How to terminate an employment relationship? Always in writing and based on the proper grounds
Termination of an employment relationship is one of the most problematic employment law issues. Especially notice of termination served by employers often give rise to disputes that may result in an employee challenging the validity of the notice at court and the employer being required to prove that the notice of termination was served in compliance with the provisions of the Labour Code. Let us take a closer look at four basic ways to terminate an employment relationship and remind you of the rules relating to employment termination. Do you know, for example, which employees are protected from being terminated by notice and when severance payment may or must be provided to an employee?
1. Agreement on termination of employment relationship
Although termination of an employment relationship by agreement is the least disputable issue and in general, both parties are less likely to challenge the validity of the agreement, the employer should always make sure that the basic requirements for termination an employment relationship by agreement have been met. The agreement on termination of employment relationship does not have to specify the grounds for termination (although in certain situations it is recommended to do so, e.g. in case a severance payment is to be provided to employee, see below) but if the grounds are specified, it must be done correctly and precisely. If the grounds for employment termination are specified incorrectly, the agreement on termination of an employment relationship may be invalid even though the specification of grounds is not mandatory in this agreements. Agreement on termination of an employment relationship, the same as with other documents relating to the termination of employment relationship, must be made in writing.
2. Termination of employment relationship during probation period
Do not forget that an employment relationship may only be terminated during the probation period if the probation period is agreed. The maximum probation period is three months, or six months in the case of managing employees. During the probation period, an employment relationship may be terminated without giving a reason or for any reason. Nevertheless, if the grounds for termination of employment during the probation period are specified, it is necessary to specify the grounds correctly and precisely, similar to termination of an employment relationship by agreement (otherwise, the termination of an employment relationship may be invalid).
Some employees are subject to statutory protection against termination that applies even during the probation period. This is the case of employees that are temporarily unable to work (or are quarantined). In such a situation, the employer may not terminate the employment relationship within the first fourteen calendar days of the employee’s temporary incapacity to work (or quarantine).
3. Termination of employment relationship by notice
While an employee does not have to specify reasons for giving notice (or may give notice for any reason), an employer may serve a termination notice to employee only based on grounds specified by legal regulation.
The grounds based on which an employer may serve a termination notice to an employee can be divided into three groups:
1. Organisational reasons
These reasons include dissolution of employer, relocation of employer or employee’s redundancy (based on the employer’s decision on organisational changes).
2. Incapacity to perform work on the part of an employee
These reasons may include an accident at work or an occupational disease, long-term lack of medical fitness or the fact that an employee no longer meets the requirements or qualifications to perform his/her work.
3. Breach of obligations on the part of an employee
There are three types of breaches (divided intensity): continuous less serious breaches, serious breach and especially gross breach of obligations (or a final verdict that the employee committed a criminal offence). In practice, it may be difficult to determine the type (or intensity) of the breach of an employee’s obligation and for this reason, notices served based on the grounds of breaching obligations are very often subject to disputes, which is apparent from a large number of judgments of Czech courts regarding this matter.
An employment relationship terminates after the expiry of a notice period, which starts on the first day of the calendar month following the delivery of the notice. The notice period must be the same for employers and employees and must be at least two months (its extension is only possible based on an agreement between an employer and an employee). As in other alternatives of employment termination, the notice must be made in writing. If there is a trade union active at the employer, the notice must be first consulted with the trade union representatives (or approved by them if the employment relationship of a member of a trade union body is to be terminated).
When is an employer not allowed to serve a notice to an employee?
An employer may not serve a notice to an employee during the so-called protective period, i.e. in the period of:
- Incapacity to work, spa treatment or in-patient treatment;
- Military exercise or active service;
- Full release to hold a public office;
- Temporary incapacity to work at night (applicable to employees working at night); and
- Providing long-term care or caring for a child of up to 10 years of age.
Neither notice of termination nor immediate termination may be applied to:
- Pregnant female employees;
- Female employees on maternity leave; and
- Employees on parental leave.
Please note! If an employee was served a notice before the start of a protective period and the notice period would expire during the protective period, the protective period is not included in the notice period (employment relationship thus terminates only after the remaining portion of the notice period following the termination of the protective period expires unless the employee states that he/she does not insist on the employment relationship being extended).
4. Immediate termination of employment relationship
Immediate termination of an employment relationship is only possible in exceptional situations specified in the Labour Code. Both the employer and employee may immediately terminate the employment relationship only based on the reasons specified in the Labour Code. The specification of reasons for immediate termination must always include the precise description of facts. Immediate termination must be made in writing and must be consulted with the trade union if there is any trade union active at the employer (or approved by the trade union if employment relationship of a member of a trade union body is to be terminated).
Both the employer and the employee have two options to immediately terminate an employment relationship.
Reasons on the part of an employer:
- Especially gross breach of an employee’s obligations (such as intentional damage to the employer’s assets, pretence of work, etc.). In practice, it may be difficult to determine whether the breach of obligation on the part of the employee is especially gross (i.e. whether there is the required intensity); therefore immediate terminations of employment relationships based on these grounds very often result in legal disputes. We thus recommend that you pay special attention to the appropriate assessment and specification of the reason for immediate termination.
- A final verdict that the employee committed an intentional criminal offence and is sentenced to an unconditional imprisonment for a period exceeding a year, or a final verdict that the employee committed an intentional criminal offence in connection with performance of work and is sentenced to an unconditional imprisonment for a period of at least six months.
Reasons on the part of an employee:
- Failure to pay wages or salaries (or compensation thereof) within 15 days after the maturity period as defined in the Labour Code.
- An employee cannot continue performing work without posing a serious threat to his/her health and the employer does not allow the employee to perform other suitable work.
In practice, employers must pay severance to employees most frequently if a notice is served for organisational reasons (employer’s dissolution, employer’s relocation or employee’s redundancy). However, there are also other situations in which an employee must be provided with a severance payment, e.g. if the employee’s employment relationship is terminated as a result of an accident at work or an occupational disease.
What is the amount of severance payment if termination notice is served for organisational reasons? If an employment relationship lasts less than a year, severance payment of at least one average monthly salary is provided. An employee is entitled to at least two average monthly salaries if he/she worked at least a year but less than two years. At least three monthly salaries are provided to employees whose employment lasted at least two years. If an employee’s employment comes to an end as a result of an accident at work or an occupational disease, the employee is entitled to severance pay of at least twelve times his/her monthly pay.
Please note that the above-mentioned amounts of severance payments are only minimal amounts stipulated by law. An employer is free to provide leaving employees with higher severance payment or to provide the payment even if not required by legal regulations (in the latter case, severance payment will be subject to social security and health insurance contributions).