The following article is a best-friends initiative among the following firms: BonelliErede, Bredin Prat, De Brauw Blackstone Westbroek, Hengeler Mueller, Slaughter and May and Uria Menendez.
Are any concessions (that are not redundancy-related) expected from companies in exchange for financial support from the government or other special measures? (if not, explain briefly why or what the government’s strategy is in this area).
Hengeler Mueller (Germany). With regard to employment-related financial support from the German state (e.g., short-time work allowances, possibility to make deferred payments with respect to the employers’ contribution to the employees’ social security insurances), there are currently no concessions expected from companies.
This is different for other financial support schemes. There is a series of different schemes in Germany and restrictions depend very much on which scheme is used. For example, in order to obtain a loan from the German Reconstruction Loan Corporation (Kreditanstalt für Wiederaufbau, KfW), a company must agree on restrictions for dividend payments, bonuses etc. in the loan agreement. Further, if the German state recapitalizes a German stock corporation, dividend payments etc. are prohibited for the term of the holding period.
Partly, the conditions of the different schemes are still subject to continuous change. As a result, potential restrictions should be assessed in the individual case for the specific scheme at the time when using funding assistance is considered.
Uría Menéndez(Spain). Article 34 of RDL 11/2020, as amended by RDL 13/2020, empowers the Spanish Social Security Treasury to grant six-month moratoriums, without interest, to companies and self-employed workers included in any Social Security regime, who request it and meet the requirements and conditions to be established by ministerial order.
The moratorium, where granted, will affect the payment of social security and joint collection contributions, payable by the employer, which accrual period, in the case of companies, is between April and June 2020 and, in the relation to self-employed workers, between May and July 2020, provided that the activities they carry out have not been suspended due to the state of emergency.
Companies and self-employed workers, provided that they are not benefiting from another deferral, may request a deferral of their outstanding social security payments due between April and June 2020, as established in the social security regulations, for which purpose an interest rate of 0.5% will apply. The requests for deferment must be made within the first ten calendar days of the regulatory period for payment indicated above.
De Brauw (Netherlands). On 17 March 2020, the Dutch government announced a temporary scheme of emergency salary subsidies ("NOW"). Under NOW, the government will provide a subsidy to employers of up to 90% of salary costs, in proportion to the reduction in the employer’s revenue due to COVID-19 prevention measures. For example, if the employer expects a 60% reduction, the subsidy will be set at 54% (90% of 60%).
All employers are eligible for NOW, regardless of size, provided that:
•the employer maintains salary costs at the same level “as much as possible” during the period for which it will receive a subsidy;
•the employer does not submit a request for dismissal on economic grounds during the period for which the subsidy has been awarded;
•the employer uses the subsidy exclusively for the payment of salaries; and
•the employer informs the works council, employee representation or employees about awarded subsidies.
Non-compliance with these conditions may affect the amount of the subsidy.
The Dutch government will conduct a light preliminary review of the employer's NOW application upfront, in order to facilitate swift pay-outs. NOW will be available for three months, and there is an extension option for another three months. After the term of the subsidy has ended, a full review will be conducted retroactively. Each employer will have to demonstrate its own actual reduction in revenue. Larger companies may need to provide an auditor’s report.
Slaughter and May (England). On March 20th 2020 the UK government launched the Coronavirus Job Retention Scheme (CJRS). The CJRS provides grants to businesses covering 80% of the wages (up to £2,500 per employee per month plus certain social security and pensions contributions) of individuals who have been ‘furloughed’ due to the COVID-19 outbreak. The CJRS is administered by HMRC (the UK tax authority) and all businesses are eligible, regardless of size, provided the employer had a UK bank account and PAYE payroll scheme in place on 19 March 2020. There is no limit on the amount of funding available, and the CJRS is initially open until the end of June, to be reviewed thereafter.
The UK government has not indicated that any concessions are expected from companies that receive grants under the CJRS. In particular, there is nothing that makes access to the CJRS conditional on an employer not paying dividends or taking any other action as regards executive remuneration. However, messaging and reputational issues are already having an impact on companies that are using the CJRS when considering dividends and how to remunerate their executives.
