Dismissal of employees upon liquidation of the company

Liquidation of an LLC is a process of voluntary or forced closure of a company, which involves a complete shutdown of the company, including staff reduction, shutdown of production and any other activity, completion of settlements with counterparties. 

Dismissal of employees is the termination of employment relations between an employee and an employer at their own request, by agreement of the parties or on the occasion of other circumstances provided for by the Labor Code of the Russian Federation.  

Thus, the liquidation of a business and the termination of employment contracts with employees are interdependent concepts. The process of staff reduction in connection with the closure of the company is regulated by Article 81 of the Labor Code of the Russian Federation. We will tell you more about the dismissal procedure in this article. 

How does liquidation differ from the reorganization of a legal entity?

Reorganization is a process that involves the closure of an old legal entity and the formation of a new one. It can take the form of a merger, merger, division, separation or transformation of one company into another. Thus, reorganization is not liquidation in the classical sense of the term. 

Article 75 of the Labor Code of the Russian Federation contains information that the reorganization of the company is not considered a reason for the reduction of employees. This means that existing employment contracts must be renegotiated with a new legal entity. 

However, on the basis of clause 6 of Article 77 of the Labor Code of the Russian Federation, an employee has the right to make an independent decision on dismissal. In this case, the employee can notify the employer of his intentions on the same day without mandatory work in 14 calendar days. 

Features of staff reduction in case of LLC closure

As we noted earlier, the main reason for the dismissal of employees is the exclusion of the company from the register of the Unified State Register of Legal Entities, which is prescribed in paragraphs 3 and 6 of Article 61 of the Civil Code of the Russian Federation. This means that even those categories of employees who, under normal conditions, were obliged to remain on the company’s staff are subject to reduction. This primarily concerns the following categories of persons:

• Women on leave due to pregnancy and childbirth. 
• Employees who are on parental leave for up to 3 years.
• Employees who are on annual paid leave. 
• Pregnant employees. 
• Employees who are on sick leave. 
• Single mothers raising children under the age of 14. 
• Mothers raising disabled children under the age of 18. 
• Pre-retirees. 

In these circumstances, it is important for the employer to know that he is obliged to notify the employees themselves, the trade union and the employment service about the staff reduction. 

The procedure for notifying an employee of an upcoming reduction

According to Article 180 of the Labor Code of the Russian Federation, employees are required to receive notifications about their upcoming reduction in connection with the liquidation of the company no later than two months before the date of the planned reduction.  An exception can be made only in two situations:

• If the employment contract with the employee is concluded for a period of less than two months. Then the employee can be notified three days before the dismissal. 
• If employees are engaged in seasonal work. In this case, the period is reduced to 7 days.

The notification will be considered handed over provided that the employee has signed the order on termination of the employment agreement. If the employee refuses to sign the document, the employer is obliged to draw up an act of refusal. In this case, the termination of the employment contract may go through court. 

If an employee for any valid reasons does not have the opportunity to familiarize himself with the order – he is on sick leave or on vacation – then the notification must be sent by mail to the address of the place of residence. 

It is important to keep in mind that the rule on warning an employee about the upcoming dismissal is in effect so that the employee can write a counter-application for termination of the employment contract ahead of schedule, that is, without two months of work. In this case, it is important for the applicant to rely on Part 3 of Article 180 of the Labor Code of the Russian Federation to receive severance pay. Otherwise, the employer may regard the submitted application as dismissal at his own request. 

The procedure for notifying the union about the upcoming reduction

According to paragraph 2 of Article 12 of the law “On Trade Unions, their Rights and Guarantees of Activity”, the trade union of employees must receive a corresponding notification no later than three months before the date of the upcoming reduction. 

The law does not establish a special form for drawing up a document. It is important that the notification contains a list of employees being laid off, information about the decision on the liquidation of the company and the date of the protocol.

The procedure for notifying the employment service about the upcoming reduction

The Decree of the Government of the Russian Federation No. 99 of 5.02.1993 “On the organization of work to promote employment in conditions of mass release” states that if the reduction of staff affects 15 or more employees, then the following rules must be followed: 

• For the first time, the company must notify the labor inspectorate three months before mass layoffs by submitting a form modeled on Annex 1 to Resolution No. 99.
• The company must re-notify the labor inspectorate two months before mass layoffs by submitting a form modeled on Annex 2 to Resolution No. 99. This time, the document must contain information about the personal data of each employee, his average income, education level, specialty.

It is important to take into account that each region has the right to independently establish separate requirements for mass layoffs. 

It is also necessary to take into account that if there is a staff of less than 15 people, it is enough to send a notification to the employment service once in no later than two months. 

The legislation of the Russian Federation does not establish a special form for notifying the labor inspectorate. It is important to have a reduction order already drawn up, issued within the company and drawn up in accordance with the resolution of the State Statistics Committee of the Russian Federation “On approval of unified forms of primary accounting documentation for labor accounting and its payment”. The document must contain the reason for the dismissal, that is, the liquidation of the organization. 

How to competently break off an employment relationship with an employee?

As a rule, the dismissal of an employee in connection with the liquidation of an organization is not much different from the termination of an employment contract for other reasons. As a rule, the procedure is as follows:

• Making an entry in the work book about the dismissal of an employee in connection with the liquidation of the enterprise on the basis of Part 4 of Article 84.1 of the Labor Code of the Russian Federation. 
• Issuance of a work record book on the day of dismissal. Unclaimed workbooks are handed over to the archive of a special institution from where the employee will later be able to pick it up on his own. 
• Issuance of an employee certificate of insurance payments on sick leave for the last two years. The document is drawn up in the form approved by the order of the Ministry of Labor of Russia dated 30.04.2013 No. 182n. 
• Issuance of a 2-personal income tax certificate to the employee, which reflects income and tax deductions for the last two calendar years. 

What payments can employees receive when they are downsized? 

According to Part 1 of Article 178 of the Labor Code of the Russian Federation, when an organization is liquidated, each employee has the right to receive a settlement in the amount of average monthly earnings, which is transferred to the employee’s current account on the day of termination of the employment contract. 

It is important to take into account, if it is impossible to find a new job within a month after dismissal, the employer is obliged to pay the employee a second severance payment in the amount of average monthly earnings with the possibility of its full or partial extension for another month. However, it is important to keep in mind that the last rule applies only to those reduced employees who registered at the labor exchange, but could not find a job. 

The employer should know that when working out a two-month period, he is obliged to keep the employee’s bonus part of the salary. An exception can be made in cases of officially documented downtime at the enterprise, when employees are sent on forced leave without pay with the preservation of 2/3 of the average earnings. 

What should an employer do with personnel documents after liquidation? 

All personnel documentation must be transferred to the archive of a special archival organization with which the company’s management must conclude a contract. As a rule, we are talking about a municipal or state archive, where information will be stored on demand. As a rule, this data may be needed by an employee to restore work experience or confirm earnings when applying for an old-age pension. 

Sanctions for violation of the law

The procedure for termination of employment contracts in case of liquidation of the company has certain deadlines and a regulated procedure. Violation of the order threatens the employer with penalties. Thus, a fine in the amount of 35,000 to 50,000 rubles may be imposed on a legal entity, and from 1,000 to 5,000 rubles on an official. 

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