Laying off an employee is a way to temporarily reduce the workforce when the amount of work decreases. An unlawful layoff may result in liability for compensation.
We help you ensure that:
- The layoff is done on legally valid grounds
- The implementation of the layoff is carefully planned
- Employees are notified of the layoff in accordance with legal requirements.
Legal requirements of layoffs
The grounds for layoffs are also regulated by the Employment Contracts Act. If, as an employer, you are considering a layoff of employees, check whether:
- Your situation qualifies as an financial or production-related reason for termination under Section 3, Chapter 7 of the Employment Contracts Act, or
- The work or the employer’s ability to provide work has temporarily decreased, and as an employer, you cannot reasonably arrange other suitable work or training that meets the employer’s needs for the employee.
A temporary decrease in work or the employer’s ability to provide work is considered a valid reason for a layoff if it is estimated to last no more than 90 days.
If the situation can be resolved with a fixed-term layoff, the employer and employee may agree on the matter with some flexibility. However, even in such cases, a fixed-term layoff must be necessary due to the employer’s circumstances.
A layoff should be prepared carefully
It is advisable to review the initiation of layoffs with an experienced lawyer. While the relevant rules are outlined in the Employment Contracts Act, applying them to a specific case always requires legal interpretation.
Additionally, it is essential to consider special provisions regarding employees with fixed-term employment agreements and shop stewards.
What happens during layoffs?
A layoff is not intended to be a permanent arrangement. The employer can recall laid-off employees to work during the layoff period, which terminates the layoff, and the obligations related to employment and salary payments resume.
Employees have the right to take on other jobs during the layoff, and resigning has been made easier if the layoff has lasted continuously for 200 days.
Layoffs are not always the right solution for improving a company’s financial situation. The employer may also choose to terminate an employee’s contract for business-related reasons (financial and production-related grounds). Termination on these grounds must be carried out in accordance with the rules set in the Employment Contracts Act.
