FRANCE | COLLECTIVE DISMISSAL – KEY ISSUES
- Collective dismissals rules apply to dismissal of more than 1 employee for economic reasons.
- The procedure varies depending on the number of employees made redundant and the global headcount of the company and of the group to which it belong.
- A redundancy situation consists of two elements: (i) the cause, i.e. economic difficulties, technological changes or the safeguard of the competitiveness of the company; and (ii) the consequence, i.e. cutting or modifying a job.
- Preliminary obligations:
- selection criteria to determine the order of dismissal and identify the suppressed positions
- redeployment researches within the group, at the worldwide level, to try to avoid the redundancy
- adaptation to try to avoid the redundancy
- redeployment scheme offer to offer the State schemes permitting to increase the chances to have a new position.
- The procedure includes the information and consultation of staff representatives on the economic reasons basing the dismissal and on the consequences on employees. The information and consultation must take place before any redundancy procedure is initiated.
- If more than 9 employees are concerned by the redundancy plan in a company of more than 50 employees, a Social plan (“PSE”) must be drafted and subject to the consultation of the works council, providing for various additional indemnities (such as mobility indemnities, additional severance pay, etc.). The financing implication of the company into the social plan is assessed in light of the group financial means.
- If the measures of the PSE are deemed insufficient by a court, the PSE would be considered as null and void, permitting employees who would claim so to be reinstated.
CHECK LIST – FULFILMENTS OF THE EMPLOYER IN FRANCE
- The Employer must strictly assess the number of employees concerned by the redundancy as various procedures exist.
- The Employer must verify whether the economic reasons basing the dismissal are sufficient in light of French case law.
- The Collective Bargaining Provisions must be strictly checked as a specific procedure may be provided.
- The information and consultation of the works council must be followed. As the process may require several weeks/months and as an opinion must be issued before the dismissal procedure is started, the information and consultation process shall be well prepared and take place sufficiently in advance to the contemplated dismissal date.
- Selection criteria must be drafted in advance and subject to the information and consultation of the works council.
- Individual and specific redeployment researches, at the group level, must be conducted.
- The Employer should keep the evidence of the researches made.
- The redeployment scheme must be identified (choice between 2 schemes depending on the number of employees within the group) and properly propose in the framework of the dismissal procedure.
GERMANY | COLLECTIVE DISMISSAL – KEY ISSUES
- In general any collective redundancy follows the same rules on the individual level towards the affected employees like an individual dismissal for operational reasons (see card individual dismissal).
- In addition, any collective redundancy needs to be notified to the respective local employment agency before the individual terminations are served.
- Whether or not such a collective redundancy results in the need for such a so called “mass dismissal notification” depends on whether certain thresholds are met.These are:
- In entities with 20 and less employees, regardless of the number of employees affected, no mass dismissal notification has to be made.
- In entities with more than 20 employees and less than 60 employees the threshold is met when more than 5 employees are to be dismissed.
- In entities with 60 and more employees but less than 500 the threshold is met with 10% or at least more than 25 employees.
- In entities with at least 500 employees the threshold is met when at least 30 employees are to be terminated.
- All terminations have to be executed by serving the respective notice letters or signing separation agreements within 30 calendar days.
- Even though the mass dismissal notification basically appears to be paperwork is decisive, as a wrongful notification or not notifying the employment agency at all if there is a notification obligation makes the individual dismissals invalid and therefore void, so that the affected employees could claim for reinstatement.
- If there is a works council in place and the aforementioned thresholds are met, the measure results in co-determination rights of the works council, so that a balancing of interests and social plan has to be agreed upon. Whilst the balancing of interests basically deals with the If, When, Why and What of such a measure the social plan is about compensating the affected employees.
- A social plan can be avoided if the redundancy measure is only limited to reductions in force and does not go along with any other changes like e.g. operational changes. If this is the case, a social plan only needs to be negotiated if the following thresholds are met:
- In entities with less than 60 employees, 20% of the workforce but at least 6.
- In entities with at least 60 employees but less than 250, 20% of the employees or at least 37.
- In entities with at least 250 employees and less than 500 employees, 15% or at least 60 employees.
- In entities with at least 500 employees, 10% of the workforce but at least 60 employees.
There is no clearly set out period of time within which these thresholds have to be met.
A balancing of interests yet still needs to be concluded.
If a works council is in place, it can hinder you by means of interim injunction to proceed with the measure, unless a balancing of interests has been entered into.
CHECK LIST – FULFILMENTS OF THE EMPLOYER IN GERMANY
- Are the thresholds for a mass dismissal notification met?
- Is there a works council in place?
- If a works council is in place:
– Do I need a social plan?
– Are the thresholds met?
– What is the contents of the measure?
– Is it just reduction in force or any further changes of operations?
- If a works council is in place, factor in the respective time for negotiations with the works council (dependent on the number of employees affected and the size of the measure approximately two to three months).
- The individuals may yet still challenge their individual dismissal and claim for unfair dismissal even if a social plan and a balancing of interests have been concluded.
