Employee suspension (: The other measure that is milder than terminating an employment contract)
I. Preamble
“Profit is the brother of loss” mentions a well-known Turkish saying.
This saying is, unfortunately, proved right in the context of business. This is when the (healthy) attempt to make a profit turns out to be ineffective.
What is crucial is how the businessman evaluates each case. Is the situation reversible or not? Is the cessation of business temporary or permanent? Does it affect the whole business or only part of it?
In any case: the effort to reduce a business’s expenses turns out to be particularly significant. Wage cost reduction is the first thought.
Layoffs? Is that the only solution?
Are there milder measures? Rotational work or employee suspension?
We have already referred to rotational work.
In this article we will examine employee suspension.
II. Suspension-in general
1. In general
Termination of an employment contract is a permanent (but also socially burdensome) measure. But what is basically crucial is the support of the business. Rescuing it will mean the (socially desirable) survival of jobs. Employee suspension is, as mentioned, the other milder measure (along with rotational work). Jobs are saved this way, even temporarily. The expectation of a definitive recovery of the business is kept alive. The prospect of a permanent rescue of (endangered) jobs survives.
2. The legislative framework
Suspension is regulated by Article 10 of Law 3198/1995, as in force (after its last amendment in 2010). This provision states:
“Businesses and holdings, if their activity is restricted, may, instead of terminating the employment contract, suspend their employees in written, and the suspension shall not exceed a total of three (3) months per year, unless they have previously consulted the legal representatives of employees in accordance with the provisions of p.d. 240/2006 (Government Gazette 252 A) and Law 1767/1988 (Government Gazette 63 A).
If there are no employee representatives in the company, all employees are informed and consulted. information may be provided by a one-time notice at a prominent and accessible place in the business. The consultation shall take place at the place and time specified by the employer. During suspension, the employee receives half the average of the last two months’ full-time wage of full-time employment. After the three months have expired, at least three (3) months must pass before the same employee can be suspended again. The employer must inform the relevant services of the Labor Inspection Body, IKA and OAED in any manner regarding the relevant statement of suspension, affecting part or all of their staff. “
3. Purpose and basic principles
3.1. Suspension has a dual purpose:
(a) To contribute in the reorganization of the business with the restricted activity; and
(b) To support the employees to look for a job during their suspension.
3.2. The business that is called upon to deal with its restricted activity achieves, through suspension, a reduction in its redundant staff and employment costs.
Most important: No layoffs.
Suspension may extend to all of the employees (: complete suspension). But it may also extend to some of them (: partial suspension).
In no case, however, can suspension be applied as a measure against a specific employee. Suspension is a collective measure (like that of rotational work).
Thus, the company can suspend the employment relationship for its redundant staff.
During suspension, the obligation to pay for salaries is limited: The employer pays (to the suspended employees) half (1/2) of the average full-time salary of the last two months.
3.3. An employee who is suspended does not, of course, have to present themselves to the business and provide their work for the duration of the implementation of the measure.
During this time, the employee has the opportunity to work for another employer. Alternatively: to engage in any other activity. They shall not in any event be deprived of their right to receive ½ of their salary. These salaries are not offset by what the employee receives from their (potential) employment under another employer to supplement their income.
Additionally: the time period of suspension is considered as if the employee was actually working. This means that it is taken into account for the determination of the amount of compensation due in case of dismissal, for increasing the salary due to seniority, etc.
III. Conditions for enforcing suspension
1. It is clear from the wording of the law that the measure of suspension is, in some respects, identical to that of the unilaterally imposed rotational work. The same applies to what is accepted (and we have already analyzed) in the context of rotational work.
The conditions laid down by law for the suspension of employees to be valid are, in particular, the following:
(a) Restriction of the activity of the enterprise;
(b) Prior information and consultation with employee representatives;
(c) The written form,
(d) The maximum length of suspension and
(e) Notification to the competent departments of the Labor Inspection Body, EFKA. and OAED.
2. In more detail:
(a) Restricting the economic activity of the enterprise
The first essential prerequisite is that the business’s “activity is reduced”. This requirement is also met with the unilateral imposition of rotational work. There we said: “The law does not further specify what “the reduction of business” really means. In any case, there is no need to jeopardize the viability of the business. However, any (minor) reduction of the operation of the enterprise, of the establishment or of a sector of the business and/or if the business is operating at a loss are not sufficiently meeting the relevant legal requirement. Nor is it sufficient for an employer to have financial or liquidity issues that result in their difficulty to pay employees for a certain period. It is required that the “volume of activity” should be such that “there will be a surplus of staff as a result of the reduction in available work” (Circular 35958/666/2017).”
As suspension is imposed as an extreme measure, but also a measure milder than that of the termination of the employment contract, it is a reasonable premise that the reduction of the activity poses a real threat to jobs. In other words, it must be such a reduction that it could lead to dismissals for economic and technical reasons.
