Termination of the employment contract when the employee's job function becomes redundant for the employer: how can the employer avoid mistakes and the employee protect his rights?

Changes in work organisation are an inevitable reality of modern business. Economic crises, technological advances or changes in the way a company operates can lead to situations where certain job functions performed by employees become redundant for the employer. In such cases, the Labour Code (" LC") gives the employer the right to terminate the employment contract, but this right is limited by strict rules. Commenting on such situations, Laura Jodeliukaitė, a lawyer at AVOCAD, stresses that dismissal of employees in such cases must be carried out with the utmost care and responsibility, as non-compliance with the rules may result in legal disputes and significant financial losses for the employer.

Grounds for and substance of termination of employment

The LC provides that an employer has the right to terminate an employment contract if the employee's job function becomes redundant for the employer due to changes in the organisation of the work or other reasons related to the employer's activities.

Thus, changes in work organisation or other reasons related to the employer's activities may make the work function performed by the employee redundant for the employer, i.e. the employer's need for the employee's work changes and the work function performed by the employee becomes superfluous.

This could be the case when a company introduces a new technology that allows the automation of certain functions. This technological change may reduce the need for certain job functions because these functions are performed faster and more efficiently by the new technology. For example, a company implements an automated customer service platform that is able to answer common questions and solve simple problems. In such cases, the need for customer service agents may be reduced as these tasks are efficiently performed by the system.

A job function performed by an employee may be considered redundant if the employer abandons the job function entirely or decides that the same or similar functions can be performed by fewer employees in order to optimise resources, etc.

The reasons for terminating an employee's contract, which are linked to the employer's activities, can be both internal (reorganisation of the work organisation, optimisation of the resources available, etc.) and external (economic or other external reasons where the employer decides to reduce the cost of the company's activities, etc.).

Conditions for dismissal of redundant staff

Termination of an employment contract when the work function performed by the employee becomes superfluous for the employer will only be lawful if certain conditions are met.

First, the changes in work organisation or other reasons related to the employer's activities are real and make the job function performed by the worker (or group of workers) redundant.

If the employee challenges the lawfulness of his dismissal, the employer will have to prove that:

• changes in work organisation or other reasons related to the employer's activities are real;
• these are the reasons why a particular job function performed by a particular worker (or group of workers) is redundant (the reason is directly causally linked to the fact that the job function performed by the worker has become redundant for the employer).

However, termination will be considered unlawful if the employer's structural/organisational changes turn out to be a sham.

A fictitious reason for termination of employment can be, for example, if a new person is hired to replace an employee after the dismissal. A similar situation may arise where an employer abolishes a post but soon creates a new post with identical or very similar functions. This would indicate that the employer's reasons given for the redundancy of the job function were unfounded, as the job function performed by the employee was not in fact redundant, and may have been intended to justify the termination of the contract of employment of a particular employee.

Second, the staff selection criteria are met

Where a redundant job function is performed by a number of employees but the employer plans to make only some of them redundant, it is necessary to establish and apply clear criteria for selecting employees. These criteria must be used to decide which employees will be retained and which will be made redundant.

Criteria for selecting redundant workers must be agreed with the workers' representatives

The employer adopts the criteria for selecting the workers to be made redundant, but these must be agreed with the works council or, in the absence of a works council, with the trade union. The selection for dismissal is carried out by a specially appointed committee of the employer, which also makes proposals for dismissal. If neither a works council nor a trade union is established, the employer shall not set up a panel and shall decide on the selection criteria and carry out the selection of the employees itself.

Staff members with a right of first refusal to remain

The selection criteria for redundancies must ensure the right of preference of certain workers to remain in employment. For example, priority for job retention is given to workers who are less than three years away from retirement pension age, who have three or more children under the age of 14 or who are raising a child under the age of 14 on their own, as well as in other cases provided for in the LC. The right of preference applies only if the worker's qualifications are not inferior to those of other workers of the same specialisation employed by the undertaking (except for the exception provided for in the LC).

In addition, the employment contract cannot be terminated in the case of a pregnant worker, workers with children under the age of three, or in other cases provided for by law.

Thirdly, the dismissed worker must be offered a vacancy

The employer must offer the dismissed worker other vacancies, if any. The first vacancies to be offered shall be those which are appropriate to the employee's occupation, qualifications and, where appropriate, medical condition. If there are no such vacancies, or if the worker refuses to take them, any other job which the worker could perform in accordance with his abilities and state of health may be offered. The employer is not obliged to offer jobs for which the worker is not suitably qualified or does not meet the other requirements for the vacancy.

The employment contract can only be terminated if there are no vacancies in the workplace during the notice period (up to five working days before the end of the notice period), to which the employee can be transferred with his/her consent.

Fourth, the time limits for giving notice of impending dismissal are met

The employer must comply with the statutory notice periods. If the employment relationship lasts for more than one year, the employee must be given one month's notice of dismissal. If the employment relationship lasts less than a year, the notice period is two weeks. It should be noted that longer notice periods apply to vulnerable groups of workers.

The dismissed worker is also entitled to severance pay. If the employment relationship has lasted less than one year, the payment is half of his average salary. If the employment relationship lasted more than one year, the amount of the payment shall be equal to two times his average salary.

Termination of an employment contract, when the employee's job function becomes redundant for the employer, is a complex process that requires special attention and care from the employer. Compliance with all legal requirements and procedures can reduce the risk of legal disputes, protect workers' rights and avoid financial losses due to unfair dismissal.