ITALY | COLLECTIVE DISMISSAL – KEY ISSUES
- A collective redundancy normally constitutes an objective material ground for justifying dismissal of a certain number of employees and is linked to a downsizing, conversion or shutting down of a company / business unit or material parts thereof. The downsizing is not necessarily linked to a company being in crisis and may be carried out even without modifying or closing any establishment or plant.
- Under Italian law, the redundancy procedure applies only to workers and employees and not to executives.
- It also does not apply to employers who employ less than 15 employees at the beginning of the procedure (to be calculated on the average number of employees in the prior six months).
- In the event that an employer proposes to dismiss at least 5 employees in the same business unit or in different units located in the same area (“provincia”) within a period of 120 days, he has to comply with a specific procedure, which includes information and consultation with the unions.
- Before proceeding with a mass dismissal, the company must pay a fixed fee, called “entry fee”, to the social contribution authority (INPS) and notify the work’s council / trade unions of its proposal to carry out a reduction in headcount, disclosing its plans regarding the situation.
- This notification must be in writing and must contain the following mandatory information: Reasons for the overstaffing; Reasons why collective dismissal is unavoidable; Numbers and job descriptions of affected employees; Company plan for dealing with this situation; Timing of the plan and the date when the planned dismissals would be implemented
- In the event of redundancies, the employees affected are selected in accordance with the criteria agreed in the consultation phase. Should no agreement be reached, the criteria provided for by law must be applied (Family circumstances; Length of service; Productive and organizational needs).
ITALY | COLLECTIVE DISMISSAL – CHECK LIST FULFILMENTS OF THE EMPLOYER
The Employer must give prior notice to the relevant work’s council, trade unions, Ministry of Labour and employers associations stating the reasons for the reduction in headcount, the numbers and job descriptions of the employees, the date on which the planned dismissals are going to be effective.
- Within 7 days since the information is received, the work’s council / trade unions have the right to send a written request for a meeting to jointly examine the situation with the company, with a view to avoiding or reducing the number of redundancies or to finding alternative solutions to the dismissal.
- This joint evaluation (first phase) may take a maximum of 45 days from the date of notification by the company.
- The aim of these meetings is also to reach a possible agreement between the company, unions and employees enabling a reduction in the cost of the procedure.
- As part of the agreement, the employer may agree to pay an increased severance package to all employees dismissed by reason of redundancy, in which case it is usual to require the dismissed employees to sign agreements on an individual basis waiving all rights and actions against the employer. The possible severance package is usually agreed even in case of shutting down of a plant, when all the employees are involved.
- Should no agreement be reached within 45 days, the parties involved are called before the Ministry of Labour to re-examine the situation and to put forward possible terms for an agreement. This second phase may last no longer than 30 days from the date of the failure of the first negotiation phase.
- The total number of days allowed for completion of the above mentioned steps is, therefore, 75 days.
THE NETHERLANDS | COLLECTIVE DISMISSAL – KEY ISSUES
- The Dutch Collective Redundancy (Notification) Act (“CRA”) offers additional protection to employees in case of a collective dismissal.
- Pursuant to the CRA, the employer is obliged to notify the interested trade unions as well as governmental body UWV of its intention to collectively dismiss in the meaning of the CRA.
- A collective dismissal in the meaning of the CRA is: a forced dismissal of 20 employees or more within the same work region and within a period of 3 months.
- The contemplated decision of the employer to terminate activities of its enterprise or to materially downsize such activities is subject to Works Council’s advice.
- Social consequences and measures are often included in a Social Plan.
- The selection of the employees that will be dismissed cannot be done at random, but should be based on the Principle of proportionality.
- Ways of termination of employment agreement in case of redundancy: (I) Termination by mutual consent, (II) Termination by giving notice after UWV approval, (III) Dissolution by the Court.
- There are no statutory rules regarding severance payments. However the Cantonal Court Judges have adopted the “Cantonal Judges Formula” to calculate payments: A (weighted years of employment) x B (monthly salary) x C (correction factor).
- It is customary to take the notice period into account or to make payments in lieu of notice in case of termination by mutual consent.
THE NETHERLANDS – COLLECTIVE DISMISSAL CHECK LIST
FULFILMENTS OF THE EMPLOYER
- In most cases – depending on the extent and reason of the reorganization – the employer must request the Works Council’s advice prior to taking the decision to collectively dismiss employees.
- The Dutch Collective Redundancy Notification Act (“CRA”) offers additional protection to employees in the case of a collective dismissal.
- The CRA prescribes that an employer that intends to terminate the employment agreements of at least 20 of its employees within a period of three months and within one work region must report its intention in writing to as well the relevant trade unions as the UWV WERKbedrijf (“UWV”), and give grounds for the decision.
- The CRA gives the interested trade unions the power to start negotiations with the company involved with regard to the consequences of a collective dismissal, often resulting in a Social Plan.
- It is important that if an employer is of the opinion that the function of an employee must be made redundant due to economical or organisational reasons, the employer should be able to substantiate this e.g. with financial data. Furthermore, the employer should carefully assess whether there is another suitable position within the organisation that can be offered to the employee. Only if reemployment of the impacted employee is proven not possible, the employer may initiate termination of the employment agreement.
