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Collective redundancies in groups of undertakings

November 2009 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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When a parent company is contemplating collective redundancies in one or more subsidiaries, the subsidiary in question must not consult the potentially affected employees until the parent company has made the strategic decision that forces the subsidiary to consider the option of redundancies.

A subsidiary is not required to consult employee representatives about proposed collective redundancies until the parent has named the subsidiary as the one that will be affected. This was established by the European Court of Justice when it laid down specific guidelines as to when potentially affected employees are entitled to be consulted.

The case in point concerned an international computer organisation that had decided to terminate its operations in Finland, a decision which resulted in collective redundancies in the subsidiary. The affected employees issued proceedings because they felt they had been consulted too late in the process when a definitive decision had already been made by the parent.

Decision of some firmness

The proceedings were conducted in the Finnish Supreme Court, which decided to ask the ECJ for a preliminary ruling on how to interpret the provisions which form the basis of Finnish law in this area.

The ECJ ruled that representatives of employees who are potentially affected by collective redundancies must be consulted when the parent has made the strategic decision that forces the subsidiary to consider the option of redundancies. There would be no point in forcing a subsidiary to consult with employee representatives before the subsidiary has been identified as the one that will be affected by the redundancies.

And subsidiaries may not, whether so instructed by the parent or not, dismiss employees until the employee representatives have been consulted.

Norrbom Vinding notes: 

  • that the ECJ's clarification of when employees must be consulted in the event of collective redundancies in a group of undertakings is highly relevant to the interpretation of the Danish Collective Dismissals Act because it has now been determined that if the strategic decision to carry out collective redundancies has been made by others already before the consultation process is begun, the employer representatives are allowed to say so

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