CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

1.1 Reasons for dismissal

The employer must establish a real and serious reason to dismiss an employee.

It may be:

  • a personal reason, notably a fault (disciplinary ground), poor performance, disablement of the employee when the employer is unable to relocate / redeploy him to another position or make reasonable adjustments to his post; or
  • an economic reason, such as economic difficulties, technological changes or the absolute necessity of restructuring to safeguard competitiveness. The economic reason is analysed at the level of the group’s companies established in France operating in the same business sector. The redeployment obligation for economic dismissal is limited to jobs available “in French territory in the company or in other companies of the group, the organisation, activities, and operating location of which allows mobility of some or all of the personnel“;
  • the refusal to amend the employment contract following a collective performance agreement

The reasons for regular termination as set out in the Labour Act are as follows:

  • if the need for work ceases to exist for economic, technical or organisational reasons (‘notice due to business reasons’); or
  • the employee is incapable of fulfilling his employment-related duties due to certain personal characteristics or qualifications (‘notice due to personal reasons’); or
  • the employee intentionally breaches a contractual obligation (‘notice due to misconduct’); or
  • if the employee did not satisfy the employer’s requirements during the probationary period.

There are two alternative sets of reasons for dismissing employees:

  1. Employee-related reasons: (1) in case of disciplinary misconduct (in case of a severe breach, or more repeated breaches of work discipline rules or of those rules set forth in the individual employment agreement, collective bargaining agreement or internal regulations), as disciplinary sanction; (2) in case of physical / mental incapacity, as duly ascertained by the relevant medical bodies; (3) professional inadequacy; (4) in case of placement in police custody or house arrest for more than 30 days; or
  2. reasons not related to the employee:  redundancy following workforce restructuring, based on e.g. economic, financial or organisational grounds (by way of either individual or collective procedures).

1.2 Form

The stages in the individual dismissal procedure are as follows:

  • The employee is formally invited to a preliminary meeting.
  • At least five business days after the formal invitation, a preliminary meeting is held during which the employer explains the reasons for the contemplated dismissal and listens to the employee’s explanation.
  • The employee may be assisted by a third party (an employee of the company or an adviser of the employee mentioned on an official list prepared by the Prefect, depending on the existence of employee representative bodies in the company).
  • The dismissal letter must be sent to the employee at least two (or seven for a dismissal due to economic reasons) business days after the meeting (and within a month for a disciplinary dismissal).

The dismissal letter must be a registered letter whose receipt must be acknowledged by the employee, signed by either a legal representative of the firm or a person duly empowered by a legal representative, and who must belong to the company.

Applicable collective bargaining agreements can provide for a more favourable timeframe and / or procedure.

The letter must explicitly mention the grounds for dismissal. There are other mandatory provisions such as the possibility of choosing to benefit temporarily the supplementary health care scheme in force in the company, etc.

The grounds set out in the dismissal letter may be specified by the employer or at the employee’s request after the letter has been sent. If the employee does not make such a request, the letter’s lack of an adequate explanation will not in itself support a finding that the dismissal lacks real and serious cause, but will merely entitle the employee to compensation of no more than one month’s salary.

A special procedure (possible involvement of the works council, see below,
meeting and notification of the dismissal) applies in the case of a dismissal for economic reasons or when the dismissal concerns a ‘protected employee’ (e.g. members of the social and economic council, and trade union delegates notably).

A specific procedure prior to the dismissal exists for employees who have been recognised as physically incapable of performing their work by a labour doctor (redeployment obligation, possible involvement of the social and economic council, etc.).

For a dismissal based on a disciplinary reason, the employer should move rapidly as the procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovery of the facts.

Written form, including reasons for termination. Decision is to be delivered to the employee.

