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Q&As on business and employment security

Document | 01 February 2012


Employment relationship

Question: What guidance is provided in ILO standards to determine who is an employee?

Answer: The international labour standards recognize the importance of establishing an employment relationship for protecting workers’ rights. Such determination should be guided primarily by the facts relating to the performance and the remuneration of the work, notwithstanding how the relationship is characterized in any arrangement, contractual or otherwise. Specific “indicators of the existence of an employment relationship might include the following elements.

(a) the fact that the work:

  • is carried out according to the instructions and under the control of another party;
  • involves the integration of the worker in the organization of the enterprise;
  • is performed solely or mainly for the benefit of another person;
  • must be carried out personally by the worker;
  • is carried out within specific working hours or at a workplace specified or agreed by the party requesting the work;
  • is of a particular duration and has a certain continuity;
  • requires the worker's availability; or
  • involves the provision of tools, materials and machinery by the party requesting the work;

(b) periodic payment of remuneration to the worker; the fact that such remuneration constitutes the worker's sole or principal source of income; provision of payment in kind, such as food, lodging or transport; recognition of entitlements such as weekly rest and annual holidays; payment by the party requesting the work for travel undertaken by the worker in order to carry out the work; or absence of financial risk for the worker.”[1]

The determination of the existence of such a relationship should be guided primarily by the facts relating to the performance of work and the remuneration of the worker, notwithstanding how the relationship is characterized in any contrary arrangement, contractual or otherwise, that may have been agreed between the parties.[2]

[1] Employment Relationship Recommendation, 2006 (No. 198), paragraph 13.
[2] R. 198, para. 9


Termination of employment

Question: What are valid reasons for dismissal of a worker?

Answer: According to the ILO Termination of Employment Convention, 1982 (No. 158), the employment of a worker should not be terminated unless there is a valid reason for such termination connected with the worker’s capacity or conduct; or based on the operational requirements of the undertaking, establishment or service.

Reasons which are not considered as valid include: race, colour, sex, marital status, family responsibilities, pregnancy, religion, political opinion, natural extraction or social origin, union membership or participation in union activities, filing of a complaint against an employer, or temporary absence from work due to illness. 

A worker should not be dismissed for misconduct which under national law or practice would justify termination only if repeated on one or more occasions, unless the worker received prior written warnings[1].

The worker should be given notice in writing of the decision to terminate his or her employment.[2]

A worker whose employment is to be terminated should be given a reasonable period of notice or compensation in lieu thereof, unless he or she is guilty of serious misconduct[3].

An individual worker dismissed on grounds of misconduct should have the right to defend himself or herself against any allegations made before termination, unless the employer cannot reasonably be expected to provide this opportunity.[4] The worker should be entitled to be assisted by another person.[5]

A worker should have the right to appeal to an impartial body such as a court or arbitration committee, unless the dismissal was previously authorized by a competent authority.[6] The burden of proving the existence of a valid reason should rest on the employer. Alternatively or additionally, the impartial body should be empowered to reach a conclusion based on the evidence provided by the parties according to national law and practice[7].

In cases of collective dismissals, enterprises should provide reasonable notice to the appropriate government authorities and representatives of workers in their employment and their organizations so that implications may be examined jointly in order to mitigate adverse effects to the greatest possible extent.[8]

[1] Termination of Employment Recommendation, 1982 (No. 166), para. 7
[2] R. 166, para. 12
[3] Convention concerning Termination of Employment, 1982 (No. 158), Article 11
[4] C. 158, Article 7
[5] R. 166, para. 9.
[6] C. 158, Article 8(1)
[7]C. 158, Article 9(2)
[8]ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, 4th revision (2006), para. 26

Question: Is it ok to fire a worker on the spot, without a second warning, for failure to wear personal protective equipment?

Answer: A worker should not be fired for misconduct that under national law or practice would justify termination only if repeated on one or more occasions. An employer should give the worker appropriate written warning before firing the worker.[1]

[1]Termination of Employment Recommendation, 1982 (No. 166), paragraph 7

Question: Is it ok for a company to dismiss a worker while on leave recovering from eye surgery?

Answer: Workers should be protected from arbitrary dismissal,[1] i.e., dismissal without a valid reason related to the competence or conduct of the worker.[2] Dismissal should not be based on temporary illness or injury.[3]

[1]ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, 4th revision (2006), para. 27.
[2]C. 158, Article 4.
[3]C. 158, Article 6.

Question: Is it ok for a company to dismiss a pregnant worker if she has been let go for other reasons and her pregnancy was not known at the time?

