Does an employer need a reason in order to lawfully terminate an employment relationship? If so, what reasons are lawful in the jurisdiction?
Employment & Labour Law
The employer generally does not need to provide a reason if it terminates the employment relationship with notice or salary in lieu.
Any such termination should be conducted in accordance with the employment agreement and the Employment Act (Cap. 91) (“EA”), if it applies.
However, there is some authority that an employer may not terminate a fixed term contract by notice or salary in lieu of notice.
Introduction to Singapore Employment Law
By way of background, the EA is Singapore’s main employment legislation and covers all employees except the following:
- Managers or executives with a basic monthly salary of more than S$4,500;
- Domestic workers; and
- Statutory board employees or civil servants.
Part IV of the EA, which sets out rest days, hours of work and other conditions of service, only applies to the following categories of employees:
- Workmen (doing manual labour) with a basic monthly salary not exceeding S$4,500; and
- Employees who are not workmen but are covered by the EA with a basic monthly salary not exceeding S$2,500.
Part IV of the EA does not cover all managers or executives, regardless of their salaries.
Other statutes and the common law may also apply in various situations. Finally, the Ministry of Manpower (“MOM”), together with its tripartite partners, the National Trades Union Congress (“NTUC”) and the Singapore National Employers Federation (“SNEF”), has issued various employment guidelines and advisories. While these guidelines and advisories are not legally binding, MOM may take steps against employers who do not comply with certain guidelines or advisories.
Except as otherwise provided in an employment contract or collective bargaining agreement, no law requires employers to follow a formal procedure when discharging individual employees. Generally, employees employed on an “at-will” basis may be terminated, with or without cause or grounds, provided it is not for an impermissible reason, most commonly discrimination on grounds of a category protected by law or protected “whistleblowing” activity (reporting or objecting to certain employer activity where the employee reasonably believes that the employer has engaged in violations of specific laws). The employment contracts of executives and other highly-skilled individuals often incorporate a “just cause termination” clause, mandating that the employee may only be terminated (without severance or damages) for “cause” on specified permissible grounds.
In Spain there is no termination without cause, so that the employer must always justify the reasons for employment termination (unless the termination takes place during the trial/probationary period, in which case the employer may dismiss the employee without grounds, notice and termination severance). Dismissals cans be supported on the following grounds:
- Owing to the worker’s known or observed ineptitude subsequent to his/her actual placement in the company.
- Owing to the worker’s lack of adaption to technical modifications made on his/her work post, where said changes are reasonable.
- Where there is a demonstrated objective need to decrease the number of jobs for economic, technical, organisational or production reasons (redundancy dismissals which could be of individual -objective/individual redundancy- or collective -collective layoff/redundancy- nature).
- Owing to absences from work, even when these are justified but intermittent, when they amount to 20% of the working days of two consecutive months, provided that the total absences in the previous 12 months exceed 5% of the working days, or 25% for in 4 non-consecutive months within a 12 month period (there are some absences that are expressly excluded from the above calculations in accordance with legal provisions).
- Repeated and unjustified absence from work or lack of punctuality at work;
- Lack of discipline or disobedience at work;
- Verbal or physical offences to the employer or those working for the company or family members living with them;
- Violation of contractual good faith, as well as abuse of confidence;
- Continuous and voluntary decrease in the work performance;
- Habitual drunkenness or drug addiction if it negatively affects work; and
- Harassment based on race, ethnic origin, religion or convictions, disability, age or sexual orientation, and sexual harassment directed against the employer or persons working for the company.
The very serious misconducts for disciplinary dismissals may be also established in the applicable collective bargaining agreement.
According to the Turkish Labour Law numbered 4857 (the "Labour Law"), termination of an employment contract by the employer can be conducted in two separate ways as: (i) termination on valid grounds (Article 18) (ii) termination for just cause (Article 25).
