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Layoffs: A Legalink Summary Of Laws Around The World

Introduction
Dear Reader:
Layoffs eliminating jobs for economic reasons rather than for poor performance or
misconduct of employees are a global phenomenon that is likely to continue for the foreseeable
future. More than ever, companies doing business worldwide need to know how the laws pertaining
to layoffs vary from one nation to the next, and they need to know it promptly.
Welcome to Layoffs: A Legalink Summary Of Laws Around The World.
Legalink
(www.legalink.ch) is an international network of independent law firms. Through our twice-a-year
meetings, members develop personal working relationships and collaborate with each other to be
able to serve our clients outside of our own particular jurisdictions. This book is such a
collaboration, with summaries of the laws relating to layoffs in 44 countries.
A word of caution: the goal of this project is simply to provide the reader with a general
idea of what a company needs to know about the law pertaining to layoffs. This book does not
provide legal advice, which can be obtained only by discussing specific facts with a
qualified lawyer who is expert in the subject matter of layoffs in the jurisdiction in which
you are doing business. What may be perfectly acceptable in one country may be an invitation to
legal liability across the border. Please also remember: laws change. This book is being published
in September 2009. Although we may publish an update sometime in the future, the only way to
know that the information you are reading still is current is to talk to a qualified lawyer in the
relevant country.
Forty-four member-firms of Legalink collaborated to assemble this information. The
personal working relationships that enabled us to produce this project also enable us to help our
clients find the right lawyer for the right matter in numerous countries. Should you have issues
pertaining to layoffs, or to employment matters generally, you should contact the lawyer and law
firm identified with the response from the particular country. You may also contact me or Rita
Jardim, the Chief Administrative Officer of Legalink, and we will be happy to put you in touch with
the appropriate Legalink member.
Best wishes,
Douglas B. Mishkin
Editor
Patton Boggs LLP
2550 M Street, N.W.
Washington, D.C. 20037
dmishkin@pattonboggs.com
Tel:
202-457-6020
Fax: 202-457-6482
LEGALINK
Rita Jardim

Rua da Mesquita, Casa dos Areais


2705-352 Colares
Portugal
Tel:
351 91 234 97 55
Fax:

351 21 383 02 58

AUSTRALIA
Prepared by
Frank Ruggiero
Behan Legal
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
The Commonwealth Government has recently passed the Fair Work Act 2009 (Act),
which came into effect on 1 July 2009, and replaced the previous Workplace Relations Act.
An employer can legitimately dismiss an employee or group of employees, without facing
potential unfair dismissal claims, if the dismissal was a case of genuine redundancy. Section
389 of the Act provides that a genuine redundancy occur if:
a) The job is no longer required to be performed due to changes in the operational
requirements of the employers enterprise; and
b) The employer has complied with any obligation in a modern award or enterprise
agreement that applied to the employment to consult about the redundancy.
Conversely, a dismissal will not be considered to be a genuine redundancy if it would
have been reasonable in all the circumstances for the employee to have been redeployed
within the employers enterprise or the enterprise of an associated entity of the employer
(section 389(2) of the Act).
The Act does not define the term operational requirements. However, the government
has provided some examples of reasons that a genuine redundancy may occur:

The particular job becomes mechanised;

The business slows down due to lower sales or production;

The business relocates;

A merger or takeover happens; or

The business restructures or reorganises.

2.
Are there any formal requirements for terminating an employee or groups of
employees?
Written notice of termination
Section 117 of the Act provides that an employer must not terminate an employees
employment unless they have given that employee written notice of the day of termination. The
period of notice to be given depends on the employees period of continuous service with the
employer. For example, one weeks notice is required where the employee was employed for a
period of less than 12 months, and four weeks notice is required for a period of five years or
more.

Payment in lieu of notice can also be made by the employer, if the amount paid is based
on the full rate of pay for the hours the employee would have worked had the employment
continued for the minimum notice period.
A modern award or enterprise agreement may also provide specific terms about the
period of notice that must be given to an employee.
Certain classes of employees are not required to be notified of their termination, including:

Casual employees;

Probationary employees of three months or less;

Employees engaged under a contract for a specific period or specific task;

Seasonal employees;

Employees guilty of misconduct, where their continued employment is


unreasonable;

Trainees;

Daily-hired employees in the building and construction industry or in connection


with livestock slaughter within the meat industry;

Weekly-hired employees in the meat industry whose termination is determined


solely by seasonal factors; and

Employees who earn over $108,300 per year, and who are not covered by an
award or agreement.

Redundancy pay
An employer is required to pay to the employee redundancy pay if the industrial
agreement, award, or notional agreement preserving state awards that applies to the
employment provides that the employee is entitled to redundancy pay.
Pursuant to section 119 of the Act, an employee is entitled to receive redundancy pay if
their employment was terminated:
a) Because the employer no longer requires the job done by the employee to be done by
anyone, except where this is due to the ordinary and customary turnover of labour; or
b) Due to the insolvency or bankruptcy of the employer.
The amount of pay, calculated on the employees base rate of pay for his or her ordinary
hours of work, is determined by reference to a table set out in section 119(2). The minimum
period of continuous service required by an employee before redundancy pay is required to be
paid is one year.
However, in certain circumstances an employer is not required to pay redundancy pay to
terminated employees. For example, employees who are engaged for a specific period or for a

specific task or tasks, casual employees, and seasonal employees are usually not entitled to
redundancy pay.
Section 120 of the Act also provides that where the employer obtains other acceptable
employment for the employee or the employer cannot pay the amount of redundancy pay due,
they can apply to Fair Work Australia (the Authority) seeking a determination that the amount
of redundancy pay calculated under section 119 be reduced to the amount specified in the
determination.
Other situations that exclude the obligation to pay redundancy pay are where the employees
period of continuous service is less than 12 months or where the employer is a small business
employer having less than 15 employees (section 121(1) of the Act).
Other statutory requirements
Employees may also have accrued annual leave and other leave that an employer will be
required to pay out upon termination. In addition, the termination may leave the employer liable
to pay severance pay to the employee.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
See above answers to questions one and two relating to redundancy.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Unlawful termination
Section 772(1) of the Act sets out a number of grounds upon which employment is not to be
terminated by an employer. Some of these grounds include, but are not limited to:

Temporary absence due to illness or injury;

Trade union membership activities or non-membership of a trade union;

Race, colour, sex, sexual preference, age, physical or mental disability, marital status,
family or carers responsibilities, pregnancy, religion, political opinion, national
extraction or social origin;

Absence during maternity or parental leave; or

Absence to file a complaint against an employer and to seek out competent


administrative authorities.

Exceptions to this provision exist in section 772(2) where the termination was based on
the inherent requirements of the particular position concerned, or the employment was with
an institution conducted in accordance with certain beliefs or a religion and the termination
was in good faith and to avoid injuries to the religious susceptibilities of adherence to that
religion.
Unfair dismissal

An employee may also try to bring a claim for unfair dismissal. Unfair dismissal is
proven if the Authority is satisfied that a persons dismissal from their employment was
harsh, unjust, or unreasonable and the dismissal was not due to a genuine redundancy, was
not by a small business, and was not consistent with the Small Business Fair Dismissal Code
(section 385 of the Act).
Section 387 sets out specific criteria for determining what is harsh in the
circumstances. Certain employees may also be protected from unfair dismissal by a modern
award or enterprise agreement that covers them.
General Protections
The Act also provides general protections in Part 3-1.
These include prohibitions that adverse action not be taken against another person
(including dismissal) because they have a workplace right or have not exercised a workplace right,
that adverse action not be taken due to discriminatory factors and prohibitions against dismissing
an employee only to re-hire them to perform the same work as an independent contractor (sham
arrangements).
Anti-Discrimination laws
In addition to the Fair Work Act 2009, the Commonwealth Government has enacted
several anti-discrimination Acts to deal with specific claims for discrimination, as follows:

Racial Discrimination Act 1975;

Sex Discrimination Act 1984;

Disability Discrimination Act 1992; and

Age Discrimination Act 2004.

The States and Territories also have their own Acts dealing with equal opportunity. In
Victoria, the government has enacted the Equal Opportunity Act 1995 to deal with such
claims.
5.
What sanctions or penalties may be imposed against employers for violating any
of the requirements mentioned in Nos 1-4 above?
Contravention of Unfair dismissal provisions
Where there is a contravention of the unfair dismissal provisions, the Authority may
order that the dismissed employee be reinstated, or if this is not appropriate in the
circumstances, order that the employer pay compensation to the employee in lieu of
reinstatement (Division 4 of Part 3-2 of the Act).
Termination that is not a genuine redundancy may be considered unfair dismissal and
will attract the same penalties as a contravention of unfair dismissal.
Contravention of unlawful termination under section 772

Section 772 is a civil remedy provision. The Federal Court or Federal Magistrates Court
can make any order it considers appropriate in the circumstances where they are satisfied that
an employer has breached a civil remedy provision. These courts have the power to:

Order the granting of an injunction, or interim injunction to prevent the contravention;

Order an award of compensation for loss suffered due to the contravention; or

Order the reinstatement of a person.

The courts can also make a pecuniary penalty order of up to $6,600.00 for a person or up
to $33,000 for a corporation for each breach.
An employee can also apply to the Authority to deal with an unlawful termination dispute.
6.
What are one or two most common mistakes that employers make that lead to
liability for a layoff?
Many employers believe that making part of their workforce redundant is a good way
to reduce their business costs. However, employers should only consider redundancy as a last
resort and ensure that they manage the process effectively to avoid possible penalties or
claims for unfair dismissal or unlawful termination. This includes following all procedures for
the giving of notice, redundancy pay and all other statutory entitlements.
Another common mistake is that employers often view the person as redundant in
their workplace, rather than the actual job or position. This may set the groundwork for a
potential unlawful termination or discrimination claim by the disgruntled employee.
Some options to avoid making employees redundant are to encourage them to take any
unused annual leave where possible, negotiate a short-term reduction in work hours, or put
certain positions on hold for short periods of time and rotate staff.
7.
What other employment issues are likely to arise from a layoff in your
jurisdiction that you have not addressed in your answers to the previous questions?
Dismissal at common law
At common law, damages can be claimed by an employee for wrongful dismissal
under an employment contract, on the basis that the dismissal was without notice when notice
was required. However, the calculation of damages does not include distress and humiliation
at the loss of a job and similarly a court will not award damages for an employees inability to
find further work because of the wrongful dismissal.
An employee may also seek to bring a claim for summary dismissal under common
law where they were dismissed for minor breaches of the terms of the employment contract.
The award of damages in this instance will usually be restricted to the reasonable period of
notice required to be given under the contract.
It is also important to note that when an employer sells their business to a new owner, this
act of sale effectively terminates the employment contracts of all staff. Those employees who
take up positions with the new owners will be entering into new employment contracts, even if

the terms and conditions stay the same or the Vendor and Purchaser agree that certain
entitlements
carry
over
to
the
new
contracts
or
agreements

AUSTRIA
Prepared by Bert Ortner
Fiebinger, Polak, Leon & Partner
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Under the Austrian Employment Act (Angestelltengesetz), the employer may terminate
at the end of any calendar quarter by observing the statutory (or agreed longer) notice period.
Notice periods depend on the position (shorter notice periods apply for some blue-collar
workers) and length of employment. Notice periods range between six weeks (during the first
two years of employment) and five months (after 25 years of employment). Some collective
bargaining agreements contain more restrictive provisions.
In general, no grounds for termination need to be stated. Certain groups of employees
may only be terminated with prior consent of the labor court. These include pregnant women,
mothers on maternity leave, mothers working part-time, members of the labor council,
apprentices, workers performing military service and disabled employees.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
In general, there are no formal requirements. Certain collective bargaining agreements
require that terminations be made by a written document. If a works council exists in the
enterprise, the works council must be informed at least five full work days in advance (the day of
such information and the day when the termination is issued shall not count) and any termination
that is issued before such waiting period is void.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
Special rules exist for mass layoffs. These apply, subject to more detailed rules, if more
than 5% of the workforce is terminated (including terminations by mutual agreement that are
proposed by the employer) within a period of 30 days.
The employer must notify the works council and the local employment office of such
envisaged terminations, and must observe a 30 days waiting period. Any terminations that are
made during such waiting period are void.
Furthermore, in case of such mass-layoffs, the works council may request a mandatory
social plan which provides for additional voluntary payments to the terminated employees.
Therefore, it is advisable to avoid triggering the thresholds for mass-layoffs, if possible.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Employees can challenge their terminations based on three groups of grounds:


a) the termination was based on improper motives: E.g., if the termination is based on the
employees labor union or works council activities, upcoming military service or if the employee
was terminated because he raised claims against the employer which are not clearly unjustified.
b) the termination is socially unjustified: This ground for a challenge is employed by
employees who argue that due to their old age, possible lack of skills and poor financial
background, they face serious difficulties in finding a new job which would allow them to pay
their expenses, and that it would be comparatively easy for the employer to keep them on the
payroll.
c) the termination is discriminatory: such challenges are not very common in Austria.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
a) if the proper notice period is not observed, the employment will nevertheless end at the
indicated (incorrect) date and the employee is entitled to damages (which are usually equal to the
pay until the next possible effective date of termination).
b) if the formal requirements that are mentioned in item 2 are not observed, the
termination is null and void.
c) if the formal requirements that are mentioned in item 3 are not observed, the
termination is null and void.
d) upon a successful challenge, the termination is null and void. Certain antidiscrimination laws provide for additional payment of damages and/or fines. The amounts
involved are relatively low (usually a few hundred Euros or slightly more).
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
a) All formal requirements must be diligently observed.
b) Employers should try to avoid triggering the rules for mass-layoffs if there is a works
council in the enterprise which could force them to agree to a mandatory social plan (which
would usually provide for additional voluntary payments). A social plan can usually be
avoided by terminating less than 5% of the workforce during each 30 days period.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Austria has a complex labor law system. While, in general, terminations are admissible
without important grounds, there are numerous exceptions and formalities, and employers should
consult an employment attorney before issuing terminations.

BELGIUM
Prepared by Laurence Vermeiren
Lustica
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
A.

Statute of 3 July 1978 on employment contracts requires any employer to give an


employee an advance notice of his layoff (art. 37). A notice period, depending on
the type of the contract (white-collar or blue-collar, a distinction still made in
Belgium) and the seniority of the employee has to be respected before the
employment contract can be terminated.

For white-collar employees, the Statute of 3 July 1978 stipulates the following (art 82):
Seniority
Notice period (in months)
from 0 to 5 years
3
from 5 to 10 years
6
from 10 to 15 years
9
from 15 to 20 years
12
from 20 to 25 years
15
In practice, however, the notice period for white-collar employees will be determined by
a formula developed taking into account established case law. This "Formula Claeys" takes into
account salary, age and seniority and will, in general, allow for a notice period longer than the
legal one, which is often considered as "the bare minimum" by the courts.
For blue-collar employees the Statute of 3 July 1978 stipulates the following (art. 59 ) :
Less than 20 years seniority
28 days (4 weeks)

More than 20 years seniority


56 days (8 weeks)

The Collective Labor Agreement N75 of 20 December 1999 introduces a special notice
period for most (several industry sectors exclude its application) blue-collar employees in the
private sector:

Less than 6 months seniority

Between 6 months and less than 5 years


seniority
Between 5 years and less than 10 years
seniority
Between 10 years and less than 15 years

Notice given by employer


28 days (4 weeks)
For blue-collar employees with less than 6
months seniority it is possible to provide for a
contractual notice period of at least 7 days (art.
61).
35 days (5 weeks)
42 days (6 weeks)
56 days (8 weeks)

seniority
Between 15 years and less than 20 years
seniority
20 years and more
1.

84 days (12 weeks)


112 days (16 weeks)

Compensatory severance pay

The employer who does not respect the notice period or who lays off an employee
without advance notice must pay the laid off employee a compensatory severance pay equivalent
to the salary corresponding to the missing notice period (art. 39 1 et 29 bis).
2.

Serious fault

The Statute of 3 July 1978 allows laying off an employee without advance notice and
without severance pay in case of a serious fault committed by the employee during the working
relationship (art. 35).
3.

Illness

The Statute of 3 July 1978 also allows putting an end to the employment contract after a
suspension of more than 6 months due to illness. The employer should provide the severance pay
equivalent to the remaining notice period (art 58 and 78).
4.

Random lay-offs of blue-collar employees

Furthermore, the Statute of 3 July 1978 protects blue-collar employees against random
lay-offs (unrelated to their capacity/behavior or to the economic situation of the company). If it is
proven that a layoff was random in the sense of the statute, the employer must pay the bluecollar employee a special severance pay equivalent to the 6 months salary which may be
combined with an eventual compensatory severance pay (see 2 here below).
B.

Layoff of protected employees


1.

Employees representatives

The Statute of 19 March 1991 on specific layoff treatment of employees representatives


forbids employers to lay off employees representatives, unless they have committed a serious
fault (recognized as such by established case-law) or unless they are laid off for an economic or
technical reason, recognized by a joint committee, composed of employers and employees
representatives.
2.

Other protected employees

Pregnant women, employees who have interrupted their career, employees who have
filed complaints for harassment, discrimination or violence at work and employees exercising a
political function are protected for certain periods/aspects. Protected employees may not be laid
off during the protected period for any reason linked to the reason for their protection.

C.

Layoff in case of closing of place of business / Collective redundancy


1.

Closing of place of business

Applicable legislation:
-

Statute of 26 June 2002 on closing of place of business and its implementing Royal
Decree of 23 March 2007

Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the
Member States safeguarding employees' rights in the event of transfers of undertakings,
businesses or parts of undertakings or businesses

Collective Labor Agreement N 32bis of 7 June 1985 safeguarding employees rights in


case of change of employer due to the contractual transfer of a business and regulating
the rights of employees transferred with the transfer of assets after bankruptcy or scheme
of arrangement.

Closing of place of business means (i) a final closing of the main activity of a business or a
department thereof, (ii) causing the number of workers to decrease to less than one quarter of the
number of workers employed the calendar year before the closing. The change of location of the
business, a merger, sale or restructuring can be considered as a closing of place of business for
the application of the law. In case employees are transferred along with assets and change
employers as a consequence, the Collective Labor Agreement N 32bis of 7 June 1985 will
safeguard the rights of these employees (e.g. no loss of seniority, severance pay to be paid by
company acquiring the assets, etc.). A closing of place of business compensation is attributed
to certain workers laid off because of the closing (in general, employees with a seniority
exceeding one year and not yet entitled to their pension). This closing of place of business
compensation amounts, as per 1 September 2008 (amounts are subject to an annual index
update), to:
-

EUR 142 per year seniority (with a maximum of EUR 2.841), plus, if applicable

EUR 142 per life year above age 45 of the employee (with a maximum of EUR 2.699).

The Closing of place of business Fund, established by the 26 June 2002 Statute, will
guarantee the payment of some compensation to employees when the employer is no longer able
to do so (in case of bankruptcy, etc.). In case the closing of place of business entails a collective
redundancy, the legal provisions with regard to the legally proscribed information/consultation
procedures will apply (see below).
2.

Collective redundancy

Applicable legislation:
- Council Directive 98/59 EEC relating to collective redundancies;
-

Collective Labor Agreement N 24 of 2 October 1975 on the information and consulting


procedure of the employees representatives in case of collective redundancy;

Statute of 13 February 1998 including certain provisions to promote employment


(Chapter VII, Collective redundancy) and its implementing Royal Decree of 30 March
1998

Royal Decree of 24 May 1976 on collective redundancy

Collective Labor Agreement N 10 of 8 May 1973 on collective redundancy.

For the application of the law, a collective redundancy is any layoff unrelated to the
employee himself, affecting in a period of 60 days at least 10 employees (if the company
employs between 20-100 employees), 10% of the employees (if 100-300 employees) or 30
employees (if over 300 employees). The total number of employees taken into consideration is
the average number in the calendar year before the layoff. Layoffs related to the employee
(mistakes, incompetence, etc.) are not taken into consideration.
If an employer wishes to proceed to a collective redundancy he must follow certain stringent
procedures, where he informs and consults the employees representatives prior to the layoff and
where he informs the director of the regional employment administration of his intention to
proceed to a collective redundancy. A breach of these procedures may have as a consequence
that the employer must continue the employment and in any case continue to pay the salary for a
period of 60 days.
The employer must furthermore pay a special compensation to the affected employees. Such
special compensation and its payment are subject to several parameters, but in general it can be
said to be equal to 50% of the difference between the affected employees salary after taxes and
his unemployment benefits, to be paid for a period of 4 months.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
A.

Individual layoff: The employer has to give advance notice of termination of the
contract (see above under 1.A.1).

B.

Collective redundancy: Applicable legislation requires the employer to respect a


very specific procedure, where he informs and consults the employees
representatives prior to the layoff and where he informs the director of the
regional employment administration of his intention to proceed to a collective
redundancy (see above under 1.C.2).

3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Yes. A laid-off employee may use the anti-discrimination legislation to challenge his/her
inclusion in the layoff.
5. What sanctions or penalties may be imposed against employers for violating any of the
requirements mentioned in Nos. 1-4 above?
A.

Civil sanctions:
1.

Individual layoff

The employer who does not (fully) respect the notice period or who infringes upon the
anti-discrimination legislation will most likely be challenged before the court by the laid off
employee and may be ordered by the court to pay a compensatory severance pay equivalent to
the salary corresponding to the missing notice period, damages (no punitive damages), as well as
costs of the procedure, attorneys costs, etc.
2.

Collective redundancy

If an employer has failed to respect the regulations regarding the information and
consultation procedures, he may be challenged by each individual employee affected by the
collective redundancy and forced either to continue the employment during a limited period of
time or to pay additional compensation to employees.
B.

Criminal sanctions:
1.

Collective redundancy

If an employer has failed to respect the regulations regarding the information and
consultation procedures, he may be subject to imprisonment and/or a fine in application of
several laws (Statute of 5 December 1968 on Labor Collective Agreements (art. 56 60), Statute
of 20 September 1948 on reorganization of economy (art. 32, 34 and 36), Statute of 28 June 1966
on compensation of laid off employees (art. 27, 29 and 30)).
2.

Discrimination

If an employer is found to have infringed the anti-discrimination legislation, he is subject


to imprisonment and/or a fine.
C.

Administrative fines

In addition to civil and criminal sanctions, administrative fines may also be imposed on
the employer who does not conform to the mass redundancy / closing of business legislation. The
Statute of 13 February 1998 on rules in favor of employment (art. 70) establishes a possibility to
force the employer to pay back all State / Regional assistance received during the 5 last years
before the lay off.
This provision should be implemented by a Decree (which is not issued yet at the Federal
level, but well at the level of Flemish Region).

6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Most often, conflicts arise with regard to the duration of the given notice period or the
qualification of a fault as a serious fault (allowing the employer to lay off the employee in
question without a notice period).
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Problems also arise with regard to the exact nature of the employment: self-employed vs.
employee. Such conflicts often arise when managers or other well-paid individuals, hired as
self-employed by the company, later claim to have been employed as an employee in order to
claim social benefits and (additional) severance pay. The court will decide taking into account
the factual circumstances of the case (who did the employee have to report to, was permission
needed for holidays, manner in which the employee was listed on the website of the company,
etc.).

BRAZIL
Prepared by Ricardo Sanches
Felsberg Associados
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Brazilian Labor law does not regulate mass termination procedures. Therefore, there is no
mandatory negotiation/notification involving the labor union in case of such dismissals. In this
regard, the individual dismissal without cause procedures established by Brazilian Labor must be
applied.
Dismissal without cause is permitted but is subject to the employer giving the employee a
30-day minimum advance notice (which is increased by certain collective bargaining
agreements) and in addition to the severance payments due in case of an employees requested
dismissal, the employer will also have to pay a dismissal indemnification of fifty percent (40% to
the employee and 10% to the Brazilian Federal Savings Bank) of the balance in the employees
accrued severance fund (FGTS ) account.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Regardless of the dismissal form (with cause, without cause, breach of contract by the
employer or request for termination by the employee), the employee is entitled to receive his/her
th
severance payments until the 10 day after the dismissal in case of dismissal with an indemnified
30-day advance notice or until the first working day after the worked advance notice.
However, if the employment contract has been in force for more than 12 months, then
termination must be signed in the presence of and approved by the Labor Union officer or the
competent authorities at the Local Office of the Labor Department.
Furthermore, please note that under Brazilian Labor Law, employees in certain
conditions have job tenure, and may not be dismissed without cause. Brazilian legislation
provides for temporary job tenure in the following circumstances, among others, provided by law
or the applicable collective bargaining agreement:
(i) union leaders - from the employees registration as a candidate to one year after the
end of his/her term;
(ii) expectant mothers from the confirmation of the pregnancy to 5 months after the
birth;
(iii) employees who have suffered a workplace accident or are receiving social security
allowances due to labor-related illness - for 12 months after their return to work;
(iv) members of the Internal Commission for Accident Prevention (CIPA) - from the
employees registration as a candidate to one year after the end of his/her term.

3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. The employer may not use discrimination practices in establishing the dismissal of
employees (whether individual or collective dismissals). In any case, the employee may file a
labor claim requiring reinstatement at work and pain and suffering damages, although such
claims are not as common as in the U.S., especially in layoff scenarios. On the other hand, it is
very common that former employees file labor claims against their former employers seeking
allegedly unpaid overtime, salary differences, bonuses or damages for unfair practices.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
Under Brazilian Labor Law employers who do not provide the mandatory advance notice
shall indemnify it by means of one additional monthly salary plus FGTS, Christmas bonus and
vacation pay differences, calculated as if the employee had worked during the notice period.
Additionally, if mandatory severance is not paid within the terms determined by Brazilian labor
law, then the employee is entitled to one additional monthly salary as indemnification.
Administrative penalties may also be applied if the company is subject to an audit procedure by
the Regional Office of the Ministry of Labor.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Employers fail to duly calculate and pay the severance payments within the 10-day
period in case of an indemnified advance notice.
Employers fail to verify whether the employees are entitled to any form of legal or
collective bargaining agreement establishing job tenure.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Please note that, despite the absence of specific provisions regarding mandatory
negotiations and restrictions on mass dismissals, recent precedents in the Regional Labor Courts
of So Paulo and Campinas have determined: (i) the suspension of layoffs especially those
which took place in 2009 due to the global economic crisis; (ii) that companies were obliged to
previously negotiate with the labor union for other alternatives to the layoffs (i.e. salary
reduction, suspension of contracts and voluntary dismissal programs) and, if such measures are
not sufficient, negotiate additional benefits for the employees dismissed. The most relevant case,
involving an Aircraft Company which dismissed more than 4,000 employees, which occurred

quite recently, - was one of such precedents. In this case, the Regional Labor Court of
Campinas determined the suspension of all such dismissals and, after the negotiations, ordered
the company to pay additional severance benefits. However, in April/2009 the Superior Labor
Court overruled the suspension of the dismissals and granted the companys motion to recognize
that the dismissals were effective. The Court also ruled that the employer had no obligation to
negotiate such layoffs with the labor union, although the company accepted the additional
benefits determined by the Regional Labor Court.
Finally, please note that under the Brazilian Federal Constitution, employees have: (i)
five (5) years to file a suit in order to claim any rights during the employment relationship; and
(ii) two (2) years from the end of their (alleged or formally recognized) employment relationship
to file suit for labor rights, whilst such rights may be claimed for a period of up to five (5) years
before the filing of such a lawsuit. On the other hand, the statute of limitations on FGTS
contributions is thirty (30) years.

CANADA
Prepared by Arie Gaertner
Miller Canfield
PROVISO the general answers provided herein are with respect to the statutory
employment laws of Ontario only governing temporary and mass layoffs. The statutory
laws are minimum requirements with respect to employee rights and can therefore be
trumped by the Common Law.
Each Canadian province has statutes similar to that of Ontario, save and except for
Quebec; Quebec is a Civil Law jurisdiction, and its laws are often substantially different
than in all other Canadian provinces.
Federal employers, who are governed by the Canada Labour Code, Division IX
Group Termination of Employment, are subject to different requirements than provincial
employers.
The answers to the questions below do not deal with the employers obligation in the
event of termination from employment of individual employees, but instead only address
temporary and mass lay-offs.
1. Are there any laws that govern a layoff of employees? If so, what do the laws require?
An employer is entitled to effect a temporary lay-off, subject to any common law rules
that might provide otherwise. Subsection 56(2) of the Ontario Employment Standards Act 2000
(ESA) defines a temporary lay-off from work as a lay-off of not more than 13 weeks in any
period of 20 consecutive, or less than 35 weeks in a period of 52 consecutive weeks. If the
employer lays off an employee without specifying a recall date, the employee is not considered
to be terminated unless the period of lay-off actually exceeds that of a temporary lay-off.
An employee without a regular work week will be considered laid off for a period longer
than the period of a temporary lay-off if, for more than 13 weeks in any period of 20 consecutive
weeks, or more than 35 weeks in any period of 52 consecutive weeks, he or she earns less than
one-half the average amount he or she would have earned per week in the period of 12
consecutive weeks preceding the consecutive week period.
The ESA specifies how certain absences from work should be taken into account for layoff purposes in addition to delineating what is an excluded week for the purposes of
calculating the lay-off period.
With respect to employees who do not have a regular work week, an excluded week
will be counted toward the period of 20 or 52 weeks as the case may be. With respect to
employees who do not have a regular work week, an excluded week will not be counted as part
of the 13 or more weeks, but shall be counted as part of the 20-week period. In addition, an
excluded week shall not be counted as part of the 35 or more weeks, but shall be counted as
part of the 52-week period.

