1000580 EMEIA LEL Newsletter-Fall 2014_V9.indd

Multi-jurisdictional Labor and Employment Law update

January 2014 Issue

Labor and Employment Law in EMEIA

Multi-jurisdictional Labor and Employment Law update1

In this issue …

Editorial 3

Austria 4

• New measures aiming to reduce redundancies

Bulgaria 5

• Employment termination and youth employment news

France 6

• The new French law is a “game changer” on the redundancy process

Germany 7

• German Federal Labor Court rules on “reasonable discretion” regarding the payment of performance bonuses in employment agreement

Greece 8

• Anticipated new measures related to collective redundancies

Italy 9

• The latest measures taken to improve the Italian labor market

Kazakhstan 10

• Insight on Kazakh collective redundancies

Multi-jurisdictional Labor and Employment Law update 2

Netherlands 11

• Recent decisions regarding the “quality selection” method in restructuring operations

Norway 12

• ►The new “Ship Workers act” in force in Norway — Better legal protection for ship workers

Romania 13

• Social protection measures relating to collective redundancies in the public sector

Russia 14

• Reducing headcount without redundancies

Spain 15

• The new Spanish regulations on redundancies

Switzerland 16

• Important changes in legislation with regards to redundancies

Ukraine 17

• Redundancy update

Multi-jurisdictional Labor and Employment Law update3 Multi-jurisdictional Labor and Employment Law update3

EditorialEven if the 2013 year-end stock market reports tend to suggest a healthy degree of optimism, and certain analysts seem to believe that the global economic slump could be coming to an end, many companies are still looking to slim down their workforce, and redundancies are still very much on the minds of CEOs and Human Resources professionals alike.

Paradoxically, the economic crisis has had adverse effects on European labor law. Where certain countries are aiming to simplify overprotective and overburdening redundancy procedures, others are discovering the virtues of administrative checks and balances on large-scale redundancy plans.

Regardless of whether or not the current situation is a sign of a soon-to-be flourishing European economy or merely a reprieve from stormier waters ahead, it is clear that the past few years have left their mark on the landscape of labor law in Europe. For most European countries, this represents the beginning of a new conception of the role labor law should play in redundancy procedures, where added flexibility should encourage companies to find other more creative ways to reduce HR costs.

Roselyn SandsLabor and Employment Law Leader


Austria

New measures aiming to reduce redundancies Under Austrian labor law, there are essentially three types of termination: ordinary termination, termination by mutual agreement and immediate dismissals for rightful cause. To avoid these terminations, Austrian labor law offers various measures that allow employers to tackle economic difficulties without having to carry out any redundancies. To follow is an overview of the recent legislative changes in Austrian legislation regarding these measures.

“Educational leave” and “educational part-time leave”In 2013, the Employment Contract Law Adaptation Act (AVRAG) amended Austrian labor law and introduced the notion of “educational leave” and

“educational part-time leave.” These two measures aim to provide employees with an opportunity to pursue additional studies while maintaining a certain level of professional activity.

Initially, employees with at least six months’ service could negotiate unpaid educational leave with their employer; this could last between two months and a year, and would allow employees to take a break from their work in order to pursue additional studies.

From 1 July 2013, employees with at least six months’ service are now entitled to request an “educational part-time leave.” During this leave, which can be between four months and two years, the employee’s weekly working hours are reduced by at least a quarter and at most by half, for a minimum of 10 working hours per week.

Short–time workingWhen faced with temporary economic difficulties, employers can negotiate collectively bargained agreements with social partners, which allow them to implement “short-time working.” This consists of a reduction of the weekly working hours for most employees. It allows employers to keep their workforce, in particular skilled employees, and guarantees that these employees will not be made redundant for the duration of the agreement.

The agreements must be submitted for approval to the Public Employment Service, which will then offer monthly subsidies to the company in order to compensate employees for their salary reduction in line with the hours that would have been worked had there been no agreement.

Part-time work for elderly workers Elderly workers are provided with part-time compensation by the Government if their weekly working hours are reduced by at least 40% and at most 60% prior to their retirement, and if the employers agree to pay a compensatory wage as well.

