CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

In Belgium, a distinction is made between blue-collar workers and white-collar workers. Blue-collar workers provide manual labour; white collar workers provide intellectual labour.

The main difference between these two statutes were the lengths of the notice periods, which were equalised on 1 January 2014.

Today, the distinction between blue-collar workers and white-collar workers is still made in the method of payment of remuneration, the calculation of notice period in case of employment before 1 January 2014, and some working conditions.

1.1 Reasons for dismissal

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.

The Belgian legal system does not differentiate specific reasons for dismissal. The main distinction is between a “regular” dismissal with compensation (period of notice or indemnity in lieu of notice) and a dismissal with serious cause (summary dismissal). A dismissal because of business reasons falls under the normal dismissal with compensation.

According to Collective Bargaining Agreement n° 109, the employer does not have to state the motives for a regular dismissal on his own initiative, but only if the employee makes a written request.

If an employee requests the employer’s motive for the dismissal, the employer needs to prove that the dismissal was “based on reasons which are related to the capabilities or the behaviour of the worker or which are based on the operational necessities of the company… and which would have been decided upon by a normal and reasonable employer”.

If the employer fails to provide this proof, the dismissal will be considered a “clearly unreasonable dismissal” and the employee will then be entitled to a gross indemnity equal to between three and a maximum 17 weeks’ remuneration (at the determination of the labour courts).

1.2 Form

The employee must be notified of the dismissal in writing.

Not applicable.

1.3 Notice period

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.

Notice must be given in writing and must comply with the mandatory language requirements applicable in Belgium.

The employer gives notice to perform, either by registered mail or through a bailiff (“gerechtsdeurwaarder” / ”huissier de justice”). If the employee gives notice to perfom, he can also request the employer to sign a duplicate of the notice letter. The notice letter must specify the length of the notice period and the day on which the notice period begins.

For termination with immediate effect, there is no specific form of notice (except for a dismissal for serious cause). Nevertheless, a registered letter or a letter signed for receipt by the employee is recommended for reasons of proof.

Termination of an employment contract of unlimited duration

Employment agreement with performances before 1 January 2014

For the determination of the applicable notice period, two distinct periods will be considered:

  1. before 1 January 2014, and
  2. on or after 1 January 2014.

The notice period includes results before and after 1 January 2014.

Period before 2014

For white-collar workers employers to give notice, seniority acquired before 1 January 2014 will qualify for a notice period of:

  1. either a notice of three months per started period of five years of seniority for white collar-workers earning EUR 32,254 gross or less; or
  2. one month per year of service for white-collar workers earning more than EUR 32,254 gross with a minimum of three months.

For blue-collar workers, the following scheme is applicable for the calculation of the first part of the notice period (calendar days):

In certain industry sectors, different notice periods were applicable for blue-collar workers. These periods need to be applied in the first step of the calculation.

The notice period if the white-collar worker gives notice is:

  1. 1.5 months in the first five years of employment and three months  in case of a seniority higher than five years for white-collar workers earning EUR 32,254 gross or less; or
  2. 5 months per period of five years of service with a maximum of 4.5 months for white-collar workers earning more than EUR 32,254 gross or a maximum of 6 months for white-collar workers earning more than EUR 64,508 gross.

If the maximum (3, 4.5 or 6 months) referred to above is reached, the notice period corresponds to this maximum and, thus, it is not necessary to calculate the notice for the period from 1 January 2014 (see below).

Period from 1 January 2014

For the period as from 1 January 2014, fixed notice periods based on the seniority of the employee (white and blue-collars)  – as from that date – apply.

Attention: if notice is given by the employee, the sum of the notice period before 1 January 2014 and as from 1 January 2014 is limited to 13 weeks.

Employment agreement with performances from 1 January 2014

For the termination of employment agreements with performances as of 1 January 2014, the aforementioned notice periods, applicable for the second part of the calculation, will apply. Exceptions were made for some industries (e.g. construction sector).

