Reorganization of an enterprise: is it necessary to fire workers? Procedure

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Published: 06/01/2016

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When an enterprise is reorganized, its legal status is terminated or its legal status is changed, rights and obligations are transferred to another legal entity.

A prerequisite is the termination of the activities of one person and the formation of a new one or several new ones.

• Types of reorganization
• Grounds for dismissal
• Dismissal procedure
• Payments
• Features of dismissal

Forms of reorganization

When an enterprise undergoes reorganization, its legal status is terminated or changed, and the new organization receives all the rights and obligations of the legal entity. A mandatory part of such an action is the completion of the production activities of one company and the formation of a new company. These changes inevitably entail the dismissal of employees.

The process itself is very complex legally, since it does not boil down to a simple transfer of powers from one enterprise to another. Article 57 of the Civil Code of the Russian Federation establishes several types of reorganization:

• Transformation. The organization is completing its production activities. On its basis, a company of a different legal type is created.
• Separation. The company ends its work, and several enterprises are founded on its basis.
• Selection. A certain part of the company’s powers is transferred to the new organization, but the previous legal entity does not cease to function.
• Joining. The enterprise ends its work, and its rights and obligations are transferred to the newly created company.
• Merger. Two or more companies merge into one legal entity. At the same time, each of them ceases to function, transferring its powers to a new organization.

All types of changes in the legal status of an enterprise are reflected in the position of specialists working in it. Some employees may be laid off, while others may change their place and work schedule. This usually entails the recruitment of new staff, as well as layoffs in connection with the reorganization of the enterprise under Article 81 of the Labor Code of the Russian Federation.

Do I need to do this when joining another organization? Is it legal?

As a rule, a particularly urgent need to reduce the number of personnel arises in connection with reorganization in the form of annexation (Part 2, Clause 4, Article 57 of the Civil Code of the Russian Federation). In this case, two organizations merge at once, which leads to the appearance of extra workers.

As noted above, reorganization, including through merger, according to the law cannot be a reason for the dismissal of personnel.

However, termination of the employment contract is still possible. This can happen for one of the following reasons:

• the employee refused to move to a new job (position) that was offered to him;
• the staff or number of personnel has been reduced (if the employer has chosen such measures and the reduction procedure has been followed);
• the employee refused to continue working in another location (if the location of the reorganized company was changed).

When making a decision to dismiss, the employer must remember the categories of employees who cannot be laid off. We are talking about pregnant employees, women on maternity leave, etc.

Dismissal procedure

When changing the legal form of a legal entity, it is very important to correctly terminate the employment contract with employees. The legislation provides the following grounds for the procedure:

• reduction of staff or number of employees;
• change of owner of the enterprise;
• refusal of employees to continue working due to changes in contract terms.

But some specialists are not subject to layoffs, regardless of the type of reorganization. These include:

• Employees on maternity leave. This category of workers is not subject to layoffs, and when they are dismissed due to reorganization in the form of merger of an enterprise or any other, it is necessary to correctly draw up all documents relating to these citizens.
• Women on maternity leave for children under 3 years of age.
• Specialists who are on any vacation.
• Trade union members.

In order to legally terminate an employment contract with employees, a certain procedure must be followed. It consists of the following steps:

1. Issuance of an order on the upcoming change in the legal status of the organization.
2. Issue by the manager of an order to issue written notices to all employees.
3. Drawing up additional agreements to specialist contracts, in which the employer indicates upcoming changes in the working conditions of company employees.
4. Employees who do not want to continue production activities under new conditions send appropriate applications to the organization’s personnel service.
5. The employer makes the required payments to all resigning specialists.

When registering a dismissal due to the reorganization of an enterprise in the form of a merger or other change in its legal status, the specified procedure must be followed. Its provisions are based on the requirements of Russian labor legislation, and therefore will help to avoid mistakes.

Grounds for dismissal

The grounds for dismissal may be as follows:

• reduction in numbers and staff;
• change of owner. In this case, the director and his deputies, the chief accountant may be dismissed;
• the employee’s reluctance to continue working in connection with reorganization or changes in the terms of the employment contract.

