Employer’s mistakes when downsizing employees
Here’s a real-life example: because of what mistakes a court finds an employee’s dismissal illegal, they will be reinstated, and the employer will be exacted their salary for the period of forced absence, compensation for moral damages and court costs
Dismissal of employees due to downsizing is both a simple and complicated procedure. It is simple because the procedure of staff reduction is specified by the law (Articles 81, 82, 178-180 of the RF Labor Code). It is complicated because mistakes can be made with mass layoffs that will cause the employer a lot of problems. Such a mistake can result in a court ruling that the dismissal is illegal, the employee will be reinstated, and the employer will be exacted wages for the period of forced absence (i.e. for the time the employee did not work and defended his rights in court), compensation for moral damages, and court costs.
Rules for layoffs
1. First of all it is necessary to issue a redundancy order. It should specify the reason, the date of the forthcoming staff reduction, the positions to be reduced and approve a new staff schedule. 2.
2) Define the persons who may not be dismissed due to staff reduction (Article 261 of the Russian Labour Code). Namely:
- A pregnant woman;
- A woman with a child (children) under the age of 3
- a single mother raising a disabled child under the age of 18 or a young child (under the age of 14);
- an employee raising a disabled child under the age of 18 or a minor child (under the age of 14) without a mother;
- an employee (parent or other legal representative) who is the sole breadwinner of a disabled child under the age of 18;
- an employee (parent or other legal representative) who is the sole breadwinner of a child under the age of 3 in a family raising three or more young children, if the other parent (legal representative) is not in an employment relationship.
3. Conduct a personnel audit to identify employees with an advantage over others in the same position.
If productivity and qualifications are equal, preference shall be given to:
- Family workers – if they have two or more dependents;
- persons in whose family there are no other workers with independent earnings;
- Persons who were injured at work or had an occupational disease while working at the organization;
- disabled veterans of the Great Patriotic War and disabled veterans of combat operations for the defense of the Fatherland;
- to employees who improve their skills at the direction of the employer without discontinuing their work.
Other categories of employees having a preferential right to stay at work may be specified in the collective agreement (part 3 of Article 179 of the Russian Labour Code).
4. Notify the employment service of the forthcoming layoff:
- Two months in advance if the employer is an organization;
- Two weeks in advance if the employer is an individual entrepreneur;
- In case of mass layoffs – no later than three months prior to the start of the relevant measures (clause 2 of Article 25 of the Law on Employment of the Population).
5. To request a motivated opinion of the trade union at least two months before the start of the layoff, and in case of mass layoffs, at least three months in advance (Art. 82 of the Labor Code of the Russian Federation). If the trade union disagrees with the employer’s decision, it holds consultations with the employer or its representative within three working days, the results of which are documented in a protocol. In the event of failure to reach an agreement, the employer has the right to make a final decision after 10 working days from the date of sending the draft order and copies of documents to the elected body of the primary trade union organization (Article 373 of the Russian Labour Code).
6. To notify in writing and personally, against signature, each employee subject to dismissal in connection with the reduction in pay at least two months prior to dismissal (part 2 of Article 180 of the Russian Labour Code). There are several exceptions to this rule. An employee with an employment contract valid for up to two months must be given notice of termination at least three calendar days in advance, and for an employee employed in seasonal work at least seven calendar days in advance (Article 292.2, Article 296.2 of the Russian Labour Code). An employment contract can also be terminated before the notice period expires – with the employee’s written consent (part 3 of Article 180 of the Russian Labour Code). 7.
7. Any dismissed employee must be offered all available vacancies to which he/she can be transferred (Article 180.1 of the Russian Labour Code). Every suitable vacancy that appears in the company until the last day of work, as well as lower-level vacancies and lower-paying jobs must be offered (part 3 of Article 81 of the RF Labor Code). Both permanent and temporary vacancies must be offered, for example the position of an employee on maternity leave. Vacancies must be notified more than once. If the employee agrees to one of the offered vacancies they are transferred to another position (Article 72.1, clause 3, Article 81 of the Russian Labour Code). No dismissal is made in this case.
8. Upon expiry of two months from the date of notification, fire the employees:
- Issue an order about dismissal and familiarize the employee with it against receipt;
- Make a settlement, not forgetting to pay compensation for unused leave;
- Issue a work record book; a certificate of the amount of the employee’s earnings for the two calendar years preceding the dismissal; a document that contains information sent to the Pension Fund for the period of the employee’s work (form СЗВ-М).
More often employers make mistakes when determining employees with priority right to stay on the job, as well as offer not all vacant positions.
A real example of employer mistakes
For employers, examples of case law can help protect them against errors in downsizing. In addition, the decision adopted by the court can be used when considering similar cases.
