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Termination of Employment Relationships due to Redundancy or the Elimination of the Position

The economic situation often forces businesses to take measures aimed at cutting costs. With budgets being squeezed, employers might be looking to reduce headcount. However, an employer who has decided to downsize must carry out layoffs in compliance with the applicable laws.

Firstly, it is important to remember that termination due to redundancy or where the position in question is being eliminated are not due to any conduct on the part of the employee. This means that the termination procedure in Poland must be followed in line with the Act on Mass Layoffs (i.e. the Act on Special Rules of Terminating Employment for Reasons Not Attributable to Employees of 13 March 2003). Technically, redundancy (or cutting jobs) means a reduction in the number of employees doing the same job, whereas the elimination of a position applies to the situation where the employer no longer needs anyone performing a specific job.

The Act on Mass Layoffs, contrary to what the name suggests, applies to any termination of an employment relationship due to reasons not attributable to an employee. It means that, even in the event of terminating the employment relationship with an individual due to redundancy/job elimination, the employer must observe the provisions of the Act on Mass Layoffs. At the same time, it must be remembered that the Act on Mass Layoffs does not apply to employers employing less than 20 people. Typical mass layoffs (involving the termination of employment with a group of employees) are procedurally more complex than individual dismissals.

Another important requirement that must be met is to state redundancy/job elimination as the reason for the termination of the employment contract. This must be stated in the termination notice (Article 30 § 4 of the Labour Code).

Given the specific nature of the termination process, special attention must be paid to redundancy. Since a redundancy occurs when an employer requires fewer people to carry out a certain kind of work, clear reasons should be given on how the individuals being made redundant were selected (there is no such need when the employer eliminates a unique job position). The employer’s selection criteria for redundancy must be appropriate for the situation, and must be objective and non-discriminatory (appropriate criteria may include length of service, education and experience, performance and KPI achievement).

It is crucial to follow a fair redundancy selection process. First of all, information on the rules of termination is an element of the termination procedure – it should be presented to the employee in the redundancy notice. Courts have found that a redundancy notice must contain the selection criterion for redundancy, unless the criterion is obvious or already known to the employee. The need to specify the selection criterion for redundancy is also due to the labour courts, which will verify whether the employer used correct redundancy selection criterion.

In this context, it should be remembered that termination of employment relationships under the Act on Mass Layoffs, as with any other forms of termination, may be contested in court. An employee who has been made redundant may seek the same remedy as an employee who has been dismissed under the standard procedure – a claim for reinstatement or compensation.

If the grounds for termination are incorrectly articulated, and specifically with reference to redundancy without correct criteria or job elimination in the case of an employee doing a job that is not unique in the employer’s structure, may result in a dispute where the court will likely consider the grounds for termination as irrelevant or false, and the termination wrongful. As a result, the employer will be forced to reinstate the employee or pay compensation (even if he or she has already received severance pay in connection with the redundancy / job elimination).

Therefore, employers should exercise utmost care and diligence when terminating employment relationships due to redundancy/job elimination – since any defects or underperformance of the termination procedure, and specifically indicating incorrect selection criterion for redundancy, may turn out to be more expensive than expected.

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This article is part of the Newsletter | Summer 2022.