Written form is necessary. The employer must provide at least the following information: (i) the legal and factual grounds for dismissal; (ii) the notice period to which the employee is entitled (when this is the case); (iii) the dismissal priority criteria  (in case of collective dismissals); (iv) a list of all available positions at the employee’s level and the deadline by which the employee may choose to fill a vacancy, in case of dismissal for physical / mental incapacity or professional inadequacy; (v) the legal term during which the dismissal decision may be challenged; and (vi) the competent court before which the dismissal decision may be challenged.

In case of dismissal due to disciplinary misconduct, physical / mental incapacity or professional inadequacy, the employer must conduct a prior evaluation procedure of the employee.

1.3 Notice period

The notice period is set by the applicable collective bargaining agreement and the Labour Code, and generally lasts between one and three months. The contract may be terminated without notice in the event of gross misconduct or intentional misconduct.

Regular termination: notice period ranges from two weeks to three months, dependent on the employee’s length of service with the same employer.

The three-month period is extended by an additional two weeks / one month for 50 / 55-year-old employees who have 20 or more years’ continuous service with the same employer.

Extraordinary termination (summary dismissal): no notice period. Termination during probationary period: notice period of at least seven days.

Termination by employee: notice period cannot be longer than one month if the employee has a good reason.

If the employment is terminated because the employee  breaches his contractual obligations, notice periods are halved.

The statutory minimum notice period is 20 working days and is applicable in case of dismissal for physical or mental incapacity, as well as dismissal for professional inadequacy, and/or individual or collective redundancies. Individual or collective labour agreements may require longer notice terms.

Notice terms shall not apply in case of dismissal for professional inadequacy, if the employee is under his/her probation period.

1.4 Involvement of works council

The social and economic council must be informed and consulted (with an advisory but formal vote of its members) when a mass redundancy is planned, or for the planned dismissal of a protected employee or physically disabled employee.

The works council must be informed of the employer’s intention to dismiss. The works council‘s consent is required for dismissal of the following employees:

  • members of the works council; and
  • candidates running for works council positions and members of the election committee for a period of three months following the announcement of the results of the election to the works council; and
  • employee representatives in a body of the employer; and
  • employees with diminished ability to work and employees in immediate danger of physical disability; and
  • employees over 60 years of age.

Not applicable, as works councils are not currently regulated by nor allowed under Romanian labour law.

1.5 Involvement of a union

When a company employs more than 50 workers, trade unions may be involved in a mass redundancy procedure to negotiate an ‘employment saving plan’.

If there is no works council, consent is given by the union commissioner (the union representative employed with the respective employer). The union‘s consent is required for the dismissal of a union commissioner during their period of office and for six months thereafter.

No specific statutory involvement in the dismissal process. However, employees have the right to request trade union representatives or employee representatives to assist them during the individual dismissal procedure for e.g. disciplinary reasons or professional inadequacy.  

Also, trade union consultation is required during the collective-redundancy process. More precisely, the employer has the obligation to consult the trade union on methods of mitigating the impact of the collective redundancy – in this respect, the employer must reply to the trade union on the mitigating factors, in a specific timeframe and also provide the trade union justifications for the redundancy-related measures being taken.

1.6 Approval of state authorities necessary

This is required when dismissing ‘protected employees’ and now the validation or homologation of the employment saving plan is also required for mass redundancy procedures.

If the works council or union commissioner do not consent, consent can be substituted by a judicial or an arbitral decision.

Not necessary. The approval or prior notification of state authorities may be required in case of e.g. collective redundancies within state-owned companies or within specific industries, as well as part of specific terms of state-aid schemes to which the employer is benefitting or has benefitted.

1.7 Collective redundancies

Different procedures apply according to the company’s workforce and the number of employees concerned (the procedures are ‘lighter’ in small companies that dismiss fewer than ten employees).

