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The Warsaw Voice » Law » October 14, 2009
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Changes in Employment Law as a Remedy for Economic Crisis
October 14, 2009   
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The economic crisis hit Poland, as most other countries. Even if so far its effects have been less profound than elsewhere, it is still of sufficient strength to make employers look anxiously at their order books. The predictable effect has been businesses closing down, layoffs and redundancies. Many employers in Poland were forced to resort to collective dismissals as they had no other legal possibility of reducing the working hours of their employees. Many other entrepreneurs had to bear the costs of employment, even if their production lines were at a standstill or the demand for their services had dried up.

In response to the descending gloom, the Polish government, federations of employers and trade unions got together to work out a crisis-survival package. They all agreed that the slowdown in the Polish economy required a flexible and common-sense response through the adoption of legislative measures to counter or mitigate its effects. This was the motive force behind the formation of the Tripartite Commission for Social Dialogue which has recently unveiled a social compact devised to weather the crisis.

Parliament adopted the Act on alleviating the effects of the economic crisis on employees and entrepreneurs on July 1, and it came into force on August 22, 2009; popularly referred to as an anti-crisis package, its regulation will be binding for the next two years.

The broad sweep of the Tripartite Commission's terms of reference can be seen in the detailed criteria that must be satisfied in order to qualify for relief: some of this package's provisions concern only those companies that have been hit by serious difficulties but there are others which are applicable to all companies.

This new piece of legislation is particularly supportive of companies meeting the following criteria: (i) those whose orders have dropped by 25 percent or more, in terms of quantity or value, in the three months starting July 1, 2008, as compared to any three month period between July 1, 2007 and June 30, 2008; (ii) they are not in arrears with their tax and social security contributions.

This group of employers will be entitled to receive extra payment to supplement the remuneration of employees who have been temporarily laid off or have had their working hours reduced due to a shortfall in orders. The extra payment will be available for six months covering 100 percent of the unemployment benefit in case of layoffs, and 70 percent in case of reduced hours.

Employers who are in financial difficulties will be entitled to reduce the working time stipulated in their employees' employment contracts for a period not longer than six months and up to half the full-time working hours. These reductions have to be made by means of agreement between the employer and the trade unions or on the basis of agreements with employee representatives elected in accordance with the internal regulations prevailing at the given company.

In addition employers struggling with the effects of the economic crisis will be entitled to receive financial support from public funds to pay social security contributions. They may apply for suspensions in making Social Benefit Fund contributions.

It is worth stressing that this anti-crisis package extends a helping hand not just to employers struggling with the effects of the economic crisis, because some of its provisions affect all the entrepreneurs operating on the market regardless of their size or economic condition.

The regulations concerning all Polish companies, allowing them to make, with the consent of employees' representatives, working time more flexible, offer the possibility of extending such an emergency arrangement by up to 12 months. Employers may introduce individualized working time schemes. This will enable working time to be extended (e.g. up to 10 hours per day) during the time when an employee's work is needed, and to shorten working time when business takes a downturn. The introduction of individual working time schedules will also be possible at the request, for instance, of an employee looking after children of up to 14 years of age, or looking after members of their families requiring personal care.

Unfortunately, the anti-crisis legislation has one significant drawback connected with the new provisions on fixed-term employment contracts. Under the new regulations, the total period of a fixed-term employment contract immediately followed by a further fixed term contract, cannot exceed 24 months. Exceptionally, contracts in force prior to August 22, 2009, which terminate after Dec. 31, 2011, may last longer than 24 months.

Serious doubts arise whether fixed-term contracts concluded before Aug. 22, 2009 and expire before Dec. 31, 2009 are also subject to the 24-month restriction. If so, it would trigger many complications for employers and employees who concluded such contracts before the new legislation came in. Such an approach would mean that the law has got retroactive power. That is why some legal experts argue that the 24-month period should be counted not from the day the contract was signed but as from any day subsequent to the day the new legislation came into force, in other words Aug. 22, 2009. Nonetheless it is really difficult to give a straight answer in this regard and this is an issue that can be expected to come before the Polish labor courts before long. It will be a kind of side effect of legislation which had the primary goal of alleviating the economic crisis. This can only remind us once again that nobody's perfect.

Aleksandra Minkowicz-Flanek, attorney-at-law, head of Salans Labor & Employment Practice
Paweł Krzykowskilawyer at Salans Labor & Employment Practice
Adam Brzeziński, lawyer at Salans Labor & Employment Practice
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