Criteria for Selecting Employees for Layoff for Economic and Operational Reasons

The present memo summarizes the basic criteria and procedures that a company must follow when selecting employees for dismissal for economic and technical reasons, in order to ensure the legality of the decision and reduce the risk of invalidity due to abuse.

Fundamental Principles

–              Dismissal is a last resort (ultima ratio).

–              The selection of an employee must be based on objective and comparable criteria.

–              The decision must serve a genuine business purpose and not personal motives.

–              The process must be documented and verifiable.

 

Prerequisites before selecting an employee to be laid off

The company must ensure that:

There are genuine economic and technical reasons (e.g., reorganization, discontinuation of operations, cost reduction).

There is a causal link between the business reason and the specific position.

Milder measures have been considered, such as:

–              transfer of the employee,

–              change of duties,

–              part-time employment,

–              modification of working conditions,

–              internal reallocation of resources.

–              It has been checked whether a vacant position is available.

–              The possibility of alternative employment, even in a lower-level position, has been evaluated.

 

Definition of a comparison group

The selection must be made among employees who:

–              belong to the same category,

–              have the same or a related specialty,

–              are at a comparable level in terms of skills, qualifications, and job performance.

 

Selection Criteria

The company must consider, cumulatively:

–              Seniority in the company

–              Age

–              Marital status (children, dependents)

–              Financial burden resulting from termination

–              Productivity / job performance

–              Ability to find other employment

These criteria must be applied comparatively and consistently to all employees within the same team.

 

Evaluation process (recommended practice)

Before deciding to terminate employment, it is recommended to compile an internal file that includes:

a list of comparable employees, key characteristics for each:

–              position / specialty,

–              seniority,

–              age,

–              marital status,

–              performance,

–              assessment of potential for alternative placement,

–              justification for the final selection.

 

Prohibited factors

Dismissal is considered abusive when based on personal animosity, malice, or enmity; a vindictive attitude; dissatisfaction due to an employee’s lawful conduct (e.g., asserting rights); or reasons unrelated to the company’s interests.

 

Consistent application

The company must be able to demonstrate that:

• the same criteria were applied to everyone,
• there was no arbitrary selection,
• the retention of other employees is justified.

 

Formal requirements

In addition to the substantive criteria:

• the notice of termination must be in writing,
• full and proper severance pay must be paid,
• the calculation must be based on the statutory regular wages.

 

Conclusion

The selection of an employee for dismissal is legally sound when:

–              there is a documented operational need

–              less burdensome solutions have been considered,

–              objective and comparable criteria are applied,

–              the selection is justified and consistent,

–              any element of personal targeting is ruled out.

 

* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.