Termination indemnities (commonly referred to as payments in English) to be paid in the case of the termination of an employment contract by the employer.
How and when can an employer terminate an employment contract?
Employment contracts for a definite duration or a specific task
Employment contracts for a definite duration or a specific task automatically expire at the end of the contractual term or when the task has been achieved. No indemnity (payment) is due in such a case.
Employment contracts entered into for a specific task or a definite duration, may not be terminated by either party at any time except in case of serious cause.
If the employer terminates the employment contract, he has to pay an indemnity equal to the remuneration that should have been paid until the end of the employment contract. This indemnity may not however be higher than double the indemnity that should have been paid if the contract had been for an indefinite period.
Employment contracts concluded for an indefinite period
Basic rules:
Employment contracts concluded for an indefinite period may be terminated by either party at any time (except for the special category of protected workers, see section II.4 ).
The terminating party must however give the other party a notice of termination in writing and in the appropriate language.
If the employer fails to give adequate notice, he is liable to pay an indemnity equal to the salary and benefits (including holiday pay, bonus, thirteenth month...) that the employee would have been entitled to during the adequate period of notice, based on the last monthly salary. The same rule applies for the employee.
Notice period given by the employer:
a) Manual workers (blue collars) (CCT nr. 75)
- with less than 6 months of service : the applicable notice period is 28 calendar days
- with more than 6 months but less than 5 years : 35 calendar days
- with more than 5 years but less than 10 years : 42 calendar days
- with more than 10 years but less than 15 years : 56 calendar days
- with more than 15 years but less than 20 years : 84 calendar days
- with more than 20 years of service : the applicable notice period is 112 calendar days
In many sectors, there are collective agreements providing for longer (or shorter) notice periods. Notice properly served is generally effective the monday of the week following the one during which it is served.
b) Intellectual workers (white collars or employees)
- employees earning less than 25,277 EUR a year: the applicable notice is 3 months per period of 5 years of service.
- employees earning more than 25,277 EUR : -
The notice period is determined by mutual agreement, at the earliest when the notice is given, or, in the absence of agreement, by the Labour Court. No general rules are provided by statute in order to determine the length of the notice but the main factors taken into account by the Courts are the employee's age, seniority, position and salary. Courts often use calculation formula. The most frequently applied formula is the so-called "Claeys" formula based on computer calculation.
- there is a special rule for employees earning more than 50,554 EUR and who were hired after April 1st , 1994:-
In such cases, parties may fix the notice period that will have to be respected in case of the employer terminating the contract. The length of notice cannot however be shorter than the notice period provided for employees earning less than 25,277 EUR a year : 3 months per period of 5 years of service.
Notice is effective the first day of the month following the one during which it is validly served (except in case of suspension of the contract).
c) Procedure
Notice given by the employer is only valid if served by registered letter (that will have to be served at the latest three working days before the end of the month) or by bailiff's writ providing the length and the day of beginning of the notice period.
d) Yearly premiums, holidays allowances and 13th month
The employer who terminates an employment contract has to pay yearly premiums, holiday allowances and 13th month pro rata payment.
Trial period clause
Any employment contract may contain a trial period clause allowing each party to terminate the contract during the trial period subject to a reduced period of notice. In order to be enforceable, the trial clause must be in writing and signed before the worker starts his employment.
For manual workers, the trial period may not be less than 7 days and more than 14 days. The contract may not however be terminated during the first 7 days except for serious cause. Thereafter, it may be terminated at the end of any working day during the trial period without notice or payment in lieu.
For intellectual workers and sales representatives, the trial period may not be more than 6 months, and more than 12 months if the employee's annual remuneration exceeds 30,301 EUR.
During the trial period, the contract may be terminated at any time by giving 7 days notice. However notice given during the first month of employment will be considered as given only at the end of that month. Notice must be given under various formal requirements (see section I.2.1.).
Immediate termination
There is an important exception to the above rules: the employment contract may be terminated immediately without any notice or indemnity (payment) in lieu thereof if the other party is liable for an act or omission considered by law as constituting a 'serious cause'. Serious cause is defined as any act or behaviour "which immediately and permanently precludes the continuation of a working relationship between the employer and the employee".
