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Labor and employment law challenges in business transformations

Poland

Workforce restructuring

The key practical issues in workforce restructuring include:

  • Legal justification
  • Works council and employee representatives’ process
  • Labor administration process
  • Costs and timing
  • Litigation risk

Applicable legislation

Collective redundancy procedure is governed by the Act on specific terms and conditions for terminating employment relationships with employees for reasons not related to the employees of 13 March 2003 (consolidated text of 2015, Journal of Laws of 2015, item 192).

Collective redundancy procedure is triggered in case of termination by the employer, employing at least 20 persons, of employment relationships for reasons not attributable to the employees. It is triggered by way of termination notice by the employer, as well as by way of mutual consent, if over a period not exceeding 30 days, the redundancies affect:

  • At least 10 employees while employing 20-99 employees
  • At least 10% of employees while employing 100-299 employees
  • At least 30 employees while employing 300 or more employees

If the employer employs fewer than 20 persons and/or the above thresholds are not met, the collective redundancy procedure is not triggered.

Required legal justification

Polish law does not stipulate specific legal grounds for redundancy. The employment relationships could be terminated due to reasons not attributable to the employees (for instance, such as economic difficulties of the employer, reorganization of business and closing of the work establishment).

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Unions: The employer must consult with trade unions in meetings/and or through exchange of official letters. If there is no trade union acting at the employer, the employer is obligated to consult with the employees’ representatives (elected by all the employees in the manner adopted at the employer). Prior to the consultation process, the employer must provide the following information to the trade union/employees’ representatives:

  • Reason for the intended collective redundancies
  • Number of employees and professional groups affected
  • Proposed criteria for qualifying the employees
  • Sequence of giving notices on redundancy
  • Proposed time period of implementation
  • Proposal for solution of the employment matters connected with the intended collective redundancies
  • Method of calculation of the value of severance payment or additional payments, if any

Further, the employer is obligated to provide any other information material for the process of consultation in the due course. A protocol for every meeting with trade unions or employees’ representatives must be established. There is no prescribed deadline for consultation; however, the employer must propose a deadline for consultation. Consultation should concern in particular a possibility of avoiding or limiting the scale of group redundancies or changing professional qualifications of employees or employing them elsewhere.

At the end of the consultation period, the employer and the company’s trade unions must enter into an agreement stipulating the following:

  • Terms and conditions governing the implementation of the redundancies in the matters related to the employees who are subject to the planned collective redundancies
  • Obligations of the employer necessary to resolve other employment matters connected with the planned collective redundancies

In the event no trade unions are operating within the employer, the above issues should be covered by a collective redundancy regulations (i.e., internal bylaws) issued solely by the employer.

Works council: In general, irrespective of the obligations toward the trade union, the employer must provide the information to the works council on matters relating to the following:

  • Activities and the economic situation of the employer and changes envisaged in relation to the economic situation
  • Employment structure and anticipated employment changes, as well as activities aimed at maintaining the level of employment
  • Activities that may lead to significant changes in the work organization or the employment basis

The employer must provide information within the deadline proposed by the employer, in the form and within the scope enabling the works council to familiarize itself with the case, to analyze the information to prepare for consultations.

In addition, the redundancies would trigger an obligation to consult specifically with the works council in the matters of redundancies. Consultations with the works council should be carried out:

  • Within the deadline proposed by the employer, in the form and scope enabling the employer to undertake measures with respect to the matters covered by consultations
  • Depending upon the topic of the discussion at the relevant managerial level
  • On the basis of the information provided by the employer and the opinion presented by the works council
  • In a manner enabling the works council to meet the employer in order to learn its position, together with a justification of its opinion
  • Consultations that provide opportunity to reach an agreement between the works council and the employer

How and when: The employer should forward the information in writing to the trade unions/employees’ representatives in time that enables the unions/employees’ representatives to notify their proposals related to matters of redundancies (with regard to the consultation process). No specific regulations apply to the timing and manner of the consultation process.

It is necessary to conclude an agreement with the trade unions within 30 days from the date of notification.

Consultation requirements with other employee representatives

The employer is obligated to consult with the employees’ representatives if there is no trade union and/or works council acting at the employer. The employees’ representatives are elected by all the employees in the manner adopted at the employer (usually by general elections). For more information on how and when the employees’ representatives need to be informed and consulted, see “Consultation requirements with works council/unions.”

Consultation requirements with employees

No legal barriers apply to open communication with employees on a collective redundancy. The employees may be communicated with in any manner chosen by the employer.

Approval/notification of the labor authorities or other government authorities

Approval of the Regional Labour Office (Powiatowy Urząd Pracy) or other government authority is not required for implementing collective redundancy; however, the employer must notify the Regional Labour Office, during the consultation period, with regard to the collective redundancy process as follows:

The first notification: should contain the same information as delivered to the trade unions/employees’ representatives, except for the information on payments. The first notification must be delivered in writing as soon as possible.

The second notification: must include information on the rules applicable to collective redundancies defined by the agreement with the trade unions/employees’ representatives (or in a collective redundancy regulations), including the following:

  • Reason for the intended collective redundancies
  • Number of all employees and the number of employees intended for dismissal; the professional groups affected by collective redundancies
  • Sequence of giving notices on dismissal
  • Proposed time period for implementation
  • Fact of completion of consultation process with the employees’ representatives
  • Proposal for solution of the employment matters connected with the intended collective redundancies

The second notification must be delivered in writing after the conclusion of the agreement/ issuing the regulations.

Employee selection criteria

Polish labor laws do not stipulate any specific employee selection criteria. The employer must propose and communicate the employee selection criteria; however, the proposed selection criteria must not be discriminatory.