2. Are there any formal requirements for terminating an employee or groups of employees?
Ontario Regulation 288/01 sets out an employers notice obligations in situations of
mass termination where 50 or more employees are terminated within a prescribed period.
Special rules apply where 50 or more employees receive notice of termination at an employers
establishment within a four-week period (otherwise known as mass termination). In particular,
the following notice periods are prescribed by section 3 of Ontario Regulation 288/01:
Number of Employees Affected Minimum Notice of Termination or Termination Pay or Both
50 or more but fewer than 200: At least eight weeks
200 or more but fewer than 500: At least 12 weeks
500 or more: At least 16 weeks
When a mass termination occurs, the employer is required to provide the Director of
Employment Standards with certain prescribed information, and the notice of termination is not
effective unless the employer submits it in the prescribed form prior to giving notice to the
affected employees.
The mass termination rules do not apply if:

The number of employees whose employment is terminated at the establishment


is not more than 10 percent of the number of employees who have been employed there
for at least three months; and

The terminations were not caused by the permanent discontinuance of part of the
employers business at the establishment
3. Are there special legal requirements for a layoff caused by redundancy in the
workforce?
See above.
4. Are there employment laws that laid-off employees can use to challenge their inclusion in
the layoff?
Not as a general rule. However, an employee could try to advance a claim under the
Ontario Human Rights Code.
5. What sanctions or penalties may be imposed against employers for violating any of the
requirements mentioned in Nos. 1-4 above?
Compensation for termination and severance pay. In only very rare instances is there any
prospect of reinstatement.

Part XVIII of the ESA deals with reprisals by employers against employees for exercising
their rights or attempting to enforce their rights under the ESA.
6. What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

Improper calculation of temporary lay-off

Unintentionally triggering mass termination provisions

Failure to pay proper notice (or payment in lieu) and severance amounts

Failure to utilize advance written notice as a means of reducing or eliminating the


need to pay termination pay
7. What other employment issues are likely to arise from a layoff in your jurisdiction that
you have not addressed in your answers to the previous questions?
As noted at the outset, the amounts prescribed by the ESA are minimums only. There are
additional obligations under the common law that are significantly greater than the amounts
prescribed by the ESA.
The answers provided here do not address the circumstances that arise where the work
force is represented by a union. In such circumstances, the collective agreement between the
employer and trade union may well contain specific termination provisions that exceed the ESA
minimums where there are mass lay-offs.

CHILE
Prepared by Felipe Hurtado
URQUIDI, RIESCO & CIA. ABOGADOS

1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
The Chilean Labor Code in its Article N 160 enumerates the dismissal causes that put
term to the work contract without the right to indemnification. [I DONT
UNDERSTAND THE PRECEDING SENTENCE] These causes are the following:
1. Serious illegal conduct, properly verified, which is:
a) Workers lack of probity in the performance of functions;
b) Sexual harassment;
c) Aggressive conduct from the worker against the employer or of any worker who
evolves in the same company;
d) Insults from the worker to the employer; and
e) Immoral conduct of the worker who affects the company where he is employed
2. Negotiations that the worker executes in the same business and that have been prohibited
in the respective contract by the employer.
3. Absence to work without justified cause during two consecutive days, two Mondays in
the month or a total of three days during equal period of time. Also, the unjustified
absence, or without supporting information, from the worker that is charged with any
activity or machine whose abandonment brings a serious disturbance in the work.
4. [??]
5. Abandonment of work, being understood as:
a) The untimely and non justified abandonment of the place of work during working
hours, without permission of the employer; or
b) To refuse to work without justified cause in the activities settled in the contract.
6. Acts or omissions that affect the security of the establishment operations, or the workers
health.
7. The intentional material damage of the facilities, machineries, tools, work equipment,
products or merchandizes.
8. Serious breach of contractual obligations.

2. Are there any formal requirements for terminating an employee or groups of


employees?

The Chilean Labor Code in its article N 162 establishes the procedure for terminating an
employee or group of employees:
The employer must communicate the termination (in written form) to the workers, personally
or by certified letter sent to the address indicated in the contract, expressing the cause
invoked and the facts on which the termination is based.
This communication has to be sent within the three following working days that follow the
one in which the worker abandoned his work.
Copy of the communication has to be sent to the respective Labor Bureau, within the same
term. The Labor Bureau will have an updated registry of the communications of contract
terminations that are sent.
When the employer invokes as cause Needs of the company, the communication will have
to be given to the worker, with copy to the Labor Bureau, with at least thirty days of
anticipation. Nevertheless, this anticipation will not be required when the employer pays to
the worker an indemnification equivalent to the last monthly remuneration. The
communication to the worker will have, in addition, to indicate the total amount to pay.
The employer will have to inform the state by letter of the social security quotes until the last
day of the month previous to the one of the dismissal. If the employer has not paid any of the
quotes at the time of the dismissal, the dismissal will not produce the effect of putting term to
the work contract. [I dont understand the last sentence]
However, the employer will be able to confirm the dismissal by paying and communicating
the payment of the social security quotes, by certified letter accompanied with the
documentation emitted to the corresponding institution.
Notwithstanding, the employer will have to pay to the worker the remunerations and other
benefits settled in the work contract during the period between the date of the dismissal and
the date of the communication to the worker.

3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?
There are no special legal requirements for a layoff caused by redundancy. The employer
is free to make any restructure to the company. The unique obligation is the payment of
the corresponding indemnification to the worker.

4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
No.

5.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The infractions to the Labor Code and its complementary laws are sanctioned with
monetary penalties, according to the importance of the infraction and the number of
workers that the company has with work contract.
Despite the previous paragraph, if the employer has nine or less workers, the Labor
Bureau will be able to authorize, at the employers request and only once a year, the
substitution of the penalty imposed with the obligatory attendance to labor courses
dictated by the Labor Bureau which will last no longer than two weeks.
Once the substitution of the penalty is authorized, if the employer does not attend to the
courses within the term of two months, the Labor Bureau will apply the originally
imposed penalty, increased in a one hundred percent.

6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The most common mistake that employers make that leads to liability for a layoff is when
employers invoke a legal dismissal cause that puts term to the work contract without a
real justification. [I DONT UNDERSTAND THIS SENTENCE?]

7.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
The omission in the payment of the workers social security quotes.

THE PEOPLES REPUBLIC OF CHINA


(excluding Hong Kong, Macau and Taiwan)
Prepared by David Zou
Boss Young
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
According to Labor Contract Law of the Peoples Republic of China, if the company
reduces the workforce by 20 persons or more, or by a number of persons that is less than 20, but
accounts for 10 percent or more of the total number of the employees, the company may lay off
the employees after it has explained the circumstances to its trade union or to all of its employees
30 days in advance, has considered the opinions of the trade union or the employees and has
subsequently reported the layoff plan to the labor administration department.
The laid-off employee shall be paid severance pay based on the number of years he/she
has worked with the company at the rate of monthly wage for each full working year. Any period
of more than six months but less than one year shall be counted as one year. The severance pay
payable to an employee for any period of less than six months shall be one-half of his/her
monthly wage. If the monthly wage of an employee exceeds three times of employees average
monthly wage published by the local government, the severance pay to payable to him/her for
each full working year shall be 3 times of employees average monthly wage and the cap of the
number of years shall be 12 years.
The monthly wage means any employees average monthly wage for the 12 months
prior to the termination of his/her employment contract. If the employer would like to terminate
the employment contract immediately, it should pay the employee additional one month salary in
lieu of the 30-day notice; however, the employer should still consult with trade union or all of its
employees as well as report the layoff plan to the competent government authority.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Please refer to our reply to question No. 1. In addition, the employer should be
responsible for dealing with the formalities relating to the termination of the employment, such
as the issuance of the document proving the termination of the employment, the transfer of the
employees file and social security account and etc.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Yes. According to Labor Contract Law of the Peoples Republic of China, the following
employees shall have the priority to be retained with the employer in case of mass layoff: (1)
those who have fixed-term employment contracts with a relatively long term; (2) those who have
concluded open-ended employment contracts with the employer; or (3) those who are the only
ones in their families to be employed and whose family has an old person or a child who requires
financial support. Thus the employees who meet the above-mentioned requirements can
challenge their inclusion in the layoff compared with other employees who are not laid off. In
addition, any laid-off employee who falls in any circumstance listed in our reply a. (1)-(5) to
question No. 6 below can also challenge their inclusion in the layoff.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
In case the employee requests the continued performance of the employment contract by
both parties, the employer should continue to perform the employment contract; in case the
employee does not request so or the continued performance of the employment contract has
become impossible, the employer shall pay the employees twice of the statutory severance pay as
compensation.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
a. The employer lays off the following employees whom the employer should not terminate
in a case of a mass layoff in accordance with Labor Contract Law of the Peoples
Republic of China:
(1) the employee is engaged in operations exposing him/her to occupational disease
hazards and has not undergone a pre-departure occupational health check-up, or is
suspected of having got an occupational disease and is being diagnosed or under medical
observation;
(2) the employee has been confirmed as having lost or partially lost his/her capacity
to work due to an occupational disease or a work-related injury when working for the
employer;
(3) the employee is sick or got a non-work-related injury, and still in medical care;
(4) the female employee is in her pregnancy, confinement or nursing period; and
(5) the employee has been working for the employer continuously for not less than 15
years and is less than 5 years away from his/her legal retirement age.
b. The employer fails to consult the layoff plan with the trade union or all of its employees,
or fails to report the layoff plan to the governmental authority as required by the law, or
fails to compensate the laid-off employees as required by the law.

7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
a. In case of the mass layoff due to the sale of all or major business/assets of the company,
the purchaser who will employ any laid-off employee should credit such employee for
his/her years of prior service with the previous employer in the new employment contract
executed by the employee and the purchaser unless such employee has been fully
compensated in accordance with the law upon layoff.
b. If the laid-off employee should comply with the non-compete obligations after the
termination of the employment as stipulated in the employment contract, the company
should pay the compensation to the employee in accordance with the employment
contract on a monthly basis.

CYPRUS
Prepared by Christina Orphanidou
Ioannides Demetriou, law offices
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
The main legislative piece governing the layoff of employees is Legislation on the
Termination of Employment of 1967, as it has been amended over the years (last amendment
was noted in 2003). Labour Courts in Cyprus are following the above provisions in order to rule
on labour questions and issues that may arise in relation to employment. Legislation provides
that in order to lawfully dismiss an employee, unless the employment contract has expired and
was not renewed, an employer needs to give notice, on which he is informing the employee of
the reasons of dismissal. The notice period varies and depends on the period of employment. For
example, according to Article 9 of the 1967 legislation, if the employee has been working
continuously for a period of minimum 26 weeks and a maximum of 52 weeks, the notice period
is one week.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
In the event where employees are members of labour unions and a collective agreement
of employment has been signed between the employer and employees, then the employer needs
to consult with or inform the union prior to taking any action with reference to the employment.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
According to Article 21 of the aforementioned legislation, the employer needs to notify
the Minister of Labour and Social Insurance of the redundancy at least a month prior to the day
the employment will be terminated.
This notice shall include the number of employees who are likely to be deemed
redundant, the area of business which might be affected, the description of the job held by the
affected employees as well as their names and family obligations and lastly the reasons for
considering the personnel as redundant.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
The 1967 Legislation has been given a wide scope application and it is the legislative
instrument used to challenge the inclusion of an employee in a lay-off. Part IV of the legislation
specifically deals with the termination of employment because of redundancy reasons. A laid-off
employee will usually challenge his inclusion in the layoff, when an application for
compensation has been made to the Redundancy Fund and the Redundancy Fund refuses to

compensate him according to legislation. This will be the case where the Redundancy Fund does
not believe that there were legitimate redundancy reasons.
Article 18 of the 1967 Legislation provides that an employee is redundant where:
the business will cease or has ceased to exist
where the number of employees needed has been reduced due to the use of new
equipment
a department is no longer operative
the volume of business has been reduced
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The employer may be asked by courts to compensate the employee. The compensation
will depend on the period of employment of the employee and the 1967 legislation includes
Annexes which demonstrate the manner to calculate the amounts. The maximum amount of
compensation that the court will order the employer to pay is the equivalent of the total amount
of a 52-weeks period salary and only in those situations where the court feels that the employee
will no longer have a competitive advantage in the market because of age or personal
circumstances.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The most common mistake employers make is that they do not have sufficient evidence
to support the claim that their business was suffering and that it was necessary to layoff some of
their employees. The Labour Court will not be easily persuaded unless detailed accounts and
other evidence are produced. Additionally, some employers fail to give notice, as prescribed by
legislation.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Legislation and case law demonstrate that the above issues addressed are the ones likely
to arise.

FINLAND
Prepared by Tea Telamo
Hammarstrom Pukakka

1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
The laws that govern layoffs are the Employment Contracts Act and the Act on Cooperation within Undertakings. The Act on Co-operation within Undertakings only applies to
employers employing more than 20 employees.
Employment Contracts Act
The Employment Contracts Act sets the grounds for layoffs. An employment contract
may only be terminated with proper and weighty reason, which is either related to the
employee's person or to financial and/or production-related reasons.
The employer may terminate the employment contract if the work to be offered has
diminished substantially and permanently for financial or production-related reasons or for
reasons arising from reorganization of the employer's operations. The employment contract shall
not be terminated, however, if the employee can be placed in or trained for other duties (Chapter
7, Section 3 of the Employment Contracts Act). According to the Employment Contracts Act
there are no grounds for termination, if 1) either before termination or thereafter the employer
has employed a new employee for similar duties even though the employer's operating
conditions have not changed during the equivalent period; or 2) no actual reduction of work has
taken place as a result of work reorganization.
The Act on Co-operation within Undertakings
The Act on Co-operation within Undertakings states that lay-offs or termination of
employment contracts due to production and/or financial reasons are matters covered by the cooperation procedure (Section 32). It is required under the Act on Co-operation within
Undertakings that before the employer takes a decision on the matters previously mentioned (or
other matters covered by Chapter 6), the employer shall negotiate the reasons for the action
envisaged, its effects and possible alternatives with the employees concerned or with their
representatives.
An employer shall submit a proposal for negotiations at least five days before the
beginning of negotiations, if the employer is considering to serve notice of termination, lay-off or
reduce a contract of employment into a part-time contract of one or several employees.
Prior to initiating the co-operation procedure, the employer shall provide the employees
concerned and the relevant staff representatives with any information necessary with regard to
the matters to be dealt with in the negotiations.

If a measure subject to negotiation is likely to result in the termination of contracts, layoffs, or the reduction of contracts of employment to part-time contracts, affecting one or more
employees, the employer shall be deemed not to have fulfilled his obligation to negotiate before
at least fourteen days have elapsed since the beginning of the negotiations. If the measure subject
to negotiation is likely to result in the termination of contracts, lay-offs of more than 90 days or
reduction of contracts to part-time contracts affecting at least 10 employees, the negotiation
period shall, however, be at least six weeks from the beginning of the negotiations.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The co-operation procedure as stated above.
A notice must be given to the employee to terminate the employment contract. Employer
must observe the notice period which is either agreed in the employment contract (up to six
months) or the notice period under the Employment Contracts Act (depending on the duration of
the employment relationship the notice period is from 14 days to six months).
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes, an employee can use the Employment Contracts Act to challenge his/her inclusion
in the layoff, for example stating that I was included in the layoff because of my
gender/age/health/disability/national
or
ethnic
origin/nationality/sexual
orientation/language/religion/opinion/belief/family ties/trade union activity/political activity or
any other comparable circumstance.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
If an employment contract is terminated without a ground laid down in the Employment
Contracts Act, employer will be ordered to pay compensation for unjustified termination of the
employment contract. The exclusive compensation must be equivalent to the employees salary
due for a minimum of three months or a maximum of 24 months (for an employees
representative maximum is equivalent to the salary of 30 months).
Where a lay-off or termination of employment contract for financial/production-related
grounds is resolved without observing the co-operation procedure (deliberately or by gross
negligence) and the employee's contract has been reduced into a part-time one, or terminated, or
he has been laid off, for reasons relating to that decision, he shall be entitled to receive a sum of
maximum of 30.000 Euro as indemnification from the employer.

If the termination of an employment contract is based on gender, the employer will be


ordered to pay compensation of at least 3,000 Euro.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
1) Making the decision of who are the employees whose employment contracts are
terminated before the co-operation procedure has been completed (or even started);
2) Terminating employment contracts although the employer has either before termination
or right thereafter employed a new employee for similar duties even though the
employer's operating conditions have not changed during the equivalent period.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
None

FRANCE
Prepared by Bouchra ZEROUALI
Vovan and Associates
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

Before proceeding to any layoffs, the employer has a legal obligation to research any redeployment
(reclassifying) opportunities within the company group. He has also the obligation to define the
criteria (as for example: age, family situation, abilities ) to determine the order of the redundancies
within the same category.
Measures governing the redundancy are codified in the Labor Code (Code du Travail) except
when collective agreements (convention collective) are more favorable and in particular with regard
compensations (allowances). The rules with regard redundancy legal obligations depend on the
number of employees whose redundancy is envisaged as well as the number of employees in the
company
The employees have a priority (so they wish) regarding any recruitment done by the company within
the year following the year of their redundancy.
There are three types of redundancy procedure
-

redundancy of one employee;


redundancy from two up to nine employees in a 30day period
Redundancy of more than ten employees: In that case and if the company has more
than 50 employees, the employer has to draw up a job preservation plan submitted to
the works committee ( comit dentreprise).

2.
Are there any formal requirements for terminating an employee or groups of
employees?
a) As for any layoff the economic motivation has to set up. In this regard the economic motivation
is defined by law for three issues and two issues were added by case law. The legal validity of the
redundancy depends on the drafting of the letter of the redundancy which has to set up precisely the
motivation in an absolute formal way which reproduce the terms of the law or case law.
b) Before any redundancy notification, compulsory consultations issues which depend on the
number of redundancy envisaged and the number of employee in the company. There is either i) a
preliminary interview of the concerned employees, or ii) a consultation of the staff representatives
(dlgu du personnel) and a preliminary interview or iii) a consultation of the works committee
with regard the job preservation plan.
c) Specific schedule has to be compulsory followed according to the law or Collective agreements
(provided collective agreements are more favorable than the law) or a case by case basis a
redundancy methodology agreements (accord de mthode) which cannot be less favorable that
law or collective agreements.

3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No, except for the schedules and notice period which are different for white collar (cadre) and
blue collar (non cadre).
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. A laid-off employee may use any anti-discrimination laws to challenge his/her inclusion in the
layoff. For example: (a) I was included in the layoff because of my [race/age/national
origin/religion/disability/gender, etc.]; or (b) The layoff has a disparate impact on employees based
on [those same categories]; or (c) I was included in the layoff to retaliate against me for complaining
about sexual or moral harassment
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The penalties differ according to the neglects committed by the employer:
a) Absence or not enough relevant job preservation plan: The employer has to pay the salaries that
the laid-off should have been perceived for the period between his redundancy and the decision of
Court stating in favor of the employees and has to reinstate the employee in the company, except
when this one is closed or if the employee does not wish so. In these latter cases, the minimum is
twelve months allowances.
b) Non compliance with the formalities of the procedure: allowances are based on the damages, but
as a general rule the law or the case law provide for the employee with a one month allowance
c) Should the economic motivation be considered by the judge as being non-existent: allowances are
based on the damages if the employee has less than two year of seniority in a company which
employs less than ten employees bearing in mind that if the employee has at least a two year
seniority and the company employs more than ten employees, the minimum allowances is six
month.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The main two mistakes are i) the drafting of the redundancy notification letter and ii) the formal
procedure regarding the redeployment plan to be proposed to the employees.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Should staff representative (dlgu du personnel) works committee representatives or trade


union representative be included in the lay offs labor authorities authorization has to be obtained by
only for these employees.

GERMANY
Prepared by
Dr. Ouart & Collegen
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
General regulations concerning the layoff of employees can be found on the federal level,
especially in the Brgerliches Gesetzbuch (BGB) and the Kndigungsschutzgesetz (KSchG),
a special law on layoffs and protection of employees.
According to the KSchG, the termination of an employment has to be socially
justified. In case of a redundancy due to business operations, the termination of an employment
is presumed to be socially justified.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Section 622 para. 2 BGB requires the compliance of a delay depending on how long the
employer has been employed (e.g. a delay of two months to the end of the months in case of an
employment of at least five years). The notice of termination has to be made in writing (Section
623 BGB).
In enterprises with five or more employees, there should be a BETRIEBSRAT (Staff
Committee which might have nothing to do with a trade union). In most of German enterprises,
such a Betriebsrat does exist. In case of layoffs, the employer has to inform the committee about
the grounds of the termination and give the committee the opportunity to be heard (Section 102
Betriebsverfassungsgesetz (BetrVG)). The Betriebsrat has a certain time limit to give its
opinion. If the employer terminates the contract without hearing, the termination is invalid.
If the number of layoffs and the size of the enterprise reaches a certain limit, the
employer is also obliged to give written notice to the AGENTUR FR ARBEIT (Federal
Employment Agency), to the Betriebsrat and to the individual affected employees (Section 17
KSchG). In case of insolvency of the enterprise, special requirements will apply for the layoffs
(Insolvenzordnung (InsO)). The Betriebsrat has to be heard (Section 111 BetrVG).
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Yes. The employee has the possibility to file a protest claiming that his inclusion in the
layoff is a discrimination (e.g. age/maintenance obligations/disability etc.). The duration of the
labour contract is also one of the main criteria for selection during a layoff procedure: The longer
you worked for this enterprise, the more chances you have not to belong to those who are
included in the layoff.
The place to attack the termination is the ARBEITSGERICHT (Labour Court (Special
Courts for litigation on labour law)). There are three levels of courts, local, regional and federal
level all of them with participation of lay judges, one nominated by employers and the other
nominated by employees. In first and second instance, there is only one professional judge, on
the federal level there are three professional judges, each time accompanied by two lay judges.
The rules for litigation are laid down in the federal Arbeitsgerichtsgesetz (ArbGG).
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
Usually, there are no sanctions or penalties which may be imposed against the employer
for violating any of the legal requirements. However, if any of the requirements mentioned above
is missing, the employer takes the risk to be confronted with the contest of the termination at
(labour) court. If the court is convinced that the necessary requirements have not been fulfilled,
the employment contract is still valid and the employer has to continue paying the employee her
salary even for times when the latter did not work. Punitive damages are unknown so far in
Germany.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
In general, formal mistakes are the most important for litigation in this domain.
In enterprises, where a BETRIEBSRAT exists, the main source for mistakes is probably
the non-hearing of the staff committee. If the termination is effected without the participation of
the Betriebsrat, the employee concerned has the best chances to declare the termination null and
void at the Labour Court (Special Courts for litigation on labour law).
Another mistake, especially in smaller enterprises, might be the lack of correspondence
of the responsible persons in the enterprise and the persons who signed the termination.

7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
One of the most important political and economic measures in the current financial and
business crisis is the so-called KURZARBEIT (short time work) as an alternative to layoffs. This
legal concept dates back many decades (it was introduced even before the founding of the
Federal Republic of Germany) and is included in the legislation on welfare law

(Sozialgesetzbuch III). Recently, it was put into practice again at the beginning of the business
crisis.
The aim of Kurzarbeit is to enable employers to keep their employees during a temporary
crisis while reducing the labour costs with the financial help of the AGENTUR FR ARBEIT
(Federal Employment Agency). This Agency is partly financed by the contribution of employers
and employees, but also receives money from taxes. The employees receive less money, but their
contribution to Social Security (health insurance, pension insurance, unemployment insurance)
remain on the same level due to the sponsorship of the Agentur fr Arbeit.
Kurzarbeit is limited to a period of 6 months, but can be extended to a maximum period
of 24 months. The Federal Government recognized a special economic crisis and extended the
period to 2 years (elections will come soon at the federal and state level).
As employees are paid less during the period of Kurzarbeit, the employer has to request
the consent of the BETRIEBSRAT (Staff Committee) which is normaly given in a general crisis
like this. Together with this consent of the Betriebsrat, the employer can request Kurzarbeit at
the Agentur fr Arbeit.
Sometimes TARIFVERTRGE (collective wage agreements, mostly for special
branches) provide special provisions to the period of Kurzarbeit, e.g. professional trainings.

Germany
Prepared by Anette Prasser
Rechtsanwlte und Notar
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?
Basically there are two main laws concerning a layoff of employees:
i. Code of civil law (Brgerliches Gesetzbuch abbr. BGB) which rules general
period of notice and form of the notice of termination:

622 BGB and 624 BGB rule the notice period depending on the duration
of the employment,

623 BGB rules the form of the notice of termination written form is
required,

626 rules a two weeks notice period between taking notice of a cause and
dismissal for this cause.

ii. Protection Against Dismissal Act (Kndigungsschutzgesetz abbr. KSchG)


which contains special rules for the protection of employees. According to 1 KSchG
this act protects employees against socially unjustified dismissal. This act applies for
employees whose employment began on 01 January 2004 or after this date if
there are more than ten employees in the establishment (exclusive of
apprentices) and
employees whose employment existed on 31 January 2003 if there were more
than five employees at this time in the establishment (exclusive of
apprentices) who are still employed at the layoff time, whereas the
employees being employed after 31 December 2003 are not added to this
amount,
after being continuously employed more than six months.
For executive/managing staff the KSchG generally applies with some exceptions.
According to 1 of KSchG employees are protected against socially unjustified dismissal.
A dismissal can therefore be only legally valid if justified by:
reasons attached to the employee himself, or
reasons of conduct of the employee, or

urgent business needs which are incompatible with the continuation of


employment. In this case the correct social criteria for redundancy have to
be respected which means that the social circumstances of all comparable
employees are weighed against each other in detail, as for example
continuous length of service in the establishment, age, number of
dependants etc.
Moreover there are special protective laws for persons particularly in need of protection as
e. g. pregnant women and mothers until the end of the fourth month after the childbirth ( 9 of
Maternity Protection Law - Mutterschutzgesetz), severely disabled persons ( 85 of Ninth Book of
Social Security Code Neuntes Buch Sozialgesetzbuch) and others.
Also, a layoff may be considered as invalid for other reasons, e.g. if it is contrary to the
public policy ( 138 BGB) or the principle of good faith ( 242 BGB).
According to case law, any layoff has to comply with the principle of proportionality.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
If there is a work council in the establishment, it has to be always consulted about the
intended termination, otherwise the termination is invalid ( 102 of Betriebsverfassungsgesetz Works Council Constitution Act). If the work council opposes the layoff and the employee files an
action for unfair dismissal, the employer has to employ the employee by his request until there is a
final court decision.
According to 17 KSchG the employer is obliged to announce to the Labour Office an
intended dismissal
i. of more than 5 employees if there are 21 to 59 employees in the establishment,
ii. of at least 10 % or more than 25 employees if there are 60 to 499 employees in the
establishment,
iii. of 30 employees or more if there are at least 500 employees in the establishment.
At the same time the employer has to inform the work council ( 17 II KSchG).
In case of dismissal for cause the employer is, according to 626 II BGB, obliged to dismiss
an employee within two weeks after he has gained knowledge of the cause
In the case of dismissal for reasons of urgent business needs, if the employee does not file an
action for unfair dismissal, he is entitled to compensation if the employer has pointed out this right
in the notice of termination ( 1a) KSchG).
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?

