CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

The Employment Act (“EA”) is Singapore’s main labour law. The EA confers certain statutory protection(s) to local and foreign employees working under a contract of service in Singapore. Employees who are not covered under the EA are: (1) seafarers; (2) domestic workers; and (3) statutory board employees or civil servants in Singapore.

When dismissing an employee in Singapore, an employer needs to be mindful of:

  1. the terms of the employment agreement;
  2. the statutory protections conferred by the EA; and
  3. the common law in Singapore.

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

According to the Constitution, the law offers employees protection against unfair dismissal. This protection not only encompasses union members or any given class of workers, but all those who work at least four hours a day and have exceeded the probationary period. These employees may not be dismissed without fair reasons, as expressly provided for by law. If the reason for dismissal is not one of a number of ‘fair reasons’ included in the law, an employee has the right to choose one of the following alternatives:

  • Bring a claim against the employer for reinstatement; or
  • Bring a claim against the employer to receive compensation due to unfair dismissal.

The following are considered fair reasons, as provided for by law, that allow employers to dismiss employees:

i. Reasons related to capability:

  • The employee loses his physical or mental faculties or becomes suddenly incompetent in a manner detrimental to his job performance; the employee performs poorly compared to the average performance of other personnel and the employee; or the employee unjustifiably refuses to undergo a medical examination related to the performance of duties.
  • Court conviction for an intentional crime.
  • Disability.

ii. Reasons related to major faults or misconduct that are specifically provided for in the law:

  • Failure to comply with duties.
  • Decline in performance.
  • Misappropriation or attempted misappropriation of the goods or services of the employer.
  • Disclosure of confidential information or provision of false information that may be detrimental to the employer.
  • Unfair competition.
  • Attendance in the workplace under the influence of alcohol or drugs.
  • Committing violence, severe indiscipline, or intentional damage to the employer’s goods.
  • Unjustified absences of more than three consecutive days or five non-consecutive days and repeated delays.

Nevertheless, according to Peruvian law, the first three months of services constitute an employee’s probationary period. During this time, the employee is not legally protected against dismissal and therefore may be dismissed by the employer without invoking any reason or complying with any formality. 

The law authorises parties to establish a probationary period of a maximum of six months for qualified employees or persons of trust who work closely with senior staff and have access to the company’s confidential information. In these cases, the term of the probationary period in the contract must reflect the requirement for training, adjustment requirements or the position’s level of responsibility.   

There are two broad regimes for dismissal:

  1. termination without cause; and
  2. summary dismissal for reason(s) attributable to the employee.

Where an employer wishes to terminate an employee’s contract without cause, he may do so by giving notice or by paying the employee his base salary in lieu of the notice period.

An employer can also, after due inquiry, summarily dismiss an employee for cause (e.g. as a result of employee misconduct) with immediate effect, i.e. without the stipulated notice period (referred to as “dismissal”). This results in immediate termination of the employment agreement. What amounts to misconduct is largely a question of fact, and generally the relevance and effect of the misconduct is judged with reference to its effect on the employer-employee relationship. The total accrued salary and any other sum due and payable to an employee who is dismissed must be paid either on the day of the dismissal or, if that is not possible, within three days, not including Sunday (or any such rest day as determined by the employer) or public holidays.

An employee who claims that he or she has been unfairly dismissed may file a wrongful dismissal claim (“dismissal claim”) with the Tripartite Alliance for Dispute Management ("TADM") within one month of his or her last day of employment. For managers and executives, a dismissal claim can only be made if they have worked for their employer for at least 6 months. There is no minimum service time period required for non-managers and non-executives filing dismissal claims. Dismissal claims will be referred to mediation at the TADM before adjudication by the Employment Claims Tribunal.

If a female employee has worked for an employer for at least three continuous months, the employee has statutory maternity protection against retrenchment and dismissal without sufficient cause.

Employers are not statutorily required to provide reasons for dismissal, in particular for dismissals with notice. If however the employer is terminating an employee for poor performance and dismisses the employee without notice, the failure to give reasons would amount to wrongful dismissal.

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.

