CMS Expert Guide to employment termination law and legislation

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1. Dismissal of employees

1.1 Reasons for dismissal

A claim for unfair dismissal can be made if the reason for dismissal was not one of a number of ‘fair reasons’ (e.g. conduct, capability, "some other substantial reason", statutory ban or redundancy).

Most employees need a particular length of service to bring a claim for unfair dismissal. At present this is two years’ service. However, all employees can bring a claim for unfair dismissal if the reason for dismissal is deemed to make the dismissal automatically unfair (e.g. for whistleblowing or for family reasons such as dismissals for reasons connected to pregnancy, parental leave, or requests for flexible working).

Even if the dismissal is deemed to be for a fair reason, to avoid a successful claim for unfair dismissal the employer must still follow a fair procedure and act reasonably in dismissing the employee.

If the reason for the dismissal involves discrimination against the employee (because of a protected characteristic such as sex, race, age or disability), employees may make a discrimination claim irrespective of their length of service.

Employees with two years of service have the right to request a written statement of reasons for dismissal. Employers must provide the statement within 14 days of the request.

Irrespective of length of service, employees dismissed during pregnancy or statutory maternity or adoption leave are automatically entitled to a written statement of reasons for dismissal without having to request it.

The reasons for dismissal must be provided if a contract is terminated without notice or if a contract of unfixed duration is terminated with notice. The reason must be real and specific, so the employee can easily understand the grounds for dismissal. The reasons for termination with notice may be attributable to the employee (e.g. non-performance or improper performance of the employee’s duties), or not attributable to the employee (e.g. redundancy). The Polish Labour Code does not list such reasons.

Termination without notice (summary dismissal) may be justified for a number of reasons, but is only permitted when certain statutory conditions are met.

In the remaining case, involuntary termination does not require justification.

1.2 Form

Employees may be dismissed orally or in writing. In misconduct and capability dismissals the ACAS Code of Practice states that the employee should be invited to attend a meeting to explain their version of events. A letter should then be sent to confirm the reason for the dismissal and the date of dismissal in writing to avoid any dispute over the effective date of termination. A right of appeal should be offered. Failure by the employer to follow the Code of Practice does not give an employee a remedy for breach. However in the event that an unfair dismissal claim is successful and there has been non-compliance with the Code the tribunal has the power to increase the award of compensation by up to 25%.

Similar rules apply to both ordinary termination with notice and summary dismissal without notice.

The employee must be served with the original letter of dismissal, and not  an electronic file, e-mail, fax or photocopy. The letter of dismissal must be  in Polish and signed by a person authorised to act on behalf of the company. It is possible to request that the employee signs other language versions of the letter in addition to the Polish version. The letter of dismissal must include information about the employee’s right to appeal to a labour court. The deadline for an employee to appeal against enforced dismissal is 21 days.

1.3 Notice period

There is a statutory minimum notice period of between one and 12 weeks, dependent on length of service.

The contract of employment can provide for a longer notice period. Failure by the employer to comply with the contractual notice period can result in a claim for ‘wrongful dismissal’.

Statutory notice periods vary depending on the type of employment agreement and the length of service with a given employer.

For a contract of unfixed duration and a fixed-term contract, the notice period is:

  1. two weeks for an employee with less than six months’ service; or
  2. one month for an employee with at least six months’ but less than three years’ service; or
  3. three months if the employee has been employed for three years or more.

Probationary period employment contracts have shorter notice periods, of three working days to two weeks, depending on the agreed length of the probationary period. Polish law recognises probationary period contracts as a separate type of employment contract and not as an initial period of an indefinite term employment contract. After the probationary period, a new contract can be agreed.

Notice periods of a week or multiple weeks always end on a Saturday, and notice periods of a month or multiple months always end on the last day of the month.

The contractual or statutory notice period does not have to be observed for a summary dismissal.

1.4 Involvement of works council

No general legal requirement for involvement, but staff forums may be involved in the case of collective redundancies (see below).

A single dismissal for employee-related reasons (e.g. performance-related dismissal) is not subject to any collective notification or consultation requirement.

Only group dismissals or significant reductions of the workforce undertaken as a part of a restructuring trigger the notification and consultation requirement. The employer must notify / consult a works council about any matters relating to employment status and structure, any predicted or proposed changes in this respect, and actions taken to maintain the current level of employment. However, this will only be necessary when the anticipated changes are permanent or significant (in relation to the employer’s size).

Works council members may not be dismissed involuntarily (either with or without notice) during their term of office without the prior consent of the works council.