The correct social criteria have to be respected (cf. answer to question 1)


Obligation to inform the work council according to 7 II KSchG (cf. answer to question 2)
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes, when the correct social criteria are not respected in the case of dismissal for reasons of
urgent business needs, the employee can challenge the dismissal due to violation of 1 III KSchG.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
An employee can file an action for unfair dismissal within three weeks from the day he
obtains the dismissal in written form.
The court may decide as follows:
if the action is successful, the layoff is invalid and the employment continues
and the employee is entitled to his regular salary, or
annulment of the employment according to 9 KSchG against
compensation settled by this decision when the dismissal is unjustified but
the continuation of the employment unacceptable for the employee or the
employer.
In practice, most actions do not end by court decision but by a compensation settlement
between the parties.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
In case of a dismissal for reasons attached to the employee himself or for reasons of conduct
of the employee, a common mistake is that the employer does not give the employee a prior warning
which is in many cases required.
In case of a dismissal for reasons of urgent business needs, a common mistake is that the
employer does not respect the correct social criteria.
Procedural mistakes are also common notice period, work council hearing etc.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Employee layoff on a large scale may in some cases result in a reclaim of subsidies.

GUERNSEY
Prepared by Paul Richardson
AFR Advocates

1.

Are there any laws that govern a layoff of employees? If so, what do the laws
require?

There are no Laws that deal solely with redundancy. The Employment Protection
(Guernsey) Law, 1998, as amended (the Law) does, however, contain certain provisions
relating to redundancy.
Redundancy is defined at section 34 (3) as:
(a) the fact that the employer has ceased, or intends to cease, to carry on the
business for the purposes 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; or
(b) the fact that the requirements of that business for employees to carry out work
of a particular kind, or for employees to carry out work of a particular kind in the
place where the employee was so employed, have ceased or diminished or are
expected to cease or diminish.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

The Commerce and Employment Department of the States of Guernsey has published a
Code of Practice for handling redundancy. Whilst this is not legally enforceable per se,
employers are advised to follow these Guidelines as closely as possible in order to protect their
position. A redundancy carried out in accordance with Codes of Practice is drastically less likely
to be considered unfair.
The Code of Practice recommends:
(1) that a redundancy procedure be set up, with input from the workforce;
(2) that the redundancy procedure should include:
(i)
(ii)
(iii)
(iv)
(v)

confirmation that it is the managements aim to maintain job


security where possible;
consultation arrangements with employees or any trade union;
measures for minimising or avoiding redundancy;
that selection criteria be used where redundancy is unavoidable;
and
any contractual agreement on notice and/or redundancy pay.

(3) steps should be taken to ensure that any redundancy will be genuine;
(4) redundancies should be minimised or avoided where possible;
(5) a pool for selection should be drawn up;
(6) objective and verifiable selection criteria for redundancy should be
established, keeping employees informed and avoiding inadmissible criteria ;
(7) trade unions and/or staff should be consulted;
(8) alternative work should be considered as an alternative to redundancy, with
reference in related companies or businesses.
Where a company is too small for the above process to be practicable, three principles
should be adhered to. These are:

3.

consulting with employees about redundancy situations well before final


decisions are reached;

ensuring that there is a fair and objective basis for redundancy selection; and

taking all reasonable steps to avoid or minimise redundancy e.g. offering


alternative work where it exists.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No, but see point 2 above.

4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

An employee may make a complaint if the redundancy was such as to constitute an unfair
dismissal. This may occur, for example, if proper procedure was not followed, or if the
redundancy was a sham. Like all claims in unfair dismissal, this action is restricted to employees
who have a years continuous service (section 15(1) of the Law).
There are special considerations where a person has been made redundant for an
inadmissible reason. Pursuant to section 13 of the Law, if an employee has been made
redundant because of:
trade union membership or activity;
pregnancy;

their having asserted a relevant statutory right;


health and safety;
an act of sexual discrimination; or
refusal to work on Sundays, if they are a worker protected by the Employment
Protection (Sunday Shop Working) (Guernsey) Law, 2001;

their dismissal will automatically be deemed unfair, without being subject to the usual one-year
qualifying period for unfair dismissal (section 15(2) of the Law), but only if the circumstances
constituting the redundancy applied equally to one or more other employees in the same
undertaking who held positions similar to that held by the employee and who have not been
dismissed by the employer.
5.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

Pursuant to section 22(a) of the Law, the penalty for unfair dismissal is a payment to the
dismissed employee of six months wages. Under section 23, this may be reduced in certain
circumstances.
6.

7.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
(1)

Employers may fail to follow the Commerce and Employment


Departments Code of Practice. This does not, of itself, render them liable
to a penalty, but an Employment Tribunal will take into account any
failure to follow the Code into account.

(2)

Employers occasionally make an employee redundant, and replace them


immediately. This reveals the redundancy to have been a sham and
potentially an unfair dismissal.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Under Guernsey law, there is no statutory requirement for an employer to make a


redundancy payment. That said, it is usual for contracts of employment to contain some
provision relating to redundancy and to provide an assurance of severance pay. Compromise
agreements providing an employee with redundancy pay in exchange for confidentiality and
various waivers of statutory rights are also the norm.
The most common issues relate to whether accrued bonuses and other like benefits
survive the redundancy, or do they terminate with the dismissal.

Hong Kong
Prepared by Julia Charlton
Charltons Law
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Termination of employment in Hong Kong is governed by the Employment Ordinance
(Cap.57) (Ordinance). With a few limited exceptions, the Ordinance applies to all employees
engaged under a contract of employment in Hong Kong and their employers. It is not possible to
contract out of the Ordinance and any term of an employment contract seeking to eliminate or
reduce employees rights or benefits under the Ordinance is void.
The Ordinance provides a minimum level of protection to all employees covered by the
Ordinance regardless of the number of hours worked. Employees engaged under a continuous
contract of employment are entitled to additional benefits. An employee who has been
employed for 18 or more hours per week for at least 4 weeks is taken to be employed under a
continuous contract.
In the case of collective dismissals, there is no statutory obligation on employers to
consult employees on either a collective or individual basis. Nor is there any governmental or
regulatory authorization requirement. As detailed in the answers to the following questions, the
Ordinance does however stipulate the procedures for terminating employment contracts, the
termination payments to be made and, in the case of employees engaged under a continuous
contract for at least 24 months, requires payment of severance in a redundancy situation.
Employees engaged under a continuous contract for at least 5 years who are terminated
otherwise than for redundancy may be entitled to a long service payment.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

An employer can terminate a contract of employment by giving notice of the length


required under the Ordinance. Alternatively, an employer can terminate a contract without
notice by paying wages in lieu of notice.
In the case of continuous contracts of employment, the length of notice required for nonprobationary employees is:
(a)

Where the contract provides for the length of notice on termination, the agreed
period, subject to a minimum of 7 days;

(b)

Where there is no contractual notice period, at least one months notice.

Employees on probation can be terminated without notice during the first month of
probation. Thereafter, they are entitled to notice of the length provided for in the employment

contract. If the contract provides for less than 7 days notice or there is no contractual notice
period, the minimum period is 7 days.
The notice period cannot include any maternity leave or annual leave.
Where an employer terminates a contract without notice, the employee must be paid the
amount of wages that would have been due to the employee for the notice period.
The definition of wages includes all remuneration and earnings payable to an employee
including travel allowances and non-discretionary commission and attendance allowances.
Overtime pay is within the definition of wages if it is paid consistently or if its monthly average
in the previous 12 months amounts to at least 20% of the employees monthly wages for that
period. End of year payments, bonuses of a gratuitous or discretionary nature and the value of
certain benefits provided by the employer such as accommodation, education and medical care,
are excluded from the definition of wages.
Employers are required to pay wages in lieu of notice, and all other termination payments
other than severance payments, as soon as practicable, and no later than 7 days after the
termination date.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?

The Ordinance requires an employer to make severance payments to employees who


have been employed for 24 months or more under a continuous contract and have been dismissed
by reason of redundancy or laid-off.
An employee will be regarded as having been dismissed by reason of redundancy if the
dismissal is attributable wholly or mainly to the fact that:

the employer has closed, or intends to close, the business for which the
employee was employed;

the employer has ceased, or intends to cease, carrying on business in the


place where the employee was employed; or

the requirements of the business for employees to carry out a particular kind
of work, or for employees to carry out a particular kind of work in the place
where the employee was employed, have ceased or diminished or are
expected to cease or diminish.

In the absence of proof to the contrary, an employee is presumed to have been dismissed
by reason of redundancy.
An employee is regarded as laid off if his employer has not provided him with work or
wages for more than:

(a)

half of the normal working days in any 4 consecutive weeks; or

(b)

one-third of the normal working days in any 26 consecutive weeks.

Days of lock-out, rest days, statutory holidays and annual leave are not counted as normal
working days in determining whether an employee has been laid off.
Calculation of Severance Payments
Employees paid monthly
The severance payment will be two-thirds of the lower of: (a) the employees last full
months wages (or, at the election of the employee, his average monthly wage during the
previous 12 months); and (b) HK$22,500, for each year of service.
Employees paid on a daily or piece basis
The severance payment will be the lower of: (a) the wages for any 18 days chosen by the
employee from his last 30 normal working days; and (b) two-thirds of HK$22,500, for each year
of service.
The amount payable in respect of an incomplete year of service is calculated on a pro rata basis.
Deductibility of Employers Contributions
A severance payment can be reduced by the amount of:
(a) gratuities based on length of service or occupational retirement scheme benefits
(other than those attributable to contributions by the employee) paid to the
employee; or
(b) benefits under a mandatory provident fund scheme (other than those attributable to
contributions by the employee) which are held for, or have been paid to, the
employee.
To be deductible, the above gratuities and benefits must relate to the years of service for
which the severance payment is payable.
Maximum Amount Payable
The Ordinance caps the amount payable by way of severance payment at HK$390,000.
Associated Companies
Where an employee was previously employed by an associated company of his
employer, the period of employment with the associated company can be counted as a period of

employment with the employer provided that the two companies were associated at the time of
the employees move.
Time for Payment of Severance Payment
In order to claim a severance payment, an employee is required to give his employer
written notice of the claim no later than 3 months after the dismissal or lay off takes effect. Such
notice can only be served after the 3 month deadline with the approval of the Commissioner for
Labour. The employer is required to make the severance payment to the employee within 2
months after receipt of notice of the employees claim. At the time payment is made, the
employer must also provide the employee with a written statement showing how the amount has
been calculated.
Offers to Renew/Re-engage Employees
An employee is not entitled to a severance payment if his employer (or its associated
company) made a written offer to renew the employees contract or to re-engage him under a
new contract, and the employee unreasonably refused the offer. The offer to renew or re-engage
must be made at least 7 days before the termination date and the renewal of the contract or re
engagement must become effective on or before the termination date.
4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

The principal grounds on which an employee can challenge the termination of his
employment under the Ordinance are unreasonable dismissal, unreasonable variation of terms of
employment contract and unlawful dismissal. For such a claim to be successful, the employee
must have been dismissed other than for a valid reason. The definition of valid reason is set
out in Section 32K of the Ordinance and includes dismissal of an employee by reason of
redundancy or other genuine operational requirements of the business. Hence dismissals by
reason of redundancy or the genuine operational requirements of the business should not of
themselves give rise to the above claims.
An employee may however be able to challenge his or her inclusion in the layoff under
the following anti-discrimination laws: the Sex Discrimination Ordinance, the Race
Discrimination Ordinance, the Disability Discrimination Ordinance and the Family Status
Discrimination Ordinance. These Ordinances prohibit both direct and indirect discrimination on
the basis of sex, marital status, pregnancy, race, disability and family status (i.e. a persons
responsibility for the care of immediate family members).
Protected Employees
There are also statutory prohibitions on dismissing employees in specified
circumstances. Employers are prohibited from dismissing:

5.

(a)

a pregnant employee engaged under a continuous contract of employment who


has given her employer notice of her pregnancy (Section 15(1) of the Ordinance);

(b)

an employee who is on sick leave and entitled to receive sickness allowance


(Section 33(4B) of the Ordinance);

(c)

an employee by reason of his exercising his rights in respect of trade union


membership and activities (Section 21B(2)(b) of the Ordinance);

(d)

an employee by reason of his giving evidence in proceedings, or information in an


inquiry, in connection with the enforcement of the Employment Ordinance (s.72B
of the Ordinance) or the Factories and Industrial Undertakings Ordinance (Section
6 of the Factories and Industrial Undertakings Ordinance (Cap. 59); and

(e)

an employee who is entitled under the Employees Compensation Ordinance


(Cap.282) to compensation for incapacity suffered before the employer and
employee enter an agreement for the employees compensation or before a
certificate of assessment is issued (Section 48 of the Employees Compensation
Ordinance).

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

An employer who does not pay termination payments (other than severance payments)
when due may be prosecuted, and if convicted, may be liable to a fine of HK$350,000 and to 3
years imprisonment. An employer who fails to pay a severance payment is liable on conviction
to a fine of HK$50,000.
An employer who dismisses an employee in breach of the prohibitions referred to in the
answer to Question 4 above, may be prosecuted and subject to a fine, on conviction, of
HK$100,000. The employer may also be liable to pay compensation to the employee.
Where an employer is found to have breached Hong Kongs anti-discrimination laws,
the remedies which the court may award include injunctions, reinstatement, and compensatory as
well as punitive or exemplary damages. If proceedings are brought in the district court, there is
no limit on the amount of damages which the court may award. In employment cases,
compensatory damages are based principally on loss of earnings and injury to feelings caused by
the discrimination. Awards for injury to feelings in discrimination cases can be substantial and
have typically been in the range of HK$15,000 to HK100,000.
6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

One of the common issues in relation to lay offs is whether annual leave can be used to
off set the required notice period of termination in order to shorten the notice period. The answer

is no, an employer must ensure that employees are given notice of termination of the length
required by the Ordinance.
7.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Continuity of Employment on Transfer of Business


On the transfer of a business, the transfer does not break the continuity of the period of
employment of employees who are kept on by the transferee and their periods of employment
with the transferor count as periods of employment with the transferee (Paragraph 5 of the First
Schedule of the Ordinance). The transferee may therefore seek to negotiate adjustments to the
purchase price so that the transferor bears contingent liabilities for severance or long service
payments accrued in respect of periods prior to the transfer.
Long service payment
An employer is liable to pay a long service payment to an employee engaged under a
continuous contract for at least 5 years in the following circumstances:
(a)

the employee is dismissed and the dismissal is not by reason of redundancy or a


summary dismissal due to serious misconduct and the employer is therefore not
required to pay a severance payment;

(b)

an employees fixed term contract of employment has expired and not been
renewed;

(c)

the employee terminates his contract having been certified by a medical


practitioner as permanently unfit for his type of work;

(d)

on the resignation of an employee aged 65; or

(e)

the death of an employee.

Long service payments are calculated in the same way as severance payments, are subject
to the same maximum amount and are payable within 7 days from the date of termination of the
contract. Long service payments are not payable in a redundancy situation, thus if an employee
is entitled to severance on being made redundant, he will not additionally be entitled to a long
service payment. As is the case for severance payments, an employee will not be entitled to a
long service payment if he unreasonably refused an offer by his employer (or its associated
company) to renew the employees contract or to re-engage him under a new contract where the
offer was made at least 7 days before the termination date and the renewal of the contract or re
engagement would take effect on or before the termination date.
Change of Ownership on Transfer of Business

Where there is a change of ownership of a business, an employee will not be entitled to


any severance payment or any remedies for unreasonable or unlawful dismissal or unreasonable
variation of the terms of the employment contract, if he unreasonably refuses an offer from the
new owner of the business to renew the employees existing contract or to re-engage him under a
new contract on the same or no less favourable terms. The offer to renew or re-engage must be
made no later than 7 days before the anticipated termination date and the renewal or reengagement must take effect before the termination date. (Sections 31J and 32D of the
Ordinance). These provisions however apply only on a transfer of business and will not
apply on an acquisition of shares in a company. Thus where there is to be a transfer of a
business and the transferee is to take on all or any of the sellers employees, offers for renewing
or re-engaging the employees must be made in strict compliance with the requirements of
Sections 31J and 32D of the Ordinance.
Establishing Valid Reasons for Employees to be Dismissed
Where any employees are to be dismissed on a transfer of business or generally, it is important to
establish that they have been dismissed for a valid reason. Section 32K of the Ordinance sets out
the 5 valid reasons for dismissal or the variation of the terms of an employment contract:

the conduct of the employee;

the employees capability or qualifications for performing the work he is


employed to do;

redundancy or other genuine occupational requirements of the business;

statutory provisions making it unlawful for the employee to continue to be


employed by the employer or to continue employment under the terms of his
current contract; or

any other substantial reason.

As a practical matter, employers should document the reasons for dismissal in case they
are subsequently challenged. They should also ensure that the criteria on which they select staff
for redundancy are fair and do not contravene any of the anti-discrimination laws.
Unreasonable Dismissal, Unlawful Dismissal and Unreasonable Variation of Contract
Terms
An employee can challenge the termination of his employment and obtain remedies on
the following grounds:
(a)

Unreasonable dismissal: where an employee engaged under a continuous


contract for at least 24 months is dismissed other than for a valid reason as
defined under Section 32K of the Ordinance (see above); or

(b)

Unreasonable variation of the terms of an employment contract: where the


terms of a continuous contract under which an employee is employed are varied
by his employer without the employees consent, in the absence of an express
term in the contract permitting the variation, and other than for a valid reason
within the meaning of Section 32K; or

(c)

Unlawful dismissal: where an employee is dismissed other than for a valid


reason and in breach of any of certain statutory prohibitions on dismissal of
employees in specified circumstances (see the categories of protected employees
in the answer to Question 4 above).

Remedies Available
(a)

Reinstatement or Re-engagement Orders

A reinstatement or re-engagement order can be made where unreasonable dismissal,


unreasonable variation of contract terms or unlawful dismissal is established. However both the
employee and employer must agree to the order. A reinstatement order requires the employer to
treat the employee as if he had not been dismissed or as if the terms of the contract had not been
varied. A re-engagement order requires the employer, his successor on a change of ownership,
or an associated company to employ the employee on terms comparable to his original terms of
employment or in other suitable employment
(b)

Terminal Payments Awards

This is a discretionary remedy which may be awarded if no reinstatement or reengagement order is made. The provisions as to the calculation of terminal payments are
complicated. Very simply, terminal payments include: (a) the employees statutory entitlements
under the Ordinance; (b) a pro rata amount of the long service payment to which the employee
would have been entitled had he been employed for 5 years; and (c) any other payments due
under the contract.
Terminal payments awards can be made for unreasonable dismissal, unreasonable
variation of contract terms or unlawful dismissal.
(c)

Compensation Awards

Compensation awards may only be made in cases of unlawful dismissal where no order
for reinstatement or re-engagement is made. It is a discretionary remedy and is subject to a
maximum of HK$150,000.
Situations in which the Remedies are not Available
The above remedies are not available in the following circumstances:

(a)

on the transfer of a business where the employee unreasonably refuses an offer to


renew the employees contract or re-engage him under a new contract in the
circumstances set out in Section 32D of the Ordinance (see Change of
Ownership on Transfer of Business above);

(b)

on the expiry of a fixed term contract where the employee unreasonably refuses
the employers offer to renew his contract of employment or re-engage him under
a new contract on no less favourable terms where a written offer was made no less
than 7 days before the expiry of the contract and the renewal or re-engagement
would be effective on or before the expiry date; and

(c)

where the employee is summarily dismissed for serious misconduct under Section
9 of the Ordinance.

Summary Dismissal
An employer is entitled to terminate an employee without notice or wages in lieu of
notice if, in relation to his employment, the employee:
(a)

willfully disobeys a lawful and reasonable order;

(b)

misconducts himself;

(c)

is guilty of fraud or dishonesty; or

(d)

is habitually neglectful of his duties.

HUNGARY
Prepared by Hdi Bozsonyik, Adrienn Tar and Lszl Pk
Szecskay Attorneys at Law
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Act XXII of 1992 on the Labor Code (hereinafter: the Labor Code) governs
employment relationships, including the termination of the employment in Hungary.
Employment relationships established for an indefinite period may terminate in the
following ways:
a)
successor;

by the death of the employee or the cessation of the employer without a legal

b)

by mutual agreement between the employer and the employee;

c)

termination by the employer or the employee by an ordinary notice;

d)
termination by the employer or the employee by an extraordinary notice with
immediate effect;
e)
during the probation period in case of termination by the employee or the
employer with immediate effect.
Employment relationships established for a definite period may terminate in the
following ways:
a)
by the death of the employee or the cessation of the employer without a legal
successor;
b)

by mutual agreement between the employer and the employee;

c)
termination by the employer or the employee by an extraordinary notice with
immediate effect;
d)
during the probation period in case of termination by the employee or the
employer with immediate effect;
e)

by expiration of the definite period,

f)
the employer may terminate the employment relationship under conditions other
than those stipulated above, in which case the employee shall be paid one year's average
salary, or his average salary for the remaining period if it is less than one year.

The Labor Code includes special provisions on mass lay-offs.


The following situations qualify as mass redundancy or mass lay-off: the termination of
the employment of:
i.
employees;

at least 10 employees by an employer that employs more than 20 but less than 100

ii.
10 per cent of the employees by an employer that employs at least 100 but less
than 300 employees;
iii.

at least 30 employees by an employer that employs at least 300 employees;

within a period of thirty days, for reasons in connection with its operations.
In order to calculate the employees, the average statistical workforce for the preceding
six-month period before the redundancy shall be taken into account. If the employer has more
than one business premise, the numbers indicated above must be taken into account with respect
to all such business premises individually. However, if these business premises are located in the
same county or in Budapest, the number of the employees shall be aggregated.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Termination by ordinary notice
Both the employee and the employer may terminate the employment relationship for an
indefinite period by ordinary notice. The employer shall justify the reason for termination by
notice, unless the employee is a pensioner or an executive as defined by law. (The justification
shall clearly indicate the cause. In the event of a dispute, the employer must prove the
authenticity and substantiality of the reason for termination.)
The reason for termination must be exclusively in connection with
(i)

the employee's ability,

(ii)

the employees behavior in relation to the employment relationship, or

(iii)

the employer's operations.

Before the termination of the employment on the basis of the employee's work
performance or conduct, the employee shall be given the opportunity to defend himself against
the complaints raised, unless it cannot be expected of the employer in view of all the applicable
circumstances.

The Labor Code sets forth situations when an employer shall not terminate an
employment relationship by ordinary notice, i.e. with those unable to work due to illness; during
sick leave for the purpose of caring for a sick child etc. The notice period shall be minimum
thirty days and maximum one year depending on the period spent by the employee in the
employment relationship. In the event the employer terminates the employment, the employee
must be exempted from performing work for at least half of the notice period.
With termination by ordinary notice by the employer and the cessation of the employer
without a legal successor, the employee shall be entitled to a severance payment if the
employment relationship has been in existence for at least 3 years. The severance shall be
amount to between 1 and 6 months' average salary depending on the duration of employment
relationship with the employer.
Termination by an extraordinary notice
The employer or the employee may terminate an employment relationship by
extraordinary dismissal in the event that the other party
a)
is in breach of its/his/her substantial obligations arising out of the employment
relationship, whether willfully or by gross negligence, or
b)
otherwise behaves in such a manner that would make the continuance of the
employment relationship impossible.
Both the employer and the employee shall justify the reason for termination by
extraordinary notice. The justification shall clearly indicate the cause. In the event of a dispute,
the party which terminated the employment must prove the authenticity and substantiality of the
reason for termination.)
Prior to the employer's announcement of termination by extraordinary notice, the
employee shall be given the opportunity to acknowledge the reasons for the planned termination
and to defend himself against the complaints raised, unless it may not be expected of the
employer as a result of all the applicable circumstances.
The right to provide extraordinary notice may be exercised within 15 calendar days of
learning of the reason that serves as the basis for such termination, but the latest within one year
from the occurrence of the cause, or in the event of a criminal offence up to the statute of
limitation period (three years in case of an executive employee).
If an employment relationship is terminated by the employee by extraordinary notice, the
employer shall pay the employee his/her average remuneration for a period the same as in the
event of termination by ordinary notice by the employer. The provisions pertaining to severance
payment shall also be duly applied. The employee may also claim compensation for any
damages incurred.
Mass lay-off

When an employer is planning to implement collective redundancies, it shall begin to


consult with the workers' council or, if no such council exists, with the committee set up by the
local trade union branch and by the workers' representatives (hereinafter referred to as "workers'
representatives") within fifteen days prior to the decision, and shall continue such negotiations
until the decision is adopted or until an agreement is reached.
At least 7 days before the discussions, the employer shall inform the workers'
representatives in writing regarding the reasons for the projected redundancies, the number of
workers to be made redundant, and the number of workers employed in the 6 months preceding
the decision.
During the consultations the employer shall inform the workers' representatives in good
time in writing of the period of the proposed redundancy, the criteria for selection and the
conditions for redundancy payments.
In order to reach an agreement, the consultations shall, at least, cover the possible ways to
avoid collective redundancies, the principles of redundancies, the means of mitigating the
consequences, and reducing the number of employees affected.
The employer shall notify the government employment agency about its intention to
make a collective redundancy, and all the relevant details. This notification shall be conveyed
simultaneously with the provision of information to the workers' representatives.
If an agreement is reached between the employer and the workers' representatives during
the consultations, it shall be documented in writing. A copy of this agreement shall be sent to the
government employment agency.
Following the consultations with the workers' representatives, the employer will be
entitled to make the necessary decisions relating to the redundancy which will have to address
issues such as (a) the number of the employees affected and (b) the first and last day of the
execution of the redundancy and the detailed timing of the individual measures.
The employer shall notify the government employment agency in writing at least thirty
days prior to implementing the termination by ordinary notice or delivering the necessary
statement in case of an employment for a definite period.
The employer shall also notify the employees affected of its intention to make a
collective redundancy at least thirty days prior to delivery of the ordinary dismissal or the
necessary statement in case of an employment for a definite period. A copy of this notification
shall be delivered to the workers' representatives and to the competent employment center.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?

If the reason for termination is in connection with the employer's operations, the
employment can be terminated by ordinary notice. If the conditions of mass lay-off are met, both
the requirements of termination by ordinary notice and the special requirements for mass lay-off
shall be fulfilled (please see Section 2 above).
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Termination may be challenged for non-compliance with formal requirements and for
reasons pertaining to the merits, i.e. employees may challenge the reasons of the termination.
The most typical formal mistakes are the following:

the notice was not provided in writing,

the notice was not signed or delivered by the person entitled to exercise
employer's rights,

the notice was delivered during a so-called "protection period" (e.g. the employee
is on sick leave/maternity leave/is pregnant, etc.),

the notice was delivered after the statutory deadline in case of termination by
extraordinary notice had elapsed.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
In the event of unlawful termination, the following sanctions can be imposed against the
employer:
(i)
the employee shall, upon request, continue to be employed in his/her original
position;
(ii)
if the employee does not so request or if upon the employer's request the court
does not order the reinstatement of the employee in his/her original position, the court
shall order, with respect to all applicable circumstances (in particular the unlawful action
and its consequences), the employer to pay no less than two and no more than twelve
months' average salary to the employee;
(iii)
if the employee does not so request or if upon the employer's request the court
does not order the reinstatement of the employee in his/her original position, the
employment relationship shall be terminated on the day on which the order determining
the unlawfulness of the termination becomes final, therefore the remuneration of the
employee shall be paid to him/her until this day;
(iv)
the employee shall be reimbursed for lost wages (and other emoluments) and
compensated for any damages arising from such loss. The portion of wages (other

emoluments) or damages recovered elsewhere shall neither be reimbursed nor


compensated.
In the event of an unlawful termination of the employment by immediate notice, the
employee shall be also entitled to the remuneration due in case of an ordinary termination, thus,
to the average salary due for the notice period and to severance.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
As concerns termination by ordinary notice, the most common mistakes arise from
insufficient reasoning and formalities.
Furthermore, the person entitled to exercise the employers rights shall exclusively make
the decision on termination by ordinary notice or agree with the employee mutually on
terminating the employment. Such person may authorize another person to sign any of the
mentioned documents; however, the decision shall be made by the person entitled to exercise the
employers rights.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Special rules shall be applied to executive officers. The Labor Code sets forth that
executive employees are the executive officers of a company (i.e. CEOs, or Managing Directors
in case of a limited liability company or members of the board of directors in case of a PLC), and
their deputies. The shareholders' or quotaholders' meeting shall be entitled to exercise employer's
rights with respect to Managing Directors or members of the Board of Directors. Therefore, in
order to terminate the employment of a Managing Director or a board member, the shareholders'
or quotaholders' meeting shall pass a resolution on the termination of the employment, and shall
appoint a proxy to sign and deliver the termination documents. If ordinary notice is to be given to
the executive employee, the employer shall not provide reasoning to the ordinary termination. In
addition, some other limitations concerning the ordinary notice (e.g. prohibition of termination
with regard to those who unable to work due to illness/during sick leave for the purpose of caring
for a sick child etc) shall not apply to executive employees.