Formalities to be observed in cases of fair dismissal include the following:

  1. Dismissal due to lack of capability: The employer must send a prior written notice of dismissal to the employee stating the reason for dismissal and must grant 30 calendar days for the employee to reply. At the end of this period, the employer can proceed with  the dismissal if the employee was unable to sufficiently defend his actions or lack thereof.
  2. Dismissal related to major faults or misconduct: The employer must send a prior written notice of dismissal stating the reason for dismissal and attaching all the evidence supporting it. The employee has six calendar days to issue the reply. At the end of this period, the employer can proceed with the dismissal if the employee was unable to sufficiently defend his actions or lack thereof.

For contractual termination (i.e. termination without cause), notice of termination has to be given in writing. There is no special formality required for summary dismissal of an 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.

  1. Dismissal due to lack of capability: prior notice of 30 calendar days’ 
  2. Dismissal related to major faults or misconduct: prior notice of six calendar days.  

In both cases, it is necessary to follow the procedure detailed in point 1.2.

The EA provides for a statutory minimum period of notice of between one day and four weeks, depending on the employee's length of service.

The EA provides that the length of notice in an employment contract should be the same for both the employer and the employee.

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.

No legal requirement for involvement.

No involvement.

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 legal requirement for involvement.

No involvement.

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.

Not necessary other than in the case of collective redundancies (see below).

Not necessary.

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 employer can terminate employment contracts without paying compensation for dismissal for reasons of force majeure or for economic, technological, structural or similar reasons, which then make the dismissals necessary. In this case, the employer must obtain the prior authorisation of the Labour Ministry, based on an expert report prepared by an independent auditor supporting the need for the dismissals. In practice, there have been few cases in which the Ministry of Labour authorised a company to make its employees collectively redundant.  

Legally, the parties may negotiate and reach an agreement to terminate the employment contracts of the personnel included in the measure before the Ministry of Labour issues its opinion. In these cases, if the employees are affiliated with a union, then the union’s participation in the negotiations is mandatory.  

In the case of the dissolution and liquidation of a company, or if it is declared bankrupt by a competent authority, authorisation from the Ministry of Labour is not required and five days’ prior notice shall suffice.

Employers who employ at least ten (10) employees are required to notify the Ministry of Manpower if five (5) or more employees are retrenched within any 6-month period within five (5) working days after the affected employees are notified of their retrenchment.

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 dismissal (dismissal without notice) is only lawful when the employee has committed a breach of contract that is sufficiently serious for the employer to terminate the employment contract with immediate effect. Although the law regulates this kind of dismissal, it is recommended that the regular dismissal proceeding be used.

Allowed. See Section 1.1. "Reasons for dismissal" for further elaboration.

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 a fair reason is not given or the legal formalities are not complied with, the employee may alternatively claim:

  • Reinstatement of position, which can only be claimed by employees who do not occupy leading positions (management positions) and/or were not in positions of trust (employees who work in close contact with senior staff and who have access to the company’s confidential information). Workers in management or trust positions are only entitled to claim compensation for dismissal if they are unfairly dismissed.
  • Compensation for unfair dismissal, which is equivalent to: (i) for employees hired for an indefinite period of time, one and a half monthly salaries for each year of service, with a maximum of 12 salaries; and (ii) for employees hired for a fixed term, one and a half monthly salaries for each month that remains until the end of their contract, with a maximum of 12 salaries.

In addition to the compensation for arbitrary dismissal provided by law, the judges have recently been admitting claims for compensation for damages arising from the dismissal. Such compensation is generally made up of the concepts of emergent damages, loss of profits and moral damages, the amount of which must be determined by the court. Additionally, the judges have established the right of dismissed workers to demand a new concept called “punitive damages”, the amount of which equals the amount that the worker stopped contributing to the pension system during the time he was laid off.

As we mentioned above, unfair dismissal does not release the employer from a claim for moral damages in addition to the compensation for unfair dismissal to be paid to the employee. Although legally an employee only has the right to claim compensation for unfair dismissal as compensation for the termination of employment, recent case law criteria provides compensation for moral damages, emergent damages, loss of profits and "punitive damages" to employees who are subject to unfair dismissal where there is evidence of malicious conduct by the employer. 

In addition to the compensation for arbitrary dismissal provided by law, judges are recently admitting claims for compensation for damages arising from dismissal. Such compensation is generally based on the concepts of emergent damages, loss of profits and moral damages, the amount of which must be determined by the Court. Additionally, judges have established the right of fired workers to demand a new concept called “punitive damages”, the amount of which equals the amount that the worker stopped contributing to the pension system during the time he was laid off.

