Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?
Employment & Labour Law (2nd Edition)
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.
An employer can lawfully terminate the employment relationship with or without a reason. But, depending on the reason, the employer may be liable to pay compensation to the worker.
Employees (but not the broader category of “workers”) who meet the minimum qualifying period of employment of two years or more are protected from unfair dismissal. To avoid liability for unfair dismissal, an employer can only dismiss a protected employee for one of five fair reasons set out in the Employment Rights Act 1996. The five fair reasons are: (1) the capability or qualifications of the employee; (2) the employee’s conduct; (3) redundancy; (4) illegality; and (5) “some other substantial reason”. A dismissal for one of these reasons is potentially fair but, to avoid liability for unfair dismissal, the employer must also ensure that they are acting reasonably in treating the reason as sufficient for dismissal of that employee and that they follow a fair dismissal process.
Employees are protected from day one of their employment from automatically unfair dismissal. Dismissals which are classified as automatically unfair include dismissing an employee for asserting certain legal rights, where the employee has made a protected disclosure (i.e. they are a whistleblower) and where the employee is dismissed for reasons connected to pregnancy and/or childbirth.
An employer who dismisses an employee for a reason which is directly or indirectly discriminatory, based on the characteristics protected from discrimination under the Equality Act 2010, will be liable for discrimination.
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 the 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, 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 (or pay in lieu of notice) 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.
In order to lawfully terminate an employee, the employer must have either just or authorized causes. This is anchored on the principle of the security of tenure which is not only statutorily provided, but is constitutionally enshrined.
The following are just causes for termination:
(a) Serious misconduct or willful disobedience;
(b) Gross and habitual neglect of duties;
(c) Fraud or willful breach of trust;
(d) Commission of a crime or offense by the employee against his employer, the employer’s immediate family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
On the other hand, the following are authorized causes for termination:
(a) Installation of labor-saving devices;
(c) Retrenchment to prevent losses;
(d) Closure or cessation of business; and
(e) Disease not curable within six months as certified by competent public authority, and continued employment of the employee is prejudicial to his health or to the health of his co-employees.
As a general rule, an employer is entitled to terminate an employee's employment for legitimate reasons, which are not in breach of any laws (such as anti-discrimination laws), collective agreements (if applicable), workplace practices and policies, etc. The following reasons may be classified as legitimate reasons for termination of employment: poor performance, poor skills, poor attitude, redundancies as a result of a financial situation or restructuring, business closure, etc. An employer's right to terminate an employee's employment is also subject to the employer performing a hearing procedure, providing prior written notice and exercising good faith when making the final decision to dismiss an employee.
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, restructuring due to downsizing or restructuring due to new technology. Personal reasons are all reasons attributable to the employee, such as the employee’s performance or conduct.
Redundancy 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 redundancy 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.
Under statute, Irish employees with more than one year’s continuous service (inclusive of their notice period entitlement) are protected against the termination of their employment without fair reason (an “unfair dismissal”). In certain circumstances, the employee does not require one year's continuous service to be protected under statute, for example dismissal by reason of unlawful discrimination.
The following are the potentially fair reasons for the termination of an employment relationship:
- the capability, competence or qualifications of the employee;
- the conduct of the employee;
- the redundancy of the employee;
- the employer being prohibited by statute (whether impacting the employer or the employee) from employing the individual;
- other substantial grounds justifying the termination.
However, employers should be aware that a fair reason alone will not ground the lawful termination of an employment relationship under statute. As well as having a fair reason, the employer must follow a fair and proper procedure before concluding that the employment relationship is to be terminated.
An employee may potentially restrain the termination of his or her employment relationship by way of injunction including where:
- the person purporting to effect the termination does not have the corporate authority to do so;
- the contract is not terminated in accordance with its terms; or
- the right to fair procedures has been breached.
In circumstances where an employee's employment is terminated allegedly on grounds of having made a protected disclosure (whistleblowing), an employee can seek to restrain such termination by way of a statutory injunction if they can demonstrate substantial grounds to contend that the termination of their employment is on grounds of having made such a disclosure.
Under contract, an employer can lawfully terminate a contract of employment by providing an employee with his or her notice entitlement only, in the absence of any reason for the termination. This type of termination is referred to as a “no fault” dismissal. However, the employee may still be protected against unfair dismissal under statute (as explained above) and, even if the employee is not protected under statute, implementing a "no fault" dismissal is not without substantial risk of the employee seeking to restrain the termination by application for an injunction. It is advisable in specific circumstances only once an employer has sought legal advice.
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.
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 (please refer to question 21 regarding the potential amount of damages the employer may be ordered to pay in case of unfair dismissal).
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 in France);
- economic grounds (the job elimination must rely on, for example, economic difficulties which are assessed at the level of the group or of the sector of activity of the group to which the company belongs, but only on the French territory, and the employer must also do his/her utmost to redeploy the employee).
From a formal perspective, in order to help companies to secure the dismissal procedures they may enforce, the “Macron laws” (ordonnances Macron) dated September 22, 2017 and corresponding decrees have published various templates of dismissal letters that employers can use.
Moreover, the Macron laws provide that, following the notification of termination, the employer has 15 days to provide further details to the concerned employee on the grounds of dismissal, while the employee also has 15 days to ask the employer for additional explanations.
