Collective redundancies. How to carry them out? Practical tips.

In recent years, collective redundancies have mainly affected financial institutions, particularly banks, which have increasingly switched to remote (online) customer service. However, it seems that the COVID-19 pandemic has changed this situation. According to media statistics on the number of redundancies, the number of people reported for redundancy in 2020 was twice as high as in the previous year. One of the reasons for this was the COVID-19 pandemic. The upward trend is expected to continue in 2021. This applies in particular to the industries most affected by anti-pandemic restrictions, such as tourism, but also retail trade due to the recurring restrictions on the operation of shopping centres.

What should be kept in mind when carrying out collective redundancies?

The Mass Redundancy Act

The Act of 13 March 2013 on special rules for terminating employment relationships with employees for reasons not related to the employees (referred to as the Mass Redundancy Act) applies only to employers who employ at least 20 people on the basis of an employment contract. This means that smaller employers are not required to follow a specific procedure when dismissing a larger number of employees, nor are they required to pay severance pay. On the other hand, they cannot take advantage of the facilitations in terms of dismissal or change of conditions for protected employees.

Collective nature of the redundancy

Collective redundancies occur when, within a period of 30 days, an employer terminates the employment relationships of at least:

• (i) 10 employees in companies employing between 20 and 99 employees;
• (ii) 10% of employees in companies employing between 100 and 299 employees;
• (iii) 30 employees in larger companies

- by way of notice or by mutual agreement. Mutual agreements should be taken into account for the purposes of calculating thresholds if at least 5 agreements are concluded under these conditions. This should be borne in mind, as practice shows that dismissals by mutual agreement often ‘slip through the net’ when counting dismissals. This may result in the collective redundancy procedure not being applied, which in turn creates the risk of the redundancies being considered to have been made in breach of formal requirements and, therefore, of the terminations being unlawful.

Reasons for dismissal

In practice, the reason for dismissing an employee will be either the liquidation of his/her position (if the position held by the employee is unique in the organisation, e.g. the director of a liquidated department) or a reduction in the number of positions (when there are more positions of a given type, e.g. rank-and-file employees).

Each of these reasons will usually be followed by more far-reaching changes in the employment structure (e.g. the liquidation of a department). However, indicating employment restructuring as the reason for dismissing an employee without explaining to the employee how this translates into their individual situation will not be sufficient. A notice of termination constructed in this way may be considered defective in the event of a dispute.

In addition, a termination notice dictated by job cuts should indicate the criteria for selecting employees for dismissal so that the employee can understand the basis on which their employment relationship was selected for termination. The criteria for selection for dismissal may vary. In particular, they may relate to the performance and manner in which employees perform their duties. It is also possible to take social considerations into account (e.g. having other sources of income). For example, although reaching retirement age cannot be a reason for termination (and if it were indicated as a reason, it could be treated as age discrimination), it is commonly accepted to use this factor as a criterion for selecting employees for dismissal.

It is not necessary to specify the criteria for selection for redundancy in the event of job cuts if the employer is closing down an entire department and dismissing all its employees.

Procedure and time frame

If the above-mentioned employment and redundancy thresholds are reached, the company should apply the collective redundancy procedure. It should be remembered that failure to comply with the collective redundancy procedure will result in the redundancies being deemed unlawful.

If the employer intends to carry out collective redundancies, they should conduct a mandatory consultation procedure with the trade unions (if any) or employee representatives. The consultations should concern the possibility of avoiding collective redundancies or reducing their scale, as well as measures to support employees affected by the redundancies, including in particular the possibility of retraining or finding alternative employment.

The consultation procedure begins with the employer notifying the trade unions (employee representatives) and the relevant district labour office in writing of the planned redundancies. The employer should negotiate the terms of the redundancies with the trade unions (employee representatives). If there are trade unions at the employer's and the parties reach an agreement during the consultation on the terms and conditions of the redundancies, the parties should conclude an agreement to that effect. The parties have 20 days to reach a consensus. Otherwise, the employer may, in principle, act alone by adopting redundancy regulations (the same applies if there is no trade union at the employer).

Once the rules for collective redundancies have been established, the employer notifies the relevant employment office.

It should also be remembered that if at least 50 employees are to be made redundant within a period of three months, this will be treated as a so-called monitored redundancy. This means that, regardless of the requirements of the Act on Group Redundancies, the employer will have to agree with the relevant employment office on the provision of mechanisms to help employees find new jobs (employment agency services, training, etc.). At least part of the costs of these benefits may be borne by the employer, which should also be taken into account in the redundancy budget.

In Poland, unlike in some European Union countries, an employer initiating a collective redundancy process is not legally obliged to offer other jobs to the employees being made redundant. Therefore, once the terms of the redundancy have been agreed, the employer can proceed to hand out notices of termination (or sign agreements) to the employees.

It should be remembered that if the employer does not conclude an agreement with the trade unions on the terms of dismissal, they will be obliged to conduct a normal consultation on individual dismissals in accordance with Article 38 of the Labour Code. Failure to conduct such a consultation will constitute a formal procedural error resulting in the unlawful termination of the employment contract.

Effective termination of employment under the collective redundancy procedure cannot take place earlier than 30 days after the date of notification of the employment office about the terms of dismissal.

At the same time, it should be remembered that if, within 15 months of the redundancies, the employer recruits employees in the same occupational groups, priority should be given to those who were made redundant earlier.

Protection against dismissal

Protection against dismissal is modified in the case of redundancies carried out under the Act on Group Redundancies. However, it should be remembered that protection is only completely removed in the event of the employer's liquidation or bankruptcy. The liquidation of a workplace (e.g. the liquidation of one of the warehouses) where a protected employee (e.g. a pre-retirement age employee) is employed will not be sufficient to terminate their employment contract if the company that is the employer continues to operate.

In principle, employees covered by protection (e.g. persons of pre-retirement age) cannot have their employment contracts terminated immediately as part of a collective redundancy. The Collective Redundancies Act only allows for a change in their working and remuneration conditions. If the change in employment conditions results in a reduction in remuneration, protected employees will be entitled to a compensatory allowance.

Severance pay

The statutory severance pay provided for in the Act on Group Redundancies is not excessive compared to other European Union countries. This is worth remembering in the case of Polish companies also operating abroad. It may be many times higher than in Poland, which will need to be taken into account in the budget for possible cross-border redundancies.

The amount of severance pay varies depending on the employee's length of service at the company and is equal to

• (i) one average monthly salary if the employee has been employed by the company for less than two years;
• (ii) two average salaries if they have been employed by the company for between 2 and 8 years; and
• (iii) three average salaries if their length of service exceeds 8 years.

The amount of severance pay is additionally limited to 15 times the statutory minimum wage - in 2021, this is PLN 42,000. In practice, however, the financial terms of dismissal are often changed during negotiations. As a result, the severance pay paid to employees is higher than that resulting from the provisions of law. Voluntary benefits vary depending on the industry and size of the entity. In practice, the limit of 15 times the minimum wage is most often waived. Often, the employer increases the severance pay by an additional month's salary. Some employers decide to increase the severance pay depending on the employee's length of service at the company.

It is worth noting, however, that the temporary COVID-19 anti-crisis measures allow the remuneration limit to be reduced to 10 times the statutory minimum wage. This applies to employers affected by a decline in turnover or a significant increase in the wage bill during the state of epidemic or state of epidemic threat. As a rule, however, in order to apply this solution, the dismissal of a given employee does not have to be directly related to the COVID-19 pandemic.

 

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In the next part of the series, we will present how to effectively communicate the need for collective redundancies, what alternatives to redundancies exist, and how to part ways with individual employees.