Compliance Guidelines for Employers on Economic Layoffs Under the Epidemic
Time:
2020-05-07
Author:
Xiuling Ou
Source:
Guangxi Tongwang (Liuzhou) Law Firm
Visits:
40
Basic Case Information
Affected by the epidemic, a certain information technology company in Xin'an Street experienced operational difficulties and planned to reduce the number of employees. The company originally intended to terminate the labor relationship with some employees through economic layoffs, but did not carry out the layoffs according to legal procedures. After learning about this, the employees complained to the labor administrative department. After receiving the complaint, the labor administrative department conducted legal publicity to the person in charge of the enterprise, informing them that they should try their best to stabilize jobs through job rotation and rest, and if economic layoffs are necessary, they should also be carried out in accordance with the law, and the trade union or all employees should be informed of the situation 30 days in advance.
After learning that it could not immediately legally terminate the labor contract through economic layoffs, the company immediately notified the employees to stop working, forcing the employees to propose termination of the labor relationship. After the employees did not propose to terminate the labor relationship, the company directly terminated the labor relationship with the employees unilaterally for various reasons such as the employees' violation of rules and regulations. After receiving the notice of termination of the labor relationship, the employees immediately applied for labor arbitration, claiming compensation for illegal termination of the labor relationship and wages for February and March 2020, totaling more than 700,000 yuan. (Case source: A7 edition of Baoan Daily, April 03, 2020)
Handling result
The local labor and personnel dispute arbitration committee explained to both parties the standards for wage payment during the suspension of work during the epidemic, as well as the relevant laws and policies for illegal termination of labor contracts. After mediation, both parties reached an agreement that the company would pay the employees compensation and wages, totaling more than 500,000 yuan.
Lawyer analysis
At the beginning of 2020, the year of Gengzi Rat, a sudden outbreak of the new coronavirus swept the world. Fortunately, the Chinese government took active measures to respond, and has basically contained the domestic epidemic. With the "unblocking" of Wuhan, it marks a major phased achievement in China's epidemic control, but the negative impact of the epidemic on the economy has gradually become clear. The current situation determines that China cannot be overly panicked or blindly optimistic. Now the new crown epidemic is triggering a domino effect around the world, the global supply chain system has been greatly impacted, and the global wave of layoffs is fierce. No one can be immune. Small and medium-sized enterprises, whose capital chain is very fragile, are facing severe survival tests and have to take measures such as salary reductions and layoffs in order to continue. As mentioned above, the epidemic has severely damaged some companies, so can economic layoffs be carried out on the grounds of the epidemic?
In the context of the overall economy being affected by the epidemic, the protection of workers is particularly important. According to the Notice of the General Office of the Ministry of Human Resources and Social Security on Properly Handling Labor Relations Issues During the Prevention and Control of Pneumonia Epidemic Caused by New Coronavirus Infection, "If an enterprise has difficulties in production and operation due to the impact of the epidemic, it can stabilize jobs by adopting methods such as adjusting salaries, rotating jobs and shifts, and shortening working hours through consultation with employees, and try not to lay off employees or reduce layoffs." Obviously, the official wording is to "try not to or reduce" layoffs, rather than "prohibit" layoffs. The labor and personnel departments have also adopted a more tolerant attitude towards economic layoffs caused by the epidemic. However, employers should pay attention to the fact that my country has clear procedures and substantive requirements for economic layoffs in law. In view of the fact that the Ministry of Human Resources and Social Security advocates in principle that enterprises avoid or reduce layoffs, enterprises that do need to implement economic layoffs due to operating difficulties caused by the epidemic should strictly follow the specific procedures and norms for layoffs in relevant laws and regulations such as the Labor Contract Law. If the employer's layoff conditions are not met, it will face the legal risk of being deemed an illegal termination by the court, as in the above case.
Compliance Operation Guidelines for Employers' Economic Layoffs
I. Substantive requirements
1. Meet one of the four circumstances in which economic layoffs can be carried out as stipulated in Article 41 of my country's Labor Contract Law. These four circumstances are the substantive conditions for whether an enterprise can choose economic layoffs: (1) Reorganization is carried out in accordance with the provisions of the Enterprise Bankruptcy Law; (2) Production and operation are in serious trouble; (3) The enterprise undergoes industrial transformation, major technological innovation or adjustment of business methods, and still needs to reduce personnel after the labor contract is changed; (4) Other major changes in the objective economic circumstances on which the labor contract was based at the time of signing, making it impossible to perform the labor contract.
2. Meet the number of people stipulated, that is, 20 or more people or less than 20 people are laid off, but accounting for more than 10% of the total number of employees in the enterprise. Moreover, it is necessary to prepare relevant materials that meet the requirements for layoffs, such as financial statements and audit reports proving the loss situation, authentication reports issued by the tax bureau proving the enterprise's income situation, and certificates issued by the human resources and social security department proving that social security payments have been delayed due to financial difficulties; certificates of cancellation of orders by cooperative customers, etc., or because of national policies and overall planning, the employer is required to relocate, demolish or close down within a time limit.
II. Procedural requirements
1. The trade union shall be informed of the economic layoff 30 days in advance. If there is no trade union, all employees must be informed;
2. After the enterprise informs the enterprise's trade union or all employees of the situation, it shall propose a preliminary plan for layoffs and listen to the opinions of the trade union or employees;
3. After modifying and improving the reasonable opinions on the preliminary layoff plan put forward by employees, determine the enterprise layoff plan and the list of laid-off employees and announce them;
4. After soliciting the opinions of the trade union and workers, the plan shall be submitted to the human resources and social security department for record.
5. Officially issue a notice of termination of the labor contract to the employee and pay economic compensation in accordance with the law.
III. Other issues that need attention
1. Priority retention of personnel:
(1) Those who have signed a fixed-term labor contract with the unit for a longer period of time;
(2) Those who have signed an open-ended labor contract with the unit;
(3) Families with no other employed persons and who have elderly or minor children to support.
If the employer re-employs personnel within six months, it shall notify the laid-off personnel and give priority to re-employing the laid-off personnel under the same conditions.
2. Personnel who shall not be laid off:
According to Article 42 of the Labor Contract Law and the Notice of the General Office of the Ministry of Human Resources and Social Security on Properly Handling Labor Relations Issues During the Prevention and Control of Pneumonia Epidemic Caused by New Coronavirus Infection:
(1) Workers engaged in occupational disease hazard operations who have not undergone occupational health examinations before leaving their jobs, or suspected occupational disease patients during the diagnosis or medical observation period;
(2) Those who suffer from occupational diseases or work-related injuries in the unit and have been confirmed to have lost or partially lost their ability to work;
(3) Those who are sick or injured for non-work-related reasons and are within the prescribed medical treatment period;
(4) Female employees during pregnancy, maternity leave, and breastfeeding period;
(5) Those who have worked continuously in the unit for 15 years and are less than 5 years away from the legal retirement age;
(6) Other circumstances stipulated by laws and administrative regulations.
(7) For employees of enterprises who are unable to provide normal labor due to patients with pneumonia infected by novel coronavirus, suspected patients, close contacts during their isolation treatment or medical observation period, or due to the government implementing isolation measures or taking other emergency measures.