Termination of an indefinite-term employment contract by the employer: Procedures and conditions

Table of Contents

Introduction

The termination of an indefinite-term employment contract by the employer is subject to specific rules under labor law, and it is crucial for the employer to carry out this process correctly. The Labor Law No. 4857 regulates the aspects that the employer must consider during the termination process.

Conditions and Reasons for Termination

If a workplace employs 30 or more workers and the employee whose contract is to be terminated has at least six months of seniority, the employer is required to provide a valid reason. Valid reasons may arise from the requirements of the job or workplace or may relate to the employee’s performance or conduct. Termination based on a valid reason does not result in the employee losing their entitlement to severance pay, provided that they meet the necessary conditions for such entitlement.

However, the employer always retains the right to terminate the employment contract for just cause, beyond a valid reason. Just cause may arise in cases such as the employee’s health condition, behavior contrary to the rules of ethics and good faith, or failure to fulfil the job requirements. In workplaces with fewer than 30 employees, the employer is required to provide just cause.

Termination Process

The steps the employer must follow during the termination process are as follows:

  • If the termination is based on a valid reason, it is mandatory to obtain the employee’s defense. However, in cases of immediate termination for just cause, obtaining a defense is not required.
  • The termination notice must be made in writing and the reason for termination must be clearly stated.
  • The termination notice must be delivered to the employee.

Mediation Process

If the employer terminates the employment contract without a valid or just reason, or if the employee disputes the stated reason, and there are 30 or more employees employed by the employer, the employee may file a lawsuit for reinstatement. However, before filing a lawsuit for reinstatement, the employee is required to apply for mediation. Mediation is a precondition for reinstatement claims. The employee must apply to a mediator within one month from the date on which the notice of termination was served.

During this process:

  • The parties attempt to resolve the dispute outside of court.
  • If no agreement is reached, the employee may file a reinstatement lawsuit within two weeks from the date of the mediation final report.

Mediation offers both the employee and the employer the opportunity to avoid court costs and lengthy legal proceedings. If no agreement is reached, the option to pursue legal action remains open.

Employee’s Rights and Legal Remedies

If the court determines that the termination was not based on a valid reason:

  • The employee’s reinstatement is ordered.
  • Compensation equivalent to up to four months’ wages is awarded for the idle period.
  • If the employer does not reinstate the employee, an additional compensation of four to eight months’ wages is paid.

Additionally, in cases of termination based on a valid reason:

  • If notice periods (2 to 8 weeks, depending on seniority) are not observed, the employer must pay notice compensation.
  • An employee with at least one year of service is entitled to severance pay.

However, if the employment contract is terminated for just cause, the employer is not obligated to pay any compensation.

Employer’s Obligations After Termination

The employer’s responsibilities following termination include:

  • Notifying the Social Security Institution (SGK) of the employee’s termination and delivering the notification to the employee.
  • Reclamation of the work materials provided to the employee by the employer.
  • Providing a service certificate upon request.
  • Obtaining a release agreement no earlier than one month after the termination of the employment contract.
  • In cases of mass layoffs, notification to the Provincial Directorate of the Employment and Labor Agency is mandatory.

Conclusion

The termination of an indefinite-term employment contract by the employer must be carried out meticulously within the framework of the Labor Law No. 4857 and related regulations. Providing a written notice, clearly stating a valid or just reason, obtaining the employee’s defense, and adhering to legal notice periods and notification procedures reduce the likelihood of future legal issues for the employer. Seeking support from a lawyer specialized in labor law is beneficial for managing this process effectively.