Agreements on the notice period

Since 1 January 2014, individual negotiations before the termination of the employment contract have no longer been possible when dealing with the notice period or indemnity in lieu of notice for white-collar workers. However, valid agreements on termination modalities, existing on 31 December 2013 and concluded at an individual level remain valid and enforceable.

Since 1 January 2014 it has only been possible to deviate from the legal notice periods by means of a company-level collective labour agreement.

Following termination, parties may negotiate the notice period or the indemnity in lieu of notice.

Special terms

Different notice periods apply in case of counter-notice by the employee whose employment contract was previously terminated by the employer and who wishes to leave the employer earlier for a new job. These notice periods are limited to four weeks.

If notice is given to an employee in order to terminate the employment agreement from the first day following the month in which the employee attains the statutory pension age, the basic terms apply with a maximum notice period of 26 weeks.

Protected employees

Some categories of employees have special statutory protection against dismissal and are entitled to additional compensation if dismissed (e.g., employees that filed a harassment or discrimination complaint, employees with a political mandate, employees on parental leave).

These categories of protected employees may not be dismissed for reasons related to the grounds on which they are protected. In most cases, the employee can claim damages equal to six months’ remuneration on top of normal notice requirements when the employer is unable to prove that the reasons for the termination are unrelated to the grounds for the protection.

Incapacity to work

If employee is absent due to incapacity to work after the notice of termination has been given, the employer may immediately terminate the employment agreement upon payment of indemnity in lieu of notice corresponding to the remaining notice period. In such case and under certain conditions, the period covered by the guaranteed salary is deducted from the remaining notice period.

Termination of an employment contract of limited duration (fixed-term or well-defined job)

Fixed-term contracts expire automatically on the date agreed by the parties; consequently, no notice of termination needs to be given or indemnity offered in lieu of notice.

If the parties continue performances after the employment contract term has expired, the contract will be subject to the same rules as an employment for unlimited duration.

A fixed-term contract can also be terminated before the agreed term unilaterally by either party or even during a period of incapacity to work.

Since 1 January 2014, each party has been able to terminate the contract by giving notice during the first half of the agreed term of the contract (limited to a maximum of 6 months); the notice period has to end within this first half of the agreed term (or the period of 6 months referred to above).

Notice must be given in the same manner as for an employment agreement for unlimited duration and will also start to run from the Monday following the week in which notice is given. The periods of notice to be given are the same as those for termination of an employment agreement for unlimited duration.

For successive contracts for a limited period, this rule can only be used for the first contract.

If the contract ends after this first half of the agreed term, the party terminating will have to pay an indemnity in lieu of notice. This amount will be equal to the amount of remuneration that would have been paid until the end of the contract, although limited to twice the amount of the indemnity in lieu of notice that should have been paid had an employment agreement for unlimited duration been offered.

1.4 Involvement of works council

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

The main role of the works council is to be informed and consulted about a range of economic and employment issues, although it does have some limited decision-making powers.

The employer must inform and consult the works council on cases of mergers, closures, business transfers, large-scale redundancies, etc.

Furthermore, the works council has a decisive competence in setting up the general criteria for collective dismissal.

1.5 Involvement of a union

No involvement for dismissals.

The central role of the trade union delegation is to negotiate new agreements and ensure that existing ones are complied with. The trade union delegation also deals with disputes between the employer and the employees, both on an individual and collective basis.

1.6 Approval of state authorities necessary

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.

Collective dismissal and closure

There is no approval of state authorities necessary in case of collective dismissal and closure.

However, the sub-regional employment service and the federal employment services must be informed about the intention to proceed with a collective dismissal and about the outcome of the information and consultation procedure with the works council.

Protected employees

Employee members of the works council or the health and safety committee can only be dismissed for “serious cause” or for economic or technical reasons. In both cases the employer must seek authorisation in advance, either from the labour court in the case of “serious cause” or from the competent joint committee where the reasons are economic or technical.

1.7 Collective redundancies

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.

Specific rules apply to collective dismissals or closures. The employer must respect the information and consultation procedure prior to the decision to proceed with a collective dismissal or closure.

