Restructurings, Redundancies and Reductions in Force
A Practical Guide for Employers
The global workplace is continuing to evolve, with many businesses experiencing significant and long-lasting change alongside increasingly challenging market conditions. For an employer considering potential redundancies and reductions in force (RIFs) across multiple jurisdictions, understanding how to navigate the different legislative frameworks is vital. Aligning business objectives with often conflicting legal obligations can have a critical impact on the planning, timing and implementation of global redundancy and RIF programs. This practical guide highlights the key issues for an employer to note if considering redundancies and RIFs in the following jurisdictions:
Mayer Brown's Employment & Benefits group has extensive experience in guiding employers through all aspects of restructuring, redundancies and RIFs. For further guidance on the full range of issues, across these and other jurisdictions, please get in touch with one of the listed contacts.
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May 2023
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1. What amounts to a redundancy? Redundancy describes the termination of employment agreements without cause. There is no statutory definition of a collective dismissal. This shall be considered on a case-by-case basis, but the general criteria focus on the social and economic impact of the collective dismissal. A collective dismissal is equivalent to an unjustified dismissal, which means that an employee dismissed in a mass dismissal exercise will have the same rights as an employee dismissed without cause. 2. Is an employer obliged to consult about a redundancy? The Brazilian Labor Code does not require any prior employee/representative/union consultation in relation to redundancies, but an employer should consider whether there are any consultation provisions in collective agreements. Unions should participate in collective dismissals, but this would not require the union's prior authorization or the execution of a specific collective agreement for the relevant purpose. 3. What process should an employer follow? The procedures for the execution of redundancies, provided that there is no specific provision set forth in any applicable collective agreement, are the same procedures carried out for the execution of terminations without cause. Thus, the employer can communicate the termination without cause at any time, in writing, unless the employment agreement is suspended (e.g., parental leave, sick leave, vacations, etc.), in which case the employer needs to await the employee's return. The employer should also proceed with making the severance payments set forth in the Brazilian Labor Code for termination without cause. All termination documents must be in Portuguese. 4. Does an employer have to consider alternative employment for an employee? Although considering alternative employment is recommended and perceived as good practice, there is no requirement provided by Brazilian labor law in this regard. An employer must observe collective agreements in order to verify if there is any provision on this matter. 5. Do any categories of employees have special protection? Some employees may have temporary job guarantees, such as pregnant employees, union representatives, members of the Work Accidents Prevention Committee (“CIPA”) and employees who have received work-related accident or sick pay allowances. There may also be other groups of employees with this type of temporary job guarantee pursuant to the applicable collective agreements (e.g., after returning from vacation, when the employee is close to retirement, etc.). In addition, a company with 100 or more employees can only terminate an employee with a disability or an employee who has been rehabilitated by the National Social Security Institute without cause after hiring a substitute (i.e., another employee with a disability or an employee who has been rehabilitated by the National Social Security Institute), due to legal quotas. It is recommended that the employer enters into negotiations with the employee regarding their termination and validates the agreement before the Labor Court. 6. Does an employer have to notify any government departments? An employer is not required to notify, consult or obtain approval from any government departments prior to making redundancies. 7. What payments must be paid to an employee terminated by reason of redundancy? Severance payments that arise as a result of a termination without cause include the following (note that collective agreements may provide different or additional amounts):
Salary (proportionate to the days worked); Notice, of 30 days up to 90 days (the minimum period is 30 days and the employee gains three additional days per year of work in the company, limited to a total of 90 days). The company can request the employee work only up to 30 days’ notice and will have to reduce the daily working hours by two hours during this period or reduce one week if the employee receives monthly payments (so that the employee can pursue another job) without discounts (if the company does not require the employee to work, the company can pay the employee in lieu of notice); Christmas bonus (proportionate); Accrued vacation with the 1/3 constitutional bonus (payment is doubled if the 12-month term for the employee to take vacation has expired); Unemployment Guarantee Fund (“FGTS”) fine of 40% (the company deposits 8% of the employee's salary in this special account on a monthly basis and, in case of termination without cause, it has to pay 40% of this account's balance as a fine); and Overtime and allowances, if applicable.
•
The employee will be able to withdraw 100% of the Unemployment Guarantee Fund balance and may be entitled to receive unemployment insurance paid by the government. 8. Are there any penalties for failure to follow process? The employer must pay the severance within 10 days of giving notice or, if the employee works the notice, within 10 days of the last day of work. If it fails to do so, the employer is required to pay a penalty of one month’s salary to the employee.
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Aline Fidelis
1. What amounts to a redundancy? In the US, the term “reduction in force” (RIF) is commonly used to describe a situation in which an employer terminates employees and typically has no intention of replacing the positions, resulting in a permanent reduction in headcount. 2. Is an employer obliged to consult about a redundancy? There is no general requirement to consult about a reduction in force. However, depending on the type of event which triggers the terminations and the number of employees terminated, various parties will need to be notified 60 days in advance of such terminations taking effect. The federal law which addresses such notification requirements is the Worker Adjustment and Retraining Notification Act (WARN), 29 U.S.C. §§ 2100 et. seq. While this publication focuses on federal law, note that certain states have their own separate WARN laws (“baby-WARN” laws), e.g., California, New York, which have different thresholds for employer coverage, triggering events, and different notice periods. Employees who are represented by a union are covered by the WARN Act and applicable baby-WARN laws, and they also may be entitled to notice pursuant to the terms of the applicable collective bargaining agreement. The WARN Act applies to an employer if they have 100 or more employees, not counting certain short-term and part-time employees. Events which trigger notice are “plant closings” and “mass layoffs”:
A plant closing occurs if an employment site (or one or more facilities or operating units within an employment site) will be shut down and the shutdown will result in an employment loss of 50 or more employees during any 30-day period. A mass layoff is a layoff which does not result from a plant closing, but which will result in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer’s active workforce at the employment site.