An employee may lodge a dismissal claim seeking to be reinstated to his previous position and for any loss of income due to the wrongful dismissal, and/or for compensation. Employees have to engage in mandatory mediation with their employers at the TADM followed by adjudication at the Employment Claims Tribunal if a mediated resolution cannot be reached. The EA defines the term 'dismiss' to also include resignation of an employee if the employee can show, on the balance of probabilities, that he did not resign voluntarily but was forced to do so because of any conduct or omission on the part of the employer. Employers should be mindful that such employees can also lodge a dismissal claim.

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.

Compensation for unfair dismissal:

  1. For employees hired for an indefinite period (provided they have passed the trial period) compensation is equal to one and a half monthly salaries for each full year of service with a maximum of 12 salaries. Fractions of the year are computed proportionally.
  2. For employees hired for a fixed term (provided they have passed the trial period), compensation is equal to one and a half monthly salaries for each month that remains until the end of their contract, with a maximum of 12 salaries. Fractions of the month are computed proportionally.

Under the EA, employees who have served the company for at least two (2) years are eligible for retrenchment benefits. Those with less than two (2) years’ service could be granted an ex-gratia payment out of goodwill.

The EA does not dictate the nature or amount of severance pay and leaves it to the mutual agreement between the employee and the employer. In the absence of a contractual agreement, the prevailing norm is to pay between two weeks’ to one month’s salary per year of service, depending on the company’s financial position and industry.

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.

During the employment contract term, an employee is forbidden to compete with the employer in its line of business (this is considered a major fault). After the employment contract is terminated, there is no regulation in this regard. However, a post-contractual non-compete clause can be included, which must be for a set period of time and the employee must receive adequate economic compensation for this.

Restrictive covenants (including non-competition clauses) are not valid and will be void unless:

  1. they are deemed by the Singapore Courts to be reasonable between the parties and in the interests of the public;
  2. they seek to protect legitimate proprietary interests; and
  3. are not more extensive than is reasonably necessary to protect such interests.

The burden of proof is on the employer to show that the covenant is reasonable between the parties, whilst the employee bears the burden of proof to show that the covenant is against the public’s interests.

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.

The Tripartite Guidelines on Wrongful Dismissal were published on 1 April 2019 to illustrate what is considered wrongful dismissal. Employers are reminded to be mindful of the examples in these guidelines as these are matters that TADM mediators and Employment Claims Tribunal adjudicators are likely to take into account when mediating and/or adjudicating wrongful dismissal claims.

For the latest updates and developments on wrongful dismissal claims, please contact CMS Holborn Asia’s employment law team.

2. Dismissal of managing directors

There is no distinction between the duties and liabilities of a “director” and a “managing director” save as otherwise provided for in the constitution of the company.

The table below focuses on the removal of a managing director from his or her office as director. This is separate and different from the termination of a director’s contract of employment and/or other related employment issues, which are covered in Section 1 “Dismissal of employees” as that relates to the director’s role as an employee of the company.

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’)).

In Peru, directors do not qualify as employees, so they can be removed from their position without observing any legal formalities, except as provided for in the company’s bylaws. However, if a director is also in charge of the management of the company, he is considered an employee and in this case the legal provisions regarding the dismissal of employees must be observed.

Managers and managing directors who have passed the probationary period can be dismissed (i) for fair reasons, in which case it is necessary to follow the dismissal formalities applicable to all employees in general or (ii) via a vote of no-confidence (without invoking a fair reason), in which case the person in question has the right to receive compensation for unfair dismissal.  

Regarding the dismissal of managers, the following should be taken into account: 

  • If the employee was hired from the beginning as a trusted employee or to occupy a position classified as an executive one (someone who works in direct contact with managers and who has access to confidential information belonging to the company) and is dismissed without fair reason, they will be entitled to receive compensation for unfair dismissal. 
  • If the manager was initially hired to fill a non-executive position or position of trust, attains a management position and is then dismissed without fair reason, the person has the right to choose whether to claim reinstatement in the last position not qualified as an executive or trust position, or to receive compensation for unfair dismissal. 