The main principles are the same:

  • The employer has a duty to inform and consult the staff representative bodies;
  • All documentation related to the collective redundancy must be sent to the state authorities

In case of mass redundancies (more than ten employees in a company employing at least 50 employees):

  • The employer has a duty to inform and consult the social and economic council, involving at least two meetings (the social and economic council may be assisted by an accountant in some cases). Please note that, with the new law, the duration of the consultation has been regulated.
  • An ‘employment saving plan’ (a social plan providing real alternatives and social measures accompanying the redundancy, such as redeployment, redeployment leave, training, etc.) should be drafted. There are two options for drafting it: either through a collective agreement negotiated with trade unions or unilaterally by the employer (only in the absence of trade unions in the company or if no agreement is found and then only after consultation with the social and economic council).
  • This employment saving plan should then be sent to the state authorities that will either validate it (if agreed with trade unions) or homologate it (if unilaterally drafted by the employer). If the state authorities do not agree with the plan, the employer may present another draft after consulting the social and economic council.

Employer who expects to terminate at least 20 employees, five of which due to business related reasons, all within a 90-days’ period, is obliged  to duly consult the works council / union commissioner in order to possibly reach an agreement to save the employees and / or limit the number of terminations. The employer is obliged to provide the works council / union commissioner with written information concerning the reasons for termination, total number of employees, number, professions and positions of employees who are supposed to be terminated, election criteria for such employees, amounts and way of calculating their severance payments and measures undertaken to prevent such terminations. Employer is obligated to consider and explain all possibilities and suggestions that may lead to avoidance of terminations. Also, the Croatian Employment Agency needs to be informed about the previously mentioned points and consultations with the works council / union commissioner.

The employer must follow a specific collective redundancy process, in terms of procedural steps and relevant deadlines, as strictly prescribed by Romanian labour law. The collective redundancy process includes, inter alia, notifying and consulting with the trade union or employee representatives on the redundancy measure(s) and informing the territorial labour authority, as well as the territorial workforce agency about the proposed redundancy measure(s) and the outcome of trade union/employee representative consultations. The collective redundancy process applies in the event that the employer plans to initiate redundancies, such as those listed below, within a timeframe of 30 calendar days:

  1. at least ten employees, if the total number of employees at the company level ranges between 20 and 100 employees; or
  2. at least 10% of employees, if the total number of employees at the company level ranges between 100 and 300 employees; or
  3. at least 30 employees, if the total number of employees at the company level is at least 300 employees.

1.8 Summary dismissals

The term ‘summary dismissals’ has no real meaning in France. Dismissal without a notice period is only possible where there has been a serious breach, but even in that case, the form described above for dismissal procedure, including the preliminary meeting and registered letter, must still be applied. In case of dismissal without notice, the employee has no dismissal indemnity or notice period indemnity, because there is no notice period. Such dismissed employees are still entitled to unemployment insurance benefits, however. The dismissal procedure must begin within a few weeks of the employer becoming aware of the reason for dismissal and no more than two months after the discovering of the facts.

Summary termination (summary dismissal) is defined as termination without notice, and is only lawful where there has been: 

  1. a serious breach of employment obligations, or
  2. the employment relationship between the parties is no longer possible for another important reason (there are, therefore, two possible reasons: (i) breach of employment obligations; or (ii) another important fact; in either case, the employment relationship must not be possible any longer).

The employee is to be dismissed within 15 days of the day of becoming aware of the fact / reason for dismissal.

Termination without notice (summary dismissal) is only lawful in case of disciplinary dismissal (for severe or repeated breach of work disciplinary rules or of those rules set forth in the individual employment agreement, collective bargaining agreement or internal regulations) or in case the employee is placed under arrest or under house arrest for more than 30 days. If there is a valid reason for summary dismissal, the employer should not wait more than 30 days after becoming aware of the reasons triggering the dismissal before approving the dismissal.

1.9 Consequences if requirements are not met

The amount of damages depends on the actual loss suffered by the employee. For dismissals notified on or after 24 September 2017, the ordonnance n° 2017-1387 provides that the damages have a preset minimum and a maximum amount depending on the employee’s length of service. The ordonnance also stipulates specific lower minimum amounts for companies that usually employ fewer than 11 employees, but the maximum remains identical.

