Termination of employment for organization reasons - Redundancy

In connection with spreading of coronavirus titled as SARS CoV-2, many employers are persuaded to deal with existential problems. One of methods, how to deal with crisis, is to make radical cuts, including redundancy. In this situation employers terminate employment for organisation reasons.

Employment contract can be terminated only for reasons written in Section 52 of the Labour Code[1] (hereinafter “Labour Code” or LC”), one of them are organisational changes because of redundancy of an employee. Reasons can be technical, technological, economical or there can be other factors which have an impact on employer's business plant or on other employer's activities. If the result of these organisational changes is impossibility to assign employees' work in accord with employment contract (objectively), these changes can be notice reason.

The employee becomes redundant due to the decision of the employer or the competent authority about change of his tasks, technical equipment or reduction of the number of employees in purpose of increasing the effectivity of work or other organisational changes.[2] The notice reason has to be defined so it can't be confused with another.

Redundacy of an employee due to organisational changes

Redundancy due to (any kind of) organisational change is the only legal reason of notice according to Section 52 (c) of the Labour Code. Preconditions for redundancy of an employee are:

  • adoption of a decision to change task of an employer, technological equipment, reduction of the number of employees for the purpose of increasing work effectiveness or other organisational changes (hereinafter “decision about changes or decision about organisational changes”)
  • redundancy of an employee,
  • causal link between decision about changes and redundancy of an employee

Decision about changes

Decision about changes is adopted by an employer, form and name of the decision re not specified. It is appropriate to decide in a form with acceptance and content without any doubts, the optimal is to adopt it in written form.[3] The employee must be informed about the decision no later than in the notice; the text of decision doesn't have to be presented to him. The decision about changes doesn't have to reducing the number of employees, this was confirmed by the Supreme Court: “(...) termination of an employment contract by notice because of redundancy is not qualified by absolute redundancy of the number of employees. (…) contrarily it can happen even in connection with increasing the number of employees. The law allows employers to regulate the number of employees and even their qualification constitution so the employer can employ the number and qualification constitution of employees which is suitable for him”[4] In cited decision, the notice was given to an employee who worked as a shop assistant. Her working position was cancelled by decision about organisational change and it was made new position - assistant manager and on this position was employed new employee. The reason of this change by employer was “(….) change of functional classification of particular employees on working place[5] (…)”. In cited decision, the Supreme Court cancelled the decision of appellate court by which the notice was adjudged void and reproach inadequate assessment and point out necessity to examine content of work of shop assistant and new position of an assistant manager, especially examine whether are differences between these positions.

The employer has to consider really carefully, if the employee becomes redundant in consequence of organisational change - it's not allowed to increase the number of employees with the same type of work and at the same time to fire one of employees because of redundancy. The work of this employee is still necessary for an employer.

The law allows to employer to regulate the number of employees and even their qualification, so the number of employees and their qualifications is suitable for him.[6] The employer has a free hand in realizing his needs and chooses the composition of employees, so the redundant employee can be substituted by more employees, but different and more suitable. The situation can be demonstrated on this example, the employer who owns a restaurant decides to by better equipment in kitchen. Because of better equipment he will need less of cooks, but he will employ one more waiter. In this case is decision about organisational change legitimate because it will end by redundancy of one cook.

For validity of notice is not important if the decision will be effective or not. Practise of the Supreme Court: “(fulfilment of material prerequisite of notice) it is valid even if the effect because of which the organisational change is done, isn't effective.”[7] If “(…) the decision (competent authority) is done because of another aim so the employer (competent authority) just pretended the adoption of a decision about organisational change (…), it is necessary – regardless how he named the decision – to deduce that the decision about organisational change isn't accepted.”[8] The examination of organisational changes is necessary to do in total, logical continuity and in the wider content. It would be covert organisational change for example in this situation, the employer employed one more employee as a driver to four other drivers. In this case is without doubt that they do the same work. The unwanted employee was than fired as redundant.[9] This decision can't be a decision about organisational change according to Section 52 (c) of the Labour Code because the employer employed another diver even if he didn't have enough work for him. He created the artificially redundancy of an employee who was fired by the increasing the number of employees. The court declared the notice invalid.

Redundancy of an employee

The employee is redundant within the meaning of that provision if the work arranged in an employment contract is not needed for an employer anymore. “The conclusion about redundancy of concrete employee must be based on type of work which an employee does according to an employment contract and examination if the organisational change makes this type of work entirely or in present extent of work unnecessary for an employer.”[10] If the employer decides to make an organisational change and increase the efficiency of producing department by selling one of his two producing machines it is possible to fire one of employees who becomes redundant for an employer.

If more employees become redundant, the practice of the courts says that: “If an organisational change has an impact on more employees and just some of them are redundant for an employer, decision about choosing of a redundant employee makes an employer; the court is not (not even in deciding about validity of notice) entitled to examine a decision of an employer.”[11] The employer' s decision can't be discriminatory, and it has to respect the principle of equal treatment according to Section 16 of the Labour Code, the employer can't terminate an employment contract because of age or gender. The court decided about invalidity of notice of sixty years old employee due to an organisational change, the employer wanted to reduce the number of employees by 24 employees because of reducing the budget for employees' payments. But according to an employee it was because of generation change and the employer just wanted to fire employees in retiring age. The court declared that the decision about an organisational change had not been accepted and the notice has been invalid due to discriminatory acting.[12] The employer didn't win at appeal court or Supreme Court.

