In view of the ever-changing economical environment and the directions issued from time to time towards the restructuring or the moving of the internal employees, the concept of laying off employees has come to be of great importance to many companies. Hence, layoffs enable companies and organizations to temporarily suspend their employment contracts instead of applying the mass lay off method. This mechanism can prove to be critical in retaining talent and in reducing the costs of operations in economic downturn situations. However, such situations can only be applied if the employee’s rights and the appropriate procedures are invoked.
What does Layoff mean?
The layoff refers to the situation whereby employment contracts are suspended temporarily but not terminated. During the course of the lay off, employees are not paid any salary and do not work but their legal relationship with the employer is retained. In this manner, this mechanism is employed as an alternative to applying the layoffs in case where there is an economic crisis or there is a need to restructure the internal organization.
In the context of Anglo-Saxon countries labour legislation a layoff allows an employer to suspend the contract of employment for a period ranging between two and five months with appropriate deals with union representatives and the authorization from the Ministry of Labour.
During this period, employees can receive government assistance, such as unemployment insurance , to minimize the financial impacts.
What is the difference between layoff and mass layoffs?
The distinction among layoff and mass layoffs lies in the main within the brief nature of layoffs as compared to the permanent termination of contracts in mass layoffs.
In layoffs, employment contracts are briefly suspended, maintaining the employment courting, at the same time as in mass layoffs, contracts are definitively terminated, finishing the relationship.
Furthermore, the implementation of layoffs requires negotiation and agreement with unions , whereas mass layoffs follow labor legislation without the need for union approval.
What is the relationship between layoff and unions?
The dating among layoff and unions is vital, as the implementation of layoff requires negotiation and settlement with these entities.
Here, unions represent the hobbies of employees, ensuring that their rights are respected at some stage in the brief suspension of employment contracts.
Therefore, the layoff process must be previously agreed with the unions, including:
- Initial proposal: the company presents a detailed layoff proposal, including reasons, duration and benefits;
- Negotiation: unions analyze and negotiate terms to ensure financial support and protection for employees;
- Collective agreement: a collective agreement is signed, regulating the layoff with clauses on financial assistance, return to work and post-layoff stability.
Why do companies lay off?
Companies lay off employees for a variety of reasons, mainly to temporarily adjust their workforce without resorting to permanent layoffs.
So, the most common reasons include:
- Economic crisis: reduce costs during periods of recession or financial difficulties;
- Restructuring: implementing new strategies or technologies without losing talent;
- Drop in demand: adjust production in sectors with seasonal variations in demand.
In this way, layoff allows companies to keep their employees engaged and prepared to return to work when the situation improves.
Which companies can apply for layoff?
As described in art. 476, any company can apply for layoff, as long as it follows some specific criteria:
- Economic justification: the company must present clear reasons, such as economic crises or the need for restructuring;
- Negotiation with unions: the company needs to negotiate and obtain a collective agreement with the unions that represent the employees;
- Authorization from the MTE: the implementation of the layoff requires authorization from the Ministry of Labor, in accordance with current legislation.
Thus, these criteria ensure that the layoff is a temporary and agreed measure, protecting the rights of employees while the company goes through difficult times.
Furthermore, it is important to remember that layoff measures should only be applied in exceptional cases, and not as a strategy to remove certain groups of employees.
One example is the case of a disabled employee who was laid off by the company. However, based on analyses of the group of employees laid off under the same measure, the TRT found the company guilty of discrimination.
Therefore, it is HR’s role to intervene and present the motivations, needs and applicable penalties in the event of layoff.
What are the rights of those on layoff?
During layoff, employees have several rights to make certain their protection all through the period of suspension of employment contracts:
- Financial assistance: Employees may receive financial assistance, usually equivalent to unemployment insurance. This assistance helps cover their basic needs during the period when they are not working.
- Maintenance of benefits: benefits such as health insurance, dental care and other collective agreements remain valid during the layoff.
- Job security: After the furlough period ends, employees are guaranteed job security for a set period, usually equivalent to the length of the furlough period. This means that they cannot be fired immediately upon returning to work, providing additional security.
- Participation in qualification programs: in some cases, during the layoff period, employees may be included in qualification or training programs, aiming to improve their skills and increase their employability.
- Communication and information: companies are required to inform employees about the details of the layoff, including duration, benefits during the period and procedures for returning to work.
These rights are established to protect employees during the temporary suspension of their employment contracts, ensuring financial support and maintenance of essential benefits.
How long does Layoff last?
The length of the layoff can vary, but generally follows the following criteria:
- Initial period: the layoff lasts between two and five months;
- Extension: may be extended by means of a collective agreement and authorization from the unions;
- Frequency: the contract may only be suspended once every 16 months;
- Stability: after the end of the layoff, employees are guaranteed job stability for a set period, normally equivalent to the duration of the suspension.
These criteria are established to ensure that the layoff is a temporary measure and agreed between the parties.