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What is an economic redundancy?

Verified 22 November 2019 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Labor

A dismissal for economic reasons is a dismissal by an employer for reasons not related to the employee himself.

The reasons for the dismissal are economic:

  • or a abolition or transformation of the employment of the employee concerned
  • a modification of an essential element of the employment contract refused by the employee

The economic reasons that the employer may invoke are:

  • Economic difficulties
  • Technological changes (e.g. introduction of new IT technology into the enterprise with an impact on employment)
  • The need to safeguard the company's competitiveness
  • Termination of business (unless due to fault of the employer)

Economic difficulties arise when the company is experiencing a significant change in at least one economic indicator such as:

  • Decrease in orders or turnover
  • Operating losses or a deterioration in cash or gross operating surplus
  • Any other factors which may give rise to economic difficulties

Please note

there is no legal definition of significant developments in any of these economic indicators. Only the judge may specify under what conditions the economic dismissal is justified on that ground.

A significant decrease in orders or turnover is constituted when, in comparison with the same period of the previous year, the decrease reaches a duration that varies according to the size of the company, under the following conditions:

Number of quarters of decline in orders or turnover in the company constituting a significant decrease

Workforce of the company

Number of quarters of decline in orders or turnover constituting a significant decrease

Less than 11 employees

1

At least 11 employees and less than 50 employees

2 consecutive

At least 50 employees and less than 300 employees

3 consecutive

At least 300 employees

4 consecutive

Example: a company with 40 employees which justifies a decrease in its turnover for 2 consecutive quarters compared to the same period of the previous year may lay off at least 1 employee for economic reasons.