Employment legislation reforms in Greece

1. Employment legislation reforms in Greece a report prepared by Kostis Bakopoulos Bakopoulos Katharios Law Firm, Athens Ass. Professor at the Law School of the University of Athens

2. Structural reforms as a condition for financial aid • In April 2010, private capital markets were practically closed for Greece as a funding source. • Eurozone countries and the IMF provided tworescue packages to Greece, worth 110 and 130 billion EUR, under following conditions: • Implementation of austerity measures, to restore fiscal balance • Extensive privatisation of government assets • A “haircut” of 53,5% face value on Greek government bonds held by private creditors • Implementation of structural reforms, to improve competitiveness and growth prospects. Important part of the reforms were measures to adjust labor costs and enhance flexibility of labor conditions. • Two Memoranda of Understanding (MoU) were signed between the Greek government and its creditors, in 2010 and 2012. They prescribe in detail the legislative reforms. • The reform progress is under surveillance of the “Troika”.

3. The topics of this presentation I. Dismissals • The main legal concept • Case law protection • Special protection for specific categories of employees • The reforms II. Reforms regarding collective labour relations III. Other flexibility measures • Overtime payments • Flexible arrangements of working time • The discretionary “In-rotation work” pattern • Temporary agency employment • Fixed-term contracts IV. Final comments

4. Dismissals: The main legal concept • “The employer is free to terminate but has always to pay”. Dismissal protection through severance payment (indemnity) rather than through the material justification of the dismissal. • indemnity must be paid irrespectively of the reason of the dismissal, even in cases where it is related to a fault or another serious reason. Exception: Criminal offence. • The amount of indemnity grows along with seniority and is calculated on the basis of the last salary. • Optional prior notice. The function of prior notice in Greek law is to reduce indemnity to the half (but never replace it – “notice in lieu of payment” does not apply). • Before the reforms, 99%+ of all dismissals were without prior notice. In view of the length of statutory notice periods (1 to 24 months), employers preferred to pay full indemnity (1-24 monthly salaries) and finish with the contract immediately.

5. Dismissals: Case law protection • Legal basis is Art. 281 of Greek Civil Code (principle of good faith, prohibition of the abuse of rights). • A dismissal for which all formal requirements have been fulfilled, may be declared abusive by a Court. • It is abusive if it was triggered by an illicit motive or because no reasonable interest of the company existed or because the employer has not properly applied selection criteria. • Instance Courts apply a wide interpretation of the principle of good faith. • As a result, Greek law combines elements of a indemnity-pay law and a materially protecting law.

6. Dismissals: Material protection for specific categories of employees • Teachers in private schools, trade union executives, female employees under maternity protection: All enjoy direct protection by law; termination only for serious reasons permitted. • Employees of almost all public entities and (formerly state-controlled) banks have enhanced protection through age limit-clauses established in the respective Internal Work Regulations. • Several Work Regulations contain clauses that define specific reasons for which the contract can be terminated (enumerative principle).

7. Dismissals: The reforms Main goal: make dismissals easier and cheaper • Free termination in the first 12 months after hiring (no indemnity, no prior notice) • Notice periods shortened: Max. 4 months (instead of 24 until 2010) after 10 years of service • indemnity amounts reduced to the half: 2 - 12 monthly salaries if termination is without prior notice OR 1 - 6 monthly salaries if prior notice is given. (Until 2012: the double, respectively) • indemnity payment facilities (more instalments than before) • Abolition of all legislative regimes providing material dismissal protection. Clauses in Internal Work Regulations providing age limits or permitting termination only for defined reason have been abolished. Termination according to the common rules (without specific or serious reason) Maternity protection and protection of trade union executives still in force. • Collective redundancies Legal thresholds increased: 6 employees in entities employing 20 to 150 employees, 5% of the personnel in entities employing more than 150 employees BUT: The new legislation did not touch so far the veto right of the trade union and/or the Administration

8. Reforms regarding collective labour relations (1) The main scopes of the new legislation are: • to promote frequent collective bargaining • to decentralize collective bargaining by promoting company collective agreements • to break the system of “total application” of collective agreements • to freeze automatic salary increases based on seniority • to retain government control in setting minimum salary • to abolish unilateral recourse to arbitration.

9. Reforms regarding collective labour relations(2) • Collective Agreements are concluded for definite duration, min. 1 year max. 3 years. No possibility for Collective Agreements of indefinite duration. • Company Collective Agreements (which apply to all employees of the company) prevail over Sectoralor Same Profession Collective Agreements, even if they are less favourable. • Company Collective Agreements can be concluded in any entity employing at least 5 employees. If no trade union exists, it is signed by a “union of persons”, an almost informal employee representation. • The Ministry of Labourcannot extend the scope of application to non-members by declaring Collective Agreements as generally binding.

10. Reforms regarding collective labour relations(3) • Salary and other remuneration terms in the National Collective Agreement are binding only for employers who are members in an employer organization. • Minimum salary, mandatory for all employees irrespective of union membership, is determined by Law and not by National Collective Agreement. • Salary increases based on seniority (service time) are frozen until unemployment falls below 10% (now 27%). • New rules about employment terms after expiry of a Collective Agreement: An effective bargaining tool for employers. • All terms remain in force for 3 months (instead of six) • Thereafter all terms seize to exist ex lege, except of basic salary and 4 specific allowances • If a new Collective Agreement is signed, it replaces the old one • Unilateral recourse to arbitration is not possible. Arbitration cannot regulate other issues than the base salary.

11. Other flexibility measures • All statutory overtime payments were lowered by about 20% • Discretionary reduction of working time and salary: In case of business downturn the employer can unilaterally introduce in-rotation work, for max. 9 months per year, and proportionally lower pay. “In-rotation work” is daily work of 8 hours but fewer days per week or less weeks per month or less months per year. Employees have no right to oppose to the implementation because it is the employer's discretionary right. • Flexible working time patterns (“arrangement of working time”). Increased working hours (up to 10 daily) during a certain period are set off by reduced working hours during a following period. The employer can so meet volatile operational needs and avoid costly overtime work. • Temporary agency employment: The duration of the assignment (placement) may extend up to 36 months (previously 18 months). Temporary employment agencies can be legal entities or individuals. • Successive fixed-term contracts: They should be justified by an objective reason. If not, they should not be longer than 36 months in total or have been renewed more than 3 times in 3 years.

12. Final comments • The "crisis legislation" which has overhauled over the last 3 years important institutions of Greek employment law did not touch the basic rules of individual contractual freedom. The pactasuntservanda-principle still applies (but it is certainly compromised by the circumstances). Exception: “In-rotation work” • The government is pressed to proceed to further changes of the employment legislation. Main points: • Tightening voting rules to go on strike • Abolition of the prohibition of lock-outs • Collective redundancies without veto rightby the union or the Ministry • Limiting special leaves for union executives. • A very recent decision of the Council of State, Plenary Session, has declared unconstitutional the new legislation that has abolished the unilateral recourse to arbitration and has limited the authority of arbitrators to the regulation only of the base salary. This is a serious setback to the reform process.