The employees will be entitled to specific indemnities in case of collective dismissal with or without closure. Although there is no legal obligation to do so, it is quite common for social partners to negotiate and conclude a social plan.

Furthermore, the employer must take measures to re-activate the employees affected by the collective dismissal.

1.8 Summary dismissals

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.

For a dismissal with a serious cause, the contract must be terminated within three working days after the day on which the act constituting the serious cause came to the employer’s knowledge. Dismissal for serious cause should preferably be notified by registered letter.

Additionally, the employee must also be given written notice with the reasons for the termination, ultimately by registered letter within three working days after the dismissal for serious cause.

The termination must be carried out by a person authorized to dismiss the employee.

1.9 Consequences if requirements are not met

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.

In general, Belgian employment law favours a complementary indemnity (payment of damages) rather than an obligation to reinstall the employee.

1.10 Severance pay

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.

A party that terminates the employment contract without notice must pay compensation equal to the current annual remuneration (including benefits) corresponding to the notice period that should have been respected.

According to Belgian employment law, different non-competition clauses may apply.

1.11 Non-competition clauses

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.

General non-competition clause

A non-competition clause in the employment contract of an employee, not a sales representative, is only valid if:

  1. the scope is limited to similar activities and to competing companies; and
  2. the scope is limited to a well-defined geographic area in which competition may exist (limited to the Belgian territory);
  3. the duration of the clause does not exceed 12 months after the termination of the employment agreement; and
  4. the clause provides for the payment of an indemnity by the employer to the employee equal to at least 50% of the gross remuneration that the latter could have earned during the duration of the non-competition clause.

The non-competition clause is only enforceable if:

  1. it is a written agreement compliant with the mandatory language requirements applicable in Belgium;
  2. certain remuneration thresholds are met;
  3. all the validity conditions are fulfilled (territory, duration, similarity of activities and financial compensation) and
  4. the employment agreement is terminated (i) after the first six months of the execution of the employment contract and (ii) by the employee without serious cause or by the employer for serious cause.

The employer may waive the application of the clause within 15 days of the end of the employment. If the application of the clause is not waived within these 15 days, the employer must pay a non-competition indemnity to the former employee. However, the judge can mitigate the effects of a non-competition clause that is contrary to the public order.

International scope and / or R&D Department

The same conditions as the general non-competition clause apply, except for:

  1.  the geographical scope is not limited to Belgian territory,
  2. the employee who must have acquired a special knowledge in industrial or commercial matters;
  3. the duration may exceed 12 months,
  4. it is also valid in case of termination within the first six months of the execution of the employment contract or in the case of termination by the employer without serious cause. However, such derogations must be expressly provided for in a written agreement.

There is an important point regarding the waiver of a non-competition clause with an international scope. In the event of a dismissal subject to a notice period, the employer will have to inform the employee at the time of notification of any intention to effectively apply the clause at the end of the notice period. As a second step, no later than 15 days after the final termination of the employment contract, the employer will then have to waive the non-competition clause if he/she still wishes to do so. If these two steps are not fulfilled, the employer will have to pay the non-competition indemnity to the former employee.

Sales representatives

The same conditions as the general non-competition clause apply, except that   

  1. the geographical scope is limited to the area of activities,
  2.  the employer does not need to pay a lump-sum compensation,
  3. it concerns similar sales activities.
After termination of the employment

Unlike non-competition clauses included in the employment contract, post- contractual non-competition covenants are not subject to specific conditions. However, their duration, as well as the penalty in case of a breach, must be reasonable in the circumstances (seniority, salary, etc.).

1.12 Miscellaneous

Not applicable.

Not applicable.

2. Dismissal of managing directors

On 28 February 2019, the new Belgian Companies and Associations Code was adopted by the Belgian Chamber of Representatives. This reform has had various implications for the status of directors, which will be examined below.

The Belgian Companies and Associations Code confirms explicitly that company directors operate on a self-employed(independent) basis. In certain company forms, the board of directors can also delegate the powers related to the day-to-day activities of the company to a manager in charge of daily management. This manager can be a third party or a director of the company. If a director is appointed in charge of the daily management, this mandate is called “managing director”.