Kaluga District Court considered a case about the reinstatement of employees fired in connection with staff reductions.
All stages of the downsizing procedure have been passed.
1. an order to reduce the number of employees was issued.
2. Three months before the dismissal the employees who had the priority right to stay in their jobs (clause 1 of Article 179 of the RF Labor Code) and a higher labor productivity were identified. The evaluation was made on the basis of the Employer’s Regulations in force. Each employee was assigned predetermined points.
3. Two months before the dismissal the employees were given notice of the beginning of the reduction procedure, requested a reasoned opinion of the trade union, and notified the employment service. But already at this stage the employer began to make mistakes. Impersonal documents were attached to the request of the motivated opinion. They contained the personal data of the trade union members only. Isn’t that grounds for refusing to approve the dismissal of the trade union members? After all, the union has no way to verify that the employer correctly identified the employees with priority right to remain employed. But the employer felt that personal data protection was more important. In response to all inquiries, it cited data protection for non-union employees.
4. The employer offered the downsized employees vacancies. And they were offered eight times. Seventeen employees consented to one of these offers. All of them met the requirements and were eligible for the position. All but one were rejected with the wording “after considering the candidates, preference was given to another employee, and the position is no longer vacant. On the planned date, 16 employees were fired.
Next came the court.
Six of the fired workers went to court to sue for reinstatement. It listed three grounds for challenging the dismissal.
1. lack of grounds for dismissal. Reducing the number or staff of employees is the employer’s prerogative. But after the downsizing procedure began, production increased. The employer began to recruit workers for the reduced positions, to enter into fixed-term employment contracts with them. But the plaintiffs were not offered to return.
In court, the employer did not deny contracting new employees, but did not agree to increased production.
2. Violation of the reduction order. Among the 17 employees who applied for the vacant position, the employer gave preference to an employee with a lower performance rating. In addition, he did not offer the employees a position that had been vacant for six days.
(3) Violation of the procedure for requesting a reasoned opinion. The union could not verify that the employer had correctly identified the employees with priority rights to remain employed.
The court upheld the claims and reinstated all of the employees who sought protection of their rights.
The court sided with the employees
In its decision, the court did not assess the existence or absence of grounds for dismissal, but acknowledged that the dismissal procedure had been violated. The court pointed out: the labor law establishes the employer’s obligation to offer employees whose positions are being cut, all vacant positions corresponding to their qualifications, a lower position or lower-paying work. If several employees apply for the same position, one of them must be chosen taking into account the provisions of Article 179 of the Labor Code of the Russian Federation on the priority right to stay in employment in case of reduction in number or staff of employees.
However, the employer ignored this provision of the law. He did not provide evidence of an evaluation of 17 applicants for a vacant position. In doing so, the court referred to the procedure approved by the employer for determining employees with priority right to stay on the job. This procedure provides that the commission determines the list of persons who have such a right. However, the court was not provided with the minutes of the committee meeting to determine the employee with priority right to take the position for which there were 17 applicants. The employer had identified employees with preferential rights once, prior to the start of the downsizing procedure. He decided that this evaluation was sufficient. But the court held that the employer was wrong.
Simultaneously with the downsizing procedure, in which employees were terminated at the employer’s initiative, they were offered to terminate their contracts by agreement of the parties for several salaries. Even those workers who were not affected by the cutbacks agreed to this. The documents showed that one worker was dismissed by mutual agreement of the parties on September 10, and on September 17 this unit was made redundant. In other words, the staff position had been vacant for six days. The position was not offered to any of the employees. Therefore, the court agreed with the plaintiff, who argued that he could have applied for the position, but the employer deprived him of that opportunity.
In doing so, the court paid no attention to the argument that there was a violation of the union’s request for a reasoned opinion. But it did not matter to the reinstated employees what was the basis for the cancellation of the employer’s order. What mattered to them was the result.
One of the six cases has now been reviewed by the court of cassation. The decision of the court of first instance has been left unchanged.
Recommendations to employers
1. It is unacceptable to remove positions that have been vacated but are not subject to redundancy once redundancy proceedings have begun.
2. If the employer adopts a Regulation on the determination of employees with priority right to remain in employment when reducing the number of employees or staff, then all stages of evaluation should be provided for.
(3) If more than one employee is applying for the same vacant position, it must be determined which of them has priority right to remain employed.
4. It is important to offer all available vacancies.
5. If the organization has a trade union, it is not necessary to submit impersonal documents when requesting a reasoned opinion, which will not allow you to verify the correctness of the employer’s actions. The employer’s openness will allow the union to point out mistakes, and the employer to correct those mistakes and conduct the reduction procedure without violations.