If the number of employment losses which occur during a 30-day period fails to meet the threshold requirements of a plant closing or mass layoff, but the number of employment losses for two or more groups of workers reaches the threshold level during any 90-day period, of either a plant closing or mass layoff, notice must be given, unless the employer can demonstrate that the employment losses during the 90-day period are the result of separate and distinct actions and causes. Note that, in the sale of a business context, if employees of the seller become employees of the buyer immediately following the sale, any technical termination does not trigger the WARN Act. An ”employment loss” means an employment termination, other than a discharge for cause, voluntary departure or retirement; a layoff exceeding six months; or a reduction in an employee’s hours of work of more than 50% in each month of any six-month employment period. 3. What process should an employer follow? As a first step, the employer will need to determine positions which need to be eliminated and base their decisions about each employee on legitimate, non-discriminatory and non-retaliatory reasons. These decisions will ideally be documented. As a second step, if the employer is a covered employer under the WARN Act, it will need to assess whether a plant closing or mass layoff will occur (looking forwards and backwards 90 days if prior terminations have occurred or are expected to occur). If the employer is covered by the WARN Act and a covered event will occur, the employer must give notice to each individual worker who may be reasonably expected to experience an employment loss, but if the worker is represented by a union, notice must be provided to the chief elected officer of the union representing the employee (and not to the employee directly). The employer must also give notice to the State dislocated worker unit and to the chief elected official of the unit of local government in which the employment site is located, e.g., the mayor of a city. Notice must be timed to reach the required parties at least 60 days before a plant closing or mass layoff and employment separations. No particular form of notice is required except that it must be in writing. The elements of the notices for each of the parties are slightly different and can be found at 20 CFR Part 639.7. Content includes information such as: the name and address of where the mass layoff or plant closing is to occur; whether the planned action is expected to be permanent or temporary; if the entire plant is to be closed, a statement to that effect; the expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated; and the name and telephone number of a company official to contact for further information. There are three exceptions to the 60-day notice: (1) when there is a faltering company; (2) when there are unforeseeable business circumstances; and (3) when there is a natural disaster. The employer bears the burden of proof that the condition for the exception must be met, and must still give notice as soon as practicable. 4. Does an employer have to consider alternative employment for an employee? No. 5. Do any categories of employees have special protection? No categories of employees receive special protection under the WARN Act. However, as noted above, the employer needs to make decisions based on legitimate, non-discriminatory and non-retaliatory reasons in order to avoid challenge under federal and state equal employment opportunity and whistleblower laws. 6. Does an employer have to notify any government departments? In the case of a plant closing or mass layoff, yes. See response to question 3 above. 7. What payments must be paid to an employee terminated by reason of redundancy? There is no statutory entitlement to severance. In addition, the WARN Act does not recognize the concept of pay in lieu of notice. However, since the WARN Act provides that the maximum employer liability for damages, including back pay and benefits, is for the period of violation up to 60 days, providing employees with full pay and benefits for the 60-day notice period effectively precludes any relief when 60-days’ advance notice is not given. Employers may wish to pay employees severance and the WARN Act allows voluntary and unconditional payments that are not required by any legal obligation (such as a contract) to be offset against an employer’s back pay liability. Note that these unconditional payments will not provide consideration for a waiver and release of claims. 8. Are there any penalties for failure to follow process? As touched on above, an employer that violates the WARN Act is liable to each affected employee for an amount equal to back pay and benefits for the period of violation, up to 60 days. An employer that fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation. In any suit, the court, in its discretion, may allow the prevailing party a reasonable attorney’s fee as a part of the costs.
Andrew Rosenman
arosenman@mayerbrown.com +1 312 701 8744
rzadikany@mayerbrown.com +1 213 621 3916
Ruth Zadikany
mkane@mayerbrown.com +1 312 701 7125
Maritoni Kane
kleffert@mayerbrown.com +1 312 701 8344
Kim Leffert
1. What amounts to a redundancy? Article 41 of the Labour Contract Law of the People's Republic of China (Amended in 2012) (the “LCL”) provides that an employer may terminate an employee by reason of redundancy, where:
The employer restructures in accordance with the Enterprise Bankruptcy Law of the People's Republic of China; or The employer encounters serious difficulties in production or business operations; or The employer has amended labor contracts as a result of switching production, introducing material new technological innovation or revising business methodologies, and still needs to reduce its workforce; or The employer can establish that other major changes in the objective economic circumstances, which were relied upon when the labor contract was concluded, now render the contract impossible to perform.
This ground is only available if it is necessary to lay off 20 or more employees, or there are fewer than 20 employees affected but they account for more than 10% of the total number of the employer's workforce. This means that the redundancy ground for termination of employment cannot be relied upon for individual termination of employment. 2. Is an employer obliged to consult about a redundancy? Yes. In accordance with Article 41 of the LCL, before exercising a workforce reduction, the employer is required to explain the circumstances 30 days in advance to the labor union or all of the employees, and to take the opinions or suggestions from the labor union or any employee into consideration. 3. What process should an employer follow? As mentioned above, in accordance with Article 41 of the LCL, before exercising a workforce reduction:
a.
b.
c.
d.
the employer is required to explain the circumstances 30 days in advance to the labor union or all of the employees, and to take the opinions or suggestions from the labor union or any employee into consideration; and after that, the employer must report the workforce reduction plan to the local labor authority for review and filing.
