The Employment Relationship Act (‘Zakon o delovnih razmerjih’ or ‘ZDR-1’) distinguishes between ordinary and extraordinary termination of the employment contract. Ordinary termination is termination with notice period, which is only possible due to a business reason, reason of fault, incapacity to work, inability to work due to disability, or the unsuccessful completion of a probationary period, any of which render continuation of the employment under the conditions of the existing employment contract impossible.
A business reason occurs when the performance of certain work is no longer required under the conditions of the current employment contract due to economic, organizational, technological, structural or similar reasons on the employer’s side.
Reasons of incapacity are: non-achievement of expected work results because the worker has failed to carry out the work in due time, professionally and with due quality, or non-fulfilment of the conditions for carrying out work as stipulated under the law and executive regulations issued on the basis of law due to which the worker fails to fulfil or cannot fulfil the contractual or other obligations arising out of the employment relationship.
Extraordinary termination is termination without notice period and is only possible if:
- it is based on one of the exhaustively provided reasons in ZDR-1; and
- taking into account all the circumstances and interests of employer and employee, continuation of the employment until the end of the notice period or until the expiry of the employment contract is considered impossible; and
- it is given within 30 days of establishing the reason for extraordinary termination, and within six months of the occurrence of that reason.
According to the Constitution, the law offers employees protection against unfair dismissal. This protection not only encompasses union members or any given class of workers, but all those who work at least four hours a day and have exceeded the probationary period. These employees may not be dismissed without fair reasons, as expressly provided for by law. If the reason for dismissal is not one of a number of ‘fair reasons’ included in the law, an employee has the right to choose one of the following alternatives:
- Bring a claim against the employer for reinstatement; or
- Bring a claim against the employer to receive compensation due to unfair dismissal.
The following are considered fair reasons, as provided for by law, that allow employers to dismiss employees:
i. Reasons related to capability:
- The employee loses his physical or mental faculties or becomes suddenly incompetent in a manner detrimental to his job performance; the employee performs poorly compared to the average performance of other personnel and the employee; or the employee unjustifiably refuses to undergo a medical examination related to the performance of duties.
- Court conviction for an intentional crime.
ii. Reasons related to major faults or misconduct that are specifically provided for in the law:
- Failure to comply with duties.
- Decline in performance.
- Misappropriation or attempted misappropriation of the goods or services of the employer.
- Disclosure of confidential information or provision of false information that may be detrimental to the employer.
- Unfair competition.
- Attendance in the workplace under the influence of alcohol or drugs.
- Committing violence, severe indiscipline, or intentional damage to the employer’s goods.
- Unjustified absences of more than three consecutive days or five non-consecutive days and repeated delays.
Nevertheless, according to Peruvian law, the first three months of services constitute an employee’s probationary period. During this time, the employee is not legally protected against dismissal and therefore may be dismissed by the employer without invoking any reason or complying with any formality.
The law authorises parties to establish a probationary period of a maximum of six months for qualified employees or persons of trust who work closely with senior staff and have access to the company’s confidential information. In these cases, the term of the probationary period in the contract must reflect the requirement for training, adjustment requirements or the position’s level of responsibility.