INDIA
Prepared by Suyash Srivastava
Luthra & Luthra

1.

Are there any laws that govern a layoff of employees? If so, what do the laws
require?

Preliminary
Yes. Under Indian law, layoff (i.e. retrenchment/termination) of employees is governed
by the Industrial Disputes Act, 1947 (the ID Act) and state specific Shops & Establishments
legislations.
Kindly note that as such the term layoff under Indian law is defined under the ID Act
as the failure, refusal or inability of an employer on account of shortage of coal, power or raw
materials or the accumulation of stocks or the breakdown of machinery or natural calamity or
for any other connected reason to give employment to a workman whose name is borne on the
muster rolls of his industrial establishment and who has not been retrenched. Hence, the term
layoff under the ID Act is normally understood to mean a temporary layoff of the employee
without terminating or retrenching the employee.
However, for the purposes of these questions, we proceed on the basis that the term
layoff refers to retrenchment or termination of workers on account of several reasons.
Applicability
The ID Act applies to all employees who satisfy the definition of workmen under
Section 2 (s) of the ID Act. A workman is any person (including an apprentice) employed in
any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory
work for hire or reward, whether the terms of employment be express or implied, and for the
purposes of any proceeding under this Act in relation to an industrial dispute, includes any such
person who has been dismissed, discharged or retrenched in connection with, or as a
consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that
dispute, but does not include any such person (i) who is subject to the Air Force Act, 1950 (45 of
1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or (ii) who is
employed in the police service or as an officer or other employee of a prison; or (iii) who is
employed mainly in a managerial or administrative capacity; or (iv) who, being employed in a
supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or
exercises, either by the nature of the duties attached to the office or by reason of the powers
vested in him, functions mainly of a managerial nature.
The normally accepted test to determine the status of employees as workmen is whether
the employees fall under any of the statutory exceptions on the basis of the job profile and nature
of work performed; what is the dominant nature of the job performed; whether the dominant
nature of the job performed falls under any of the headings contemplated by the provision i.e.

manual, skilled, unskilled, technical, clerical or operational work; pay and duration of tenure are
irrelevant factors for the determination of the status of an employee.
Retrenchment/Termination
Retrenchment means the termination by the employer of the service of a workman for
any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action,
but does not include - (a) voluntary retirement of the workman; or (b) retirement of the workman
on reaching the age of superannuating if the contract of employment between the employer and
the workman concerned contains a stipulation in that behalf; or (bb) termination of the service
of the workman as a result of the non-removal of the contract of employment between the
employer and the workman concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein; or (c) termination of the service of a workman on the
ground of continued ill-health.
Requirements in relation to retrenchment are governed by Sections 25-F and 25-N of the
ID Act. Section 25-F applies to any workman who has completed at least 240 days of service in a
year and requires one months notice in writing or payment of wages in lieu of such notice;
retrenchment compensation at the rate of 15 days of wages for every completed year of service
and notice to be served on the appropriate government or authority.
In the event of a workman working in either a factory or a plantation or a mine
employing 100 or more workmen, in the case of retrenchment, if the workman has completed at
least 240 days of service in a year, Section 25-N of the ID Act requires three months notice in
writing or payment of wages in lieu of such notice; retrenchment compensation at the rate of 15
days of wages for every completed year of service and the prior permission of the appropriate
government for such retrenchment.
Termination is also governed by the relevant shops and establishment legislations enacted
by state legislatures which typically provide that dismissal or termination cannot be carried out
without appropriate notice or payments in lieu of such notice.
It is also necessary to note that where an employee is sought to be dismissed or
terminated for reasons of misconduct or other acts during the course of employment, it is
imperative that such an employee is given an opportunity of being heard through a disciplinary
enquiry.
Layoff
In the case of a temporary layoff without retrenchment i.e. in relation to layoff as defined
above, Section 25-C of the ID Act requires every workman to be paid fifty percent of his basic
wages for the period during which he is temporarily laid off. However, this only applies to
establishments employing fifty or more workmen.
In the event of a workman working in either a factory or a plantation or a mine
employing 100 or more workmen, in the event of such a temporary lay-off without termination,

Section 25-M of the ID Act requires the prior permission of the appropriate government to be
obtained prior to any such layoff, subject to certain other requirements of Section 25-M.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

The requirement is as described above under Section 25-F of the ID Act and state shops
and establishments legislations.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?

No. There is no other specific requirement in relation to layoffs caused by redundancy


apart from those described above in response to No.1.
4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Yes. The ID Act provides employees classified as workmen, with the right to raise
industrial disputes to challenge any termination which is perceived as wrongful. The appropriate
government will refer such disputes to Labour Courts for adjudication.
Employees can also file complaints of unfair labour practices under the ID Act against
certain actions by employers such as termination by way of victimization, on patently false
reasons, in colourable exercise of the employers rights, amongst others.
Under Section 33 (3) of the ID Act, one per cent of workmen subject to a maximum of
100 workmen belonging to a registered and recognised trade union are considered as protected
workmen in respect of whom the employer is prohibited from taking any action against to alter
the service conditions of such protected workman or to discharge or dismiss the protected
workman. However, this prohibition is only for the time period during which an industrial
dispute involving the protected workman is already pending.
5.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

In industrial disputes raised by employees under the ID Act, courts grant reliefs of
reinstatement and back wages in the event of a finding of wrongful termination. Apart from this,
in cases of criminal prosecutions for unfair labour practices, Section 25-U of the ID Act
prescribes a penalty in the form of imprisonment of up to 6 months or with a fine of up to Rs.
1,000/- or both. Persons in charge of the affairs of an establishment may also be subject to
criminal prosecution and such penalties.
6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

Certain common errors made by employers leading to liability for wrongful terminations
include:
(a)
Failure to pay retrenchment compensation under the ID Act to retrenched
employees

7.

(b)

Failure to correctly classify employees as workmen entitled to the benefits


and remedies under the ID Act

(c)

Terminating employees in a manner that attaches a stigma to their stint,


without due enquiry and complying with principles of natural justice

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Closure
The only other issue that arises in this context is in relation to closure of undertakings.
Section 25-FFA of the ID Act requires serving of 60 days notice upon the government by an
employer intending to close down an undertaking. However, this provision applies only to such
establishments which employ 50 or more workmen.
In the event of a workman working in either a factory or a plantation or a mine
employing 100 or more workmen, in relation to closure of such an establishment, Section 25-O
of the ID Act requires that the prior permission from the appropriate government must be
obtained at least 90 days before the effective date of the intended closure, subject to other
requirements of Section 25-O. In addition, every workman in such an establishment must be
provided with compensation at the rate of 15 days wages for every completed year of service.
Transfer
In the event of any transfer of an undertaking resulting in transfer of employees, in the
event of a sale of a business, under Section 25-FF of the ID Act, the buyer is required to ensure
that (i) the service of the workmen has not been interrupted by such transfer (i.e. the continuity
of service is maintained); (ii) the terms and conditions of service of the workman after such
transfer are not less favourable to the workman than those applicable to him immediately before
the transfer; and (iii) the workman is paid compensation upon retrenchment at any point in the
future in the manner provided under the ID Act. In the event that the buyer fails to comply with
the above three conditions, the seller is required to comply with Section 25-F of the ID Act, and
provide notice and compensation as prescribed to such workmen.

INDONESIA
Prepared by Christian Teo
C Teo Law
1.

Are there any laws that govern a layoff of employees? If so, what do the laws
require?

1.1

Governing Law

In Indonesia, layoff of employment (or the commonly used term Termination of


Employment Relationship or Termination) is governed by:
(i)
Law No. 13 of 2003 dated 25 March 2003 on Manpower, as revised by the
Decision of Constitutional Court, Docket No. 012/PUU-I/2003 (Manpower Law); and
(ii)
Law No. 2 of 2004 dated 14 January 2004 on the Settlement of Industrial Relation
Dispute (Industrial Dispute Law);
1.2

Requirement of Termination

In Indonesia, a Termination may be carried out under the basis of: (i) fault of employer or
employee or (ii) other reasons (i.e. change of status, merger & acquisition, bankruptcy, closed
down, force majeure, efficiency, etc).
As a general formal requirement, (i) a bipartite negotiation must be carried out; and/or (ii)
an approval from the Industrial Relation Dispute Settlement Institution must be obtained, prior to
the Termination. In specific cases, the Manpower Law requires an employer to serve warning
letters to employee prior to the carrying out the aforementioned general condition.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

The Manpower Law does not distinguish the procedure of Termination of employee, be it
individually or collectively. Please find below the three (3) general and formal steps for
Termination in Indonesia, in its ascending order:
(i)

necessary effort to prevent termination

The Manpower Law prescribes that all relevant parties involved in an employment
relationship, being the employer, employee, worker union (if any) and government (as the case
may be) must make every necessary effort to avoid Termination.
The efforts referred to above means all action with the main objective of avoiding the
proposed Termination (i.e. re-arrangement of working hours, cost efficiency, reorganizing
working method, providing counseling to the employees).
(ii)

bipartite negotiation:

If after carrying out such preventive efforts, Termination is still considered as the best
way forward, the employer shall then be bound with the obligation to conduct a bipartite
negotiation with the relevant employee. Both parties must reach a settlement on the terms and
conditions of the Termination. If the bipartite negotiation has a positive outcome, the Industrial
Dispute Law requires the parties to register their settlement agreement with the relevant
Industrial Relation Court.
(iii)

approval from the Industrial Relation Dispute Settlement Institution:

However, if the bipartite negotiation failed, then the Termination shall only be effective
upon approval from the Industrial Relation Dispute Settlement Institution.
The Industrial Dispute Law provides that Termination can be settled through; (i)
mediation; (ii) conciliation; and, ultimately, (iv) Industrial Relation Court. Without approval
from any one of these Industrial Relation Dispute Settlement Institutions, a Termination shall be
void by law.
In the event that the Termination is settled through Industrial Relation Dispute Settlement
Institution, both employer and employee are still bound by their respective employment
obligation, in which the employee must continue to perform his/her assigned work and the
employer pays the employees remuneration, e.g. salary and benefits. The employer may put the
employee under suspension on this point, but however, still must pay the employees
remuneration.
As a result of Termination, an employer shall be obliged to compensate the relevant
employee with a severance package, which may comprise of the following element (i) severance
pay, (ii) long service pay, (iii) compensation and, in certain cases, (iv) separation payment. The
amount and element of severance package shall be dependent upon reason of Termination and
the conditions relevant to each employee, such as (i) term of employment, (ii) benefits received
and/or (iii) employees position.
As we have mentioned in Point 1.2 above, in specific cases, the Manpower Law requires
an employer to serve warning letters to employee.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?

The Manpower Law recognizes redundancy-based termination as termination due to


efficiency, the only distinct legal requirement towards this type of termination is that the
severance pay received by the respective employee is twice as much from the regular one.
4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes:

(A)

the Manpower Law, for the basis to challenge his/her Termination, whether it is
(i) the legality of his/her Termination;
(ii) the amount of his/her severance package; or
(iii) remuneration during the Termination process, and

(B)
5.

Industrial Dispute Law, for the procedural guidelines.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

There are no sanctions or penalties provided in the Manpower Law towards the
Termination requirements.
However, please note that until such time an amicable settlement is reached and/or an
approval from any one of the Industrial Relation Dispute Settlement Institution is obtained, a
Termination is considered to be void by law.
The consequence to this condition from the part of employer is the obligation to pay the
employees salary.
6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Based on our observation, there are two general mistakes by the employers:

7.

(i)

termination mostly initiated by the employer are seldom accompanied by the


approval of the Industrial Relation Court or other Industrial Relation Dispute
Settlement Institution; and

(ii)

in termination based on violation of employment agreement (or any other binding


employment documents), employers rarely provide the warning letter(s) as
required under the Manpower Law.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Based on decision of the Constitutional Court passed on 28 October 2004 (Decision No.
012/PUU-I/2003/Decision) regarding the Judicial Review on the Manpower Law in
conjunction with Constitution of Republic of Indonesia, the provisions of termination based on
employees grave violation were no longer applicable.

As a consequence, in order to terminate an employee who is alleged of conducting


criminal act, the employer has to wait until there is a binding conviction by a court of the said
employee for the relevant criminal act.

REPUBLIC OF IRELAND
Prepared by David Lynch
McEvoy Partners
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Redundancy in Ireland is governed by the Redundancy Payments Acts, 1967 2007.
Definition of Redundancy
A redundancy situation is defined as occurring when there is a dismissal of an employee
by his employer which results wholly or mainly from one of the following scenarios:
a)

b)
c)

d)

e)

where an employer has ceased, or intends to cease, to carry on the business for the
purposes for 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; or
where the requirements of that business for the employee 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; or
where an employer has decided to carry on the business with fewer or no
employees, whether by requiring the work for which the employee had been
employed (or had been doing before his dismissal) to be done by other employees
or otherwise; or
where an employer has decided that the work for which the employee had been
employed (or had been doing before his dismissal) should henceforward be done
in a different manner for which the employee is not sufficiently qualified or
trained; or
where an employer has decided that the work for which the employee had been
employed (or had been doing before his dismissal) should henceforward be done
by a person who is also capable of doing other work for which the employee is
not sufficiently qualified or trained.

There are two important characteristics of redundancies, namely, impersonality and


change. It is the job itself, and not the person, that is made redundant. The redundancy must be
for reasons not related to the employee concerned and must not be for the purpose of merely
making way for an alternative employee to do the same job.
The Unfair Dismissals Acts, 1997 2005 provide that a dismissal of an employee will
not be deemed to be an unfair dismissal if it results wholly or mainly from the redundancy of
the employee. However, employers must strictly adhere to the definition of redundancy.
Selection of Employees for Redundancy

Employers must act reasonably in taking the decision to dismiss a person on the grounds
of redundancy. Redundancy legislation provides that when determining whether a dismissal is
an unfair dismissal, regard may be had to the reasonableness or otherwise of the employers
conduct in relation to the dismissal.
Once it is established that redundancies are necessary, employers must decide which
employees are to be made redundant. If an employee is dismissed due to redundancy, but the
circumstances constituting the redundancy applied equally to one or more employees in similar
employment with the same employer who are not dismissed, the dismissal will be deemed to be
unfair where the selection of a particular employee:
(a)

resulted wholly or mainly from one or more of the following matters:

(i)
activity;
(ii)

the employees membership of a trade union or engagement in trade union

the religious or political opinions of the employee;

(iii)
civil proceedings, whether actual, threatened or proposed, against the
employer, to which the employee was or will be a party or is likely to be a witness;
(iv)
criminal proceedings against the employer, whether actual, threatened or
proposed, in relation to which the employee has made, proposed or threatened to make a
complaint or statement to the prosecuting authority or to any other authority connected
with or involved in the prosecution of the proceedings or which the employee was or is
likely to be a witness;
(v)

the race, colour or sexual orientation of the employee;

(vi)

the age of the employee;

(vii)

the employees membership of the travelling community; or

(viii)

the pregnancy of the employee; or

(b)
was in contravention of an established procedure (whether agreed between the
employer and the employee or a trade union or established by custom and practice) and
there were no special reasons justifying a departure from that procedure.
Where there is no established procedure and the dismissal was not on one of the 8
grounds listed above, then consideration will be given to the reasonableness of the employers
decision. Where there are 2 or more employees engaged in similar employment, the employer is
obliged, in the absence of an established procedure, to adopt objective criteria for determining
who should be selected for redundancy.

Employers must ensure that the criteria chosen are applied consistently across the board.
The employer must be able to demonstrate that a particular employee had been compared to
others who might have been made redundant and that he had been selected fairly on the basis of
the pre-determined criteria. Furthermore, the employer must be able to show that the procedure
was applied to each employee who has been made redundant. Departure from an established
procedure without special reasons justifying such a departure will give rise to an inference of
unfair selection for redundancy and ultimately a finding of an unfair dismissal.
Notice
Notice in accordance with the employees contract must be furnished to the employee if
dismissed by reason of redundancy. If the right to pay in lieu of notice is not specified in the
employment contract, or if no contract exists, an employee may waive his or her right of notice
and may accept payment in lieu of notice, with the employers consent. Failing that, an
employee is entitled to stay on and work during the notice period irrespective of whether or not
there is work for the employee to do. Where an employee accepts payment in lieu of notice, the
date of termination is deemed to be the date on which notice, if given, would have expired.
Employees continue to be entitled to either their contractual termination notice or the
minimum notice laid down by the Minimum Notice and Terms of Employment Acts, 1973
2001. These minimum periods of notice apply if there is no notice provision in an employees
contract of employment or if the contractual notice is less than the statutory minimum. The
relevant periods of notice are as follows:
Period of Service
13 weeks 2 years
2 5 years
5 10 years
10 15 years
15 or more years

Period of Notice
1 week
2 weeks
4 weeks
6 weeks
8 weeks

These are the minimum periods of notice only. The Redundancy Payments Acts also
apply a different and overriding minimum notice period of two weeks written notice to
employees with a minimum of 2 years service.
The requisite notice must be given to the employee on the prescribed Form RP50 Part A.
When dismissal actually takes place, and where the employee is entitled to a redundancy
payment, the employee must be given a Redundancy Certificate (Form RP50 Part B). A claim
by the employer for a 60% rebate of the cost of statutory redundancy can be made to the
Department of Enterprise, Trade and Employment on the Form RP50 accompanied by copies of
the Redundancy Certificate.
Redundancy Payment

The statutory redundancy payment is a lump-sum payment based on the pay of the employee.
Employees must have 104 weeks continuous service in order to be entitled to the statutory
redundancy payment, which is:

Two weeks pay (subject to a maximum of 600 per week or 31,200 per year) for every
year of service, regardless of age; and

One further weeks pay.

It should be borne in mind that a weeks pay may be calculated in different ways for the
purposes of the legislation, depending on whether or not the employees pay varies in relation to
the amount of work they do, or on whether or not they work full-time or part-time, or on whether
or not they have normal working hours, or on whether or not they receive regular bonuses or
allowances, or on whether or not they job-share, or on whether or not they regularly work
overtime etc. The statutory redundancy payment is tax-free.
Collective Redundancies
As provided for in the Protection of Employment Act, 1977 (as amended), collective
redundancies arise where, during any period of 30 consecutive days, the employees being made
redundant comprise:

5 employees, where 21-49 are employed;

10 employees, where 50-99 are employed;

10% of the employees, where 100-299 are employed; and

30 employees, where 300 or more are employed.

In a collective redundancy situation, the employer is obliged to enter into consultations with
a view to reaching agreement with the employees representatives. The Protection of
Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007 (the
2007 Act) provides that consultation with employees representatives must take place at least
30 days before the first notice of dismissal is served. The aim of the consultation is to consider
whether there are any alternatives to the redundancies.
The employer is also obliged to provide the following information in writing to the
employees representatives:

The reasons for the redundancy;

The number and descriptions of the employees affected;

The number and descriptions of employees normally employed;

The period in which the redundancies will happen; and

The criteria for selection of employees for redundancy.

The employer is also obliged to inform the Minister for Enterprise, Trade and Employment in
writing of the proposed collective redundancies, and initiate consultations with employees
representatives representing the employees affected by the proposed redundancies, in each case
at the earliest opportunity and in any event at least 30 days before the first dismissal takes effect.
The 2007 Act provides that a breach of such notification/consultation time periods may
attract a fine of up to 250,000.
The 2007 Act effectively allows the Minister for Enterprise, Trade and Employment to refuse
to pay the 60% statutory redundancy rebate to an employer where the Labour Court had issued
an opinion that the collective redundancies that were proposed and subsequently implemented by
the employer were exceptional collective redundancies (as referred to in Section 16 of the
2007 Act).
Lay-Off
There is also the separate and distinct concept of lay-off under Section 11 of the
Redundancy Payments Act, 1967.
A lay-off situation (for the purposes of the above-mentioned Act) arises where an
employer is unable to provide work but believes this to be a temporary situation and gives
notification of the lay-off before the work finishes. The employer should explain to the
employees the reason for the lay-off and keep the employees informed of the situation during
this time. Where an employee has been laid off for 4 or more consecutive weeks or, within a
period of 13 weeks, for a series of 6 or more weeks of which not more than 3 weeks were
consecutive, and after this period he gives his employer notice in writing of his intention to claim
redundancy payment, the employee will be entitled to redundancy (Section 12 of the
Redundancy Payments Act, 1967). This enables employees to claim redundancy pay where they
have been laid off for a specified period of time. It prevents an employer from keeping an
employee for an indefinite period without having to make payments pursuant to the Redundancy
Payments Acts. An employer on receipt of notice from an employee pursuant to Section 12 is
entitled to give a counter-notice pursuant to Section 13 of the Redundancy Payments Act, 1967,
which must inform the employees that they will recommence employment not later than 4 weeks
after the notification and for a period of employment of not less than 13 weeks during which
time he or she would not be laid off. If an employee does not give his or her employer notice
pursuant to Section 12, his lay-off can arguably continue indefinitely. It is only the notice given
by the employee which triggers the end of the lay-off on the employees part and this can be met
by the counter-notice given by the employer pursuant to Section 13.
Other matters

Employees with less than two years service are not entitled to a statutory redundancy
payment and are only entitled to notice.
Even though an employee is entitled to statutory compensation for being made redundant,
it is common for employees to be paid in excess of their statutory entitlement.
The extent to which an employee is paid in excess of his statutory entitlement depends on
the industry or the particular employer. It has to be very clearly stressed that any payment above
statutory entitlement is made ex-gratia, i.e. there is no legal obligation to make this payment
unless there is some form of agreement, either express or implied to so do. As a very rough rule
of thumb, employers can pay a sum equivalent to anything between two and six weeks pay per
year of service on an ex-gratia basis.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

See the responses set out at Part 1 above (under the headings Notice and Collective
Redundancies).
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
See the responses set out at Part 1 above.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
(1)
An employee can bring a claim under the Unfair Dismissals Acts, 1977 to
2005, claiming that it is not a genuine redundancy on the basis that it does not fall under
one of the five definitions of redundancy or on the basis that he has been unfairly selected
for redundancy. An employee must have 12 months service with the employer in order
to be able to make a claim under these Acts.
(2)
An employee may also bring a claim under the Employment Equality
Acts, 1998 and 2004, on the basis that he has been discriminated against by being
selected for redundancy. The nine discriminatory grounds are race, age, gender, marital
status, family status, disability, sexual orientation, religion and membership of the
travelling community. There is no minimum service requirement in order to bring a
claim under this legislation.
(3)
An employee could also bring a wrongful dismissal action to the civil
courts. This is essentially a claim alleging a breach of his employment contract or a
violation of his constitutional rights.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

Unfair Dismissals Acts, 1977 2005


An employee unfairly dismissed under the 1977 Act is entitled to redress, which may
consist of reinstatement in his old position, re-engagement in a reasonably suitable alternative
position, or compensation of up to two years salary depending on the circumstances of the
case.
Protection of Employment Act, 1977
Section 11 an employer who fails to initiate consultations under Section 9 or fails to
comply with Section 10 shall be guilty of an offence and shall be liable on summary conviction
to a fine not exceeding 5,000 (as amended by the Protection of Employment (Exceptional
Collective Redundancies and Related Matters) Act, 2007).
Section 13 an employer who contravenes Section 12 by failing to notify the Minister
for Enterprise, Trade and Employment of proposed redundancies shall be guilty of an offence
and shall be liable on summary conviction to a fine not exceeding 5,000 (as amended by the
Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act,
2007).
Section 14(2) where collective redundancies are effected by an employer before the
expiry of the 30-day period mentioned in subsection (1), the employer shall be guilty of an
offence and shall be liable on conviction on indictment to a fine not exceeding 250,000 (as
amended by the Protection of Employment (Exceptional Collective Redundancies and Related
Matters) Act, 2007).
Section 18(3) an employer who contravenes subsections (1) or (2) in respect of keeping
records for a specified period shall be liable on summary conviction to a fine not exceeding
5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and
Related Matters) Act, 2007).
Redundancy Payments Acts, 1967 2007
Section 17(3) an employer who fails to comply with this section which requires the
giving of notice of the proposed dismissal for redundancy or who furnishes false information in
such a notice shall be guilty of an offence and shall be liable on summary conviction to a fine not
exceeding 5,000 (as amended by the Protection of Employment (Exceptional Collective
Redundancies and Related Matters) Act 2007)
Section 18(4) an employer must furnish a redundancy certificate; where an employer
fails to do so or furnishes false information in a redundancy certificate he will be guilty of an
offence and shall be liable on summary conviction to a fine not exceeding 5,000 (as amended
by the Protection of Employment (Exceptional Collective Redundancies and Related Matters)
Act 2007)

Employment Equality Acts, 1998 and 2004


An employee dismissed in contravention of this legislation is entitled to redress, which
may consist of reinstatement in his old position, re-engagement in a reasonably suitable
alternative position, or compensation depending on the circumstances of the case. A fine may
also be imposed on the employer.
Minimum Notice & Terms of Employment Act, 1973
Section 4 imposes an obligation on an employer, where it wishes to terminate the contract
of employment of an employee, to provide notice of such termination on the employee. The
length of notice depends on the length of time in which the employee has been in the employers
service. See the responses set out at Part 1 above (under the headings Notice and Collective
Redundancies). In the event of a failure by an employer in this regard, an award of
compensation may be made to the employee for any loss sustained by him by reason of such
failure.
NOTE: This Memorandum does not purport to provide a comprehensive note of all of the
various penalties and sanctions that are provided for in the legislation as referred to in this
Memorandum (nor indeed of all of the law that applies to dismissals, redundancies and lay-offs).
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
While not expressly required by the Redundancy Payments Acts, it is advisable, even in
small-scale or individual redundancy situations, to engage in dialogue with employees likely to
be affected. Employers should bear in mind that the news of redundancy may be a shock to the
employees. It is preferable to communicate that news in a way which gives employees the
opportunity to consider their options (including any alternative roles) and to put forward their
own views.
It is also important to remember that an employers conduct in implementing a dismissal
(whether on grounds of redundancy or otherwise) can be taken into account by the Employment
Appeals Tribunal when assessing the fairness or otherwise of a dismissal. While employers are
not required to create a position for redundant employees where none exists, the Tribunal has
found that an employers failure to look into the availability of alternative positions and to offer
them to the employee can be deemed unfair.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
The European Communities (Protection of Employees on Transfer of Undertakings)
Regulations 2003 gave effect to the mandatory provisions of the EU Acquired Rights Directive
and revoked the earlier 1980 and 2000 regulations in this regard. Under these Regulations, there
is a prohibition on the dismissal of an employee on the grounds of the transfer of all or part of an

undertaking or business, except for economical, technical or organisational reasons which entail
changes in the workforce.
In other words, the transfer of all or part of an undertaking or business will not in itself
constitute valid grounds for dismissal. The affected employees, therefore, would have a claim
for unfair dismissal unless the employer could successfully demonstrate that the dismissals were
justified for valid economical, technical or organisational reasons which entail changes in the
workforce. For example, therefore, dismissals effected purely to make the target business more
attractive (perhaps, for example, at the request of the prospective buyer) would be caught by the
legislation.
Certain employee rights are triggered by a transfer of all or part of an undertaking or
business. These include a consequent and automatic transfer to the buyer of the rights and
obligations of the seller under its employees contracts of employment (other than as respects
certain benefits). For the purposes of the Regulations, note that a transfer of an undertaking
could include (for example) a sale of assets or the setting up of an outsourcing arrangement.
Where a transfer of a business or undertaking is proposed, there are various specific
employee consultation and other requirements which must be met by the seller and buyer.
In the event of the employers failure to meet its obligations under the Regulations, note
that each employee could be compensated in an amount equal to as much as two years pay
(depending on the nature of the failure in question).

ISLE OF MAN
Prepared by Victoria Barratt
Laurence Keenan Advocates

1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
There are two main areas to consider in relation to the termination of employment in the
Isle of Man:1.

The possibility that there be a claim for unfair dismissal; and

2.

Redundancy.