- The selection of the employees that will be dismissed cannot be done at random, but should be based on the principle of proportionality.
- The employer must categorise employees in interchangeable positions into age groups, namely ages from 15 to 25, from 25 to 35, from 35 to 45, from 45 to 55 and 55 and older. Within each age group the last hired employee will be the first to be considered for dismissal.
- The statutory notice period to be taken in to account by the employee is one month. The statutory notice period to be taken into account by the employer is related to the duration of the employment agreement. In the event that the agreement has lasted less than 5 years, the notice period is 1 month, between 5 and 10 years is 2 months; between 10 and 15 years, 3 months and 15 years or more, 4 months.
- A longer notice period can be agreed upon in contract. In that case, the notice period to be taken into account by the employer has to be twice the notice period agreed upon for the employee. The notice period for the employee may not exceed a period of 6 months.
- 3 (most common) ways of termination of employment agreement in case of redundancy:
- (I) Termination by mutual consent,
- (II)Dismissal after UWV approval,
- (III) Dissolution by the Court. Termination by mutual consent is in general the most flexible and quickest and therefore preferable way to terminate the employment agreement.
- In case of a dismissal for economical reasons, it is generally accepted that a Court will grant a severance payment to the employee. The severance payment is in dissolution proceedings based on the “Cantonal Judges Formula” (axbxc):
- A is applied as follows: years of service up to the age of 35 count for 0.5, years of service between the age of 35 and 45 years count for 1, years of service between the age of 45 and 55 for 1.5 and each year over 55 years of age counts for 2.
- B consists of the monthly (base) salary and other structural cash remuneration (e.g. holiday allowance). As the economic situation of a company is well (or in any case not bad) and there is no necessity to restructure, the C-factor should be considerably higher than 1. This formula is often also used in many Social Plans.
- The Cantonal Judges Formula is generally also applied in terminations by mutual consent.
UK | COLLECTIVE DISMISSAL – KEY ISSUES
- Employers are required to inform and consult employees about collective (in order words, large-scale) redundancies either through employee representatives or recognised trade unions.
- This duty is in addition to other individual dismissal employer obligations (see “individual dismissal”) and other information and consultation requirements (for example, European works councils).
- The duty to consult applies where an employer is proposing to make 20 or more employees at one establishment redundant within a period of 90 days or less. It may also apply beyond redundancy to reorganisations and contractual change where this number of employees are involved.
- Consultation must begin in good time and no later than the following minimum periods before the first dismissal takes effect: 30 days – where between 20 and 99 redundancies are proposed at one establishment; or 90 days – where 100 or more redundancies are proposed at one establishment.
- The obligation is to consult with appropriate representatives of affected employees. Appropriate representatives are recognised trade union representatives, or, either an appropriate standing committee of employee representatives, or an ad-hoc committee of elected employee representatives.
- Consultation begins with the employer providing specific written information to the representatives.
- The employer must then consult with the representatives about ways of avoiding the dismissals, reducing their number and mitigating the consequences of the dismissals.
- There is a narrow special circumstances defence which may assist employers unable to consult.
- Failure to consult may result in an award of up to 90 days’ pay in respect of each employee.
- There is a statutory obligation to inform the government of proposed collective redundancies.
UK – COLLECTIVE DISMISSAL CHECK LIST
FULFILMENTS OF THE EMPLOYER
- Employers need to ensure that any redundancy situation falls within the statutory redundancy definition as follows:
- the employer ceases to carry out the work for which that employee was employed; or
- the employer ceases to carry out the work for which the particular employee was employed at the place where the employee worked; or
- the employer needs fewer people to carry out the kind of work for which the employee was employed; or
- the employer needs fewer people to carry out work of the kind for which the employee was employed at the place where he/she worked.
- Collective dismissals require detailed planning in advance, in order to reduce employee relation problems and risk of breaching legal obligations. Drawing up a timetable, training managers, allocating responsibilities, agreeing a communication plan, preparing for the election of employee representatives are all typical parts of that planning process.
- Where employee representatives are elected for the purpose of collective dismissals information and consultation, special election rules apply including a requirement that the employer makes arrangements to ensure that the election is fair.
- Representatives and candidates for election have a number of rights including rights to access affected employees, appropriate accommodation and other facilities to be provided by the employer and reasonable time off with pay to perform their functions or to undergo training to perform such functions. In addition, they are protected from being subjected to a detriment by the employer on grounds that they were a candidate or representative or performed any functions or activities as a representative or candidate and from being unfairly dismissed if the reason or principal reason for dismissal was that they were a representative or a candidate or performed or proposed to perform any functions or activities as such.
- Every employee who is dismissed by reason of redundancy is entitled to receive from his or her employer a redundancy payment, provided that the employee has at least two years’ continuous employment with the employer or its group of companies. The amount of the redundancy payment is based on the dismissed employee’s age, salary and length of service and is subject to a current maximum of £11,400. Many employers provide more generous company redundancy payments.
For more information contact ELLINT