The Austrian Government initially introduced this measure in to alleviate pressure on the pension system by reducing the number of elderly workers taking early retirement. However, the initial incentives were too high and an overwhelming number of employers and employees implemented this scheme; so, even if the working hours are reduced, employers must now pay full social contributions on the amount of hours worked prior to the reduction.

Helen Pelzmann [email protected]

Gloria Ecklmair [email protected]


Bulgaria

Employment termination and youth employment news

New Supreme Court ruling regarding powers of attorney and the termination of employment relationsThe Bulgarian Supreme Court recently adopted a new position in matters relating to dismissals of employees by third parties holding explicit powers of attorney given by the affected employers. Prior to this new ruling, the Supreme Court’s position had been contradictory as it had declared that these powers of attorney were both illegal in all cases and legal for disciplinary dismissals. Employment terminations by an employer’s representative with an explicit power of attorney could therefore be declared either illegal by the court, or legal under certain circumstances.

However, the Supreme Court recently took a clear decision, allowing employers to authorize third parties in possession of a power of attorney to terminate employment relations, regardless of the grounds for termination.

New measures against youth unemploymentNew measures aim to reduce the high youth unemployment, comprising individuals under the age of 29, by means of direct subsidies granted to employers. A state subsidy will be granted when a young person, registered at the National Employment Agency for a period of at least 12 months, is employed part–time by a company. The state subsidy will be granted to the employer for a maximum employment period of 12 months. Under the same circumstances, a special subsidy can be granted to companies that hire young people with few or no educational qualifications.

Employers who hire unemployed young people with average or high educational qualifications but little or no professional experience will also be granted state subsidies, but on the condition that such individuals occupy a position that corresponds to their qualification. The subsidy will be granted for a period of between 6 and 18 months on an incremental rate, rising from 30% of the wage for the first few months to 75% over the last few.

The subsidies will only be granted if the employer, in a three-month period prior to hiring the unemployed young people, has not dismissed any employees holding the positions that are to be filled.

Martin Dimitrov [email protected]

The new French law is a “game changer” on the redundancy processThe new French law on the securization of employment (known as LSE) modified significantly the redundancy procedure starting 1 July 2013.

As the redundancy process is rather complex in France, this law aims at eliminating the uncertainty factor in the timing and costs of the redundancy process. Indeed, one of the key difficulties for employers in France has been managing the timeline of the Works Council process and its completion. This new law clearly defines the timeline for the Works Council process, a pre-condition to implementation of a redundancy project.

However, under the LSE, the role of the Labor administration is now key: no redundancies can take place without the approval of the Labor administration. So under the new law, both Works Councils and the Labor Administration must be presented with documentation explaining the project and make observations and proposals concerning the procedure or the social measures provided for by the redundancy plan (Plan de Sauvegarde de l’Emploi). The employer is obliged to take these observations into consideration.

Moreover, the process now gives the employer the option either to prepare these documents unilaterally or to prepare them in negotiation with the unions.

The LSE also changes the jurisdiction of the French courts: it is now the administrative court judge who has jurisdiction and only to challenge the Labor Administration’s decision to approve or reject the project. However, once approval has been given the administrative judge should, in principle, only verify that the process through which the redundancy plan was designed respects the law. In addition, when the closure of a company or establishment is considered, the employer must now search for a purchaser as soon as the announcement of the shutdown project is made.

It is too early to tell whether the changes brought on by the LSE will render the French redundancy process more easy or less so for employers. As of this writing, the timeline for the process appears simplified yet the process itself is more complicated.

Recent case law under the new LSE law Recent case law has highlighted two interesting trends in the manner in which the French courts interpret the new law.

Firstly, certain commentators feared that the French civil courts, who previously had sole jurisdiction over issues related to the validity of redundancy plans and its process, would be reluctant to hand over its jurisdictional powers to the administrative courts. However, in two decisions dated November and October 2013, the French civil court of Nanterre applied the law to the letter and deemed that it had no

jurisdiction over the matters brought forward by unions, over the validity of the process through which the redundancy plan was designed. It is therefore unlikely that civil court judges will search for means to circumvent the new law and declare jurisdiction over such issues.