4. Does an employer have to consider alternative employment for an employee? Among the four circumstances that can give rise to a termination by reason of redundancy under Article 41 of the LCL (see question 1 above), an employer is only required to consider alternative employment for employees before exercising the workforce reduction where the employer switches production, introduces material new technological innovation or revises business methodologies, and still needs to reduce its workforce after amending the labor contracts. 5. Do any categories of employees have special protection? Employees who are protected In the event of a termination by reason of redundancy, where an employee falls within any of the following categories, the employer will be prohibited from terminating their employment as set forth in Article 42 of the LCL:
an employee who is engaged in occupational disease-prone work who has not had a medical examination to determine whether they are free from such disease, or is in any diagnostic or observation period pending such determination; or an employee who has been confirmed as having lost or partially lost capacity to work due to an occupational disease contracted or a work-related injury sustained with the employer; or an employee who is suffering from an illness or sustained a non-work-related injury, and is still within the set medical treatment period; or an employee who is pregnant, on maternity leave or within a nursing period; or an employee who has worked continuously for the employer for 15 years or more and is within five years of the legal retirement age.
e.
Employees who have priority to be retained Article 41 of the LCL sets forth that, in selecting who to lay off, the following employees will have priority to be retained:
an employee who has entered into a comparatively longer fixed term labor contract with the employer; an employee who has entered into an open-ended labor contract with the employer; and an employee who is the only one employed in their family, and has to support elderly or minor family member(s).
Laid-off employees have priority to be rehired If an employer that has reduced its workforce pursuant to Article 41 of the LCL intends to hire new employees again within six months, it shall notify the employees who were laid off, and such employees shall have priority to be rehired under the same conditions. 6. Does an employer have to notify any government departments? Yes. As mentioned above, in accordance with Article 41 of the LCL, before exercising a workforce reduction, an employer must report the workforce reduction plan to the local labor authority for review and filing following a consultation with the labor union or all of the employees. 7. What payments must be paid to an employee terminated by reason of redundancy? Accrued remuneration up to the termination date All outstanding wages, payments in respect of accrued but unused annual leave, and any pro-rata contractual bonus up to the time of termination are payable.
Outstanding wages = [normal monthly wages] x [number of outstanding working days up to the termination date / 21.75] Under PRC law, an employer should arrange for its employees to use up all accrued statutory annual leave before termination. Otherwise, the employer must pay salary in lieu to such employees, which amounts to 200% of the normal rate. If the employer provides discretionary annual leave to the employee in addition to the statutory annual leave, the employer can set out in its annual leave policy as to whether and how the untaken discretionary annual leave should be compensated. Payment in lieu of accrued but unused statutory annual leave = 200% x [untaken annual leave days] x [the employee's total remuneration (excluding OT payment) during the last 12 months / 12 / 21.75] Where an employee is entitled to a contractual bonus under the labor contract (such as the 13th month salary), regardless of whether or not such contractual bonus is subject to certain conditions (such as being payable solely at the discretion of the employer or payable only when the employee is with the employer at the time of payment) under the relevant clause of the contract, it is generally accepted by the labor dispute arbitration committee or the court that the bonus must be paid by the employer to the leaving employee on a pro-rata basis and based on the same criteria the employer would apply to other existing employees.
Statutory economic compensation Subject to the table below, the calculation method of the statutory economic compensation is “Monthly Salary x Service Year,” taking into account the period before and after January 1, 2008, respectively (“Pre-2008 Period” and “Post-2008 Period”). This means that the total amount of the statutory economic compensation shall be the amount for the Pre-2008 Period (if any) plus the amount for the Post-2008 Period.
While the statutory economic compensation is the minimum amount of severance payment that an employer must pay to the employee under PRC law, the employer has the right to offer any additional amount as an ex-gratia payment on top of the statutory economic compensation, in particular, when it intends to encourage the employee to agree to the termination by mutual agreement, which is a safer path compared to the termination by reason of redundancy. 8. Are there any penalties for failure to follow process? In the event of the employer’s failure to follow the statutory process, the arbitration committee or the court may consider that such employer does not have sufficient reason to unilaterally terminate an employee's employment, and it may be exposed to the following consequences for an unlawful termination:
The employer may be required to reinstate the employee's employment; or If the employee does not request reinstatement, or if the labor contract can no longer be performed, the employer may be required to pay damages to the employee at twice the rate of statutory economic compensation; or While the LCL is silent, in practice, it is most likely that the employer may still have to pay full salary to the employee during the period from the termination date to the date when the final award takes effect. Depending on the labor dispute resolution process, such a period may range from three months to over one year.
The Monthly Salary shall be capped at three times the local average monthly salary for the previous year as published by the local government when calculating the statutory economic compensation.
Any period equal to or more than six months but less than one year will be counted as one year, and any period less than six months will be counted as half a year; and
The Service Year shall be capped at 12 years, if the employee’s Monthly Salary is capped as required above (being three times the local average monthly salary).
Requirements for Post-2008 Period
It depends on the local rules as to whether the Monthly Salary shall be capped.
It depends on the local rules as to how the Service Year is calculated and whether it shall be capped.
Requirements for Pre-2008 Period
“Monthly Salary” means the average monthly salary (including wages, bonus, allowance and other monetary income) of the employee during the 12 months prior to the termination.
“Service Year” means the year(s) of service of the employee with the employer (plus the year(s) of service recognized by such employer, if any).
Definitions
duncan.abate@mayerbrown.com +852 2843 2203
Duncan Abate
jennifer.tam@mayerbrown.com +852 2843 2230
Jennifer Tam
hong.tran@mayerbrown.com +852 2843 4233
Hong Tran
This chapter was prepared with the assistance of Meng Bo Law Office, a PRC law firm based in Shanghai, with which Mayer Brown has a close working relationship.