Article 18 of the Labour Law provides that the dismissal of employees is required to be made on the basis of "an objective valid reason" relating to (i) the efficiency or (ii) behaviour of such employee or (iii) the necessities of the enterprise (e.g. economic, technological or organizational reasons), to the extent the employee concerned is subject to the job security provisions of the Labour Law (i.e. the employee concerned has at least 6 months of employment term at a workplace where 30 or more employees are being employed). In such case, termination requires compliance with applicable notice periods and payment of legal and contractual rights (e.g. seniority indemnity, paid leave, additional benefit or bonus if any). Employer representatives, who are entitled to manage the entire enterprise and/or are authorized to recruit and dismiss employees on behalf of the employer (i.e. executives and top managers), are not subject to job security and therefore employers will not be obliged to comply with the above-mentioned provisions while terminating their labour relationship with this category of employees.
Pursuant to Article 25 of the Labour Law, in the event of the existence of certain grounds, the employer can terminate the employment contract with immediate effect without observing any notice period. The grounds listed under Article 25 comprise the following:
- Health reasons (e.g. sickness or disability leading to three consecutive days of absence or five days in a month; determination by the Health Committee that the workplace could be hazardous to the employee),
- Reasons relating to ethics and principle of good faith (e.g. persistent failure to comply with duties, acts in violation of trust and loyalty such as breach of confidence or confidentiality, theft; unjustified absence from work for two consecutive days or twice on business days after a holiday or three days in a month),
- Compelling reasons (e.g. arrest or detention of the employee causing absence exceeding the notice period; arising of a reason compelling the employee to be unable to work at the workplace for longer than a week).
In such case, termination can occur without need to comply with any notice period and does not require either payment of legal or contractual rights.
In Colombia, in general, an employment agreement may be terminated unilaterally (except in case a special protection exists (e.g. maternity, sick leave, handicap employees, union representatives) with or without just cause (just causes are listed in the law by way of limitation) or by mutual consent.
Events of just cause of termination provided for in the law include the following:
- Deceit of the employee in regards to presenting false accreditations or certifications to obtain the job or to gain undue advantage for the position.
- Any act of violence, insults, mistreatment or severe indiscipline caused by the employee against its work, the employer, members of his family, managers or co-workers.
- Any severe act of violence, insults, mistreatment or severe indiscipline caused by the employee outside the place of work against the employer, members of his family, its representatives or business associates, shop managers, security guards or doorman.
- Any material damage caused intentionally to buildings, work, equipment, machines and raw materials, tools and other objects related to the job, and any gross negligence, which may put in danger the safety of people or objects.
- Any immoral or criminal act committed by the employee in the workshop, place of work, or anytime during service.
- Any serious violation of the obligations or especial prohibitions of the employee pursuant to articles 58 and 60 of the Labor Code, as well as any serious fault contained in a collective bargaining agreement or the like, arbitration award, individual contract, policy or procedure.
- Unless afterwards acquitted, an employee’s detention for more than thirty days, or the correctional arrest that exceeds eight days, or for a lesser period when the cause of the sanction is enough to justify the termination.
- Revealing technical or business secrets, or publishing reserved matters in detriment of the employer.
- A deficient performance of the work not corrected in a reasonable time since the employer requests a change, in relation to the employee’s capacities and with the average performance in analogous labours.
- Employee’s systematic non-performance of contractual or legal obligations, without valid reasons.
- Any of the employee’s addiction or bad habit that disturbs the discipline in the workplace.
- Systematic reluctance of the employee to accept the preventive or curative provisions, prescribed by the employers healthcare provider or by the health authorities to avoid illness or accidents.
- Employees’ ineptitude to perform the entrusted work.
- Recognition of retirement or disability pension to the worker while in service to the company, and
- Non-work related contagious or chronic illness of the employee, as any other illness or injury that incapacitates employee to perform its work for a period of more than one hundred and eighty days. The dismissal under this this event can only take place once the one hundred and eighty day term expires, and does not release the employer from paying any legal or contractual benefits and compensations derived from the illness.
If the employment agreement is terminated without just cause, the employee will be entitled to the payment of severance (indemnification) which is calculated in accordance with the seniority and the salary level.
Please note that before exercising a just cause, the employer has the obligation to allow the employee to exercise his/her right to defence with respect to the conducts that constitute the just cause or should give a notice of fifteen (15) working days before the termination date of the employment agreement (depending on the just cause).
