Today, many companies are forced to lay off employees due to economic difficulties. In the first four months of this year, almost 500 people have contacted the HUGO.legal lawyers regarding labor law, with most disputes being resolved with the help of a lawyer at the labor dispute commission. Katrin Martis, a lawyer at the legal aid platform HUGO.legal, discusses key aspects of layoffs—when layoffs are permitted, who can be laid off, and the compensation amount.
When can the employment contract be terminated?
An employer may terminate an employment contract without notice for a valid reason. Valid reasons may include circumstances related to the employee (Section 88 of the Employment Contracts Act) or the economic situation (Section 89). An employer may terminate a fixed-term or open-ended employment contract for economic reasons, i.e., lay off an employee, if continuing the employment under the agreed terms becomes impossible due to reduced workload, restructuring, the closure of business, bankruptcy, or the end of bankruptcy proceedings, as well as other circumstances related to the termination of work due to economic reasons. An employee’s refusal to change the conditions of the employment contract (including salary conditions) is not considered a layoff situation that justifies termination. Any change in the employment contract terms does not equate to ending the employment under the agreed terms.
The employer must offer another job if possible
The employer has an obligation to offer the employee another position within the company before the employment ends for economic reasons (Section 89(3) of the Employment Contracts Act). The goal of offering another job is to provide the employee with the opportunity to continue working with the same employer. This goal is met if suitable work is offered to the employee. The employer must offer another job if it is reasonable considering all circumstances, including the interests of both parties, and does not cause disproportionately high costs for the employer. The obligation to offer another job does not apply when the employer’s business ends or in the case of bankruptcy. The offer of work cannot be limited solely to the employee’s professional field. To avoid terminating the employment, the employer should also consider offering the employee another type of work that they are capable of doing. The employer is not obligated to offer the job if the employee is not suitable for the open position. The obligation to offer another job cannot be substituted by organizing a competition for open positions.
Employees with a child under 3 years old have a priority right to remain employed
The employer must adhere to the principle of equal treatment when laying off employees (Section 89(4) of the Employment Contracts Act). The employer can retain employees who perform better or are deemed necessary. However, the employer cannot favor employees based on gender, age, ethnicity, sexual orientation, or other circumstances unrelated to the work. After identifying employees with priority rights (such as employee representatives and those with children under three), the employer may freely choose whom to lay off and whom to keep. The priority right to remain employed applies to employee representatives and employees raising children under three (Section 89(5) of the Employment Contracts Act). For instance, if the employer needs to lay off employees and finds that some employees have children under three, the employer must prioritize these employees in the layoff process.
Notice of termination depends on seniority
Section 97 of the Employment Contracts Act establishes the minimum notice periods that an employer must observe when terminating an employment contract. The notice period depends on the duration of the employee’s employment. The notice periods are as follows: less than 1 year – 15 calendar days, 1–5 years – 30 calendar days, 5–10 years – 60 calendar days, and 10 or more years – 90 calendar days.
The laid-off employee is entitled to compensation from both the employer and the unemployment insurance fund
When an employment contract is terminated due to a layoff, the employer must compensate the employee with one month’s average salary (Section 100(1) of the Employment Contracts Act). Additionally, the unemployment insurance fund pays compensation under the conditions specified by law (Section 100(2)). Employees whose employment has lasted at least five years with the employer are entitled to compensation from the unemployment insurance fund.
The layoff can be disputed within 30 calendar days
If the laid-off person disagrees with the layoff, they have the right to dispute the termination with the labor dispute commission or the court within 30 calendar days from receiving the layoff notice.
