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Monday, February 27, 2012

Eurozone Crisis and Global Economy: Three reasons Europe is in crisis and Canada is not

Imagine getting fired, but still collecting your full salary for another three and a half years.

If you’re sitting around the office shuffling papers, that probably sounds like a nice little daydream.
But that dreamy-sounding scenario — and other similarly-generous severance benefits — have helped create an economic and fiscal nightmare in Europe.
If Stephen Harper, Dalton McGuinty and Don Drummond ever got their eyes on some of these doozies, they’d probably have a coronary right on the spot. Here are some other signs that you’re not exactly in Kansas…er, Canada any more.
Dutch reform
In the Netherlands, companies who want to get rid of permanent employees face plenty of obstacles. Those obstacles include time, money, paperwork and a quasi-governmental tribunal named the Dismissal Authority (which come to think of it is a pretty good name for a band, or maybe a dominatrix).
If a Dutch company is firing a permanent employee without cause, they either need to come to some kind of voluntary severance agreement, or go to the Dismissal Authority for permission.
The Dismissal Authority then uses the oh-so-catchily-named Dutch Cantonal Court Formula as a guideline to come up with an appropriate severance payment. It takes into account an employee’s years of service, their salary, the employee’s likelihood of getting rehired somewhere else, as well as the financial health of the company doing the firing.
A nice Article
In Italy, there’s basically a two-tier employment market. People with good job protection (let’s be generous and not call it jobs for life, but it’s pretty close), and people with almost no job protection (ciao, most folks under the age of about 30 – the Italian youth unemployment rate hovers around 30 per cent).
The people living the dolce vita are the ones protected by Article 18 of the country’s labour code. The Article, which applies to companies with 15 or more workers, says anyone fired without just cause has the right to be reinstated, with back wages. There are three definitions of “just cause” in the Article, all of which have proven tough to demonstrate in court: Non-performance, frustration or “excessive burden.”
On top of that, the company must pay the Italian unemployment insurance body the equivalent of those back wages as a quasi-fine.
That extra cost, combined with the length of time it takes for fired-worker cases to work their way through the court system, makes most Italian firms reluctant to get rid of employees.
Trying to get rid of Article 18 has proven to be hazardous to your health — two Italian economists have been murdered (one in 1999, the other in 2002) while trying to help national governments revamp labour market rules.
In 2003, then-president Silvio Berlusconi introduced reforms which allowed companies to hire temporary employees, who wouldn’t be subject to Article 18.
Muchos gracias
That 42-month severance package, by the way? You’ll have to be in Spain to get it, and you’ll have to hurry.
The Spanish government recently introduced legislation to cut compensation for workers fired without cause from 45 days salary per year of service, up to a maximum of 42 months salary. The new rules would cut that to 33 days salary per year of service, capping the payout at 24 months salary. Even if companies can prove the firings were because of economic conditions, they still have to pay the departing workers 20 days of salary per year of service.
Not that we’re saying there’s a connection, but in Spain, the unemployment rate is just under 24 per cent.
Meanwhile, back in Ontario
In Ontario, workers fired without cause can only dream of getting two years salary in compensation. Here, the most you’re legally entitled to is either eight weeks notice, or eight weeks salary. And you can only get to that exalted status after having worked at the same job for (you guessed it), eight years. Until then, it’s one week’s notice or salary for each year you’ve worked.

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