Secondly, questions were raised regarding the manner in which the administrative courts would use its new-found powers. Most commentators were skeptical and feared that they would be overzealous in a subject they did not necessarily master, and thus would not be satisfied with a simple verification of the procedure and would therefore overstep the boundaries of their prerogatives. However, the first administrative decisions, rendered by the courts in December 2013, show that the administrative judges merely verify that the legal process has been respected by the employer. As such, once the redundancy plan is approved by the Labor Administration, the administrative courts appear to simply verify that the legal process was properly respected.

Roselyn Sands [email protected]


France


Germany

German Federal Labor Court rules on “reasonable discretion” regarding the payment of performance bonuses in employment agreementThe German Federal Labor Court recently ruled that an entitlement to a performance-related bonus lapses if, for the relevant financial year any exceptional circumstances occurred. This remains true, even if the personal goals defined by the employment agreement have been met.

In the case in question, according to his employment agreement, a bank employee was entitled to receive a performance-related bonus if he met specific individual goals. In addition to performance-related goals, the payment was also linked to other criteria such as team behavior, the economic success of the bank and the current market situation. The agreement specified that, in any case, the bonus would be paid discretionarily, on the basis of reasonable criteria set by the employer. The employee received performance bonuses from 2003 to 2007. In 2008, the bank’s management decided not to pay out any variable remuneration worldwide. The bank justified the non-payment in the context of the worldwide banking crisis and the critical financial situation of the bank itself, which had suffered substantial losses during the economic crisis. Bankruptcy could only be prevented by means of public subsidies.

During the proceedings, the employee argued that the refusal of payment constituted a breach of contract. In his opinion, he had successfully achieved and exceeded his individual goals. Furthermore, he claimed a violation of the equal treatment principle, as employees whose contracts were terminated in 2008 received a performance bonus for 2008, in spite of the banking crisis.

Reasons for the decisionThe Court justified its decision by the fact that, according to the employment agreement, the performance bonus depended not only on the employee achieving his personal aims, but also on the bank’s success and its “reasonable discretion.” The court considered that the lower court, which decided in favor of the employee, did not completely consider and evaluate all relevant circumstances. Even if the payment of the bonus depended on the success of the bank in the respective fiscal year, the employer could decide on a discretionary basis whether or not to pay any bonuses in specific cases. In addition, the employment contract did not define a specific amount for the bonus or even a minimum amount.

However, the non-payment of a performance bonus is only justified if there are particularly serious grounds that could be considered as “reasonable.” According to the court, the worldwide banking crisis in 2008 and the imminent danger of bankruptcy were considered to be such grounds. The employer therefore lawfully applied reasonable discretion by not paying out any bonuses for that year.

Furthermore the court clearly stated that there was no violation of the equal treatment principle. The employees who were no longer employed in the bank were not in a comparable situation to those who were still employed at the time, and could therefore be treated differently.

Karsten Umnuss [email protected]

Anticipated new measures related to collective redundanciesA new law was recently passed that provides for new rules regarding issues related to collective redundancies for companies with more than 20 employees.

The new law identifies two alternative conditions that define the notion of collective redundancies. Henceforth, a collective redundancy is established when a company has made redundant within a time frame of one calendar month either:

• up to 6 employees in establishments normally employing more than 20 and less than 150 employees

Or

• 5% of employees in establishments normally employing more than 150 employees and up to 300 employees

According to this law, if a company is considering collective redundancies, it must consult with the employee representatives in an effort to avoid the dismissals or reduce the number of employees affected and mitigate the consequences, before taking any action. The employer should provide the employees with information that includes the reasons for the redundancies, the number and positions of employees to be made redundant and the period during which the redundancies are to be made. The employer must also inform the Greek administration.

The consulting period lasts for a specific period of time set by the new law, beginning on the date the employer notifies the employee representatives. The results of the consultation procedure are recorded in minutes and communicated to the Greek administration.

If the parties come to an agreement, the employer may implement collective redundancies according to the agreement. If an agreement is not reached within the time limit, the Greek Administration may extend the consultation period, allow all or part of the dismissals, or prohibit all or part of the dismissals.

If the employer fails to comply with the aforementioned procedure, each redundancy is considered null and void.

