Social plan? Don't forget about the placeholder plan!

When a company must reorganize and consequently lose jobs, there is not infrequently a desire to avoid forced layoffs as much as possible. While the apportionment principle in itself provides an objective way of selecting employees for dismissal, it does not take into account the possibility that there may well be employees who wish to leave voluntarily, allowing others to keep their jobs.

For this reason, social plans sometimes included a place-maker or voluntary departure scheme. The problem with such plans, however, was that often older employees made use of this arrangement, which created the risk that the arrangement would be classified as a disguised early retirement plan (RVU), with all the costly tax consequences that would entail.

Last month, however, the Supreme Court cleared the way for the place-making arrangement in a social plan. In a June 22 ruling, our highest court ruled that such arrangements may be part of a social plan without question, as long as they do not have the (sole) purpose of offering (only) older employees a financial bridge until retirement.

The place-maker arrangement can thus be used as a nice extra instrument to cushion the negative consequences of a (collective) dismissal. So don't forget to include it!

For the exact terms and conditions that apply to a place maker arrangement, please contact one of our attorneys from service area Labor and Education.

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