Support for mass staff reduction: how to do it lawfully and without lawsuits

Reducing staff is one of the riskiest processes for an employer in labour law. It is often resorted to out of necessity: because of the war a business loses capacity, markets or its very property, and reducing the workforce becomes a question of the company’s survival. The topic is more pressing than ever — but that is exactly why it is important not to create even greater problems for yourself. The price of even a minor procedural error is reinstatement of the employee by court order, payment for the entire period of enforced absence, moral damages, inspections by the State Labour Service and fines. And if the reduction is a mass one, that error is multiplied across dozens of people at once. Under martial law some rules have changed, but the procedure itself has not gone anywhere — it remains formal, sequential and unforgiving of missed deadlines. Dextra Law supports mass redundancies from the first order to the final settlement, so that optimising the headcount does not turn into a series of lost lawsuits, inspections and fines. The main rule is simple: if you are going to make redundancies, do it properly. Below is exactly how.

Redundancy or dismissal: what is the difference

These words are often used as synonyms, but legally they are not equal. Dismissal is the general term covering any termination of an employment contract: by agreement of the parties, at the employee’s own request, for a breach, on expiry of the term. Redundancy (staff reduction) is only one specific ground for dismissal on the employer’s initiative, provided for in paragraph 1 of part one of Article 40 of the Labour Code (Code of Labour Laws). In the same paragraph, alongside redundancy, stand liquidation, reorganisation, bankruptcy and repurposing — all of these being “changes in the organisation of production and labour”.

Within redundancy itself there is also a distinction, and confusing these concepts is dangerous.

Reduction in numbers	Reduction of the establishment (staff schedule)
The number of employees in a given position decreases, but the position itself remains in the staff schedule	Specific positions are removed from the staff schedule — they disappear entirely
Example: there were five managers, three remain; the “manager” position continues to exist	Example: the position “logistics manager” is removed from the staff schedule as such

In practice, a reduction in numbers is almost always reflected in the staff schedule, so these processes often go together. But the correct wording determines both the order and the subsequent logic of selecting the employees to be made redundant.

When a reduction becomes a “mass release”

This is a critically important line: as soon as a reduction meets the criteria for a mass release, the employer acquires additional obligations towards the state, above all towards the employment service. The criteria are set out in Article 48 of the Law “On Employment of the Population”. A mass release is a one-off release or one occurring over a certain period:

Period	Scale of release
Within one month	10 or more employees where the enterprise has between 20 and 100 employees; or 10% or more employees where it has between 101 and 300
Within three months	20% or more employees regardless of the total headcount

If your reduction reaches these thresholds, the dismissal procedure alone is no longer enough — notification of the employment service is added, in its own, earlier deadline. That is why the scale of the reduction is calculated in advance, before the first order.

The step-by-step redundancy procedure

The order of actions is strict, and each step has its own deadline. Skipping any of them is a potential ground for reinstatement of the employee by a court.

Step 1. Decision and order on changes in the organisation of production and labour

Everything begins with the owner’s reasoned decision on changes in the organisation of production and labour and an order approving a new staff schedule from the date it takes effect. This is the foundation of the whole procedure: it is here that it is fixed which positions, or how many units, are being reduced and why.

Step 2. Determining the preferential right to remain at work

When not everyone is being made redundant but only some employees holding the same positions, the employer does not choose arbitrarily. Article 42 of the Labour Code establishes a preferential right to remain at work: it belongs to employees with higher qualifications and labour productivity. On equal terms, preference is given to certain categories — in particular those with two or more dependants, persons whose family has no other member with an independent income, employees with long continuous service at this enterprise, combatants and other categories defined by law. This analysis is worth documenting: in court the employer will have to prove why exactly these people were kept.

Step 3. Checking the protected categories

A separate group of employees may not be made redundant. Under Article 184 of the Labour Code, dismissal on the employer’s initiative is not permitted for pregnant women, women with children under three years of age (under certain conditions — up to six), single mothers with a child under fourteen or a child with a disability, and other persons treated as equivalent to them. In addition, an employee may not be dismissed during a period of temporary incapacity or while on leave — the date of dismissal will have to be moved. Skipping this step means a guaranteed loss in court.

Step 4. Personal notice two months in advance

Each employee being made redundant is given personal written notice of the forthcoming release no later than two months in advance (Article 49-2 of the Labour Code). An important nuance: the time an employee spends on leave or on sick leave is not excluded from this two-month period — it runs in the ordinary way. The notice is drawn up so that proof of delivery remains.

