What does the cancellation of a job position represent and what impact does it have on the employee that occupies such job position?
The cancellation of a position represents an internal restructuring measure of the employer, determined by various circumstances (e.g., economic, technological, organizational, etc.) existing within the company at a given time. Its purpose is to streamline the employer’s activities, aiming for a more effective utilization of human and financial resources.
The cancellation by the employer of a job position must be justified by objective criteria and, as explicitly stated by Article 65(1) of the Labor Code, must not be related to the employee occupying the job position being canceled.
Regarding the impact that the cancellation of a job position has on the employee occupying it, the same Article 65(1) of the Labor Code stipulates that the cancellation of a job position may lead to the dismissal of the employee for reasons unrelated to its person/behavior. Of course, the employer also has the option to offer the employee whose job position is being canceled another job position within its structure, but such measure is not mandatory per to the Labor Code.
What conditions must be met for the legal cancellation of a job position?
The conditions to be met for the legal cancellation of a job position are briefly provided by Article 65(2) of the Labor Code. These conditions involve the effectiveness of the job position cancellation measure and the existence of a real and serious cause underlying the decision.
Effectiveness of the job position cancellation
As stated in both legal literature and court practice, the effectiveness of cancelling a job position implies the removal of such job position from the employer’s structure. In practical terms, this measure means removing the job position from the employer’s organizational chart and, if applicable, from the staff list.
The cancellation of the job position becomes effective, according to court practice, by ceasing the particular daily activities performed by the occupant of that job position, either through the permanent cease of their performance within the overall operations carried out in the company, or by reallocating additional service duties to an employee who primarily performs another category of activities.
The removal of the job position from the employer’s organizational chart is a fundamental and essential evidentiary element of the legal cancellation of the job position. Any other evidence regarding the effectiveness of cancelling the job position serves only a complementary role. In practice, the court may request the submission of the organizational chart both before and after the cancellation of the job position in order for the employer to prove the effectiveness of the measure.
The real and serious nature of the job position cancellation measure
The Labor Code does not specify, even by way of example, what real and serious causes can lead to the cancellation of a job position. As a result, it has been left to the legal literature and court practice to determine concretely which causes are real and serious and can justify the cancellation.
In this regard, the legal literature and court practice has indicated that a cause is real when it presents an objective character, meaning that it truly exists and does not disguise reality. Furthermore, a cause is considered serious when the measure taken by the employer does not disguise reality and is aimed exclusively at improving the employer’s activities.
Court practice is extremely rich in terms of the real and serious nature of job position cancellations. For example, the following situations have been established by the court practice as real and serious causes that have led to the cancellation of job positions:
- Adoption of internal reorganization measures by the employer due to various objective causes (e.g., economic difficulties, loss of contracts, loss of authorizations, loss of suppliers, etc.).
- Outsourcing of services to an external provider.
- Consolidation of two positions.
- Decrease in the employer’s turnover.
The same court practice has ruled that the following are not real and serious reasons for cancelling job positions:
- The employer’s economic difficulties are not real considering its behavior in the market (e.g., hiring campaigns for new employees).
- The employer based the measure on hypothetical situations (predictions) rather than concrete factual elements.
- The job position was terminated just two months after hiring another person for the same job position.
What aspects should be considered when dismissing an employee whose job position has been cancelled?
The most important aspect for the employer to consider when dismissing an employee whose job position has been cancelled is that the elimination of the job position cannot constitute a measure for dismissing the employee for personal/subjective reasons, but a necessary measure to improve efficiency that may lead to the employee’s dismissal for objective reasons, independent of its personal qualities/behavior.
Additionally, in order to justify the dismissal, the employer must have previously cancelled the job position.
Another extremely important aspect is for the employer to comply with all procedural stages of the dismissal resulting from cancelling the job position, as well as with the mandatory content of the dismissal decision.
Lastly, the employer should also consider the number of employees being dismissed due to cancelling job positions to determine if the number of employees being dismissed risks triggering the specific procedures for collective dismissals.
To prove good faith in the event of a contested dismissal decision, although not required by labor law, the employer could also offer the employee an alternative job position.
Additionally, it is recommended that in cases where the employer decides to individually dismiss a certain employee even though there are several employees occupying similar job positions according to the organizational chart, the employer should provide a minimum justification regarding its decision in order to eliminate the appearance of subjectivity when choosing the employee that will be dismissed.
What happens to the responsibilities of the person who has been dismissed due to the cancellation of the job position?
To the extent that these responsibilities need to be continued, they can be taken over by other employees or outsourced. Establishing a new job position in order to hire someone who will assume the responsibilities of the person who was dismissed due to the employer cancelling the job position is excluded.
What does the court analyze or should analyze in resolving a case involving job position cancellation?
As emphasized in legal literature on various occasions, the measure of cancelling a job position followed by employee dismissal is a decision entirely within the employer’s discretion. However, the court responsible for resolving a case regarding the dismissal of an employee due to such a cancellation should strictly analyze the validity aspects of the measure.
Nevertheless, the employer’s discretion should be objective and not subjective, and the elements that objectify this decision (e.g., various documents underlying the decision) will play an important role in the court when administering proof.