Grounds for Unilateral Lay-off

The employer may by a unilateral order lay-off an employee if the employer has a financial or production-related reason to terminate the employment contract. This means that the employee can be laid off if the work has essentially and permanently diminished on financial, production-related or operation reorganizing-related grounds and the employee cannot be placed or trained for other duties.

Reasons connected with the employee cannot constitute grounds for lay-off but the employer and employee may agree to suspend work and payment of salary as a disciplinary measure. From the employee’s perspective this is a more lenient punishment than termination or cancellation of the employment relationship. This kind of an agreement does, however, not constitute unilateral lay-off.

The employer may also lay-off an employee if the employer’s prerequisites to offer work have temporarily diminished and the employer is unable to provide other suitable work or training meeting the employer’s needs without unreasonable effort. There are no quantitative preconditions in respect of diminishing of work and a relatively small diminishing may justify the use of partial lay-offs.

Besides temporary diminishing of work also temporary diminishing of the work offering conditions is considered lay-off ground. In this situation the grounds for lay-offs are solely financial. These reasons may be due to the savings needs of the employer, for example, which require a reduction in labor costs in a form of laying off.

There is no prescribed minimum or maximum duration for lay-offs. Temporary diminishing of work may, however, last at most 90 days according to the Employment Contracts Act. Consequently, the above mentioned reasons of temporary diminishing of work or the employer’s ability to offer work are only applicable to lay-offs of 90 days at most. Lay-offs of a longer period than 90 days must always be justified by a production-related or financial ground in accordance with the Employment Contract Act.

A temporary diminishing of work do not justify employer to lay-off employee, if it is possible for the employer to organize other suitable work for the employee without essential difficulties or with minor training train the employee to new assignments.

If the company must apply the co-operation procedure (it has regularly more than 20 employees) it shall at least 5 days before the lay-off give its employees a written negotiation proposal and also negotiate of the planned lay-offs according to the Act on Co-operation within Undertakings. Both co-operation procedures and negotiation procedures are handled more closely in section [Co-operation Negotiation Obligation in Reducing the Use of Personnel].