Bredin Prat(France). On March 27th, 2020, the French Ministry of Finance declared that favorable measures regarding tax and social contributions (deferred payments) would be conditioned on the absence of dividend distributions in 2020 by companies who are considered to be “large companies”.
Large companies who request the deferred payment of social security contributions must agree not to pay dividends in 2020 to their shareholders in France or abroad and not to carry out share buybacks or reductions in capital that are not justified by losses in 2020.
These conditions are subject to certain exceptions, notably if the decision to pay dividends was made prior to March 27th, 2020 or if the share buyback was concluded before this date. Non-compliance with this commitment will result in any deferred social security contributions having to be reimbursed together with penalties for late payment as well as interest.
BonelliErede (Italy) The Italian government issued a decree providing, among others assistance schemes, for State-guaranteed loans to companies, within certain limits and subject to certain conditions.
One of these guaranteed loans establishes some employment related restrictions on the employer who actually benefits from it: from April 9, 2020 lending institutions may temporarily benefit (i.e. until 31 December 2020) from an irrevocable and first demand guarantee issued by SACE S.p.A. (a public owned company which provides financial and insurance services to support Italian companies) to cover their exposure to companies affected by the Covid-19 health emergency.
Therefore, employers can access a state-guaranteed loans (for the maximum duration of 6 years) that shall be allocated to support personnel costs, investments, or working capital to be employed in production plants or business activities located in Italy.
In order to request a state-guaranteed loan, the beneficiary employer shall undertake and declare, inter alia, (i) to not approve the distribution of dividends or the buyback of shares during 2020 (inc. in any other company based in Italy which belongs the same group); (ii) to manage the “occupational levels” by means of unions’ agreements (please see greater details on this particular commitment in the column regarding redundancies).
Are any concessions expected from companies in the area of redundancy plans? Do redundancy plans have to be suspended during the Covid-19 crisis? Are they prohibited during this time? (if not, explain briefly why or what the government’s strategy is in this area).
BonelliErede (Italy). According to the measures introduced by the government, for 60 days as of March 17, 2020 employers cannot start collective redundancy procedures and, during the same period, pending procedures started after February 23, 2020 are suspended.
During the same period, employers cannot serve individual dismissal for economic reasons. This provision (apparently) does not apply to employees with the rank of executives (dirigenti). Also, this provision certainly doesn’t prevent dismissals for disciplinary reasons.
After that period, unless such prohibitions are extended, employers may be able to conduct individual and collective redundancies.
These provisions apply in general to all employers, regardless that they benefit from any kind of financial support or any other special measure.
Provisions on COVID-19 emergency lay-off systems currently do not expressly prohibit individual or collective redundancy after 17 May.
Finally, as stated in the column on the left, the granting of certain state-guaranteed loans is conditional upon the employer undertaking to “manage occupational levels” through union agreements. This is an exception to the ordinary regime, according to which collective redundancies require union involvement, but are not conditional upon the conclusion of a union agreement (in lack of which the employer may nevertheless serve the dismissals).
The wording used in the law – “management of occupational levels” – is quite generic: while it appears rather straightforward that this provision would require a union agreement for a collective redundancy, doubts may arise in respect of individual redundancies. In lack of any official interpretation, a possible interpretation could be that:
a single dismissal for economic reasons without the unions’ consent should not represent a breach of this provision; a higher number of dismissals - which, although below the threshold for collective procedures (i.e. below 5 dismissal in 120 days), nevertheless has an impact on occupational levels - could be considered in breach of this provision.
Slaughter and May (England). The stated aim of the CJRS is to support the economy by protecting jobs - the policy aim is that companies will furlough employees rather than make them redundant in this first phase of the pandemic. A claim to the CJRS can only be made in respect of employees who remain in employment. The CJRS cannot be used to fund redundancy costs.