Despite the provisions in law, the Supreme Court recently established jurisprudential criteria for the rights of management or trusted employees upon dismissal via a vote of no confidence that differs from the Law:

  • For those employees who directly entered into an executive position or position of trust, the compensation payment for arbitrary dismissal does not need to be paid if their employer terminates the employment relationship via a vote of confidence. 
  • For employees who initially began their employment in a position in which they performed common or ordinary functions, and subsequently acceded to an executive position or a position of trust, they are entitled to receive compensation for arbitrary dismissal if (i) their employer prevents them from taking up their former position after the withdrawal of confidence; or (ii) if the employee himself decides not to take up his former position again.

It is important to point out that these criteria do not formally constitute binding precedents of mandatory application. However, in practice they are applied to judicial instances. This should be taken into consideration when negotiating the termination of employment agreements. 

It is also important to bear in mind that a few months ago the Government published a draft supreme decree to modify the regulations of the Law on Labor Productivity and Competitiveness, in which, among other things, the right to compensation for arbitrary dismissal corresponds to any employee dismissed without justification, including management and trust workers. If this regulation is approved, judges would be forced to apply it.

It is not a strict legal requirement for reasons to be provided when a director is being removed. This will ultimately be subject to the constitution of the company in question.

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.

If the manager or managing director is dismissed with fair reason, formalities for the dismissal of any employee must be observed. However, if the employee is dismissed via a vote of no confidence (i.e. without fair reason), the dismissal can be carried out immediately without notice.

Public Company

  • A public company may, by ordinary resolution (i. e. a vote by a simple majority at a general meeting), remove a director before the expiration of his period of office, notwithstanding anything in its constitution or in any agreement between the public company and the director.
  • However, if the director was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove him will be ineffective until a replacement director is appointed.
  • Special notice must be given of a resolution to remove a director or to appoint a replacement director at the meeting at which the incumbent director is removed. The company is required to send a copy of the notice to the director concerned and at the meeting, the director is entitled to be heard. The director is also entitled to make written representations (of a reasonable length) and to request that a copy of those representations be sent to every member of the company. The company is entitled to apply to the Singapore Court for the director to be denied the right to send out representations or to have his or her representations read at the meeting.
  • Public listed companies in Singapore are subject to additional obligations under the law, including the obligation to make an immediate announcement to the Singapore Exchange (“SGX”) upon the cessation of the director’s services.

Private Company

  • A director must be removed in accordance with the company’s constitution. Where the constitution is silent on the removal of a director, it may be amended in accordance with the required procedure on the removal of directors. Subject to any provision to the contrary in the constitution, a private company may remove a director by ordinary resolution before the expiration of his or her term, notwithstanding anything in any agreement between the company and the director.
  • However, if the company also wishes to remove the director as an employee of the company, this must be in accordance with the termination provisions of his or her employment contract with the company.
  • The removal of a director will be deemed invalid unless at least one director who is ordinarily resident in Singapore (who may be the sole director) remains on the board.
  • The Accounting and Corporate Regulatory Authority of Singapore (ACRA) should be notified that a director has ceased to hold office within 14 days of said action having taken place.

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.

i. The notice periods for dismissals for fair reasons are as follows: 

  • Dismissal due to lack of capability: notice of 30 calendar days.
  • Reasons related to major faults or misconduct: notice of six calendar days.

In both cases, it is necessary to follow the dismissal procedure provided for employees in general. 

ii. Dismissal due to withdrawal of trust (dismissal without fair reason): no notice.

The following is the legal dismissal procedure provided for employees in general that is applicable for managers:

According to the Constitution, the law offers an employee protection against unfair dismissal, as long as the employee has exceeded the probationary period. These employees may not be dismissed without fair reasons, as expressly provided for by law. If the reason for dismissal is not one of a number of ‘fair reasons’ included in the law, the employee has the right to bring a claim against the employer to receive compensation due to unfair dismissal.