1.5 Involvement of a union

No involvement normally other than in the case of collective redundancies (see below) or if the employee exercises their right to be accompanied by an appropriate trade union representative to a disciplinary meeting.

Notification is required if the employer wishes to dismiss with notice a permanent employee (employed under an employment contract for an unfixed duration) who is a trade union member, or whose rights and interests the trade union has agreed to defend.

The trade union must be informed in writing, including the reasons for termination, at least five days before the employee receives the letter of termination. If the trade union decides that the dismissal is unjustified, it may present the employer with its substantiated objections in writing. An employer may proceed to dismiss having considered the opinion of the trade union (although this opinion is not binding). If the submission of a trade union opinion is delayed or absent, the employer may proceed without any additional consideration.

Notification is also required if the employer wishes to dismiss an employee without notice. In such a case, the trade union has three days to express its opinion in writing.

Trade union officers, or other employees named in a special resolution   of the trade union’s board of management, are protected against involuntary dismissal and may not be dismissed without trade union consent. The number of employees protected under a special resolution depends on   the number of employees who are members of the trade union or the number of the company’s officers (a decision left up to the trade union’s board of management).

1.6 Approval of state authorities necessary

Not necessary.

Not generally necessary.

However, employers have certain obligations to inform the Labour Offices of a group redundancy procedure, particularly for large-scale redundancies.

1.7 Collective redundancies

If 20 or more employees are proposed to be made redundant at one "establishment" within a period of 90 days or less, consultation with employee representatives (who may be trade union representatives) must begin at least 30 days (or 45 days if 100 or more employees are to be made redundant) before the first dismissal takes effect.

Additionally, employers are obliged to notify the Secretary of State (for Business Innovation and Skills) where they are proposing to dismiss as redundant 20 or more employees within a 90-day period.

The Secretary of State must receive notification at least 30 days (or 45 days if 100 or more employees are to be made redundant) before the first dismissal takes effect.

A copy of the notification must also be provided for the employee representatives.

A group dismissal occurs when an employer employing at least 20 employees terminates the employment relationships of at least the following numbers of employees within 30 days, with notice, and for non-employee-related reasons:

  1. ten employees − if the employer employs fewer than 100 employees; or
  2. 10% of the total workforce − if an employer employs at least 100 but fewer than 300 employees; or
  3. 30 employees − if the employer employs at least 300 employees or more.

These thresholds include terminations on mutual agreement if at least five such terminations have been initiated by the employer.

Small companies (employing fewer than 20 employees) are not subject to the group dismissal procedure, and may proceed without any prior notification of / consultation with employee representatives or local authorities.

1.8 Summary dismissals

Summary dismissal (dismissal without notice) is only lawful where the employee has committed a breach of contract that is sufficiently serious to entitle the employer to treat the employment contract as terminated with immediate effect. A typical example is where the employee has committed gross misconduct.

Dismissal without notice is only permitted in specified circumstances.

An employee may be summarily dismissed (disciplinary dismissal) if he:

  1. commits a serious breach of his basic employee’s duties; or
  2. commits a crime while employed (the offence must be obvious or confirmed by the judgment of a final court), provided that such crime makes his further employment impossible; or
  3. through his own fault loses a license necessary for the performance of duties connected with the post.

Summary dismissal may only be exercised within one month of the employer becoming aware of the reasons for dismissal.

It is also possible for the employer to summarily dismiss an employee without fault due to long-term absence from work, where:

  1. the employee is unable to work by reason of illness:
    1. for a period longer than three months, if the employee has less than six months’ service with a given employer; or
    2. for a period longer than the period the employee has been receiving sick pay and sick benefit (typically 182 days) and the first three months of rehabilitation benefit (additional 90 days); and
  2. the employee’s justified absence from work for other reasons lasts longer than one month.

1.9 Consequences if requirements are not met

The employee may have various claims, such as an unfair dismissal claim where the primary remedy is financial compensation. However, there is also scope for the claimant to request reinstatement or re-engagement, and in very limited circumstances (e.g whistleblowing) the claimant can request interim relief, and if the tribunal grants this, then an employer must continue paying the claimant's wages until the date of the substantive hearing. Most employment-related claims in the UK are made in employment tribunals.

If the termination of a contract without notice, or termination of a contract of unfixed duration with notice, is unlawful the employee may claim reinstatement or compensation.

Reinstatement cannot be claimed for an unlawful termination with notice during a fixed-term or probationary contract.

If the contract is of unfixed duration, compensation of between two weeks’ and three months’ salary (and not less than the employee’s salary during the notice period) may be awarded.

In an unlawful termination without notice, an employee may in general only claim compensation of up to three months’ salary. Further entitlement can be claimed on the basis of general civil law rules.