Step 5. Offer of other work

Simultaneously with the notice and throughout the period up to dismissal, the employer is obliged to offer the employee other available work — all vacancies matching their qualifications, and in their absence any other vacant positions. Dismissal for redundancy is possible only where there is nowhere to transfer the employee with their consent. The absence of such an offer is one of the most frequent causes of reinstatement.

Step 6. Notifying the employment service

In the event of a mass release, the employer is obliged to inform the territorial body of the State Employment Service using form No. 4-PN. For dismissals connected with changes in the organisation of production and labour, this information is submitted two months before the planned release. Failure to submit it, or missing the deadline, is a separate violation with corresponding consequences.

Step 7. Dismissal order and final settlement

After the deadlines have passed, dismissal orders are issued, an entry is made, the employment record book (if any) is handed over, and the final settlement is made on the day of dismissal. On payments — below.

Justifying and paying compensation

Money is the part where mistakes cost the most, because a delayed settlement entails separate liability. What is due to the employee on redundancy:

• Severance pay — in an amount of no less than the average monthly earnings (Article 44 of the Labour Code). A collective agreement or the employment contract may set a higher amount, and then it applies.
• Compensation for unused leave — for all unused days of annual leave.
• Wages — for the time actually worked up to and including the day of dismissal, together with the due allowances and bonuses.

All payments are made on the day of dismissal (Article 116 of the Labour Code). If the employer delays the settlement through no fault of the employee, liability arises under Article 117 of the Labour Code — payment of the average earnings for the entire period of delay. That is why the justification and the precise calculation of the amounts are prepared in advance, not on the last day.

The specifics of martial law

Martial law has simplified certain mechanisms, but it has not abolished the general redundancy procedure. The main differences are set by the Law “On the Organisation of Labour Relations under Martial Law” No. 2136-IX.

• Dismissal during leave or sick leave. Law No. 2136-IX permits dismissal of an employee on the employer’s initiative during a period of temporary incapacity or leave (except maternity leave and childcare leave), with the date of dismissal set accordingly.
• The special “wartime” ground. If the production, organisational or technical conditions, the means of production or the employer’s property have been destroyed as a result of hostilities and it is impossible to provide the employee with work, a separate ground applies (paragraph 6 of part one of Article 41 of the Labour Code), with a shortened notice period and its own rules.

It is important not to confuse an ordinary redundancy under paragraph 1 of Article 40 with the wartime ground under Article 41: they have different deadlines, different documents and different consequences. Choosing the wrong ground is also a reason for a lawsuit.

Typical mistakes that lead to reinstatement

• the employee was notified less than two months in advance, or the fact of notice could not be proven;
• the available vacancies were not offered, or not all of them were;
• an employee from a protected category was dismissed, or one during sick leave or leave;
• the preferential right to remain at work was not analysed or not documented;
• in a mass release, the employment service was not notified within the set deadline;
• the wrong ground for dismissal was chosen — redundancy instead of the wartime ground, or vice versa;
• the final settlement was delayed, incurring liability at the average earnings for the entire period of delay.

Each of these mistakes alone can make a dismissal unlawful. In a mass redundancy they are twice as dangerous, because a single flawed procedural template is repeated across all the employees.

How Dextra Law supports a mass redundancy

Redundancy is a core area of our work and employment practice. We take on the whole process — from the strategy to the final settlement — so that optimising the headcount is legally clean and protected from lawsuits. Dextra Law:

• Analyses the scale and classifies the process. We determine whether the reduction meets the criteria for a mass release and what additional obligations follow from that.
• Prepares the documents. We draw up the orders on changes in the organisation of production and labour and the new staff schedule, personal notices, offers of vacancies, and dismissal orders.
• Carries out a risk analysis. We check the preferential right and the protected categories, so that those who may not be dismissed do not end up in the reduction.
• Handles communication with the employment service in the correct deadlines and form, taking the rules of martial law into account.
• Calculates and justifies the compensation and builds the payment schedule to avoid liability for a delayed settlement.
• Defends you in disputes. If an employee challenges the dismissal, we represent the employer’s interests in court and take on the resolution of labour disputes.

A mass redundancy is not about “who to dismiss” but about how to do it so that, six months later, you do not receive a dozen reinstatement judgments. That is precisely the part we take on.

Frequently asked questions

Planning a staff reduction?

The Dextra Law team will support your redundancy at every stage — from the order on changes in the organisation of production and labour to the final settlement — taking the rules of martial law into account, and will protect the company’s interests in the event of a dispute. Contact us to assess the risks and draw up a clear action plan with deadlines.