Answer: A worker may be dismissed during her pregnancy only if the dismissal is based on a valid reason related to the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service.[1] Pregnancy itself is not a valid ground for dismissal.[2] The burden of proving that the reasons for dismissal are unrelated to pregnancy should rest on the employer.[3]

The ILO Maternity Protection webpage can provide further information as well as access to the legal database on maternity protection.

[1]Termination of Employment Convention, 1982 (No. 158) Article 5(d) and Maternity Protection Convention, 2000 (No. 183), Article 4.
[2]Maternity Protection Convention, 2000 (No. 183), Article 8(1) states: “It shall be unlawful for an employer to terminate the employment of a woman during her pregnancy or absence on leave referred to in Articles 4 or 5 or during a period following her return to work to be prescribed by national laws or regulations, except on grounds unrelated to the pregnancy or birth of the child and its consequences or nursing.”
[3]C. 183, Article 8(1).

Question: When a company is bought up, what is the standard on severance pay due from the old company to the following groups:
                        1)Staff that will be employed by the new company
                        2)Staff that will lose their jobs?


Answer: A worker whose employment has been terminated should be entitled to one of the following: a severance allowance or other separation benefits; a benefit from unemployment insurance or other social security benefit or assistance; or a combination of allowance and benefit.[1] Which means of providing for the workers who have lost their employment are appropriate for a specific situation depends on national law.

If a severance allowance or separation benefit is paid, the amount of benefit should be based on length of service and the level of wages, and paid directly by the employer or by a fund constituted by employers' contributions.[2]

Workers whose employment is transferred rather than terminated fall outside these provisions and need not receive any severance allowance from the previous owner of the operations.

[1]C. 158, Article 12.
[2]C. 158, Article 12.

Question: Does a worker have the right to request one month’s payment when the employer ends the contract and what is the length of notice required?

Answer: The Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) is the ILO normative instrument addressed specifically to enterprises. The MNE Declaration encourages enterprises to “obey the national laws and regulations, give due consideration to local practices and respect relevant international standards.” [1]

Concerning notice, Paragraph 26 of the MNE Declaration states: In considering changes in operations (including those resulting from mergers, take-overs or transfers of production) which would have major employment effects, multinational enterprises should provide reasonable notice of such changes to the appropriate government authorities and representatives of the workers in their employment and their organizations so that the implications may be examined jointly in order to mitigate adverse effects to the greatest possible extent. This is particularly important in the case of the closure of an entity involving collective lay-offs or dismissals.

This paragraph is referring to changes where “major employment effects are anticipated”.[2] If the dismissal was individual, it does not likely fall into this category. The international labour standards concerning termination of employment provide further guidance for companies. An individual worker whose employment is to be terminated is entitled to a reasonable period of notice or compensation in lieu thereof, unless the worker is guilty of serious misconduct [3]. The government, in consultation with the national employers’ and workers’ organizations, is responsible for specifying in national law what constitutes reasonable notice.

Concerning severance pay, the MNE Declaration states that governments, in cooperation with multinational as well as national enterprises, should provide some form of income protection for workers whose employment has been terminated.[4] International labour standards provide that a worker whose employment has been terminated should be entitled to one of the following, depending on what is specified in national law: a severance allowance or other separation benefits; a benefit from unemployment insurance or other social security benefit or assistance; or a combination of allowance and benefit.[5]

If a severance allowance or separation benefit is paid, the amount of benefit should be based on length of service and the level of wages, and paid directly by the employer or by a fund constituted by employers' contributions.[6]

[1] ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, para. 8.
[2] The MNE Declaration cites the Termination of Employment Recommendation, 1963 (No. 119), which provides in paragraph 7(1): “A worker whose employment is to be  terminated should be entitled to a reasonable period of notice of compensation in lieu thereof.” This Recommendation has been superseded by the Termination of Employment Convention, 1982 (No. 158) and Termination of Employment Recommendation, 1982 (No. 166).
[3] See, Termination of Employment Convention, 1982 (No. 158), Article 11.
[4] Ibid, para. 28.
[5] See, Termination of Employment Convention, 1982 (No. 158), Article 12.
[6] Ibid.
 


Responsible restructuring

Question: In ILO’s view how, if at all, should a company involve the trade union in restructuring or sale of a company?

Answer: A priority in restructuring or sale processes is to maintain any company as a sustainable enterprise able to conduct its business effectively and employ people under decent working conditions.[1] This objective is a shared concern of employers and workers.