Based on relevant information from the media the Greek Government is contemplating removing the privilege set by the law that allows the Greek Administration to veto part or all of the dismissals.

Such an amendment is intended to provide additional flexibility to Greek companies with regard to collective redundancies and thus support them in overcoming the current difficult financial environment.

Maria Rigaki [email protected]


Greece


Italy

The latest measures taken to improve the Italian labor marketA recent law, the “decreto lavoro,” was published in the Italian Official Gazette on 22 August 2013 and came into force on 23 August 2013.

Amendments to the previous major Italian reform, the “riforma Fornero,” on fixed-term contracts and project-based contractsFixed-term contracts:

The first change concerns fixed-term contracts “without reason” (contratti a tempo determinato acausali). Fixed-term contracts without reason allow employers to use fixed-term contracts in circumstances that would traditionally not be allowed; the conditions under which fixed-term contracts without reason could be used were legally defined by prior to the new law. However, the new law states that employer and employee trade unions that are recognized as representative at the national level may now negotiate collective agreements with employers in order to define new circumstances under which these temporary contracts can be used without reason. Furthermore, the law provides the option to extend the maximum duration of a fixed-term contract to 12 months.

The second change concerns the reduction of the period that must elapse between two fixed-term contracts, in order to avoid the conversion of the second one into a permanent contract. If the employee has previously been employed on a fixed-term contract for up to six months, at least 10 days, instead of 60 days previously, must elapse before a new fixed-term contract is passed. If the previous fixed-term contract lasted more than six months, 20 days must elapse, instead of 90 days previously.

Project-based contracts

As the name implies, project-based contracts allow employers to hire employees for the duration of a project, under certain circumstances. The riforma Fornero provided that duties carried out by employees with project-based contracts should not consist of ordinary or repetitive duties; otherwise, the employee would be deemed to be a permanent employee. The new law changes the “or” into “and”: thus, the working activity may now consist of ordinary or repetitive duties, but the duties must not have both characteristics.

Creation of economic benefits for employers that hire individuals under the age 30, in order to cope with the current high level of unemploymentAn employer may reduce his social security contributions by hiring workers under the age of 30, on the condition that the hired individual meets one of the following criteria:

• ► The worker has been unemployed in the previous six months.

• ► The worker does not have the equivalent of a high school degree.

The employer benefits from reduced social contributions for 18 months, with a total maximum saving of €650 per month. In addition, the same benefit is provided for employers who convert a fixed-term contract into a permanent one; however, this benefit only lasts for 12 months.

Lara Giambra [email protected]


Kazakhstan

Insight into Kazakh collective redundanciesIn practice, employers use collective redundancies for different reasons, linked to market conditions or as a consequence of reorganization plans. Regardless of the underlying reasons, employers must comply with the legal requirements set forth by the Kazakhstan labor legislation. Otherwise, certain liability issues may arise for the employer.

How does the Kazakhstan labor legislation regulate staff redundancies? The labor legislation, as well as the existing case law on this subject, is mostly employee-oriented. As a result, if an employer fails to comply with certain requirements or procedures, there is a risk that the employees may claim that their rights have been violated, and the Kazakh courts will reinstate them in their jobs and oblige the employer to pay their salary for the period of their enforced absence.

Any company, including foreign legal entities operating in Kazakhstan, should bear in mind the following general requirements established by the Kazakh labor legislation for staff redundancy.

Employers must respect certain criteria and procedures when making redundancies. First of all, each collective redundancy should clearly define the grounds on which it is based; for instance, a decrease in production volume or the closure of a subdivision could be considered grounds for a collective redundancy.

Secondly, employers making with collective redundancies should notify the Kazakh labor authorities two months prior to the actual redundancy date; this date is usually stated in the employer’s decision.

Thirdly, prior to making a collective redundancy, the employer should also make all reasonable effort to transfer the affected employees to other positions, should any be available, if the employee agrees to such a transfer. The employer should notify the employees in writing of their redundancy and its expected date, one month prior to the actual redundancy date.

Additionally, the employer should pay compensation established by the Kazakh labor legislation to the employee, within three working days from the date of termination of employment. This compensation usually includes elements such as the salary for the period of employment, compensation equal to at least one month’s salary for the loss of job and compensation for any unused vacation.