There are no current measures to prevent an employer making redundancies amongst staff who are not furloughed under the CJRS. That said, the presence of the CJRS has so far prevented a significant number of COVID-19 related redundancies in the UK. It remains to be seen whether the existence of the CJRS causes employees who are made redundancy to argue that their dismissal is unfair given the alternative available to employers: but that is not a feature of the government scheme.
Bredin Prat(France). The French government initially announced in mid-March that any redundancies as a result of Covid-19 would be prohibited. For the time being, however, it is still possible to terminate employment contracts.
In any case, as the Covid-19 pandemic does not seem to constitute a case of “force majeure” under French labour law, the legal criteria governing dismissals on economic grounds must therefore still be complied with.
Restrictions on carrying out collective redundancies can only exist if the company has benefited from a partial activity scheme twice in 36 months or if the employer has agreed not to proceed to any collective redundancies under the terms of a collective agreement in exchange for certain concessions from the employees (increase in working time, reduction in salary, etc.).
Hengeler Mueller (Germany). With regard to redundancies, the general statutory provisions for the dismissal of employees in Germany apply. No facilitating provisions, prohibitions or concessions by the employer regarding redundancies are in place or are planned due to the COVID-19 pandemic. In detail:
Terminations for operational reasons (betriebsbedingte Kündigungen) are subject to fairly strict requirements and would only be possible if the shortfall of work is not only temporary.
Termination of employment with offer for altered conditions (Änderungskündigung – e.g. in order to reduce working time and/or salary) is also subject to very strict requirements and only possible in exceptional cases.
If a works council exists, it must be involved when terminating employment relationships. Specifically, in the event of mass redundancies and closures, a compromise of interests and social plan must be negotiated with the works council.
De Brauw (Netherlands). If an employer intends to terminate an employment agreement due to economic reasons, the mandatory route is to file for a dismissal permit with the governmental labour authority UWV stating that there is a reasonable, statutory ground (i.e. redundancy) for dismissal.
One of the conditions to be eligible for NOW (temporary scheme of emergency salary subsidies) is that the employer commits not to make employees redundant on economic grounds during the period for which the subsidy is provided. During the subsidized period after 17 March 2020, the employer may not submit a request for dismissal on economic grounds to the UWV as referred to in article 7:669(1)(a) of the Dutch Civil Code.
If the employer nonetheless dismisses an employee based on economic grounds with a permit from the UWV, the employer will face punitive effects on the subsidy under NOW: 150% of the salary of the dismissed employee will be deducted from the total salary costs eligible for compensation on the basis of NOW.
Please note, if the permit was filed during the subsidized period after 1 April 2020, the employer will also have to demonstrate to the UWV that the dismissal cannot be adverted by making use of the NOW subsidy. With regard to dismissal permits filed before 2 April 2020, the UWV will not take the NOW into account while assessing the request for dismissal on economic grounds.No facilitating provisions or prohibitions regarding redundancies are in place or are planned due to the COVID-19 pandemic.
Force majeure and the economic, technical, organizational and production reasons as a result of the COVID-19 health crisis will not be deemed valid justification to terminate employment contracts or dismiss employees. Therefore, in practice, redundancy plans are prohibited, at least, during the state of alarm (currently, until 9th May 2020).
Uría Menéndez(Spain). In contrast, temporary layoffs (ERTE according to its Spanish acronym) have been incentivised: in essence, it could be said that there are two different types of ERTE: (i) ERTEs due to business reasons (i.e. economic, technical, organisational and production grounds); and (ii) ERTEs due to force majeure. The key difference between them is that in ERTEs based on business grounds, a consultation period with employee representatives must be held, whereas in force majeure ERTEs the labour authority takes a decision on whether the force majeure requirements are met based on the documents submitted by the company to justify the measure.
Exceptionally during the COVID-19 situation, employees affected by an ERTE are entitled to claim social security unemployment benefits, even if they have not met the standard requirements for entitlement, and anything they claim during the COVID-19 situation will not affect their entitlements afterwards; i.e. they will not “use up” their entitlements (article 25 of RDL 8/2020). They will initially be entitled to 70% of their social security contribution base and 50% if/when they reach 181 days of unemployment. Companies may supplement benefit payments.