August 24, 2017

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.

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