If, after a merger or accession, some of the employees turn out to be “superfluous”, a reduction occurs. In this case, specialists with higher qualifications, experience, and labor productivity indicators have an advantage.

There are categories of employees who cannot be laid off under any form of reorganization:

• women on maternity leave and employees on maternity leave to care for children under 3 years of age;
• employees on leave: annual, temporary disability, unpaid; single parents (guardians, foster parents) who have children under 14 years of age or disabled minors;
• trade union workers.

Possible mistakes

Each form of reorganization has its own characteristics of completing cooperation. But usually employers, when firing employees for this reason, make the same mistakes:

• A citizen is fired due to the absence of his position in the staffing table of the new organization. The employee can challenge such termination of the employment relationship in court, since the manager, before formalizing the dismissal, was obliged to offer the employee all available vacancies.
• The ill specialist was not properly notified of the upcoming changes.
• Documents for terminating the employee’s employment contract were drawn up despite the citizen’s refusal to sign the corresponding order. Upon the fact of refusal, you should draw up a report certified by the signatures of witnesses, and only after that continue the dismissal procedure.
• The employer issued notices to employees too late because he incorrectly calculated the end date of cooperation.
• The employer forced the specialists to resign of their own free will in order to save money on compensation payments. Employees can challenge such termination of a contract in court, but only if there is conclusive evidence.
• The dismissal of workers began earlier than measures to reduce staff or personnel.

Almost all of the listed errors can serve as the basis for legal proceedings. If the court satisfies the employee’s claim, the employer will be obliged not only to reinstate the citizen in his position and compensate him for material damage for forced absence, but also to fully pay for the moral damage caused to the employee.

Merger of an enterprise

When carrying out this form of company reorganization, the dismissal of personnel is not mandatory, since employees can get jobs in the newly formed company. But still, some conditions for carrying out production activities may change, for example:

• location of the enterprise;
• payroll methods;
• methods for calculating and paying bonuses;
• work schedule.

If an employee is not satisfied with the new working conditions, he must submit a resignation letter to his manager.

But the reason for ending the relationship in the document should indicate the specialist’s personal reluctance to continue working in connection with the reorganization of the company.

Dismissal during reorganization of an enterprise in the form of merger

With this form of reorganization, several firms voluntarily cease their activities and merge with another enterprise. Those companies that join do not fire their employees. Therefore, there is no need for mandatory written notification. But some working conditions may change, for example:

• the address where the new workplace will now be located;
• methods of calculating wages;
• methods for calculating and paying bonuses and various bonuses;
• duration of working hours and rest time.

If the employee does not agree with such changes, he can write a letter of resignation. The application must indicate the reason not “of one’s own free will”, but “unwillingness to work in connection with the reorganization that has occurred.”

Merger of organizations

Enterprises undergoing this form of reorganization undergo a voluntary merger into a single organization. The purpose of such a merger is most often to enhance competitiveness.

There is no need to notify company personnel about such changes, since all specialists retain their jobs. But if a citizen refuses to work in accordance with the new terms of the contract, which inevitably entails a change in the legal status of the company, then he has the right to resign. The basis for ending cooperation in this situation should be the employee’s reluctance to work in the new organization formed as a result of the reorganization.

How to fire an employee due to reorganization

The procedure for interaction between the enterprise management and employees during the reorganization period is regulated by the Labor Code. In accordance with the provisions of the document, as a result of the reorganization, the employee retains his position and all labor rights.

General procedure for dismissal

If your company is undergoing a reorganization process (for example, a merger with another company), then all employees of the company should be notified about this. Based on the information received, each employee decides whether he is ready to work in a new company or not.

You do not have the right to arbitrarily, on your own, dismiss an employee due to reorganization. (Article 75 of the Labor Code). However, the employee himself may make such a decision, in which case you must grant his request for dismissal.