Unfair Dismissal
The Employment Act 2006 (the 2006 Act) provides the requirements for the
termination of any employment contract.
The employee must not be unfairly dismissed. In order for the dismissal to be fair the
2006 Act states that it is for the employer to show the reason (or principal reason) for the
dismissal and that this reason falls within one of the categories stated in the 2006 Act or some
other substantial reason of a kind such as to justify the dismissal of an employee holding the
position which that employee held.
The reasons the 2006 Act provides are that:(a) the dismissal related to the capability or qualifications of the employee for
performing work of the kind which he or she was employed by the employer to do, or
b) the dismissal related to the conduct of the employee, or
(c)

the dismissal was that the employee was redundant, or

(d) the dismissal was that the employee could not continue to work in the position
which he or she held without contravention (either on his or her part or on that of his or her
employer) of a duty or restriction imposed by or under a statutory provision.
Redundancy
A redundancy situation will usually occur where the employers need to carry out a
particular kind of work has diminished or ceased.
The 2006 Act states that a person can be deemed to be unfairly dismissed if their contract
of employment is terminated by redundancy but it is shown that the circumstances constituting
the redundancy applied equally to one or more other employees in the same undertaking who

held positions similar to that held by the employee and who have not been dismissed by the
employer, and any of the reasons within the 2006 Act applies. The Redundancy Payments Act
1990, (the 1990 Act) also applies if the reason for dismissal is redundancy. This is discussed
further in the answer to question number 3.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Unfair Dismissal
The 2006 Act provides certain mandatory minimum notice periods for employees.
An employee who has been in employment for more than one month is entitled to:(a)
not less than one weeks notice if his or her period of continuous employment is
less than 2 years;
(b)
not less than one weeks notice for each year of continuous employment if his or
her period of continuous employment is 2 years or more but less than 12 years; and
(c)
not less than 12 weeks notice if his or her period of continuous employment is 12
years or more.
The employee can however, waive their right to these periods of notice and agree payment in
lieu of notice with the employer.
The employee also has the right to be given a written statement of reasons for their dismissal.
This statement must be provided by the employer within 14 days of any request by the employee.
The statement must provide details of the reason for dismissal.
The employee is entitled to receive the written statement of dismissal without having to
request the same if dismissed at any time when they are pregnant and at any time after childbirth
in circumstances in which her ordinary or additional maternity leave period ends by reason of the
dismissal.
Redundancy
If an employment is terminated due to redundancy the requirement for providing a certain
notice period as set out in the 2006 Act still applies, as does the requirement to provide a written
statement for reasons of dismissal contained within the 1990 Act.
In addition, there are further requirements for redundancies. The employer must consider
whether the employee could be placed in an alternative role within the organisation and the
employer must ensure that they consult with the employees in the redundancy process.

It must also be considered if any collective agreements are in force and whether these
affect the termination of employment.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
The reasons the 2006 Act provides under which the redundancy would be unfair are the
same as any other unfair dismissal case as detailed in the answer to question 4 below.
The way in which employees are chosen for redundancy must be fair and understood by
the employees. Factors which may be taken into account may be:

skills or qualifications

standards or work performance

aptitude for specific sorts of work

attendance and disciplinary records.

The 1990 Act also applies if the reason for dismissal is redundancy. Redundancy
payments are only required to be made to employees who have had a minimum of two years
continuous employment at the organisation.
If an employee unreasonably refuses an offer of suitable alternative work, he will not be
entitled to a redundancy payment. It would be for the Employment Tribunal to decide whether
the refusal was unreasonable or not.
Provisions are contained within the 1990 Act which stipulate the redundancy payment an
employee is entitled to.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Unfair /Wrongful Dismissal
An employee can made a claim for either wrongful or unfair dismissal to the Isle of Man
employment tribunal under the 2006 Act. Wrongful dismissal cases may also be brought in the
Isle of Man Courts of Justice.
A wrongful dismissal claim can be brought where the terms of the employees contract of
employment have not been complied with by the employer.
Unfair dismissal may be claimed where a contract of employment was not terminated for
the correct reasons (as contained in the answer to question 1 above). Reasons for an unfair
dismissal claim include dismissal due to:-

1.

Involvement in health and Safety matters;

2.

Claiming their rights to annual leave and other working time cases;

3.

Acting as the trustee of an occupational pension scheme;

4.

Protected disclosures;

5.

Assertion of statutory rights;

6.

Trade union membership or activities;

7.

Asserting their right to minimum wage;

8.

Flexible working rights;

9.

Asserting right to be accompanied to a disciplinary or grievance hearing;

10.

Dismissal for protected industrial action;

11.

Racial discrimination;

12.

Religious discrimination; and/or

13.

Sexual orientation.

Redundancy
If any of the procedures required by the 2006 Act or the 1990 Act are not followed then
the employee can challenge the employers decision to terminate employment.
A redundancy can be deemed to be unfair if the decision to terminate employment is
made in accordance with any of the 13 factors above. If the redundancy is not fair then a claim
can be made to the Isle of Man Employment Tribunal.
Further claims can also be made by the employee if the employer fails to consult with the
employees in the process of redundancy or if they fail to offer the employee any suitable
alternative employment if this is possible.
The 1990 Act states that any questions arising under the 1990 Act as to the right of an
employee to a redundancy payment, or as to the amount of a redundancy payment, should be
referred to the Isle of Man Employment Tribunal.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

Unfair Dismissal
If no written reasons for dismissal are given to the employee the Employment Tribunal
can made a declaration as to what they believe the employers reasons were for dismissing the
employee and can make an award that the employer must pay the employee two weeks pay.
If a termination of employment is found by the Employment Tribunal to be unfair then
certain Orders can be made. These Orders may include an order for reinstatement of the
employee, an order for re-engagement and/or compensation.
The sum of compensation which can be awarded is prescribed by the 2006 Act and
includes a basic award and a compensatory award. The basic award is calculated on the basis of
how many years continuous employment the employee has had with the organisation at the rate
if a weeks pay (presently subject to a cap at 480) multiplied by each completed year of
continuous employment. The compensatory award can not exceed 50,000. In addition, there is
an award for injured feelings which is subject to a maximum of 5,000.
Redundancy
Under the 1990 Act if written reasons are not provided to the employee for redundancy
the employer is guilty to an offence and liable on conviction to a fine not exceeding 200.
If a redundancy is found by the Employment Tribunal to be unfair, then certain Orders
can be made. These Orders may include an order for reinstatement of the employee, an order for
re-engagement and/or compensation.
If the employer does not make the redundancy payments in accordance with the terms of
the 1990 Act the Employment Tribunal can order the employee to pay the same. Where any
offence is committed under the 1990 Act by a body corporate and it is proved to have been
committed with the consent or connivance of, or to be attributable to any neglect on the part of,
any director, manager, secretary or other similar officer of the body corporate or any person who
was purporting to act in any such capacity, he as well as the body corporate can also be found to
be guilty of that offence.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
1.

Failure to follow the correct procedures in the Acts/ failure to give correct notice;

and
2.
Incorrectly classifying a dismissal as a redundancy (i.e. the redundancy must be
genuine. The role in which the employee is working in must no longer exist)
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

The 2006 Act provides that in certain cases where the employer can show that they are
insolvent or that the their business has ceased that the Isle of Man Governments Department of
Health and Social Security may make pay to the employee out of the Manx National Insurance
Fund the amount to which in the opinion of the Department the employee is entitled to in respect
of any arrears in pay (but not more than 8 weeks), any other amount entitled under their contract
of employment including holiday pay and any basic award for compensation in any unfair
dismissal claim.
The Isle of Man has also enacted the Trade Disputes Act 1985 (the 1985 Act). The
1985 Act states that where there is a trade dispute, an industrial relations officer may, or at the
request of either of the parties must, inquire into all the circumstances of the dispute and offer the
parties his assistance with a view to settlement.
Where the matter is not settled, the industrial relations officer may, or at the request of
either of the parties must, request that the Isle of Man Council of Ministers establish a court of
inquiry. The Council of Ministers can then make recommendations with a view to bringing about
a settlement to the dispute.

ISRAEL
Prepared by David Malkoff
S. FRIEDMAN & CO

1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
(a)
Advance Notice of Resignation and Dismissal Law 5761-2002 provides for a
prior written notice of up to 30 days. In addition it is mandatory to conduct a hearing
procedure according to the terms determined by various precedents. In case of layoff of
an employee, severance payment equivalent to one month's salary per each year of
employment is mandated under the Severance Pay Law 5723-1963
(b)

The above shall apply also in case of a mass layoff.

2.
Are there any formal requirements for terminating an employee or groups of
employees?
Under Sec. 37 of the Employment Service Law 5719-1959 an employer who gives
termination notices to ten or more employees shall notify the competent Employment Service
Office of such termination notices.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No specific requirements are specified in any applicable law, however such requirements
may be inferred from applicable collective agreements.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
(a)
Under certain circumstances, potential laid-off employees may rely on several
employment laws, which condition the termination of employment on the receipt of a
specific permit from the relevant authorities. For example, in the case of a pregnant
employee who has worked at least 6 months, the termination of employment during the
pregnancy period, the maternity leave and sixty days thereafter is subject to a specific
permit to be given by the Minister of Industry. Another example is the case of an
employee who is in army reserve duty, whose dismissal during the period of service and
30 days thereafter is subject to a specific permit to be given by the authorized committee
under the Discharged Soldiers (Reinstatement in Employment) Law 5709-1949.
(b)
In addition various laws prohibit the termination of employment under specific
circumstances such as those specified in the Protection of Employees (Exposure of
Offenses, of Unethical Conduct and of Improper Administration) Law 5757-1997; this

law prohibits termination of employment in cases where the employee argues that his
dismissal derives from a complaint filed by him against his employer or against another
co-worker or due to his assistance in filing such a complaint; or under the Equal
Employment Opportunities Law 5748-1988 which prohibits termination of employment
due to a discrimination in respect of religion, age, race, nationality, sexual tendency,
parenthood, etc.
(c)
Potential laid-off employees may also base their claim on the provisions of an
applicable collective agreement in case the lay-off procedure is not conducted in the
required manner.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
In the absence of permit and/or in certain cases of laying-off not in accordance with the
relevant laws, the lay-off may be considered null and void and the court may order the
reinstatement of employment of the employee. In case of other infringements of legal
requirements and/or laying-off not in accordance with collective agreements the sanction may be
pecuniary only. Compensation shall be determined by the Labour Court at its discretion and,
except for unusual cases, shall amount to the actual loss of the employee's salaries up to a period
of 12 months.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Lately the implementation of the rule of hearing has become more common; however
there are still cases in which the court ordered compensation for unlawful dismissal only because
of the absence of the requested hearing. In addition, sometimes only during the hearing is certain
information obtained, which forces the employer to take different measures in order to
implement the legal dismissal of the employee. It is therefore highly recommended to carefully
follow the terms determined by the court regarding the hearing procedure including the hearing
of the employee's arguments with an open mind and in good faith.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
It should be noted that all the above provisions and prohibitions (including the
requirement to obtain the necessary permits) shall apply also in case of the closing down of a
company. Such is the case also when a company is purchased by another entity and the
employees are dismissed and re-employed by the purchasing company as its employees.

ITALY
Prepared by Pierre Fortin
BDL-Lex

1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
The issue is mainly regulated by Law No. 604/66 and by Law No. 300/70 (Statute of
Workers). The general principle is that the dismissal must be supported by legitimate cause and /
or justification, and must comply with specific procedures. The absence of legitimate cause or
justification and a defect in procedure have the following consequence:
- in case of company with over 15 employees, the reinstatement of the
employee in his employment (so-called real protection);
- in case of a company with fewer than 15 employees, the payment of an
indemnity determined by the Judge (so-called compensation protection).
Nonetheless, for some categories of workers (such as domestic workers,
workers on trial period and workers of more than 65 years of age) the
requirement of the compulsory motivation does not apply, and the dismissal
can be freely communicated.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Yes, there are specific requirements, for both individual and collective dismissals. First,
the dismissal must be communicated in writing; a verbal dismissal is ineffective.
In the case of a dismissal for disciplinary reasons, the rules provided by the Statute of
Workers shall be applied. In summary, the specific disciplinary reason must be communicated in
writing and the worker must be given a specific period (not less than 5 days) to provide his
justifications. Upon expiration of such time, it is possible to proceed with the termination.
Collective dismissals must also comply with specific procedures. They must be
communicated to the Trade Union Association, to the Direzione Provinciale del Lavoro or to
Labour Ministry and must indicate the technical, organizational and / or production reasons for
which the dismissals cannot be avoided, the number, location and company profiles of the entire
staff. The workers to be laid off must be identified according to specific criteria set by the
collective agreements or, failing that, by Law 223/1991 (which takes into account the
employees family situation, the length of service and the technical and organizational needs of
the company.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?

The reduction of personnel (due to a decrease of the business or other objective reasons)
is always possible, but must comply with the rules already mentioned. In particular, the
procedure cannot be applied indiscriminately, and must follow certain criteria. This is regulated
by Law No. 223/1991 which provides a very articulate procedure applicable to companies with
more than 15 employees who intend to make at least 5 dismissals in a 120 days timeframe, for
reasons of a decrease/close of the business, or company reorganization.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
An employee dismissed for redundancy may invoke the non compliance with the
procedure provided for by Law No. 223/1991. Failure of any step of the procedure entails the
nullity of the proceeding, and the right to reinstatement in employment.
5.
What sanctions or penalties may be imposed against employers for violating
any of the requirements mentioned in Nos. 1-4 above?
The illegality and/or invalidity of the dismissal may give rise, as already mentioned, to
the reinstatement of the employee in his employment (in the case of company with more than 15
employees), or to the payment of an indemnity (which can vary from 2 to 6 months salary).
Criminal penalties for the employer are excluded.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The main errors may be the faulty evaluation of a conduct by the employer or the failure
to observe the procedure. As already mentioned, the consequence is the invalidity and/or
ineffectiveness of the dismissal; however the employers mistake does not give rise to any
specific liability (except for the manager who committed the mistake who must respond to
company directors).
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
A general topic related to layoffs is that of public financial support for the dismissed
employee (so-called Ammortizzatori sociali). The dismissed employee is entitled to an
unemployment allowance from social security (I.N.P.S.) for a period of 8 months (12 if more
than fifty years of age). The amount is equal to a percentage of gross monthly salary and has a
maximum limit set by law. In order to obtain it, the worker must:
- be in a state of actual involuntary unemployment;
- have at least two years of contribution to I.N.P.S.;
- have at least 52 weeks of contributions in the two years prior to
unemployment;

- have submitted a written application to I.N.P.S. within 60 days from the


layoff.
Dismissal for just cause objective also gives the worker the opportunity to be inserted in
the mobility lists. Companies that hire workers on the mobility lists benefit from important
reductions in social security (I.N.P.S.) contributions.

JAPAN
Prepared by Chiyu Abo
Chuo Sogo Law Off.
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Article 20 of Labor Standards Act requires the employer to give the employee at least 30
days advance notice or to make payment of the average wage in lieu of such notice.
In addition, Article 16 of Labor Contract Act provides that if termination of an employee
lacks objectively reasonable grounds and is not considered to be appropriate in general social
terms, it shall be invalid as an abuse of the right.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Generally, the above notice requirement (or payment in lieu of notice) and the existence
of objectively reasonable grounds are required.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
The same articles of the above laws apply in case of termination by redundancy. In the
past court precedents, generally the courts have considered the following four elements in
deciding the existence of reasonable grounds and validity of termination of employment for
redundancy in the workforce;
(i)

whether reduction of work force is necessary for the continued operation of the
company;

(ii)

whether the company has made reasonable efforts to avoid termination of


employment by cost saving, stop of hiring, transfer of employment, offering a
plan for early retirement;

(iii)

whether the company has made reasonable choice of the employees to be


terminated; and

(iv)

whether the company has made negotiations in good faith with the employees
about necessity, timing, alternative arrangement, etc. before terminating the
employees.

4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

The terminated employee can claim that termination of employment is lacking


objectively reasonable grounds and invalid under Article 16 of Labor Contract Act.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
A criminal penalty of imprisonment of not more than 6 months or fine of not more than
300,000 yen may be imposed against a person who has violated the provisions of Article 20 of
Labor Standards Act. In addition, for a violation of Article 20 of Labor Standards Act, the court
may award an additional amount equal to the amount payable by the employer under the article.
Further, the court may order reinstatement of the employee and back pay if it has found
termination of employment is invalid under Article 16 of Labor Contract Act.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Under the above court precedents, before giving notice of termination of employment to
the employees due to redundancy in the workforce, the employer must take certain steps, such as
offering an early retirement scheme, negotiation with specific employees for voluntarily
resignation from the company, providing reasonable explanation, but sometimes employers do
not take such necessary steps. .
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In some cases, the employees may suddenly join a labor union and the union may
intervene in the process when a company has started actions aimed at termination of the
employees. There is no way for the employer to stop this movement, and the employer is
required to faithfully negotiate with the labor union in such a case.

KOREA
Prepared by Thomas P. Pinansky, Joo Hyoung Jang and Jae Choi
Barun Law
1.
Are there any laws that govern a layoff of employees? If so, what do the laws
require?
Under the Labor Standards Act of Korea (the LSA), the employer may terminate an
employee(s) only if there is a justifiable cause for the termination. As the LSA does not have
detailed provisions on which causes constitutes justifiable causes, it is primarily up to the
court to decide whether a cause asserted by the employer is justifiable or not. On the other hand,
the LSA and other labor laws expressly provide that certain terminations are not justifiable.
Notable examples include, among others, termination during a maternity leave and 30 days
thereafter, termination during a leave of absence due to a work-related injury or disease and 30
days thereafter, and termination on the ground that the employee engaged in lawful labor union
activities.
Under the LSA, the employer should give 30 days written notice of termination or pay
30 days ordinary wages in lieu of such notice. Termination of an employee should be made by
written notice.

2. Are there any formal requirements for terminating an employee or groups of


employees?
Under Korean labor laws, termination of an employee may be divided into 3 types: (i)
ordinary termination, (ii) disciplinary termination, and (iii) mass layoff. As described above,
termination is lawful only if there is a justifiable cause; provided, however, that different
requirements apply to mass layoffs as described below.
3. Are there special legal requirements for a layoff caused by redundancy in the
workforce?
Under Korean labor laws, a mass layoff means termination of employees in order to
reduce workforce due to a business need of the employer. In order for the mass layoff to be
lawful, (i) there should be an urgent business necessity; (ii) efforts should be made to avoid
the mass layoff; (iii) there should be reasonable and objective standards to determine which
employees would be terminated; and (iv) the employer should give a 50 days prior notice to the
labor union or the representative of the employees representing the majority of the employees
and have good faith consultation with the labor union or the representative.
The urgent business necessity has been interpreted to mean that the company must
show losses for a considerable period of time (e.g. one to two years). However, it has been the
recent trend to broaden the scope of the urgent business necessity so that it may include
M&As, plant closings and business relocations, etc. necessary to overcome certain economic
difficulties.

4. Are there employment laws that laid-off employees can use to challenge their inclusion
in the layoff?
A terminated employee may file a civil lawsuit asking the court to invalidate the
termination or file a request for a remedy with the Labor Relations Commission (the LRC)
established under the Ministry of Labor (the MOL). If the LRC decides in favor of the
employee, the LRC may order the employer to reinstate the employee with back pay.
5. What sanctions or penalties may be imposed against employers for violating any of the
requirements mentioned in Nos. 1-4 above?
If the employer does not comply with an order for a remedy rendered by the LRC, the
LRC may impose an administrative penalty on the employer for an amount not exceeding KRW
20 million up to 4 times within a two-year period. If the employer does not comply with the
finalized decision of the LRC, the MOL may also file a criminal complaint against the
employer, the penalty of which is up to 1 year imprisonment or KRW 10 million. The criminal
penalty may be imposed both on the company and its individual (chief) representative.
6. What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The employers often believe that an employee with a fixed term of employment may be
dismissed upon the expiration of such term even if there is no other justifiable cause for
dismissing the employee. However, even if the term of employment is expressly fixed in the
employment contract, the employee may be deemed a regular employee with no fixed term of
employment in the event that the employment relationship continues for more than 2 years. In
such event, the employers refusal to renew the employment contract may be recognized as
being equivalent to termination of the employee, which is not lawful unless there is a justifiable
cause.
7. What other employment issues are likely to arise from a layoff in your jurisdiction that
you have not addressed in your answers to the previous questions?
While the Korean courts have recently broadened the interpretation of the urgent
business necessity standard, employer-initiated terminations (including mass layoffs) are still
difficult in Korea. Given this difficulty, it is common for the employer to seek voluntary
resignations from employees in lieu of involuntary terminations. For example, early retirement
programs are commonly used in Korea as a safer (although costly) alternative to mass layoffs.

MALAYSIA
Prepared by Sonia Abraham
Azman Davidson & Co.
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The Employment Act 1955 (EA) governs the layoff or retrenchment of employees.
However, the EA applies to employees who earn less than RM1,500 and manual workers regardless
of their salaries. Section 60N of the EA provides that in a retrenchment, employers must terminate
their foreign workers first before terminating local workers in a similar capacity. For employees who
fall within the scope of the EA, the length of notice depends on the employees length of
employment. Notice must not be less than four weeks if the employee has been employed for less
than two years, less than six weeks if the employee has been employed for more than two years
more but less than five years. If the employee has been employed for five years or more, notice
must be given at least eight weeks in advance.1
Termination of employees covered by the EA must also conform with the applicable
regulations. Pursuant to Regulation 3 of the Employment (Termination and Lay-Off Benefits)
Regulations 1980, an employer is liable to pay termination or lay-off benefits in accordance with
Regulation 6 to an employee who has been employed under a continuous Employment Contract for
not less than 12 months if the employment contract is terminated or the employee is retrenched.
Regulation 6(1) (a), (b), and (c) governs the amount to be paid as termination or lay-off benefits.
The regulations depend on the length of the employees tenure. The benefits shall not be less than
ten days wages for every year in service for an employee employed for a period of less than two
years, fifteen days wages for every year in service for an employee employed for between two to five
years, and twenty days wages for every year in service for an employee employed for more than five.
As for employees who are not governed by the EA, the length of notice and termination
benefits would be in accordance with their employment contract. However, employers are
encouraged to comply with the Code of Conduct for Industrial Harmony 1975 (CoC) before
embarking on a retrenchment exercise despite the fact that the CoC is not legally binding. The CoC
is an agreement that was executed by the Malaysian Trade Union Congress and the Malaysian
Employers Federation in 1995 with the approval of the then Minister of Labour and Manpower.
The CoC sets out the guidelines/measures or industrial practices and procedures in relation to
retrenching and laying off employees. Art 22(a)(ii) of the CoC stipulates that employers are
encouraged to pay termination benefits to retrenched employees notwithstanding the fact that the
employees do not fall under any collective agreement, the EA or any contractual agreement.
It is a well established principle that in the retrenchment of surplus employees, the principle
of Last In First Out (LIFO) must be followed. LIFO requires the employer to select the most junior
employee in a particular category of employment for retrenchment. For the purposes of LIFO, a
Sales Manager would be considered to be in a different category from a Sales Executive. Pursuant
to the Employment (Retrenchment) Notification 2004 [PU(B) 430], employers are required to notify
the Labour Department and file the necessary PK forms. Articles 20 and 22 of the CoC contain a
consultation requirement, but this is only a guideline and lacks legal force.
1

Section 12(2) (a), (b) or (c) of the EA.

2.
Are there any formal requirements for terminating an employee or groups of
employees?
If the company is unionized, the employer must give notice of retrenchment to the union in
accordance with the provision of the Collective Agreement. The employer should invite the union to
discuss the implementation of the retrenchment. The employer is to inform the union of the
necessity to begin retrenchment, the category/group of employees identified for retrenchment as
well as discuss the mode of payment. The employer must ensure that the minutes of meeting are
prepared and signed by all parties concerned. The employer must then inform the Labour
Department via the PK Forms one month before the retrenchment exercise and hold a meeting
with all the employees to inform them of the decision to retrench.
If the company is not unionized, the employer must identify the category/group of
employees who are to be retrenched and inform the Labour Department via the PK Forms one
month before the retrenchment exercise. The employer is to hold a meeting with all the employees
to inform them of the decision to retrench.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No. The requirements are the same as above.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. An employee who has been retrenched or laid off can make a claim at the Industrial
Relations Department (IRD) pursuant to Section 20 of the Industrial Relations Act (IRA) 1967 if his
retrenchment is without just cause or excuse. The IRD will then hold conciliatory proceedings and
make a recommendation to the Minister of Human Resources on whether the matter ought to be
referred to the Industrial Court. If the matter is referred to the Industrial Court, the employee can
bring his claims against the employer there.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
Pursuant to Section 20 of the IRA, if an employee is found to have been dismissed without
just cause or excuse, the Court may award back wages up to 24 months and reinstatement or
compensation in lieu of reinstatement at one months salary for each year of service.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
One common mistake is the failure to ensure that the lay-off or retrenchment was with just
cause or excuse. Employers must be able to show that there is a legal basis and justification to carry
out the reorganization or restructuring exercise. They also must show that the selection criteria was
bona fide and not an act of victimization. Cogent reasons compelling the Employers to embark on a
retrenchment exercise must be produced. If the reason is business loss, then the balance sheet and

profit and loss accounts must be produced to establish the financial losses suffered by the company.
The company must be able to show actual financial loss, not just paper loss. If the company is
alleging that the reason is due to reduced turnover, it must be able to show a significant decline in
business over the months/years and a reduction in the companys profits.
While failure to follow the LIFO principle constitutes unfair retrenchment, employers can be
departed from it if the employer has a recognized and valid reason for doing so. The employer is
not required to use the LIFO principle in the following instances: the employer has adopted an
objective and fair selection criteria in the retrenchment exercise; it can be established that a more
senior employee who was retrenched had a record of poor performance; and where it can be
established that a more junior employee retained instead of a more senior employee has special skill
or qualification.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
None.

MEXICO
Prepared by Luis Capin
Capn, Caldern, Ramrez y Gutirrez-Azpe, S.C.
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The Federal Labor Law requires payment of a severance when an employee is dismissed
without just cause. Under this law, the employer must pay three months of salary (integrated salary),
twenty days of salary (integrated salary) per each year of services, a seniority premium (capped twice
the minimum wage in case the employees salary exceeds said maximum), back salary from the date
of dismissal until the date of payment, and any accrued benefits and salaries. The Federal Labor
Law specifies for what reasons employees can be fired for cause.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Yes, the requirements are to draft and deliver a termination notice to the employee with the
cause or causes and date of termination. In case of the employees denial of receipt of the notice,
the employer must file it with the competent Board within the following five working days.
In case of collective terminations, a notice of termination must be filed with the competent Board.
The severance payments depend on the cause for the termination and will either be three of four
months of severance and the corresponding authorization given by the competent Board.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No, the Law does not consider redundancy as a justified cause of termination.
In collective terminations, in case the employer decides to substitute employees for machines or
mechanic procedures, then the employer must pay instead of three months of salary a severance of
four months, plus seniority premium and twenty days per year of services.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes, the Federal Labor Law (Section 48).
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The sanctions or penalties are the payment of severance referenced above in question one
and in case of a labor procedure, the back pay salaries from the date of termination or dismissal until
the date the employer makes the corresponding payment with the Board, complies the final
judgment or decides not to be subject to the Boards jurisdiction through an economic payment.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

The most common mistake is the failure of employers to comply with the formalities for a
termination with cause. Employers often do not support a layoff with the appropriate evidence
before carrying out the termination. Prior to a dismissal, the reasons for the layoff must be
substantiated with evidence in case there is a later need to file the notice of termination with the
Board.
To terminate an employee for lack of performance without the corresponding evidence to
support that fact or to dismiss a temporary employee who does not have a correct or justified
temporary agreement.
Upon expatriates, to pass over the original agreements, secondment letters, or recognition of
benefits or plans give to the employee prior to his assignment in Mexico.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Often, there is an issue over the payment of back wages. Payment of past due salaries are
determined from the date of termination until the date of an employers compliance with the final
judgment. Back pay will be levied in instances where the employee wins his case and the employer is
either not able to support the causes of termination or has not complied with the legal formalities of
a lay off.

NEW ZEALAND
Prepared by Ross Crotty
Lowndes Assocs.
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

Section 4 of the Employment Relations Act 2000 applies. When an employer is proposing
or considering a decision that will or is likely to have an adverse effect on the continuation of
employment of any employee or employees, certain requirements apply. The employer must
provide access to information, relevant to the continuation of the employees employment, about
the decision to employees. The employer must also give the employee an opportunity to comment
on the information to their employer before the decision is made.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The dismissal must be justified. The applicable individual or collective employment
agreement provisions regarding notice and consultation must be complied with as well as Section 4
noted
above.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No, the requirements in 1 and 2 above apply equally to redundancy lay-offs.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. Employees may bring personal grievance challenges to their dismissal. The available
grounds for contesting a dismissal include: lack of justification; discrimination; sexual harassment;
racial harassment; duress in relation to membership of a union or employees organization; and if
employed in cleaning or food catering services, the failure by the employer to protect employees
job.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The penalties include: the reinstatement of the employee to her former job; reimbursement
of wages lost; compensation for humiliation, loss of dignity, and injury to the feelings of the
employee; compensation for loss of any benefit; and recommendations to employer to prevent
further violations.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

The most common mistakes are the failure to consult with the employee before making the
decision and the failure to provide the affected employees with sufficient information before making
the decision.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
The parties to mergers and acquisitions are required to seek specific advice on compliance
with the employee protection provisions applicable to the particular transaction. Not only do
statutory provisions apply but the individual and collective employment agreements may contain
relevant clauses.

