European employment law checkpoint

Individual and collective redundancy

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Show What restrictions are there on an employer's ability to dismiss an employee?

England

France

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 labor inspector. In the event where a protected employee is made redundant without the authorisation of the labor inspector or in spite of the labor 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.

Belgium

Individual dismissal

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: there is no obligation for the employer to justify its decision to dismiss a white-collar employee.

Multiple dismissals

Depending on the sector-level collective bargaining agreement, a multiple dismissal can be made subject to certain restrictions (e.g. the reassignment of the employees concerned to other departments, a ban on new hires, etc.).

Collective dismissal

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 employees to be dismissed.

Portugal

Apart from the legal requirements explained in question 1 above, with regard to the termination of work positions, the employer is not entitled to dismiss any employees if:

  1. the grounds for the redundancy procedure have been caused by the employer's own fault;
  2. it is possible to assign the redundant employee to a vacant position compatible with the employee's professional category;
  3. there are term employment agreements in force for the redundant position; and
  4. 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.

In addition, both the collective dismissal and the termination of work position procedures have to comply and follow the several steps and phases described in the Portuguese Labour Code, addressed below.

Germany

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:

  1. 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.
  2. 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.
  3. 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.

Formal aspects

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.

Ireland

There are no such restrictions provided that:

  1. the redundancy situation is genuine; and
  2. the employee concerned was not unfairly selected for redundancy. In this regard, unfair selection will arise if either:
    1. the selection for redundancy resulted wholly or mainly from one of the automatically unfair reasons for dismissal e.g. pregnancy, race or age, or
    2. 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

Spain

As a general comment, Spanish labour law is very protective of employees and labour courts are very reluctant to decide in favour of the 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 is a specific legally established reason.

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 as from the date on which their representation ends). They also have job retention rights in the event of suspension or termination of the employment relationship due to economic, technological, production or organisational reasons (either collective or individual). Also, in the case of wrongful dismissal, the representative is entitled to return to the company (unless he/she prefers be leave).

Likewise, the SW provides special protection for individually dismissed employees under certain maternity/paternity-related circumstances; their dismissals would be considered null (the reinstatement of the employee would be mandatory) if no legal reasons exist for fair termination.

It is important to stress that a specific procedure established by law must be followed in Spain 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 labour authority and 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).

As for individual dismissals for objective reasons, the employer must give the relevant employees notice of 30 calendar days. Such notice must be in writing and must include a detailed explanation of the circumstances leading to the dismissal; payment of the statutory severance must be provided at that time, which is equivalent to 20 days of salary per year of employment with a maximum limit of 12 months of salary, unless a higher severance payment has been agreed in the employment contract. This notice must also be given to employee representatives. If the 30 calendar day notice is not respected, the employer will have to pay compensation equivalent to the salary corresponding to the defaulted period.

Italy

The Netherlands

Termination

Pursuant to Dutch law, the employer can terminate an employment agreement:

  1. 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 Werkbedrijf (UWV);
  2. by requesting the Subdistrict Court to rescind the employment agreement;
  3. by reaching an agreement with the employee to terminate the employment agreement with mutual consent; or
  4. with immediate effect based on an urgent cause as provided for in Dutch law.

Ad a

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: (i) business/economic reasons and (ii) 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 of the employee who's 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 (see question 4) is applied to calculate damages.

Ad b

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 (see question 4). 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 - Wet melding collectief ontslag (WMCO) see question 5 - a Subdistrict Court judge may decide that the UWV is more suitable to decide on the dismissals.

Ad c

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 (see question 4) 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).

Ad d

Not relevant for this question.

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. 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. In the case 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.

Notice period

The employer must observe a notice period of, in principle, one up to 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 5 years of service - 1 month
  • from 5 up to 10 years of service - 2 months
  • from 10 up to 15 years of service - 3 months
  • from 15 years of service onward - 4 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.

f 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

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Show What are the remedies for dismissal in violation of these restrictions?

England

France

See What are the consequences of non-compliance by the employer? and Are there any other relevant points? below.

Belgium

Individual dismissal

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 is entitled to 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.

Multiple dismissals

The restrictions on a multiple dismissal will depend on the provisions of the sector-level collective bargaining agreement(s). As a general rule, if the applicable procedure is not followed, employees can claim twice their compensation in lieu of notice (severance pay).

Collective dismissal

If the employer fails to follow the applicable information and consultation procedure, 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.

Portugal

If the redundancy procedures are not carried out in accordance with the rules set forth in the Portuguese Labour Code, there is a strong risk that a ruling of unfair dismissal will be given. This is provided that a lawsuit is brought by the employee within one year (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 (i) receive all the payments s/he 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 of the amounts the employee has received during this period, if any, and (ii) 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, should the employee choose 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 for the opposition should the grounds be deemed sufficient and in that case, the amount of the indemnification due 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 compensation.

This increased indemnity is also due with regard to employees' representatives and pregnant employees. Employers are not allowed to oppose to 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. This is opposed to employees who are not entitled to this special protection, who will have to bear the burden of proof in order to be immediately reinstated.

