The balance between employer flexibility and employee protection continues to shift. Faced with workplaces adjusting to economic pressures and in some places a popular backlash against globalization, it’s difficult for governments to know how best to modernize their mass dismissal and redundancy laws and collective rights more generally. From the UK’s desire to strengthen employee consultation rights to Hungary’s more employer-friendly approach, responses differ to essentially the same complex issue.
Protecting employees
Balancing employer flexibility with employees’ rights is rarely simple. After a long period in which the United Kingdom prioritized labor market deregulation, the new government’s approach will be to extend the obligation to inform and consult on collective redundancies. At the moment, dismissals of 20+ employees at one establishment within a 90-day period trigger collective consultation. The “one establishment” rule will be removed, meaning dismissals across several workplaces will trigger consultation duties.
This may prove difficult to manage for multi-site employers at the same time that failure to comply attracts larger penalties. The government is consulting on whether to increase the maximum penalty from 90 to 180 days’ pay for each employee or to remove the cap entirely. The aim here is to ensure it isn’t cheaper and easier for employers to pay employees than to consult with unions or employee representatives.
Another legislative target is “fire and rehire,” where employers dismiss employees and re-engage them on new, typically worse, terms and conditions. From 20 January, employment tribunals can increase protective awards by up to 25 percent for employers that opt to fire and rehire an employee and fail to comply with the statutory Code of Practice on dismissal and re-engagement. The Code emphasizes employee consultation before dismissals take place. This change aligns with the government’s broader initiative to protect employees. Under the Employment Rights Bill, fire and rehire dismissals will be automatically unfair in most cases, giving employees even more protection.
Alongside changes to consultation rights, the Employment Rights Bill will make it easier for unions to get statutory recognition. Trade unions will get access to workplaces to recruit and organize members, and membership requirements and voting thresholds will be reduced to simplify recognition applications.
Hong Kong is another territory with a focus on improving employee rights. Until now, it’s been possible for employers to offset severance payments against mandatory provident fund (pension) contributions or long service payments on termination. The government is abolishing the practice, viewed as unfair to employees, so employers can no longer use such contributions to offset long-term service payments and/or severance payments for employees for years of service after 1 May 2025, increasing the cost of large-scale redundancy programs. Employers can continue to use mandatory provident fund contributions to offset long service and/or severance payments owing for years of service up to the May transition date. This will require more complex split calculations for employees with periods of service before and after the transition date.
Potential changes
Mass dismissals have led to a legal stalemate in Germany, where the current economic climate means they remain common. When an employer plans a mass dismissal within a 30-day period, the employer is required to tell the works council and notify the appropriate local authorities, in line with the Collective Redundancies Directive. The process is complex, and it’s common for employers to make mistakes.
Errors in the consultation process or in the information given to local employment agencies generally invalidate dismissals. That is unless the works council has led to the error or the incorrect information is not part of mandatory notification requirements. One division of the Federal Labor Court recently queried whether the principle that dismissals are generally invalid is consistent with the Collective Redundancies Directive requirement that penalties be proportionate. This draws a distinction between an employer that has simply failed to comply wholesale and one that has tried to provide proper notification but done so incorrectly. To resolve this conflict, another division of the Federal Labor Court referred the issue to the European Court of Justice. For now, the situation remains unresolved, but the eventual decision could mean dismissals can go ahead even if notification requirements haven’t been followed to the letter.
Uncertainty ahead
To make collective dismissals in Spain when a business is closing down, employers with 50+ employees have to tell the Spanish labor authorities and the main unions at least six months before consultation begins (which itself lasts at least 30 days). This notice requirement was introduced by Royal Decree 608/2023, which has been in force for nearly 18 months. Yet there’s ongoing uncertainty about how it will be enforced and whether the labor authorities will sanction employers that don’t comply. Smaller companies in particular find planning six months ahead problematic, and the practical effect is still being worked out.
There are no expected legal changes or case developments related to collective redundancies in France this year. But there has been an increase in redundancy/ social plans, which employers with 50+ employees should negotiate and agree with representative trade unions and which, in some cases, require the French labor administration’s validation, before implementing mass dismissals. This reflects, at least in part, financial pressure caused by government loans offered during the pandemic on favorable rates falling due for repayment.
China is another country that has seen an uptick in mass redundancies over the last couple of years. National-level rules define mass dismissals (20 or more employees or 10 percent of the workforce) and the situations in which mass dismissals are permitted. But the detailed implementation is typically regulated by local rules that depend on the city where employees work. These often require employers to get local authority approval before mass dismissals take place. The rules are obviously similar to the thresholds that trigger consultation requirements in the EU and the United Kingdom. To avoid filing requirements, it’s common for employers to agree a mutual termination of the employment relationship with employees.
Employer friendly
The Hungarian government tends to pursue labor market policies that favor employers. In line with this, it has focused on reducing employee consultation rights, not extending them. Current obligations for employers, such as collective redundancies or TUPE, are governed by EU law and are not gold-plated by domestic law. Penalties for non-compliance, which are mainly reputational consequences, are low.
In the United States, employment is typically “at will,” so employers can terminate at any time for any reason. But federal and state Worker Adjustment Retraining Notification laws require employers to provide notice of mass dismissals. Under the federal law, employers with 100+ employees which plan to dismiss 50+ employees at one location must give 60 days’ notice. They also have to notify federal, state, and local government agencies as well as union representatives. Employers that don’t comply face statutory fines and penalties, as well as being liable for wages during the relevant notice period. State “mini-WARN” laws may impose different thresholds and notice periods. For example, in New York State, employers must give 90 days’ notice to dismiss 25+ employees.