to inform and consult with ‘appropriate representatives’ of the affected employees on a collective basis. The term, affected employees, is not limited to those being dismissed but applies to any employee who may be affected by the dismissals.
The definition of ‘redundancy’ which TULRCA applies is wider than that applying to individual redundancies under the Employment Rights Act 1996. A proposal to dismiss employees for any reason, not related to the individuals themselves, will fall within the scope of redundancy under TULRCA. This includes, for example, a proposal to dismiss employees for failing to agree to new terms and conditions of employment.
If the employer is proposing to dismiss 100 employees or more within a 90 day period, consultation with the affected employees must begin at least 45 days before the first of the dismissals takes effect. If the proposal is to dismiss less than 100 employees, consultation must begin at least 30 days before the first of the dismissals takes effect.
An employer that fails to comply with its obligations to inform and consult with employee representatives is liable to pay a protective award to employees. The amount is decided by an Employment Tribunal, having regard to what is just and equitable in the circumstances, and can be up to a maximum award of 90 days’ actual pay per employee.
The purpose of the award is to penalise the employer, rather than compensate employees for losses suffered. If there were special circumstances that made it not reasonably practicable to comply with these requirements, then the employer will have a defence to the claim for a protective award.
An employer must notify the Secretary of State where it proposes 100 or more redundancies within a 90 day period.
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 between eight and 16 weeks 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 an employer intends to terminate the employment of 50 or more employees at a single location within a four-week period, the employer must give the Minister of Labour, the affected employees, and their unions(s) the following amount of written notice according to the number of employees affected:
- 8 weeks - 50 or more employees but less than 100
- 12 weeks - 100 or more employees but less than 300
- 16 weeks - 300 or more employees
Group termination notice must be provided directly to all affected employees as per the timelines above, regardless of how long the individual employees in the group have been working. The notice must specify the number of employees whose employment will be terminated, and the effective date of the terminations.
- British Columbia: If 50 or more employees are terminated in a single location during a two month period, then the employer must give the Ministry of Labour, the affected employees, and their union(s) between eight and 16 weeks’ written notice, depending on the number of employees terminated.
The mass/group notice of termination provisions in applicable legislation are subject to specified exceptions.
Large numbers of dismissals may be done under the first four authorized causes discussed in Question 1.
An employer may implement termination by redundancy when the following are present:
(a) Superfluous positions or services of employees;
(b) Positions or services are in excess of what is reasonably demanded by the actual requirements of the enterprise to operate in an economical and efficient manner;
(c) Good faith in abolishing redundant positions;
(d) Fair and reasonable criteria in selecting the employees to be terminated: and
(e) Adequate proof of redundancy such as feasibility studies/proposals.
A valid retrenchment program requires the following:
(a) Retrenchment must be reasonably necessary and likely to prevent business losses;
(b) Losses, if already incurred, are substantial, serious, actual and real, or if only expected, are reasonably imminent;
(c) Expected or actual losses must be proved by sufficient and convincing evidence;
(d) Retrenchment must be in good faith and not to defeat or circumvent the employees' right to security of tenure; and
(e) Fair and reasonable criteria in ascertaining the retention and dismissal of employees, such as: status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
Mass termination due to closure of business requires the following:
(a) Decision to close or cease operation of the enterprise by the management;
(b) Decision was made in good faith; and
(c) No other option available to the employer except to close or cease operations.
A valid termination due to the installation of labor-saving devises requires the following:
(a) Introduction of machinery, equipment or other devices;
(b) Introduction must be done in good faith;
(c) Purpose for such introduction must be valid such as to save on cost, enhance efficiency and other justifiable economic reasons;
(d) No other option available to the employer than the introduction of machinery, equipment or device and the consequent termination of employment of those affected thereby; and
(e) Fair and reasonable criteria in selecting employees to be terminated.
Termination of employment within the framework of collective dismissals is subject to the same rules of termination of individuals, i.e. the termination process should be carried out in good faith and subject to the employer performing a hearing procedure and providing prior written notice for termination. In addition, where there is an existing trade union or employee representative body, they must be informed and consulted with. In the event some employees are terminated while the employment of others who carry out similar positions is retained, the employer should have valid reasons/explanations with respect to the selection process. Additionally, an employer who terminates the employment of 10 employees or more is required to send a notification in this regard to the Israeli Employment Service.
The Swedish Co-Determination 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 number of employees are affected.
However, a notification to the Swedish Public Employment Service (“ES”) must be made prior to termination 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.
If a collective redundancy situation arises then certain notification and consultation obligations apply. A collective redundancy means dismissal for reasons unconnected to the individual employee (typically 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 Employment Affairs and Social Protection; and (iii) collective redundancies cannot take effect until 30 days after the date of notification to the Minister for Employment Affairs and Social Protection.
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).
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 (ranging from one to four months, depending on the number of dismissed employees) give 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 and/or discussed with the Works Council) containing inplacement and outplacement measures and have this plan approved by the Labour Authorities. This administrative process tends to secure the redundancy plans, as the latter will only be implemented once the Labour Authorities have issued their authorization.
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.
A large number of dismissals or redundancies can only be undertaken when certain conditions and legal procedures stipulated in LCL are met.
A. ‘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 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 to the objective economic situation mean the performance of the employment contract can no longer continue.
C. Legal procedure must be complied with, for example, the employer shall draft 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 employees’ years of service, the term of his/her contract and his/her family’s needs into consideration when it decides the priority of employees to be kept.