Germany

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".

Ireland

An employee who claims to be entitled to a statutory redundancy payment may refer a claim 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 (see paragraph 3.2 below), 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.

Spain

In cases of individual dismissal for objective reasons, the affected employee may file a claim before the labour courts. The courts may consider the dismissal:

  1. Fair:

    If the reasons alleged for the termination are proven and found sufficiently serious and relevant.
  2. Unfair:

    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 in the previous position, or (b) paying severance equivalent to 45 days of salary per year of employment with a maximum limit of 42 months of salary which will be tax free. In both cases, the employer would have to pay the employee the salary which accrued from the date of dismissal to the date of notification of the ruling ("procedural salary").
  3. Null:

    If (i) the employer has breached the employee's constitutional rights, (ii) the dismissal is considered discriminatory, (iii) it affects individuals who are especially protected (pregnant women, persons on maternity/paternity leave, persons on leave for childcare, etc.), or (iv) 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).

    If the dismissal is declared null by the labour court, the employer must reinstate the employee in the prior position and pay the salaries from the date of the dismissal up to the date of the reinstatement.

In connection with the collective dismissal procedure, the employer will not be entitled to dismiss the employees if it has not complied with the formal procedure (negotiation) and no approval from the authorities is granted; otherwise, the employees will claim before the courts the nullity of the dismissals and the reinstatement of the employees will be mandatory. Likewise, should the employer close down the workplace without the approval of the collective dismissals measure by the labour authority, the labour inspectorate may impose a fine ranging from EUR6,251 to EUR187,515.

Italy

The Netherlands

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 question 2, paragraph 2.2), 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 with 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.

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Show What is redundancy?

England

France

According to Article L.1233-3 of the French Labor Code (referred to as the "Labor 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" [1] .

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.

Footnotes

[1] Significant Laws:

The Social Modernization Law (Loi de Modernisation Sociale) of January 17, 2002 (hereinafter the "Social Modernization Law") amended the collective redundancy procedures. This new Social Modernization 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 January 18, 2005 introduced the principle of forward-looking labor force and skills management with a view to anticipating and forestalling collective redundancies (Article L.2242-15 of the Labor Code), as well as the personalized redeployment agreement (convention de reclassement personnalisé).

Belgium

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 determines a specific procedure to be followed.
  • A collective dismissal is defined and regulated at national level.

A collective dismissal or mass layoff is defined as any unilateral dismissal on grounds which do not relate to the employee's person, effected over an uninterrupted period of 60 days, of:

  • at least 10 employees in undertakings that employ more than 20 but less than 100 people on average in the calendar year immediately preceding the dismissal; or
  • at least 10 per cent of the workforce in undertakings that employ at least 100 but fewer than 300 people on average in 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.

In this context, a dismissal is defined as the unilateral termination of the employment contract by the employer for reasons that are not attributable to the employee.

Portugal

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 which 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:

  1. 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 said 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 over 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.
  2. 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, involving 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 (i) the closing down of one or several of the company's business units or (ii) 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 followed depends on the number of affected employees.

The Portuguese Labour Code defines market, structural and technological reasons, as follows:

  1. Market reasons: reduction of the company's activity, determined by the foreseeable decrease of demand of goods or services or as a result of a supervening legal or practical impossibility of placing those goods or services in the market (e.g. overruling of a legal permit to trade certain goods).
  2. 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.
  3. 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 communication means.

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.

Germany

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:

  1. 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.
  2. 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.
  3. 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.

Ireland

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:

  1. 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;
  2. 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;
  3. 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;
  4. 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
  5. 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:

  1. the dismissal is one of a number of dismissals that, together, constitute collective redundancies;
  2. the dismissals concerned were effected on a compulsory basis;
  3. 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:
    1. other persons who are, or are to be, directly employed by the employer; or
    2. other persons whose services are, or are to be, provided to that employer in pursuance of other arrangements;
  4. those other persons perform, or are to perform, essentially the same functions as the dismissed employees; and
  5. the terms and conditions of employment of those other persons are, or are to be, materially inferior to those of the dismissed employees.

Spain

In Spain, the term redundancy refers to the termination of job positions based on economic, technical, organisational and production reasons. The main regulation governing redundancy in Spain is the Statute of Workers (SW).

Under Spanish law, there are two types of redundancies for restructuring purposes, as follows:

  1. Individual dismissal due to objective reasons (article 52 of the SW):

    In this regard, the criterion for individual dismissals based on economic, technical, organisational and production reasons is numerical. Therefore, dismissals are individual if, within a period of 90 days, the number of employees affected 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.
  2. Collective dismissal (article 51 of the SW):

    When the abovementioned thresholds are exceeded, a procedure called "collective dismissal" must be followed in order to seek authorisation from the labour authorities to carry out the dismissals, after negotiation with the employee representatives.

    Royal Decree 43/1996 of January 19 enacted the regulation on the procedure for collective dismissals.

When are economic, technical, organisational or production reasons sufficient grounds for employment terminations?

