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Labor and employment law challenges in business transformations

Slovakia

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 (workforce restructuring) is governed by Sec. 73 (specifically applicable to collective redundancy) and Sec. 59 to 80 (generally applicable to any employment termination) of the Slovak Act No. 311/2001 Coll. Labour Code as amended (Labour Code).

Collective redundancy is defined as termination of employment relationship of a number of employees, within 30 days, due to an employer’s closure or relocation, organizational reasons or other reasons not relating to the employee’s person. The number of employees terminated varies depending on the following scenarios:

  • At least 10 employees while employing 21-99 employees
  • At least 10% employees while employing 100-299 employees
  • At least 30 employees while employing 300 or more employees

If the above thresholds are not met, the redundancy is not considered collective and is only subject to the general provisions of Sec. 59 to 80 of the Labor Code governing termination of an employment relationship with an individual employee.

If the above thresholds are met, in addition to the general provisions governing individual termination, specific provisions on collective redundancy also apply and trigger the complex process which involves information and consultation procedures as well as notification of the labor authority.

Required legal justification

Employees can be made redundant by an employer by serving the notice of termination or by mutual agreement.

If an employer terminates an employee by serving the notice, the redundancy must be justified by one of the following reasons:

  • Employer’s closure or relocation
  • Reorganization (the employer’s written resolution on change in duties performed by the employee, technical equipment or reduction in the number of employees with the aim of securing work efficiency, or other organizational changes)

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Employees’ representatives must be informed and consulted by the employer prior to implementing a collective redundancy; no approval of the employees’ representatives is required. However, if the employer intends to dismiss a member of the employees’ representatives, then the consent of the representatives is required.

Employees’ representatives: The employees’ representatives involved in a collective redundancy process can be the trade union for all employees, the works council (in companies having more than 50 employees) or the works trustee (in companies between 13 and 50 employees).

Works council and works trustee have identical rights and duties.

If both a trade union and a works council or a works trustee operate alongside each other, the employer has to complete the information process on collective redundancy for both, but consult only the works council or works trustees.

Information obligation: Prior to collective redundancy (at least one month prior to serving the first notice on redundancy or proposal for termination agreement to the employee), the employer must provide the employees’ representatives with all following necessary information (“initial report”) in writing:

  • Reasons for collective redundancy
  • Number and structure of employees to be made redundant
  • Number and structure of all employees employed by the employer
  • Period over which collective redundancy shall be implemented
  • Selection criteria of employees to be made redundant

Consultation obligation: Based on the information provided in the initial report and in a view of reaching an agreement, the employer must consult with the employees’ representatives regarding:

  • The measures to avoid or limit the collective redundancy (mainly through potential alternative work at the employer’s other workplaces)
  • The measures mitigating the adverse consequences of collective redundancy

Consultation should be conducted in a reasonable manner and at an appropriate time, with adequate subject matter and intention to reach an agreement. However, failure to reach an agreement following consultation does not alter the collective redundancy process. The employer must only consider the employees’ representatives opinion and deliver a report specifying the outcome of the consultations (“final report”) to the employees’ representatives (and the labor authority).

The employer may only serve a written notice on redundancy, or a proposal for termination agreement to the first impacted employee one month following the completion of the information and consultation process and one month following the delivery of the final report to the labor authority. These two time periods shall be calculated separately and begin (or may begin) on different days; however, these time periods may run parallel and, therefore, it can happen that they expire on the same date if the information and consultation process and delivery of the initial report and the final report were done on the same date.

Consultation requirements with other employee representatives

There is no specific obligation to inform and consult the employees’ representatives for health and safety on collective redundancy unless it raises issues substantially impacting the health and safety at work.

Consultation requirements with employees

The employer must inform and consult the impacted employees directly, only if there are no employees’ representatives.

The information and consultation process of the impacted employees is the same as the information and consultation process of the employees’ representatives, in particular, the obligation to submit the initial report to consult on measures to avoid, limit or mitigate the collective redundancy’s impact and the obligation to submit the final report (for more information, see “Consultation requirements with works council/unions”).

In addition, the employer must provide for the legal justification of the redundancy in the notice of termination or, in certain cases, in the mutual termination agreement.

Approval/notification of the labor authorities or other government authorities

No approval of the labor authority is required in order to implement the collective redundancy. The process of collective redundancy in Slovakia requires the involvement of the labor authorities. The employer must, in particular, perform the following:

  • First, inform the competent labor authority of the collective redundancy by submitting a copy of the initial report together with the names and addresses of permanent residence of the employees to be made redundant.
  • Second, inform the competent labor authority of the outcome of the consultation process with the employees’ representatives (or employees directly) by submitting a copy of the final report (for more information on “initial report” and “final report,” see “Consultation requirements with works council/unions”).

The employees’ representatives are entitled to submit comments relating to collective redundancy to the labor authority. In the absence of the employees’ representatives, the employees themselves cannot exercise this right.

Role of the labor authority is to seek for ways to limit the impact of the collective redundancy. One month after the delivery of the final report to the labor authority, the employer may serve a written notice on dismissal or proposal for termination agreement to the employees. This does not apply if the employer was declared bankrupt by the court. The one-month period may be shortened by the labor authority for objective reasons.

Employee selection criteria

There are no required selection criteria provided by Slovak law. The employer is free to choose the employees to be made redundant; however, they must observe the general principles of nondiscrimination enshrined in the Labor Code and in anti-discriminatory legislation.

The employer must specify the employees selection criteria in the initial report submitted to the employees’ representatives (or employees directly) and to the labor authority.

