Lay-offs – here's how it works

News article

Here we have collected basic information on lay-offs and the temporary changes that the pandemic has caused to legislation and collective agreements concerning the laying off process.

An employer may lay-off an employee on two grounds. Firstly, the employer has the right to lay-off if they have financial or productional grounds for terminating the employee's employment relationship. Secondly, the employer has the right to lay-off if the need for work has temporarily decreased. Here, temporary means that the amount of work or the employer's ability to provide work has been reduced for a period of max. 90 days. Laying off also requires that the employer cannot be reasonably expected to arrange other suitable work or training for the employee that also meets the employer's needs instead of the lay-offs.

In regular circumstances, an employer may only lay-off a fixed-term employee if they are working as a substitute for a regular employee and the employer would have the right to lay-off that regular employee if they were at work.

Because of the COVID-19 situation, the government proposed and the parliament accepted temporary changes to labour legislation concerning lay-offs. These changes allow the employer to also lay-off employees in fixed-term employment relationships under the same conditions as regular employees. This is a temporary change that will only be in effect 1.4.–30.6.2020 as far as is known at the moment of writing. This temporary change does not concern the public sector, i.e., instances such as the state, municipalities or municipal federations.

Co-operation negotiations

An employer must engage in co-operation negotiations before laying off an employee if they employ at least twenty employees. In smaller companies the employer must present the employees a preliminary report of the lay-off.

The COVID-19 situation has also caused changes to co-operation negotiations. In regular circumstances, the negotiation period is 14 days or six weeks, depending on the kind of lay-offs and the size of the company. Now this negotiation period has been shortened to five days. This legislative change also concerns private employers only and is in effect 1.4.–30.6.2020, as far as is known at present. The shortened negotiation period is also applied to such negotiations that were ongoing as the legislative change entered into effect on 1.4.2020 and to such negotiations that begin before the end of June but resume after 30.6.2020.

Lay-off notice period

In normal circumstances, the employer must notify the laid off employee at least 14 days before the lay-off is to begin. This clause in the Employment Contracts Act was also temporarily changed as a result of the pandemic: now it is enough that the employer notifies the laid off employee five days in advance. This change, too, is in effect 1.4.–30.6.2020.

In addition to statutes in law, collective agreements often contain clauses on co-operation negotiations and lay-off notice periods as well. After the COVID-19 hit, YTN has also engaged in negotiations with the employer side to change our collective agreements to temporarily shorten co-operation negotiation periods and lay-off notice periods to five days.

Working while laid off

An employer may accept other work for the duration of the lay-off as long as the work does not involve activities that are in competition with the employer. The prohibition of competing activity found in the Employment Contracts Act and the separate prohibition of competition clauses contained in employment agreements remain in effect even during a lay-off.

When working is to resume, the employer must notify an employee who is laid off until further notice of the matter at least seven days before the work is to resume, unless something else has been agreed upon. If the employee has accepted other work for the duration of the lay-off, they have special grounds for terminating this second employment relationship while adhering to a period of notice of five days.

Handing in your notice during a lay-off

An employee has the right to hand in their notice during a lay-off without a separate period of notice if the date set by the employer for the continuation of the work is over seven days away.

In the event that the lay-off has lasted for more than 200 calendar days, the employee has the right to terminate the employment relationship and receive notice pay as compensation. It should be noted that this pay is indeed compensation – not salary – and the employee does not need to be at work to obtain it (i.e., no duty to work). The aforementioned rule does not concern part-time lay-offs. 

Annual leave and lay-offs

If an employee is laid off full-time, they earn new annual leave on those days when they are prevented from working because of the lay-off. The annual leave will accumulate for a maximum period of 30 work days. The same applies to employees who have been laid-off on a part-time basis, but they accumulate annual leave over the course of a maximum period of six months at a time.

Employees take their annual leave according to the Annual Holidays Act as usual, even during a lay-off.

Employees take their annual leave according to the Annual Holidays Act as usual, even during a lay-off. Ultimately, it is the employer who sets the time of annual leave, but even then the holiday must be scheduled for the holiday season. The summer holiday season is 2.5.–30.9. and the winter holiday season is 1.10.–30.4. The employer pays holiday pay for the duration of the annual leave.

As a rule, the employer must notify each of their employees of the time of their annual leave at least a month before the leave is to begin. If a period of notice of one month is not possible, this notice must be given at least two weeks before the holiday is to begin. If the employer has already notified the employee of the time of their annual leave, that notification is binding for the employer regardless of any possible lay-off needs.

The author works at TEK as an employment lawyer.

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