CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

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.

Generally, it is difficult to terminate an employee without the employee’s consent under Ukrainian law. Valid grounds for termination may be divided into those related to the employee’s breaches of employment duties (“termination with cause on the part of the employee”) and those not related to the employee’s actions (“termination without cause”). Termination is not generally allowed while an employee is on annual or sick leave.

An employer may unilaterally terminate an employee with cause in the following cases:

  • systematic unjustified failure to fulfil employment obligations;
  • unjustified absence from work for more than three hours during one day;
  • appearance at work while under the influence of alcohol or drugs;
  • misappropriation of property;
  • a single gross violation of employment obligations;
  • actions of a company head causing delayed or reduced payment of wages;
  • immediate subordination to a related party contrary to the Ukrainian law “On Preventing Corruption”;
  • actions of an employee entrusted with company assets (cash or property) that result in the loss of the employer’s trust; or
  • immoral conduct.

Termination in most of these cases is regarded as a disciplinary sanction and must be imposed following special procedures prescribed by law. An employer may terminate an employee without cause in the following cases:

  • changes in organisation of work and production (redundancy);
  • employee unsuitability for the job or position due to lack of qualification or poor health conditions;
  • reinstatement of an employee who previously occupied the position;
  • absence from work due to sickness for more than four continuous months;
  • recruitment by the army or mobilization of an employer-natural person during a special period; or
  • the employee’s unsuitability for the job or position is discovered within his / her probation period.

Except when an employee is absent for four months due to sickness, termination without cause is only allowed if the employee cannot be transferred to another position or job.

1.2 Form

The employee must be notified of the dismissal in writing.

In all cases, a decision regarding dismissal must be conveyed in the form of a written order and signed by a duly authorised representative of the employer. The employee is to be provided with a copy of the dismissal order on the last day of his / her employment.

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.

This depends on the grounds for dismissal.

The statutory minimum notice period is two months if the case involves redundancy.

In certain cases (e.g. where there has been a single gross violation of employment duties), notification is not required.

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.

Not applicable unless provided for by a collective bargaining agreement or the internal policies of the employing company.

1.5 Involvement of a union

No involvement for dismissals.

In cases involving redundancies, the employer must notify and consult with the trade union at company level (if such a union operates at the employing company). In some cases, moreover, the employer is required to obtain prior consent from the trade union at company level (if one operates) to terminate the employment of trade union members. Such cases can include redundancy (unless the redundancy is caused by the liquidation of the employing company).

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.

Not applicable.

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.

Currently there are no specific rules for collective redundancies in Ukraine, i.e. the redundancy procedure is the same irrespective of the number of people being made redundant.

In cases of redundancy, the employer must comply with the following notification and consultation requirements:

  • it must inform the trade union at company level (if one such operates within the company) about the redundancies being considered.The notice must be given within three months of the decision on the redundancies being taken, but no later than three months before the redundancies are expected to take place. Given these time requirements, it is advisable to notify the trade union promptly after the decision on redundancies has been taken;
  • it must notify the employees of the redundancy two months in advance;
  • in case of collective redundancy (see definition below), it must notify the State Employment Centre (in this text, the ‘Agency’) of any redundancies being considered, two months in advance;

The applicable law defines “collective redundancy” as a one-time dismissal

or series of dismissals following a decision by the employer made within

i. one month, if

  • ten or more employees have been dismissed from a company employing 20 to 100 individuals; or
  • 10% or more of the workforce have been dismissed from a company employing 101 to 300 individuals; or

ii. three months, if

  • 20% or more of the workforce have been dismissed, irrespective of the total number of staff.

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.

Generally, dismissal without notice by an employer is only possible with respect to certain categories of employees (i.e. the general management of the company) in cases where there has been a serious breach of duty. Also, dismissal without cause and without notice is possible for employees qualifying as company officials (e.g. director) if their corporate mandate is terminated.

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.

Employees are reinstated, and / or awarded continued payment of salary.

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 statutory severance payment of one average monthly salary is only required if the decision regarding the dismissal has been taken by the employer on the following grounds:

  • changes in organisation of work and production (redundancy); or
  • employee unsuitability for the job or position; or
  • reinstatement of an employee who previously occupied the position.

When dismissing a company official in connection with the termination of his / her corporate mandate, a statutory severance payment of six times the employee’s average monthly salary must be paid.

In all cases of dismissal, an employer must pay a terminated employee all payments due under his / her employment agreement (e.g. salary and compensation for any of the employee’s annual vacation accumulated but unused during his / her whole term of employment with the employing company). Voluntary severance payments are also subject to negotiations between employer and employee. These are especially common if the justification for a dismissal may be doubtful.

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 covenants are not enforceable in Ukraine.

1.12 Miscellaneous

Not applicable.

Certain categories of employees cannot be dismissed by an employer without their prior consent. These “protected” employees include:

  • pregnant women; and
  • women with children under the age of three, or under the age of six if a registered medical practitioner certifies that home care is necessary; and
  • single parents or the legal guardians of a child under the age of 14 or a handicapped child.

The law only allows “protected” employees to be dismissed if the employer is liquidated without legal succession. Under these circumstances, the law requires that they be paid their average salaries for three months following the termination.

