Layoffs

A “layoff” means the temporary interruption of working and salary payment based on the employer’s decision or an agreement made at the employer’s initiative, while the employment relationship remains otherwise valid. Employers may lay off employees either for a fixed term or until further notice by interrupting work entirely or by shortening an employee’s regular working hours pursuant to the law or an agreement insofar as is necessary based on the grounds for the layoff. The best alternative in terms of unemployment security is for a part-time layoff to be implemented as full days, rather than by shortening the working day.

An employer has the right to lay off employees if the employer has financial or production-related grounds, as referred to in the Employment Contracts Act, for terminating employment contracts, or if the work or the employer’s capacity for offering work are temporarily reduced and the employer is unable, within reason, to organize other suitable work or training corresponding to the employer’s needs for the employees. Work or the capacity for offering work as grounds for a layoff are deemed to be temporarily reduced if they can be expected to last for a maximum of 90 days.

A layoff may also be agreed on in the aforementioned circumstances, but in such a case the agreement must indicate that it has been made due to the employer’s aforementioned need and at the employer’s initiative, to ensure that it will not result in a suspension period in unemployment security. Employers must cancel any layoffs announced to employees before the layoffs begin in the event that the grounds for them no longer exist. A situation of this kind may take place when the employer receives new work that the laid-off employee is capable of doing, for example.

When the employer has become aware of the need for layoffs, the employer must initiate cooperation negotiations in companies that employ at least 20 people. In companies with less than 20 employees, the employees must be provided with advance notice concerning the layoffs. This can be given orally or in writing, and its provision is not subject to an actual deadline. The advance notice must indicate the grounds for the layoffs, their estimated scope, implementation method, start date, and duration or estimated duration. At the same time, the employer must reserve for the employees or their representatives an opportunity to present their views on the advance notice.

Employees must also be informed of a layoff in person. If this is not possible, the employer may deliver the layoff notice by letter or electronically. The notice must be given no later than 14 calendar days before the layoff begins. The notice must indicate the grounds for the layoff, its start date, and its duration or estimated duration. Collective agreements may include agreements on longer notice periods, so it is advisable to check the matter from the collective agreement applicable to your own work.

Employers must also, upon request, provide a separate certificate of layoff that indicates the grounds for the layoff, its start date, and its duration or estimated duration. Unemployment funds sometimes require this certificate, but the layoff notice is usually adequate.

An employee has the right, during their layoff, to accept other work, use the apartment in their use as a fringe benefit or on the basis of a lease agreement related to the employment relationship, and use fringe benefits (such as a company phone or company car), provided that there is a separate agreement on their retention during the layoff.

Employees may not during their layoff disclose the employer’s business and trade secrets, establish a competing company or otherwise harm the employer. Nor may you take a job at a direct competitor of the employer.

A layoff has no impact on the granting or notice periods of annual holidays. In other words, an employee has the right to take a holiday during the holiday season even when they are laid off, and the layoff does not change the dates of holidays already announced. The employee is entitled to receive normal salary during the holiday. Learn more about the granting and notice periods of annual holidays.

In a full-time layoff, annual holidays are accumulated for the first 30 working days. In a part-time layoff, annual holidays are accumulated for a period of six months. The six-month period begins again, however, if the shortened working week continues after a new holiday credit year has begun.

Employees are entitled to hand in their notice during a layoff without a period of notice, as long as the date on which the work is, according to the employer’s notice, intended to resume is more than seven days away. This right also applies to a part-time layoff for the entire duration of the layoff, regardless of whether the date on which the employee hands in their notice is a working day or a layoff day. The employment contract is terminated as soon as the employee delivers the notice of termination to the employer. If the notice is delivered by mail or via email, the employer is deemed to have become aware of it no later than on the seventh day after it has been mailed or sent.

A laid-off employee has the right to terminate an employment contract they have made with another employer, regardless of its duration, with a five-day period of notice.

If the layoff has continued interrupted for more than 200 calendar days, the employee has the right to terminate the employment relationship and receive, as compensation, the salary for the period of notice and the attendant annual holiday compensation. This rule does not apply to part-time layoffs. In this case, the salary for the period of notice is calculated according to the period of notice complied with by the employer. Given that it is compensation, the employee is not obligated to work during the period of notice.

If an employer terminates the employment of a laid-off employee so that the termination takes effect during the layoff, the employee is entitled to receive a salary for the period of notice. The employer may deduct 14 days’ salary from the salary for the period of notice if the employee’s layoff was preceded by a 14-day statutory or contractual layoff notice period. This rule may have been derogated from with national collective agreements.

According to the Employment Contracts Act, a layoff may only be ended. Its postponement or temporary interruption are not possible without an agreement but, to be on the safe side, it is advisable to check the clauses on the matter from the collective agreement applicable to one’s own work. A layoff may not be interrupted artificially in an attempt to circumvent the law, and annual holiday, for example, does not break the continuousness of a layoff.

A new layoff cannot be extended by a unilateral decision of the employer or by simply changing the first notice concerning the layoff. In such situations, employees are entitled to a new layoff notice period. This matter may be agreed upon differently only in the context of a collective agreement.

Employers may lay off shop stewards and employee representatives only on financial and production-related grounds, and only in such a way that all work in the company comes to an end.

Employers may lay off employees in fixed-term employment relationships only if they are substituting for a permanent employee and the employer would have the right to lay off the permanent employee if they were working. This also applies to a “mixed” type of employment contract, i.e. a fixed-term employment contract that includes an agreement on the possibility to terminate the contract.