Staff Notification

When a company is separated, merged or transformed, a legal entity ends its production activities, which always entails the dismissal of employees. Before this, the employer is obliged to notify all employees in writing about future changes. The notice should be drawn up in two copies, one of which is given to the employee, and the citizen signs on the other, confirming the fact of receipt of the notice and familiarization with the information contained in it.

All employees must receive notice 2 months before the start of the reorganization. This period allows the specialist to find a new job, and the employer has the opportunity to prepare the documentation necessary for the proper dismissal of the employee.

In such a situation, the legislation exempts citizens from the mandatory two-week work period, that is, every employee who is laid off can quit earlier. At the same time, the application indicates a reduction in staff as the basis for terminating cooperation.

Procedure: how are employees fired due to changes?

The procedure for dismissing personnel during the reorganization of a business entity has a certain algorithm that must be followed.

This whole process can be represented in the form of the following sequential stages:

1. First of all, the employer is obliged to notify employees about upcoming changes.
   It’s worth pointing out right away that labor law does not stipulate the procedure for notifying personnel about reorganization. However, due to the fact that such events affect and change the terms of the employment contract, in this case Part 2 of Art. 74 of the Labor Code of the Russian Federation. According to the norm mentioned above, the company’s management must notify employees in writing about upcoming reorganization measures 2 months before their completion, that is, before making the corresponding entry in the Unified State Register of Legal Entities. The text of this document can also include a proposal to move to a similar or different workplace after the reorganization. It is recommended that the notice be given to employees against receipt. This may be required in case of litigation or inspection by supervisory authorities.
2. The employee must familiarize himself with the notification received. If he does not want to continue working under the proposed conditions, then he must notify the employer in writing.
3. The next step is for the employee to write a letter of resignation for the reason specified in clause 6 of Art. 77 Labor Code of the Russian Federation.
4. Based on the submitted application, the employer will have to issue a dismissal order. Moreover, a person leaving the organization in connection with its reorganization must familiarize himself with the text of this document against signature.
5. Then a full settlement must be made with the resigning employee.
6. On the last working day, an employee leaving the enterprise due to reorganization must be given a work book (with the appropriate entry) and other documents specified in the law.

Compensation payments

A mandatory part of dismissing an employee is making a final payment. Thus, the employer must pay employees:

• Salary for time worked.
• Compensation for unused vacation.
• Bonuses and payments provided for in the employment contract and local regulations.
• Severance pay calculated on the basis of average monthly earnings for the last year. This amount is paid within two months after dismissal.

If an employee resigns before the start of the reorganization, the employer is obliged to provide him with additional severance pay. In addition, if the employee was not employed within two months after the termination of the relationship, then the employer must pay him for the third month. But to receive this payment, a citizen must register with the local Employment Service.

Payment of compensation upon dismissal during reorganization

In all other forms of reorganization, one or more legal entities cease their activities. Therefore, there will be a massive layoff or reduction of employees. In these cases, the employer must notify each employee in writing of the upcoming changes. The notice is drawn up in two copies. The employee signs on one of them. This does not indicate that he agrees with future changes. This indicates that you are familiar with the events that will be held in the near future.

The manager must pay resigning employees:

• wages for the time actually worked;
• compensation for those vacation days that the employee did not have time to take off;
• bonuses that are specified in the employment contract;
• severance pay. It is paid for the next 2 months. It is calculated based on the average monthly earnings of a particular employee over the last year;
• other payments that may be provided for in an employment or collective agreement, as well as in other local regulations.

Notification is sent to each employee at least 2 months before the proposed events. This time is necessary both for the employee himself to re-employ himself, and for the employer to prepare all the necessary personnel documents.

The law does not oblige employees to strictly work 2 months before the start of reorganization measures. You can quit earlier. In your resignation letter, you must write the reason for “reduction in staff.”

In this case, the employer must pay additional severance pay, calculated based on the remaining days before the expiration of the 2-month period and the average earnings of this employee.

If the employee was unable to find a job within the next two months after dismissal (these 2 months were paid by the employer upon dismissal due to staff reduction), then the employer is obliged to pay him for the 3rd month without work. In this case, the employee must be registered with the employment center.