Do’s & Don’ts in case of dismissal and downsizing
The coronavirus has a major impact on our economy and possibly also on your company. In the context of this pandemic, several companies are facing particularly difficult circumstances which can result in the difficult decision to dismiss certain employees. Here are some do's and don'ts that might be useful for your company in case of possible future redundancies.
Alternatives to avoid (collective) dismissal?
It is important not to launch the collective dismissal procedure too hastily. In practice, we often see that the number of intended layoffs can be significantly reduced with the implementation of a number of alternative measures.
In this context, it is useful to consider whether one of the following alternative measures can be applied in your company:
- The non-extension of employment or consultancy agreements of definite duration and a limitation of the use of temporary employees;
- The reduction of the working time of certain employees e.g. by means of time credit end-of-career, parental leave and time credit in the context of covid-19 or a temporary sponsored working time reduction (e.g. 1/4th or 1/5th working time reduction);
- Temporary unemployment;
- Internal mobility: Employees can possibly be reoriented or relocated to certain open positions (e.g. due to the non-extension of definite agreements) within the company as alternative to a dismissal;
- A freeze of the (extralegal-)salary increases;
- Salary optimization e.g. flexible reward plan;
- Early retirement scheme for senior employees.
Explore the option of ‘garden leave’ as alternative
When an employment contract is terminated, the performance of a notice period can be burdensome for both parties and dangerous for the business continuity of the company.
As a result of the above, employers often opt for a dismissal with immediate effect. However, this means that a one-off payment of the indemnity in lieu of notice should be made on the dismissal date.
A (better) alternative is to agree upon an exemption of performance during the notice period while remaining his/her salary (i.e. garden leave).
- The payment would be spread over the duration of the notice period and the employee will continue to receive the payment of his/her normal fixed remuneration without having to perform the notice period;
- The non-compete clause shall apply free of charge during the entire period of notice.
Be careful concerning the dismissal of protected employees
The irregular dismissal of protected employees (i.e. employee representatives and candidates) can lead to the compulsory payment of high protection indemnities.
Currently, it is certainly important to be extra vigilant in this respect due to the resumption of the occult protection period. This new occult period started between 18 and 31 August 2020 and runs until the new X+76 (between 2 and 15 November 2020). When social elections are organised within your company, it is therefore advisable to be cautious regarding possible dismissals from now until mid-November.
If a social plan would be concluded with the unions in the context of multiple dismissals or a collective dismissal, it is in any event a must to agree upon the removal of the protection of the (candidate) employee representatives.
Waiver of non-compete clause
The enforcement of a non-compete clause in the event of dismissal is not free of charge for the employer as a lump-sum compensatory indemnity should be paid to the employee. This compensatory indemnity is equal to at least half of the gross salary corresponding to the duration of the non-compete.
The enforcement of the non-compete clause in the event of dismissal will, therefore, only be advisable for employees with important functions for whom the risk of competition is high. For other employees we recommend waiving the application of the non-compete clause within 15 days of the dismissal in order to avoid the obligatory payment of such disproportionately high indemnity.
The above does not apply to sales representatives as they are by no means entitled to a lump-sum compensatory indemnity.
In the event of dismissal, employers often overlook the obligation to make a timely and valid outplacement offer.
This has expensive consequences, especially for dismissals with an indemnity in lieu of notice for more than 30 weeks. If a valid outplacement offer is made, the employer may reduce the legal indemnity in lieu of notice with 4 weeks salary. This deduction of 4 weeks is, of course, not possible when no valid outplacement offer has been made.
In order to avoid unfortunate additional costs for the employer, it is important to be aware of the outplacement obligations.
Company car and holiday pay
If the dismissed employee has a company car, it is advisable to postpone the payment of the departure holiday pay until after the company car has been returned by the employee. Any costs as a result of damage to the company car can then be deducted from this departure holiday pay.
Dismissal for serious cause
It is often difficult to evaluate whether a certain misconduct by the employee can qualify as a serious cause, or there is simply not enough evidence to prove this gross misconduct. If the employer invokes the gross misconduct on the part of the employee, the risk lies entirely with the employer. If a court subsequently rules that the gross misconduct cannot be proven or does not qualify as a serious cause, the indemnity in lieu of notice will be due.
For this reason, it is recommended to encourage the employee to resign himself or to agree with a termination in mutual agreement (and thereby avoid the disgrace of a dismissal for serious cause) when there is any doubt or lack of evidence of the gross misconduct.
Kris De SchutterPartner Attorney at law
Kris De Schutter is a partner in our office in Brussels and member of Loyens & Loeff’s Employment & Benefits Practice Group. He has extensive experience in alternative (flexible) remuneration, restructuring and change processes.T: +32 2 700 10 13 E: email@example.com
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