Dismissal indemnity is payable unless the dismissal is due to gross misconduct or intentional misconduct. The amount payable is mainly set by the collective bargaining agreement but must not be less than 1 / 4 of the monthly salary per year of service for the first ten years of service, plus 1 / 3 of the monthly salary for each year of service after ten years. Indemnity is also payable for unused accrued holiday entitlement and for the notice period if the employer chooses to release the employee from performing it.
An employee with an open-ended contract who has two years’ continuous service with the same employer (and is not being dismissed due to an intentional breach of contractual obligation) is entitled to a severance payment. The statutory minimum severance payment is calculated by multiplying one-third of the average monthly salary in the preceding three months by the number of years’ continuous service with that employer. The severance payment is capped at six times the average monthly salary, unless otherwise provided for by law, by-law, collective agreement or work contract
In case of dismissal for cause, no severance pay is due to the employee.
In such cases the employer must only make payments related to rights the employee accrued during the employment period, which can include pro-rata payment for accrued holiday entitlements (1 / 12 of the employee’s holiday pay for each month of the incomplete holiday accrual period at the time of dismissal (such holiday pay being, in full, equivalent to one monthly salary plus an additional 1 / 3 of monthly salary), proportional 13th salary (1 / 12 of one monthly salary for each month worked in the then current calendar year), as well as double payment for any overdue holiday periods (i. e., holiday periods not enjoyed by the employee within 12 months of the employee acquiring the right to enjoy such holiday period).
If the employee is dismissed without cause, the employer must pay to the employee, in addition to the payment of accrued rights and as a penalty for unfair dismissal, an amount equal to 40 % of that which the employer has deposited into the employee’s severance compensation fund (“FGTS”) during his / her employment. In addition, the employer must pay a further 10 % of the amount deposited into the FGTS to the government. Every month, employers are required to deposit 8 % of the employee’s monthly salary into his / her FGTS account, which is managed by the Federal Savings Bank on behalf of the employee. Thus, this penalty will depend on the length of employment and on the amount of the employee’s monthly salary.
If the dismissal is amicably agreed to between the employee and the employer, the employer will have to pay half of (a) the financial compensation for prior notice, if the parties agree that the prior notice will be financially compensated for instead of the employee actually working during such period, and (b) the penalty equivalent to 40 % of the amount the employer has deposited into the employee’s FGTS (i. e., 20 % of the amount deposited into the FGTS).
All other termination payments, such as amounts due in respect of accrued rights, should be fully paid.
In cases of fixed term employment contracts where there is no provision allowing the parties to terminate the agreement early without cause and the employer opts for early termination without cause, the employer must pay the employee half of the amount the employee would otherwise have been entitled to receive during the remainder of the agreement term.