Transfer of undertakings: procedural aspects

On August 25, 2011, in Transfer of undertakings, by Kalina Jaroslawska

Employers participating in the transfer of undertakings must meet certain procedural requirements to make sure the the transfer complies with the labour legislation and measures for protection of employees.

First, they must notify their trade unions or – where there are no trade unions present – their employees of the transfer and related matters (such as reasons for the transfer and its predicted effects as well as plans concerning employment or work and pay conditions). Notification must be made in writing at least 30 days before the planned date of the transfer. However, failure to provide notification does not render the transfer null and void.

Second, the employer may not terminate the employee solely on the grounds of the transfer. Such termination will be considered unjustified and trigger employee remedies I discussed in some of the blog entries before. However, there may be other reasons to justify termination, e.g. the need to restructure or reduce the employer’s workforce, or an employee’s poor performance. The important thing is that any such reason must be genuine and concrete.

Third, employers partaking in the transfer of undertakings must bear in mind that in connection with the transfer an employee is entitled to make use of a “summary” termination procedure, that is, an employee may terminate the employment contract on 7 days’ notice within 2 months of transfer, without giving reasons. An employment contract so terminated will be understood to have been terminated by the employer with the applicable period of notice. Since the procedure of transfer is aimed at protecting the employee in the first place, there is no equivalent right for the employer and no “summary” termination procedure is available for them. As mentioned above, even regular dismissals solely on the grounds of the transfer are limited.

Photo: http://www.flickr.com/photos/cristinabe/4635930677/

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The answer is: YES, the employee may terminate the employment contract without notice, provided that the employer, as the Labour Code says, grossly violates his or her basic duties with regard to the employee.

The key issue for the employee is then what situations are caught by gross violation in question.

First and foremost, the employer will be considered to grossly violate his or her duties with regard to the employee, when they fail to pay wages on time intentionally or negligently so that material interests of the employee become threatened or the employee suffers a loss in that respect. These two sets of circumstances – one on the part of the employer, and the other on the part of the employee – must coexist for the employer’s failure to pass the test for “gross violation of his or her duties with regard to the employee”. As a result, in many cases a one-time several day delay in payment of wages, especially when the employee’s salary is considerable, though clearly a violation of the employer’s duties, may not be found gross. It will then not adequately justify termination of the employment contract without notice.

If termination of the employment contract is justified, the employee may claim damages:

  • equal to wages due for the applicable notice period – with regard to employment contracts for indefinite time;
  • equal to two weeks’ wages – with regard to employment contracts for definite time.

However, there is a trap for the employee if the termination without notice is found unjustified, i.e. when the employer’s conduct is not qualified as gross violation of basic duties with regard to the employee. In such a case it is the employer that may claim damages, in the same amounts as above.

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Irrespective of the kind of the employment contract, if it was terminated without notice in an unfair or unlawful manner, the employee may file for:

  • reinstatement to his or her previous position or
  • damages.

The choice of the remedy to make use of belongs to the employee.

The amount of damages depends on the kind of the employment contract:

  • if an employment contract for indefinite time was terminated without notice, the damages equal, as a rule, to the employee’s wages for the applicable notice period;
  • if an employment contract for definite time was terminated without notice, the damages equal, as a rule, to the employee’s wages for the time, until which the terminated employment contract was supposed to last, though for no longer then 3 months.

The court may award damages even if the employee demanded otherwise if it is found that, despite the termination being unfair or unlawful, it would be impossible or purposeless to continue employment.

Specifically in relation to employment contracts for definite time, sometimes the employee may be entitled to damages only. This restriction applies in situations where the period for which the employment contract was supposed to remain in force has already lapsed or where the period in question is so short that reinstatement seems inexpedient judging by the facts of the case.

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In contrast to the employment contract for indefinite time, termination of the employment contract for definite time may only be challenged at court if it was unlawful, i.e. violated statutory provisions related to termination. From the legal standpoint, there is no such thing as an unfair termination of the employment contract for definite time because when you terminate a contract of that kind by notice you don’t need to give a justifying reason.

This affects the scope of remedies available to an employee whose employment contract was definite time was terminated. Namely, reinstatement to the previous position is, as a rule, excluded and the employee may only claim damages.

The amount of damages which may be awarded by the court will be equal to the employee’s wages for the time, until which the terminated employment contract was supposed to last, though for no longer then 3 months.

Again, a court dispute initiated by the employee may be resolved by means of a settlement, the subject-matter of which may vary, depending on the parties’ mutual arrangements, e.g. it may provide for a different amount of damages or a different manner of termination of employment.

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An employee who has been terminated with notice may bring an action against the employer. The scope of available actions depends on the kind of the employment contract which has been terminated.

In case of the employment contract for indefinite time the employee may challenge termination that was unfair or unlawful. ‘Unfair’ means without just cause, e.g. when grounds for termination provided by the employer are untrue. ‘Unlawful’ means violating statutory provisions related to termination, e.g. made otherwise than in writing or during the employee’s justified absence.

The employee who has been dismissed in an unfair or unlawful manner may file for:

  • declaration that the termination with notice was ineffective (as long as the contract is in force) or reinstatement to his or her previous position (when the employment contract has come to an end due to lapse of the notice period); or
  • damages.

The choice of remedy belongs to the employee.

The amount of damages which may be awarded by the court ranges from two weeks’ to three months’ wages, but no less than wages due for the applicable statutory period of notice. The court may award damages even if the employee demanded otherwise if it is found that, despite the termination being unfair or unlawful, it would be impossible or purposeless to continue employment.

A court dispute initiated by the employee may be resolved by means of a settlement, the subject-matter of which may vary, depending on the parties’ mutual arrangements, e.g. it may provide for damages instead of reinstatement or a different manner of termination of employment.

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