When you can be dismissed for redundancy

The employer’s grounds for termination are limited

As an employee, it’s much easier to give notice: you can give notice at any time and for any reason. On the other hand, the employer must always give a clear reason. The employer’ s reasons for giving notice are set out in the Labour Code, otherwise the notice is invalid. These reasons must be precisely described, a mere reference to the law is not enough. The conduct of the employee which led to the termination must also be clearly defined. The notice must be in writing. The employment relationship shall end on the expiry of the notice period, which shall be 2 months unless otherwise agreed in writing with the employer and shall start on the first day of the calendar month following the date of delivery of the notice, with the end of the notice period falling on the last day of the calendar month concerned.

If the employer makes a mistake in terminating the employment relationship and does not use the correct reason for termination, the employee may challenge it by bringing an action. Litigation over the invalidity of a termination can be lengthy, and throughout its duration the employee’s claim for compensation for lost wages accrues and can easily run into hundreds of thousands of crowns. Thus, inconsistency in the preparation of legal documentation can prove to be liquidating for the employer, which is why it is worth consulting a lawyer in advance in disputed cases.

Planning organisational changes

Both the epidemic and the subsequent economic crisis have led to the closure or reduction of a number of operations. In this context, employees have encountered the typical reason for termination of employment, which is dismissal for redundancy. However, this is a valid legal step on the part of the employer in the event that the employer actually undergoes organisational changes, for example, the downsizing of the PR and marketing team, the reduction of a certain production segment or the closure of a branch in one of the cities.

In the words of the Labour Code, these are situations where there is:

• the dissolution of the employer or part of it,
• relocation of the employer or part of it,
• the redundancy of an employee as a result of a decision by the employer to change its tasks, technical equipment, to reduce the number of employees in order to increase work efficiency or other organisational changes.

The decision on the organisational change must be taken first, before the employee is dismissed. It does not necessarily have to take a specific form, for example, the minutes of the management meeting will suffice, but the decision must be demonstrably communicated to the redundant employee. A properly prepared document, such as a model notice of redundancy, can make the situation much easier for the employer.

In addition, there must be a causal link between the organisational change and the redundancy of the employee and the change should actually lead to a more efficient operation of the employer.

Beware of unnecessary costs

Beware, however, of a situation where you give notice to an employee on the date when the organisational change giving rise to his or her redundancy takes effect. In that case, the employee’s notice period starts, but the employee no longer has a job to do for you because his or her position has been eliminated or merged with another. However, the employer must pay the employee a wage replacement equal to his average earnings until the end of the employment relationship (i.e. until the expiry of the notice period). Taking into account the possible entitlement to severance pay, the employer will pay the employee a salary payment of 3 to 5 months without the employee having done any work, only as a result of the bad timing of the organisational change.

Assuming that employee redundancy is in the vast majority of cases a problem that develops over a long period of time and can therefore be anticipated, a very simple and elegant solution is to terminate an employee for redundancy because of an organisational change that has been decided but will only occur in the future. In such a case, the employee concerned will continue to work until the expiry of the notice period and will thus not be a deadweight expense for the employer. The above procedure is also envisaged and approved by the courts.

This is best illustrated by a concrete example. On 29 June 2022, the employer decides on an organisational change which will be effective from 1 September 2022. On the same day (29 June 2022), it serves a notice of termination on the employee who has become redundant. The period of notice will therefore expire on 31 August 2022 and the employee concerned will become redundant on the following day. However, if the employer had decided to make the organisational change effective immediately on 29 June, the employer would have paid two months’ wage compensation without having done any work in return.

The procedure outlined above can save the employer quite substantial wage costs and is nothing more than simple planning.

Trade union agreement

If the employer has a trade union, the employer’s obligations include first discussing any termination with the trade union and, if the termination directly affects members of the trade union, obtaining the trade union’s consent. The consent is then valid for a period of two months, during which the employer must, if necessary, give notice to the employee. The redundancy notice template should therefore include the following information to make the process easier.

Fake organisational reasons

We were contacted by Ms Christine, who worked as an assistant manager in one of the company’s regional offices. The person of the previous director, her boss, was under a lot of pressure from various quarters and he eventually did not defend his position and left. The new director demanded that his two previous (and loyal) assistants leave with him and gave them both notice. He justified this on the grounds of organisational change. In fact, the number of assistants was subsequently reduced from two to one and the position was filled by a new colleague brought in from the Director’s previous post. As part of the declared organisational change, the job description was slightly modified and the new assistant was also responsible for some of the accounting and financial work. On the other hand, part of her workload, which consisted of organising numerous meetings and taking minutes, was removed. However, Mrs Christine nevertheless considered that her dismissal was invalid.

The assessment of redundancy is based on the type of work agreed in the employment contract. Thus, redundancy cannot be linked to an organisational change which makes it unnecessary for the employee to continue to perform the activities he or she has been performing, provided that the employer is still able to assign the employee to other work within the agreed type of work.

When the courts assess the lawfulness or unlawfulness of the dismissal, they do not decide on the organisational change itself, but of course take it into account and in the context of the dismissal. It is clear from the case-law that the hiring of another employee to fill a position from which the previous employee was ‘terminated’ for redundancy is generally evidence of the unjustified nature of the reason for termination.

We helped Ms. Kristýna to draft a court action challenging the validity of her termination. The employer argued that the new position of assistant had a diametrically opposed job description and was incompatible with Ms Kristýna’s previous job description, but the court held that the employer had the ability and obligation to assign the employee work under the employment contract even under the new organizational structure. In assessing the situation, it also took into account the fact that both of the existing assistants had been dismissed, which indeed signalled a desire for a change in personnel rather than an organisational change. If only one of them had been dismissed as a result of the organisational changes, that would have been a different situation. However, in that event, he found that the dismissal was invalid and awarded Ms Kristýna both damages for wages for the entire duration of the dispute and costs.