Recommendations to employees
1. Paragraph 3 of Article 81 of the Labor Code of the Russian Federation obliges the employer to offer the employee vacancies corresponding to their qualifications and lower positions in the case of reductions. Therefore after receiving notification of the impending layoff it is necessary to inform the employer in writing of the education available, with supporting documents attached. This can be a diploma of specialized secondary or higher education, a driver’s license, documents confirming advanced training, certificates of foreign language proficiency, etc. Sometimes the employer does not keep such documents and therefore may not know about the employee’s qualifications.
If, after submitting supporting documents, the employer pretends to be unaware of the employee’s qualifications, then the failure to offer him a position for which he could qualify may be recognized by the court as a violation, the dismissal as unlawful, and the employee will be reinstated.
2. Within 14 days from the date of dismissal you should register at the employment center. Why? An employee dismissed in connection with staff reduction is entitled to average monthly earnings for the period of employment. The period for which the average wage is paid cannot exceed three months after the dismissal with deduction of the severance pay (Article 178 of the Labour Code of the Russian Federation).
In other words on the day of dismissal the employee receives severance pay in the amount of his/her average earnings. If during this month and the following month (two months in total) the dismissed employee still does not find a job, he/she will be entitled to apply to his/her former employer for another average monthly wage. He or she will receive it for the second month in which he or she was unemployed.
If the employee fails to find a job in the third month, he or she will be able to receive the average monthly wage from the former employer for that period as well. The third payment is made in exceptional cases by decision of the Employment Service, provided that the employee is registered with the Employment Centre within 14 working days of dismissal and has not been employed within two months of the date of dismissal.
(What to do if you feel you have been treated unfairly at work – lawyers give the answer to this question in our section “Employee Employment Rights.”)
Six situations when downsizing an employee can end up in court
Nervous situation with staff reductions constantly forces employers to make mistakes. Sometimes they forget to notify the employees about the upcoming event, or they don’t offer the vacancies if they are available, or they don’t inform the employment agencies about the situation. But, perhaps, the most questions are related to the categories of employees, whom the legislation protects from dismissal.
It would seem that everything is clear. The Labor Code has article 261, which defines the categories of people not subject to layoffs. These are pregnant women, single mothers and other persons raising children under the age of 14 and a disabled child under the age of 18, and women with a child under the age of 3. But in practice things are much more complicated.
There are cases when an organization does not have a collective agreement, and the management has planned the procedure of staff reduction, in connection with which it began to serve notices to employees. And suddenly the collective organizes itself and nominates initiative representatives. The complexity of the situation is that most often the representatives are people who themselves fall under the downsizing procedure.
What to do with the negotiators?
Article 39 of the Labor Code of the Russian Federation provides guarantees and compensations for people participating in collective bargaining. It states that employees’ representatives who were nominated as negotiators to conclude a collective bargaining agreement retain their jobs for the entire period of negotiations.
Negotiating a collective bargaining agreement is a long process and can take up to three months. Therefore, if you are negotiating a collective bargaining agreement at a time when downsizing is also underway, you cannot downsize representatives. They will retain their jobs for the duration of the negotiations.
Reduction of women on maternity leave to take care of a child under the age of 3
It is also necessary not to forget about Article 256 of the RF Labor Code, which says that women (fathers, grandmothers, grandfathers, and other persons) who are on leave to care for a child under the age of 3 retain their job (position) for the duration of this leave.
Difficulties with this category of personnel often arise in public companies. Personnel managers receive an order from above that some positions and even structural subdivisions have to be excluded, and suddenly it turns out that the people on maternity leave work in these very structural subdivisions. What to do with them? Often they follow the order and cut them down. But if the employee goes to court, he will be restored to work.
Firing a pregnant woman
The only ground on which pregnant women can be dismissed is the liquidation of the organization or the termination of the IE.
Here it is also important to pay attention to one detail. Even if the employee herself was not aware of her pregnancy, but it later turns out that on the date of dismissal she was pregnant, she will be reinstated in court.
According to clause 25 of the Resolution of the Plenum of the Supreme Court of the RF from 28.01.2014 № 1, “absence of the employer’s knowledge about the pregnancy is not a reason to dismiss the claim for reinstatement”.
And one more thing: a pregnant woman, whose employment contract was terminated on the employer’s initiative, is subject to reinstatement even if by the time her claim for reinstatement is considered in court, her pregnancy has not persisted.
Employers keep coming back to the same question: what to do with pregnant women and people on maternity leave if they need to be laid off due to industrial necessity, but cannot do so according to the law?
In fact, there are only two ways out in this case:
- You negotiate with them and draw up a dismissal by agreement of the parties;
- You wait for them to move from a privileged to a non-confidential category.