In collective dismissal procedures such reasons exist:

  1. When the termination of employment contracts contributes to overcome the negative financial situation of the company, if economic reasons have been alleged. Spanish case law has established that the financial hardship must be present and real, placing the company's viability at risk.
  2. When the termination of employment contracts contributes to guarantee the company's viability and the future level of employment within the company, by means of a more effective use of its resources, if technical, organisational or production reasons have been alleged.

    Technical reasons exist when the company's production equipment has been renewed and, consequently, a part of the workforce has become unnecessary. The reason being that the technical improvement would have the same production capacity with a reduced workforce due to a modification of the production process.

    Organisational reasons require a particular persuasive effort from the employer, as they could be considered to be too vague. These reasons usually refer to the introduction of new working methods, with the subsequent necessary organisational readjustment, even if this readjustment is not based on a previous investment to renew capital goods. Outsourcing may in some cases be an organisational reason for such purposes. However, organisational reasons are strongly linked to economic reasons.

    Production reasons refer to the alteration of the products or services offered by the company. As organisational reasons, production grounds are also strongly linked to economic grounds.

Conversely, article 52 of the SW establishes that the economic grounds to make the employee redundant must contribute to overcome negative financial situations or on technical, organisational or production grounds to overcome difficulties preventing the proper running of the company, either due to its competitive positioning in the market or due to demand.

Italy

The Netherlands

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.

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Show What compensation is an employer obliged to pay to redundant employees?

England

France

Severance pay

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: 1/5th monthly salary per year of service + 2/15th monthly salary per year after ten years of 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, said duration is set forth by law as follows:

  1. where the employee has less than six months of service, the duration of his/her notice period is set according to the common practice in the company or field;
  2. where the employee has at least six months and less than two years of service, he/she benefits from a one-month notice period; and
  3. where the employee has two years of 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.

Belgium

Employees who are dismissed in the framework of a collective dismissal are entitled to the following:

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 EUR29,729 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 EUR29,729 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 at least one month per year of employment. However, this method cannot result in a notice period which is shorter than the statutory minimum.
  • Blue-collar employees: for blue-collar employees, the notice period can be determined either at industry level or by law. Most sectors have applied this possibility, and 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.

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 EUR400 gross per month for up to four months following the termination of their employment contracts. This compensation is in addition to unemployment benefits, provided the employee is entitled to receive such benefits.

Redeployment compensation

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 above this age threshold.

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 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.

Examples:

Blue-collar employee (45 years or older) 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.

White-collar employee 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.

Outplacement

All employees above 45 years of age upon termination are entitled to outplacement at the employer's expense. Depending on the programme, the cost of outplacement can vary from EUR2,500 (excluding VAT) to EUR10,000 (excluding VAT) per employee.

Social plan

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 period or more compensation in lieu of notice
  • special end-of-service premiums
  • outplacement
  • 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

Portugal

Redundant employees will be entitled to receive a severance compensation amounting to one month base remuneration and seniority bonus, if any, per each year of seniority (the fraction shall be calculated on a pro rata basis), with a minimum limit of three months' salaries 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)].

The acceptance of the severance payment by the employees implies that they have presumably 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.

Germany

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.

Ireland

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:

  1. 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
  2. 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:

  1. absence for over 52 consecutive weeks by reason of an occupational accident or disease;
  2. absence for over 26 consecutive weeks by reason of any other illness;
  3. absence by reason of lay-off by the employer; and
  4. 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.

Spain

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, if such dismissal is considered unfair by the courts after the claim filed by the employee, the severance will be higher (45 days of salary per year of employment with a maximum limit of 42 months of salary)

Likewise, the minimum statutory severance payment in case of collective dismissal is also equivalent to 20 days of salary per year of employment, with a maximum limit of 12 months of salary. However, in the course of the mandatory negotiations, employee representatives usually demand severance payments above the minimum statutory severance payment. Often, the statutory severance payment for unfair dismissal (45 days of salary per year of employment with a maximum limit of 42 months of salary) is taken as a minimum reference.

Moreover, in a collective dismissal procedure, affected employees who are older than 55 will have the right to an additional benefit consisting of contributions made by the employer to social security by means of a special agreement until the employee reaches 61.

Italy

The Netherlands

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.

Pursuant to 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 1
  • 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 2.

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 1
  • 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 2.

This change is intended to reflect the improved employment opportunities for young people while continuing to protect older employees.

Example

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: EUR3,000
  • C-factor: 1

Calculation of severance payment based on the old formula

  • 16 years of service (round up)
  • 40 - 50 years: 7 years of service (round up)
  • 50 years onward: 9 years of service (round down)

A: (7 × 1.5) + (9 × 2) = 28.5
B: EUR3,000
C: 1

Severance payment: 28.5 × 3,000 × 1 = EUR85,500 gross

Calculation of severance payment based on the current formula

  • 16 years of service (round up)
  • 35 - 45 years: 2 years of service (round up)
  • 45 - 55 years: 10 years of service
  • 55 onward: 4 years of service (round down)

A: (2 years × 1) + (10 years × 1.5) + (4 years × 2) = 25
B: EUR3,000
C: 1

Severance payment: 25 × 3,000 × 1 = EUR75,000 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 bad.

