Collective Redundancies

• Author: Merle Muda
• Pages: 119-123

Merle Muda

Collective Redundancies

The legal status of workers in the event of collective redundancies is regulated on the international level by International Labour Organisation (hereafter ILO) Convention No. 158 concerning Termination of Employment at the Initiative of the Employer and the 1975 European Union (EU) Directive 75/129/EEC on the approximation of the laws of Member States relating to collective redundancies, amended by Directive 92/56/EEC of 1992. Little attention has been given to collective redundancies in the existing Estonian legislation, and the subject is only indirectly referred to in a few paragraphs of the Employment Contracts Act (hereafter ECA), which does not, in comparison with the international regulations, provide workers with sufficient protection. The aim of this article is to determine which principles have been set down by the ILO and EU relating to collective redundancies, the legal status of Estonian workers regarding this question, and how in future it is intended to protect Estonian workers in the event of collective redundancies in accordance with the draft of the Special Principles of the Law of Obligations Act.

Concept of Collective Redundancies

Collective redundancies are regulated by ILO Regulation No. 158, Part 3, entitled "Additional Provisions on the termination of employment contracts for economic, technological, structural or other similar reasons". The Convention does not define the concept of collective redundancies, but instead allows the question to be regulated by Member States: pursuant to Articles 13(2) and 14(2) of the Convention, Member States, after having fulfilled the obligations stipulated in the above-mentioned Articles of informing and consulting with the workers' representatives and informing the competent public authority, may introduce limitations to the execution of the stipulation, in cases where the number of workers whose termination of employment is contemplated is less than a certain number or percentage of the workforce [5, pp. 239-245].

The concept of collective redundancies is established in Article 1(1) of EU Directive 75/129/EEC, according to which collective redundancy¹ means dismissals from work for one or more reasons not related to the individual workers concerned where, according to the choice of the Member States, the number of redundancies is:

either, over a period of 30 days:

(1) at least ten workers in establishments normally employing more than 20 and less than 100 workers;

(2) at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers;

(3) at least 30 in an establishments normally employing 300 workers or more,

or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question [6, pp. 173-175].

In the case of collective redundancies, it must be kept in mind that the reason for the termination of an employment contract must be of an economic nature, that is the redundancy must have no connection with the individual worker. It is also important that the initiative for the termination of the contract come from the employer. The European Court of Justice has come to this conclusion, asserting that extensive termination of employment contracts after an employer has announced to a bankruptcy court that he doubts his ability to pay a debt is not considered to be redundancy according to Directive 75/129/EEC [2, pp. 312]. Thus, the Directive is not applicable to a situation where an employer may plan, on the basis of the establishment's economic situation, collective redundancies, although for some reason does not carry them out. The Directive does, however, apply to collective redundancies which are connected with the termination of the operations of an establishment where that is the result of a judicial decision [2, p. 313].

The term "establishment" is not defined in the Directive. This has led to continual confusion and legal disputes, since different terms, which do not carry the same content, have been used in the translation of the above-mentioned concept into the languages of the Member States (establishment, institution, local unit, place of work, etc.) [2, p.314]. Pursuant to § 5(1) of the Estonian Commercial Code, an establishment is an economic unit through which a trader operates. An establishment is comprised of things, rights and obligations belonging to the trader which are or should, by their nature, be designated for the activities of the establishment [8]. Accordingly, an establishment is not a legal person, nor can it be an employer. A trading company, which may own several establishments, is, as an a legal person, an employer. Therefore the collective dismissal of workers in an establishment is decided by a trading company. The European Court of Justice has taken the view that in determining the number of workers to be dismissed, one must consider the specific unit where the worker is employed, and it is not of importance that the unit be competent to implement collective redundancies on its own [2, p. 314]. Thus, in Estonian conditions, one must, where necessary, consider the structural unit (establishment) where the worker is employed, not the employer as a legal person.

The Estonian ECA does not define the concept of collective redundancy. ECA § 89 introduces the principle that if an employer intends to terminate employment contracts with ten to twenty workers during a three month period due to a lay-off of workers and job placements for the released workers are not ensured, the organisation or person representing the workers may suspend termination of the contracts for up to one month. If more than 20 workers are released during a three month period due to a lay-off and job placements are not ensured for the released workers, the organisation or person representing the workers may suspend termination of the contract for up to two months [7]. This...