Swiss labour law is governed by the principle of freedom to dismiss. This means that an employer does not need a specific lawful reason for terminating an employment. Nevertheless, upon request of the employee, an employer terminating the employment must state its respective reasons in writing (see art. 335 para. 2 of the Swiss Code of Obligations).
Notwithstanding the principle of freedom to dismiss, Swiss labour law does not allow terminations in bad faith (so called abusive terminations). While such terminations do not invalidate the termination as such, they may lead to a compensation claim of the wrongfully terminated employee in an amount of up to six month’s salary provided that the employee adheres to the respective procedural requirements (see art. 336 et seqq. of the Swiss Code of Obligations).
Yes. Regular full-time employees are usually employed for an indefinite term and the employer’s right of unilateral termination for such employees is strictly limited in Japan. Article 16 of the Labour Contract Act (‘LCA’) stipulates that ‘a dismissal shall, where the dismissal lacks objectively reasonable grounds and is not considered to be appropriate in light of social convention, be treated as an abuse of right to dismiss and invalid’.
Reasonable grounds for dismissal that have been recognised by the courts can be roughly categorised into the following 4 types:
- incompetence or poor performance,
- violation of a disciplinary rule,
- business necessity, and
- failure to join a trade union where union membership is compulsory.
Unless such a reasonable ground exists, any dismissal of an employee is void. Furthermore, even if a reasonable ground exists, the dismissal could still be void if it ‘is not considered to be appropriate in light of social convention’. What this standard entails is that the court would generally only acknowledge a dismissal to be valid if the ground for dismissal is of a serious level and no circumstances exist on the employee’s side that would render the dismissal to be overly severe.
As to fixed-term employment, a stricter rule applies to termination during the term. Article 17 of the LCA provides that, absent a ‘compelling reason’, an employer may not terminate fixed-term employment prior to its expiration.
Compared with such termination, not renewing a fixed-term employment is generally easier. However, in certain circumstances, the non-renewal of fixed-term employment could be nearly as difficult as the dismissal of employees employed for an indefinite term.
Under Article 19 of the LCA, if an employee requests the renewal of a fixed-term contract in either of the following cases, the employer shall be deemed to have accepted such request unless it can prove that there are reasonable grounds not to renew the contract:
- if the contract has been renewed repeatedly, rendering it the equivalent of a contract with an indefinite term, or
- where the employee had a reasonable expectation that the contract would be renewed.
In addition, under Article 18 of the LCA, a provision which came into effect on 1 April 2013, an employee who has been employed by the same employer under a fixed-term contract that has been renewed at least once and has continued in effect for more than five years may request the contract to be converted into a contract with an indefinite term (please see reply to Question 21).
No. The general rule is that an employer is entitled to terminate employment of employees at its discretion and not required by law to specify a reason for termination. However, in this circumstance, an employer has the obligation to make payment of statutory severance pay at the rate set out by the Labour Protection Act 1998 (“LPA”) (which ranges from 30 to 300 days’ wages depending upon length of service) to an employee whose employment is terminated without reason or for reasons other than those set out in Section 119 of the LPA.
Examples of reasons for termination of employment under Section 119 of the LPA include the instance (i) where the employee performs his duties dishonestly or intentionally commits a criminal act against the employer or (b) where the employee intentionally causes the employer to suffer losses.
In the case that the employer needs to rely upon one of the grounds under Section 119 of the LPA to terminate employment without paying any statutory severance pay or to protect the employer from a claim for unfair termination, the termination notice must specify clearly details of the misconduct of the employee and the reasons for termination, otherwise, the employer would be prohibited by law from relying on such reasons and fact when defending a Labour Court claim against the employer.
Indian employment laws do not recognise at-will employment. Termination of employment typically requires to be supported with cogent reasons.
Termination could be on account of misconduct, non-performance, loss of confidence, redundancy etc. Misconduct normally includes insubordination, theft, fraud, or dishonesty in connection with the employer’s business or property; wilful damage to or loss of employer’s goods or property; taking or giving bribes or any illegal gratification; habitual absence without leave; habitual late attendance; habitual breach of any law applicable to the establishment; riotous or disorderly behaviour during working hours at the establishments or any act subversive of discipline; habitual negligence or neglect of work; sexual harassment etc. Redundancy is typically on account of business restructuring or reorganisation, excessive workforce, economic slowdown of business etc.