NORWAY
Prepared by Hans Rugset
Braekhus Dege Advokatfirma ANS
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

In Norway, we have the Employment Act from 2005 which contains several rules regarding
layoffs. Most employment relationships are terminated either by resignation by the employee or
dismissal by the employer. The Employment Act provides that a dismissal must be objectively
justified due to circumstances relating to the operation of the business, the employer or the
employee. This requirement applies to both individual and collective dismissals. Further, the
requirement is absolute and cannot be contracted around.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Yes, there are strict procedural rules that have to be satisfied when dismissing employees.
Failure to comply with the procedural rules shall, as a general rule, lead to a finding that the dismissal
was unfair and unjustified. A notice of dismissal must satisfy certain formal requirements, including
information about the employees rights. It must be in writing and delivered to the employee
personally or by registered mail. The notice of dismissal need not contain a reason for the dismissal.
However, the employee can request an explanation for the dismissal and it is therefore normal to
give a short explanation for the dismissal in the notice. The period of notice is often stipulated in
the contract of employment. If not, the statutory period of notice is usually one month.
An employer may summarily dismiss an employee, i.e. dismiss him without notice, if the
employee is guilty of a gross breach or other serious breach of the contract of employment.
Whether the dismissal is individual or collective, the company is obliged to discuss the situation with
the employee and his or her representative, if any, before making any decision to dismiss an
employee.
In the case of mass lay-offs (more than 10 employees within a period of 30 days), the
employer has an extensive duty to discuss all circumstances with the employees representatives. The
employer must also give notice to the Labour and Welfare Service. Furthermore, the lay-off will not
take effect until 30 days after the Labour and Welfare Service has been informed.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
An employer who is considering collective redundancies shall hold meetings as early as
possible with employee representatives with the purpose of reaching agreement and avoiding a
collective redundancy or the purpose of reducing the number of dismissals. Redundancies and other
rationalization measures must also be considered by the companys working environment
committee, if one exists. Working environment committees are obligatory for employers that
employ more than 50 employees.

Furthermore, both the rationalization measures and the individual dismissals must be
justified. The employer shall weigh the needs of the enterprise against the disadvantage for each
employee. There is a statutory duty to consider whether the employee can be given suitable
alternative work within the enterprise and dismissal will not be deemed to be justified if the
employer has other suitable work to offer the employee. The requirement that the dismissal must be
objectively justified also obliges the employer to consider less drastic alternatives than redundancy,
for instance temporary lay-off. The law does not prescribe selection conditions other than the
previously mentioned requirement that the notice must be justified. The most common selection
conditions are based on a combination of the principles of length of service and qualifications, but
individual and social circumstances are also taken into account. Employees with a considerable
length of service and seniority enjoy stronger protection. Most collective bargaining agreements lay
down a seniority principle that applies unless there are grounds for deviating from it. Employees
who are made redundant have a preferential claim to new employment for 12 months after the
expiration of the notice period, provided the employee is qualified for the vacant post and the
employee has been employed by the company for a total of at least 12 months within the past two
years.
Temporary lay-offs are considered to be a less drastic measure than dismissal. Layoffs are
executed by suspending the employer-employee relationship in accordance with the employment
contract. Although Norwegian legislation does not directly regulate the employers right to lay off
employees, certain rules have arisen from practice and the collective agreements. Even if an
employer must also show good cause in the event of a lay-off, the burden is not as heavy as it is for
dismissal. Still, the company must act reasonably in evaluating who should be laid off. Furthermore,
temporary lay-offs must only be used when the employer is set to bring back the employers in
question into the workforce after the temporary situation has passed. The temporary situation must
also be based on specific, short term difficulties. The employer pays salary for the first 5 days of a
temporary lay-off in case of a full lay-off or a reduction of at least 40 percent in the working hours.
If the working hours are reduced by less than 40 percent, the employers period is 15 days.
Employees who are temporarily laid off are entitled to unemployment benefit if the working hours
are reduced by 40 percent or more.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
An employee who considers a dismissal to be unfair or unreasonable may contest it and
claim that it was invalid and/or claim damages. If a dismissal is contested, both parties can, within
certain time limits, demand that negotiations are held after notice is given. Both parties may be
assisted at such negotiations. If the negotiations are not successful, or if no negotiations are held, the
employee may institute legal proceedings. Provided that the notice of dismissal complied with the
formal requirements, the time limit for instituting a proceeding is eight weeks from the conclusion
of negotiations or, if negotiations were not held, from the date when notice of dismissal was
received. If the employees claim is limited to damages, the time limit for instituting proceedings is
six months.
Provided that the employee institutes proceedings within eight weeks from the conclusion of
negotiations or, if negotiations were not held, from the date when notice of dismissal was received,
and within the notice period, the employee is generally entitled to remain in her post during any
ongoing legal proceedings pending final resolution. This right includes the right to perform ordinary

work tasks and to receive wages and additional benefits until the parties have reached an agreement
or the case has been legally and finally settled.
The employer can apply to the court for an order that the employee shall vacate her post
after the expiration of the notice period. Such an order can be granted at the discretion of the court
if it finds that it would be unreasonable for the employment relationship to continue pending judicial
determination.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
If the court finds in favor of the employee, the dismissal shall, as a general rule, be deemed
to be invalid and the employee may continue in his employment. In exceptional circumstances, the
court can find that employment shall be terminated, notwithstanding that the dismissal was invalid.
The employee may also claim compensation for economic and non-economic loss as a result of the
dismissal. Such compensation shall be at the discretion of the court having regard to the employees
loss of income, any future losses and the other circumstances of the case. The employee may also be
awarded legal costs.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
These days, a very common mistake is to initiate temporary lay-offs without good cause.
Temporary lay-offs must be based on the assumption that the redundancy is temporary, and that the
employees in question will return to the company when the redundancy period is over. Shortfall in
turnover due to the financial crisis is as a general rule not deemed to be good cause. Thus, the
employee may claim salary for the dismissal period (normally 1 to 3 months) instead of 5 days.
Furthermore, in collective dismissals, employers tend to make mistakes when applying
selection conditions, which easily could lead to claims. The most common mistakes are ignorance of
collective agreements prescribing the application of certain selection conditions, lack of awareness in
the actual application of otherwise fair and justifiable selection conditions, and failure to hold
individual meetings and discussions with every employee.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In general, many employees contest dismissals due to alleged lack of documentation or
justification of the reason for dismissal. As a result of this, it is advisable to build up documentation
for an individual dismissal, such as warnings in writing and other documentation of breach of the
employment contract.
Furthermore, on March 1, 2009, new provisions regulating employers access to employee
emails came into effect in Norway. Under these provisions, employers may access employees emails
only if it is deemed necessary for the daily operations of the company, or if they suspect that the
employee is breaching their contractual obligations. Moreover, the employee is entitled, as far as
possible, to be notified and given an opportunity to respond before the employer accesses the email
information. They should also be allowed to be present when the emails are being accessed and to

be represented by a trade union representative. Of course, where access is requested on the basis of
suspicion of serious breaches to duties arising from the employment relationship, an early warning
may provide the employee with the opportunity to delete data that may prove their guiltiness. To
prevent this from occurring, the employer may therefore make a copy of the appropriate areas of the
computer network which is to be subject to inspection before the employee is notified.

PANAMA
Prepared by Diana Montemayor
Rosas & Rosas
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

With respect to the following, layoff is understood to be the involuntary termination of an


employment agreement not strictly related to personal performance, but due to other factors such as
economic cycles or reduction in force. The Labor Code of Panama allows the termination of an
employment agreement due to economic causes such as permanent suspension of the tasks related
to the labor agreement, business slow down, or interruption in work. The Labor Code of Panama
requires the employer to prove the economic cause of the layoff before the administrative labor
authorities who have to authorize the termination of the employment before it occurs. Employers
must give the affected employee written notice of such termination and pay the affected employee
with an indemnity that depends on the employees length of employment.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
There are no further formal requirements other than the already mentioned prior
authorization from the administrative labor authorities and the written notice to the affected
employee.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Under the Panama Labor Code, employees must be notified of the request for authorization
filed by the employer before the administrative labor authorities. They also have the right to present
evidence in support their position. An affected employee may claim wrongful termination if the
employer fails to provide the required notification of the termination. The employee can also seek
to be reintegrated to the workplace as a remedy for this termination.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
Should termination of the labor agreement be considered by the labor courts to be
wrongful termination, the employer shall pay the employees salary up to a five month period, in
addition to the indemnity and a surcharge stated by law.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

The two most common mistakes made by employers are their failure to provide the affected
employee the written notice and the failure to obtain authorization from the administrative labor
authorities.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
When terminations due to economic causes, the Panama Labor Code stipulates employees
should be terminated in the following order: most recent employees; foreign employees; non-union
employees; unskilled employees; and pregnant women.

PERU
Prepared by Jose Burgos
Estudio Grau
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

According to the Peruvian Constitution, the law must grant workers an adequate protection
against arbitrary firing. Following this constitutional pronouncement, Supreme Decree 03-97-TR
establishes that employees who work at least four hours per day and have worked longer than the
three month legal trial period can only be fired due to fair causes contemplated by the law. If the
worker suspects that he/she has been fired without cause or arbitrary firing, the worker can
choose to sue his/her employer for reinstatement of work or for the receipt of severance pay due to
arbitrary firing. This severance payment is equal to one and a half months pay for each year of
the employees for up to twelve months pay total if the employee had been hired for an indefinite
length of time. If a worker hired for a fixed term is fired, one and a half months pay must be paid
to him for each month he would have worked before the contracts expiration for up to the
equivalent of twelve months pay.
A worker can be terminated without severance pay for what are considered fair causes.
These causes include: the loss of his physical or mental faculties; sudden ineptitude related to job
performance; deficient performance compared to the average performance of the personnel and the
worker himself; the workers unjustified refusal to undergo a medical examination to perform its
duties; judgment due to intentional crime or disability of the worker; and major faults specifically
foreseen in the law. This latter category includes the non-compliance of duties on the job, decline in
the performance, appropriation or frustrated appropriation of goods or services of the employer,
neglect to disclose information, providing false information that may damage the employer, disloyal
competition, going to work under the influence of alcohol or drugs, acts of violence, serious
unruliness, intentional damage to the employers goods, and unjustified absence to work longer than
3 consecutive days or than 5 non-consecutive days during a period of 30 days of than 15 nonconsecutive days during a period o 180 days, and repeated tardiness. If a worker considers that his
firing is arbitrary, he/she is entitled to file a demand requesting his reinstatement on work or the
corresponding payment of the firing compensation, in which case the employer must support its
firing grounds.
The employer can also terminate the work contracts without firing compensation due to
force majeure, economic reasons, technological reasons, or structural causes that make the cessation
necessary. In these instances, the employer must obtain the prior authorization from the Ministry of
Labor whose approval is based on an expert report by an auditor company that justifies the need for
the dismissal.
In case of dissolution and liquidation of a company, or in case of bankruptcy declared by the
competent authority, an authorization given by the Ministry of Labor is not required; rather, ten day
notice prior to termination is sufficient.
2.
Are there any formal requirements for terminating an employee or groups of
employees?

The legal requirements are those mentioned above. The formal requirements are described
below. If the employer decides to terminate work contracts due to force majeure, economic
reasons, technological, structural or similar reasons, the employer is obliged to provide the
corresponding union, or if there is none, the affected employees, with complete information on the
reasons for the layoff as well as a list of all affected employees. After this notification, the employer
must begin bargaining with the union or the affected employees agree on conditions for the layoff or
other measures to be taken instead of the layoff. After such bargaining begins, the employer has to
file an application before the Ministry of Labor for an authorization of the layoff, based on an expert
report by an auditor company that justifies the need for the dismissal. After the workers review the
expert report, they have 15 working days to present their own expert report. Subsequently, the
Ministry invites both parties to a 3 day mediation hearing after which the Ministry issues the
corresponding decision.
It is important to mention that for political reasons it is very difficult to obtain the
authorization of the Ministry and that the majority of applications for an authorization for layoff are
rejected. For this reason, employers in Peru almost always have to negotiate the termination of the
work contracts. These negotiations often result in laid off employees getting better compensation
than what is provided by law.
If the employer decides to terminate a work contract due to the commitment of major faults
or other reasons attributable to the employee that are specifically foreseen in the law, the employer
has to send the employee a letter explaining the reasons for the termination. The employee then has
6 days to contest the discharge. Only after expiration of such term or after receiving the contest,
the employer is entitled to send a termination letter to the employee. If the employee considers the
dismissal to be against the law, then he/she is entitled to file a suit against the employer for
reinstatement on work or for severance pay. If the suit results in a finding of an arbitrary firing,
the employer will be obliged to reinstate the employee or to pay the corresponding severance
depending on which of these two remedies the employee have chosen at the moment he/she filed
the suit. This lawsuit can only be filed before a Labor Court upon the first 30 days after the
notification to the employee of the dismissal. In case the employee files a suit before a Civil Court
alleging a violation of his/her constitutional rights, the term for filing the lawsuit will be 60 working
days.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
The special legal requirements for a layoff caused by redundancy are those described above.
The redundancy is referred to by law as structural reasons for termination of the work contracts
and the layoff requires the previous authorization of the Labor Ministry, unless the parties reach an
agreement by which means the employees accept to resign from their jobs.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
All the above mentioned legal regulations can be used by any laid off employee to challenge
her termination.

5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
If the employer does not comply with the legal requirements for a layoff, the employer is not
entitled to dismiss any employee. The laid off employee has the right to require his/her
reinstatement at work or the payment of his legal compensation for an arbitrary dismissal. If the
employer has not complied with the legal requirements, the Court will oblige him/her to reinstate
the employee or to pay him/her appropriate compensation under the law. In addition, the Labor
Ministry could fine the employee. If the employer does not comply with the reinstatement or the
payment of the compensation ordered by a Court, the employer may be prosecuted for a crime.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The most common mistakes by employers are the general non-compliance with the legal
requirements mentioned above.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
None.

PORTUGAL
Prepared by Pedro Furtado Martins
Srvulo
1. Are there any laws that govern a layoff of employees? If so, what do the laws require?
The Portuguese Labour Code (in the version applicable since the 17 February 2009) lays out two
forms of layoffs: collective dismissal (articles 359. to 366.) and individual redundancy (articles 367.
to 372.). A dismissal is considered to be collective whenever there is (i) a closure of one or more
departments or (ii) the need to reduce the workforce due to structural, technological or economic
reasons, and the employer terminates, either simultaneously or within a period of three months, the
employment contracts with at least 2 employees for companies with up to 49 employees or 5
employees for companies with 50 or more employees. In cases where dismissals do not meet the
requirements to be considered collective dismissals, the rules regulating individual redundancy shall
apply. These two types of layoffs apply to all employers, regardless the size of the work force or the
nature of the employment, and all types of employees including white and blue collar workers,
managerial staff, and employees occupying positions of trust within the organization.
The dismissal (for whatever reason) is only allowed when there is just cause and must be made
as a part of a procedure organized by the employer. The grounds or just cause for layoffs the
legislation refers to the following types of reasons: closure of one or more departments of the
company; economic or market forces such as the reduction in the companys activity due to lower
demand for goods and services or when it is impossible for practical or legal reasons to supply these
goods and services; technological changes in the techniques or manufacturing processes or
automation of production, equipment to control the movement of goods, as well as automation of
communications or services; or structural changes such as changes in the main product line or
restructuring of part or all of the company.
2. Are there any formal requirements for terminating an employee or groups of employees?
Collective Dismissals: A complex procedure applies to employers in terminating employees.
For, a collective dismissal, the employer shall notify the workers commission (or if one does not
exist, the workplace multi-union committee or the trade union representatives) and the Ministry of
Employment and Social Security as to the impending dismissals through an initial communication.
In cases where there are no representative structures for the employees, all employees potentially
affected must be notified and may elect, from among themselves within the period of 5 working
days after which they have received the initial notification, a committee to act on their behalf. This
initial communication from the employer must include a set of documents comprising of a
description of the dismissals grounds, a list of the entire workforce organized in accordance with
the companys departments; and the identification of the criteria used to select which employees are
to be dismissed.
Within the period of 5 days after the initial communication to employees representatives or after
the period of 5 working days for the election of a committee by the employees potentially affected
by the dismissal, a process of negotiations and consultation begins between the employer and the
employees. These negotiations are focused on reaching an agreement regarding the method of

carrying out the dismissals and the adoption of other measures aimed at reducing the number of
employees affected such as changing to part-time, conducting more training or allowing early
retirement. The Ministry provides services by as a participant in the negotiation process to support
the parties, to help them reconcile their respective interests, and to assure compliance with legal
requirements. In most cases, the negotiations happen just for the purpose of establishing what
compensation is to be paid to the employees. The adoption of alternative measures to the dismissal
is uncommon. In fact, the negotiations usually end after one or two meetings through which the
impossibility of reaching an agreement with the employees is verified. The negotiations conclusion
is ensured by a deadline at the end of which the employer is automatically allowed to decide whether
it will carry out the dismissals.
If an agreement is reached or it has been 15 days since the initial communication was made, the
employer may issue a final decision by giving written notice to each employee to be dismissed. This
notice must state the specific grounds for the employers decision and the date on which the
contract will be terminated. The communication must also refer the amount of the compensation
due as well as the form of this compensations payment. If the employees are entitled to other labor
credits (arising from the performance or the termination of the employment), such communication
must also include a reference to the amount of such credits, and the place, date and form of their
payment. On the same date in which the dismissal decision is sent to the employees, the employer
shall provide the Ministry of Employment and Social Security with a report outlining who is being
dismissed along with other information. It is worth highlighting that the 15 day limit functions to
limit the duration of the negotiations. Therefore, in order to decide on the dismissal without the
agreement of the employees, the employer just has to wait until the end of that period and prove
that at least one meeting with the employees took place.
Individual redundancy: A different, but complex procedure applies to individual redundancy.
The employer must make an initial communication to the workers commission or, if the relevant
company does not have one, to the work-place multi-union committee or, should the latter not exist,
to the trade union representatives. The employer must also notify the employee concerned. This
notification should address the need to eliminate the post and terminate the employment contract,
the reasons behind this decision, and a list the employees affected along with their respective
occupational categories.
If the employees representative structure is not in agreement with the proposed dismissal, it has
a period of 10 days to object. The employee affected may make an identical objection. After the
initial communication, the employees affected or their representative structure can, within 3 working
days, request the intervention of the Portuguese Labour Inspection. This entity will function to
assure the fulfillment of applicable legal requirements. The Inspection will have to present a written
report within 7 days.
Five days after the window for employees opportunity to object has closed, the employer may
issue his decision. This decision shall be in writing and include a statement on the individual
redundancy. This statement will outline the reasons of the dismissal and include the facts that justify
the impossibility of taking alternative measures, proof that the selection criteria has been duly
observed if objections have been lodged, the amount of compensation and other labour credits to
be awarded to the employee as well as the place and the form of its payment, and the date on which
the contract will terminate.

3. Are there special legal requirements for a layoff caused by redundancy in the workforce?
For both collective dismissal and individual redundancy, the following requirements apply. An
employer is required to give prior notice to employees of their termination. The period in between
this notice and the date of termination is known as the prior notice period. The amount of prior
notice varies with respect to the duration employment relationship. For employees who have been
employed for less than one year, the prior notice period is 15 days. For employees with seniority
equal to or greater than one year, but less than five years, the prior notice period must be 30 days.
For employees with a seniority equal to or greater than five years, but less than 10 years, the prior
notice period must be at least 60 days. Finally, for employees with a tenure equal to or greater than
10 years, the prior notice period due is at least 75 days. If the employer does not comply, wholly or
partially, with the prior notice requirement, the employer will have to pay compensation equal to the
remuneration of the absent period of notice. In this instance, the employment contract will
terminate as if the employer has complied with the prior notice requirements, not at an earlier date.
After termination, the employee will receive financial compensation of one months basic pay
per each year of service. This rate of pay will be calculated pro rate temporis and is subject to a
minimum of three months pay. Portuguese law presumes that the employee accepts the dismissal
when she receives the compensation. An employee can not appeal his dismissal to the courts, unless
he is able to prove that he did not accept the dismissal and returns or makes available to the
employer the total amount of financial compensation paid.
Employees affected by a collective dismissal shall be entitled, during the prior notice period, to
time off to find employment. This time off to secure other employment is two working days per
week and is taken without loss of pay. During the period of notice the employee has a special right
to resign by giving notice of three working days. The employees resignation does not affect his
entitlement to the compensation above referred.
Another type of legal requirements regards the criteria for selection given the reorganization of
the workforce. When several posts with identical job responsibilities exist and the employer wishes
to eliminate some of the jobs, it becomes necessary to terminate employees selectively. If this
scenario occurs within the context of a collective dismissal, the law does not impose any criteria.
The employer can choose the criteria, provided that they are not discriminatory and that there is a
relevant connection between the grounds invoked for the layoff and the criteria used to select the
employees to dismiss.
For individual redundancy, the criteria for terminating employees are proscribed by the law.
Employees must be terminated in the following order: employees with the shortest length of service
in the particular employment post; employees with the shortest length of service in the occupational
category; employees in a lower category in the hierarchy; and employees with the shortest length of
service in the relevant company. Employees who, in the 3 months prior to the redundancy
procedure, were transferred to their present job, are entitled to return to their original work post
should that post exist and continue to receive the same basic pay.

4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
The failure to comply with the above requirements and procedures gives the employee the
right to challenge the dismissal, appealing to the labour courts. Within a period of 60 days (or six
months in the case of a collective dismissal), the employee can contest the decision of dismissal on
the following grounds: lack of or insufficient motives of the employer supporting for the dismissal;
non-compliance with the applicable legal requirements to the dismissal procedure; or failure to pay
due compensation to the employee.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
The consequences of an unfair dismissal vary depending on the employers fault. If the
termination is invalid, the contract remains in force and the employment relationship is not severed.
The employee can be entitled to damages arising from the termination of the employment contract.
This compensation will be, at least, equal to the amounts of the retribution that the employee would
have received since the date of the dismissal until the date of the final ruling. Further, the employee
is entitled, with respect to the period subsequent to the ruling, to be reinstated with all rights and
guarantees unaffected. If the employee prefers not to return to the enterprise, he may opt, instead,
to be paid some compensation. This compensation will be established by the court somewhere
between 15 and 45 days of basic retribution for each year of service, calculated on a pro rata basis,
and be equal to a minimum of three months pay. The court will also consider the time the law suit
is pending in making its determination of the appropriate amount of compensation. If the employer
has up to 10 employees at its service or if the employee in question occupies a management position,
the employer may present an opposition to the reinstatement request in which it must prove that the
employees return would be harmful to its commercial activity. If the court rules in favor of the
employer, the employer not have to reinstate the employee, but will have to pay the compensation
established by the court for somewhere between 30 and 60 days of basic retribution for each year of
service calculated on a pro rata basis.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Since the procedure is very complex, sometimes employers fail to comply with some of the
deadlines or communication restrictions. There are also some cases in which the employer fails to
pay the correct amount of compensation and/or other labour credits or does not pay these amounts
in due time. Another frequent problem is the lack of coherence between the grounds invoked in the
dismissal and the criteria used to choose the employees affected.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In practice, the vast majority of proposed cases of collective dismissals and individual
redundancies are settled through agreed resignation or agreed redundancy. These expressions
designate situations where, by an agreement with the employer, the employee consents to terminate
the contract of employment in return for compensation as an alternative to a collective dismissal or
a redundancy procedure. The legal form of termination is then not dismissal but termination by

agreement. However, the law recognises that in reality the initiative to terminate the contract is on
the employers side, and therefore classifies this situation as involuntary unemployment for
unemployment benefit purposes.
Portuguese legislation does not establish any limitation regarding the possibility of signing
termination agreements whether the employer is conducting a collective dismissal or an individual
redundancy. In fact, it is frequent to initiate this kind of process just as a way of pressuring
employees to sign individual termination agreements. Such an agreement may be concluded at any
time and is wholly discretionary, which means that it is not necessary for any justification of the
termination. It is only necessary for purposes related with employment benefits such as before the
Social Security administration, to state the reasons for the agreement).
It is worth noting that any agreement must be in writing and signed by both parties. This
agreement must mention the date of its signature and also the date of the beginning of its effect.
The employee can revoke the agreement up until the seventh working day after its signature
provided that the employee gives the employer written notice. Should this situation occur, the
employee shall return any amounts received. However, this right is not granted whenever the
agreement is properly dated and the signatures of the parties are recognised before the Public
Notary.
In reference to the compensation normally paid in these cases of termination, Portuguese law
does not provide for either a minimum or a maximum entitlement for terminations by agreement
between the parties. Nevertheless, in order to pressure the employee to sign the termination,
compensation is, in most cases, paid. This payment normally reflects the amounts established by
law for cases of collective dismissals and redundancy (severance pay) plus those credits which are
due in every case of termination. In most cases the amounts negotiated are higher because it is only
by raising the compensation that an employer is able to induce the employee to sign the termination
agreement.

ROMANIA
Prepared by Magda Alexandru
Buzescu Ca
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The layoff procedure is regulated by the Labor Code and the Collective Employment
Agreement concluded at the National Level for the years 2007-2010 (CEA). In addition, the
provisions of the Collective Employment Agreements approved at the sector level or company level
are also applicable. According to Art. 68 of the Labor Code, this procedure regarding layoffs applies
in three cases: (i) if an employer dismisses at least 10 employees within a period of 30 days and has
less than 100 employees; (ii) if the employer dismisses at least 10% of the employees, within 30 days
and has less than 300, but more than 100 employees;(iii) and if the employer dismisses at least 30
employees and has more than 300 employees.
In case of layoffs, the employers most important obligation is to start consultations with the
trade unions or, with the employees representatives. These discussions should focus on methods
and means for avoiding collective layoffs or reducing the number of affected employees.
Throughout the consultations, the employer must notify the parties, in writing, of: the total number
and categories of employees; the reasons for the layoff; the number and categories of employees to
be affected by the layoff; the criteria, according to the law and/or the collective employment
contract, for establishing the layoff priority order; the measures considered in order to limit the
number of the dismissed employees; the measures considered for the mitigation of the consequences
of the layoff and the compensations to be granted to the dismissed employees, according to the legal
provisions and/or the applicable collective employment contract; the date on which, or the period
during which, the layoffs shall take place; and the deadline until the employee's representatives may
submit proposals for avoiding layoffs or for diminishing the number of dismissed employees. The
employer is obliged to send a copy of such notification to the trade union/employee's
representatives on the same date as the employer sends such to the Territorial Labor Inspectorate
and to the Territorial Unemployment Agency. The trade union/employees representatives may send
its/their points of view to the Territorial Labor Inspectorate. At the grounded request of any of the
parties, the Territorial Labor Inspectorate, with the approval of the Territorial Employment Agency,
may order the reduction of the 30-day notice period, without infringing the individual rights with
regard to the notice period. The Territorial Labor Inspectorate has the obligation to inform in due
time the employer or the trade union/employee's representatives, as the case may be, with regard to
such reduced period, as well as to the reasons for such decision.
The goal of this 30-day notice period before the commencement of a collective layoff is to
allow the Territorial Unemployment Agency to find solutions to the issues resulting from the
projected collective layoff and to notify these solutions promptly to the employer and to the
employee's representatives.
If more time is needed to agree on a solution, the Territorial Labor Inspectorate, with the
consultation of the Territorial Unemployment Agency, may postpone the issuance of the layoff
decisions by 10 calendar days. The Territorial Labor Inspectorate may postpone any decisions if the
issues surrounding the layoff require more time to be solved than the date mentioned in the
collective layoff notification. The Territorial Labor Inspectorate has the obligation to inform in
writing the employer or the trade union/employee's representatives should there be a postponement

of the issuance of the layoff decisions and notify the reasons for this postponement prior to the
expiry of the initial period.
2.
Are there any formal requirements for dismissing an employee or groups of
employees?
Upon the completion of the steps mentioned above, the employers will issue an individual
layoff decision for each of the employees. Each decision will include the mandatory requirements
provided by the Labor Code. The layoff decisions shall become effective as of the date of their
notification, which may be the date when the decisions are notified by registered mail with
acknowledgement of receipt, the date when the employees signed for having been served, or the
date when the decisions are notified by means of a bailiff.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. A laid-off employee may use the provisions of the Labor Code and of the CEA in order
to challenge his/her inclusion in the layoff. For example, an employee may argue that he/she was
included in the layoff discriminatorily and allege that the criteria mentioned by the CEA were not
followed.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in No. 1-4 above?
A layoff which is carried out in non-compliance with the legal provisions is void. In such
case, the court can cancel the layoff procedure and compel the employer to pay damages equal to
the indexed, increased, and updated salaries and any employee entitlements. At the request of the
employee, the court which decided the cancellation of the layoff procedure may compel the
employer to reinstate the employee to his/her former job.
6.
What are the one or two most common mistakes that employers make which lead to
liability for a layoff?
The provision included in the CEA stipulating that in case of layoffs the employer has to
inform the employees in writing about the prior notice term creates confusion among the employers
with regard to whether the prior notice term should be notified to the employees as a different
document or should be part of the layoff decision.
If the prior notice term is notified before issuing the layoff decision, the employers risk that
a court might void the entire layoff procedure. Because the Labor Code provides that the layoff
decision has to mention the duration of the prior notice term, this flaw becomes fatal. Moreover,
the prior notice term has to be part of the layoff decision as this term is determined from the date of
notification of the said decision. At the end of this term, the employment relationship between the

employer and employee will cease to exist, without any other formalities. In general, employers do
not comply with the steps of the layoff procedure or the applicable deadlines.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Under Art. 60 of the Labor Code, there are certain situations under which the employer may
not layoff employees. They are as follows: during the employees temporary disability as ascertained
by a medical certificate according to the law; during an employees pregnancy to the extent that the
employer had knowledge about the pregnancy before issuing the layoff decision; during an
employees maternity leave; during any leave for raising a child up to the age of 2, and for a disabled
child up to the age of 3; during leave for raising a disabled child aged up to 7 or in the case of a
disabled child, for other health problems, until the child turns 18 ; during military service; during the
employees tenure as an elected position in a trade union body, except when the dismissal is ordered
for a serious disciplinary departure or for repeated disciplinary departures by that employee; or
during the employees paid leave.
The CEA provides several layoff criteria for protecting certain employees from losing their
jobs. If the measure would affect two spouses working at the same company, the employment
contract of the spouse with the lower income shall be cancelled without cancelling the employment
contract of a person who has a job not subject to layoff. Any layoff measures should primarily
affect employees without any children to support. The last tier of potentially affected workers
consists of women with children to support, widowed or divorced men who have children to
support, single parents, and both male and female employees who have no more than 3 years until
retirement at their request. In the case of the application of the collective layoff procedure, the
employer cannot hire other employees to the same positions for a period of 9 months. If the
employer intends to hire, it will have to offer these positions first to the dismissed employees.

