Limitation of business activity (: Dismissals or Rotational Work?)
I. Preamble
When Demosthenes, in his work Olynthicus I, proclaimed that “it is harder to maintain wealth than to acquire it”, he probably did not realize the time value of this position of his (nor did he realize that I would be using it today).
The value of this position is self-evident in matters relating to safeguarding personal wealth. The same goes in matters relating to ensuring the existence and health of every business.
It is a fact that every entrepreneur (with no exception) sincerely strives for the development of their business activities.
Sometimes their efforts are not successful. They then face a series of dilemmas: Should I shut my business down? Should I lay off some employees in order to still be able to offer jobs to the rest and keep my vision alive?
Dismissing employees is the first (necessary -obviously not desirable) solution. It results, in any case, in the business saving the expenses it would otherwise occur.
Terminating an employment contract is the most drastic, unilateral, way to intervene on it. When an employer decides to terminate an employment contract, the result is not only the termination but also the loss of the job. Without the employee’s approval.
Safeguarding the interests of both the company and of the employees, is equally important. In order to avoid dismissals (and in the interests of both), the legislature has adopted, among other things, two more mild measures. These of rotational work and suspension. These measures may prove just as appropriate to protect the interests of the business (as well).
In this article we will deal with the first of the two, rotational work.
II. Rotational work -in general (and part-time work)
1. In general
Rotational work is part of the part-time employment institution. We have already referred to part-time employment in a previous article.
2. The legislative framework
2.1. Rotational work is regulated by the provision of article 38 par. a and b of Law 1818/1990-as applicable. This regulation states:
“When drawing up or during the duration of an employment contract, the employer and the employee may, by a written individual agreement, agree to any form of rotational employment.
Rotational employment is considered to be working fewer days per week or fewer weeks per month or fewer months per year, or a combination of these on a full-time daily basis.
The protection provided by this Article shall also cover those employed in accordance with the agreements referred to in the preceding paragraph.”
2.2. Also, par. 3 d’ states:
“The employer may, provided their activities are reduced, instead of terminating the employment contract, impose a rotational employment system on their business, the duration of which may not exceed nine (9) months in the same calendar year, only after they have informed and consulted with the legal representatives of the employees, in accordance with the provisions of P.D. 240/2006 and Law 1767/1988. The agreements or decisions referred to in this paragraph shall be notified within eight (8) days of their drafting or receipt to the relevant Labor Inspectorate. “
3.3. Rotational work is therefore different from part-time work. Rotational work refers to working fewer days per week or fewer weeks per month or fewer months per year or a combination of these. However, in any case, it exclusively refers to full-time employment.
Working less than “full-time” is linked to part-time work.
III. Rotational Work Schemes – Features and Requirements
According to the above, two are the possible rotational work schemes.
The former is the product of an employer-employee agreement.
The second is that imposed by the unilateral decision of the employer.
1. Rotational work as per a relevant agreement
1.1. Conventional rotational work is what is agreed between the employer and the employee. This agreement can take place at two different times. When concluding an employment contract or, alternatively, during a (already existing) full-time contract. In the latter case, the agreement shall modify the original contract.
1.2. In rotational work, employees’ working and non-working days alternate. There is, of course, a corresponding reduction in their remuneration. Despite this rotation, however, the operation of the business (or of the part of the business) continues. It goes without saying that the work is offered full-time. In no case is rotational work allowed when the work is offered part-time.
As for the other provisions of the law:
Switching between working and non-working days is not subject to any restrictions. This rotation can be freely agreed upon, without the need for the working and non-working periods to be the same or similar. For example, on a five-day work system it may be agreed to provide work for any number of one to four days a week, or to provide reduced weekly work only for certain weeks of the month and so on.
1.3. In a bit more detail: There is no restriction on the duration of conventional rotational work (as opposed to the restrictions provided if the rotational work is unilaterally imposed -below under 2.4.iv). The content of the agreement is therefore left to the contractual freedom of the employer and the employee. The law does, however, lay down some clear conditions (below 1.4-1.6) for such agreements to be (legally) concluded.