1. What amounts to a redundancy? Under the Employment Ordinance ("EO"), an employee will be taken to be terminated by reason of redundancy if the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed or in the place where the employee was so employed. Redundancy also includes situations where 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. If an employee's remuneration depends on the amount of work provided by the employer, then the employee will be taken to be laid off if the total number of days on which no work is provided or no wages is paid exceeds half of the total number of the normal working days in any four consecutive weeks or one-third of the total number of normal working days in any 26 consecutive weeks; and the employee is not paid a sum equivalent to the wages they would have earned if they had been provided work on those days. However, if the contract of employment or contractual policy provides for a redundancy situation, then the employer will need to comply with those contractual obligations. 2. Is an employer obliged to consult about a redundancy? There is no statutory obligation for an employer to consult a staff union or an employee before a redundancy exercise. However, the employer will need to comply with any contractual obligation to consult. 3. What process should an employer follow? If there is a contractual policy or procedures on redundancy, then the employer will have to comply with the policy or procedures before termination, failing which it may give rise to a breach of contract claim. An employer must ensure that the basis for selecting the position to make redundant does not breach any of the anti-discrimination ordinances (which make unlawful discrimination on the ground of sex, marital status, pregnancy, breastfeeding, disability, race and family status). For example, selecting only employees who have taken sick leave may give rise to disability discrimination. While redundancy is a valid reason for termination under the EO, an employer is not required to inform the employee or set out the reason for the termination in the termination letter. An employer may consider stating that the employment is terminated by reason of redundancy to assist the affected employee in seeking for replacement employment or to pre-empt a suggestion that the termination of employment has been on other unlawful discriminatory grounds. An employer can normally terminate the employment by giving the employee the requisite notice of termination or payment in lieu of notice. An employer must serve the required notice under the contract. An employer must also be mindful of the other prohibitions on termination of employment discussed below. 4. Does an employer have to consider alternative employment for an employee? An employer will not need to consider alternative employment for an affected employee whose position has been made redundant unless there is a contractual obligation to do so. 5. Do any categories of employees have special protection? In addition to the prohibitions mentioned above, there are other statutory prohibitions on termination, including the following:
Section 15 of the EO prohibits an employer from terminating an employee who has served notice of pregnancy or is on statutory maternity leave. The employer may dismiss a pregnant employee only if summary dismissal is justified. Section 33(4B) of the EO prohibits an employer from terminating an employee on any "sickness day" taken by the employee in respect of which statutory "sickness allowance" is payable other than by way of summary dismissal. Section 21B of the EO prohibits an employer from terminating an employee by reason of the employee exercising their rights in respect of trade union membership and activities at the appropriate time. Section 48 of the Employee's Compensation Ordinance ("ECO") prohibits an employer from terminating an employee who is entitled to compensation under the ECO until certain certificates are issued. Summary dismissal is not an exception. Section 2 of the Rehabilitation of Offenders Ordinance prohibits an employer from terminating an employee because of a spent conviction (i.e., an offense in respect of which the employee was not sentenced to imprisonment exceeding three months or to a fine exceeding $10,000, the employee has not been convicted in Hong Kong on any earlier day of an offense and a period of three years has elapsed without that employee being again convicted in Hong Kong of an offense).
6. Does an employer have to notify any government departments? There is no statutory obligation on an employer to consult or notify the Labor Department before or after a redundancy exercise. An employer however will need to notify the Inland Revenue Department of the termination of employment in the usual way. Where an employee intends to leave Hong Kong for a period of more than one month after the termination, the employer is required to withhold any payments of money to the employee for a period of one month from the date on which the notification was given to the Inland Revenue Department, or until a “letter of release” is received from the department, whichever is earlier. The employer should also notify the Immigration Department of the cessation of employment if the employee requires a work visa to work in Hong Kong. The above notifications would be required for any termination of employment and are not specific to a redundancy exercise. 7. What payments must be paid to an employee terminated by reason of redundancy? Only an employee who has been employed under a continuous contract for not less than 24 months is entitled to statutory severance pay if they are terminated by reason of redundancy or laid off. An employer may also use the employer's contribution element to the Mandatory Provident Fund or retirement scheme or gratuities (if any) based on the length of service to offset the amount of statutory severance payment payable to the employee under the EO. However, this ability to offset will gradually be phased out. If the employer has a more generous contractual severance pay arrangement, then the employer will need to comply with that more generous obligation. In addition, the employer will also need to make the other usual termination payments, which include outstanding wages, payment in lieu of notice, payment for accrued but untaken annual leave, pro-rata end of year payment or bonus and any other payments under the contract. If a contractual obligation is more generous than the statutory entitlements, then the employer must comply with the contractual obligations. All termination payments (save for severance payment, if any) should be paid within seven days of termination. Severance payment should be paid within two months of receipt of claim from the employee. That said, typically an employer will pay statutory severance pay together with other termination payments. Late payment of wages is a criminal offense. 8. Are there any penalties for failure to follow process? A failure to follow a contractual process or obligation will amount to breach of contract which may result in the employee bringing a claim for damages. Breaching any of the prohibitions on termination may result in a claim for damages by the employee and also potentially amount to an offense.
1. What amounts to a redundancy? Retrenchment is a term used to describe the process of reducing the workforce of a company or organization, typically as a result of restructuring, downsizing, or other financial pressures. 2. Is an employer obliged to consult about a redundancy? An employer is not legally required to consult the Ministry of Manpower ("MOM") before conducting a redundancy. However, if a company is unionized, then the relevant union will need to be consulted before the retrenchment exercise is carried out. 3. What process should an employer follow? The MOM, the National Trades Union Congress ("NTUC") and the Singapore National Employers Federation ("SNEF") together form the tripartite partners in Singapore. They release various guidelines to outline progressive workplace practices for an employer to adopt. While these guidelines are not statutory laws, the MOM is entitled to take action against an employer who does not comply with the tripartite advisories. An employer is required to give an employee advance notice of their termination and retrenchment. This should be in compliance with their employment contract or based on the length of service of the employee. The tripartite partners have also released an advisory on managing excess manpower and responsible retrenchment. The guidelines specify that retrenchment should be conducted in an objective and fair manner, and an employer should consider the following non-exhaustive factors when selecting an employee for retrenchment:
Ability of the employee to contribute to the company’s future business needs; No discrimination against a group on grounds of age, race, gender, religion, marital status, family responsibility (e.g., a pregnant employee) or disability; No deprivation of employee entitlements or benefits (e.g., maternity leave); or No punishment for exercising employee rights (e.g., filing a salary-related claim).