Employers should transfer documents confirming employees’ work experience within the company on their last working day of employment. If employees have any documents, equipment or devices provided by the employer to carry out a job, they should be returned.

If the employee is a member of a trade union, termination by staff redundancy is only permitted if approved by the employer trade union, following the procedure established by a collective bargaining agreement.

Lastly, and importantly, not all employees can be made redundant; certain categories are protected, such as pregnant women or women on maternity leave. A new provision was recently introduced to the Kazakh labor code, stating that employees aged between 55 and the retirement age cannot be made redundant without the approval of a special commission, whose members consist of an equal number of both employer and employee representatives.

To summarize, it is crucial to meet all the requirements of Kazakhstan labor legislation when making collective redundancies. This will help the employer justify its position before the labor authorities, who may conduct an audit following a claim filed by a redundant employee, or one who takes the company to court.

Dinara Salikhzyanova [email protected]


Recent decisions regarding the “quality selection” method in restructuring operationsThe “quality selection” method (stoelendansmethode) applies during company restructuring operations and follows a simple procedure. Certain job positions are eliminated in full and employees occupying such positions are made redundant; however, should the company choose to create new job positions, the redundant employees can apply for these new positions. In two recent cases, the Eindhoven subdistrict court detailed the circumstances in which this method could be authorized. In both cases, the employer had requested termination of two employment contracts. Both employers opted for a reorganization using the quality selection method; hence, certain job positions were eliminated and others created.

The first case concerned a female employee with a temporary disability. The employee had been given the opportunity to apply for another position but her application had been denied. The employer asserted that the denial was not connected to the employee’s disability, which, in any case, was merely temporary. The employee adopted the position affirming that the employer had reinforced a duty of care, since she had fewer opportunities on the job market given her current disability, and that she should thus have been hired for the alternative position.

The second case concerned an employee occupying the position of deputy manager with a partial disability. The employer decided, based on experience, skills, qualifications and last-earned salary, that the employee was insufficiently qualified for a new job. The employee asserted, among other things, that his application had been rejected even before he had had the opportunity to prove that he could qualify as eligible for the new job.

In both cases, the subdistrict court started with the basic premise that, in principle, employers are free to set up and manage their business as they see fit. That freedom ends when the interests of their employees are compromised in an unacceptable manner. The court ruled that the quality selection method could be applied under two conditions. First, the positions that had been eliminated should not be interchangeable with the positions that had been created. Second, one should be able to use objective measures to test whether or not the selection method used to fill the new vacancies was sufficiently careful and that no arbitrariness was involved. In both cases, the court ruled that the newly created positions were not interchangeable with the positions that had been eliminated.

In the first case, a psychological assessment of the employee showed that she fell short of the desired level and was considered suitable for the new job only to a limited extent. No other suitable position was available; the court thus granted a severance payment.

In the second case, the court did not terminate the employment contract, as the employee had not had a fair chance to compete for the new positions. There had not been a careful selection process. The basic requirement is that the equality principle should apply in a restructuring operation, in order to establish which employees are eligible for dismissal. Selection on the basis of quality is not permitted.

To avoid the semblance of qualitative selection with this method, employers are required to ensure that the old and the new positions differ objectively, and they must apply a careful and objective method of selection. Thorough preparation for any reorganization is therefore essential.

Wouter Engelsman [email protected]

Netherlands


Norway

The new “Ship Workers Act” in force in Norway — better legal protection for ship workersOne of the main purposes of the new act is to ensure that ship workers benefit from the same rights as other employees, while at the same time taking into account the special considerations that apply to naval employment. Except for chapter 10 of the act concerning protection against discrimination, the “Ship Workers Act” entered into force on 20 August 2013, the same date as the Maritime Labor Convention (MLC) entered into force. The act implements the MLC in Norwegian law. Chapter 10 of the act entered into force on 1 January 2014.

The act mainly applies to employees on Norwegian registered vessels. It does not apply to employees who only work on board vessels while the vessel is in harbor.

