Regulating restructuring 49

This section provides some of the central features of the regulation of restructuring in the eleven countries and the changes made since the financial crisis 2008-2009. Em- phasis is placed on the regulation of the employers’ initiation of collective redundan- cies, which is the main form of regulation in most of the eleven countries. Regulations pertaining to the transition conditions are discussed in later sections.

Thresholds

The countries studied in this project differ appreciably as regards the regulation of the employers right to initiate restructuring. First of all there is a clear difference in terms of the applicability of employment protection legislation among the selected Member States. In most Member States, there are thresholds, pertaining to the size of the enterprise being restructured or the size of the restructuring event, compared to the size of the workforce. The most common threshold is that companies must have at least 20 employees in order to fall within the scope of the national legislation. In Slo- venia the threshold is enterprises with 30 employees and in France and Portugal 50

employees. In Spain the threshold is formulated in a different way. Collective dismis- sals are defined according to how many workers are affected in relation to the size of the enterprise, see table 1 below. But the company needs to have a minimum of six employees if the entire workforce is affected. In Sweden there are no lower numerical bounds at all, implying that the legal framework is applicable to all enterprises, inde- pendent of their size. There are, however, exceptions to be made for smaller enter- prises when it comes to the selection of workers for redundancy. Thus, there is great variation between Member states in terms of the coverage of provisions for collective redundancy.

Figure 7: Threshold conditions: minimum size of company, number of employees

Source: EMCC legal database

The implication of thresholds is that the initiation of collective redundancies is only regulated in a small minority of enterprises. Employees in small enterprises, which constitute about two thirds of the private labour force, are not covered by any form of employment protection. This exclusion of SMEs and the public sector was also identi- fied as one of the key gaps in the European Commissions’ fitness check of the Europe- an directive on information and consultation, including the directive on collective re- dundancies (Wauters, et.al., 2013; European Commission Staff working document, 2013). 0   10   20   30   40   50   60   Em ploye es  

Table 1: Thresholds for collective redundancies

Countries Minimum size of company covered

BE A company must have at least 20 persons employed to fall within the scope of nation- al legislation on collective redundancies.8

BG A company must have at least 20 persons employed in order to come within the scope of national legislation on collective redundancies.

CZ 20 employees9

FR 50 Employees

DE Establishments of more than 20 employees

NL 20 employees

PT at least 2 dismissals in companies with fewer than 50 employees, or at least 5 dismis- sals in larger firms

SI Within the scope of legislation on collective redundancies, if at least 10 employees are to be made redundant when the employer employs more than 20 and less than 100 people.

ES To fall within the scope of legislation, employers must plan to dismiss or make redun- dant between 10 and 30 employees within 90 days due to a negative economic situa- tion or the adoption of technical, organisational and production measures.

The minimum figure varies – 10 if under 100 are employed in the company, 10% if between 100 and 300 are employed; and 30 if 300 or more than 300 are employed. The company needs to only have a minimum of more than five employees if the en- tire workforce is affected.

SE There are no numerical lower bounds. All enterprises are covered. 10

UK 20 persons must be employed.

Source: EMCC legal database

In several of the eleven Member States, the labour law is only applicable to the pri- vate sector, with exceptions for public sector employers. An exception is the Czech Republic and Sweden, where the employment protection legislation is universal and covers all employers, both private and public.

Regulating the initiation of collective redundancy

Labour laws also regulate the grounds under which the employer may initiate collec- tive redundancies. In most countries the law stipulates specific grounds for which termination are prohibited. Terminating an employment contract because of marital status, whistle blowing, ethnic origin or political opinions are examples of prohibited grounds specified in several countries. However, member states vary in the specifica- tion of prohibited grounds for dismissal. There are also specific categories of workers

8 _{Since June 2009, however, companies employing less than 20 workers may also be subject to this legislation, under certain}

circumstances.

9 _{Collective dismissals means the termination of employment relationships by one employer within a period of 30 calendar}

days to no less than: (i) ten employees where an employer employs from 20 to 100 employees; (ii) 10 % of employees where and employer employs from 101 to 300 employees; (iii) 30 employees where an employer employs more than 300 employees.

10 _{A unique feature of the Swedish employment protection legislation is that, while legislation is universal, the law makes}

who are protected in cases of collective redundancies, for example workers’ represent- atives, pregnant women or workers on parental leave.

Table 2: Allowable reasons for collective redundancies Countries Allowable reasons defined by law

BE Partly based on the collective agreement n°24 (1975), the collective dismissal is described as a redundancy for which the responsibility is non-inherent to workers. This means that dismissals are related to economic or technical reasons, or reasons linked to production.

BG Employers can justify redundancies on the grounds of a reduction in business activity or plant or branch closure.

