According to the latest data, Poland has one of the lowest unemployment rates in the EU and its economy needs more workers. Therefore, this may not seem like an appropriate time to discuss group layoffs.
However, we also face increasing doubt about the future of work and global macroeconomic trends like decoupling and deglobalisation. Moreover, there is a tendency to ‘keep things lean’. Due to this, we are seeing greater numbers of restructurings, relocations, and reorientations. These often have one thing in common: they usually lead to layoffs.
Hence, we believe it is useful to take a closer look at the ‘frightening concept’ of ‘group layoffs’.
Group layoffs and when they happen
Contrary to popular belief, group layoffs do not happen that often in the formal sense. From the legal perspective, ‘group layoffs’ are conditional on meeting certain quantitative thresholds of dismissed employees. The employer’s headcount determines the thresholds, which range from 10 to 30 employees. Even layoffs that are executed by signing mutual settlement agreements count towards the total number of layoffs if they involve at least five employees.
However, there are three factors that additionally decrease how often formal group layoffs happen in reality.
- Only dismissals that are for reasons not attributable to employees, such as redundancies due to an economic crisis, count towards the total number of layoffs. So it’s crucial to determine the reason for termination.
- The special law on group layoffs only applies to employers who have 20 or more people working under an employment contract, so the special rules described below are often not relevant to smaller employers.
- This law does not apply to contracts governed by civil law, such as service contracts.
In addition, all layoffs for reasons not attributable to an employee that remain below these thresholds are only partially subject to the special law on layoffs.
The group layoff procedure
One reason why many employers prefer to stay under the group layoff threshold is the procedure that must be followed in that situation. If this procedure is not complied with, the termination notices given to laid-off employees are defective, which means that employees can easily win a lawsuit for reinstatement or damages.
For companies that have local trade unions and those that do not, the procedure varies. For companies without unions, employee representatives elected in a company play a similar role to trade unions. If there are no such representatives, they first need to be elected before the group layoff procedure can be launched.
The following steps give an overview of the procedure:
- First notification. The company notifies the trade unions (employees’ representatives) of an intended group layoff. The notification must explain issues such as the business reason for the layoff, the occupational groups that may be affected, the proposed criteria for selecting employees for the group layoff, and the benefits for the terminated staff. A similar notification must be sent to the local labour authority.
- Consultations. The next step is to hold consultations with the trade unions or employee representatives. With a trade union, consultations should last up to 20 days and may be concluded with the execution of an agreement on the terms of the group layoff. If no agreement is executed, the employer issues the layoff rules unilaterally. One major advantage of having an agreement is that it eliminates the requirement to consult the individual termination reasons with the trade union.
- Layoff rules. If no agreement is signed or there is no trade union, the employer unilaterally enacts the layoff by-laws. This document stipulates the rules that must be followed in terminating employment contracts within the layoff (for example, the amount of additional severance pay).
- Second notification. Afterwards, the employer must send another notice to the local labour authority, with the employee representatives/trade unions cc’d. This notice includes information about the layoff arrangements that have been set up (see the previous step).
- Individual terminations. Only after sending the second notification can the employer proceed to handing out individual termination documents (i.e. termination letters and mutual settlement agreements) to the persons selected for dismissal.
In addition, if the layoffs affect at least 50 employees over a period of three months, the employer must notify the local labour authority of an intent to agree the scope and the form of outplacement. This can be addressed in one of the above-mentioned notifications.
Employees’ rights in the case of group layoffs
The law provides for two specific rights to employees in the case of group layoffs: entitlement to severance pay and a right to re-employment.
The amount of severance pay depends on the employee’s compensation and duration of service in the organisation. The amount of the statutory severance pay is from one month’s salary to three months’ salary. However, it is capped at 15 times the minimum remuneration for work in Poland. This means that from 1 January 2024, this cap is 63,630 złotys.
In practice, employers often give employees additional monetary benefits besides the statutory severance pay. The most common benefits include additional severance pay, the ability to use outplacement programmes, extended private medical insurance or partial financing of training. Sometimes, these are offered to incentivise employees to sign mutual settlement agreements on the termination of employment.
Employees who are dismissed in a group layoff have the right to be rehired. If three conditions are fulfilled, the employer has to take back a dismissed employee. First, the employee must have lost their job as part of a group layoff. Second, the employer must rehire employees from the same occupational group. Third, the employee must say they want to work again within a year of losing their job. In practice, this right can be difficult for large employers who hire and fire employees at the same time. This is why it is important to determine which occupational groups can be exempted and which are included in the layoff rules or agreement.
Another entitlement that should be considered is protection from unilateral termination of some types of staff. This means that some types of employees (e.g. pregnant women) cannot be fired unilaterally unless the employer accepts the high risk of facing unfair dismissal lawsuits that are likely to happen in such cases. However, the extent of protection depends a great deal on the situation of the group layoff and the status of protected employees. In some cases, it may transpire that the protection does not apply, for example, because the employer has since gone out of business). So, a case-by-case analysis is needed in this regard.
Summary
We often tell our clients that they should perceive a group layoff as an ordinary but time-consuming HR process. It sometimes happens even in prosperous companies, and it usually ends with staff getting better severance packages than they would if laid off individually.
Thus, we encourage keeping this perspective in mind when we hear of group layoffs or are helping a client to plan one. How difficult this process will be operationally for the given employer depends to a large extent on the employment set-up and how things are arranged from day one. For this reason, it is worth being well prepared for this process before it begins.