The new act strengthens employment protection for ship workers and, to a large extent, gives ship workers’ rights that are, at the very least, equal to those of employees working on land. The structure of the act is also more logical and modern, and the language has been made gender-neutral; for instance, the term “seaman” is replaced by the gender-neutral term “ship worker.”

The former “Seamen’s Act” granted ship workers better rights than other workers in some situations. Under the former act, ship workers were protected against dismissal on the grounds of illness and injury. This protection remains but is now limited to a one-year period.

The new act also increases ship workers’ participation rights by strengthening their consultation rights and their right to receive information from their employer in certain matters linked to the employer’s economic situation. For instance, ship workers now have the right to request information related to vacant positions as well as the use of temporary employment, and must be heard by the employer before their dismissal.

The age for retirement for ship workers has been increased from 62 years in the former Seamen’s Act to 70 years in the new Ship Workers Act, and ship workers’ rights to leave have also been strengthened.

The new act also contains provisions that aim to protect whistle-blowers and allows ship workers to file a complaint against their employer if they do not meet their legal obligations in matters relating to labor law.

The employer, defined as the entity that employs the ship worker for work on board the ship, is the primary party responsible for complying with the provisions of the act and for ensuring that the obligations in the employment contract are satisfied.

The ship owner is responsible for ensuring that the employer fulfils its obligations according to the employment contract and the act. Ship owners have an obligation to ensure compliance with the act and to establish and implement systematic controls; they must also implement systems and procedures allowing them to check that the ship worker’s rights are respected on board the ship.

In addition, if the ship owner and employer are not the same legal entity, the ship owner is jointly and severally liable with the employer for the payment of wages, holiday pay and other economic rights conferred by the act, such as the payment of travel expenses and warranties.

Sven Skinnemoen [email protected]


Social protection measures relating to collective redundancies in the public sectorDuring recent months, numerous governmental discussions and employee protests have taken place in Romania in relation to collective redundancies in several majority state-owned companies. Attempts to privatize companies such as Poşta Română, the national postal service, which is a major employer in Romania with over 30,000 employees, have failed for a number of reasons, one of which was the expected costs associated with redundancies required to streamline the companies.

To address this issue, the Government passed an Emergency Government Ordinance (EGO) in April 2013 that regulates social protection measures for people made redundant from majority state-owned companies, based on a redundancy plan. The provisions of the EGO are applicable until 31 December 2018.

Under the EGO, those made redundant benefit from an unemployment indemnity and a supplementary monthly income, as well as severance payments in accordance with the provisions of the applicable collective bargaining agreements.

Only employees with permanent employment contracts concluded at least 36 months prior to the redundancy may benefit from the provisions of the EGO.

The supplementary monthly income is granted for a period of 12 to 24 months, depending on the length of service of the redundant employee, and is paid from the state unemployment budget.

Changes in the new civil procedure that apply to employmentThe new civil procedure code that came into force in February 2013 introduces a requirement for a mandatory preliminary procedure to be followed in the presence of a mediator prior to submitting a claim before a court.

From 1 August 2013, for individual labor disputes concerning the conclusion, performance and termination of employment contracts between employees and employers, the parties must attend a meeting with a mediator to learn about the advantages of mediation.

The plaintiff has the obligation to initiate the procedure with the mediator. If the claims are submitted to court without this preliminary procedure, they shall be dismissed prematurely.

After the meeting with the mediator, the parties can either accept mediation to solve the conflict or refuse to participate in mediation and submit the claim for a hearing before a court.

If the parties refuse the settlement of the dispute through mediation, the mediator will issue a certificate of participation to the meeting, as proof for a court that the preliminary procedure required by the law was fulfilled.

Cristina Bazilescu cristina. [email protected]

Nicoleta Gheorghe [email protected]

Romania


Russia

Reducing headcount without redundanciesIn the context of the crisis in the Eurozone, Russia has shown relatively satisfying unemployment statistics. The Russian Government unofficially discourages layoffs in favor of other cost-cutting options. In these circumstances almost any personnel reduction attracts the attention of the relevant controlling authorities, which forces employers to think twice before choosing redundancy in favor of other termination options, and to make sure that the formal redundancy procedure is accurately observed. Otherwise, even the most apparently insignificant non-compliance with the formal procedure could result in the whole redundancy being declared void by a court; this is especially true given that Russian courts tend to be employee-friendly.