In some circumstances, the dismissal will be void, allowing the employee to request reinstatement. (These circumstances may include collective redundancies without a social plan, dismissal after an occupational injury or in discriminatory dismissals, or dismissal of a protected employee without state authority authorisation). In such a case, the compensation cannot be less than six months’ salary.

If it is decided the dismissal is illegal, the employee is to be reinstated. Reinstatement is possible even before the end of the court procedure to determine the legality of the dismissal if the employee so requests. If the parties do not wish to continue with their employment relationship, the court shall at the employee‘s request determine:

  1. the date of termination of the employment contract; and
  2. compensation for damages, which ranges from three to eight times the employee’s average monthly salary over the previous three months (depending on the employee’s age, length of contract and obligations in relation to supporting family members or other dependants as defined by family law).

The dismissal will be null and void. In addition, the employer may pay the employee compensatory damages, which include unpaid wages and benefits from the dismissal date and up to the date of the court decision confirming the nullity of the dismissal. Upon request, the employee can be reinstated into his/her former position within the company. Moral damages and court expenses may also be awarded, depending on the evidence brought by the employee before the court. Moral damages aim at repairing a moral prejudice sustained by the employee who is a victim of an illegal dismissal and are separate from material damages (e.g. the European Court of Human Rights awarded moral damages of up to EUR 5,000 for the stress felt by an employee going through court proceedings).

1.10 Severance pay

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

There is no statutory severance payment. However, the employee may be entitled to severance payments pursuant to his/her individual employment agreement or applicable collective bargaining agreement.

1.11 Non-competition clauses

A non-competition clause is only valid if provided in the work contract, and if:

  • The employer demonstrates that this clause is necessary to safeguard his interests and proportionate (e.g. the lower is the position the less the clause is justified);
  • Its scope is limited to a reasonable area, a reasonable period of time, and precise activities; and
  • The employee receives a monthly indemnity during the term of the clause (the indemnity amount is set by the work contract or collective bargaining agreement, but is generally between 20% and 50% of the employee’s monthly salary).

This clause can be waived by the employer in the letter of dismissal or according to the provision of the applicable collective bargaining agreement and / or employment contract.

The examination of the terms of the applicable collective bargaining agreement is key on this matter.

Post-contractual non-competition clauses must last no longer than two years from the date of termination of the contract. The employer is obliged to pay compensation (at least one-half of the average monthly salary paid in the last three months of employment). The covenant will not be valid if the employee is a minor or if the employee‘s salary amounts to less than the average national salary.

The non-competition clause does not apply if: (i) the employee terminates the contract without notice period (extraordinary termination) and does not state that he does agree that the clause applies; or (ii) if the employee is dismissed without a justified reason, unless the employer undertakes to pay the prescribed remuneration for the duration of the clause.

Post-contractual non-competition clauses are only valid if the individual employment agreement specifies:

  1. the activities prohibited; and
  2. the amount of the monthly indemnification (at least 50% of the average of the last six monthly gross salaries before the employment termination or, in case the employee is hired for less than six months, the average of the monthly gross salaries to which the employee was entitled during his/her employment ); and
  3. the duration of the non-competition clause (the legal maximum duration being two years); and
  4. the third parties for whom the employee may not work; and
  5. the restricted geographical area(s).

1.12 Miscellaneous

Specific and restrictive rules and procedures apply in the case of pregnant women, women on and returning from maternity leave, young fathers, and employees recovering after a work-related accident or suffering from a work-related illness. Women on maternity leave cannot be dismissed during this period.

Since 2008, a new means of termination has been introduced, namely “by mutual agreement”. This new possibility is called ‘rupture conventionnelle’ (mutual termination of the employment contract). The termination is agreed by both employer and employee and there is no cause or reason to demonstrate.

The employee is entitled to unemployment insurance benefits and dismissal indemnity provided by law or the applicable collective bargaining agreement (or more if agreed).