1.10 Severance pay

The employment contract may provide for the employer to make a payment in lieu of notice, for example, equal to the salary that the employee would have earned during the notice period. If this is not provided for in the contract, the parties can agree for such a payment to be made, for example, as ‘damages’ for breach of contract.

If an employee with two years’ continuous service has been made redundant, they will be entitled to a statutory redundancy payment. The amount is calculated according to a statutory formula based on the employee’s age, length of service and weekly pay (capped at GBP 538 as at April 2020), up to a maximum of GBP 16,140 (as at April 2020). The employment contract may provide for an enhanced redundancy payment.

If the employee has been unfairly dismissed, and brings a successful claim in an employment tribunal they may be able to claim a ‘basic award’ calculated according to the same formula as the statutory redundancy payment (but employees cannot usually recover both a statutory redundancy payment and a basic award), and a ‘compensatory award’ which is capped at the lower of one year’s salary and GBP 88,519(as at April 2020). If an order for reinstatement or re-engagement is made there is scope for this cap to be lifted.

Employees who argue that they were dismissed for making a protected disclosure (whistleblowing) are not restricted by the statutory cap referred to above.

Similarly, the statutory cap does not apply where the dismissal was related to a prohibited ground under the Equality Act 2010. In these scenarios the potential awards can be significant.

If an employer employs more than 20 employees, and dismisses an individual solely for non-employee-related reasons (e.g. due to a reduction in the workforce or redundancy of a work post), it must pay a severance payment equivalent to:

  1. one month’s salary − for employees with less than two years’ service with a given employer; or
  2. two months’ salary − for employees with between two and eight years’ service; or
  3. three months’ salary − for employees with more than eight years’ service.

However, severance pay is capped by statute at 15 times the national minimum monthly salary (capped at PLN 39,000 from January 2020, equivalent to approx. EUR 9138).

1.11 Non-competition clauses

Restrictive covenants will be void for unlawful restraint of trade and so are unenforceable unless they protect the legitimate business interests of the employer and go no further than is necessary to provide that protection, in terms of activity, duration and geographical area. However they are widely used in senior level contracts. It is always recommended to take advice on tailoring such a clause for each individual employee and to ensure that when employees are promoted or their role changes that the restrictions are suitably updated.

Post-contractual non-competition clauses

Post-contractual non-competition restrictions are permitted when an employee has access to confidential information, the disclosure of which could damage the employer. In this case, the parties should in this case enter into a separate post-termination non-competition agreement. This should specify the restricted time period and compensation due to the employee (which must not be lower than 25% of the employee’s salary for the duration of the agreement). Compensation may be paid in monthly instalments.

1.12 Miscellaneous

Employers may wish to avoid a potential dispute over a termination of employment by obtaining a waiver of rights from an employee in consideration for a termination payment. In the UK this agreement is referred to as a settlement agreement and there are a number of statutory formalities to include before such an agreement is enforceable in respect of statutory rights, including the requirement that the individual takes independent advice on the terms of the agreement. There are also risks attached to making an offer to an employee to enter into a settlement agreement and therefore legal advice should be taken before doing so. In addition, in 2019 the UK Government announced legislation on the use of non-disclosure agreements in discrimination cases which was expected to come into force in 2020, however given the pandemic, this has been delayed and no new time frame has been given. The UK statutory equality body, the Equality and Human Rights Commission issued guidance on this subject in October 2019 setting out good practice for employers to consider. 

Not applicable.

2. Dismissal of managing directors

In the United Kingdom (UK), the rights and obligations of a ‘director’ are the same whether they are for a ‘managing director’ or any other type of director. However, not all directors are employees. ‘Managing directors’, for example, are employees of the company, but ‘non-executive directors’ are not employees. Normal practice is for a managing director to have a service agreement supplementing their statutory and common law obligations as a director. Often a managing director's employment contract will require them to resign any directorships when their employment terminates, so that their directorship and employment terminate simultaneously. It Is therefore often simpler (and preferable) to remove a managing director by dismissing them from their employment, and then requiring them to resign their directorship. Please see the section "Employees: United Kingdom" for information on the relevant issues when taking that approach, as well as the "Miscellaneous" section below.

This table only covers removal of the director from office as a director and does not cover termination of any contract of employment or other employment issues.

2.1 Reasons for dismissal

The company may remove the director for any reason, unless the articles of association of the company or any other agreement between the director and the company provide otherwise. There is however a statutory procedure that the shareholders of any UK company can use to remove a director (see below). This procedure will apply regardless of any agreement between the company and the director, or any provision of the company's articles.