Employers have the right to dismiss employees at any time without need of any justification or motive.
Every time an employer decides to dismiss an employee (either with or without motive) the employer must pay the worker a dismissal indemnity with the only exception of those cases in which the worker has incurred in what is locally called "notoria mala conducta". This concept, which can be literally translated as evident or manifest misconduct is of legal creation, but the actions which might be considered to be misconduct are a matter of judicial interpretation, and thus, there is no definition or single interpretation. An example of the misconducts could be robbery, violence against the employer or other employees, etc.
The employment relationship can be terminated for the following reasons:
- If both the employer and employee agree to terminate the relationship (provided that the employee’s consent is in writing);
- If the duration of a fixed term contract has expired (and such period has not been extended, whether expressly or implicitly); or
- For unlimited duration contracts, if either the employer or employee gives 30 days prior written notice to the other party, citing a “legitimate” reason.
The employer also has the right to terminate an employment relationship without notice in the following specific circumstances:
- If the employee has assumed a fake identity or nationality or has provided fake qualifications or documents;
- Prior to the end of the probation period;
- If the employee has caused substantial material loss to his employer (but the employer must have notified the Department of Labour within 48 hours of his becoming aware of such acts);
- If the employee has not complied with any safety instruction (as long as such instruction was in writing and displayed prominently at the workplace, or it has been otherwise provided to the employee if he is illiterate);
- Failure by the employee to complete his duties (as long as he has been provided with written notice of the failure and has still failed to rectify it);
- If the employee discloses his employer’s secrets;
- If the employee is convicted of a crime involving honour, honesty or public morals (but the conviction must be final and have been given by a competent court);
- If the employee is discovered to be under the influence of drugs or alcohol during his working hours;
- If the employee assaults his employer, manager or colleague during his working hours;
- If the employee takes a leave of absence, without a valid reason, for more than 20 days (consecutive or otherwise) in any one year, or for more than seven consecutive days; or
- If the employee works for another employer during annual leave or sick leave.
In China, a legal reason provided in labour contract law (LCL) is always required for an employer to terminate an employment relationship, and such reasons are classified into two situations:
A. Unilateral termination due to employee’s fault – Termination is allowed only if:
a. It is proven that the employee fails to meet the recruitment conditions within the probation period; or
b. the employee seriously violates the internal rules and bylaws established by the employer; or
c. the employee causes severe damage to the employer due to seriously neglect his/her duties or seeking private benefits; or
d. the employee simultaneously enters an employment relationship with another employer and thus seriously affects his/her completion of the tasks assigned by the employer, or the employee refuses to make the modifications after his/her employer points out the problem; or
e. the employment contract is fully or partially invalid because the employee forced the employer to sign the contract against its will by means of deception or coercion or by taking advantage of the employer’s difficulties; or
f. the employee is under investigation for criminal liabilities according to the law.
B. Unilateral termination without employee’s fault – Termination is allowed only if:
a. The employee is sick or injured due to a non-work related reason and cannot resume his/her original position after the expiration of the medical treatment period nor any other position arranged by the employer; or
b. the employee is incompetent in his/her position and still fails to meet the position requirements after training or transfer to another new position which his/her employer arranged; or
c. the performance of the employment contract cannot continue due to considerable change of the objective situation on which the contract is based, and both the employer and the employee cannot reach an agreement on amending it after mutual negotiation; or
d. mass redundancy is also allowed when the employer meets the statutory conditions provided in LCL (see question 2).
Employers may terminate an employment with or without notice. The Swedish Employment Protection Act (“EPA”) sets forth that termination of an employment with notice requires objective grounds to be deemed valid.
A distinction of objective grounds is made between termination due to redundancy and termination due to reasons related to the employee personally. Redundancy covers all reasons attributable to the employer, e.g., shortage of work, close down of a business or restructuring due to new technology. Personal reasons are all reasons attributable to the employee, such as the employee’s performance or conduct.
Redundacy is normally considered to be an objective ground and it is easy to prove while the assessments whether an objective ground due to personal reasons is at hand is much more complicated and difficult to determine. A termination due to personal reasons or redundacy will not be considered based on objective grounds if there are other alternatives than a termination available to the employer, such as relocating the employee to other positions in the workplace.