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Show What are the employer's obligations in the redundancy process?

England

France

There are three types of redundancy procedures, based on the number of the 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, thus requiring the consultation of the works council and the implementation of a collective redundancy plan.

Certain obligations apply however to the three procedures.

General obligations

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 Labor 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 (i) 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 (ii) 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 program

Employees can benefit from redeployment measures, whose terms and conditions of execution and content differ based on the size of the company: (i) redeployment leave if the company has at least 1,000 employees; (ii) otherwise, a personalised redeployment program (convention de reclassement personnalisé).

Redeployment leave

Pursuant to Article L.1233-71 of the Labor 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 [2];
  • groups (as defined by Article L.2331-1 of the Labor 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 Labor 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 programs 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 program. If the employee fails to reply, he/she shall be considered to have refused to take part in the redeployment leave program. 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), which 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 skills, motivation and professional experience 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
  • the employee 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 program, 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 twelve months preceding his/her redundancy notification. This monthly allowance should not be lower than 85% of the monthly minimum wage (SMIC) and is capped at EUR7,433.40 for 2009.

The employee receives a pay slip each month specifying the amount of 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.

"Convention de reclassement personnalisé"

The employer is obliged to offer each employee facing redundancy the option to take part in a personalised redeployment program (convention de reclassement personnalisé), which involves a professional skills assessment financed by the unemployment fund.

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 need be, 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).

In the event that the employee accepts the "convention de reclassement personnalisé", 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.

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.

In the case 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 program (i.e. either redeployment leave or "convention de reclassement personnalisé") to which he/she is entitled.

b) Notification of the redundancy by the employer to the concerned employee

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 to elapse 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 to elapse 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 program (see 5.1 c) above).

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 Direction départementale du travail et de l'emploi (Departmental Employment and Vocational Training Directorate)

The Departmental Employment and Vocational Training Directorate must be provided with the following information within eight days of the notification of the redundancy:

information on the company: 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: full name, nationality, date of birth, sex, address, position, date of redundancy notification.

As regards the procedure for collective redundancies involving between two and nine redundancies

In addition to General obligations and As regards the procedure for an individual redundancy above, the following rules apply.

a) Information and consultation of the works council

Please refer to Under what circumstances is an employer obliged to consult with employee representatives/works councils etc? and How does the consultation procedure work?.

b) Redundancy letter

The same rules as those described under 5.2 b) 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).

As regards the procedure for collective redundancies of 10 or more

a) Information and consultation of the works council

Please refer to Under what circumstances is an employer obliged to consult with employee representatives/works councils etc? and How does the consultation procedure work?.

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 Labor 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, case law considers that a collective redundancy plan is valid in the event where, in light of the worrying financial situation of a company belonging to a group whose main line of business is faced with tough competition and results in numerous restructuring operations, it specifies (i) the redeployment offers within the group to companies whose operations, organisation and location enable the transfer of all or part of staff and (ii) the external redeployment measures 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 shall be considered null and void. Therefore, the redundancy of the affected employees shall 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 Departmental Employment and Vocational Training Directorate

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.

Footnotes

[2] 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.

Belgium

An employer who intends to proceed with a collective dismissal must abide by the following procedure.

Step 1: Information and consultation

The employer must submit a report to the employee representatives on the works council stating its intention to proceed with a collective dismissal. The report should state, among other information, the reasons for the collective dismissal, the expected number of dismissals and the period over which the dismissals will most likely take place. A copy of this report must also be sent to the director of the Subregional Employment Office.

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 with regard to the intended collective dismissal and to formulate suggestions in order to avoid or reduce the number of dismissals or mitigate the impact 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 2: 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 3: 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 notice of termination may be sent. This period is intended to negotiate a social plan, containing particular measures intended to mitigate the employment-related consequences of the collective dismissal (additional premiums, outplacement, early retirement, etc.).

Step 4: 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 (i.e. 58), the employer must obtain recognition as an undertaking in the process of restructuring. A request to this effect must be submitted to both the regional and federal Ministry of Employment.

Step 5: Dismissals

After the cooling-off period and once a redeployment committee has been set up, the employees concerned may be dismissed.

Portugal

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.

Germany

If only a few number of employees have to be terminated (for the relevant numbers please see later), there are only two simple steps:

  1. 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.
  2. 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
  1. 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.
  2. 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).

Ireland

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:

  1. thirteen weeks to two years service: one week's notice;
  2. two to five years service: two weeks' notice;
  3. five to ten years service: four weeks' notice;
  4. ten to fifteen years service: six weeks' notice;
  5. fifteen 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.

Spain

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 on collective dismissal procedures.

Italy

The Netherlands

Pursuant to the WMCO, which is based on an EC 1975 directive, the employer must notify the relevant trade unions and the 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.

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Show Under what circumstances is an employer obliged to consult with employee representatives/works councils etc?

England

France

In accordance with the provisions of Articles L.2323-15 et seq. of the Labor 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 Labor 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 Labor Code.