Generally, in Russia, termination at the employer’s initiative is strictly regulated and may only be carried out on termination grounds explicitly listed in the Labor Code. “At-will” termination is generally not allowed, except for the CEO of a company. Most commonly, termination is initiated by the employer in the following instances: during a company liquidation, because of a redundancy, lack of qualification confirmed by the results of an certificate, repeated failure to perform employment duties or gross misconduct (including absenteeism, being drunk or intoxicated at work and theft).

There are several other instances where termination may be initiated at the employer’s initiative, but these mostly apply to specific categories of employees, e.g., employees working with valuables, upper management and employees performing an educational function.

All of these grounds for redundancy have their own disadvantages. For instance, closure of a company (or a branch or representative office) could take months and usually requires a more valid economic reason than mere HR cost reduction. Redundancy termination requires two months’ notice plus payment of up to three months’ severance; additional notice and other requirements could apply if redundancy qualifies as a mass redundancy or if there is a collective bargaining agreement in place. Termination “for good cause” can hardly be planned in advance and applies only to individual employees.

To summarize, the usual recommendation is to use efforts to negotiate with the employees for amicable termination whenever possible. In such cases, care must be taken to prevent or minimize the negative impact of potential litigation.

Oleg Shumilov [email protected]


The new Spanish regulations on redundanciesSpain’s critical economic situation has forced its Government to approve various modifications to the Spanish labor regulations. With an unemployment rate of 26.3%, the new labor regulations aim to contribute to a more efficient management of employment relationships and to the creation of jobs and a stable employment environment.

The controversial measures approved over the past year are based, essentially, on the following core principles:

• Enhancing the efficiency of the job market and cutting down on the two-tier system, where the members of one tier have indefinite term contracts, while the members of the other tier do not

• Promoting internal flexibility in companies as an alternative to destroying jobs

• Boosting the employability of specific workers

• Encouraging employers to use indefinite-term contracts and other measures to help create jobs

In order to do this, the Government has modified the regulation regarding dismissals, both individual and collective. Collective dismissals are defined as those affecting at least 10 workers in companies that employ less than 100 workers, 10% of the number of workers in companies that employ between 100 and 300 workers, or 30 workers in companies that employ more than 300 workers.

Regarding individual dismissals, the legally required severance to be paid in case of unjustified individual dismissals has been reduced from 45 days’ salary per year of service, to 33 days’ salary per year of service.

Also, the Government has redefined the criteria for dismissal based on economic, technical, organizational or productive grounds. The reform has attempted to make such causes objective and, among others, has introduced the option to proceed with such dismissals, if there are any considerable losses anticipated within the next three quarters.

Regarding collective dismissals, which have increased by 56% since the beginning of the crisis, the main modification is that employers no longer require administrative authorization to proceed. Prior to the reform, companies had to obtain an administrative authorization, which was rarely granted unless labor unions had not agreed to the dismissals; as a result, severance payments had to be very generous in order to obtain the labor unions’ agreement. Since authorization is no longer required, the severance payments offered by the companies tend to be closer to the minimum imposed by the law (20 days’ salary per year worked, and up to a maximum of 12 months’ salary).

However, we must note that some of these modifications are still being interpreted by the labor courts, which tend to protect the employees applying the “principle of employee preference,” and try to avoid abuse of employment rights. This situation certainly complicates the Spanish labor legal scenario, and as a consequence, the number of claims before labor courts is now 25% higher than before the reform.

Raul Luis Garcia Gonzales [email protected]

Spain


Switzerland

Important changes in legislation with regard to redundanciesIn Switzerland, important changes regarding redundancies are taking place. While on the one hand, Switzerland is trying to ban severance payments for top executives, on the other hand for the very first time in history, the implementation of a mandatory redundancy payment scheme is being considered.