The employer is entitled to terminate an employment without notice, summary dismissal, if the employee is in severe breach of his obligations as an employee. This may be at hand if the employee acts disloyally (e.g. working for competitors during the employment) or commits criminal actions against the employer.
Please note that neither a termination of employment due to personal reasons, nor a summary dismissal can be made based solely on circumstances older than two months.
A termination of employment without objective grounds at hand or summary dismissal, which lacks legal grounds may be declared invalid by a court upon request by the employee.
An employer with 5 or more employees is prohibited from dismissing an employee without ‘just cause’ under the Labour Standards Act (the “LSA”) which is the primary Korean legislation regulating the employer-employee relationship. The LSA does not provide a clear definition of just cause or list reasons for which a dismissal will be held to be for just cause. Guidance is taken from the judicial interpretation. The Korean courts have held that there will be ‘just cause’ where an employer may not continue his/her employment relationship with an employee from generally accepted notions. A material and serious fault which is attributable to an employee may constitute just cause. It is difficult to provide a crystal clear guideline in determining whether an employee has committed a material fault which results in a disruption of the employment relationship.
Examples of common “material attributable faults” are followings;
- misrepresentation or falsification of personal information which was the basis of their hiring;
- frequent or habitual absence without permission;
- illegal activities which may disrupt the employer’s trust, such as forging or altering company’s documents, embezzlement or theft of the employer’s fund;
- disclosure or misuse of the employer’s confidential and proprietary information such as trade secrets;
- breach of non-competition obligations provided in the employment regulations or employment contract;
- promotion of personal benefits by exploiting an employee’s position or authority in the company;
- participation in an illegal labor strike or other illegal collective action;
- causing material loss or damage to the employer intentionally or by gross negligence; and
- material non-compliance with a superior’s legitimate order without a reasonable cause.
Each case has to be decided on its own merits. The court will review the entire circumstances of the dismissal in detail and make judgment whether the dismissal is for just cause. In general, poor performance is not a common “attributable fault” which allows the employer to dismiss its employees. According to court precedent, an employer may dismiss its employees based on poor performance if their work performance is so serious as to fail to achieve the minimum level generally expected in terms of their positions and wage during a long period even though the employer had provided the employee with opportunities to improve his/her performance.
Those employed under a fixed-term contract enjoy the same protection with respect to unfair dismissal during the term of employment under the LSA as those employed under an indefinite-term contract. Employers may terminate the contract during the term only if there is just cause to do so. This, however, only applies during the period of employment and employers are free to refuse to renew the employment contract upon the expiration of the fixed term. A fixed-term contract generally comes to an end automatically on the expiry of the agreed term and without either party needing to serve notice. However, under the Fixed-Term and Part-Time Workers Protection Act (FTPTWPA), if an employer has consecutively employed a fixed-term contract employee for longer than 2 years, the employee would be regarded as being employed for indefinite term, unless such employee falls within exceptions specified in the FTPTWPA. Furthermore, if an employee has formed a reasonable expectation that her employment contract will be renewed, the employer’s refusal to renew the employment contract may be construed as dismissal of the employee for the purposes of the employment protection provisions in the LSA. In short, the employer will need to show that it had just cause for failing to renew the fixed term.
If an employer has less than 5 employees, the employer may terminate an employment contract pursuant to the Korean Civil Code. If the term of the employment contract is indefinite, in general, the employer may terminate the employment contract at any time for any reason with one month’s prior notice. If the term of the employment contract is fixed, the employer cannot terminate the employment during the term, provided however that if there is an inevitable reason, each party may terminate the employment contract during the term of contract.
a. Unilateral termination of an open-ended contract must be justified by “real and serious grounds”. In the absence of such grounds, the employee is entitled to damages for unfair termination in case of litigation. These damages typically amount to a minimum of 6 months of salary. This requirement applies to all types of dismissal, e.g. based on:
- disciplinary reasons (the misconduct must be serious enough);
- professional incompetence (the incompetence must be stated objectively and over a sufficient period of time);
- physical unfitness (the company must follow the unfitness procedure and attempt to redeploy the employee within the company or the group);
- economic grounds (the job elimination must rely on, for example, economic difficulties which are assessed at the level of the group or the sector of activity of the group if any, and the employer must also do his/her utmost to redeploy the employee).