No decision is deemed to be taken by the employer prior to the consultation of the works council/staff representatives.

Belgium

See What are the employer's obligations in the redundancy process? above.

Portugal

This obligation is not applicable in 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? below.

Germany

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?.

Ireland

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:

  1. at least 5 in an establishment normally employing more than 20 and less than 50 employees;
  2. at least 10 in an establishment normally employing at least 50 but less than 100 employees;
  3. at least 10% of the number of employees in an establishment normally employing at least 100 but less than 300 employees; and
  4. 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:

  1. the reasons for the proposed redundancies;
  2. the number and descriptions or categories of employees whom it is proposed to make redundant;
  3. the number of employees and descriptions or categories normally employed;
  4. the period during which it is proposed to effect the proposed redundancies;
  5. the criteria proposed for the selection of the workers to be made redundant; and
  6. 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:

  1. 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
  2. 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 the those employees who are potentially affected and their representatives in order to inform them of the proposed redundancies and to allow them make their views known.

Spain

A period of consultation/negotiation with the employee representatives is always mandatory in case of collective dismissals.

This obligation is not applicable in the case of individual dismissals based on redundancy reasons, although the employer must deliver a copy of the dismissal notice to the employee representatives (for information purposes).

Italy

The Netherlands

In the event the employer intends to make 20 or more employees redundant, as described in What are the employer's obligations in the redundancy process? above, 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 one fourth of the employees.

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Show What rights do representatives/Works Councils have to halt or otherwise affect the process?

England

France

The works council does not have the right to veto the employer's project nor is its opinion 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.

Belgium

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 with regard to 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 so as to ensure that the same questions are not asked repeatedly, simply in order to draw out the process.

However, note that 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.

Portugal

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 party 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, so as to negotiate the adoption of alternative measures to the intended dismissals, such as (i) a work suspension; and/or (ii) a work reduction; and/or (iii) the professional conversion and reclassification of the employees; and/or (iv) early retirements and pre-retirement agreements, etc.

Notwithstanding this, if no agreement is reached, the employer is free to proceed with the dismissals of the employees.

Germany

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.

Ireland

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 Enterprise Trade & Employment.

Spain

In general terms, in collective dismissal procedures, if no agreement with the employee representatives is reached during the negotiation period, the labour authorities are very unlikely to authorise the dismissal. Representatives are therefore quite strong during negotiations and it is for this reason that employers usually agree on a much higher severance payment than that established by law.

Individual dismissals for objective reasons may be declared null if notice of the dismissal is not duly provided to the employee representatives, as it is a mechanism of control of the numeric thresholds mentioned in What is redundancy? above.

Italy

The Netherlands

Works council

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 decide 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 a 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:

  1. order the employer to retract the decision in whole or in part, as well as to reverse certain designated consequences of the decision
  2. 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.

Trade unions

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 WMCO (see question 5), 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 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.

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Show How does the consultation procedure work?

England

France

Redundancy of fewer than 10 employees (i.e. no collective redundancy plan required)

a) Summons

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 Labor 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 Labor 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

a) Concurrent consultation procedures

As indicated in question 6, there are two consultation procedures. They can be held concurrently or not. However, the procedure is deemed completed only once the works council has given its opinion within the scope of both consultation procedures.

b) Chartered accountant

The works council is entitled to be assisted by a chartered accountant during the consultation procedure.

During the course of the first meeting, the works council must determine whether it wishes to be assisted by a chartered accountant. In particular, the chartered accountant's mandate consists in assisting the works council with all financial and economic issues.

The chartered accountant helps the works council analyse the economic rationale behind the contemplated collective redundancies.

For the purposes of his/her duties, the chartered accountant may have access to the same documents as an auditor and may request any document he/she considers useful.

c) Number of meetings

The Labor Code does not set the number of meetings that must be held as part of the information and consultation procedure.

However, French case law considers that management should address all the issues raised by the works council and answer all their questions prior to the holding of a vote, even if this results in several meetings being held. As a result, the employer must frequently hold three to four meetings with its works council.

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 Departmental Employment and Vocational Training Directorate.

Belgium

See What are the employer's obligations in the redundancy process? above.

Portugal

  1. Termination of work position:
    1. 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:
      1. the underlying reasons for the termination of the work position and the business unit to which this position belongs to; and
      2. the need to dismiss the employees assigned to the redundant position and their professional category.

      Failure to send this communication is reason enough to consider the procedure invalid and may lead the redundant employee to challenge the dismissal before court.
    2. 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, should the employees be 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 forth by law (addressed in the answer to question 2 above), the criteria adopted by the employer in order to select the redundant employees and 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 aimed at confirming that there are no term 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 shall also confirm if the criteria for the selection of the employees was duly applied and complied with. These services will then have seven days as from the date they have received this request, to prepare and issue a report on those matters.
    3. Decision:

      The employer is only entitled to proceed with the dismissals after five days has lapsed 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:
      1. a description of the grounds for the termination of the work position;
      2. confirmation that such grounds have not been caused by the employer's own fault;
      3. confirmation that it is not possible to assign the redundant employees to a vacant position compatible with their professional category;
      4. confirmation there are no term employment agreements in force for the redundant position;
      5. if alternative measures were offered, reference to the refusal of the employees to accept such offer;
      6. 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;
      7. 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
      8. 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.
  2. Collective dismissal

    A collective dismissal procedure may be summarised as follows:
    1. 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.

