Termination of employment

Last updated 29.9.2023

An employment relationship can be terminated either by dismissal, mutual agreement or cancellation. Sometimes an employment relationship can also be terminated on special grounds.

Dismissal

If an employment relationship is terminated, it will not end until the period of notice has elapsed. During the notice period, the normal rights and obligations of employment still apply. As a rule, an employee has the obligation to work during the notice period and the employer is obliged to pay the employee wages for the notice period.

An employee does not need grounds for terminating their employment contract. If an employer wants to dismiss an employee, the employer must have a proper and weighty reason in accordance with the Employment Contracts Act. The grounds for termination can either be employee-related reasons or the employer’s production-related and financial reasons.

Fixed-term employment contract

As a rule, a fixed-term employment contract is terminated without separate termination at the end of an agreed working period or after an agreed, specific piece of work has been concluded. If only the employer has information about the end date of the fixed-term employment relationship, the employer should also inform the employee of the date without delay after having received the information. Sometimes fixed-term contracts include a termination clause, i.e. a so-called mixed agreement.

Termination agreement

The employee and employer may also terminate the employment relationship by mutual agreement. The initiative often comes from an employer who does not have grounds under the Employment Contracts Act for terminating the employment relationship. However, in order for the termination agreement to be valid, the employee’s consent is also required. The termination agreement does not require proper and weighty grounds in accordance with the Employment Contracts Act.

Cancellation

An employer may cancel a fixed-term employment contract to end with immediate effect only for very weighty reasons. The right of cancellation applies to both fixed-term contracts and contracts that are valid indefinitely. The employee also has the right to cancel the employment contract if the employer violates or neglects its obligations so seriously that the employee cannot reasonably be expected to continue working even for the duration of the notice period. Such a situation could arise, for example, if occupational safety had been significantly compromised due to negligence. The right of cancellation lapses if cancellation has not been carried out within 14 days of being informed of the grounds for cancellation.

Cancelling an employment contract during a trial period

A trial period of up to six months may be agreed upon at the beginning of the employment relationship. In fixed-term contracts, the trial period may not exceed half of the duration of the contract, but no more than six months. The purpose of the trial period is to find out whether the employee is suitable for the work offered to them and whether the duties match the contract. During the trial period, the employment contract can be cancelled with immediate effect by both parties without citing any grounds. However, the cancellation of an employment contract on the basis of the trial period may not be based on discriminatory grounds indicated in legislation, or on grounds which are otherwise irrelevant with regard to the purpose of the trial period. For example, the employer’s production-related and financial difficulties are not grounds for cancelling employment during the trial period..

Special grounds

The Employment Contracts Act contains a few special grounds for terminating an employment contract. Special grounds for terminating an employment contract include transfer of business (i.e. acquisition), corporate restructuring and bankruptcy and death of the employer.

Invalidity of contracts

Provisions on the invalidity of contracts are laid down in Chapter 3 of the Contracts Act. According to the act, a contract is invalid if:

• someone has been coerced to conclude the contract by physical violence or a threat involving imminent danger to life or health
• it has been brought about by fraudulent induction
• someone has taken advantage of another person’s distress, lack of understanding, imprudence or position of dependence on them to acquire or exact a
  benefit which is obviously disproportionate to what they have given or promised
• an expression of a person’s will, due to a misprint or other error on their part, differs from what they intended, if the recipient knew or should have known of the misprint or error
• it was entered into under circumstances that would make it incompatible with honour and good faith for anyone knowing of those circumstances to invoke the transaction and the person to whom the transaction was directed must be presumed to have known of the circumstances.

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