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

Broadly speaking, under Spanish employment law dismissals must be based on disciplinary reasons or on objective reasons.

Disciplinary dismissals must be based on gross misconduct, defined as a significant and intentional breach of employment duties. This may include:

  1. Repeated and unjustified absences from work,
  2. Indiscipline and disobedience at work,
  3. Verbal or physical offences against the employer or any person rendering services in the company or their relatives residing with them,
  4. Breach of contractual good faith and abuse of trust at work,
  5. Voluntary and continued lack of normal or agreed work performance,
  6. Regular drunkenness or intoxication if it negatively affects the work performed, and
  7. Harassment due to racial or ethnic origin, religious beliefs or ideology, disability, age or sexual orientation and sexual harassment against the employer or any person rendering services in the company.

The applicable Collective Bargaining Agreement may establish additional lawful reasons for disciplinary dismissal.

Alternatively, an employee may be dismissed on objective grounds such as:

  1. Unexpected incompetence after hiring,
  2. Inability to adapt to technical changes in his / her job position,
  3. Redundancy due to economical, technical, organisational or production- related reasons.

In cases of permanent employment contracts, when the purpose of the employment is to provide services in relation to a public programme and there is a funding shortfall.

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.

Both disciplinary and objective dismissals require certain formalities.

Disciplinary dismissals require written notification to the employee detailing:

  1. the facts and type of misconduct upon which the dismissal is based, and
  2. the effective date of termination.

The applicable Collective Bargaining Agreement may establish additional formal requirements. Likewise, there may be additional requirements depending on the type of employee affected. For instance, Spanish Law also sets forth the obligation to initiate contradictory proceedings in relation to dismissals affecting the employees’ legal representatives.

Objective dismissals include the following requirements:

  1. Delivering a written notification or dismissal letter to the employee describing in detail the objective reasons upon which the termination is based, as well as the effective date of termination of the employment contract,
  2. Granting 15 calendar days’ notice (which may be substituted by the payment of salaries in lieu),
  3. Paying the legal severance of 20 days’ salary per year of service, capped at 12 months’ salary when communicating the dismissal, and
  4. Delivering a copy of the dismissal letter to the employees’ representatives.

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.

Disciplinary dismissal does not require any notice period.

The Law stipulates a 15-calendar-day notice period for dismissals due to objective causes. The employer may substitute this obligation by paying salaries in lieu of notice.

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 every dismissal taking place in the company based on disciplinary grounds or for economical, technical, organisational or production-related reasons.

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’.

The union has a right to be heard prior to the dismissal of an employee belonging to the union.

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.

Neither disciplinary dismissal nor individual objective dismissal require any approval from the state authorities.

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.

‘Collective Redundancies’ are dismissals executed by an employer for economical, technical, organisational or production-related reasons where, over a period of 90 days, the number of redundancies is:

  • At least ten in establishments (provided they employ more than 20 employees) or companies employing up to 100 workers; or
  • At least 10 % of the workforce in establishments or companies employing at least 100 but fewer than 300 workers; or
  • At least 30 in establishments or companies employing 300 workers or more.

Although under Spanish labour regulations only the company as a whole is considered in order to verify the number of redundancies implemented for the collective redundancies procedure to apply, according to some judicial precedents from the Court of Justice of the European Union the thresholds above are considered in both the company as a whole and the relevant establishment or workplace in which more than 20 employees are employed.

Spanish employment law states that a collective redundancy may also refer to the dismissal of every member of staff when the company employs more than five workers and ceases its operations due to financial, technical, organisational or production-related reasons.

The collective redundancy procedure starts with a consultation period with the employees’ representatives which may not last any longer than one month (15 days in companies with fewer than 50 employees). Although the parties are bound to negotiate in good faith, this does not entail the obligation to reach an agreement to implement the dismissals.

The Employment Authorities must also be notified about the start and result of the collective redundancy procedure.

If the parties do not reach an agreement during the consultation period, the employer may implement the dismissals. If this happens, employees are entitled to receive compensation of 20 days’ salary per year of service up to a maximum of 12 months. However, the employees have the right to challenge the dismissal before the Labour Courts.

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.

Not applicable. Disciplinary dismissals with immediate effects are similar.

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.

Disciplinary dismissals and objective dismissals may be declared unfair if the legal requirements are not met and / or the termination is not grounded on fair reasons.

Unfair dismissal entitles the employee to receive compensation or to be reinstated to his / her previous position with the retrospective payment of salaries.