      Note that failure to comply with this provision is considered a serious misdemeanour, which may trigger the application of a fine that will vary in accordance with the company's turnover and guilt (negligence or wilful misconduct).
    2. Initial information:

      An employer who intends to carry out a collective dismissal procedure is bound to give written information to the works council, or in its absence, to the company's trade union representatives of the affected employees, if any, of its intention to proceed with a collective dismissal.

      This information shall include:
      1. a description of the grounds for the collective dismissal
      2. a map of the company's personnel, discriminated by its organisational departments
      3. criteria that will be used to select the employees to be dismissed
      4. an indication of the number of employees to dismiss and their respective professional categories
      5. an indication of the period of time during which the employer intends to proceed with the dismissal
      6. 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.

      In the absence of the entities referred to above, the employer must inform of its intention to proceed with the collective dismissal to each of the affected employees, 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.
    3. 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, as well as on the application of other measures that may reduce the number of employees to be dismissed, such as (i) a work suspension; and/or (ii) a work reduction; and/or (iii) the professional conversion and reclassification of the employees; and/or (iv) early retirements and pre-retirement agreements, etc.

      The purpose of this negotiation phase is to reduce the harmful social effects of a collective dismissal. Usually, and when there are no alternatives to the dismissal, these negotiations are mainly focused on the amount of the 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 programs, maintenance of the health insurance policy for a certain timeframe, 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 a labour 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 (specially 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.
    4. Final decision:

      In the absence of an agreement avoiding the execution of the collective dismissal, the employer is still required to give written information to each employee to be dismissed, of the final termination decision, including an express reference to the grounds and date of termination of each employment agreement and indicating 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 referred to in paragraph ii) above 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 and describing 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 shall be also 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 employee's representatives, as well as the final position of the parties.

      In any case, the employer is further required to also file a copy of the referred list to the employees' representative.

Germany

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

Step Legal Regulation Description
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)

Potential Lawsuits

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:

Step Legal Regulation Description
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.

Ireland

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 redunancies.

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 the those employees who are potentially affected and their representatives in order to inform them of the proposed redundancies and to allow them make their views known.

Spain

As mentioned before, consultation/negotiation with employee representatives is only mandatory for collective dismissal procedures.

  • In this regard, negotiation with the employee representatives must be held for at least 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 before the end of such term.
  • A social plan must be proposed by the employer and negotiated with employee representatives in companies with at least 50 employees.
  • Minutes of the meetings with employee representatives summarising the parties' positions and documents analysed must be produced. These minutes must be filed with the labour authorities upon termination of the consultation period.
  • The most relevant "issues" discussed during the negotiation period (that will also be part of the social plan) can be summarised as follows:
  • the amount of the severance payments
    • number of affected employees and selection (in case of restructuring)
    • schedule for implementing the employment terminations
    • in some cases, pre-retirement plans are negotiated (i.e. payment of part wages and social security contributions up to the date of retirement)
    • employment offers in other companies/premises of the group
    • outplacement services
    • granting a preferential right to the employees made redundant, according to which they will be re-employed in case of new hire process

Notwithstanding this, in practice, the most relevant point discussed with employees relates to the amount of severance payment.

Any agreement must be approved by the majority of the employees' legal representatives.

Italy

The Netherlands

The consultation process starts when the employer has the intention to collectively dismiss 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?).

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Show How must employees be selected?

England

France

Where an employer is unable to internally redeploy its employees, 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 Labor 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 Labor 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 vs. 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.

Belgium

The Anti-Discrimination Acts must be respected.

The Belgian Anti-Discrimination Acts, which entered into effect on 10 May 2007, contains an exhaustive list of grounds on which discrimination is prohibited: age, gender, nationality, disability, marital status, religion and race. This legislation must be respected when selecting the employees to be dismissed.

Portugal

Collective dismissal

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 has already decided that the employer is not allowed to choose subjective criteria and that they have to be based on objective circumstances, such as, 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. In other words, and as an 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 therein, 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

As opposed to the collective dismissal procedure, section 368 of the Portuguese Labour Code expressly sets forth the criteria which has 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:

  1. inferior seniority in the work position
  2. inferior seniority in the professional category
  3. lower rank class of the professional category
  4. inferior seniority in the company.

Likewise, this criteria is only applied for employees with the same work position, e.g. to justify why out of two secretaries in the same business unit, only one of them was subject to the redundancy procedure.

Germany

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.

Ireland

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".

Spain

Under Spanish law no concrete criteria is 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.

Italy

The Netherlands

General

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 economical reasons. Until the first of March 2006, the rule was that in case of an application for dismissal due to economical reasons, per category of exchangeable positions of the relevant company, the employee with the least years of service was eligible for dismissal. When the employer submitted an application to the UWVconcerning the dismissal for ten employers or more, it had the possibility to choose between the proportionality principle (afspiegelingsbeginsel) and the principle of seniority (anciënniteitsbeginsel) in regard to selection for redundancy.