The daily management can be performed either on a self-employed basis (with or without a separate service agreement) or as an employee. Essential for the daily management as an employee is the relationship of subordination (i.e. power to decide what an employee must do and how it must be done). We refer to part 1 of this Guide for all aspects of the employment contract.

In this Annex, we examine the situation of a company director as well as a self-employed manager in charge of daily management. Both mandates can either be performed directly by a natural person or through a legal entity. In case of the latter, the legal entity must appoint a natural person  as legal representative who exercises the mandate and duties in the name and for the account of the legal entity.

2.1 Reasons for dismissal

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.

The mandate of a director of a public limited company (“SA / NV”) can in principle be revoked “ad nutum” (immediately, without indemnity and without having to give a reason for the dismissal). Henceforth, the revocability “ad nutum” is no longer a rule of public order, but a supplementary rule. In other words, this means that the revocability "ad nutum" remains the default rule, unless the bylaws, the terms of appointment of a director, or a management contract state otherwise and provide for a period of notice or an indemnity in case of dismissal.

However, in any case, the General Shareholders’ Meeting retains its right to revoke “ad nutum” a director if there are "justified grounds” for doing so. The Code does not define this concept. According to the preparatory works, it includes, for example, a serious criminal offence in the professional sphere or a tax fraud. Unlike the summary dismissal in the case of employees (see section 1), strict timing does not apply to dismissal under justified grounds. In any case, it is important to note that the director can always challenge “justified grounds” and launch proceedings before the Enterprise Courts.

The same principles were already applied for the private company with limited responsibility (‘BV / ‘SRL’) and will continue to apply.

For daily management, the procedure for the nomination and dismissal can be stipulated in the company’s bylaws, but in practice it is often regulated in a separate service agreement. If the procedure for dismissal is not specified, the mandate can be revoked “ad nutum” and no reason needs to be given.

2.2 Form

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.

The mandate of a director can be revoked by decision of the General Shareholders’ Meeting. The mandate of a manager in charge of the daily management can be revoked by decision of the board of directors.

The revocation of both a director or a manager in charge of daily management must be published in the Official Belgian State Gazette (‘Belgisch Staatsblad’ / ‘Moniteur Belge’).

2.3 Notice period

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.

As stated above, the principle of the revocability "ad nutum" remains the default rule, unless the bylaws, the terms of appointment or a separate agreement stipulate otherwise. The same  principles apply without distinction to the NV/SA and the BV/SRL.

For the daily management, the procedure for the nomination and dismissal can be stipulated in the company’s bylaws or in a separate service agreement.

If nothing is specified therein, the mandate for the daily management can be revoked without any notice period.

2.4 Involvement of works council

No involvement.

In companies listed on the stock market, the termination indemnity of the executive directors, the members of the board committee and other persons in charge of daily management may not exceed 12 months’ remuneration. The Belgian Company Code permits derogations from this rule, provided that the Works Council (or in its  absence, the Committee for Prevention and Protection at work or the union delegation) is notified beforehand and the prior consent of the General Shareholders’ Meeting is obtained. If a departure fee of more than 18 months' remuneration is granted, a motivated advice from the Compensation Committee is also required, in addition to the approval by a General Shareholders’ Meeting.

2.5 Involvement of a union

No involvement.

No involvement.

2.6 Approval of state authorities necessary

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 required.

2.7 Collective redundancies

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

Not applicable.

2.9 Consequences if requirements are not met

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.

A company is bound by the actions of a dismissed company representative until and unless such a dismissal has been officially published in the Official Belgian State Gazette. However, if this protection is beneficial to third parties, it cannot be invoked by third parties that know that the company representative has already been dismissed.

2.10 Severance pay

Not applicable.

There is no mandatory severance pay, unless stated otherwise in the bylaws of the company. Parties may agree upon severance pay in a separate agreement (when such an agreement is permitted).

2.11 Non-competition clauses

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.

It is possible to agree upon a non-competition clause. 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 or the clause may be mitigated  by the court.

2.12 Miscellaneous

Not applicable.

Not applicable.