While local labor laws provide the base framework for retrenchment in Singapore, there may be other industry-specific laws or regulations that apply in certain cases. 4. Does an employer have to consider alternative employment for an employee? An employer is encouraged to offer re-employment opportunities to a retrenched employee, where possible. This includes providing job training, offering alternative positions within the company, or facilitating job placement services. Where this is not possible, and the employee is above the statutory retirement age, the employer is legally obliged to offer the departing employee an Employment Assistance Package ("EAP"), to help the employee while they look for another job, and payment where retrenchment benefits have not been provided for in the employee's employment contract or collective agreement. 5. Do any categories of employees have special protection? An employee should not be retrenched on the grounds of age, race, gender, religion, marital status, family responsibility (e.g., a pregnant employee) or disability. If an employee has been certified by a medical practitioner as pregnant and has been employed by the company for three months prior to the retrenchment notification, then an employer is obliged to pay the pregnant employee her maternity benefits – namely, the employee's salary that she would have been paid during her maternity leave. 6. Does an employer have to notify any government departments? An employer is obliged to notify the MOM of any retrenchment exercise if the company is a registered business in Singapore, has at least 10 employees and has informed any employee of their retrenchment. This mandatory notification must be made within five working days after the affected employee is informed of their retrenchment. 7. What payments must be paid to an employee terminated by reason of redundancy? The employer must ensure all payments owed to the employee are provided, which includes payment of salaries, any unused annual leave, and retrenchment benefits as stipulated in any applicable collective agreements (for unionized companies). The employer is also encouraged, but not legally required, to make retrenchment benefit payments to an employee who has been with the company for two years or longer. The prevailing norm is to pay a retrenchment benefit of between two weeks to one month’s salary per year of service, depending on the company’s financial position and the industry. 8. Are there any penalties for failure to follow process? Failure to comply with guidelines set out by the tripartite partners could result in an unfair dismissal claim from an employee. Failure to comply with the mandatory retrenchment requirements is a civil contravention, for which administrative penalties of up to $2,000 per contravention can be imposed.
jchih@mayerbrown.com +65 6922 2335
Jennifer Chih
hannah.heng@mayerbrown.com +65 6950 2383
Hannah Heng
This chapter was contributed by PK Wong & Nair, now in a Joint Law Venture with Mayer Brown.
1. What amounts to a redundancy? A redundancy situation arises where an employee's dismissal is attributable to the employer ceasing, or intending to cease, to carry on the business for the purposes of which the employee was employed by it or in the place where the employee was so employed. Redundancy also includes situations where the employer has a reduced requirement for the employee to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work. 2. Is an employer obliged to consult about a redundancy? An employer is obliged to consult when proposing a redundancy. There are two types of consultation process depending on the number of employees affected and the timescale: collective and individual consultation. 3. What process should an employer follow? Collective consultation If an employer is proposing to terminate the employment of 20 or more staff within a 90-day period at the same establishment, by reason of redundancy, the employer must enter into both collective and individual consultation. Collective consultation requires an employer to consult with representatives of those employees affected by the proposed redundancies. These can be representatives of a recognized trade union, directly elected representatives or an existing body of elected or appointed representatives. Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For less than 100 redundancies, the consultation must begin at least 30 days before the first dismissal takes effect. The key aims of collective consultation are to consult with employee representatives about ways of avoiding redundancy dismissals; reducing the number of employees being made redundant; and mitigating the consequences of redundancies. An employer is required to give employee representatives certain information in writing, including the reasons for the proposed redundancies; the numbers and description of affected employees; the proposed method for selecting which employees are redundant; and the proposed method for dismissing the employees. Individual consultation Once collective consultation and any selection process (if necessary) has concluded, an employer will also need to carry out individual consultation with each employee who is proposed as redundant. It is best practice to follow a process which includes the employer confirming in writing the grounds on which the dismissal is being contemplated and inviting the employee to a meeting; holding the meeting to inform the employee of the basis of the proposed redundancy and any arrangements affecting the employee; allowing the employee the chance to ask questions/contest markings; and, where relevant, confirming the decision to dismiss by reason of redundancy in writing and allowing the employee the right to appeal the decision. If the employer has a specific redundancy or dismissal policy in place, this should also be followed. No redundancies should be implemented (i.e., notice of dismissal should not be issued) until there has been sufficient meaningful consultation with each affected employee. Given that an employee with less than two years' service does not automatically qualify for protection against dismissal (see question 8), the employer may consider a more limited consultation process for an employee with short service. 4. Does an employer have to consider alternative employment for an employee? During the consultation process (whether individual or collective), an employer should consider whether there are any suitable vacancies for a potentially redundant employee, although there is no obligation to create new jobs. Pregnant employees must be given priority over alternative roles. If an employee refuses an offer of suitable alternative employment made prior to the date on which the redundancy dismissal takes effect (or within four weeks of that date) they will lose their entitlement to a statutory redundancy payment if the refusal was unreasonable. In practice, this is difficult to prove as the test for "unreasonableness" is subjective. In certain circumstances, an employer may consider "bumping" (where an employee, whose job is redundant, is redeployed to another existing job and the employee in the existing job is instead dismissed for redundancy). 5. Do any categories of employees have special protection? Selecting an employee for redundancy based on certain protected grounds will make their dismissal automatically unfair. These protected grounds include pregnancy, maternity, family-related leave, whistleblowing, trade union membership and health and safety. 6. Does an employer have to notify any government departments? An employer must notify the Secretary of State of the proposed dismissals by filing a Form HR1. This form must be filed at least 30 days before the first dismissal where 20-99 redundancies are proposed, or at least 45 days before the first dismissal where 100 or more redundancies are planned within a 90-day period. A failure to meet this obligation is a criminal offense and an employer will be liable to pay an unlimited fine. The form must also be provided to the employee representatives. 7. What payments must be paid to an employee terminated by reason of redundancy? An employee with over two years' continuous service will be entitled to receive statutory redundancy pay (a formula based on age, length of service and weekly wage) (up to a current maximum of £19,290 for dismissals on or after April 6, 2023) and notice pay, unless they work out their notice period or are placed on garden leave. An employer may offer an employee an enhanced redundancy payment that is more generous than the statutory pay. 8. Are there any penalties for failure to follow process? Inadequate consultation is very likely to render a redundancy dismissal unfair. In such circumstances, an employment tribunal can award compensation of up to a practical maximum (currently) of £105,707 or a year's gross pay (whichever is the lower) for dismissals on or after April 6, 2023. Note that, as a general rule, only an employee who has been continuously employed for two years or more can bring a claim for unfair dismissal. This continuous service requirement does not apply where an employee has special protection (see question 5). There is also a penalty for failing to consult collectively, which is a maximum of 90 days' pay per affected employee. An employer could potentially also be exposed to discrimination claims (for which an employee can receive unlimited compensation) if, for example, an employee could seek to argue that they have been selected for redundancy on the grounds of a protected characteristic e.g., sex, race, disability, age, gender, sexual orientation or religion or belief.