SINGAPORE
Prepared by Anne Choo
CitiLegal LLC
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

If the employees and employer are parties to a collective agreement with a union, then the
terms of the collective agreement would apply. In the absence of a collective agreement or any
contractual provisions between the employee and employer (whether contained in the employment
letter or any employee handbook or policy) providing otherwise, there is no general legislation
governing a retrenchment exercise. The only legislation that applies is the Singapore Employment
Act that lays out minimum notice periods prior to termination.
However, there are guidelines that have been recently issued by the tripartite partners
(Ministry of Manpower or MOM, Singapore National Employers Federation, and the National
Trades Union Congress) known as the Employers Guide to Saving Jobs in the Business Downturn
as well as the Tripartite Guidelines on Managing Excess Manpower (revised as at 17 May 2009)
(collectively Guidelines). These Guidelines provide as follows (amongst others): a retrenchment
exercise is a last resort only entered after alternative solutions have been considered and exhausted;
union/workers have been consulted on the impending retrenchment; MOM has been notified about
the impending retrenchment (in the prescribed form); advance notice has been given to affected
workers; the reason(s) for retrenchment have been communicated clearly; terms of the retrenchment
benefits have been agreed upon; and earned statutory benefits such as unused leave, have been paid
and notice pay given. Further, any agreements made with affected workers under the contract of
service or collective bargaining agreement with the union, are upheld. Assistance must be is
provided to affected workers where possible, such as to look for alternative jobs. Finally,
arrangements must be made for affected workers to undergo skills training. The Guidelines do not
have the force of law. However, where complaints are made to MOM and upon investigation,
MOM finds that an employer has acted contrary to the Guidelines, MOM may reprimand the
employer and/or exercise its discretionary powers in other areas (for eg. the granting of future
employment pass applications by such an employer).
The length of notice to be given to workers depends on the employment contract and the
collective agreement. If their contracts or collective agreements do not provide for notice periods,
the length of notice will be calculated based on what is considered reasonable. For employees
falling under the purview of the Singapore Employment Act, the minimum notice periods below
apply.
Length of Service
Less than 26 weeks
26 weeks to less than 2 years
2 years to less than 5 years
5 years and above

Notice Period
1 day
1 week
2 weeks
4 weeks

2.
Are there any formal requirements for terminating an employee or groups of
employees?

Any formal requirements under any collective agreements and/or the employment contract
must be complied with; usually this would require notice in writing to be given by the employer and
served in accordance with the collective agreement and/or employment contract.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No, unless any applicable collective agreements or contractual provisions in the employment
contract state otherwise. However, when termination of employment occurs due to a redundancy,
the question of whether severance or retrenchment benefits apply arises.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
If the employment contract clearly states that employment may be terminated with notice
without any reasons, then no reasons need to be stated for the termination. However, if the
contract merely states that the employment may be terminated with notice, an employee may
challenge the termination by alleging it was not done in good faith. It is worth noting that the law in
this area is not settled, and in general, it would be difficult for an employee to raise this argument.
More specifically, for employees that fall within the purview of the Singapore Employment
Act, if the employee considers that he has been dismissed without just cause or excuse by his
employer, he may within one month make representations to the Minister for reinstatement. Thus,
employers should not dismiss employees for other reasons under the guise of a general layoff.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
A breach of a contract or of a collective agreement would give rise to a claim under contract
law. The Guidelines do not have the force of law, but a breach of the Guidelines may result in a
public reprimand from MOM and may possibly have other indirect effects due to the regulation by
government authorities of other areas such as the issuance of employment passes.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Not applicable.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Generally, one main issue that arises in retrenchment exercises is whether contracts can be
terminated and if so, how much notice is required. Another issue is what kind of compensation the
employer has to give to employees in relation to the termination. Usually, the standard
compensation would include accrued salary, payment for the notice period (if the employer is opting
to give payment in lieu of notice), unused leave and payment for any other benefits the employee
would have received during the notice period. Should any severance or retrenchment payments

exist, these will have to be addressed as well. The Guidelines state that employees with 3 years
service of more in the company are eligible to claim retrenchment benefit, but that the quantum of
such benefit depends on what is provided for in the collective agreement or contract of service, and
that if there is no provision, the quantum is to be negotiated between employer and employee (or
their trade union, if applicable). The Guidelines go further to say that the prevailing norm is to pay
between 2 weeks to 1 months salary for every year of service, and that if retrenchment follows a
wage cut, that the pay out should be based on the salaries before the wage cut. Thus, whilst the
position remains that there is no legislation mandating that an employer must pay retrenchment
benefits (if there is no such obligation contractually or with the trade union), the authorities appear
to be encouraging employers, wherever possible, to negotiate a fair retrenchment package for
retrenched employees
If a termination of employees is in relation to a transfer of employees pursuant to transfer of
an undertaking or business within the meaning of section 18A of the Employment Act, the
provisions of section 18A apply. It generally provides for notifications and transfer of liabilities
between transferor (seller) and transferee (purchaser).

SLOVAKIA
Prepared by Lucia Nozdrovicka
Dedak & Partners
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The layoffs of employees are governed by the Act No. 311/2001 Coll. Labor Code as
amended (SL C). The SLC requires that layoffs are executed by a written notice with a
termination period of 2 months in general, although under specific circumstances the period is 3
months. The employer can give notice on termination only for reasons expressly stipulated in SLC,
such as (i) the employer or part of it is closed or relocated or (ii) the employee becomes redundant
due to some written resolution on organizational change, change in duties, or a technical equipment
upgrade resulting in a reduction in the number of employees with the aim of increasing work
efficiency.
The employment relationship can be terminated for any reason pursuant to an agreement
between the employer and employee. Sale of the employers enterprise is not considered a reason
for employers termination by means of a notice. Termination of at least 20 employees within 90
days for the above mentioned reasons either by a notice or agreement or for other reasons not
related to an employees job performance is considered mass layoff.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The termination notice with explicitly defined termination reason must be delivered in
written form to the employee. The employer is obliged to negotiate termination of an employment
relationship with representatives of employees on basis of a written request in advance.
There are certain additional requirements connected with the mass layoff. The employer
shall negotiate with representatives of employees the measures enabling avoiding a mass layoff at
least 1 month prior to the mass layoffs scheduled commencement. For this purpose, the employer
must provide written information to the employees such as the reasons for mass layoff, the overall
structure of employees, and the number and criteria used for selecting which employees will be
affected by mass layoff. The same written information shall be submitted to the state labor
authority.
In addition, after the above mentioned negotiations the employer is obliged to submit
written protocol summarizing the negotiations to the employees representatives and the state labor
authority. The employer is entitled to terminate the employment with employees only after 1 month
has passed since the written protocol was properly delivered to the state labor authority and to the
representatives of employees.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
The redundancy of an employee shall be the reason for the organizational change. When
terminating the employment by a notice due to organizational change, the employer must decide on
organizational change by a written resolution in advance. In addition, the employer is entitled to

terminate the employment relationship by a notice only in such a case where (i) the employer does
not have possibility to re-employ the employee, not even for a shorter time or (ii) the employee is
not willing to shift to other work offered to him by the employer in the same place.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
The employee is entitled to file a claim for invalidity of termination of the employment
relationship within 2 months from the due date of employment termination. According to the Act
No. 365/2004 Coll. Antidiscrimination Act the employee is entitled to claim that the inclusion in the
layoff violates equal treatment principles due to race, origin, gender, age, religion, etc.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
If the employer does not fulfill legal requirements for termination of employment of an
employee, the termination is considered invalid. Should the employee insist on employment, the
employment is considered to remain unbroken. In such a situation, the employer is obliged to
provide the employee with salary compensation. Should the employees claim for salary
compensation for a time period exceeding 12 months arise, the court may decrease the
compensation to 12 months at the employers request. If the additional legal requirements outlined
for mass layoff are not fulfilled, the termination is still valid, but the employer is obliged to provide
the employee with salary compensation for 2 months. In connection with discrimination the
employee may demand that the employer refrain from terminating him, remedy the illegal status of
the affairs and provide appropriate relief and indemnification. In addition, due to any breach of the
provisions of SLC the penalty up to EUR 33,193.91 may be imposed by the state labor authorities.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Employers sometimes do not properly specify the reasons for termination in the termination
notice. At times, employers do not fulfill the obligation to inform the employees representatives
especially with respect to termination by a notice that is not included within the mass layoff.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Should the employment relationship be terminated because (i) the employer or part of it is
closed or relocated or (ii) the employee becomes redundant due to a written resolution on
organizational change, the employer shall pay the severance payment at least in amount
corresponding to the salary for 2 months.

SOUTH AFRICA
Prepared by Ari Soldatos
Fluxmans
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

There are significant laws governing the lay-off of employees in certain sectors. This would
be as a particular alternative to termination of employment. Usually this would be for a limited
duration of a period not exceeding eight weeks. Essentially, the laws require that there should be a
proper business reason and economic necessity and, in addition thereto, that any such process
should be preceded by a comprehensive and thorough consultation process.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Yes. A distinction is drawn between employers which employ in excess of 50 employees and
those who employ less. In the former instance, at least a sixty day consultation process is required
prior to the termination of employment based on operational requirements. This procedure
necessarily requires the intervention of any trade union or representative committee of which the
employees may be members. During the course of this particular process, employers are required to
embark upon a thorough and comprehensive consultation process with a view to avoiding or, at the
very least, minimising the termination of employment based on operational requirements. With
employers who employ less than fifty employees, whilst a similar process is the goal, the time period
concerned (namely sixty days) may be relaxed in appropriate circumstances.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
Based on the fact that this is a termination which is no fault of the employee, specific legal
requirements are determined insofar as proper. Thorough and adequate consultation is required
along with formal minutes and any dismissal must be premised on a proper commercial basis. In
addition, the selection criteria of employees to be dismissed must either be agreed upon with the
representative body or, at the very least, be fair and objective. The most fair and objective criterion
is that of "last in first out" (namely the later engaged employee should be the first to be terminated)
subject of course, to the retention of the appropriate skills and expertise.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Indeed there are. Employees who are laid off may challenge the fairness of the dismissal
both from a procedural and substantive perspective in the Labour Court. In instances where an
employer engages more than fifty employees, in the event of there being a dispute, employees who
remain employed may strike and embark upon industrial action in protest against the lay-offs, as an
alternative to litigating.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

The primary remedy insofar as an unfair dismissal is concerned in South Africa is that of
reinstatement namely that any employee who has been dismissed without a fair reason may be
retrospectively reinstated in his previous job. In instances, nonetheless, where only the procedure
has been found to have been unfair, employees would be entitled to payment of their ordinary
monthly rate of remuneration up to a maximum of twelve months.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Inevitably, employers try to short circuit the process and do not engage in thorough and
adequate consultation. In addition, very often improper and unfair selection criteria of employees
to be dismissed are implemented. In this last mentioned instance, such a dismissal would deem to
be substantively (as opposed to procedurally) unfair.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In many instances, and with the current economic climate being as it is, sympathy strikes and
secondary strike action seem to be increasingly more popular. This is where individuals who are not
directly affected by the dispute in question embark use industrial action in solidarity with individuals
who have initiated a primary strike.

SPAIN
Prepared by Pedro Moreira/Francisco Gmez
SCA LEGAL
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The main law governing the layoff of employees is the Estatuto de los Trabajadores (Labor
Act), approved by Real Decreto Legislativo 1/1995. With some exceptions, this act governs all labor
relationships subject to Spanish law. Also, there are general laws governing labor law matters, mainly
procedural legislation, which are mentioned below. Additionally, the fundamental rights stated by
the Spanish Constitution are always directly applicable to any labor. At a lower level there are also
two more sources of labor law: collective labor agreements and individual employment contracts.
The Labor Act foresees four types of dismissal: the collective layoff, the dismissal on objective
causes, the so-called ungrounded dismissal, and the disciplinary dismissal. The law establishes
different procedures for each type of dismissal.
A collective layoff is based on economic, technical, organization or production causes that
compromise the future viability of the company. A collective layoff of employees is allowed if it will
help the company overcome the situation or if the company is going to close down. The termination
is a collective layoff if during a 90-day period the entire payroll consisting of more than 5 employees
is affected by the close of a company. For companies with less than 100 employees, at least 10
employees would need to be affected during the said period of time. For companies with between
100 and 300 employees, collective layoff occurs when 10% of the employees are affected. Lastly, for
companies with more than 300 employees, 30 employees must be affected.
For a dismissal based on objective causes, the main legal grounds are an employee's
ineptitude in performing her duties; an employees non-adaptation to any technical modifications in
the work; repeated and unjustified absences from work totaling certain percentages of working days;
or the need to terminate employment contracts out of economic, technical, organizational or
production reasons, whenever the number of employees affected does not reach the minimum
required for the collective layoff.
An ungrounded dismissal occurs when the employer terminates the employment contract on
undisclosed grounds. With some exceptions, as a rule, the compensation for this dismissal consists
of 45 days of salary per year worked, up to a maximum of 42 months. Though the law calls this
dismissal ungrounded, the employer is allowed to terminate the contract by paying that indemnity.
Lastly, there is disciplinary dismissal in which an individual is terminated based on a serious
and willful breach of the labor agreement by the employee. The main legal grounds are the
following: repeated and unjustified absences from work or late arrival; lack of discipline or
disobedience at work; verbal or physical abuse towards the employer or other colleagues at work;
breach of contractual good faith or abuse of trust; willful decrease of the normal or agreed job
productivity; habitual alcohol or drug abuse which negative influence in the job performance.
It is worth mentioning that, in addition to the Labor Act, there are some statutes that cover
certain categories of labor relationships. Relationships covered by special legislation are subject to
the Labor Act only in limited terms. One example of these relationships is the employment of senior
executives, which is governed by Real Decreto 1382/1985. In this case, protection given to the

employee is less than protection under the Labor Act and, in general, the parties enjoy more
freedom at the defining their rights and obligations. The Real Decreto 1382/1985 establishes that
senior executives may be dismissed without grounds provided that they are notified in writing of the
dismissal three months in advance. In this case, the indemnity amounts to seven days of salary per
year worked, up to a maximum of six months. Nevertheless, it is usual for senior executive
employment contracts to provide for a more compensation than that required by law.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The law establishes different requirements for each kind of dismissal. For a collective layoff,
there is an administrative procedure known as Procedimiento de Regulacin de Empleo (Collective
Dismissal Procedure) under the Real Decreto 43/1996. In this case, the employer - or in some cases
the employees representatives - must file an application for an authorization before the Labor
Authorities which then determines whether the legal requirements for the collective layoff have been
met. The procedure includes a mandatory period of consultations that are aimed at forcing the
employer and the employees representatives to reach an agreement. In case an agreement is
reached, the Labor Authorities will approve the agreement. Even in case no agreement is reached,
the Labor Authorities may approve the dismissals, in which case the ruling will determine their
terms. If the administrative ruling approves the termination of the contracts, the affected employees
have the right to receive an indemnity (redundancy pay) of 20 days of salary per year worked, up to a
maximum of 12 months of salary.
For a dismissal based on objective causes, the employee must be given at least 30 days of
advance notice in writing stating the causes of the dismissal. The indemnity consists of 20 days of
salary per year worked, up to a maximum of 12 months of salary, which should be made available to
the employee together with the written notice. The advance notice may be replaced by payment of
the salaries for this period.
In the case of ungrounded dismissal, on the last day before termination and in order to avoid
legal action by the employee, the employer must give a document (finiquito) stating all the
amounts due to her on that date, including the indemnity, salaries and other compensation due
under the labor contract.
Lastly, disciplinary dismissals require that the employee is given writing notice stating the
causes and date of the dismissal. If the employee is an employees representative or a labor union
delegate an adversary procedure should be performed. If the employee is a labor union member, the
union delegates should be granted a hearing. Obviously, no indemnity is due in case of this type of
dismissal.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
The legal requirements for a layoff caused by redundancy in the workforce are those of the
collective layoff or in the event that the number of employees affected by the layoff does not reach
the minimum stated by the Labor Act for the collective layoff, then the applicable legal requirements
are those of a dismissal based on objective causes.

4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
We have to make a distinction between the two layoff procedures mentioned above, the
collective layoff and the individual dismissal (based on objective causes), because the procedure and
grounds for challenging the inclusion of an employee in the layoff are not the same.
The law regulating the collective layoff administrative procedure (Real Decreto 43/1996)
establishes no obligation to list the identities of those employees affected by the measure in the
administrative ruling or in the agreement reached in the period of consultations. As a result the
employer will select the employees who are to be terminated with some freedom, although following
the criteria set in the administrative ruling or in the agreement. Moreover, the applicable collective
labor agreements may establish some provisions on the matter.
The administrative ruling that approves a collective layoff may be challenged by either the
individual employees or their representatives and labor union delegates by filing an administrative
appeal to the higher administrative body of the competent Labor Authorities. If the appeal is
dismissed, the ruling may be again appealed but this time before the competent courts. However, if
the administrative ruling approves the collective layoff or the agreement reached in the period of
consultations, but does not contain a list of affected employees, Labor Courts are competent to rule
in disputes arising from the inclusion of an employee in the layoff. Labor Courts are also competent
to rule in disputes arising in relation to the amount of the indemnity awarded to affected employees.
In such cases, the affected employees have to bring an action before the Labor Courts. This
procedure is governed by the Ley de Procedimiento Laboral (Labor Proceedingss Act), approved by
the Real Decreto Legislativo 2/1995.
Some of the more common grounds for challenging the inclusion of an employee in the
layoff include: breach of the terms established in the administrative ruling or in the agreement
approved by the Labor Authorities; inclusion of an employee in the layoff by the employer is based
on discriminatory reasons breaching the fundamental rights established by the Constitution and the
Labor Act; or nullity of the administrative ruling approving the collective layoff or nullity of the
agreement reached in the period of consultations whenever the legal causes for the collective layoff
(established in the Labor Act) are not proved or the formal requirements for its administrative
procedure (established in the Labor Act and in the Real Decreto 43/1996) are not met. This last
ground for challenging dismissal often is invoked with special attention on the employees
representatives and labor union delegates rights in the period of consultations.
The procedure for challenging a dismissal based on objective causes is the same of that for
the disciplinary dismissal and is subject to the Labor Proceedings Act. The employee may appeal the
decision before the Labor Courts, although a conciliation hearing between the employer and the
employer must be held first before an administrative body.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
A dismissal can be challenged by the employee before the labor courts, either directly or
after the administrative ruling that authorizes a collective layoff has been declared void, depending
on the case. The labor court ruling (possible in all dismissal types) or the administrative body

(possible only in collective layoffs) will classify the dismissal in one of the following three categories:
It may be categorized as a grounded dismissal whereby all the legal requirements are met and thus,
the dismissal is valid. Alternatively, it may be an ungrounded dismissal in which no legal cause is
found to exist, the mandatory procedural provisions for each type of dismissal have not been met or
the procedure has been followed incorrectly. In this case the employer may either reinstate the
employee (when possible) or terminate his contract, paying an indemnity of 45 days of salary per
year worked, up to a maximum of 42 months. Lastly, the dismissal may be declared void by the
competent court. A void dismissal implies discrimination and a breach of fundamental rights of the
dismissed person; the main example of a void dismissal is the termination of a pregnant woman. In
this case, the employee will be reinstated at her position and also paid all salaries due between the
date of dismissal and that of reinstatement.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
In the case of the collective layoffs, the most common mistake is not following the
mandatory administrative procedure and instead dismissing the employees individually. Another
mistake is when the employer starts the administrative procedure for the collective layoff and the
legal causes either do not exist or are not proven to exist. However, Spanish Labor Authorities
competent for the approval of the collective layoff tend to be lenient on those cases.
In the cases of dismissals based on objective causes and in that of disciplinary dismissals, a
common mistake made by employers is the use of this type of dismissal when the legal causes are
nonexistent or unproven. The result is often the employees filing of an appeal challenging the
decision before the Labor Court. Possibly the most common mistake made by employers is not
specifying via the written notice the causes for the dismissal and, notably, not mentioning the exact
provision of the Labor Act which is being used for the dismissal.
7.
What other employment issues are likely to arise from a layoff in Spain that you have
not addressed in your answers to the previous questions?
There is well established case law stating that if the terminated employee has accepted the
indemnity made available to her together with the written notice of the dismissal (finiquito), it is
presumed by the Labor Courts that the employee agrees with the termination of the contract and, as
such, no legal action challenging the dismissal or the amount of the indemnity received can be
brought against the employer. Finally, it is important to mention that a scheme including measures
such as early retirements to ease the adverse effects on employees caused by the collective layoff
may be approved by the authorities in cases of companies with more than 50 employees.

SWEDEN
Prepared by Michael Cohen
Clemens Wallen stlund Advokater AB
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The Swedish Employment Protection Act (1982:80) applies to both public and private
employees (with only a few exceptions). The Act covers all employers that have a business enterprise
in Sweden. Layoff of employees is also governed by the Act and, to some extent, the Employment
(Co-determination in the Workplace) Act (1976:580).
According to the Swedish Employment Protection Act, notice of termination by the
employer must be based on objective grounds. A reduction in force due to economic reasons is
considered to be an objective ground. However, if objective grounds for notice of termination do
not exist, then it is considered reasonable to require the employer to provide other work in his
service for the employee.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Notice of termination by the employer must be given in writing and be delivered to an
employee personally. Before deciding on termination of employment on the grounds of layoffs, the
employer is normally obliged to enter into negotiations with the relevant local organization of
employees.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
A laid-off employee may use the Swedish Employment Protection Act to challenge a notice
of termination. Although Swedish antidiscrimination laws are available, they are seldom used to
challenge a notice of termination.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
If a notice of termination is given without objective grounds, the notice can be declared
invalid by a court upon application by the employee. An employer who violates the Act is liable for
damages for losses suffered by the employee as well as wages and other employment benefits. The
damages may be based on compensation for losses sustained and for the violation of the Act. The
damages are in principle determined according to the employees total period of employment with
the employer and may not exceed the following amounts: 16 months pay for less than five years of
employment; 24 months pay for at least five years but less than ten years of employment; and 32
months pay for ten or more years of employment. Violations of some of the requirements may also

entail an obligation for the employer to pay damages to the employees organization. Where
reasonable, damages may be reduced, in whole or in part.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Not applicable.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In connection with termination of employment caused by shortage of work the employer
must consider an order of priority. The order of termination for those employees who are affected is
determined on the basis of each employees total length of employment with the employer.
Employees who have been employed for the longest have priority over employees with shorter
employment times. In the event of equal length of employment, priority is given to the older
employee. An employer with at most ten employees may exempt at most two employees who, in
the opinion of the employer, are of particular importance for future activities. Employees whose
employments have been terminated due to shortage of work may also have rights of priority for reemployment
in
the
business
where
they
were
previously
employed.

SWITZERLAND
Prepared by Karin Eisenring Hiestand
Bratschi Wiederkehr & Buob
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

Mass layoffs are governed by Art. 335d et seq. of the Swiss Code of Obligations. A mass
layoff is a significant reduction in force which has nothing to do with the individuals involved but is
based on operational requirements of an enterprise. It concerns: more than 10 employees in
enterprises usually employing more than 20 and less than 100 persons; at least 10% of all employees
in enterprises usually employing more than 100 and less than 300 persons; or at least 30 employees
in enterprises usually employing at least 300 persons.
The formal requirements are as follows: consultation of an employees representatives or, if
there are none, the employees; written disclosure of the reasons for dismissal, number of employees
to be dismissed, and the time period; granting the right to all employees to make suggestions on
how to avoid the mass layoff or limit the number of employees to be dismissed; and notification to
the Labor Office.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

The employment relationships of the group of employees affected end 30 days after
notification to the Labor Office.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.

4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

Any laid-off employee can challenge the mass layoff stating that the formal requirements
have not been fulfilled (including the individual right to make suggestions how to limit the number
of employees and the right to be heard).
5.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

The terminations of the employment relationships might be declared null and void with the
consequence that the employer must make continuous salary payments and additional penalties of
salary payments.
6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

The most common mistakes are not abiding by the formal requirements by insufficiently
consulting with employees and failing to notify the Labor Office in a timely manner.
7.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

Short-time work is a valid alternative in Switzerland to avoid a mass layoff if an


underemployment in an enterprise is expected to be of a limited period only. The employer has to
request governmental subsidization and has to consult the employees. Acceptance of any employee
affected by short-time work is required.

THAILAND
Prepared by Sarah Roquefeuil & Patama Mokaves
Vovan & Associates
1.
require?

Are there any laws that govern a layoff of employees? If so, what do the laws

There is no specific law regarding the layoff-off of employees, but the rules to be followed
are stated in the general laws governing employment matters, known as the Labor Protection Act
(LPA) of 1998 and its updated version of 2008. In addition, the Social Security Office (SSO) has
issued regulations governing employees termination compensation.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
When an employer wishes to terminate an employee or group of employees, the employer
must give the employee or employees to be terminated advance notice of the termination of at least
one cycle of compensation payment (1 day/1 week/1 month). For example, if an employee is paid
on a monthly basis, the employer must provide him or her with advance notice of at least one
month prior to termination.
There are specific situations, such as in cases of business restructuring, where the employer
must provide 60 days advance notice.
When the termination is for cause (i.e. dishonest performance of professional duties,
intentional act(s) against the employer, gross negligence, violation of the companys rules, absence
for 3 consecutives days without sufficient reason or imprisonment), the employer does not have to
provide either advance notice or severance payment. Rather, the employer must pay the balance of
compensation within 3 days after the effective termination date.
When the termination is not for cause, the employer must provide severance payment, the
amount of which is based on months and years of service rendered by the employee. This severance
payment varies from 0 to 300 days and must be paid within 7 days after the effective termination
date. Employees who have been terminated are entitled to receive the equivalent of 6 months
compensation at roughly 50% of their most recent gross wage (not exceeding 15,000 THB per
month).
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No. The motivation of the lay-off caused by redundancy in the workforce is a discretionary
management decision taken by the employer. Most of the time, there is a layoff plan negotiated with
the labor union or employee committee and with the local labor inspection.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the lay-off?

