A dismissal due to downsizing must be justified by the circumstances of the business. As with other grounds for dismissal, this must also meet the requirement of objectivity.

Sometimes it may be necessary to downsize the business. Downsizing means that the number of full-time equivalents in the company is reduced. This means that employees are then dismissed from their positions.

The rules governing this are of interest both to employers considering downsizing and to employees who may be affected by downsizing.

Weak and strong reasons for downsizing

A distinction is often made between weak and strong reasons for downsizing.

• Weaknesses will arise in cases where the management of a company considers it necessary to improve profitability by cutting the workforce.
• Strong reasons for downsizing will exist when the business is operating at a loss and risks closure if the number of full-time equivalents is not reduced.

Requirements for case processing

In a downsizing process, several requirements must be met for the process to be considered lawful. The employer must assess whether termination is necessary or whether layoffs may be an alternative. While downsizing will provide a permanent solution, layoffs will provide a temporary solution, for example if the company is waiting for a larger order intake.

Unlike in the case of termination, the employment relationship will continue in the event of a layoff, where the employee is required to take leave from work, while the employer is exempt from their obligation to pay wages. The work stoppage in the event of layoffs is only intended to be temporary.

Requirement for discussions

The requirements that can be imposed on the handling of the downsizing process depend on the size of the business and how many employees will be affected. In companies with 50 or more employees, there is a requirement to hold discussions with employee representatives to assess a possible downsizing. It is natural that both the basis for the downsizing and how it will be carried out are discussed.

It is recommended that such discussions also be held for smaller businesses. Where there are no elected representatives, employees should be encouraged to elect a representative who can discuss matters with the employer.

If it is necessary to terminate the employment of 10 or more employees, the rules regarding mass redundancies will also apply. In addition, individual consultation meetings must be held in the usual manner with the employees who are being considered for termination.

Selection committee and selection criteria

How are the employees who must be laid off in the event of downsizing selected? In the event of downsizing, the entire business must initially be assessed, but in some cases it may be appropriate to assess a branch or department.

First, you must identify which groups of positions are to be assessed. Next, you must consider which selection criteria are appropriate to use. These typically include seniority, competence, suitability, age, and possibly social circumstances. This assessment will often be difficult.

Requirement to offer other suitable work

It is important to note that there is a requirement to offer other suitable work if such work is available. What constitutes other suitable work must be assessed on a case-by-case basis. If such suitable work is available, there is no objective reason for dismissal in the event of downsizing.