CMS Expert Guide to employment termination law and legislation

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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

An employer may not dismiss an employee without a legally valid cause.

Dismissal may be based on personal grounds (e.g. disciplinary dismissal, dismissal due to professional inadequacy, dismissal due to incapacity) or economic grounds (e.g. economic difficulties, technological changes), or subject to specific conditions, without stating a specific motive.

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.

The employee must be notified of the dismissal in writing.

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.

In the event of dismissal, the law provides that an employee is entitled to a notice of a duration which varies depending on his seniority as follows:

  • Length of service of less than six months: no notice period applicable;
  • Length of service between six months and less than two years: one month;
  • Length of service of at least two years: two months.

For any dismissal, the employer may choose whether the employee works during the notice period.

In either case, employee is entitled to receive the same salary, including any benefits.

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.

Works councils do not exist in Monaco. A staff representative (if established) must be properly informed prior to a collective redundancies.

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’.

No involvement for dismissals.

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.

Mandatory for employees with legal protection because of their private life or their mandate.

This protection applies to staff representatives, union delegates, pregnant women, employees taking maternity leave, paternity leave, adoption leave or family support leave, members of the Labour Court, harassment referents.

The relevant Labour Authority has to be informed of projected collective redundancies prior to their dismissal, and grant prior approval.

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.

The implementation of collective redundancies is mainly regulated by law and the National Collective Bargaining Agreement, which imposes some procedural steps prior to implementing any such decision.

Three main issues must be considered regarding the preparation and implementation of a collective social plan:

  • Drafting an information document containing all essential elements

regarding the decision to restructure, its motivation, its implementation and the measures taken by the employer to minimise any adverse impacts on employees;

  • Circulating the information to staff representatives, discussing it with them and collecting their comments and choices about measures taken to implement the restructuring (i.e., the measures adopted to minimise the number of dismissals); and
  • Implementing the restructuring plan, by obtaining the required authorisations as the case may be, notifying employees of their terminations and paying termination indemnities.

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.

Dismissal without notice is only possible in case of gross misconduct. In such a case, the employee receives no dismissal indemnity or notice period indemnity. The employee is still entitled to unemployment insurance benefits.

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.

Should the employer dismiss an employee on personal or economic grounds without a valid cause, the employer would have to pay a dismissal indemnity.

In addition, the employee could claim damages for injuries suffered due to his / her wrongful dismissal.

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.

Dismissal indemnity is payable unless the dismissal is for gross misconduct. The amount payable is mainly set by the collective bargaining agreement, but must not be less than the French legal dismissal indemnity (since 27 September 2017: 25% of the monthly gross salary until ten years of seniority and one third of the monthly salary as of the tenth‘s year). A higher indemnity is payable in case of dismissal without a stated motive. Indemnity is also payable for unused accrued paid holidays and for the notice period if the employer chooses to release the employee from performing it.

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.

Non-competition clauses are enforceable in Monaco provided they are appropriately restricted.

A non-competition clause must comply with five cumulative conditions:

  • it must be essential to protect the employer’s legitimate interests;
  • it must be limited to a specific time period;
  • it must be limited to a geographical area;
  • it must take the characteristics of the employee’s job into account; and
  • most importantly, it must provide for a financial counterpart.

Independent consideration is required for a non-competition 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

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’)).

A 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. This is particularly the case for limited companies (‘SA‘). However, a just cause is legally required in limited liability companies (‘SARL’) when revoking a managing director who is also a shareholder of the company. In any event, revocation must follow mandatory steps to be declared valid.

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.

A resolution is taken by the shareholders and / or board of directors, depending on the form of the company and the internal organisation of the management. The managing director must be given the opportunity to explain himself or herself and the revocation must not be made vexatiously.

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.

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.

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.

For limited liability companies (‘SARL’), appointment of a new director is subject to government approval. For all companies, the change of director must be registered in the Monaco Companies Register.

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).

Damages may be claimed, mainly:

  • for the lack of a just cause, in the event that such reason is legally required to revoke a legal 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 / her point before the board’s / shareholders’ decision to revoke him / her (absence of due process). However, the managing director cannot be reinstated.

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.

Not applicable.

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.

Non competition clauses are only valid insofar as they specify a restricted application in time and space. They also have to include financial compensation in order to compensate the director for the loss of revenue they cause him or her. If the clause does not include those elements, it is null and void. In that case, the director may still be held liable for unfair competition towards the company if it is demonstrated that the director resorted to fraudulent practices intended to disturb the company’s activity such as denigrating it or employing key members of its staff.

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).