As from the 1 March 2006, the proportionality principle applies to all requests for termination permits, which are based on commercial reasons. In comparison to the regulation before 1 March 2006, the method for applying the proportionality principle has changed.

Applying the proportionality principle

The Policy Rules on the Assessment of Dismissal Permits provides for schemes on 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 much FTE's within each category of exchangeable positions have to be cut.

Thirdly the cutback in FTE's 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:

  1. Did the employer argue the economical reasons for redundancy convincingly?
  2. Did the employer apply the correct selection for redundancy?
  3. Did the employer argue convincingly that there were not any options for re-employment?

If the economical reasons have been argued convincingly, the 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 on the labour market. After the selection for redundancy has been assessed, the UWVlooks at the options for re-employment. When all three criteria have been met, a termination permit is issued.

Example

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
3 employees 4 employees 0 employees 2 employees 3 employees 12 employees
25% 33,33% 0% 16,66% 25% 100%

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)  
1,00 1,33 0 0,67 1,00 4 employees

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
1 employee 1 employee no employees 1 employee 1 employee 4 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.

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Show What are the consequences of non-compliance by the employer?

England

France

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 an employee, with at least two years' service, damages 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 procedure

Where the employer fails to comply with the redundancy procedure, the court may award the employee damages for the loss incurred.

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.

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.

This indemnity cannot be cumulated with the indemnity in case of redundancy not based on real and serious grounds.

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 program

Where the employer fails to offer the "convention de reclassement personnalisé" redeployment program, the employee may take civil action to obtain damages for the loss incurred.

Failure to offer the "convention de reclassement personnalisé" redeployment program 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 Departmental Employment and Vocational Training Directorate

Failure to inform the Departmental Employment and Vocational Training 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 EUR750. 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. The following acts are, inter alia, classified as a délit d'entrave:

  • 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 EUR3,750 (two years' imprisonment and/or EUR7,500 in case of repeated offences) for the head of the company and/or by a maximum fine of EUR18,750 (EUR37,500 in case of repeated offences) for the company itself.

Belgium

If the employer does not strictly follow the applicable procedure for a collective dismissal, the employees could bring legal proceedings asking the labour court to order the employer to restart the procedure. In that case the employment contracts cannot be terminated and all employees will continue to be entitled to receive their salary until the end of the (new) procedure.

Portugal

Please refer to answers in What are the remedies for dismissal in violation of these restrictions? above.

Germany

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.

Ireland

Employees will have the remedies available to them as set out in What are the remedies for redundancy in violation of these restrictions? 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 €5,000.00 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 €250,000.00

Spain

See What are the remedies for dismissal in violation of these restrictions? above.

Italy

The Netherlands

If an employer wishes to dismiss at least 20 employees due to economical reasons, within a timeframe of three months, he has to take the WMCO into account. The 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.

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England

France

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 Labor 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 labor inspectorate carries out an investigation, which involves holding meetings with the employer and the protected employee. The labor inspector has up to two months to reach a decision after receiving the authorisation request. Notification of the labor inspector's decision must be communicated to the employer and the protected employee. The absence of a reply from the labor inspector is treated as a refusal to authorise the redundancy.

Where the labor inspector refuses to authorise the employee's redundancy, the employer is under the obligation to retain the employee.

An appeal against the labor inspector's decision may be lodged before the Employment Minister or the Administrative Tribunal within two months following notification of the decision. However, the labor inspector's decision continues to apply if an appeal is lodged.

In the event where the appeal overrules the labor inspector's refusal to authorise a staff representative's redundancy, the employer must address a second authorisation request to the labor inspector. The labor inspector must authorise the redundancy, except where a change of circumstances warrants a second refusal.

If the appeal overrules the labor 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.

Basically, employment authorities rarely authorise redundancies unless the parties have reached an amicable agreement regarding the terms and conditions of termination prior to the approval request.

Belgium

None.

Portugal

Tax implications of severance compensation

Note that the compensation paid within the scope of a redundancy procedure is exempt from social security contributions - both for the company and for the employee - without any limit, and is also exempt 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.

Hence, an offer of 1.5 months of remuneration per each year of seniority shall not be subject to taxation. The exceeding amount, however, will be subject to the normal personal income tax withholding rates.

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 to employees with longer years of service or where the employees fear that a redundancy procedure may be an option for the employer.

Tax implication on compensations agreed to in individual separation agreements are the same as in respect of severance payments within redundancies. The social security exemption will, however, in the near future (October 1, 2009, presumably), be limited to situations where employees terminated by mutual agreement have no access to unemployment benefits, in accordance with the Social Security Code that the Government is about to enact.

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 but an alternative to such redundancy procedures, in such a way the employee's unemployment should not be deemed voluntary from his or her own standpoint. In this case the terminated 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 (accounted for in October 2006), 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 but 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.

