Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Notwithstanding probation periods and not renewing a fixed-term or special type of employment agreement (eg, appointment on assignment), employers may only unilaterally dismiss employees with cause, such as for disciplinary reasons (eg, an employee breaching their employment agreement) or an objective cause related to the employer (eg, bankruptcy or insolvency).

Disciplinary cause dismissals

A disciplinary cause dismissal occurs when an employee commits a serious offence against their employer. However, the actual dismissal can only occur after the employer’s disciplinary procedure is followed.

Law No. 7/15 of 15 June 2015 (the General Labour Law) details a list of breaches considered to be serious disciplinary offences.

Objective cause dismissals

Objective cause dismissals occur when economic, technological or structural reasons require the employer to reorganise, convert, reduce or close its business activity, consequently requiring it to reduce or otherwise transform its workforce.

An employer that intends to dismiss employees in this manner must inform the General Labour Inspectorate and follow a procedure laid out by the General Labour Inspectorate.

Employees dismissed for objective cause are entitled to compensation based on their number of years of service.

Notice requirements

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Disciplinary cause dismissals

A disciplinary dismissal may only be imposed following a disciplinary procedure. These formalities are laid out in the General Labour Law, along with deadlines that the employer must comply with and the provision that the employer must provide the employee with the opportunity to put forward a defence.

If an employer fails to comply with the legal deadlines, the disciplinary procedure may be determined to be invalid and the employer could be ordered to reinstate or indemnify the employee.

Objective cause dismissals

In cases of dismissal for objective cause, employers must inform and justify this decision to the General Labour Inspectorate.

If the General Labour Inspectorate does not inform the employer of its opposition to the dismissals, the employer may notify the employee or employees of their dismissal.

The General Labour Inspectorate has 15 business days in which to object to an individual dismissal and 22 business days to object to the dismissal of more than 20 employees (collective dismissal). 

Employers must give 30 days of notice for individual dismissals and 60 days of notice for collective dismissals. Failing to respect these notice periods obliges the employer to pay the dismissed employee or employees for working the period.

Dismissal without notice

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

An employer and employee may mutually agree to terminate an employment agreement at any time, without the need for prior notice or payment of compensation.

During a probation period, an employer may terminate an employment agreement without cause and without providing compensation.

No prior notice is needed to terminate an employment agreement with a term shorter than three months.

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

Employees are entitled to compensation in cases of dismissal for objective cause.

Employees receive 100 per cent of their base salary for each of their first five years of service and 50 per cent of their base salary for each additional year.

If a dismissal for objective cause is found to be unfounded, the employee is entitled to:

• reinstatement; or
• an indemnity payment of 50 per cent, 40 per cent or 20 per cent (depending on the size of the company) of their base salary multiplied by their years of service, plus six, four or two months (depending on the size of the company) of wages due between the date of dismissal and it being declared unfounded or the employee beginning a new job.

If a disciplinary dismissal is considered void (eg, when a breach of the disciplinary procedure occurs), the employer must:

• reinstate the employee; and
• pay up to six, four or two months (depending on the size of the company) of wages due between the date of dismissal and it being declared void or the employee beginning a new job.

If an employee disagrees with the grounds for disciplinary dismissal and the dismissal is declared unfounded, the employer is required to:

• reinstate the employee; or
• make an indemnity payment to the employee of 50 per cent, 40 per cent or 20 per cent (depending on the size of the company) of their base salary multiplied by their years of service (with a minimum of three months’ worth of salary), plus up to six, four or two months (depending on the size of the company) of wages due between the date of dismissal and it being declared unfounded or the employee beginning a new job.

Employees have a right to severance pay in the event of their employer’s bankruptcy, insolvency or dissolution. When ascertaining an employee’s length of service for severance payment purposes, a fraction of a year equal to or higher than three months is considered to be one year.

Procedure

Are there any procedural requirements for dismissing an employee?

There are no procedural requirements around dismissing an employee during a probation period or not renewing an employment agreement with a term, other than informing the employee in writing.

An employer must notify the General Labour Inspectorate in writing if it intends to dismiss an employee or employees for objective cause and justify the dismissal.

If the General Labour Inspectorate considers an individual’s dismissal to be unfounded or the grounds for dismissal to be insufficient, it has 15 business days in which to oppose the dismissal or request additional information from the employer. If the General Labour Inspectorate does not respond to the employer’s notification or oppose the dismissal within this period, the employer may serve the employee with a 30-day notice of termination.

The General Labour Inspectorate has 22 business days in which to respond to an employer notifying it of its intention to execute a collective dismissal. If the General Labour Inspectorate does not respond to the employer’s notification or oppose the dismissal within this period, the employer may serve the employees with a 60-day notice of termination.

A dismissal for a disciplinary cause can only follow a disciplinary procedure comprising different phases that provide employees with the right to defend themselves, and meet the legal formalities for the decision to be valid and communicate the disciplinary measure.

Employee protections

In what circumstances are employees protected from dismissal?

The following employees enjoy special protection against disciplinary dismissals:

• union leaders, union delegates or members of employee representative bodies legally exercising trade union activity;
• former soldiers or war veterans;
• minors; and
• those with a degree of incapacity equal to or greater than 20 per cent.

Employees who have given birth within the previous 12 months (ie, covered by the maternity protection regime) may not be dismissed for any reason, except in the case of a disciplinary offence that makes it immediately and practically impossible to maintain the employment relationship.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

A collective dismissal may be conducted if an employer can satisfy the General Labour Inspectorate that there are economic, technological or structural reasons that require the dismissal of at least 20 employees.

An employer must notify the General Labour Inspectorate of its intention to execute a collective dismissal. Employees will receive 60 days prior notice of termination if the General Labour Inspectorate does not oppose the dismissal.

Employees with employment agreements subject to a collective dismissal are entitled to compensation totalling 100 per cent of their base salary for each of their first five years of service and 50 per cent of their base salary for each subsequent year of service.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Class or collective actions are not expressly allowed in employment disputes. However, if the grounds and causes of action of a group of employees are the same, they may pursue their claims under the same action.

Trade unions may also act to enforce employees’ rights.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

To apply for a retirement pension, an employee must be 60 years old and have provided at least 180 months of contributions to the social security system. 

The retirement age for women can be reduced by one year for each child they have, up to a maximum of five years.

As age is not the only requirement for accessing a retirement pension, an employer may not impose retirement on an employee until they have made the required minimum social security contributions.