If due to a decision about organisational changes the working filling decrease or some of current works are cancelled, the employee's work is not as much needed as before. In this case the employer has to offer an employee an agreement about change of an employment contract, for example by shorter working hours or add some work, it was declared also by the court: “ If an employee who works for an employer in fixed week working hours and his work is not needed for an employer anymore, refuses to conclude an agreement about change on an employment contract in which is shorter working hours (compare Section 42 Subsection 1 and Section 80 of the Labour Code), is there a reason for notice according to Section 52 ( c) because according to a decision about reducing the number of employees, the employee become redundant.[13]

On the other hand, if the range of work is bigger, cited decision of court couldn't apply. This happened in case about invalidity of an employment contract of an employee who was a part time clarinet and saxophone teacher. This employee was fired because of redundancy due to an organisational change by which a teacher position for 13 hours long teaching of playing on clarinet and saxophone was cancelled. Then was created a new position for a “full time clarinet and saxophone teacher”. The employee dismissed an offer to increase his part time job to full time job, so he was fired. The organisational change was done due to increase of work, the employee couldn't become redundant, the court said this: “(…) the plaintiff couldn't become redundant for defendant because the work, which plaintiff did for defendant according to employment contract (“saxophone and clarinet teacher”) did not become redundant for defendant in connection with an organisational change, but the defendant still needed him, just in in longer time and for juridical evaluation was not relevant that defendant offered a change of employment contract with longer working time to plaintiff (…)”[14]

Connection link between decision about change and a redundancy of an employee 

The connection link between decision about changes and redundancy of an employee is when the redundancy of an employee is a result of realizing of decision of an employee about organisational change. This decision (realizing) must be immediate and real cause of employee's redundancy. The employer must have on mind that he can solve the redundancy of an employee in different way not just by termination of a contract. In practice is usually terminating of an employment contract by another employee (or with another employee) or termination of a fixed-term contract. If employer decides about organisational change in the form of reduction of the number of employees, this change would be done one month later by terminating fixed-term contract with employee A, the employee B couldn't be fired as redundant because of organisational change. The need to reduce the number of employees would be done by terminating the contract with employee A.

This case happened in this decision of court: “If the reduction of the number of pedagogical workers (organisational change) (…) should have happened in different way than by terminating of an employment contract according to Section 46 Subsection 1 (c) of the Labour Code[15] or by agreement about terminating of an employment contract for the same reason and this fact was known in time when the notice was given (like in this situation), then there wasn't any link between redundancy of an employee and organisational changes.”[16] The employer has to make decisions about organisational changes carefully. If he omits that the change could be done differently, for example by terminating a fixed-term contract, the notice which is given to redundant employee could be invalid.

Termination of an employment contract because of organisational change – what to be aware of

If the employer wants to terminate a contract with a redundant employer because of organisational change he must have on his mind some specifics of this notice reason, or he risks that the notice could be find invalid by court.

The employer has to adopt a decision about organisational change according which an employee becomes redundant and there should be a link between decision and redundancy. Although the law allows the employer to employ just the number and the type of employees which just cover his needs, he can't arbitrarily change employees on the same working position. If he fires one employee and employs new employee on the position of the fired employee, he couldn't say that it is because of an organisational change. The employer has to think in advance about the type of work of an employee and about his qualifications and he has to be sure that there is a connection with an organisational change.

If more employees become redundant, it is employer' s decision, who will be fired, but his decision can't be discriminative – on the grounds of gender or age. The notice because of redundancy is not suitable in situation when employer can use another solution of redundancy and the decision about organisational change is not the real reason of redundancy. Mostly, this case can happen, when another employee terminates his contract or someone who has fixed-term contract. The employer has to consider all possibilities which can cause invalidity of notice.

The article has been published on © EPRAVO.CZ.

[1] Labour Code Act. No. 262/2006 Coll.

[2] Section 52 (c) of the Labour Code

[3] Compare Region Court in Prague, 29/11/2018, file no. 23 Cdo 304/2018-188:”the form of decision about organisational change is not ordered by law, so it can have oral form

[4] Supreme Court, 23/1/2018, file no. 21 Cdo 4429/2017

[5] Supreme Court, file no. 21 Cdo 4429/20017

[6] Compare for example Supreme Court, 12/1/2004, file no. 21 Cdo 1170/2003

[7]Supreme Court, 22/3/2017, file no. 21 Cdo 4485/2016

[8] Ibidem

[9] Supreme Court, 27/4/2004, file no. 21 Cdo 2204/2003

[10] Supreme Court, 22/3/2017, file no. 21 Cdo 4485/2016, in which we can find that, according to Section 52 (c) of the Labour Code subsidiary arrangement in employment contract are not consider “(…) it is just another type of work which is (not) needed for the employer”

[11] Supreme Court, 30/6/2009, file no. 21 Cdo 4245/2008

[12] District Court in Blansko, 26/7/2017, file no. 12 C 374/2015

[13] Supreme Court, 20/11/2014, file no. 21 Cdo 4442/2013

[14] Supreme Court, file no. 21 Cdo 4485/2016

[15] Now Section 52 of the Labour Code

[16] Supreme Court, 27/4/2004, file no. 21 Cdo 2580/2003