The various / potential pitfalls surrounding dismissal have triggered the implementation and the success of a mutually agreed termination called “rupture conventionnelle”, which eliminates the necessity to provide justification.
Trial periods also offer a timeframe (of one to four months, potentially renewable depending on applicable terms) where unilateral termination may occur without justification.
b. Fixed-term contracts may only be terminated (if not done so, by mutual agreement) on grounds of gross misconduct or physical unfitness. In the absence of such justification, the employer is bound to pay the salaries owed until the end of contract.
Under Austrian law apart from the notification requirement, an employer is legally permitted to terminate the employment contract without being required to precisely specify the reasons for the same. Nonetheless, the Austrian Trade Regulation points out several lawful reasons which give the possibility for the employer to terminate the employment relationship effective immediately, e.g. disloyalty to the employer, non-compliance with the employer’s orders, persistent neglect of duties, incompetence with regard to work, falsified qualification, and/or theft.
General Rule and Qualifications
The general approach is that an employer may terminate an employee at any time without cause, as long as the required notice (or pay in lieu of notice) is provided, and terms of any written employment contract are followed.
There are some important qualifiers to this general rule. For example:
- All jurisdictions have anti-discrimination or human rights legislation that prohibit termination for reasons because of a protected ground or characteristic. There are also anti-reprisal or ‘whistle-blower’ protection rules, for example, under employment standards legislation, securities legislation, labour standards legislation, the Criminal Code of Canada, and occupational health and safety legislation.
- In some jurisdictions, employers are subject to special scrutiny when terminating employees who have a certain amount of seniority. For example, employees of federally-regulated employers with one year of service, provincially-regulated employees in Quebec with two years of service, and provincially-regulated employees in Nova Scotia with 10 years of service can seek reinstatement if terminated without ‘good and sufficient reason’ or ‘just’ cause (as defined in applicable employment standards legislation). These rules are subject to various exceptions.
- Notwithstanding legal theory, typically employers in Canada do give reasons for the termination, even if described in broad, general terms, in order to avoid an inference of an improper motive and to reduce the risk of an employee claiming that the failure to give reasons, coupled with various other unduly insensitive behaviours, entitles the employee to additional moral or other non-economic loss damages.
Termination for Just Cause
While an employer in most jurisdictions does not need a reason in order to lawfully terminate an employee if the required notice is provided, the employer may terminate an employee without notice if there is just cause for termination. Cause involves serious misconduct by the employee. Cause does not include redundancy as a result of a personnel reorganisation, a downturn in business, or a personality conflict. Mere dissatisfaction with an employee’s job performance is not, by itself, sufficient cause for dismissal.
In general, ‘just cause’ is a difficult standard to meet. Whether just cause exists must be determined on a case by case basis, in the context of the overall employment relationship.
During the first six months of an employment contract of indefinite duration, the employer can terminate the employment relationship for any reason whatsoever and without motivation.
After the first six months of employment, the employer must communicate the reasons for dismissal, in writing, if the worker requests him to do. In such case, if the employer does not (timely) respond, he will automatically be liable to pay an amount corresponding to two weeks’ remuneration. Any reason may be given as a motivation for dismissal, whether economical or technical (e.g. restructuring of a company department) or personal (e.g. underperformance). In case of restructurings, temporary work and student contracts, however, workers are not entitled to request the reasons for dismissal.
In addition, the worker may claim that the dismissal is manifestly unfair. A dismissal will only be deemed manifestly unfair if the justification provided is (i) unrelated to the worker’s attitude or performance or to the employer's operational business requirements and (ii) if a normal and reasonable employer would not have taken the same decision. If the dismissal is found to be manifestly unfair, the employer may be ordered to pay an allowance corresponding to 3 to 17 weeks’ remuneration, on top of the normal severance allowance, if any (it being understood that such remuneration includes the monthly salary and extra-legal benefits).
