Termination of employment on financial or production-related grounds

The financial period ended at the end of October. The operations had been unprofitable. The employer conducted co-operation negotiations in spring, resulting in redundancies. Duties of the employees were combined after the termination of their employments. I was also laid off during the notice period, on the grounds of temporary reduction of work. Now the company is about to employ a new employee to manage my previous duties. The job title is new and the job was never offered to me.

In accordance with the Employment Contracts Act, the employer shall not terminate an indefinitely valid employment contract without proper and weighty reason. The employer may terminate an employment contract on financial or production-related grounds if the amount of work offered has been substantially and permanently reduced due to financial or production-related reasons or reasons arising from the reorganisation of the employer’s operations.

If the amount of work has reduced substantially enough to fulfil the grounds for termination, the employee cannot be laid off after the termination of their employment due to temporary reduction of work.

In accordance with the legal practice, the employment of an employee may be terminated for financial or production-related reasons even when the employee’s duties have not changed, if the duties have been merged with the duties of other employees as part of a reorganisation in an attempt to improve the overall result, after which the employer is unable to offer work to the said employee.

An employment contract shall not be terminated if the employee can be placed in or trained for other duties. The obligation to offer work is valid throughout the notice period. Employees shall primarily be offered work that is equivalent to that defined in their employment contract. If no such work is available, the employer shall offer them other work equivalent to their training, professional skill or experience. The employer shall provide employees with training required by new work duties that can be deemed feasible and reasonable from the point of view of both parties. The duration of the training depends on the size of the company; the maximum duration is a few months.

The employer’s obligation to offer work may be extended when certain conditions are met. An employer might in fact exercise control in personnel matters in another enterprise on the basis of ownership, agreement or some other arrangement. In addition to the employer’s control, the application of the extended obligation to offer work requires sufficient similarities between the two enterprises. The similarities can arise from the joint management of the personnel matters of the two companies, and from similarities in their fields or operations. The joint management of personnel matters is a special case, because if it is substantial enough, it might result in the employer’s obligation to offer work even when the two other conditions are not met. On the other hand, extending the obligation to offer work to another company always requires a certain number of similarities between the management of personnel matters and the use of HR resources. If such an employer cannot offer an employee work, it must find out if it is possible to meet the employer's obligation to provide work and training by offering the employee with work in other enterprises under its control.

The grounds for termination are not met if the employer has, either before termination or thereafter, employed a new employee for similar duties even though the employer's operating conditions have not changed during the equivalent period. The title is irrelevant when assessing the termination grounds, only the similarity of the duties is taken into account.

The employer has the obligation to offer work to a former employee whose employment contract has been terminated on financial or production-related grounds if the person is still registered as a job-seeker at an Employment and Economic Development Office after nine months of the termination and the employer needs to employ people for duties that are identical or similar to those performed by the former employee.