Answers to questions about lay-offs

TEK’s lawyers will help you with any questions you may have related to employment relationships. We will be happy to take a closer look at your particular situation.

What does lay-off mean?

Lay-off refers to a temporary suspension of work and salary payment based on the employer’s decision or an agreement made on the employer’s initiative. The employment relationship remains otherwise in force.

An employee may be laid off either for a fixed period or indefinitely. The lay-off can be done by interrupting the employee’s work and payment of salaries completely, or by reducing the employee’s regular working hours to an extent considered necessary.

When can an employer lay off an employee?

An employer may lay off an employee only if the criteria laid down in the Employment Contracts Act are met. According to the Employment Contracts Act, an employer may lay off an employee if the employer has a financial or production-related reason for terminating the employment contract, or if the amount of work or the employer’s potential for offering work have diminished temporarily and the employer cannot reasonably provide the employee with other suitable work or training corresponding to the employer’s needs.

The work or the potential for offering work are considered to have diminished temporarily if they can be estimated to last a maximum of 90 days.

Can an employee in a fixed-term employment relationship be laid off?

An employer is entitled to lay off an employee in a fixed-term employment relationship only if the employee is working as a substitute for a permanent employee and if the employer would be entitled to lay off the permanent employee if the permanent employee were working.

An employer may also lay off an employee who is in a fixed-term employment relationship if the employment contract explicitly states that the employment contract may be terminated and the employer has a financial or production-related reason for terminating the employment contract.

What does an advance notice mean?

If the employer is not covered by the Co-operation Act, the rules of procedure laid down in the Employment Contracts Act shall apply. The employer must, on the basis of information available to them, present the employee with an advance explanation of the grounds for the lay-off, and its estimated extent, implementation, starting time and duration. The explanation must be presented without delay as soon as the employer becomes aware of the need for lay-offs.

After presenting the explanation, the employer must give the employees or their representative an opportunity to be heard concerning the explanation given. If the lay-off concerns several employees, the explanation may be given to the employees’ representative or to the employees jointly.

If the employer is covered by the Co-operation Act, change negotiations must be held at the workplace if the employer is planning lay-offs. In this case, the employer does not have to give a separate advance notice.

What does a lay-off notice mean?

The employer must give the person to be laid off a lay-off notice. The lay-off notice must state the reason for the lay-off, its starting time and its duration or estimated duration.

The lay-off notice must be given to the employee no later than 14 days before the start of the lay-off. However, a lay-off notice period different from this may be specified in the collective agreement.

Can I work for another employer during the lay-off period?

Being laid off does not prevent an employee from taking on other work during the lay-off period. This means that the employee has the right to enter into another employment contract during the lay-off period. However, the employee may not violate the prohibition of competing activity laid down in the Employment Contracts Act or prohibition of competing activity possibly laid down in the employment contract. The employee is entitled to terminate an employment contract made with another employer for the lay-off period, regardless of its duration, at five days’ notice.

When must the employer notify the employee of the end of an indefinite lay-off?

The employer must notify the employee of the end of the lay-off at least seven days before the end of the lay-off, unless otherwise agreed.

Can I resign during my lay-off period?

During the lay-off period, employees are entitled to terminate their employment contract without a notice period regardless of the duration of the employment contract. However, it should be noted that this right does not apply for the seven days preceding the end of the lay-off period. In this case, however, the employee may resign in accordance with the notice period.

Employees who terminate their employment contract after the lay-off has lasted continuously for a minimum of 200 calendar days are entitled to their pay for the notice period as compensation. In this case, the termination of the employment contract is considered to be caused by the employer, and the pay for the period of notice is determined according to the employer’s notice period. However, the employer may deduct a sum corresponding to 14 days’ worth of wages from the pay for the notice period if the employee has been laid off using a law-based or contract-based lay-off notification period of more than 14 days.

The author works at TEK as an employment lawyer.