A strict procedure including preliminary meetings and consideration periods should be followed (both parties have the benefit of 15 calendar days to retract, from the date on which the form is signed); a specific form must be filled in and signed by both parties.

The specific form must be sent to the state authorities for agreement. The state authorities have a 15-open day period to review the form. Within these 15 days, the state authorities can agree to the termination, disagree or stay silent (silence amounts to agreement). However, the state authorities must expressly agree for protected employees. Otherwise the termination is void.

Since September 2017 it has been possible for the employer to negotiate a collective agreement through a ‘rupture conventionnelle collective’ (mass mutual termination of the employment contract) with trade unions. Such an agreement can only implement voluntary departures and thus excludes any dismissals designed to eliminate jobs. This new method of terminating contracts is entirely excluded from the rules governing economic dismissals. The labour administration is informed as soon as negotiations to conclude such an agreement start and reviews the agreement’s contents before validating it.

Not applicable.

If the reason for an individual or collective redundancy results from the change of employer control or transfer of undertakings, the court may invalidate any dismissals.

2. Dismissal of managing directors

It should be noted that the title ‘managing director’ is not recognised under the Croatian Companies Act or other relevant applicable legislation. The Croatian Companies Act recognises only a ‘director’, who is authorised to represent the company and obliged to be registered as a member of the management board with the respective commercial court.

A managing director need not to have an employment agreement with the company, or any other type of agreement, in order to be able to represent the company.

Where a managing director has a  managing / service agreement  which falls under the regulation of Croatian obligatory law, only the provisions of the managing / service agreement apply. If aspects of the relationship are not dealt with in the managing / service agreement, the relevant provisions of the Croatian Obligations Act will apply.

Where a managing director does not have any employment or managing / service agreement with the company, he shall be treated as a member of the management board only.

The table below sets out the position under Croatian law with respect to the managing directors of a limited liability company, with and without service agreements.

Under Romanian company law, the equivalent of the position of ‘managing director’ may either be the position of ‘director’ in a joint-stock company (‘SA’) or in a limited liability company (‘SRL’) (in Romanian, ‘administrator’), but also the position of ‘general manager’ in a SA or SRL (in Romanian, ‘director general’). For the sake of clarity, both roles are referred to below as ‘managing director’. The managing director is (i) appointed by and (ii) has his or her mandate powers established and revoked by the relevant management body of the employer (either the general meeting of shareholders, in case of directors or the board of directors in case of general managers). Mandate contracts between the managing director and an SA or SRL could also be concluded; such agreements are deemed ‘commercial agreements‘ governed by the rules of the Romanian Civil Code (and not by Romanian Labour Code).

2.1 Reasons for dismissal

The company may generally revoke the appointment of the managing director without cause, unless stated otherwise in the by-laws of the company or the resolution of appointment. However, a fair reason is legally required in certain forms of companies (e. g. the civil form or commercial forms such as certain limited companies (‘SA’) or limited liability companies (‘SARL’)).

No special reasons required (unless otherwise specified within the statute of the company or the contract itself).

Where the managing director has a service agreement, the provisions of that service agreement (and consequently the Croatian Obligations Act) will apply.

If the managing director is a member of the management board according to the statute of the company (and not only appointed by resolution of the shareholders), the company statute may set out that revocation is only possible for special reasons.

Under Romanian corporate law, the managing director may be dismissed without cause, pursuant to the corporate decision of the competent management body in this respect. In the event a management agreement has also been concluded between the managing director and the SA or SRL, dismissal must also follow the terms and conditions (including specific reasons) set forth in the management agreement.

2.2 Form

A resolution taken by the shareholders or board of directors, depending on the form of the company and the internal organisation of the management. The managing director must be notified in writing of the revocation, and the change of managing director must be published in a public Corporate Register.