1.4. In accordance with the provision of §3 e’ Article 38 of Law 1892/1990, if the above agreement between the employer and the employee is not concluded in writing, the full employment of the employee shall be presumed!
1.5. Also, according to the provision of Article 38 § 5 of Law 1892/1990, the written individual contract providing for the rotational work must include specific details. At least:
(a) the identity of the parties;
(b) the place of employment, the place of business or the address of the employer;
(c) the time of employment, the method of allocation and the working hours;
(d) the method of remuneration; and
(e) any conditions for amending the contract.
1.6. Lastly, according to the law the part-time contract must be registered within eight (8) days on the ERGANI information system (Article 38, § 3 e’ 1892/1990).
It is important to stress that in the event of failure to register the agreement, a full-time employment relationship is presumed.
2. The unilaterally imposed rotational work
2.1. The employer may unilaterally impose on their business a rotational system. A prerequisite is the reduction of their activity. The daily working hours for workers must also be equivalent to full-time employment in this case as well. There is also no restriction in this case on the distribution of working days on a weekly and / or monthly basis.
2.2. The unilaterally imposed rotational work relates to a collective arrangement. It cannot be applied, selectively, to individual employees. It should concern all the staff of the business or at least some part of it.
It is obvious that the legislator’s objective is for the business (which now has a reduced activity) to evenly distribute the negative effects of its reduced turnover to all its staff. This is in order to avoid layoffs and save jobs.
The collective nature of the arrangement also derives from the reference to the provision in question to a “rotational employment system”. It is also confirmed by the fact that, for the validity of its enforcement, the employer must inform and consult with the representatives of the employees (as discussed below under 2.4.c).
2.3. The conditions laid down by law for (legally) imposing a rotational employment system are substantive and formal. Specifically:
(a) Substantive requirements:
- The reduction of the business activity of the employer,
- The rotation of employees in the same or in different jobs at different times
(b) Formal requirements:
- Prior notification and consultation of the employee representatives,
- The duration of the enforcement shall not exceed nine (9) months in the same calendar year; and
- The decision of the employer to be registered within eight (8) days on the ERGANI Information System.
2.4. In more detail:
(a) The reduction of the employer’s activity
The first essential prerequisite is that the business’s “activity is reduced”. The law does not further specify what “the reduction of business” really means. In any case, there is no need to jeopardize the viability of the business. However, any (minor) reduction of the operation of the enterprise, of the establishment or of a sector of the business and/or if the business is operating at a loss are not sufficiently meeting the relevant legal requirement. Nor is it sufficient for an employer to have financial or liquidity issues that result in their difficulty to pay employees for a certain period. It is required that the “volume of activity” should be such that “there will be a surplus of staff as a result of the reduction in available work” (Circular 35958/666/2017).
Where rotational work is imposed as an extreme measure, but milder than that of the termination of employment contracts, it is a reasonable premise that activity reduction poses a real threat to jobs. In other words, it must be such a reduction of activity that it could lead to dismissals for logistic reasons (SC 771/2017).
(b) The rotation of employees in the same or in different jobs at different times
According to the case law of the Arios Pagos (Supreme Court of Cassation of Greece) (decisions no. 470/2018, 1279/2018, 771/2017 and 1252/2014), the rotational employment system requires that:
- the rotation of employees in the same business, holding or part of a business or holding
- in the same or in different jobs,
- at different times but at regular intervals,
at the same time while the operation of the business remains constant.
This rotation can involve:
- either groups of employees, one of whom will replace the other in succession in employment and in non-employment,
- or one employee at a time, in the sense that one employee at a time will be placed on a compulsory leave, while the other employee will be employed full-time.
Without this interchange of work, which will occupy all employees in the business or part of it that has a significantly reduced activity, the implementation of the system is, in principle, not acceptable.
(c) Prior notification and consultation of employee representatives
- Prior to the unilateral decision of the employer to impose a rotational employment system, prior notification and consultation of employees’ representatives is required by law (in accordance with the provisions of Presidential Decree 240/2006 and Law 1767/1988). Fortunately, the successful outcome of such communications is not a requirement.