A management board member may be dismissed from the corporate function without cause, unless the company deed or articles of association provide otherwise.

Apart from dismissal from the board, the contract under which the management board member received remuneration (if concluded) must be terminated separately. Polish law does not provide for a specific type of contract for board members.

In civil law relationships, if the contract (e.g. management contract) is terminated without significant reason, the company should cover any loss incurred by the management board member. Further entitlements may be provided for individual contracts.

A management board member may also be employed under an employment contract. If this is the case, the reasons for dismissal must be provided if a contract is terminated without notice or if a contract of unfixed duration is terminated with notice. The reason must be real and specific, so the managing director can easily understand the grounds for dismissal. The reasons for termination with notice may be attributable to the managing director (e.g. non-performance or improper performance of the managing director’s duties), or not attributable to the managing director (e.g. redundancy). The Polish Labour Code does not list such reasons.

Termination without notice (i.e. summary dismissal) may be justified for a number of reasons, but is only permitted when certain statutory conditions are met.

In the remaining case, involuntary termination does not require justification. Further entitlements may be granted in individual contracts.

2.2 Form

The Companies Act 2006 gives shareholders a mandatory right to remove a director by ‘ordinary resolution’ (i.e. a simple majority of the shareholders attending and voting) at a meeting notwithstanding any other agreement between the director and the company. The resolution will be of no effect if passed in writing instead of at a meeting. At least one of the shareholders must give at least 28 clear days’ notice in writing before the meeting of an intention to move the resolution at the meeting. On receiving that notice, the company must forward the notice of the resolution to the director concerned and call a general meeting of the company to vote on the resolution. The director has the right to be heard at the meeting and to make written representations. 

The company's articles of association or shareholders' agreement may contain provisions that make it difficult in practice to remove a director or provide that they can be reinstated. The company's articles of association and shareholders' agreements should therefore be checked before considering taking this route. 

A company's articles of association may set out additional (and usually less complex or time-consuming) bases on which a director can be removed. For example, the 'Model Articles' under the Companies Act 2006 set out circumstances that trigger the automatic removal of a director, including that they are prohibited from being a director by law or a bankruptcy order is made against them. Some companies' articles of association also allow the directors to remove another director by majority vote, for example. The articles of a company should be reviewed for any such procedures if removal of a director is contemplated.

In the case of limited liability companies (‘spółka z ograniczoną odpowiedzialnością’), management board members may be dismissed from office by a resolution of shareholders unless the company deed states otherwise.

In case of joint-stock companies (‘spółka akcyjna’), a management board member can be dismissed by the supervisory board, unless the articles of association state otherwise. The shareholders can also dismiss a management board member at any time.

The management board member concerned and court register should then be notified of the decision regarding the dismissal, but the dismissal is valid from the date of the relevant resolution (unless the resolution itself states otherwise).

If a management board member has an additional civil contract (e.g. a management contract), this must be terminated separately as it does not automatically expire upon the management board member’s dismissal from the board.

In dealings with a company’s management board member, the company should be represented by the supervisory board (if any is present) or an attorney-in-fact appointed by a resolution of shareholders meeting. These rules do not apply to a former management board member deemed to be an ordinary worker from the time of his dismissal from the board. Any additional contracts with the former management board member may be terminated by the board.

2.3 Notice period

Removal as a director is immediate unless otherwise specified in the articles of association of the company.

A management board member may be dismissed from the corporate function without any notice period. However, notice periods may be stipulated in civil contracts.

2.4 Involvement of works council

No involvement.

No involvement.

2.5 Involvement of a union

No involvement.

For management board members employed under employment contracts, notification is required if the employer wishes to dismiss with notice a permanent managing director (employed under an employment contract for an unfixed duration) who is a trade union member, or whose rights and interests the trade union has agreed to defend.

The trade union must be informed in writing of the reasons for termination at least five days before the employee receives the letter of termination. If the trade union decides that the dismissal is unjustified, it may present the employer with its substantiated objections in writing. Having considered the opinion of the trade union (which is not binding), an employer may still proceed to dismiss. If the submission of a trade union opinion is delayed or absent, the employer can proceed without any additional consideration.

Notification is also required for an employer to dismiss a managing director without notice. In such a case, the trade union has three days to express its opinion in writing.

Trade union officers, or other managing directors named in a special resolution of the trade union’s board of management, are protected against involuntary dismissal and may not be dismissed without trade-union consent. The number of employees protected under a special resolution depends on the number of employees who are members of the trade union or the number of company officers. (This decision is the responsibility of the trade union’s board of management).

2.6 Approval of state authorities necessary

Not necessary.

