The Supreme Court has issued a judgment on the grounds for redundancy when restructuring a company and outsourcing services.
The Supreme Court’s ruling in a case dealing with termination arising from staff cuts is a landmark case in the area of labour law, providing greater employee protection.
The court was tasked with assessing the legality of a decision by an employer (“Company”) to make their property manager redundant, at the same time outsourcing property management services from another company (“Service Provider”), which, in turn, had coincidently engaged a colleague of the property manager (another employee who had terminated employment with the Company, now commencing employment with the Service Provider). That colleague within the Company previously had similar property manager’s duties to the redundant employee, while the former colleague was in charge of managing the Company’s buildings after engagement by the Service Provider. The employer argued that due to internal restructuring, the Company was no longer able to retain the redundant employee. Moreover, the Company had no vacancies. The Supreme Court was asked to assess whether the Company had lawfully terminated the employment.
The Supreme Court affirmed that under the Labour Law employers must prove the legality of redundancy. In particular, redundancy must be properly substantiated by urgent economic, organizational, technological or similar changes in the undertaking. In fact, the information provided in the dismissal notice, i.e., that it was a mere last-resort measure due to internal restructuring, was suspected to be a purely fictitious argument meant to cover up the employer’s wish to dismiss an irritating employee.
As regards the concept of transfer of undertakings, the court established that the situation described may be subject to safeguarding employees’ rights in the event of transfer of undertakings. Transfer of undertakings under EU case law (e.g. C-392/92) covers a situation in which an undertaking by contract entrusts to another undertaking the responsibility for carrying out certain operations which it previously performed itself, even though, prior to the transfer, that work was carried out by a single employee. Consequently, the courts have to diligently assess whether a transfer of undertakings has occurred, which grants dismissed employees the right to extend their employment relations with the undertaking’s acquirer.
Source: Judgment SKC–1817/2016 of the Department of the Civil Law Cases of the Supreme Court of the Republic of Latvia