Prior notice

Be aware that 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 informed, 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 more senior 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 remunerations 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 remunerations that become 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 is deemed grounds to hold the collective dismissal procedure invalid.

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.

Germany

No. I think everything has been mentioned already in the above questions.

Ireland

None other than as set out above.

Spain

Tax aspects: In collective dismissals, any amount paid in excess of the mentioned 20 days of salary per year of service with a maximum limit of 12 months of salary is taxable (tax treatment in the Basque Country is different). However, the severance payment applicable in the event of individual dismissals declared unfair by the labour courts (i.e. 45 days' salary per year of employment with a maximum limit of 42 months' salary) - usually taken as a reference for the negotiation - is tax free. Therefore, it is very common that employees negotiate under "net amounts" terms. This practice would entail an extra cost for the employer that it would be obliged to make the corresponding grossing-up on the net agreed amounts. Currently, trade unions and employer associations are exerting pressure on the Government to standardise the tax treatment.

Unofficial negotiations: in collective dismissal procedures, unofficial negotiations with employee representatives and trade unions very often take place before formally initiating the procedure. The reason for this is that it avoids the pressure, formalities and the time constraints of a formal collective dismissal procedure as well as the direct involvement of the labor authorities. Nevertheless, the labor authorities are also contacted during these preliminary stages, in order to unofficially request their opinion and recommendations in the relevant case.

Lack of employee representatives: in a collective dismissal procedure, if there are no representatives of the employees in the work centre, the employees may participate directly in the process if there are fewer than 10 in a company. Conversely, if there are 10 or more employees, they will have to appoint a maximum of five representatives from among them to act as "negotiators" during the procedure. However, these representatives do not have the same rights and privileges as those provided for the legal employee representatives.

Italy

The Netherlands

Legislative proposal: Maximum dismissal compensation of EUR75,000

As stated under question 4, on October 30 2008 the Association decided to amend the formula. In practice, this will mean that the dismissal compensation will be lower then before. Currently there is a legislative proposal in regard to maximising the dismissal compensation for higher incomes. This means that employees with a year income of EUR75,000 or more cannot get more than one year's income as dismissal compensation. The maximisation of the dismissal compensation only arises in the event of rescinding the employment agreement by the Subdistrict Court. It is not applicable on agreements made between the employer and his employees, nor is it applicable to arrangements made in a social scheme. However, the judge has the authority to differ from the maximisation if this is unacceptable according to criteria of reasonableness and fairness.

The cabinet submitted the legislative proposal to the Council of State for its opinion. They delivered a negative opinion. Still, Minister Donner decided to submit the proposal to the House of Representatives, in order for them to agree to the proposal. However, a date for handling of the proposal has not been set yet.

Credit crisis: special regulation regarding part-time unemployment benefit (Besluit Deeltijd WW)

The Dutch Government has provided for a special regulation which makes it possible for an employer to de facto reduce the working hours of its employees (Besluit Deeltijd WW tot behoud van vakkrachten), the so-called part-time unemployment benefits - deeltijd (WW); part-time (WW). This regulation intends to give companies that are healthy enough to get through the crisis an opportunity to keep their employees. Pursuant to this regulation, employers can shorten the employee's working time by a maximum of 50%, during which period the employee is entitled to unemployment benefits (WW-uitkering) for the non-worked hours. These unemployment benefits are deducted from the employee's accrued rights to unemployment benefits and the employee does not accrue such rights over the non-worked hours. During the period in which the regulation applies, the employee remains employed for both the working and the non-working hours. The first appeal to this regulation is effective for a maximum period of three months. After this period, the appeal can be extended not more than twice, each time for a maximum period of six months. Each employer can appeal to this regulation only once. The regulation will be open to first appeals (i.e. not appeals for extensions) until 1 January 2010.

The following conditions must be fulfilled in order to be able to appeal to the regulation:

  • The employer has reached an agreement with the relevant trade unions, or - if not applicable - with a different employee representative body;
  • The agreement also includes an agreement regarding education of employees during the period of part-time unemployment benefits;
  • If the employee is dismissed during the period of part-time WW, the employer is obliged to pay the Employee Insurance Agency (UWV) a compensation equal to 50% of the unemployment benefits paid to the employee during the full period of part-time WW; and
  • After the period of part-time WW has expired, the employee will remain employed in full for a period equal to one third of the period of part-time WW, and at least for a period of three months. If the employers are dismissed during this period, the compensation as described above will apply.

There is a lot of criticism regarding this part-time WW. The criticism is focused at the major role the trade unions play, which gives a lot of power to local union representatives, who might for example, demand the employer to supplement the unemployment benefit of the employees to 100% of their salary. Another element of the criticism is that the duration is a maximum 15 months, which is shorter than surrounding jurisdictions such as Germany and Belgium, which would not create a level playing field. The last major point of criticism is that the employer has to pay a major fine if during, or shortly after, the period of part-time WW it is forced to dismiss the employee.

Before the introduction of the part-time WW facility on 1 April 2009, employers who suffered a substantial loss of sale due to the credit crisis were able to rely on the special policy rules concerning exemption from prohibition on reduction of working hours.

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