If the amount of work in the company temporarily decreases, a company may lay off employees instead of terminating their employment. Laying off employees is provided for by the Employment Contracts Act, according to which laying off means temporary interruption of work and payment of salary while the employment relationship remains in force.
Employees may be laid off for a fixed period or indefinitely and may be implemented as a full-time or a part-time lay off. During a full-time lay off work and payment of salary is interrupted completely, whereas in connection with a part-time layoff the employee\’s working hours are reduced.
A lay off can be based on an employer decision or an agreement between the employer and the employee made on the employer\’s initiative.
When the employer lays off employees based on a one-sided employer decision, the lay offs have to be based on either financial or production-related grounds provided for by the Employment Contracts Act that would allow the employer to terminate the employment or on temporary reduction of work, which is at hand in case the work or the employer\’s possibilities for offering work have diminished temporarily and the employer cannot reasonably provide the employee with other suitable work or training corresponding to its needs.
A lay off can also be agreed upon between the employer and the employee. The agreement must always be made on the employer\’s initiative. A lay off based on an agreement between the employer and the employee does not require financial or production-related grounds provided for by the Employment Contracts Act that would allow the employer to terminate the employment, but the lay off must be required owing to circumstances affecting the employer\’s operations or financial standing.
The Employment Contracts Act does not specify minimum or maximum lay-off periods, but a lay-off period exceeding 90 days requires financial or production related grounds that would allow the employer to terminate the employment, while temporary reduction of work is sufficient grounds for a lay off of a shorter period. A lay off based on an agreement between the employer and the employee may also exceed 90 days, but must always be agreed for a fixed period.
When laying off employees the procedures provided for by the Employment Contracts Act must be complied with. If the company has over 20 employees, co-operation negotiations must be held prior to the lay offs.