Certain employee categories are afforded special protection, particularly members of employees’ representatives, pregnant women and employees on maternity, parental or sick leave; however, there is no such protection against termination of employment by an agreement with the employee.

Actions required to limit the negative impact and social plan

The employer must consult with the employees’ representatives (or employees directly) on the measures to avoid or at least limit the collective redundancy impact — mainly by negotiating the possibility of redeploying employees in suitable job positions at the employer’s other workplaces — and the measures for mitigating the adverse consequences of collective redundancy.

Internal alternative employment/redeployment
There is no specific obligation to search for alternative employment. The Labor Code only stipulates a consultation obligation regarding the possibilities of placement of employees in suitable jobs at other workplaces of the employer. If redeployment requires the employee to undergo training or preparation, the employer should enable this process.

Other measures
No specific other measures are prescribed by law, as the law leaves types of such other mitigating measures at the employer’s discretion.

Estimated timeline

Duration of the collective redundancy process depends on its complexity and extent. The first step is usually the preparation of the initial report for the employees’ representatives (or employees directly) and the last step is the notice of termination or conclusion of the mutual termination agreement which is the starting point of the notice period for the impacted employees.

Legally, at least one month is required between the completion of information and consultation processes and serving dismissal notices or proposals for termination.

Usually, the notice periods range from one to three months depending on the impacted employees’ years of service.

Estimated costs

Mandatory costs

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

  • Notice period
  • Severance payment: This can range from nothing (for employees with less than 2 years of seniority, terminated by serving notice) to five times the average monthly salary (for employees with more than 20 years of seniority terminated by mutual agreement). However, the employee must return the severance payment if he or she is reemployed by the same employer within a specified period in certain situations
  • Costs associated with preparation of the initial report and final report and consultation with the employees’ representatives or employees

Customary additional costs

Customary additional costs may include severance payments provided by the employer above the statutory minimum or in cases other than those specified by the law.

In general, when employers terminate employment relationships by agreement due to closure, relocation or reorganization, they must provide a severance payment. In other cases of termination by agreement, the employer is not obliged to, but will usually offer a severance payment (equal to that applicable in the case of dismissal) in order to induce the employee to sign the termination agreement.

Further, customary additional costs may include costs for implementing measures to avoid, limit or mitigate the collective redundancy or its negative consequences, such as costs associated with redeployment process.

Hiring restrictions post-redundancy

Provisions governing collective redundancy do not contain any specific hiring restrictions post-redundancy. However, general restrictions apply when the employer makes an employee redundant due to reorganization. In particular, the employer is prevented from reopening the cancelled job position and hiring another employee for this position within two months following the employment termination. Breaching this restriction by the employer may result in annulment of the termination.

Litigation risk

Interested parties

The employer must comply with the general rules applicable to individual termination of employment during the collective redundancy process (notably legal cause and procedural rules). In case of violation of these rules, the impacted employee can, within two months from the date of termination of employment relationship, claim that his or her redundancy is declared null and void based on substantive as well as formal grounds (which includes defective delivery of the notice, absence of a written form or insufficient legal justification).

Litigation can stop or slow down the collective redundancy process. The impacted employee may notify the employer that he or she insists on maintaining the employment relationship and claiming its invalidity in court. The employment relationship will not terminate in such a case unless and until the court rules that the employer cannot reasonably be required to continue it.

Damages and other remedies

Violation of the specific rules on collective redundancy process can lead to the following consequences:

  • Inspection by the labor inspectorate, which may trigger an administrative fine of up to EUR100,000. It may also fine the responsible executive directors and managing employees of the employer personally up to four times their average monthly salary.
  • Claim of the impacted employees for wage compensation of twice the average monthly salary if the employer breached:
    • Information and consultation obligations toward the employees’ representatives
    • Notification process toward the labor authority
    • One month’s period for serving a notice on dismissal or proposal for termination agreement after the delivery of the final report to the labor authority

Violation of the general rules on individual termination (legal cause, procedural rules) can lead to the following consequences:

  • Continuance of an employment relationship: If the employee is of the opinion that the employer gave an invalid notice, or terminated the employment by an invalid agreement, the impacted employee may notify the employer that he or she insists on maintaining the employment relationship and claiming its invalidity in court. The employment relationship will not terminate in such a case unless and until the court rules that the employer cannot reasonably be required to continue it.
  • Wage compensation in the case of an invalid individual termination: The employer is obliged to provide the employee with wage compensation of their average salary from the day when they notified them of their insistence on maintaining the employment relationship. This continues until the employer enables the employee to keep working, or until a court rules on termination of the employment relationship and up to a maximum of 36 months. At the employer’s request, the court can limit the compensation to a maximum of 12 months.
  • Damages: In general, if an employee suffers loss as a result of the employer’s unlawful conduct, the employee can claim damages based on general labor and civil law rules. However, there are no punitive damages in Slovakia.
  • Remedies available under anti-discrimination legislation: If an employee was treated discriminatorily by the employer, especially with respect to the employee selection criteria, he or she may claim notably for reparation (potentially including reinstatement) and compensation for immaterial harm and compensation for material harm.

Criminal sanctions:
Criminal sanctions may be imposed only for failure to pay due wages, wage compensation or a severance payment to the employee. They can be imposed only on an individual or an executive director of an employer.

Country-specific issues

There are no other issues specific to Slovakia.

Contact

Primary Contact for Slovakia Labor and Employment Law

Sona Hankova
Ernst & Young Law s.r.o.
+421233339202

The content is current as of 1 July 2016 unless otherwise noted. This publication should not be regarded as offering a complete explanation of the tax matters referred to and is subject to changes in the law and other applicable rules.

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Slovakia
SK

Contacts