Labour-management cooperation, particularly through involvement of workers and their representatives in the planning and execution of organisational change, is also recognised as important for successful adjustment processes[2]

When considering changes in operations that have major employment effects a company should give reasonable notice of the change to representatives of the workers in their employment and their organizations.[3]

Reasonable notice is considered to be “as early as possible”[4] to provide sufficient time for the company, the appropriate government authorities and representatives of the workers to examine jointly the implications in order to mitigate adverse effects to the greatest possible extent.[5] It is important to provide workers’ representatives information as early as possible to ensure that consultation can take place on measures to avert or minimize any terminations and on measures to mitigate any adverse consequences.

Once the information is provided, the opportunity for consultation with workers’ representatives on ways to mitigate impacts should also be as early as possible, following the requirements set out in national law and practice.[6]

[1]For a discussion of the factors conducive to promoting sustainable enterprises and the practices of sustainable enterprises, see Conclusions concerning the promotion of sustainable enterprises, International Labour Conference, June 2007
[2]Restructuring For Corporate Success: A Socially Sensitive Approach, Rogovsky, N. (ed), ILO, Geneva, 2005
[3]MNE Declaration, para. 26: “In considering changes in operations (including those resulting from mergers, takeovers or transfers of production) which would have major employment effects, multinational enterprises should provide reasonable notice of such changes to the appropriate government authorities and representatives of the workers in their employment and their organizations so that the implications may be examined jointly in order to mitigate adverse effects to the greatest possible extent. This is particularly important in the case of the closure of an entity involving collective lay-offs or dismissals.” The Termination of Employment Recommendation, 1982, (No.166) paragraph 20(1) and (2) encourages enterprises to “consult the workers' representatives concerned as early as possible” and to “supply them in good time with all relevant information on the major changes contemplated and the effects they are likely to have.”
[4]Termination of Employment Recommendation (No. 119), paragraph 13(1)
[5]Termination of Employment Convention (No. 158), Article 13.
[6]C. 158, Article 13(1)(b)

Question: Does the ILO have any reference to best practices in relation to responsible restructuring?

Answer: In terms of good practice the following steps provide a useful guide and are drawn from the relevant standards:

  • Step 1: Starting a dialogue between the company, its workers and their representatives about the need for change is an important first step. This can help to stimulate ideas about changes that can be made and can also assist in alleviating fears or concerns that distract and impact on the capacity to perform effectively.
  • Step 2: Sharing relevant information ensures that everyone understands the issues involved. This should present a true picture of the company’s position in order to explain the need for change.[1]
  • Step 3: Where change is proposed as a response to downturn or negative economic circumstances it is important to consider long term scenarios rather than short term crisis responses. Creating a dialogue with workers and their representatives about the options can assist in identifying a range of alternatives[2].
  • Step 4: The implementation of change should accord with the requirements of national law and practice. In particular the implementation should be responsible, founded on objective criteria and not discriminate in any way on unfair grounds.
  • Step 5: The evaluation of the change as it is being introduced and after it is completed is an important aspect, to learn from what has occurred and to review whether objectives have been met.

If after consultation and consideration of other options it is apparent that laying off workers is required as part of the change process there are some additional steps that can be taken to ensure this is done responsibly:

  • Consult with the workers and their representatives about proposed job losses. This consultation should include the provision of all relevant information[3] , and include the consideration of measures (as far as practicable) to avert or mitigate the negative consequences of the layoffs, the timeframes involved and the options available to employees.
  • Take steps to mitigate the impact of layoffs. For further details about matters related to consultation on major changes, measures to avert or minimize terminations and mitigating the effects of termination, see Recommendation No. 166.
  • Ensure that termination practices are fair and observe national employment legislation, collective agreements and other relevant industrial instruments that provide for termination of employment, redundancies and layoffs.
  • Ensure there is a mechanism for resolving grievances and disputes. Where any concern or grievance arises an individual employee or collective of employees should be able to raise this concern and have it dealt with in an effective manner and without fear of prejudice or reprisals.[4]

Additional guidance on protecting the rights of workers when termination is required includes:

  • Set objective criteria about how the organisation will select the employees to be laid off in advance and document this.
  • Selection criteria should be weighted appropriately and should correspond to the business needs of the employer.
  • It is preferable that the criteria be capable of being objectively assessed (such as skills, qualifications, training experience).
  • The criteria must not discriminate on invalid or unfair grounds including age, sex, pregnancy, career/family responsibilities, race, marital status, disability, religion, political opinion, national extraction or social origin, temporary absence from work due to illness, absence from work during maternity leave and union membership or activity.[5]
  • Communication on the decision to lay off workers should be done sensitively and directly with those workers who will be losing their job.