Employment Law itself provides no concrete recourse to employees who have been laid off.
However, the laid-off employee can file a complaint to the labor inspection and/or ad hoc
committees (Welfare Committee, Human Rights Committee, etc.) regarding the grounds supporting
the lay-off, especially if he or she can prove that the process of termination used by the employer is
not transparent and is unfair.
5.
What sanctions or penalties may be imposed against employers for violating any
of the requirements mentioned in Nos. 1-4 above?
In case of failure to give advance notice, compensation must be paid in place of the advance
notice to which the employee is entitled. Legal interest will also be assessed at a rate of 15% if the
severance payment is not paid within 7 days and at the rate of 7% or 5% for the supplementary
month to be paid in case of failure to give at least one month advance notice. If the employee files a
complaint to the labor inspection and the attempt to negotiate fails, then the case will go before the
labor court. The labor court has the power to order the employer to reinstate the ex-employee,
provided such reinstatement is feasible and if the termination is deemed as an unfair one. The labor
court can also sentence the employer to pay complementary indemnifications in addition to
severance payment.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a lay-off?
One common mistake is to confuse the requirement to pay severance payment with the
requirement to give advance notice equal to at least one pay cycle or more than one pay cycle (in
case of business restructuring, for example). Another common issue is the miscalculation of
severance payment, particularly with respect to the payment of fringe benefits (bonus, allowance,
thirteenth month, etc.). Indeed, the employers understanding may vary about whether such items
are classified as wage or as benefits.
7.
What other employment issues are likely to arise from a lay-off in your
jurisdiction that you have not addressed in your answers to the previous questions?
Another employment issue which is likely to arise is the case of resignation subject to
condition. In the case where the employee and the employer agree about the resignation concept
and the latter still accepts to provide a financial compensation, the employer has to be careful about
the wording of documentation to be signed by both parties. The wording of the agreement is
particularly sensitive because, if not well done, it could lead to further issues, such as legal recourse
and the risk that the contract might be re-qualified.
Another issue which frequently arises concerns the termination of a foreign employee, which
implicates immigration matters. Indeed, once the foreign employee is laid-off he automatically loses
his work permit and, consequently, the business visa allowing him to stay in the country as the visa is
very often linked with the validity of the work permit. Most of the time, the employee and her
family must leave the kingdom within 7 calendar days.

THE CZECH REPUBLIC


Prepared by Jana Felixov
Felix a spol
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

In the Czech Republic, legal regulations of layoffs are based on the EC directive No. 98/59
and on the approximation of the laws of the Member States relating to collective redundancies
whose requirements have been adopted by the Czech Labor Code. According to the Czech Labor
Code, a layoff (in Czech legal terminology hromadn propoutn and usually translated as
collective dismissals) is the termination of employment relationships within a period of 30 calendar
days in any of the following scenarios: when one employer with 20 to 100 employees terminates at
least 10 employees; when an employer terminates 10 % of employees from a total number of 101 to
300 employees; or when an employer terminates 30 employees from a total number of more than
300 employees on so-called organizational grounds such as closing down, relocating, or restructuring
by the employer that causes the employee to become redundant.
Relocation of an employer is not a reason for a termination of an employment relationship
by the employer if the relocation proceeds within the place of work as determined by the
employment agreement (e.g. Prague has been set as a place of work in the employment agreement
and the employer moves within Prague). Part of an employer can include an organizational unit of
the employer even if that unit is operating quite independently in relation to the employers business
activity.
Redundancy of an employee is based on the decision of the employer to change activities,
technical equipment or to reduce the number of employees for the purpose of increasing labor
productivity or to introduce other organizational changes. In these instances, the employer has to
report his intention to the trade union or works council 30 days before giving notice of the
employment relationships termination to individual employees. As a consequence, the intended
layoff should have the subject of consultations with union or works council with regard to measures
aimed at reduction of negative implications of the collective dismissal to affected employees. Where
neither trade union nor works council are operated by the employer, the employer must give notice
on its own to every employee affected by collective dismissals. When the employment relationship
is terminated by employer for a so-called organizational grounds (regardless if in the frame of the
collective dismissal or not) there is always an obligation of the employer to disburse a severance pay.
The amount of the severance pay corresponds to at least three times average monthly earnings of
each employee.
2.

Are there any formal requirements for terminating an employee or groups of


employees?

In the case of a layoff a previous notice to trade union or works council or to all affected
employees is required. The employer is also obliged to inform the competent labor office (state
authority for employment policy and unemployment social support) at the same time. After the
termination of the consultation with the union, works council or individual employees, a written
report should be sent to a competent Labor Office informing it about the results of the
consultations, especially about the total number of affected employees, their job titles, and
professions. The employment relationship of an employee who is affected by collective dismissals

shall terminate (on the basis of the termination notice given by the employer) at the earliest 30
consecutive days after the employer's report was served to the respective Labor Office except when
the employee states a desire not to observe this time-limit. The purpose of this report is to enable a
respective Labor Office to prepare a report and a strategy for dismissed employees.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?

Redundancy in the workforce, according to the Czech Labor Code, is one reason for the
termination of an employment relationship. The conditions under which employee/employees could
be considered as redundant are set by the Labor Code (as mentioned above under 1) and specified
by interpretation of Czech Courts.
4.

Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?

The Czech legal order in general (Czech Constitution) and the Labor Code insist on the
strict prohibition of discrimination of any kind (direct and indirect discrimination, harassment,
sexual harassment, persecution etc.) especially in the context of employment. The Czech Labor
Code refers to a special Act concerning discrimination, but this (so-called Anti-discrimination) Act
has not been adopted yet. The possibility to challenge the dismissal for discrimination is more
theoretically than practically invoked in the Czech Republic in part because the burden of proof is
for the employee claiming discrimination, which in many cases lowers a chance of a claimants
success. More common is an action challenging the validity of termination for formal mistakes or
alleging the falsity of declared termination reason (according to the Czech Labor Code, there is a
possibility for an employer to dismiss an employee only for concrete reasons enumerated thereby).
5.

What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?

For a breach of the information duty of the employer to the union, works council or
individual employees, a fine of up to CZK 200.000 (USD approx. 10.000) may be imposed. Breach
of the information duty in not informing the Labor Office is not financially sanctioned, but the
termination of the employment relationships of employees affected by the layoff shall not be
effective until a delivery of a written report to the Labor Office.
6.

What are the one or two most common mistakes that employers make that lead to
liability for a layoff?

Sometimes the employers do not understand that there is a duty in connection with layoffs
to contact the Labor Office twice. First, there is a preliminary information duty about the
employer's intent to conduct a collective dismissal. After consultations with representatives of
employees or affected employees themselves, an employer must deliver a written report on his
decision concerning the layoff to the Labor Office. Only after fulfilling this duty can employees be
collectively dismissed and still, this dismissal is restricted until the 30-day time-limit has been
observed. Until the report is delivered to the Labor Office the employment relationships of
employees could not be validly terminated in the frame of a layoff.

7.

What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?

In case of an insolvency proceeding instigated with the employer, there is no need to serve a
report to the Labor Office except when the office explicitly requests it. Employees of an insolvent
employer are protected against the non-payment of their earnings and other wage claims (such as
severance pay etc.) by a special act under which the Labor Office shall cover their claims in a
concretely defined range.

THE NETHERLANDS
Prepared by Renee Hopster
Jonker Abeln
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

Under the Civil Code (Boek 7: Labour Contract), any termination of a labour agreement
must comply with the rules of the Civil Code in addition to any contractual conditions. Sometimes a
collective labour agreement applies. Additionally, usually a permit of the Gouvernmental Labour
Office (UWV Werkbedrijf) is required before the agreement can be terminated. In most of the cases
the period of termination is between one and 6 months (after permission for termination is
received), depending on the conditions in the contract and the period of time the employee has
worked.
For the layoff of 20 or more employees, the Informing mass layoff Act (Wet melding
collectief ontslag) applies. It requires the employer to inform the following bodies of the proposed
layoff: the Gouvernmental Labour Office, the branch, and the relevant Labour Unions. The
Gouvernmental Labour Office will not start the above-mentioned proceedings for permission to fire
layoff employees until one month after this information has been conveyed.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
See answer above referring to the issuance of a permit by the Gouvernmental Labour Office.
Official notice for termination is to be given after permission of the Gouvernmental Labour Office
is received, to be sent by Registered Letter
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
There are no special laws for this purpose. Any employee can challenge his inclusion in court
(Subdistrict Court).
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
They risk that the agreement is not terminated and thus, the continuation of their obligation
to furnish wages.

6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The most common mistake is not requesting a permit for a layoff.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
There are a few Acts which are relevant for a layoff. First, the Adaptation of Working
Hours Act (Wet Aanpassing Arbeidsduur) requires that an employee who has served at least for one
year can request his employer adjust the working hours or days. The request may only be denied for
good reasons which can be tried by the court. The Partial Unemployment Act (Wet deeltijd WW)
creates the possibility for the employer in times of redundancy to ask for permission to partly
terminate the agreement with (a group of his) employees. Under this Act, the employees will receive
a benefit to compensate the income loss they suffer.
Apart from termination after a permit is received, it will be possible to ask the subdistrict
court to dissolve the employment contract. Usually some compensation has to be paid. It is worth
noting that this method is not often used for a mass layoff, though.
Lastly, Information by the Ministry of Social affairs and Employment has a lot of
information about employment relations in the Netherlands in the English language can be found
on
the
following
webpage:
http://english.szw.nl/index.cfm?rubriek_id=391970&hoofdmenu_item_id=14631.

UKRAINE
Prepared by Richard Smith
RULG-Ukranian Legal
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The Labor Code of Ukraine is the main document that regulates the layoff of employees.
Under Article 40 of the Labor Code of Ukraine, a term labor agreement or labor agreement of
unlimited duration between the owner of the company, agency or organization or its authorized
representative body or person and each employee can be cancelled by the owner of the company,
agency or organization or authorized representative body or person (hereinafter employer). This
cancellation power applies to cases including production and work reorganization, including
dissolution/closing/winding-up, reorganization, bankruptcy or reorientation of the company or
organization, as well as during a workforce reduction. The actual procedure of workforce reduction
is not defined in the Ukrainian legislation. Other grounds unrelated to mass layoff, but related to
the termination of individual employees exist and are better defined in the Labor Code.
Article 21 of the Labor Code of Ukraine defines a labor agreement as an agreement between
an employee and either the owner of the company, agency or organization or its authorized
representative body or person, under which the employee is obligated to perform work stipulated in
the labor agreement and to comply with internal company rules and regulations. Additionally, the
owner of the company, agency or organization or authorized representative body or person is
obligated to pay compensation and provide appropriate working conditions stipulated by the labor
legislation, collective agreement (if any) and labor agreement.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
Under Article 40 of the Labor Code of Ukraine, each employee has to be given two months
notice prior to his termination. If a similar vacancy exists in the same company/ organization, such
employee must be offered that position. If the employee does not accept that position or if such a
similar position does not exist, the employer must inform the State Employment Agency of Ukraine
that this employee has been terminated and notify the Agency of the employee's profession,
specialty, skills and qualifications, as well as the compensation paid to the employee. In practice, in
case of a hiring or a termination of an employee, an internal company/organization order must be
issued. A laid-off employee must be paid all compensation owed to him. Under Article 44 of the
Labor Code, a laid-off employee must be paid additional compensation equal to not less than one
average monthly salary, calculated according to Ukrainian legislation (varies on case-by-case basis).
Also, valid reasons defined in the Labor Code of Ukraine must exist for the employee's termination
or layoff. Ukrainian legislation does not specify a procedure for terminating a group of employees.
3.

Are there special legal requirements for a layoff caused by redundancy in the
workforce?

Ukrainian legislation does not contain legal requirements for a layoff caused by redundancy
in the workforce. However, layoffs are allowed in response to changes in workflow at an
organization. At the same time, not every employee can be easily terminated. The employer is
obliged to take into account employee qualifications, their family situations, disability status and

other issues and rules stipulated by the Labor Code of Ukraine. A laid-off employee has first priority
to be rehired for the same position should it open again in the future.
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Laid-off employees can use the Labor Code of Ukraine and any other applicable laws, including
the Constitution of Ukraine, to challenge their inclusion in the layoff.
5. What sanctions or penalties may be imposed against employers for violating any of the
requirements mentioned in Nos. 1-4 above?
If termination in the course of a layoff is deemed invalid by the court or other body authorized
to consider labor disputes, the employer can be ordered to reinstate the employee to her previous
position, to pay compensation for the period the employee was involuntary absent from her
position, and even to pay moral damages. Also, the employer who violated the labor legislation may
be fined in accordance with Ukrainian legislation. In practice, even if termination was justified but
the employer made errors in the termination procedure, the court may order the employer to pay the
terminated/laid-off employee compensation for the term of such employee's involuntary absence
(Article 240-1 of the Labor Code).
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
The most common mistakes are likely errors in employee termination procedure and
paperwork, such as the absence of an internal order authorizing employee termination, the absence
of valid grounds for termination, and not following the Labor Code's stipulated conditions for
termination. Additionally, employers may neglect to consider the status of certain employees who
have retention priority under Ukrainian legislation such as employees with families who financially
support two or more other individuals, employees with families in which there are no other workers
with income, and other categories stipulated in article 42 of the Labor Code.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
Generally, Ukrainian labor legislation is archaic and heavily biased in favor of employees.
Overall, courts favor the interests of employees over employers and layoff procedures can be
lengthy and complicated.

UNITED KINGDOM
Prepared by Pili Fernandez Huelamo
Mace & Jones
1.

Are there any laws that govern a layoff of employees? If so, what do the laws
require?

The main piece of legislation governing dismissals is the Employment Rights Act 1996
(ERA). The term lay-off is commonly used to describe the dismissal by way of redundancy of
an employee.1 The term redundancy is defined in the ERA and a dismissal by reason of
redundancy arises when employment is terminated, that is when the employee is dismissed, in
circumstances attributable wholly or mainly to the fact that either the employer has ceased, or
intends to cease, to carry out the business for the purposes of which the employee is employed, or
the requirement for the employees to carry out work of a particular kind have ceased or diminished
(or are expected to do so). For the purposes of this questionnaire, we will answer the questions
based on the assumption that they relate to redundancy dismissals, rather than lay-off.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The employer must terminate the contract of employment by giving the employee the
requisite notice in accordance with the contract or, in the event that the contract is silent or where
such periods are greater, according to statutory notice periods. Failure to do this will mean the
employer has breached the terms of the employment contract. Consequently the employee may
claim for breach of the contract (also known as wrongful dismissal). Secondly a claim for unfair
dismissal may be made (see below for more detail) if the dismissal has not been carried out fairly and
the decision to dismiss was not within the range of reasonable responses.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
There is a duty on the employer to inform and consult. In terms of the dismissal of a group
of employees in a redundancy situation, where the employer proposes to dismiss 20 or more
employees at the same establishment within a 90 day period, the employer must consult with
representatives of affected employees for a minimum period. This period is 30 days where the
1

It should be noted that the term laid off has a particular meaning under UK employment law,
which is not the same as redundancy. An employee can only be laid off lawfully if the terms of his
contract, whether implied or express, afford the employer the right to do so. Only employees whose
remuneration depends on being given work to do can be laid-off. This is a temporary measure,
with the expectation that a return to the normal working pattern will resume. Employees who have
been laid-off are given the protection of being able to claim a statutory redundancy payment on the
basis that they have in effect been dismissed by way of redundancy, rather than temporarily laid off.
In order to claim the employee must have two years length of service and have been laid-off for the
required length of time as specified by the ERA. The employee must serve the employer with a
notice of intention to claim. An employer can serve a counter-notice to contest the claim, citing the
fact that there is a reasonable expectation of a return to normal working hours, and that therefore
there is no dismissal (by reason of redundancy).

number of employees is between 20 and 99, and 90 days for 100 or more employees. This is called
collective consultation and is governed by the Trade Union and Labour Relations (Consolidation)
Act 1992. If the duty to collectively consult applies then the employer must also notify the Secretary
of State, giving information about the reasons for the redundancies, the numbers involved and the
process to be followed.
Employees must be allowed to work or be paid for their notice periods. In addition,
employees with more than two years' service are entitled to a statutory redundancy payment
calculated with reference to length of service, age and weekly pay (subject to a cap).
4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
In addition to claiming unfair dismissal, employees may challenge their selection for
redundancy if they believe that they have been selected on discriminatory grounds. These include
sex, pregnancy or maternity leave, age, race, religious/philosophical beliefs, disability, sexual
orientation and, to some extent, part-time or fixed-term status. Employees may also challenge
selection if they believe they have been selected for being a whistleblower.
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
An employer who has failed to collectively consult on redundancies when ordered to do so
may be ordered by an Employment Tribunal to pay a so-called protective award of up to 90 days
pay for each affected employee. A failure to notify the Secretary of State may lead to the Secretary
of State instituting legal proceedings which could lead to a summary conviction and a fine up to
5000. This upper limit is subject to review from time to time.
An employer must ensure that where employees are being terminated by reason of
redundancy, that they have followed a fair procedure and have consulted properly in order to avoid
claims for unfair dismissal. If not, an employee may claim he has been unfairly dismissed, subject to
the individual having one years continuous service (but see below). In order for a dismissal to be
fair, it must be for a potentially fair reason (this includes redundancy, i.e. a business closure or a
reduction in the need for employees to carry out certain work). In assessing whether a dismissal was
fair, an employment tribunal will normally apply a general test of fairness set out in the ERA. The
employer must also show that it acted reasonably in dismissing the employee for that reason. In a
redundancy situation this includes carrying out fair selection, consulting with the employee and
considering alternative employment. There are certain circumstances where a dismissal will be
automatically unfair and in these situations there is no qualifying period of employment necessary
and there is no cap on the amount that may be awarded.
If an employment tribunal finds that a dismissal is unfair, the employee will be entitled to an
unfair dismissal award made up of a basic award subject to a cap (currently 10,500) and a
compensatory award, (largely) based on compensating the employee for as much as an employment
tribunal thinks is just and equitable to award in all the circumstances, having regard to the financial
loss suffered by the employee as a result of the dismissal and the employers actions. The award is
also subject to a cap (currently 66,200).

A tribunal can also order reinstatement of an employee (as if the employee has never been
dismissed) or re-engagement (on terms as favourable or in suitable alternative employment). It is
suffice to say this is not common. In the event either is ordered and the employer does not comply
with the order, an additional unfair dismissal award can be made of between 26 weeks minimum and
52 weeks maximum pay. A weeks pay is subject to a cap giving an employee a possible 9,10018,200 payment.
Lastly, an employee who is found to have been discriminated against or who has been
dismissed for being a whistleblower will be entitled to damages, also based on financial loss but
uncapped, together with an award for injury to feelings. There is no qualifying service needed.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Employers can lack transparency in the selection process which leads to claims for unfair
dismissal and/or discrimination. Additionally, employers can fail to collectively consult in good
time before redundancies are implemented.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
If there is a subsequent transfer of the business or part of the business then the purchaser
will be liable for any claims in relation to the redundancies under the Transfer of Undertakings
(Protection of Employment) Regulations 2006 (TUPE) (which gives effect to the Acquired Rights
Directive (2001/23/EC, formerly 77(1871 EC). Under TUPE when there is a relevant transfer
of an undertaking (or part) the employees will automatically transfer from the transferor to the
transferee. The employees transfer under their existing terms of employment and retain their
continuity of employment. All of the transferors rights, obligations and importantly liabilities
connected with the transferring employees also transfer. Therefore any claims pre-transfer, such as
unfair dismissal and breach of contract, will transfer to the purchaser. The purchaser will normally
seek to protect itself against such liabilities through appropriate indemnities in the sale and purchase
agreement. TUPE applies to business transfers and service provision changes, and does not apply to
share sales.

UNITED STATES
Prepared by Douglas Mishkin
Patton Boggs LLP
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

The federal Workers Adjustment and Retraining Notification (WARN) Act requires a
covered employer to give affected employees 60 days written notice of a plant closing or mass layoff.
The primary purpose of the WARN Act is to ensure that covered employees receive 60 days of their
regular compensation before losing their jobs.
A covered employer is any business enterprise that employs (A) 100 or more employees,
excluding part-time employees; or (B) 100 or more employees who in the aggregate work at least
4,000 hours per week (exclusive of hours of overtime). 29 U.S.C. 2101 (a)(1). Affected
employees are those who may reasonably be expected to experience an employment loss as a
consequence of a proposed plant closing or mass layoff by their employer. 29 U.S.C. 2101(a)(5).
A plant closing is the permanent or temporary shutdown of a single site of employment, or
one or more facilities or operating units within a single site of employment, if the shutdown results
in an employment loss at the single site of employment during any 30-day period for 50 or more
employees excluding any part-time employees. 29 U.S.C. 2101(a)(2). A mass layoff is a reduction
in force which (A) is not the result of a plant closing; and (B) results in an employment loss at the
single site of employment during any 30-day period for (i) (I) at least 33 percent of the employees
(excluding any part-time employees); and (II) at least 50 employees (excluding any part-time
employees); or (ii) at least 500 employees (excluding any part-time employees).
Where a sale of a business results in a plant closing or mass layoff, the seller is responsible
for providing notice of the closing or layoff which occurs up to and including the date and time of
the sale; the buyer is responsible for providing notice of any closing or layoff that occurs thereafter.
Many states have their own WARN Acts that have different requirements, e.g., numbers
of employees, amount of notice required.
2.
Are there any formal requirements for terminating an employee or groups of
employees?
The WARN Act requires that written notice be given to the State dislocated worker unit, to
the chief elected official of the unit of local government in which the employment site is located, to
the chief elected officer of the union (if there is one) and to individual affected employees. There
are exceptions to the notice requirement for a faltering company, unforeseeable business
circumstances, and for natural disaster.
3.
Are there special legal requirements for a layoff caused by redundancy in the
workforce?
No.

4.
Are there employment laws that laid-off employees can use to challenge their
inclusion in the layoff?
Yes. A laid-off employee may use any of the federal or state anti-discrimination laws to
challenge his/her inclusion in the layoff. For example: (a) I was included in the layoff because of
my [race/age/national origin/religion/disability/gender, etc.]; or (b) The layoff has a disparate
impact on employees based on [those same categories].
5.
What sanctions or penalties may be imposed against employers for violating any of
the requirements mentioned in Nos. 1-4 above?
Under the federal WARN Act, an affected employee who did not receive the requisite
amount of notice may be entitled to back pay and benefits (up to the 60 days of required notice). In
addition, an employer who fails to provide the required notice to a unit of local government is
subject to a fine of up to $500 for each day of the violation. The penalty can be avoided by the
employers payment of all money owed to each employee within three weeks of the plant closing or
layoff.
Under the various federal and state antidiscrimination laws, an employee who proves
discrimination in the layoff may be entitled to back pay, front pay, compensatory damages (for
emotional distress), punitive damages and an injunction prohibiting further discrimination.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
Since the WARN Act is not been well known, occasionally employers fail to provide notice,
or fail to calculate the number of employees terminated within a 90-day period to determine if the
WARN Act applies. To avoid liability for a claim of disparate impact under an antidiscrimination
law, an employer should perform a category-by-category analysis of the proposed layoff to
determine its possible vulnerability to such a claim.
7.
What other employment issues are likely to arise from a layoff in your jurisdiction
that you have not addressed in your answers to the previous questions?
In negotiating the purchase of a company, the purchaser should pay attention to ensuring
that any post-purchase obligations it may have to the sellers holdover employees (such as severance
in the event of a post-purchase layoff) can be structured to satisfy the purchasers possible WARN
Act obligation.
As a general matter, employers in the United States are prohibited by federal statutes from
discriminating against persons with respect to employment decisions and terms and conditions of
employment because of race, sex, age, disability, religion, or national origin. Most states have similar
statutes prohibiting such discrimination. In implementing a reduction in force, an employer should
exercise care to minimize the risks that affected employees may assert claims under these various
statutes based upon allegations that they were selected for inclusion in the reduction in force
because of their membership in one of the protected classes. Even in circumstances in which there
is no dispute that an employer has a legitimate business reason for implementing a reduction in force
(e.g., due to a slow down in work), an employer could still be held liable for discrimination based

upon the selection of the specific persons for layoff, in comparison to those retained. For
employers that are conducting reductions in force, therefore, it is critical to conduct adverse impact
analysis of the group laid off and to make sure there are legitimate and specific criteria for selecting
the individuals who are laid off. Additionally, it is important for employers to consider offering
severance payments in exchange for a release of claims by individuals impacted by layoff in an effort
to reduce potential claims.

LEGALINK QUESTIONAIRRE:
Cross-Border Layoffs: A Country By Country Summary
Of Applicable Employment Laws.
URUGUAY
Prepared by Andrs Durn Hareau
Hughes & Hughes
1.

Are there any laws that govern a layoff of employees? If so, what do the laws require?

Employers have the right to dismiss employees at any time without need of any justification or
motive. Acts 10.489 and 10.570 apply in cases of layoffs of employees. If a layoff of employees is taken
into effect, the employer must pay each worker a dismissal indemnity (IPD) with the only exception of
the following cases: probation contracts (for not more than three months); term contracts; contracts
for specific work; and for day labourers dismissed before the 100th day of work (this is commonly
referred to as "perodo de carencia").
The dismissal indemnity that employers should pay dismissed employees, consists on an
amount equal to one salary for each year or fraction of work at the company, with a ceiling of 6 years
(in the case of monthly workers). To this effect, an employees salary is considered as the usual salary
plus the average overtime, vacation pay, vacation bonus, car allowance, meal allowance, housing
allowance, and any other salary benefits.
In the case of day labourers, salary is considered as described for monthly workers, but in
proportion to 1 day's work. As well, the indemnity dismissal varies according to the number of days
effectively worked. For each year during which they have worked more than 240 days they are entitled
to 25 days wages; and for each year during which they have worked less than 240 days they are entitled
to 2 days wages for every 25 days effectively worked. Day labourers have an IPD ceiling equal to 150
day's wages.
There are some special situations in which employees are entitled to receive special indemnity
dismissals. If a mother-to-be is dismissed, no matter the motive, the employer must pay, in addition to
the dismissal indemnity, an amount equal to 6 monthly salaries or 150 days work, calculated as stated
hereinabove. If any woman is dismissed within 6 months of having given birth she will be also entitled
to this additional indemnity.
If a employee is not reincorporated after a labour related injury, he will be entitled to an
additional indemnity equal to double dismissal indemnity, i.e., he would receive, in short, an amount
equal to triple the dismissal indemnity. If an employee is dismissed within 180 days of reincorporation
he will be entitled to the referred additional indemnity and to the salary of those 180 days. If a sick
employee is not reincorporated after illness or within 30 working days of reincorporation he will be
entitled to an additional indemnity equal to the dismissal indemnity, i.e., he would receive, in short, an
amount equal to the doubled dismissal indemnity.
2. Are there any formal requirements for terminating an employee or groups of employees?

The applicable laws do not regulate the way in which the decision to dismiss an employee must
be communicated, so in principle, it may be communicated in a verbal manner. Notwithstanding,
employers commonly communicate their decisions through a written form.
3. Are there special legal requirements for a layoff caused by redundancy in the workforce?
No.
4. Are there employment laws that laid-off employees can use to challenge their inclusion in
the layoff?
Yes, employees may challenge their inclusion in the layoff arguing that they were included
due to discrimination measures such as affiliation to the Union, race, religion or nationality.
5. What sanctions or penalties may be imposed against employers for violating any of the
requirements mentioned in Nos. 1-4 above?
Employees that understand they were included in the layoff because of their affiliation to the
Union, may sue the company and request the Court to declare the dismissal null and to require the
employer to reincorporate the employee in the company. The Court can also require the employer
pay the employee the salaries he should have received during the term he could not work for the
company.
6.
What are the one or two most common mistakes that employers make that lead to
liability for a layoff?
It is common that companies facing restructuring measures (eg. shutdown of one of its
premises) view the instance as an opportunity to layoff employees affiliated to the Union. When
these type of decisions occur, it is often unfair because the affiliated worker/s should have not been
included in the list of dismissed employees. As a result, the Company may face collective Union
measures (eg. strike) or employees, included in the layoff because of their affiliation to the Union,
may sue the company and request the Court to declare the dismissal null (see answer 5).
7.
What other employment issues are likely to arise from a layoff in your jurisdiction that
you have not addressed in your answers to the previous questions?
No other issues are likely to arise.