In case of ‘collective dismissal’, the employer must inform and consult the employees’ representatives (or the employees themselves if there is no works council, health and safety committee or union delegation) by providing specific information on the envisaged collective dismissal. He also has to notify certain information to the authorities.
There is a ‘collective dismissal’ if, during a period of 60 days, a certain number of employees are dismissed for reasons not directly related to the person (but rather to the circumstances of the business): 10 employees in companies employing 20 to less than 100 employees during the last 12 months, 10% of the employees for companies from 100 to less than 300 employees and 30 employees for companies with at least 300 employees. The ‘companies’ are defined as the technical operation unit, described by economic and social criteria. Therefore, they do not necessarily coincide with the legal entity.
Most of the time, a collective dismissal happens in three phases: (i) the announcement of the employer’s intention to proceed to collective dismissal and the information and consultation on the reasons and alternatives with the employees’ representatives, (ii) the negotiation of a social plan and (iii) the implementation of it. Legally, there is nevertheless no obligation to conclude a social plan (except if there is a plan for early retirement).
At the end of phase (i), if the employer confirms the collective dismissal, he will notify the authorities, which will allow to begin a freezing period of 30 days (extendable to 60 days) during which no dismissals can be made.
Special indemnities and outplacement services, to help the dismissed employees find a new job (‘reconversion cell’), are legally foreseen (with different thresholds than the ones for the information and consultation duty). Furthermore, the social plan can contain extra-legal indemnities or measures.
Even if the thresholds of the collective dismissal are not reached, multiple dismissals can qualify for a special procedure of information and consultation imposed by CBA’s concluded at a sectoral level of industry.
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.
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.
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 then 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 abusiveness 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 (once again) 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).
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:
(i) Research government assistance schemes to support the restructuring;
(ii) Obtain employment facilitation for employees;
(iii) Consider available alternatives such as redeployment, temporary layoffs (subject to some mandatory conditions), implementing a shorter work week;
(iv) Take a long term view of manpower needs;
(v) Consult with the relevant trade unions if employees are unionised;
(vi) Not discriminate against employees and make selections based on objective factors such as the ability to contribute to the company’s future business needs;
(vii) Treat affected employees with dignity and respect; and
(viii) 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.
The term “redundancy” is not defined in the Employment Relations Act 2000. The courts have defined a redundancy as a situation where an employee’s position becomes surplus to the needs of the employer.
The law applicable to termination for cause also applies to no-fault termination for redundancy. A redundancy must be substantively justified. The business decision underpinning the redundancy has to be measured against what a fair and reasonable employer could have decided to do in the circumstances.
A redundancy must be carried out in a way that is procedurally fair. Any process agreed to in an employee’s employment agreement (if any) must be strictly followed. Employees must be informed of their jobs being in jeopardy and be consulted, and the employer must consider any alternatives to redundancy before a final decision is made. Selection of an employee for redundancy must be carried out using fair criteria and the employer must be able to show that it has considered any possibility of redeploying the employee.
Once a final decision has been made to implement redundancy:
- An employee’s agreement may provide for compensation upon redundancy, but otherwise there is no statutory entitlement to redundancy compensation.
- Notice of termination must be given to an employee who is being made redundant. A notice period of termination for redundancy is usually specified in the employee’s employment agreement. If there are no provisions relating to notice, reasonable notice must be given.
A well-resourced employer should consider what assistance it can provide to redundant employees including matters such as providing a reference, support in searching for alternative employment, curriculum vitae development or access to counselling.
According to Law no. 223 of 23 July 1991, as amended, a collective dismissal occurs when at least five dismissals are served by the employer in the same province and in a period of 120 days, due to reduction, transformation or ceasing of activity. Law no. 223 is applicable only to companies that employ more than fifteen workers. If the Law applies, the employer is required to follow an information and consultation procedure with the trade unions.
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.
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 February/March 2019 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, minutes of disagreement informing the duly substantiated attitude of the parties as to the elements under negotiation shall be forwarded to the Employment Administration, which shall send a copy to the Labour and Mines Inspectorate.
In addition, the parties must jointly refer the matter to the National Conciliation Office (Office National de Conciliation), under penalty of foreclosure, no later than 3 days after the signature of the minutes of disagreement by attaching a copy of the minutes and indicating the names of the special members who will sit on the Joint Committee on behalf of each of the parties, with a view to initiate a conciliation process.
Within 2 days of referral, the National Conciliation Office will invite the parties to conclude a social plan. The Joint Committee must meet no later than 3 days after the meeting. The deliberations must be closed no later than 15 days after the first sitting.
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.
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 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 or five or more elderly employees due to redundancy, please see Question 10.
Depending upon the nature, location and the number of employees in an establishment, the employer shall be required to comply with the provisions related to retrenchment under the ID Act with respect to employees to whom the ID Act applies.
As per the ID Act, no workman employed in any industry who has been in continuous service for not less than 1 year under an employer shall be retrenched unless: a) the workman has been given 1 months’ notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid salary in lieu of such notice; b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to 15 days average pay for every completed year of continuous service or any part thereof in excess of 6 months; and c) a notice is served to the appropriate Government / authority as per the ID Act.
If the industrial establishment (as defined under the ID Act) employing not less than 100 workmen on an average day of the preceding 12 months, terminates the employment of a workman who has been in continuous service for not less than 1 year, such industrial establishment is required to serve 3 months’ notice in writing to the workman being retrenched or salary in lieu of such notice and also take prior permission of the appropriate Government / authority as per the ID Act. Some states in India have increased the aforesaid 100 employee threshold to 300.
Employees to whom the ID Act does not apply, shall be governed by the terms and conditions mentioned in their individual employment agreement.