Valid shareholders’ resolution on revocation of appointment as member  of the management board. Registration of this revocation with the court registry. Termination of the service agreement in the same form in which the agreement has been signed (Obligations Act provisions shall apply).

A written corporate decision by the competent management body is needed in order to revoke the managing director. In order to be valid, this decision must comply with the specific requirements provided under Romanian company law (e.g. call or meeting formalities, quorum, etc.).

If a management agreement has been entered into, the managing director must additionally be provided with formal notice of the revocation in accordance with the provisions of the said management agreement.

2.3 Notice period

There is no notice period, except where one is provided by the by-laws of the company or in the resolution of appointment of the managing director.

According to the Croatian Companies Act, the appointment of a director of the company can be revoked at any time without notice (for no special reason). Some restrictions (not strictly defined) can be set out within the statute of the company.

If the director has a service agreement, the notice period will be as set out in the service agreement.

There is no statutory notice period. The notice period may be set forth in the corporate decision of the competent management body approving the revocation of the managing director or in the specific management agreement.

2.4 Involvement of works council

No.

No involvement.

No involvement.

2.5 Involvement of a union

Not applicable.

No involvement.

No involvement.

2.6 Approval of state authorities necessary

No.

Respective commercial court brings a resolution on registration of the resolution in the court registry. The court’s resolution and registration are declaratory.

Not necessary. Approval or prior notification of state authorities may be required in case of e.g. specific industries.

2.7 Collective redundancies

Not applicable.

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

Not applicable.

Not applicable.

2.9 Consequences if requirements are not met

Damages may mainly be claimed:

  • for lack of fair reason in companies where such a reason is legally required to revoke a representative; or
  • if the revocation is notified under hurtful circumstances (e.g. is very sudden and unexpected, or is publicly announced before the director is informed), or if the managing director has not been granted a reasonable opportunity to make his point before the decision to revoke him is made (absence of due process).

If there is no valid shareholder resolution, the revocation will be invalid and the court will refuse to register it in the court registry. Where the managing director has a service agreement, he could claim:

  1. compensation for damages; or
  2. fulfilment of contractual obligations in accordance with the provisions of the Croatian Obligations Act.

The managing director may be revoked at any time by the relevant corporate body of the company. However, the managing director may seek compensation in case the dismissal was without cause. 

Also, the managing director may require additional compensation, depending on the terms of his/her management agreement or rules of the Romanian Civil Code. 

From a corporate law perspective, not meeting the relevant requirements upon adopting the decision of the competent management body of the employer may lead to the invalidity of this decision. 

2.10 Severance pay

There is no mandatory severance pay for the capacity as director, unless stated otherwise in the by-laws of the company or in the resolution of appointment of the managing director.

Severance pay may be specified in the managing director’s service agreement (this is usually a large sum).

There is no statutory severance payment. Severance payments may be provided for in the corporate decision of the competent management body approving the revocation and/or in the management agreement.

2.11 Non-competition clauses

The terms of any non-competition clause must be agreed between the parties. If the scope of the clause is too wide (according to its geographic area, its length, or the activities it concerns), its validity may be challenged.

The managing director, as a member of the management board, is prohibited from doing the following without the approval of the supervisory board (or the shareholders, if the company does not have a supervisory board):

  1. being a member of the supervisory board or management board of another company with the same business activities; or
  2. performing business activities equal to those of the company for his or somebody else’s account; or
  3. using the company’s premises for performing business for his own or somebody else’s profit. The company is entitled to compensation for any damage caused.

Non-competition clauses may be set out in the resolution of the general meeting of shareholders approving the appointment of the managing director and/or in the management agreement. Such clauses are in general enforceable, provided that rules of competition law and civil law are observed.

2.12 Miscellaneous

The director may also be an employee. In this case, a proper dismissal process will have to be implemented in addition to the revocation process and corresponding dismissal indemnities paid.

Not applicable.

In the case of a general manager (in Romanian ‘director general’) of a SRL, an individual labour contract may also be concluded (please see above).