(b) Prior information and consultation with employee representatives
i. Prior to the employer’s decision on the suspension measure, the law requires prior information and consultation with employee representatives (in accordance with the provisions of Presidential Decree 240/2006 and Law 1767/1988). This is another (formal) requirement, which we met and analyzed in the case of a rotational system. Fortunately, even in the case of suspension, they do not need to end well.
ii. The above (under i) obligation applies to all undertakings to which the employer intends to impose the measure. And this, regardless of the number of employees. (Irrespective of whether they employ fewer employees than those provided for their implementation, as set forth in Articles 3 of Presidential Decree 240/2006 and 1 of 1767/1988).
iii. In addition, according to the abovementioned provision, “information may be provided by a one-time notice at a prominent and accessible place in the business. The consultation shall take place at the place and time specified by the employer.”
iv. In any case: The information should contain the reasons why the employer needs to enforce the suspension measure. Indicatively: evidence of a significant restriction on the activity, its likely duration, and the proposed extent of suspension (eg, application to certain parts of the business or to the whole business).
It is noted that in businesses with a small number of employees, this information may also be provided by an oral communication to employees.
v. The invitation of the employer to consult the employees’ representatives, or in the absence of them, all employees, should, in addition, include the place and time of the consultation. The interval between the communication and the consultation should be sufficient for the employees to prepare. The (sufficient) time is a real issue and is judged on a case by case basis. This is because it depends on several factors. Indicatively: number of employees, number and complexity of issues to be consulted on etc.
vi. Consultation under Article 4 of Law 3846/2010 is fairly broad. Of course, it is the exchange of views between the employer and employee representatives (or employees). It will focus on the measures and decisions that need to be taken to tackle the difficulties of the business with the significantly reduced activity. Specifically, the creation of a system of distributing the remaining work to all the staff of the enterprise (or to a specific part of it) in order to save jobs.
vii. What is encouraging, however, is that, as stated above, the positive outcome of the consultation is not a requirement for the implementation of the suspension measure. There is no need for the employer and employees to reach an agreement.
However, the imposition of the measure of suspension by the employer, without prior notice and consultation, is invalid.
(c) The written form
i. The written form (that is, the written statement of the employer’s decision to impose the measure of suspension) is required by the law itself. It is therefore an integral part of the validity of suspension, without which suspension is not possible. Consequence of this omission? The employee is entitled to full remuneration and not half of it, which they should be getting, if they had been lawfully suspended.
ii. The requirement for the written form is not replaced by any general disclosure that is posted on display in the workplace. According to case law, the employer must send an individual written statement to each employee they are about to suspend (SC 499/1990). It is advised to keep two copies of this statement, one of which will be delivered to the employee. In his statement, the employer is not required to state in detail the incidents which have led them to take the above measure. However, it must be concluded that the application of this measure is a consequence of the restriction of the economic activity of his business. As already mentioned (under III.2.a.), it is only under this condition that the suspension of employees is allowed.
iii. In the individual written statement, however, the employer must specify the commencement and duration of the measure. Notification of the employee’s forthcoming suspension must take place within a reasonable time prior to its commencement. Such an obligation is not required by law. It is, however, accepted by the courts as a manifestation of good faith (464/2013 First Instance Court of Xanthi). The purpose of timely notification is to allow the employee to seek other employment while suspended, so that they can supplement their income.
(d) The maximum duration of suspension
i. The law explicitly specifies the maximum length of time that the suspension measure can be implemented. In particular, its duration may not exceed three months in the same calendar year. The above quarter includes both business days, Sundays and holidays, with the term “year” being the period from 1 January to 31 December.
ii. This maximum duration of suspension may be imposed either at once or in fractions. It is therefore possible for employees to be suspended once or more times during the year. Under no circumstances, however, can multiple suspensions turn into rotational work. Suspension requires continuous and total abstinence from work. Otherwise, the dual purpose of the imposed measure (the relief of the business and the employee’s opportunity to seek work elsewhere) is circumvented.
iii. But there is one more time limit. It is about the time it takes to (re)suspend the employee. Therefore, if the abovementioned quarter is exhausted, three months of work are required in order for and employee to be suspended.
(e) Notification to the competent departments of the Labor Inspection Body, EFKA and OAED.
The last condition (of legality) of the suspension is that the employer notifies the relevant decision “by any means” to the relevant authorities of the Labor Inspection Body, EFKA (former IKA) and OAED.
IV. In conclusion
Alternation between profit and loss is not a theoretical possibility in a business. No matter how well organized it is.
In the event of damages, it is the rescue of the business that must be dealt with first.
It is up to the employer to choose the appropriate measures, where appropriate.
The utilization by the employer of milder measures (compared to the termination of employment contracts) is, of course, preferable.
Making use of the institution of suspension can be a step to the right direction…
Stavros Koumentakis
Senior Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 26th, 2020).