CZ A mass layoff is defined as the termination of work contracts by the employer in consequence of a business shut-down or relocation of the business or redundancy of the worker.

FR “redundancy implemented by an employer for one or more reasons not related personally to the worker, resulting in the elimination or transformation of a job or a change, which is refused by the worker, of an essential element of the employment contract, notably as a result of eco- nomic difficulties or technological changes”.

DE The law (§17 Protection against Dismissal Act) does not specify the allowable reasons, and operational difficulties are considered to be a sufficient condition to justify collective redundan- cies, provided the works council is informed and consulted. The works council has to agree on the social selection of workers to be dismissed. If no agreement has been reached before the public announcement, the works council may comment on the measures to the labour office.

NL A redundancy is defined as dismissals due to reorganisation for economic reasons, a merger, take-over or liquidation.

PT Legislation outlines a number of reasons for justifying redundancies – market decline, financial reasons, greater efficiency, technological change, or closure of departments or units.

SI Economic, organisational, technological, structural or similar reasons.

ES Redundancies can be implemented for a range of reasons – corporate financial problems, tech- nological change, organisational drivers, or production or market reasons.11

SE Collective dismissals are all dismissals that are not due to the characteristics or behaviour of the individual worker, but for business reasons (e.g. shut down or restructuring due to intro- duction of new technology). The definition of the business reasons are the prerogative of the employer.

UK A redundancy is defined as a dismissal for a reason unrelated to the individual employee con- cerned by the UK regulation governing redundancies. In practice, redundancies often result from economic difficulties faced by organizations. Other reasons for redundancies can include the re-organization of work at a workplace.

Source: EMCC legal database

Another form of regulation of the employers’ initiation of redundancies is to define the conditions and reasons for when redundancies are allowed. There are several different ways of doing so. In many countries the law stipulates that the employer may only initiate collective redundancies if there is “just cause” or if it is “socially motivated”. In some countries (France, Portugal and Spain) employers need to show evidence that

11 _{In Spain labour law has been going through an extensive reform since 2012. Before the labour reform, the economic}

justification has always been controversial between employers and employee representatives. The labour reform tried to clarify this issue and now it is accepted as an “economic” reason for redundancy purposes that a business has suffered a reduction in sales for three consecutive quarters compared with the same period in the previous year (for further information, see Rodriguez Contreras, 2014)

the economic circumstances are deteriorating. In some countries (for example the Netherlands and Spain) employers need to ask for permission from a government agency before collective redundancies can be initiated. Thus, employers are not al- lowed to initiate workforce reductions unless the business is under economic strain. In France, there are similar provisions, but it has been amended. The employer needs to send a notification to the labour market authorities, but if they do not respond within a particular period of time, it can be assumed that it is accepted (Teissier & Triomphe, 2014). In France employers are also obliged to consider alternatives before starting a redundancy process. Similar provisions exist in Bulgaria. In Bulgaria, companies en- visage redundancies only as last resort and only after having considered all possible alternative options and/or identifying and implementing supporting measures (e.g. phasing planned measures over time, extending or reducing working time, seeking replacement activities). The employer is obliged to consult with trade unions about the alternatives. The trade unions should submit the statement to the Employment Agency related to options for future employment of the dismissed employees.

In France social partners have also, since 2008, introduced a new means of termi- nating employment contracts, termination by mutual agreement (“rupture conven- tionnelle”), which to some extent provides greater flexibility for employers when ter- minating contracts. In this new form the employer and the worker reach an agree- ment on the termination of the employment contract. This agreement has to be ap- proved by the Labour administration. Before 2008 such mutual or voluntary termina- tions were problematic from the point of view of workers, since they were not eligible to unemployment benefits if they left their job voluntarily. The advantage of this new form of termination is that it does not affect entitlement to unemployment benefit, thus ensuring a more “secure transition between jobs”. From the perspective of em- ployers, the advantage of this measure is a secure mode of termination. In essence, this new mode of termination constitutes a response to the major uncertainties and risks related to the old termination procedures that employers are said to face, that is, the risk of legal proceedings12 _{if the employment contract is terminated unilaterally.}

Since the launch of this measure, termination by mutual agreement has enjoyed con- siderable popularity and if dismissal figures are now at all time lows, this is, in part, connected to the introduction of terminations by mutual agreement (for more infor- mation, see Teissier & Triomphe, 2014). These procedures are used most frequently

by small businesses, allowing them to terminate a worker’s employment contract without resorting to dismissal. However, in case of such terminations, there is a risk that what is presented as a voluntary or mutual agreement is not always so mutual or voluntary, i.e. that the employer informally forces the individual to accept an agree- ment to leave.