A termination of employment cannot be directly or indirectly based on a criterion protected by Belgian anti-discrimination legislation, failure which the worker may be awarded damages (see questions 11 and 12).
As far as individual dismissals are concerned, Italian Labour Law provides two different kinds of dismissal: the dismissal for “just cause” and the dismissal for “justified reason”.
(i) Dismissal for “just cause”
According to section 2119 of the Italian Civil Code, a permanent employment contract can be immediately terminated without giving any notice or payment in lieu of notice for gross misconduct committed by the employee (defined by Italian law as “just cause”). In particular, section 2119 provides that each of the contracting parties may withdraw without any notice if a cause occurs which does not allow the continuation of the employment relationship (even on a provisional basis).
(ii) Dismissal for a “justified subjective or objective reason”
According to Law 604/1966, as amended by Law 108/1990, an open-ended employment contract may be terminated by the employer for “justified reason”, which can be:
(i) “subjective”, occurring in case of a serious violation by the employee of his/her contractual obligations, but not so serious as to represent a “just cause” for dismissal; or
(ii) “objective”, i.e. a reason concerning the production or the organisation of the working activity in the enterprise.
A dismissal for “subjective” or “objective” reasons does not give the employer the right to terminate the employment contract without notice.
Note that Laws no. 604 of 15 July 1966 and no. 108 of 11 May 1990 exclude ‘justified reason’ for the dismissal of “Dirigenti” (i.e. the highest category of employee, mainly defined in Italy in the applicable collective agreement and corresponding to, for example, top managers or executives). To protect executives against dismissals, almost all National Collective Bargaining Agreements (“NCBA’s”) for executives require that their dismissals need to be ‘fair’. As a general rule, according to Supreme Court’s decisions an executive’s dismissal is considered fair only when it is not based on false, arbitrary, discriminatory, or non-existent reasons.
It should be highlighted that the Legislative Decree no. 23 of 4 March 2015 has introduced new regulations in Italy for unlawful dismissals that apply to all levels of employees - except executives - hired on a permanent basis from 7 March 2015. In particular, the Legislative Decree has introduced a “dual track system” in Italy as in the event of an unfair dismissal, newly-hired employees are subject to the generally less protective regulations recently entered into force, whilst for employees hired before 7 March the prior and more protective labour regulations continue to apply. However, the reasons for termination of employment are the same for all employees.
An employer may terminate a permanent employment contract with notice at any time, provided that the dismissal is based on a genuine and serious cause of termination (“cause réelle et sérieuse”).
Reasons for dismissal must be supported by demonstrable and explicit facts. Such facts may include:
- Reasons connected with the employee’s aptitude;
- Reasons connected with the employee’s conduct;
- Reasons arising from the operating needs of the business, establishment or department.
The Labour Code does not provide for either a definition of the genuine and serious cause, or a list of situations that should be considered as such. The content and scope of this notion has been defined by case law. As a general rule, the term “genuine” means that the cause must be exact, accurate and demonstrable, and the term “serious” means that the cause must be of some significance.
If the employee challenges the grounds provided for by the employer in support of the dismissal, the onus is on the employer to prove not only the factual circumstances but also their validity and seriousness.
A permanent contract may also be terminated with immediate effect for gross misconduct. Gross misconduct is considered to be any conduct that immediately and unequivocally makes it impossible to continue the working relationship.
Generally, the Protection Against Unfair Dismissal Act applies. It states that if an employee has worked for the employer longer than six months, the employer can only ordinarily terminate the employment relationship for reasons relating to either the employee’s person (e.g long-term illness or frequent short illnesses), misconduct (e.g misconduct at the workplace, theft or fraud to the employer’s detriment), or operational reasons (e.g reduction of number of jobs due to restructuring of business).
Only in small businesses with less than ten full-time employees, no reason is necessary to ordinarily terminate the employment relationship (ordinary dismissal) as long as the dismissal is not arbitrary.
An immediate dismissal without notice by the employer (extraordinary dismissal or dismissal for cause) can only take place when circumstances render it unreasonable to expect the employer to continue the employment relationship until the termination period has elapsed. This can be the case if the employee has committed a serious breach of contract.
