Staff Reduction or Hidden Dismissal: When the Employer Will Be Obliged to Reinstate the Employee

In conditions of martial law and constant optimization of business processes, more and more employers resort to reducing the number or staff of employees.

At the same time, this ground for dismissal remains one of the most conflict-prone in labor relations, since any violation of the procedure established by law may lead to the dismissal being recognized as illegal.

When staff reduction is allowed

One of the grounds for termination of an employment contract at the employer’s initiative is changes in the organization of production and labor. This ground is provided for in paragraph 1 of part one of article 40 of the Labor Code of Ukraine (LCU).

Such changes include, in particular, liquidation, reorganization, bankruptcy of the enterprise, re-profiling of production, as well as reduction in the number or staff of employees.

At the same time, the law does not prohibit the employer from independently determining the organizational structure of the enterprise or the need to optimize personnel. However, courts check not the expediency of such a decision, but compliance with the procedure established by law for dismissal and the reality of the reduction.

The employer must prove the reality of the reduction

The order on reduction alone is not sufficient.

The reality of the reduction can be confirmed by orders on changes to the staffing schedule, a new staffing schedule, decisions of the owner or authorized body, documents on reorganization, and economic justification of the changes.

Obligation to personally notify the employee

One of the main guarantees is the employer’s obligation to notify the employee about the upcoming dismissal.

According to article 49-2 of the LCU, the employee must be personally notified about the upcoming reduction no later than two months in advance.

The employer is obliged to offer other work

One of the key guarantees for the employee is the employer’s obligation to offer all available vacant positions.

The employer must offer all available vacant positions that correspond to the employee’s qualifications and take into account their preferential right to remain employed. If there is no suitable work or the employee refuses the transfer, they may contact the employment service or find employment independently. For certain categories of employees and under martial law conditions, the law establishes special rules and exceptions.

During martial law, there are specific features of labor relations according to the Law of Ukraine "On the Organization of Labor Relations under Martial Law." In particular, for certain cases, the notification period may differ if directly provided by law. Therefore, the employer must consider special legal regulations.

In case No. 591/7260/25, the Supreme Court confirmed that the employer is obliged to offer the employee only those vacant positions that correspond to their education, qualifications, and experience. The court recognized the dismissal due to reduction as lawful because the newly created position of vice-rector for security required a higher legal education and involved other functions related to security and mobilization work, which the plaintiff could not perform due to lack of required qualifications.

At the same time, in case No. 638/14165/21, the Supreme Court emphasized that the employer does not fulfill the obligation under article 49-2 of the LCU if they only send the employee a link to a website with vacancies.

The court noted that the employer must personally offer all available vacant positions that correspond to the employee’s qualifications, since a link to an internet resource does not confirm which vacancies were available at the time of dismissal, whether the employee had access to them, or was properly informed about them.

Who has the preferential right to remain employed

Not all employees are on equal footing during reductions. Article 42 of the LCU provides a preferential right to remain employed, primarily granted to employees with higher qualifications and productivity.

If these indicators are equal, preference is given, among others, to family employees with two or more dependents, persons whose family has no other employees with independent earnings, employees with long continuous service at the enterprise, combatants, as well as other categories defined by law.

If the employer did not conduct such a comparison or cannot confirm it with proper evidence, the dismissal may be recognized as illegal.

The Supreme Court in its ruling in case No. 751/3322/23 confirmed that the legality of dismissal due to reduction depends on the employer’s compliance with all procedural guarantees.

The court recognized the dismissal as lawful because the employee was timely notified of the release, the position reduction was real and documented, and the preferential right to remain employed was given to another employee with a higher qualification category and longer work experience in the specialty. The Supreme Court also emphasized that courts do not assess the expediency of the reduction but verify the reality of changes in labor organization and the employer’s compliance with labor legislation requirements.

Which employees cannot be dismissed

The law establishes certain categories of employees who enjoy additional guarantees.

In particular, article 184 of the LCU prohibits dismissal of pregnant women, as well as women with children under three years old (in cases defined by law — up to six years), single mothers with a child under fourteen years old or a child with a disability, except in cases of complete liquidation of the enterprise.

Separate guarantees are also provided for elected trade union employees, employees on leave or sick leave, as well as other categories of persons according to the legislation.

Is union consent required

As a general rule provided by article 43 of the LCU, dismissal of an employee due to staff reduction (paragraph 1 of part one of article 40 of the LCU) is allowed only with the prior consent of the elected body of the primary trade union organization of which the employee is a member.

At the same time, this requirement does not apply, in particular, in case of liquidation of the enterprise, as well as to certain categories of employees defined by law, including prosecutors, police officers, employees of the SBU, DBR, NABU, BEB, and other law enforcement and controlling bodies.

However, during martial law, the Law of Ukraine "On the Organization of Labor Relations under Martial Law" establishes peculiarities in applying this guarantee. Therefore, when assessing the legality of dismissal, it is necessary to consider the date of dismissal and the special norms in effect at that time.

What payments are due to the employee

On the day of dismissal, the employer must make a full settlement with the employee.

The employee has the right to receive wages for the actual time worked; compensation for all unused days of annual leave; severance pay.

According to article 44 of the LCU, upon dismissal under paragraph 1 of part one of article 40 of the LCU, severance pay is paid in an amount not less than one average monthly salary.

A collective agreement or employment contract may provide for a larger amount of such assistance.

What to do if the employee was dismissed illegally

If the employee believes that the reduction procedure was violated, they have the right to apply to the court.

Most often, the Supreme Court recognizes dismissal as illegal in cases where the employer did not comply with the notification period, did not offer all available vacancies, did not confirm the reality of the reduction, did not consider the employee’s preferential right to remain employed, improperly executed documents, or dismissed an employee who enjoys special labor guarantees.

If the dismissal is found illegal, the court may reinstate the employee, recover average earnings for the entire period of forced absence according to article 235 of the LCU, and in appropriate cases, compensate for moral damage.

Thus, during staff reduction, the employee has the right to timely notification of dismissal, an offer of all relevant vacancies, consideration of the preferential right to remain employed, and payment of severance pay.

The practice of the Supreme Court shows that even minor violations of these guarantees can be grounds for reinstatement and recovery of average earnings for the period of forced absence. Therefore, both employers and employees should carefully comply with labor legislation requirements and the legal positions formed by the Supreme Court.

Read more: who has the preferential right to remain employed in 2026 during staff reduction.

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