Question: Can an employer terminate an employee due to organizational restructuring if the employee is also experiencing performance issues?

Answer

Yes, provided that the termination genuinely results from organizational restructuring and fully complies with Article 42 of the Labour Code 2019.

An employee’s participation in a Performance Improvement Plan (PIP) or ongoing performance evaluation does not prevent the employer from implementing a legitimate restructuring. However, the employer must demonstrate that the position itself has been eliminated or substantially restructured, rather than targeting a particular employee.

Conversely, if the employer merely changes the job title or immediately hires another employee to perform substantially the same duties, the competent authorities or the court may conclude that the termination was not genuinely based on organizational restructuring. In such circumstances, the termination may be considered unlawful.

Conclusion

Before implementing a restructuring plan, employers should maintain sufficient documentation demonstrating the business need for the restructuring, the differences between the old and new positions (if any), and the labor utilization plan. Proper documentation is essential to reduce legal risks and defend the legality of the termination.

If your business requires legal advice on corporate restructuring, termination of employment contracts, handling employees with performance issues, implementing Performance Improvement Plans (PIPs), or other employment law matters, please contact SB Law. Our experienced lawyers and legal professionals are ready to assist your business in developing practical and legally compliant solutions while minimizing legal risks and employment disputes throughout the restructuring process.