In such a case, the party must terminate the contract within three days of becoming fully aware of the serious cause.
The nature of the serious cause must be notified within three days of the date of dismissal.
Special indemnities
Abuse of right
The employee can claim an indemnity for moral and material damage different from the damage caused by the termination itself on the ground of abuse of right.
If the employer has the right to terminate unilaterally the employment contract for indefinite period, this right is a contractual right that must be exercised bona fide and without abuse.
Manual workers (regulated by the law ):
Abusive termination: the dismissal of a manual worker employed for an indefinite period for reasons that have no connection with the aptitude or the behaviour of the manual worker, or that are not based on the necessities of the running of the company, the establishment or the service.
The indemnity will be 6 months of the worker's salary.
b) Intellectual workers (doctrine and case-law ):
Abuse of the right to dismiss: a fault committed by the employer at the time of termination which is different from the failure to take into consideration the rules relating to the termination of the employment contract, which causes a specific damage different from the one caused by the dismissal.
The Court will determine the indemnity.
Clientele indemnity
A special clientele indemnity has also to be paid by the employer who terminates the contract when the employee is a sales representative . The indemnity is only due if it constitutes the sales representatives' main activity and if the sale representative has at least one year of service.
This indemnity amounts to three months salary for less than five years service. If service is more than five years, the indemnity shall increase by one month for each additional period of five years' service.
Non-competition clause
Non-competition clauses are clauses by which the employee undertakes not to perform any similar services, either for his own account or as an employee of a competitor of the employer, after leaving his present employment.
Non-competition clauses must be in writing and are not valid if the employee's annual remuneration does not exceed 25,277 EUR. There are also restrictions on their applicability if the annual remuneration does not exceed 50,554 EUR.
Generally speaking, a non-competition clause is valid only if it is limited to activities similar to those presently performed by the employee and to a well-defined geographical area, if the new employer is a competitor and provided it does not exceed a period of 12 months.
Except for sales representatives, the clause must also provide for the payment of an indemnity to the employee equal to at least 50 % of the salary the latter would have earned during the duration of the non-competition provision.
The clause is not applicable whenever the employer terminates the contract or when the employee puts an end to the agreement on the basis of a serious breach committed by the employer.
Specific rules are applicable to international companies.
Protected employees
Specific employees (such as pregnant women, persons who have filed a complaint about discrimination, violence or harassment at work, persons who are candidates for political office, persons who have opted for a long-term leave, persons who are entitled to time off for training) are entitled to special protection against unjustified dismissal.
Special rules also are applicable to employee's representatives, members of the work council or the prevention and protection committee, as well as to those who are union representatives (Statute of March 3, 1991 and collective agreement number 5). These rules require, amongst others, prior approval before termination and provide for the payment of high indemnities in case of violation of the rules.
Collective dismissals
Pursuant to the legal definition, a collective dismissal is a dismissal for economic or technical reasons resulting, over a period of 60 days, in a reduction of 10 % of the number of employees with a minimum of 6 persons.
In the event of a collective dismissal, the employer has also specific information obligations to fulfil in addition to the payment of termination indemnities and extra indemnities.
If the obligations are not correctly fulfilled, the sanction will be that the termination served will be void.
Furthermore, the employer must respect a period of 1 or 2 months before he can proceed to the notification of the termination of the employment contract.
Early retirement
In order to qualify for an early retirement indemnity ("pre-pension"), an employee must be at least 60 years old and must have been dismissed by the employer. The indemnity is paid by the employer in addition to unemployment benefits.
This age requirement can be reduced to 58 years by collective agreement in the joint management/employment councils ("commission paritaire") subject to some exceptions. For some companies with financial difficulties, the Minister can reduce this age.
Outplacement facilities
Outplacement facilities are provided for employees aged 45 or more at the time of the dismissal. They are entitled to 3 X 20 hours training paid by the employer in order to promote their employment. Should the employer refuse the outplacement facilities, he would then have to pay an extra 1,500 EUR to the employee for non-compliance with those rules (CBA no. 82 of 10 July 2002).
For further information, please contact Stanislas van Wassenhove stanislas.vanwassenhove@cmslegal.bemichael.deleersnyder@cmslegal.be or or on + 32 2 626 22 32
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England and Wales
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