On the other hand, disciplinary / objective dismissals may be declared null and void if:

  1. The dismissal breaches constitutional rights of the employee or is discriminatory; or
  2. The dismissal is not grounded on fair grounds and / or the formal requirements were not met if the dismissal affects an employee under a situation of special protection against dismissal:
    1. the dismissal takes place during pregnancy, maternity or paternity leave and child adoption, foster care, guardianship for adoption purposes, risk during pregnancy or breastfeeding, sick leaves caused by pregnancy, birth or breastfeeding, time off for breastfeeding or hospitalization of the child after birth, or an extended leave of absence to take care of a child;
    2. the dismissal affects an employee whose working time has been reduced to take care of children;
    3. the dismissal affects an employee suffering gender-based violence whose working time has been reduced or reorganised given this condition; or
    4. the dismissal affects the employees after the suspension of the employment contract due to maternity, paternity, adoption, fostering or guardianship within the nine months following the child’s birth, adoption, foster care or guardianship.

Collective redundancies are also void if the legal procedure is not followed.

The consequence of a void dismissal is the reinstatement of the employee in the company and the retrospective payment of salaries.

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.

In cases of justified and fair objective dismissals or collective redundancies the minimum severance pay is 20 days’ salary per year of service capped at 12 months. In addition, employees are entitled to 15 days’ notice, which can be substituted by payment of salaries in lieu.

An unfair dismissal results in a severance pay of 45 days’ salary per year of service until 12 February 2012 and 33 days’ salary per year of service from 12 February 2012 capped at 24 months’ salary or at the severance accrued as of 12 February 2012, if higher, with a cap of 42 months’ salary.

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 it is forbidden for an employee to compete with his / her employer. Additionally, both parties may agree full dedication in exchange for monetary compensation.

A post-contractual non-compete clause may also be included in the contract. The following limitations and requirements apply:

  • The obligation may not last longer than two years for most qualified employees and six months for other workers after the termination of the employment contract.
  • The employer must have an effective industrial or commercial interest in such non-compete obligation, and
  • The employee must receive adequate economic compensation.

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.

2. Dismissal of managing directors

Under Spanish law, managing directors and other members of the board of directors have a commercial relationship with the company and, therefore, are beyond the scope of employment law. The table below deals with ‘senior executives’, who have a special employment relationship governed by Royal Decree 1382 / 1985 of 1 August. It should be noted that senior managers are exclusively those who exercise powers inherent to the ownership of the company, with independent authority (reporting directly to the board of directors) and full responsibility for the company’s general objectives.

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’)).

Disciplinary dismissals must be based on gross misconduct, defined as a significant and intentional breach of employment duties.

On the other hand, the employment contract of senior executives may be terminated by withdrawal, where no reason is required (lack of confidence).

Likewise, the contract may be terminated based on legal grounds and following the legal procedures set out in the Spanish Workers’ Statute for common employees (e.g. objective dismissal based on economical, technical, organisational and production-related grounds).

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.

Notwithstanding the type of termination, it is necessary to notify the senior executive of the employer’s decision in writing. In the event of dismissal, the employer must explain the reasons for termination and state the date on which it will take effect.

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 is required in case of disciplinary dismissal.

In case of withdrawal, by contrast, senior executives are entitled to three months’ notice unless otherwise agreed up to six months. The employer may substitute this obligation with the payment of salary in lieu.

2.4 Involvement of works council

No.

No involvement.

2.5 Involvement of a union

Not applicable.

No involvement.

2.6 Approval of state authorities necessary

No.

Not applicable.

2.7 Collective redundancies

Not applicable.

Common regulations shall apply.

2.8 Summary dismissals

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).

In the event of a disciplinary dismissal or withdrawal, failure to comply with the formal requirements above may lead to the dismissal being declared unfair.

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.

Disciplinary dismissal: if the dismissal is declared or acknowledged as unfair or wrongful, the senior executive is entitled to severance pay of 20 days’ salary in cash per year of service, with a maximum of 12 monthly payments, unless otherwise agreed in the employment contract.

Withdrawal: severance of seven days’ salary in cash per year of service, with a maximum of six monthly payments, unless otherwise agreed in the employment contract.

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.

  1. Non-compete clause during the term of the employment contract: Senior executives cannot enter into employment contracts with other companies unless they receive prior authorisation from their employer or by way of written agreement.
  2. Non-compete clause after termination of the employment contract: it can be agreed at any time of the relationship, or even upon termination.

A non-compete clause after termination of the employment contract can be agreed at any time of the relationship, or even upon termination.

The following limitations and requirements apply:

  • the obligation may not last longer than two years; and
  • the employer must have an effective industrial or commercial interest in such a non-compete obligation; and
  • the employee must receive adequate economic compensation in exchange for the non-compete obligation.

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.