cfisher@mayerbrown.com +44 20 3130 3724
Christopher Fisher
mbruce@mayerbrown.com +44 20 3130 3695
Miriam Bruce
1. What amounts to a redundancy? A dismissal is called a redundancy when it relies on:
Economic difficulties. These are characterized by a significant evolution of indicators such as (i) a significant drop in turnover, (ii) a significant drop in purchase orders, (iii) operating losses, (iv) worsening of cash flow or gross operating profit, and (v) any other elements which could justify economic difficulties. There is a significant drop in turnover or purchase orders when, compared to the same period last year, the decrease lasts for a determined period of time depending on the size of the company's workforce. A reorganization of the company in order to safeguard its competitiveness. This requires that the employer evidence that its competitiveness would be at risk if the organization of the company or its group remained unchanged or if the restructuring was not implemented. A significant technological change which leads to jobs requiring significant modification or removal. Termination of the business, i.e., a total and definitive shutdown of the company's activity.
The economic difficulties are assessed at company level or, where the company belongs to a group, at the level of the sector of activity of the company and the other entities of the group implemented in France. 2. Is an employer obliged to consult about a redundancy? If the employer considers dismissing more than one employee, and if a Social and Economic Committee (“SEC”) exists, the SEC must be informed in advance and consulted on the process. 3. What process should an employer follow? An economic dismissal requires the employer to:
select the employee(s) to be dismissed based on objective criteria (age, length of service, disability, number of dependents, professional skills); search for internal redeployment positions; provide a mandatory redeployment scheme, i.e., either the "Congé de Reclassement" (if the company (or the potential group to which it belongs) employs 1,000 employees or more in the European Area, with at least 150 employees in at least two European countries), or the "Contrat de Sécurisation Professionnelle" (CSP) program. The aim of these programs is to assist the employee in finding another professional project; and send the dismissal letter by registered post with acknowledgement of receipt.
Additional rules apply depending on the number of dismissals considered, the company headcount, and whether or not an SEC is present. These additional rules mainly relate to holding a pre-dismissal meeting, informing the French labor authorities (DREETS), and informing and consulting the SEC. When at least 10 dismissals are considered in a company with more than 50 employees, the employer must implement a social plan (“Plan de sauvegarde de l’emploi” or “PSE”) which is an even more complex procedure. The costs of the dismissals significantly increase when a social plan needs to be implemented given the variety of mitigating measures (including redeployment opportunities, outplacement, training, etc.) that need to be provided by the social plan. Under a social plan, the DREETS will verify the validity of the collective dismissal procedure and assess whether the social plan’s measures are sufficiently fair to mitigate the adverse effect on the employment rate. In parallel, the employer must inform and consult the employee representatives. The maximum timeframe for this information and consultation depends on the number of dismissals contemplated, i.e., two months for less than 100 dismissals, three months for between 100 and 249 dismissals, and four months for 250 or more dismissals. The SEC can request, during the first consultation meeting, to be assisted by an external expert accountant, which will be remunerated by the employer. Once the information and consultation process with the SEC has been terminated, the employer must file the social plan for approval with the DREETS. Any notification of dismissal is subject to the approval of the DREETS. 4. Does an employer have to consider alternative employment for an employee? The employer must search for, and propose, redeployment positions available within the group’s entities in France performing in the same sector of activity as the employing entity. Failure to do so triggers the risk of unfair dismissal as if the economic ground is not valid. 5. Do any categories of employees have special protection? Employees on maternity leave During the 16-week period of maternity leave, the employee is protected against any kind of dismissal. During a 10-week period following maternity leave, it is possible to dismiss the employee for economic reasons; however, this is unlikely to be considered fair. The same principle applies to the period preceding maternity leave during which the employer is aware of the employee’s pregnancy. Employee representatives The economic dismissal of employee representatives must be authorized by the labor inspector and requires consultation with the SEC. A protected employee that is dismissed in breach of applicable rules may claim either (i) their reinstatement within the company (except where it is impossible to reinstate them), in which case the company would also need to pay the employee’s salaries for the period between the dismissal and the reinstatement; or (ii) the payment of damages to the employee in an amount which cannot be less than six months’ salary. An employee representative who does not claim reinstatement may claim a specific indemnity based on the breach of their protective status, equal to their salary for the period between the dismissal and the expiry of the protection period, limited to 30 months’ salary. 6. Does an employer have to notify any government departments?