Not required.

2.7 Collective redundancies

Not applicable.

A group dismissal occurs when an employer of at least 20 employees terminates the employment relationship of at least the following numbers of employees within 30 days, with notice, and for reasons unrelated to work performance:

  1. ten employees − if the employer has fewer than 100 employees;
  2. 10% of the total workforce − if an employer has at least 100 but fewer than 300 employees; or
  3. 30 employees − if the employer has at least 300 employees or more.

These thresholds include termination based on mutual agreement if the employer has initiated at least five such terminations.

Small companies (employing fewer than 20 employees) are not subject to the group dismissal procedure, and may proceed without any prior notification or consultation with employee representatives and local authorities.

2.8 Summary dismissals

No special rules apply.

For management board members employed under an employment contract, dismissal without notice is only permitted in specified circumstances.

A managing director may be summarily dismissed (i.e. a disciplinary dismissal) if the individual:

  1. commits a serious breach of his basic duties;
  2. commits a crime while employed (the offence must be obvious or confirmed by the judgment of a final court), provided that such a crime makes his continued employment impossible; or
  3. through his own fault loses a license necessary for the performance of duties connected with the position.

Summary dismissal may only be exercised within one month of the employer becoming aware of the reasons for dismissal.

It is also possible for the employer to summarily dismiss a managing director without fault due to long-term absence from work, where:

  1. the managing director is unable to work due to illness:
    1. for a period longer than three months, if the managing director has less than six months of service with a given employer; or
    2. for a period longer than the period the managing director has been receiving sick pay and sick benefits (typically 182 days) and the first three months of a rehabilitation benefit (additional 90 days).
  2. the managing director’s justified absence from work for other reasons lasts longer than one month.

2.9 Consequences if requirements are not met

The removal of the director is void.

For management board members employed under an employment contract if the termination of contract without notice or termination of contract of unfixed duration with notice is unlawful, the managing director may claim reinstatement or compensation.

Reinstatement cannot be claimed for an unlawful termination with notice during a fixed-term or probationary contract.

If the contract is of unfixed duration, compensation of between two weeks’ and three months’ salary (and not less than the managing director’s salary during the notice period) may be awarded.

In an unlawful termination without notice, a managing director may in general only claim compensation of up to three months’ salary. Further entitlements can be claimed on the basis of general civil law rules.

2.10 Severance pay

The director may be entitled to a payment under the terms of any service contract (for example a payment in lieu of notice), or as an employee under statute (for example a statutory redundancy payment). Sections 215 to 222 of the Companies Act 2006 contains special rules relating to compensation given to a director for their loss of office. Such compensation requires shareholder approval, except for certain payments that are made in good faith such as payments made in discharge of a legal obligation, or to settle a claim arising from loss of office or termination of employment.

For a management board member employed under an employment contract, if an employer of more than 20 employees dismisses an individual solely for non-employment-related reasons (e.g. due to a reduction in the workforce or redundancy of a work position), the employer must pay a severance payment equivalent to:

  1. one month’s salary − for employees with less than two years’ service with a given employer; 
  2. two months’ salary − for employees with between two and eight years’ service; or
  3. three months’ salary − for employees with more than eight years’ service.

However, severance pay is capped by law at 15 times the national minimum monthly salary. (From January 2020, the cap is PLN 39,000 or EUR 9,138).

Both civil law and employment contracts may include voluntary severance payments.

2.11 Non-competition clauses

Restrictive covenants may be included in any service agreement. However, they will be void for unlawful restraint of trade and therefore unenforceable unless they protect the legitimate business interests of the employer and go no further than necessary to provide that protection in terms of the activities covered, duration and geographical area.

The director may also be subject to post-termination restrictions contained in other agreements such as a shareholder agreement, or (depending on the reward structure) share plans such as LTIPs (Long Term Incentive Plans).

For management board members employed under an employment contract, post-contractual non-competition restrictions are permitted when a managing director has access to confidential information, the disclosure of which could damage the employer. In this case, the parties should enter into a separate post-termination non-competition agreement. This should specify the restricted time period and compensation due to the managing director (which must not be lower than 25% of the managing director’s salary for the duration of the agreement). Compensation may be paid in monthly instalments.

Civil law contracts may provide for competition restrictions. Statutory provisions on minimum compensation do not apply to management board members employed under a civil law contract.

2.12 Miscellaneous

Regulated and listed companies should also be mindful of any obligations they may have under their regulatory rules and/or the rules applicable to their market listing. These rules are likely to limit the terms on which such companies can reimburse a director in connection with their removal from office or employment and can also subject a company to reporting obligations.

Not applicable.