On March 1 2012 several amendments were made to the Collective Redundancy (Notification) Act. Under the act, an employer must notify the relevant trade unions and the Employee Insurance Agency if it intends to terminate the employment of at least 20 employees within one area within a three-month period based on economic grounds. Termination by mutual consent is now included within the scope of the act. A year has since passed, but the litigation expected to result from the changes has as yet failed to materialise.
Terminations by mutual consent were previously excluded from this obligation. However, such terminations were subsumed under the act when the amendments were enacted. Presently, the following three forms of ‘involuntary termination’ fall within the scope of the act:
- l termination by way of a request for dissolution before the sub-district court;
- l termination by giving notice after the Employee Insurance Agency has granted a permit; and
- l termination by mutual consent.
Employers must consult the trade unions. However, this obligation will be deemed to have been fulfilled should the trade unions:
- l expressly waive their right to be consulted in writing; or
- l fail to respond to a written invitation, provided that the invitation was received at least two weeks before the proposed date of the consultation meeting.
Employment agreements cannot be terminated earlier than one month after the employer has notified the Employee Insurance Agency and the unions. This differs only if the trade unions declare that they have been consulted and agreed to the termination of the employment contracts.
In cases where the sub-district court is requested to dissolve an employment agreement, it is obliged to check whether the act applies and whether the employer has complied with its obligations thereunder. Attached to the request for dissolution, an employer must submit a declaration from the Employee Insurance Agency that the notification obligation has been fulfilled and a declaration that the trade unions and works council have been consulted. Only in special circumstances can an employment agreement be dissolved in the absence of a consultation or failure to observe the waiting period.
Non-compliance with employer obligations under the act might lead to the termination or termination agreement being annulled. An employee can request that a termination by mutual consent or termination pursuant to a permit being obtained from the Employee Insurance Agency be annulled if the employer fails to:
- l comply with the notification and consultation obligation; or
- l observe the one-month waiting period.
The employee must file a request within six months after termination. If the termination is annulled, the employment agreement is assumed to have remained in force.
Consequently, the employee can claim his or her normal salary and other emoluments as of the date that the agreement was terminated. On the other hand, the employer may reclaim any compensation that it paid to the employee in connection with the termination. However, problems may arise if the employee wishes to be reinstated to his or her former position.
Impact of voidability
Employers have objected to the voidability of termination agreements, since small batches of terminations by mutual consent which previously did not fall under the act can become subject to annulment due to terminations at other offices in the same area within the prescribed timeframe (ie, three months). The legislature opined that dismissals on economic grounds do not occur suddenly; such dismissals have been prepared thoroughly by employers. Consequently, employers should know when 20 or more employees will be dismissed within one area within a three-month period.
However, the legislature seems to have ignored potential difficulties for employers. The legislation might cause problems if various branches of a company commence small reorganisations within the three-month timeframe. As a result, a situation which at first glance does not seem to be covered by the act may, after a few months, fall within its scope. As the employer will have signed termination agreements already, it may be faced with former employees invoking annulment of their respective termination agreements.
Despite the anticipated difficulties of the amendments, one year after they came into force no judgments have been published in respect of employees requesting their termination to be annulled on the basis of non-compliance with the act. Nevertheless, employers are advised to remain alert and bear in mind that terminations by mutual consent are also affected. Further, employers should realise that the number of 20 employees dismissed within a three-month period relates to all employees dismissed by the various branches of a company within one area.