R&R Succeeds in Obtaining a Redundancy Approval for a Korean Textile Factory

Riad & Riad’s labor and employment team, led by Dr. Eman Riad, succeeds in obtaining the approval of the Work Force Care Central Committee (“Central Committee”) to the shutting down of a textile factory and the redundancy of 90% of the factory’s workforce.

On behalf of our Korean textile company, R&R applied to the Competent Redundancy Committee (“Redundancy Committee”) requesting to shut down the textile factory and to lay off 90% of the workforce due to production stoppage.

Riad & Riad attended the several meetings held by the Redundancy Committee to discuss the matter with the company and the labor union. The Redundancy Committee however issued its decision rejecting the company’s request. Such rejection was expected in light of the long settled tendency of the Redundancy Committees to reject redundancy requests preferring to leave it to the employer to reach a negotiable settlement with the employees by paying them a compensation which is higher than the redundancy compensation ascertained under Article (201) of the Egyptian labor law (the salary of 1.5 months multiplied by the years of service).

The company elevated the matter and challenged the rejection decision before the Central Committee. The Central Committee incudes in its members, representative of the Investment Authority (GAFI), representative of the Egyptian Industries Federation, representatives of the Labor Office, the Social Insurance Office, as well as representative of the General Labor Union.

After attending several deliberation hearings, the Central Committee – unanimously – uphold the company’s challenge and approved the redundancy request.
In order to maintain equilibrium between the two axes of the equation; the Central Committee endeavored to ensure that the employees are given fair redundancy compensations; particularly with the witnessed inflation in Egypt. As a result, it was agreed that the company would pay each redundant employee a compensation equivalent to the salary of 1.75 months multiplied by the years of service in addition to 6-week salary compensation for termination notice. The agreed compensation is slightly higher than the redundancy compensation ascertained under the Egyptian labor law. We believe such approval represents a new approach by the government to facilitate and streamline governmental procedures, not only for market entry, but also for market exit or downsizing. This comes in line with the philosophy of the new Investment Law and the promised guarantees therein.

Riad & Riad has provided legal support to the company from day one since submitting the redundancy request and the grievance to both committees and until getting a final approval from the Central Committee. Our support included drafting/submitting the redundancy request, preparing the file of the supporting documents, preparing the grievance request, attending the meetings with the Redundancy Committee and the Central Committee, reviewing the minutes of the committees’ meetings and liaising with the relevant governmental authorities.

Posted in News on Aug 24, 2017