[1]See, Convention No. 158, Article 13
[2]For further discussion and examples of these initiatives see Rogovsky N and Schuler RS (2007) Socially Sensitive Enterprise Restructuring in Asia: Country Context and Examples, ILO, Geneva and Restructuring For Corporate Success: A Socially Sensitive Approach, Rogovsky, N. (ed), ILO, Geneva, 2005
[3]Relevant information includes the reasons for termination contemplated, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out. Termination of Employment Convention (No 158) Part III, Article 13
[4]MNE Declaration, paragraphs 58 and 59
[5]Termination of Employment Convention (No.158), Article 5


Short-term contracts

Question: Does ILO have any instruments addressing the use of consecutive short-term contracts for an extended period in order to avoid paying social benefits due to workers with contracts of longer duration?

Answer: The MNE Declaration encourages companies to obey the national laws and regulations, give due consideration to local practices and respect relevant international standards.[1]

The MNE Declaration states that “enterprises, through active manpower planning, should endeavor to provide stable employment for their employees and should observe freely negotiated obligations concerning employment stability and social security.” They should also “strive to assume a leading role in promoting security of employment”.[2]

The MNE Declaration moreover recommends that “enterprise activities should be in harmony with the development priorities and social aims and structure of the country in which they operate.”[3]

[1]MNE Declaration, para.8
[2]Ibid, para. 25
[3]Ibid, para. 10


Private placement agencies

Question: My company frequently relies on local placement agencies for filling temporary gaps in staffing. Could you please tell me what we should be looking for to ensure protection of these workers’ rights?

Answer: The MNE Declaration states that “enterprises, through active manpower planning, should endeavor to provide stable employment for their employees and should observe freely negotiated obligations concerning employment stability and social security.” They should also “strive to assume a leading role in promoting security of employment”.

The provisions for protection of the rights of workers engaged by private placement agencies for temporary work assignments in companies are contained in the Private Placement Agencies Convention (No. 181) and Private Placement Agencies Recommendation (No. 188), 1997. The following lists the principles contained in these instruments which your company may wish to verify before engaging a local temporary placement agency. Some provisions, such as occupational safety and health and protection against abusive treatment of workers, are also within the direct control of the user enterprise.

Workers should have a written contract of employment with the placement agency specifying their terms and conditions of employment and should be informed of their conditions of employment before they begin an assignment[1].

Workers should not be charged any fees or costs, either directly or indirectly, except as provided by national law for certain categories of workers or types of services provided.[2]

Workers should not be subject to discrimination on the basis of race, colour, sex, religion, political opinion, national extraction, social origin, or any other form of discrimination covered by national law and practice, such as age or disability[3]. However, placement agencies are encouraged to promote equality in employment through affirmative action programmes[4].

Workers should be informed of the respective responsibilities of the private employment agency, as defined in national law.

Workers should have adequate protection in relation to:

  • freedom of association
  • collective bargaining
  • minimum wages, working time and other working conditions
  • statutory social security benefits
  • access to training
  • occupational safety and health
  • compensation in case of occupational accidents or diseases
  • compensation in case of insolvency and protection of workers claims
  • maternity protection and benefits, and parental protection and benefits[5].

Workers should not be exposed to unacceptable hazards or risks or subjected to abuse or discriminatory treatment of any kind.[6]

Workers employed by private placement agencies have the right to protection of their personal data and their privacy. Data kept should be limited to matters related to the qualifications and professional experience of the workers concerned and any other directly relevant information.[7]

Migrant workers should be provided protection adequate to prevent abuses[8]. Migrant workers should be informed, as far as possible in their own language or in a language with which they are familiar, of the nature of the position offered and the applicable terms and conditions of employment.[9]

Child labour should not be used.[10]

Temporary workers should not be engaged to replace workers who are on strike[11].

Workers should not be prohibited from accepting permanent employment with the user enterprise[12].

The above guidance is provided based on international labour standards. It is advisable to consult relevant national labour standards. National employers and workers organizations may also be a good source of information on national law, regulation and collective bargaining agreements pertaining to non-discrimination law and practice.

[1]R. 188, para. 5
[2]C. 181, Article 7
[3]C. 181, Article 5
[4]R. 188, para. 10
[5]C. 181, Articles 11 and 12
[6]R. 188, para. 8(a)
[7]C. 181, Article 6
[8]C. 181, Article 8
[9]R. 188, para 8(b)
[10]C. 181, Article 9
[11]R. 188, para. 6.
[12]R. 188, para. 15

Tags: employment security, enterprises

Regions and countries covered: Global

Unit responsible: Enterprises Department (ENTERPRISES)

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