Economic dismissals of one to nine employees: the labor authorities should be informed of the dismissals within eight calendar days of sending the dismissal letters. Economic dismissals of at least 10 employees: the labor authorities should be informed of the dismissals as soon as possible or at the time of starting the consultation with the SEC (if any). All information sent to the employee representatives regarding the dismissals, and the minutes of employee representatives’ meetings, should be sent to the labor authorities.
Where there is a need to implement a social plan, the labor administration has a wider role since it will have to approve the social plan. The labor authorities will verify the validity of the collective dismissal procedure and the content of the social plan within 15 days (when the PSE takes the form of a collective agreement) or 21 days (when it is a unilateral document set up by the employer). 7. What payments must be paid to an employee terminated by reason of redundancy? The employer must pay the employee:
A notice period, the duration of which depends on the employee’s length of service and status (the employer may release the employee from their notice period but they will have to provide a payment in lieu). In case of acceptance to the statutory redeployment program (CSP), the payment in lieu of notice, up to three months, needs to be paid to the French unemployment fund. Severance payment (only for an employee with at least eight months’ length of service). The amount of severance pay is 1/4 of the employee’s average monthly salary (i.e., calculated over the more favorable period between the last 12 or 3 months of employment preceding the notification of the dismissal) per years of service for the first 10 years and 1/3 per year of service beyond. The legal formula must be compared to any other formula that would apply to the employer (e.g., the collective bargaining agreement applicable within the company or any other source of law (e.g., employment contract)). Paid vacation indemnity: for the paid vacation days accrued and not yet taken at the end of the notice period.
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Where there is a social plan, the employer must also offer specific measures to the targeted employee such as training, ex gratia indemnity, outplacement, business start-up costs, and moving expenses to help the employee redeploy in another area, etc. The measures should be proportionate to the means and resources of the company and the group to which it belongs. If the “congé de reclassement” scheme is applicable, this entails an additional cost for the company as it would have to appoint an outplacement agency to implement such scheme and the company would need to bear its related costs. In addition, during the length of such scheme (which usually varies from 4 to 12 months including the notice period), the employee (if they accept the scheme) would be entitled to receive from the company, during the period exceeding their notice period, an allowance corresponding to at least 65% of their average gross annual remuneration calculated over the past 12 months (and at least 85% of the minimum wage). 8. Are there any penalties for failure to follow process? Standard penalties Where the redundancy is considered to be unfair by a judge, the damages granted will depend on the employee’s length of service and the headcount of the employing company. The scale goes from one month of damages to 20 months maximum, for an employee with at least 29 years of service. The damages scale does not take into account potential ancillary claims, such as payment of unpaid overtime, loss of chance to vest equity, loss of chance to benefit from variable remuneration, etc. Moreover, the damages scale does not apply to dismissals that are linked to discrimination, harassment or breach of fundamental rights (e.g., freedom of speech). In addition, hindering the SEC’s rights (such as information and consultation) is a criminal offense and can be sanctioned by (a) a fine of €7,500 euros for the legal representative and/or (b) a fine of €37,500 euros for the company. Penalties in case of breach of the social plan-related rules If the labor authorities have refused to validate the social plan but dismissals are notified or if the labor authorities have validated the process but such validation is cancelled by a court, the economic dismissal procedure would be considered as null and void as well as the economic dismissals. The employee is entitled to claim either (i) their reinstatement within the company (except where it is impossible to reinstate them), in which case the company would also need to pay the employee’s salary over the period between the dismissal and the reinstatement or (ii) the payment of damages in an amount which cannot be less than six months’ salary. If the labor authorities have validated the process but a court considers that the social plan has not been applied correctly (e.g., the selection criteria have not been correctly applied or the redeployment obligation has not been met), the dismissed employee can claim either (i) their reinstatement (which has to be agreed by both parties) or (ii) the payment of damages in the amount of the scale mentioned above.
jhaure@mayerbrown.com +33 1 53 53 36 48
Julien Haure
rgoury@mayerbrown.com +33 1 53 53 43 40
Régine Goury
1.What amounts to a redundancy? A redundancy situation arises where an employee's dismissal is attributable to the employer ceasing, or intending to cease, to carry on the business for the purposes of which the employee was employed by it or in the place where the employee was so employed. Redundancy also includes situations where the employer has a reduced requirement for the employee to carry out work of a particular kind or to carry out work of a particular kind at the place where the employee was employed to work. 2. Is an employer obliged to consult about a redundancy? There is no general requirement to consult about a redundancy. However, if a redundancy occurs in a business operation where a works council is established, such works council will need to be notified and consulted on each individual redundancy at least one week before notice is given. If a redundancy affects a larger number of employees, more far-reaching consultation obligations exist towards the works council (if any). 3. What process should an employer follow? Redundancy in businesses without a works council As a first step, in business operations without a works council, the employer will need to take (and ideally document) an operational decision to make one or several roles redundant. There has to be a plan on how work will be discontinued, reallocated or shifted elsewhere. As a second step, a social selection will need to take place based on age, seniority, maintenance obligations and disability (if any), taking into account the employee working in the redundant position and any other positions at the same level and in the same business operation that the redundant employee could be instructed to work on. The purpose of the social selection is to identify the employee who enjoys the least social protection. As a third step, vacancies will need to be considered (see question 4 below). If a larger number of employees needs to be let go (thresholds vary depending on the size of the business operation and the number of redundancies) in a 30-day time window, a mass dismissal notification has to be submitted to the Employment Agency before notice can be given. If an employee is affected who enjoys special protection against dismissal, termination permits will need to be obtained. Finally, a termination notice bearing a wet signature of a sufficient number of legal representatives of the employer entity must be delivered to the employee. Although there is no need for an individual dismissal meeting, it generally makes sense to inform the employee about the rationale of the measure and what the next steps will