2. Dismissal of managing directors

The legal requirements applicable to dismissing managing directors of Ukrainian companies are the same as for all other employees, except for the special terms of dismissal applicable to them if their corporate mandate is terminated. Ukrainian law allows a company to enter into an employment contract with the managing director. An employment contract is a specific form of employment agreement which, unlike a regular employment agreement, may provide additional grounds for dismissal comparable to those available under the law. As a result, a managing director may also be dismissed on grounds and subject to procedures provided by his / her employment contract (if such is concluded). In June 2018 the new Law of Ukraine on Limited and Additional Liability Companies (New LLC Law) came into effect presenting certain innovations for regulating the formation of a company management body (including general managers). Although the New LLC Law leaves open the theoretical possibility of appointing someone to head such a management body based on either an employment or a civil law contract, and presents additional grounds for termination of employment, the wording of the current version of the New LLC Law is vaguely drafted in this respect.

Therefore, we may only speculate on these innovations until the relevant court practice becomes available and brings more certainty.

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 main reason for dismissal of a managing director is a termination of his / her corporate mandate. Additional grounds for dismissal of a managing director are described below. Such grounds may be divided into those related to the managing director’s breaches of employment duties (“termination with cause”) and those not related to the managing director’s actions (“termination without cause”). Termination is not generally allowed while a managing director is on annual or sick leave.

An employer may unilaterally dismiss a managing director with cause in the following cases:

  • systematic unjustified failure to fulfil employment obligations;
  • unjustified absence from work for more than three hours during one day;
  • appearance at work while under the influence of alcohol or drugs;
  • misappropriation of property;
  • a single gross violation of employment obligations;
  • actions of a managing director causing delayed or reduced payment of wages;
  • immediate subordination to a related party contrary to the Ukrainian law ‘On Preventing Corruption’;
  • actions of a managing director entrusted with company assets (cash or property) that result in the loss of the employer’s trust (if applicable); or
  • immoral conduct.

Termination in most of these cases is regarded as a disciplinary sanction and must be imposed following special procedures prescribed by law.

An employer may terminate a managing director without cause in the following cases:

  • termination of a corporate mandate of a managing director;
  • termination on grounds provided in the managing director’s employment contract;
  • additional general grounds for termination as described below:
    • changes in organisation of work and production (redundancy);
    • managing director’s unsuitability for the job or position due to lack of qualifications or poor health;
    • reinstatement of an employee who previously occupied the position;
    • recruitment by the army or mobilisation of an employer-natural person during a special period;
    • managing director’s unsuitability for the job or position discovered within his / her probation period;
    • absence from work due to sickness for more than four continuous months.

Termination without cause (except when a managing director is absent for four months due to sickness) is only allowed if a managing director cannot be transferred to another position or job.

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.

In all cases, a decision regarding dismissal of a managing director must be conveyed in written form and approved by the highest governing body of the employer (e.g. by means of shareholder's/supervisory board’s resolution for joint-stock companies or resolution of participants for limited liability companies). The managing director is to be provided with a copy of the dismissal decision on the last day of his / her employment.

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.

This depends on the grounds for dismissal.

The statutory minimum notice period is two months if the case involves redundancy.

In certain cases (e.g. where there has been a single gross violation of employment duties or the mandate of a managing director is terminated), notification is not required.

2.4 Involvement of works council

No involvement.

No involvement.

2.5 Involvement of a union

No involvement.

In cases involving redundancies, the employer must notify and consult with the trade union at company level (if such a union operates at the employing company). In some cases, moreover, the employer is required to obtain prior consent from the trade union at company level (if one operates) to terminate the employment of trade union members. Such cases can include redundancy (unless the redundancy is caused by the liquidation of the employing company).

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 necessary.

2.7 Collective redundancies

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

Dismissal without notice by an employer is only possible with respect to the general management level of the company in cases where there has been a serious breach of duty. Also, dismissal without cause and without notice is possible in respect to a managing director (as he / she qualifies as a company official) if his / her corporate mandate is terminated.

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.

The managing director is reinstated, and / or awarded continued payment of salary.

2.10 Severance pay

Not applicable.

If a managing director is dismissed in connection with the forcible termination of his / her corporate mandate, a statutory severance payment of six times the managing director’s average monthly salary must be paid.

In turn, a statutory severance payment of one average monthly salary is required if the decision regarding the dismissal has been taken by the employer on the following grounds:

  • changes in the organisation of work and production (redundancy); or
  • managing director’s unsuitability for the job or position; or
  • reinstatement of an employee who previously occupied the position.

In all cases of dismissal, an employer must pay the managing director all payments due under his / her employment contract / agreement (e.g. salary and compensation for any of the managing director’s annual vacation accumulated but unused during his / her whole term of employment with the employing company). Voluntary severance payments are also subject to negotiations between the employer and managing director. These are especially common if the justification for a dismissal is in doubt.

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.

Post-contractual non-competition covenants are not generally enforceable in Ukraine.

On the other hand, the New LLC Law provides a set of limited non-competition clauses in relation to a managing director. For instance, a managing director may not conduct business activities as an individual entrepreneur within a field of activity of his / her employer without a consent from the highest governing body of the employer.

2.12 Miscellaneous

Not applicable.

Not applicable.