The Minder initiativeThe Swiss can directly influence their country’s legislation by means of a petition. Indeed, they can request that an amendment to the Federal Constitution be submitted to a referendum if a petition with at least 100,000 signatures is filed with the Government. In 2008, Thomas Minder, a Swiss businessman who became a politician, launched an initiative “against rip-off salaries.” The aim of this initiative was to limit abusive remuneration and to allow company shareholders to decide on executive pay. It was launched in response to the fact that huge severance payments had been paid out to dismissed executives, even when the companies they were managing had had poor results and mass redundancies were being considered.

After the initiative received an overwhelming majority of 71% of votes on 3 March 2013, the Swiss Federal Council had to draft an ordinance, which will stay in force until the Federal Parliament passes legislation to implement the initiative.

The ordinance will apply to Swiss-based stock corporations with shares listed on a Swiss or foreign stock exchange.

On 20 November 2013, the Swiss Federal Council adopted the final version of the ordinance, which entered into force on 1 January 2014. According to the ordinance, boards of directors of listed companies who fail to abide by the new rules could face up to three years imprisonment and fines of up to six times their annual compensation.

Redundancy payment schemePrior to recent changes, there was no legally required general statutory severance pay or redundancy payment scheme. However, depending on employees’ field of work there could be a compulsory collective bargaining agreement in place, and employees would then be entitled to redundancy payments.

The Swiss Parliament recently decided that an amendment of the Swiss code of obligations regarding redundancy payment schemes was necessary. According to the new articles 335h to 335k of the code of obligations, companies that have 250

or more employees and that make at least 30 employees redundant within a period of 30 days, will have to negotiate a redundancy payment scheme, either with the employees themselves or with the employees’ representatives. Under this procedure, employees will have the opportunity to submit proposals to the management, as to how redundancies can be avoided or their number limited and their consequences mitigated. The parties have to draw up a redundancy payment scheme. If the parties fail to reach such agreement, the redundancy payment scheme must be established by a court of arbitration whose decision will be incontestable.

It is worth noting that any federal law or any change to Swiss law may be subject to a referendum. Therefore, the Swiss people may launch a referendum that would, once again, give rise to new rules regarding severance payments of top executives, and of redundant employees.

Chiara Baggiolini [email protected]


Redundancy updatePrior to the law “on the employment of the population” effective from 1 January 2013, employers had to file reports to the Ukrainian employment centers for every redundancy that occurred in their company. The new law abandoned this obligation, which had been implemented in 1991, and now, a report must only be filed in cases involving mass redundancy cases. According to the law, “mass” redundancies are defined as redundancies of:

• 10 and more employees in a company with 20 to 100 employees, within one month

• At least 10% of the employees of a company with 101 to 300 employees, within one month

• At least 20% of the employees of a company, regardless of the total number of employees, within three months

Amendments to the procedure for issuing, prolonging and canceling the work permits of foreigners and stateless individualsOn 5 July 2013, a resolution approving the procedure for issuing, prolonging and canceling the work permits of foreigners and stateless individuals took legal force.

The resolution reduced the number of documents that an employer has to submit to obtain the work permit from an average of 15 to 7.

Another innovation introduced by the resolution is that, to prolong a work permit, an employer must submit 30 days only three documents to the labor administration prior to its expiration; documents that were submitted for the initial application must be resubmitted only in the event that they have been modified.

The resolution also reduces the time in which the labor administration will review the documents from 30 to 15 days, while the work permit validity period remains the same — up to one year.

The resolution protects the Ukrainian labor market against competition from unqualified workers. An employer, therefore, must submit information on job vacancies to the employment center 15 calendar days before applying for a work permit. A work permit may only be issued if there are no unemployed individuals with the required qualifications registered with the employment center.

The statutory fee for applying for a work permit remains the same, amounting to the equivalent of four minimum salaries, or about €420. However, the payment procedure has changed. An employer is now obliged to transfer this amount to the Social Security Fund once the labor administration has authorized the permit. If the employer does not do so within 30 calendar days of the decision, the decision shall be canceled. The administration issues the work permit within 10 working days from the day the funds are remitted to the social security fund.

The resolution has thus introduced a number of positive amendments that make the work permit process easier for employers. Yet practical implementation and interpretation of certain provisions of the resolution by the state authorities, such as the procedure for obtaining a medical certificate from outside Ukraine, remain unresolved.

Oksana Lapii [email protected]

Ukraine


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