An employer must have a justified cause to terminate an employment relationship. That cause should be set out in article 47 of the Federal Labour Law (FLL), which describes the justified causes for termination as follows:
- The employee deceives the employer, or when applicable, the union that suggested him or recommended him, with false certification or references that attribute qualifications, aptitudes, or abilities to the employee that he lacks. This reason for termination will elapse after the employee has rendered services for thirty days;
- The employee in performance of his job is not honest or honorable, commits violent acts, threatens, commits injuries on the employer, his family, the management or administrators of the company or establishment, or against clients or suppliers of the employer, except when provoked or in self-defense;
- The employee commits against one of his co-employees one of the acts detailed in the previous clause, if as a consequence the discipline and order of the workplace is affected;
- The employee commits, outside the workplace, against the employer, his family or the management or administration, any of the acts referred to in clause 2, if they are so serious that it makes the continuance of the employment relationship impossible;
- The employee intentionally causes material damage during the discharging of his duties to the buildings, machinery, instruments, raw materials, or any other assets related to the job;
- The employee negligently causes the damages mentioned in Section 5 provided that they are serious, and that negligence is the sole cause of the damage;
- The employee compromises, by his imprudence or inexcusable carelessness, the safety of the establishment or the people that are present inside it;
- The employee commits immoral acts, harassment or sexual harassment in the establishment or place of work;
- The employee reveals industrial secrets or makes known private personal matters, the disclosure of which damages the business;
- The employee has more than three absences in a period of thirty days without permission of the employer or a justifiable excuse;
- The employee disobeys the employer, without justified cause, in the course or scope of the contracted work.
- The employee refuses to adopt preventive measures or to follow the procedures established for avoiding accidents and illnesses;
- The employee arrives at work intoxicated or under the influence of some narcotic or intoxicating drug, except in the latter case, where there is an existing doctor’s prescription. Before beginning his service, the employee must bring this to the attention of the employer and present the prescription from the doctor;
- Any implemented sentence that imposes prison time on the employee that prevents him from completing his employment relationship;
- Those issues similar to those established in the previous sections that would have serious consequences.
14Bis. Lack of documents required by laws and regulations necessary for the provision of services, when the responsibility of the worker, and in excess of the period specified in Section IV of Article 43.
For administrative or salaried employees, there is a special cause for termination, referred to in article 185, when there is a sufficient and reasonable motive of loss of trust in the employee’s work.
Employees engaged in sales can be terminated with cause, if there is an unjustified, important and constant reduction in sales.
In order to lawfully terminate an employment relationship with just cause, the employer must inform the employee in writing of the date and cause or causes of the termination. This document must be brought to the attention of the employee, or directly to a Labour Board, within five days of the termination, providing the Labour Board with the address the employer has on file and requesting they notify the employee.
The lack of a written notification to the employee or the Labour Board will alone be enough to consider the separation unjustified, and consequently, nullify the dismissal.
According to the Finnish Employment Contracts Act, an employer has a right to terminate an employment only if the reasons behind the termination are weighty enough. The Act separates on one hand individual grounds that relate to the conduct and performance of an individual employee and on the other hand collective grounds that typically relate to the financial or business situation or reorganisation of the company.
According to the Act, the employer may have a legal right for termination on individual grounds if the employee neglects or seriously breaches the duties that are fundamentally relating to his/her employment. However, the law does not set a list of acts or omissions that can always be considered as legal grounds for dismissal. Sufficient grounds for termination typically relate to the employee's lengthy and unauthorised absence from work, abuse of alcohol or drugs, dishonesty, improper behaviour, and corresponding concrete breaches of obligations arising from the employment contract or employment legislation. The employee's poor performance is as a more abstract construction legally more challenging, as it rarely refers to an actual breach of any specific obligation. The adequate grounds vary depending on the employee's duties and position.
An employer is generally entitled to make an employee redundant on collective grounds, if work has diminished or been materially reduced due to economic or production-related reasons, or due to the restructuring of the enterprise and the reduction of work is permanent. The reduction of work may result also from the employer's own business decisions, like the reorganisation of the company. A precondition for terminating an employment contract on economic or production-related grounds is that the employee, with respect to his skills, cannot reasonably be repositioned or retrained within the enterprise.