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

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

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

There are two 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 employee must be notified of the dismissal in writing.

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

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

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.

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

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

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

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

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

The 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

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

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

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

No involvement.

1.5 Involvement of a union

No involvement for dismissals.

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

No involvement.

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.

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

Not necessary.

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.

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

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

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.

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

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

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

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

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.

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

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

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 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.

An employee with an open-ended contract who has two years’ continuous service with the same employer (and is not being dismissed due to an intentional breach of contractual obligation) is entitled to a severance payment. The statutory minimum severance payment is calculated by multiplying one-third of the average monthly salary in the preceding three months by the number of years’ continuous service with that employer. The severance payment is capped at six times the average monthly salary, unless otherwise provided for by law, by-law, collective agreement or work contract

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

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

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

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

Independent consideration is required for a non-competition clause.

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

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

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

Not applicable.

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

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

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

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

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

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

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

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.

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

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

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

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 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.

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

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

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

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

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

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 involvement.

No involvement.

No involvement.

2.5 Involvement of a union

No involvement.

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.

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

Not necessary.

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 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.

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

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

The 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

Not applicable.

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

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

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.

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

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

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

Not applicable.

Not applicable.

Not applicable.