This is Part V of an eight-part series of newsletters giving an overview of regulatory requirements governing the conduct of mass compulsory redundancies. The series focuses on key EU jurisdictions, providing practical information to Japanese companies operating in those countries.
In this newsletter, we will present an overview of the regulatory regime affecting mass compulsory redundancies in Belgium. In Part I we considered the position in the UK; Part II focused on Germany; Part III on France; and Part IV considered the Netherlands' regime. In Parts VI and VII, we will consider the position in Spain (Part VI) and Italy (Part VII). Each of these briefings will provide a quick reference guide to the most important provisions in each jurisdiction to enable Japanese companies to address the most significant timing and cost issues faced in that territory.
In Part VIII, we will outline recent developments in relation to industrial action in the UK, setting out practical guidance to follow both to prevent a strike and to minimise disruption to business once a strike has commenced.
The information contained in this series is necessarily of a general nature. If any of these issues affect your company, please contact us for assistance regarding your particular circumstances.
One might think that the law relating to mass compulsory redundancies ought to be the same in every EU country, given that it derives from a single EU Directive1 setting out in some detail what is required by each member state. In particular, the Directive specifies the following key obligations:
- Where there are "collective redundancies", an employer must consult with the workers’ representatives in good time and with a view to reaching agreement as to the terms or number of compulsory redundancies.
- The consultation must aim to avoid or minimise compulsory redundancies and to mitigate their consequences (for example by redeploying or retraining workers).
- The employer must give the representatives specified information including the reasons for the proposals, the number and category of workers to be made redundant, the proposed timescale and selection criteria and the level of redundancy payments.
- Consultation must take place with a view to reaching agreement as to the proposals so it is very important that no decisions are taken before the process commences.
- A specified period before dismissals are to take effect, the relevant government body must be notified. However, individual member states are given discretion in a number of key areas, for example:
- how to define "collective redundancies";
- who the "representatives" are;
- whether the representatives can call on the services of experts; and
- what the remedy for breach of the terms of the Directive should be. The Directive only sets out minimum requirements – individual member states are free to adopt laws more favourable to workers.
When do I have to consult collectively?
Where there is a proposal to make redundant at the same business unit over a period of 60 days or less:
- at least 10 employees from a workforce of more than 20 and less than 100 employees;
- at least 10% of a workforce of between 100 and 299 employees; or
- at least 30 employees from a workforce of 300 or more employees.
Any dismissals for reasons unconnected with the individual are counted towards these totals.
There are additional information obligations where there is a business closure (where the company ends its main activity or closes a department and headcount is reduced to below 25% of the average during the previous year).
What is the consultation requirement?
You must inform and consult about the compulsory redundancy proposals with the works council or, if none, the union delegation or, if none, the committee for prevention and protection at work or, if none, the employees themselves.
How long will it take?
There is no statutory minimum timeframe for collective consultation. You cannot give notices of dismissal until at least 30 days after you have notified the relevant government agency of the end of the consultation process (the second notification – see below). This period may be extended to 60 days. The whole process usually lasts between three and four months.
Can unions, works councils or other representatives veto compulsory redundancy proposals?
No, but they can delay implementation by dragging out consultation.
What is the potential penalty for breach of the consultation requirements?
A failure to inform can lead to criminal sanctions (imprisonment of between eight days and one month and/or a fine of between €143 and €2,750 per employee concerned, up to a maximum fine of €275,000). This criminal sanction could be replaced by administrative fines (a fine of between €50 and €1,250 per employee concerned, up to a maximum of €20,000).
In addition, the planned redundancies may have to be suspended or reversed until the consultation process is restarted and properly completed. Alternatively, damages can be awarded to the affected employees in the amount of salary payable for the period of time it would have taken to complete the process properly. Where there is a business closure, companies can be fined between €1,000 and €5,000 per employee.
What external approvals or notifications are required?
You must notify the relevant government agency firstly of the compulsory redundancy proposal and again once consultation is completed. There are additional notification requirements if there is a business closure. No approval is required.
How do I make the individual compulsory redundancies?
The special protection against dismissal for certain types of employees does not apply where there are collective dismissals justified by the restructuring. Selection criteria are determined by the works council or, if none, the employer (provided that they must be as objective as possible and avoid unlawful discrimination). You do not have to consult with each individual. There are special procedural requirements when dismissing employee representatives.
What severance payments will employees be entitled to?
In addition to notice, employees collectively dismissed may be entitled to a special indemnity of up to four months’ part salary (part salary being half the difference between net salary and unemployment allowance). However, if there is a business closure, they will instead be entitled to an indemnity of €142.09 per year of service (up to 20 years), plus the same amount multiplied by the number of years of service (up to 20 years) for employees over the age of 45. In addition employees must be paid other entitlements agreed as part of any social plan (which can substantially increase the total cost). A company is deemed to be "undergoing a restructuring" when the dismissals affect (taking into account only those with two years’ continuous employment):
- at least six employees from or 50% of a workforce of less than 20 employees;
- at least 10 employees from a work force of more than 20 and less than 100 employees; or
- at least 10% of a workforce of at least 100 employees.
A company undergoing a restructuring will have additional obligations, although they will only apply to a company which employs fewer than 20 employees if the company is planning to lower the age requirement for pre-pension entitlement on early retirement. The company must pay a part of the severance indemnities in the form of a redeployment indemnity to employees who agree to participate in the "employment cell" that the company must set up. This redeployment indemnity is three or six months’ remuneration depending on whether the employee is aged under or over 45. The redeployment cell must offer outplacement services to employees with at least one year’s service. Interim workers and fixed term employees with one year’s service can also benefit from the outplacement assistance but are not entitled to the redeployment indemnity.
Key practical points to keep in mind
For those Japanese companies that are contemplating instituting a compulsory redundancy program across multiple EU jurisdictions, the following list of key practical points should be considered as a starting point:
- Focus on the proposed redundancy timetable as early as possible – is it feasible in each jurisdiction? You may need to delay taking steps in one country until certain other steps have been completed in another. Appoint a single internal person with overall coordination responsibility.
- Ensure any messages given to employees/employee representatives are consistent across all relevant jurisdictions – trade union or other employee representatives may liaise with colleagues in other countries.
- Ensure any statements clearly indicate that the proposals will not be finalised until consultation is complete – for example avoid assurances to one country’s representatives that other countries will suffer just as many compulsory redundancies or that one country will be "safe" because any compulsory redundancies will take place elsewhere.
- Ensure all documents record steps as mere proposals until the full consultation process has been completed – pay particular attention to board minutes, press announcements and written communications with employees and their representatives.
- Check whether there are additional requirements for consultation and compensation specified in collective bargaining arrangements or pursuant to a European Works Council or other agreement.
- Prepare a public relations strategy.