State of Emergency measure 60/40 – who can apply?

A newly passed Decree № 55/30.03.2020 of the Council of Ministers of Bulgaria defines the rules for compensations to the employers in the period of State of Emergency, also known as measure “60/40”.

The Decree has retroactive effect and it shall be deemed entered into force as of March 13, 2020 when the State of Emergency was declared by the Parliament. Thus, the retroactive effect allows compensations to be paid also for the period between March 13, 2020 and March 30, 2020, the latter being the date of the Decree.

An important requirement for payment any compensation is presence of a decision of the European commission which defines that the compensations are not considered state aid.

The scope of the measure 60/40 is governed by criteria referring to employers as well as to employees.

Which of the employers is the measure intended for?

All employers with economic activity in the Bulgaria (whether local natural persons and companies or foreign companies) may apply, except the ones which operate in the following sectors:

•                    Agriculture, hunting and forestry;

•                    Financial and insurance activities;

•                    State governance;

•                    Education;

•                    Human healthcare and social work;

•                    Activity of households as employers, extraterritorial organizations and services.

Requirements to the employers

The Decree sets a number of requirements towards the employers which aim at guaranteeing the goodwill and “financial fair play”. The majority of them feature lack of pending debts for taxes and social security payments, lack of pending insolvency procedures or winding up procedures, lack of any violations of the labor legislation made by the employer, etc.

One of the important requirements is that the employers shall keep the employment of the workers for which they have received compensations and for the same amount of time as the period for which compensation is being paid. Yet according to the Decree, during the period of the measure, the employer shall not terminate the employment with the workers, on the following grounds: 1) reduction of staff; 2) partial closing or decrease of the business and 3) cease of business for more than 15 days. The analysis of these requirements shows that the employment shall be kept for a period of a time equal to the period of the compensations payments. The maximum duration of the measure shall be within the State of Emergency period but no longer than 3 months. The latter was declared up to April 13, however, it is expected to be prolonged by the Parliament. It is also important to be pointed out that the employer shall not exercise the options for termination of the employment listed above only during the time within which compensation is received. Breach of these requirements could lead to reimbursement of the compensation back to the state. The compensation shall be also reimbursed by the employer when declaring false information to the authorities and if the employer fails to pay the full amount of the remunerations and the social security contributions to the workers for which the compensation was received.

The Decree does not limit the options for termination of a labor contract on grounds which are not directly related to reduction or reorganization of the work force and the State of Emergency. Thus, termination as result of a disciplinary violation of the employee, termination by the employee or termination on the basis of a mutual consent shall not be deemed as violation of the Decree.

Which of the employees is the measure intended for?

Compensation may be obtained only for employees in any of the economic activities explicitly stated in the Decree, by codes according to the Classifier of Economic Activities (NACE) – 2008, namely:

•                    retail trade, except of motor vehicles and motorcycles, unless their place of business is in a shopping centers (malls). Not all retail employees are covered by the measures. Shops, specialized or not, retailing food, beverages and tobacco are an exception; drug dealers; pharmaceuticals, medical and orthopedic goods; trade in open stands and markets; retail trade not in retail outlets;

•                    passenger land transport;

•                    passenger air transport;

•                    hotel industry;

•                    activity of restaurants and fast food establishments;

•                    activity of drinking establishments;

•                    movie projection;

•                    tourist agency and operator activity; other travel and booking activities;

•                    organization of congresses and trade fairs;

•                    pre-school education (private sector);

•                    artistic and creative activity;

•                    other cultural activities;

•                    sports and other recreational and leisure activities;

•                    maintaining good physical condition;

•                    all other activities that have been terminated by an order of a public authority as an anti-epidemic measure.

The measure may not be applied to employees who are appointed after the date of the State Emergency (March 13, 2020), as well as to employees who exercise some of the following types of paid leave: (1) because of temporary incapacity for work (sick leave); (2) for pregnancy and childbirth; (3) adoption of a child up to 5 years of age and (4) parental leave for a child up to 2 years of age. The measure also does not apply to (5) staff members whose salaries and social security contributions are paid by European funds or other public funds.

Additional conditions

In the event that the employer and the employees to whom the measure is sought meet the requirements discussed above, compensation can only be obtained in the following circumstances:

Firstly, the termination of the work of the enterprise shall be in its two varieties – (1) at the initiative of the employer or (2) as a result of an order of a state body. There is no need for complete termination of work and “dismissal” of all employees. The work of the enterprise may be ceased by individual units, individual employees or by introducing a mode of work only for part of the statutory working hours. If part time work is being applied, the compensation covers up to 4 hours a day.

The second hypothesis is a drop in sales of more than 20%.  The basis for calculation of the decrease depends on the moment of establishment of the employer (the registration in the Trade Register of the company or the sole trader). For those established before March 1, 2019, a 20% drop in sales should be compared  to the same month of the previous calendar year (example – if the claim for compensation is filed in April 2020, March 2020 sales should be lower by 20 % than March 2019 sales). For the employers established after March 1, 2019, the 20% drop of sales shall be in the month preceding the filing of the compensation claim, but the benchmark is the relative sales between the January and February 2020.

Amount of compensation

The basis for determining of the compensation to the employees is their social security income for January 2020. The compensation covers up to 60% of the income upon termination of work and up to 4 hours for part-time employment. The employer shall pay to the employees the full amount of the agreed remuneration, but also all due social security contributions that were at his expense even before the State of Emergency was announced.

Application procedure

The executive director of the Employment Agency and the manager of the National Social Security Institute were entrusted with the implementation of the Decree. Exercise of the rights under the measure is related to preparation of specific documents and their submission to the relevant  “Labor Office” Directorate, which serves at the place of work of the employees.

We are at your disposal for further questions, as well as for assistance in applying and/or exploring other forms of reorganization of the work process of your business.

Progressive lawyers is very excited to be in this industry and to work with partners from this industry. If you need any assistance just give us a call or send us an e-mail.We would be happy to brain-storm together at any time.

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