The potential pitfalls surrounding dismissal have triggered the implementation and the success of a mutually agreed termination called “rupture conventionnelle”, which requires the employee’s agreement and validation by the labour administration but 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 unilaterally terminated by the employer 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.
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.
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 the employee’s fault (‘Termination for cause’)– 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 neglecting 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 resolve such concerns after his/her employer points them out; 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 without cause’) – 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 a considerable change to 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).
Under national collective bargaining agreement (CBA) nr. 109 on justified dismissal, the employee engaged for an indefinite term can ask the concrete reasons of his dismissal.
If the employer does not provide these reasons within 2 months of the express demand of the employee, he will have to pay an indemnity of 2 weeks’ remuneration. Moreover, if the dismissal is considered as ‘manifestly unreasonable’ by the judge, he can condemn the employer to an indemnity from 3 to 17 weeks’ remuneration entirely at his discretion. A ‘manifestly unreasonable’ dismissal is a dismissal (i) based on reasons not related to the ability or behaviour of the employee or which are not related to the necessity of the business and (ii) that would not be decided by a reasonable and prudent employer.
The employer must be careful with the reasons linked to the ability of the employee, because of the risk of discrimination if the dismissal is linked to the health status of the employee.
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.
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.
Swiss labour law is governed by the principle of freedom to dismiss. This means that – as a matter of principle – an employer does not need a specific lawful reason for terminating an employment. Only in case an employer wants to terminate an employment with immediate effect, ie without observing a notice period, the employer has to prove that it has good cause to do so. Generally, good cause is any circumstance rendering the continuation of employment unconscionable (see art. 337 of the Swiss Code of Obligations).
In any case, upon request of the employee, an employer terminating the employment must state its respective reasons in writing, though (see art. 335 para. 2 and art. 337 para. 1 of the Swiss Code of Obligations).
Moreover, 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 abusively 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).
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:
(a) Managers or executives with a basic monthly salary of more than S$4,500;
(c) Domestic workers; and
(d) 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:
(a) Workmen (doing manual labour) with a basic monthly salary not exceeding S$4,500; and
(b) 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.
No, within the first 90 days of employment if the employment agreement contains a valid trial period.
In all other circumstances an employer must have a justifiable reason to lawfully terminate the employment relationship. The employer must also follow a fair and reasonable process in doing so.
Termination may be without notice (summary dismissal) if the employee commits serious misconduct. Generally, serious misconduct is an act or omission which destroys or significantly undermines the trust and confidence which underpins the employment relationship. Serious misconduct may include dishonesty (e.g. theft or fraud), violence, gross negligence or gross insubordination.
Where the employee’s action or omission involves a lesser level of misconduct, or poor performance then the employer must follow a formal warning or performance management process before termination can occur.
Other grounds for the termination of employment include abandonment, medical incapacity, incompatibility, redundancy and frustration of contract.
The question of whether a dismissal or other disciplinary matter action was justified is determined by reference to section 103A of the Employment Relations Act 2000. The test requires consideration of whether an employer’s actions, and how the employer acted were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred. The employer must be able to show that it had both substantive grounds for the decision to dismiss and have followed a fair process to arrive at its decision to satisfy the test.
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:
- “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
- “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 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;
14B. 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.
- Those issues similar to those established in the previous sections that would have serious consequences.
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.
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.
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 terminate the employment relation on the basis that the probationary period was unsuccessful, without notice and termination severance). Dismissals can 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 adaptation 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 by law from the above calculations).
- 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.
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).
In terms of the dismissal of an employee, the governing legislation would be the Industrial Disputes Act 1947 (“ID Act”) as well as specific provisions of the Industrial Employment (Standing Orders) Act 1946 (“IESO Act”), Shops and Establishment Act of the relevant state (“S&E Act”). For an employee to whom the aforesaid Acts do not apply, the termination of such employee other than for misconduct, would be ‘termination simpliciter’ and will have to be guided by the terms of his employment as mentioned under the employment agreement, the principles of natural justice and judicial precedents. Indian labour legislation does not envisage a ‘hire and fire’ policy. In case of misconduct, all dismissals must follow a proper procedure requiring an enquiry to be held. Further, the employee must be given a reasonable opportunity to be heard in the process of the enquiry. The courts stresses on the right to cross examine and in cases where the enquiry has been vitiated or has followed unlawful procedure, courts have had no hesitation in reinstating the employee to his post.
The decision of an employer is liable to be challenged before an Industrial Tribunal and further before the High Court and Supreme Court as well. Courts may grant relief such as reinstatement with back wages or compensation in lieu of reinstatement. Loss of confidence in the employee, e.g. through his conduct such as habitual dishonesty, has been cited as one of the instances when reinstatement is not possible. Misappropriation or theft are also valid grounds for a dismissal of an employee. Also, unlawful industrial action such as ‘go slow’ will be valid grounds for a dismissal.
If a termination simpliciter is challenged in a court of law, courts are free to determine if such employee is being victimised or punished or being discharged on account of his misconduct. Accordingly, courts are permitted to identify if the employer has given such employee a fair hearing in accordance with the principles of natural justice, prior to effecting his termination. In the absence of such fair hearing, the court is free to set a termination order aside, and reinstate the employment of an employee whose services have been terminated.