Reduction in personnel – is it a mass redundancy?

• Employment Law
• SME

The economic reasons that require a change in the workforce are complex. To protect employees, the legislator has defined various minimum requirements that must be observed by employers in the event of major mass redundancies. The following article summarizes the minimum requirements and contains recommendations for a socially responsible approach to mass redundancies.

What does mass redundancy mean?

The terms used by employers for planned mass redundancies range from “restructuring”, “reorganization”, “operational changes” to “transformation”. As soon as the requirements for a collective redundancy under the Swiss Code of Obligations are deemed to have been met, it is formally referred to as a mass redundancy.

A mass redundancy occurs when – depending on the size of the company – a certain number of dismissals, which are initiated by the employer and have no connection with the employee, are announced in a company or part of a company within a period of 30 days.

Termination by the employer

When determining the specific number of terminations, only effective terminations by the employer should be taken into account. For example, termination agreements or the termination of temporary contracts due to the ordinary expiry of the contract term are not counted. However, early terminations of temporary contracts are included.

No connection with the person of the employee

This requirement is about not counting dismissals that are, for example, terminations due to conduct or long-term illness.

Definition of a business operation

Defining a business operation is not always easy. In formal legal terms, it is an organized structure equipped with human, material and immaterial resources allowing to achieve the work objectives. If an employer has several establishments that are part of the same company, the existence of a possible collective redundancy is determined in each individual establishment and not at company level.

30 days period

The law refers to “being given notice within 30 days” and means the time when the notice is given. The time of receipt or the end of the employment relationship is irrelevant.

On the other hand, there are various reasons why the pronouncement of termination may be staggered over time. In order not to be confronted with the accusation of circumvention of the law, even if there are legitimate reasons for a possible staggering of dismissals, employers are well advised to assume that the collective redundancy threshold value has been met if the planned dismissals reach the threshold values of the law. Another reason for this cautious approach is that changes to the planned timetable may arise during or after consultations.

Threshold value depending on company size

The following threshold values must be observed, whereby part-time and temporary employees must be counted:

• At least 10 terminations within a company of 20-99 employees,
• At least 10% of the employees in a company,
• At least 30 terminations in companies with 300 employees or more.

What steps need to be taken in a planned restructuring?

Duty to consult

As soon as employers intend to carry out a collective redundancy, they must consult the employee representatives or, if there are none, the employees. Consultation means giving the employees or their representatives the opportunity to submit proposals on how to avoid dismissals or limit their number and mitigate their consequences. The employees or their representatives must therefore be given the opportunity to comment before the final decision regarding the collective redundancy is made. To this end, employers must provide the employee representative body or, if there is no such body, the employees with all relevant information and in any case inform them in writing:

• The reasons for collective redundancies.
• The number of employees to be dismissed.
• The number of employees normally employed and
• The period during which the dismissals are to be announced.

Obligation to notify the authorities at the beginning and end of the consultation procedure

The employer must notify the cantonal employment office in writing of any intended collective redundancy by sending a copy of the notification to the employees at the beginning of the consultation. The written notification must contain the relevant information as set out above.

After the consultation has taken place, the employee representative body or, if there is no such body, the employees must be informed of the decision, considering the input of the consultation that has taken place. In addition, the employer must notify the cantonal employment office in writing of the results of the consultation with the employee representative body. The written notification to the cantonal employment office must contain the results of the consultation with the employee representatives and all relevant information about the intended collective redundancy. The notification must also take place before the dismissals are announced. and the employment relationships concerned must end at the earliest 30 days after the notification of the intended mass dismissal to the cantonal employment office, unless the dismissal takes effect later in accordance with the contractual or statutory provisions.

Careful planning

It is advisable to define in advance a precise timetable of the individual aspects of the planned implementation steps to comply with the aforementioned legal processes. Depending on the complexity and prior knowledge of the employees or employee representatives, the consultation phase can take between 6-8 weeks, sometimes even longer. In addition, the employer must determine when and to whom (internally and externally) which information is shared, taking into account the employer’s confidentiality interests. Companies listed on the SIX Swiss Exchange must also observe the SIX Directive on Ad hoc Publicity. Events (possibly very large reorganizations) that could influence the price of a share beyond the usual fluctuations must be communicated immediately and clearly by listed companies in accordance with the rules of the SIX (e.g. the SIX rules specify exactly when the ad hoc announcement is due).

We are happy to answer any questions you may have.