be. The employee will then have three weeks to file an unfair dismissal lawsuit with the labor court officially targeted at reinstatement, but most often used to negotiate an exit package. Redundancy in businesses with a works council In addition to all of the steps above, in business operations with a works council, the employer will first need to assess whether the redundancy exercise constitutes a major operational change (Betriebsänderung) in accordance with Sec. 111 Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). If it does, collective consultations with the works council need to take place targeted at negotiating a reconciliation of interests agreement (Interessenausgleich) and a social plan (Sozialplan). Such consultations may take several months. If free consultations do not result in an agreement, a conciliation board (Einigungsstelle) will need to be established. Consultations have a certain complexity and need to be well prepared. Only once the collective consultations are completed, the steps described above can be taken. In addition, the works council will need to be notified and consulted on each individual termination not later than one week before notice can be given. 4. Does an employer have to consider alternative employment for an employee? Yes, if there are vacant roles in the same legal entity available, for which a redundant employee can be qualified within a period of three to four months, and if such vacant roles are at the same or a lower hierarchical level, such roles will need to be offered. A simple termination would not be valid. If there are several employees redundant that qualify for a vacant position, the selection will have to be based on the social criteria: age, seniority, maintenance obligations and disability (if any). If several vacant roles are available, the role that least deviates from the redundant employee’s current position will always need to be offered. 5. Do any categories of employees have special protection? Yes, several categories of employees enjoy special protection, in particular severely disabled employees and employees with equal rights, pregnant women and young mothers, persons taking (or applying for) parental leave, works councils as well as other mandate holders under the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) (including election candidates and individuals organizing elections), employees who cannot be dismissed e.g., based on collective bargaining agreements, persons taking (or applying for) care leave, apprentices, persons doing military or alternative service. In some cases, redundancy dismissals are completely excluded, in others termination permits need to be obtained in advance. 6. Does an employer have to notify any government departments? Only in the case of a mass dismissal, which is triggered if larger numbers of employees are laid off and certain thresholds are exceeded, a mass dismissal notification needs to be completed and submitted to the Employment Agency in advance. 7. What payments must be paid to an employee terminated by reason of redundancy? There is no statutory entitlement to severance or other redundancy payments. However, severance may have to be paid based on a social plan (if required) or individual contractual commitments (if any). Courts can determine severance payments only under extraordinary circumstances (i.e., a justified motion for the dissolution of an employment relationship following an invalid termination). 8. Are there any penalties for failure to follow process? The main penalty is the invalidity of a termination and the right of the affected employee to claim reinstatement. In case of failure to consult with the works council, this could be considered a gross violation of the employer’s obligations under the Works Constitution Act, which may ultimately lead to a court order to take certain actions (e.g., re-enter consultations) and, in case of violation, may trigger a fine of up to EUR 10,000.
gzeppenfeld@mayerbrown.com +49 69 7941 2241
Dr. Guido Zeppenfeld
hkoeckeritz@mayerbrown.com +49 69 7941 2323
Dr. Hagen Köckeritz
1. What amounts to a redundancy? If an employer is bankrupt or insolvent, or there are any "economic or exceptional reasons" the employer is facing, the employer may terminate the employee for such reasons. However, the employer’s ability to rely on a redundancy termination is restricted to the following circumstances:
The issuance of a court ruling confirming that the employer is bankrupt or insolvent; and/or The issuance of a decision by the applicable UAE authorities confirming that the employer is unable to continue the activity for any exceptional, out-of-control economic reasons.
2. Is an employer obliged to consult about a redundancy? There is no statutory obligation for an employer to consult before the redundancy exercise. However, the employer will need to comply with any contractual obligation to consult. 3. What process should an employer follow? If there is a contractual policy or procedures on redundancy, then the employer will have to comply with the policy or procedures before termination, failing which it may give rise to a wrongful termination claim. An employer must ensure that the basis for selecting the position to make redundant does not breach any of the anti-discrimination ordinances (which make unlawful discrimination on the grounds of sex, marital status, pregnancy, breastfeeding, disability, race and family status). For example, selecting only an employee who takes sick leave or an employee who is on maternity leave may give rise to disability discrimination or sex discrimination, respectively. In consideration of the requirements provided in response to question 1 above, an employer can terminate the employment by giving the employee the requisite notice of termination or payment of wages in lieu of notice. An employer should serve the required notice under the contract. In the absence of an agreed notice period, the length of notice required to terminate a contract should be not less than 30 days (and not less than 14 days for an employee under probation). An employer must also be mindful of the other prohibitions on termination of employment discussed below. 4. Does an employer have to consider alternative employment for an employee? An employer will not need to consider alternative employment for an affected employee whose position has been made redundant unless there is a contractual obligation to do so. 5. Do any categories of employees have special protection? The employer is prohibited from terminating an employee (or providing a termination notification) due to pregnancy or when they are on maternity leave. Furthermore, the employer may terminate a sick employee after they finish their sick leave, referred to in Article (31) of the employment law, if they are unable to return to their work, provided that the employee receives all their financial entitlements in accordance with the provisions of the employment law. 6. Does an employer have to notify any government departments? In redundancy situations, the employer must obtain a court ruling confirming that the employer is bankrupt or insolvent and/or a decision by the applicable UAE authorities confirming that the employer is unable to continue the activity for any exceptional, out-of-control economic reasons. 7. What payments must be paid to an employee terminated by reason of redundancy? The employee would be entitled to certain redundancy payments including end of service gratuity (for an employee who has at least one year’s continuous service), payments for accrued/untaken annual leave, repatriation flight and any other contractual payments. 8. Are there any penalties for failure to follow process? All end-of-service entitlements must be paid within 14 days of the termination date. Failure to comply may result in a fine of between AED5,000 and AED1,000,000.
jtaha@mayerbrown.com +971 4 375 7163
Jad Taha
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