- The above (under i) obligation applies to all undertakings to which the employer intends to impose the measure. And this, regardless of the number of employees. (Irrespective of whether they employ fewer employees than those provided for their implementation, based on Articles 3 of PD 240/2006 and 1 of 1767/1988).
iii. According to § 4 of article 38 of Law 1892/1990, as employees’ representatives:
“Are defined in the following order of priority:
(a) representatives of the most representative trade union organization of the undertaking or holding, which in its articles of association covers employees, irrespective of their category, position or specialty;
(b) representatives of the existing trade unions of the business or holding;
(c) the workers’ council
(d) in the absence of trade unions and a workers’ council, all workers shall be informed and consulted.”
- In addition, according to the abovementioned provision, “information may be provided by a one-time notice at a prominent and accessible place in the business. The consultation shall take place at the place and time specified by the employer.”
In any case: The briefing should include the reasons that make it necessary for the employer to impose a rotational system. Indicative: evidence of a significant reduction of activity, its possible duration, the proposed scope of rotation (its application, for example, to certain sectors of the business or to the business as a whole), the particular employment distribution system that the employer intends to implement (: SC 771/2017).
It is noted that in businesses with a small number of employees, this information may also be orally communicated to the employees.
- The invitation of the employer to consult with the representatives of the employees, or in the absence of them, with all of the employees, should also include the place and time of the consultation. The time between the communication and the consultation should be sufficient for the employees to prepare. The (sufficient) time is a crucial requirement and whether or not that requirement is met is examined on a case by case basis. This is because it depends on several factors. Indicative: number of employees, number and complexity of issues to be discussed etc.
- The consultation under article 38 of Law 1892/1990 has a rather broad framework. Of course, it is the exchange of views between the employer and employee representatives (or employees). It will focus on the measures and decisions that need to be taken to tackle the company’s difficulties resulting from the reduction of its business. In particular, the creation of a system of allocating the remaining available work to all the staff of the enterprise (or of a specific sector of it) in order to save jobs.
vii. What is encouraging, however, is that, as mentioned above, there is no legal requirement that the consultation on the implementation of rotational work has a successful outcome. There is no need for the employer and employees to reach an agreement.
However, imposing a rotational employment system without prior notifications and consultation is illegal and is (considered to be) unilaterally adversely affecting the working conditions. In this case, the employee may regard the employer’s decision as a termination of the employment contract. The employee then has two alternatives: either (a) to leave and claim the legal compensation or (b) to continue to offer their services in accordance with the terms of the employment contract – rendering the employer at default for not accepting the services offered, which would result in the employer owing the employee all their wages.
(d) Maximum duration of work rotation
As already mentioned, in the case where the rotational work is agreed upon between the parties, there is no time limit. On the contrary, this is not the case when the employer imposes this system unilaterally. The duration of this unilaterally imposed measure shall not exceed nine (9) months within the same calendar year (§3 d’ Article 38, Law 1892/1990).
(e) Registration of the employer decision in ERGANI
The last formal requirement (for the validity) of the unilateral enforcement of a rotational employment system is to register the relevant decision within eight (8) days in the competent Labor Inspectorate. (Already, by virtue of Decision No. 40331 / 19.09.2019 of the Ministry of Labor and Social Affairs, it is mandatory to submit to the ERGANI information system the Labor Inspectorate Body’s appropriate forms, such as Form E9 on rotational work.)
Therefore, the unilateral decision of the employer should be registered with ERGANI within eight days of its adoption.
IV. In conclusion
Imposing a rotational employment system is an important tool in the hands of the employer, in their effort to ensure, in times of distress, the survival of their business.
It can happen by consensus.
It can (fortunately) take place unilaterally.
In this case, the employer needs to pay attention to some crucial legal requirements (evaluation of individual parameters, processing of specific data, planning of strategy, rotational employment system design & implementation, realization …)
However, the employer is required to focus, above all, on the fulfillment (and proof of fulfillment) of the necessary legal requirements.
And all of this is an important, if not necessary, step towards rescuing (troubled) businesses.
Of course, and as a result, in rescuing (the always valuable) jobs as well…
Stavros Koumentakis
Senior Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 19th, 2020).