Who qualifies as a single mother?
Since a single mother is protected from reduction by Article 261 of the RF Labor Code, it is important to understand how the courts understand this category of employee. If you refer to paragraph 28 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of 28.01.2014 № 1, it recommends proceeding from the fact that single mothers include a woman who is the only person who actually exercises parental responsibilities for raising and developing native or adopted children in accordance with family and other legislation, that is, raising them without a father, in particular in cases where the father of the child:
- is deceased;
- Has been deprived of parental rights;
- Restricted in parental rights;
- Is recognized as missing;
- Is recognized as incapacitated (partially capable);
- cannot personally bring up and support a child for health reasons;
- Is serving a sentence;
- Avoids raising children or protecting their rights and interests.
What if an employee is on vacation or on sick leave and needs to be laid off?
Dismissal of an employee during a period of incapacity for work or while on vacation is considered unlawful (Article 81 of the RF Labor Code).
If the employee resigns, there is nothing to prevent him or her from being laid off while on vacation or while on sick leave. But downsizing is the employer’s initiative. And here everything is not so simple.
Often there are situations in which the employer actually does the right thing: he gives the employee two months’ notice of his upcoming dismissal, draws up the documents, but then the dismissal day comes, and the employee does not show up for work – he says he is sick. What to do?
Many employers start to think of something and make mistakes as a result. Although the basic rule they should follow is that no matter how long an employee is sick or on vacation, as long as their disability or vacation lasts, you cannot fire them.
What scares employers in these situations? During the time the employee is on sick leave, a new staffing schedule may come into effect and the employee’s job function “disappears.” In essence, it would no longer be possible to provide the employee with a job.
For example, you expect an employee to come off sick leave on November 10. Prior to November 9, he was temporarily disabled. November 10 comes, you process the dismissal. You do not need to put the November 8th or 9th dismissal date, because it should not fall on the period of temporary disability or vacation.
Since you can no longer provide the employee with a job on November 10, the ideal way out in this case is to do it for organizational reasons (absence of a position in the staffing table) and to file the dismissal on November 10.
How the priority right to remain employed is determined
At the same time with those employees who can not be reduced, you should remember about those categories of staff, which by law have a preferential right to stay on the job. And here the most important question – when does this right arise? When there are several employees applying for the same position.
For example, you have two full-time electricians, and you only need to keep one. You will have to decide who has priority right to stay on the job.
It is in these situations that the need arises to create a commission. And although it is not written in any normative act, many employers have felt the need for the commission, faced with the intricacies of staff reduction procedures in practice.
The fact is that the key task of the commission is to gather information about employees and determine their preemptive rights. Such work helps a lot and protects the company from negative consequences, because the main motive of workers who challenge the procedure of reduction in court – to prove that they just had to stay working. Their question “why me?” triggers a check on the correctness of the employer’s actions – did the employer identify preemptive rights and how exactly?
Key criteria in determining preemptive right
First of all, you need to carefully read Article 179 of the Labor Code of the Russian Federation. Many people believe that preemptive right is primarily the employee’s family. However, this is not true. The main criteria are productivity and qualification of the employee.
But, as you know, productivity is not so easy to determine. Especially when it comes to categories of workers whose productivity is difficult to measure. For example, creative workers. Then you must take into account their qualifications. It is easier to determine if only because part 1 of Article 195.1 of the Russian Labor Code gives a clear definition of it.
The article shows that the employee’s qualification consists of:
- level of knowledge;
- professional skills; and
- work experience.
You will have to compare workers on all of these characteristics when determining priority right to remain in the job.
Long before the downsizing procedure, some companies have an employee evaluation procedure. It helps to find out who has what qualifications. If your company has not had an attestation, then it is necessary to collect all the documents on employees, confirming their skills, knowledge and experience. The result of the commission’s work is drawn up in the form of a detailed act, which literally indicates line by line who has what benefits and why.
Only after you find out the qualifications of employees, you need to refer to Part 2 of Art. 179 of the Labor Code, which states that when equal performance and qualifications must go to the identification of the following parameters:
- whether the employee is a family person (if there are 2 or more dependents (disabled family members who are fully supported by the employee or who receive assistance from the employee, which is their permanent and primary source of livelihood));
- whether the employee is a person whose family does not have other employees with independent earnings;
- Whether the employee has suffered a work-related injury or occupational disease while working for the employer
- Whether the employee is disabled in combat to defend the Fatherland;
- Whether the employee is one of those who are receiving on-the-job training at the employer’s direction.
These categories of employees will have a priority right to stay on the job only after you have identified equal performance and qualifications. All of these details are recorded in a deed.
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