The following are considered fair reasons, as provided for by law, that allow employers to dismiss employees:

iii. Reasons related to capability:

  • The employee loses his physical or mental faculties or becomes suddenly incompetent in a manner detrimental to job performance; the employee performs poorly compared to the average performance of other personnel and the employee; or the unjustified refusal of the employee to undergo a medical examination related to the performance of duties.
  • Court conviction for an intentional crime.
  • Disability.

iv. Reasons related to major faults or misconduct that are specifically provided for in the law:

  • Failure to comply with duties.
  • Decline in performance.
  • Misappropriation or attempted misappropriation of the goods or services of the employer.
  • Disclosure of confidential information or provision of false information that may be detrimental to the employer.
  • Unfair competition.
  • Attendance at the workplace under the influence of alcohol or drugs.
  • Committing violence, severe indiscipline, or intentional damage to the employer’s goods.
  • Unjustified absences of more than three consecutive days or five non-consecutive days and repeated delays.

Nevertheless, according to Peruvian law, the first three months of services constitute the employee’s probationary period. During this time, the employee is not legally protected against dismissal and therefore may be dismissed by the employer without invoking any reason or complying with any formality. 

The law authorises the parties to establish a probationary period of more than three months for managers or directors, whose probationary period can reach up to a maximum of one year.   

No statutory minimum notice period for the removal of directors. Dependent on terms of resolution and can be immediate.

The termination of the director’s employment contract will be in accordance with what is stipulated in the director’s employment contract.

The EA provides that the length of notice in an employment contract should be the same for both the employer and the employee.

2.4 Involvement of works council

No.

Not applicable.

No involvement.

2.5 Involvement of a union

Not applicable.

No involvement.

No involvement.

2.6 Approval of state authorities necessary

No.

Not required.

Not necessary.

2.7 Collective redundancies

Not applicable.

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

Not applicable.

No special rules apply.

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 fair reason is not invoked or the legal formalities for a fair dismissal are not complied with, the manager or managing director has the right to receive payment of compensation for unfair dismissal.  

The manager can demand reinstatement only if he previously held a position that was not qualified as an executive position or a position of trust, provided he is reinstated to the last unqualified position he occupied.  

With regard to unfair dismissal, it must be taken into account that this method of dismissal does not release the employer from a claim to compensation for moral damages, in addition to the compensation for unfair dismissal to be paid to the manager. Although the employee only has the legal right to compensation for unfair dismissal as compensation for termination of the employment contract, recent case law has provided for payment of compensation for moral damages to employees who are subject to unfair dismissal when there is evidence of malicious conduct by the employer.

The removal of the director is invalid and / or ineffective.

In the case of public companies, non-compliance with the announcement obligations referred to above could result in a reprimand and / or sanctions from SGX.

Even if the requirements above are met, a director may sue for damages and compensation for breach of his or her contract of service (i. e. his or her employment agreement with the company) if the provisions for termination as set out in the same are not complied with.

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.

The compensation for withdrawal of trust (dismissal without fair reason) amounts to: 

  1. For employees hired for an indefinite period (provided they have passed the trial period), compensation is equal to one and a half monthly salaries for each full year of service with a maximum of 12 salaries. Fractions of the year are computed proportionally. 
  2. For employees hired for a fixed term (provided they have passed the trial period), compensation is equal to one and a half monthly salaries for each month that is missing so that the contract expires with a maximum of 12 salaries. Fractions of the month are computed proportionally.

In addition to the compensation for arbitrary dismissal provided by law, judges are recently admitting claims for compensation for damages arising from dismissal. Such compensation is generally based on the concepts of emergent damages, loss of profits and moral damages, the amount of which must be determined by the Court. Additionally, judges have recently established the right of fired employees to demand “punitive damages”, the amount of which equals the amount that the employee stopped contributing to the pension system during the time he was laid off.

Any severance pay will be made in accordance with what is provided for in the director’s employment contract. See section 1.10 “Severance pay” for more details.

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.

During the employment contract term, it is forbidden for an employee to compete with the employer in their line of business (this is considered a major fault). After the employment contract is terminated, there is no regulation in this regard. However, a post-contractual non-compete clause can be included, which must be for a set period of time and the employee must also receive adequate economic compensation.

Restrictive covenants (including a non-competition clause) are not valid and will be void unless:

  1. they are deemed by the Singapore Courts to be reasonable between the parties and in the interests of the public;
  2. they seek to protect legitimate proprietary interests; and
  3. are not more extensive than is reasonably necessary to protect such interests.

The burden of proof is on the employer to show that the covenant is reasonable between the parties, whilst the employee bears the burden of proof to show that the covenant is against the public’s interests.

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.

Not applicable.