Further, the selection criteria proposed should be clear and objective. For example, the amount of remuneration is an admissible main criterion in case the redundancies are conducted due to economic reasons; however, other criteria such as seniority and skills should also be taken into account.

During collective redundancies, the employer may only terminate work and remuneration (and not the employment relationships) of certain employees who are protected. This applies, for example, to an employee who is a:

  • Member of the management board of an enterprise trade union
  • Member of an enterprise trade union entitled to represent the trade union toward the employer or of an authority or a person acting in the name of the employer in matters concerning labor law
  • Member of a special bargaining group or a European works council
  • Social labor inspector

In case of a decrease of remuneration, such employees mentioned above should be provided with an equalizing benefit (a monetary benefit amounting to the difference between their remuneration before and after the decrease).

The selection criteria used by the employer may be assessed by Polish courts in case of a dispute.

Actions required to limit the negative impact and social plan

The mandatory actions include consultation with the trade unions/employees’ representatives.

Internal alternative employment/redeployment
The employer must consult trade unions/employees’ representatives on measures concerning, in particular, the possibility of avoiding or limiting the extent of group redundancies and providing opportunity to employees to acquire the required professional qualifications or employing them elsewhere (alternative employment).

Other measures
In case of collective redundancies concerning at least 50 employees within 3 months, the employer is obligated to agree with the relevant Regional Labour Office (Powiatowy Urząd Pracy) on the scope and forms of support for the dismissed employees in particular with regards to job placement, occupational counseling and training.

Estimated timeline

In general, the preparation of any specific documentation required for the information and consultation process and for the contemplated negotiation with trade unions/employees’ representatives takes between two to three months; however, this period may vary depending on the standpoint of the trade unions and the structure of the entire process.

Delivery of termination notices may not be commenced prior to the delivery of the second notification to the Regional Labour Office (Powiatowy Urząd Pracy). Further, termination of an employment contract by a compromise agreement may not be effected prior to the delivery of the second notification to the Regional Labour Office. In practice, the usual period for the entire process takes about three to four months.

Estimated costs

Mandatory costs

The key components of mandatory key HR legal costs are as follows:

  • Cash in lieu of unused vacation time — calculation should be conducted pursuant to the methods indicated by the Labour Code and the executive provisions.
  • Severance pay — must be paid on the day of termination of employment. The statutory severance pay amounts to:

    • One month’s remuneration for an employee who was employed with the employer for less than two years
    • Two months’ remuneration for an employee who was employed with the employer for two or more years but not more than eight years
    • Three months’ remuneration for an employee who was employed with the employer for more than eight years

Customary additional costs

Customary additional costs may include:

  • Bonuses
  • Retirement benefits (to be paid on the day of termination of employment)
  • Non-compete compensations (if any)
  • Any other benefits to be paid on the day of termination of employment

Hiring restrictions post-redundancy

In case of hiring in the same work category, the employer must rehire an employee with whom the employment relationship was terminated during collective redundancy, if such redundant employee notifies his or her intention to take up the employment at such employer within one year of the termination of his or her employment relationship.

In case of hiring employees in the same group of employees (i.e., employees on similar job positions), the employer should reemploy the impacted employee within 15 months of the date of terminating his or her employment relationship during the collective redundancy only if the impacted employee expresses his or her interest to be reemployed within one year from the date of termination of his or her employment relationship.

Litigation risk

Interested parties

Claims may be brought by the employees and/or the labor inspector in the name of an employee. The time period in which the employee (or the labor inspector as the case may be) is entitled to bring a claim depends on the subject of such claim. The claim may concern, for example:

  • Compensation or reinstatement to work on the grounds of unfair dismissal (unjustified termination of an employment relationship)
  • Payment of remuneration components and/or severance pay
  • Compensation for violation of the collective redundancy proceedings (in case a damage is inflicted to an employee)

According to the Labour Code, as a general rule, claims arising out of an employment relationship are barred by a limitation period of three years from the date on which the claim became enforceable. Limitation periods cannot be shortened or extended by a legal action (for example, through an employment contract).

The litigation may not stop or slow down the redundancy process; however, in certain cases such as unjustified termination of an employment relationship, the court may declare the termination of employment relationship null and void.

Damages and other remedies

Action may lie for reinstatement, damages, payment of severance pay, etc.

Damages for unfair dismissal

The amount of damages for unjustified dismissal is predetermined in the Polish Labour Code. In case of wrongful termination of the employment contract concluded for an indefinite period, an employee is entitled to:

  • A nonpecuniary claim for considering the termination ineffective or for reinstatement to work
    or
  • A claim for pecuniary compensation amounting to the employee’s remuneration for two weeks up to three months, but not lower than the remuneration for the notice period applicable to such employee

An amount of claim for compensation for violation of the collective redundancy proceedings depends on whether damage is inflicted on an employee.

Reinstatement

The court may award reinstatement for unfair dismissal if the impacted employee claims for reinstatement. The impacted employee is entitled to claim either for reinstatement or for monetary compensation. If a reinstatement is decided by the court, the employee is entitled to remuneration for the period of being out of work, but not more than two months’ remuneration; if the notice period was for three months, then not more than one month’s remuneration.

Criminal sanctions

No criminal sanctions are applicable to the employer.

Country-specific issues

There are no other key issues specific to Poland.

Contact

Primary Contact for Poland Labor and Employment Law

Michal Balicki
Ernst & Young Law Tałasiewicz, Zakrzewska i Wspólnicy spółka komandytowa
+48225576328

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Poland
PL

Contacts