Last updated: 3 April 2017
During the life of a company, reorganization – also known as corporate restructuring – results from the need to adapt to the economic, legal or market environment. Reorganization occurs both when the company is financially healthy and when it faces a difficult situation, likely to trigger insolvency proceedings or simply as a result of a strategic decision of the company or of the group to which it belongs.
Given the complexity of the reorganization process, which can have important social and fiscal consequences, we present hereinafter what we consider to be good practices in connection with labor law.
REORGANIZATION METHODS
Corporate reorganization has legal consequences that bear not only on the company itself or its activity, bot also on employment contracts between the company and its employees, the company’s relations with the collective representation bodies. In this case, we deal with a dismissal or a voluntary termination of the employees’ employment contracts.
A) Dismissal
Article 65 of the Labor Code provides the conditions to be complied with in order to dismiss an employee following the elimination of his/her position: the elimination must be effective and must have a real and serious cause. Depending on the total number of employees and on the number of employees to be dismissed, dismissal may be individual or collective.
a) Individual dismissal
In accordance with the Labor Code, individual dismissal of employees occurs in the following situations:
- The employer has 20 employees at most, regardless of the number of employees dismissed;
- The employer has between 21 and 99 employees and dismisses under 10 employees within 30 calendar days;
- The employer has between 100 and 299 employees and dismisses under 10% thereof within 30 calendar days;
- The employer has over 300 employees and dismisses under 30 employees within 30 calendar days.
b) Collective dismissal
According to the above mentioned law, collective dismissal occurs in the following cases:
- The employer has between 21 and 99 employees and dismisses at least 10 employees within 30 calendar days;
- The employer has between 100 and 299 employees and dismisses at least 10% thereof within 30 calendar days;
- The employer has over 300 employees and dismisses at least 30 employees within 30 calendar days.
Furthermore, in order to calculate the number of dismissed employee, one has to take into account the employees whose individual employment contracts were terminated at the employer’s initiative, for reasons non-attributable to the employees in question, if there are at least 5 dismissals of this type. Collective dismissal is a more complex process and its implementation may last at least 45-46 calendar days.
Good Practices
According to our practical experience, in order to reduce risks, it is essential to pay attention to the following aspects:
- Develop a good dismissal strategy. This means establishing the objective of the reorganization (for example, to reduce losses, increase returns, reduce operational costs, the number of positions) and, above all, analyzing and knowing the applicable provisions Labor Code and other applicable laws, individual employment contracts, collective employment contract, where applicable etc.).
- Comply with the legal procedure and conditions. In order to avoid the invalidation by the Court of the dismissal procedure further to a legal action lodged by an employee, the company has to thoroughly motivate its reorganization decision (with regard to the causes of reorganization), to initiate and organize consultations with the employees (during collective dismissal procedures), to notify the competent authorities (for collective dismissals), comply with the employees’ notice periods (issuing proper notice letters) and communicate dismissal decisions (they must contain all compulsory elements, especially the motives for dismissal etc.).
- Social dialogue – which should ensure transparency of reorganization - refers both to the causes and/or motives of the procedure, as well as to any potential measures that can be taken by the company for protecting the employees it dismisses.
Please note that social dialogue is a compulsory stage only during collective dismissal procedures: Therefore, the employer must first initiate consultations with the union leaser or the employees’ representatives on the dismissal procedure it intends to perform.
However, social dialogue should not be ignored during individual dismissal procedures, taking into account the employer’s obligations set fort by Law no. 467, establishing the general framework for employee information and consultation.
B) AMICABLE TERMINATION OF EMPLOYMENT AGREEMENTS
Employers can also try to negotiate and reach an agreement with the concerned employees, but success of such negotiations depends on how this operation is conducted.