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Termination of employment relationship in the private and municipal sectors

Written by Tekna’s legal department Feb. 27 2021

An employment relationship often ends when one of the parties resigns; or, if an employee breaches their contract, it can lead to dismissal. An employment relationship can also end by mutual agreement between the parties.

Losing a job whether due to resignation, dismissal or the like is serious and may cause dramatic consequences for the individual involved. So it’s important for employees to be aware of their rights if they find themselves in this situation. The Working Environment Act regulates all actions associated with terminating an employment relationship for employees in both the private and municipal sectors. 

Read more about employment conditions in the civil service

According to the Working Environment Act section 15-1, before an employer takes the step of dismissing an employee, this subject must be discussed with the employee in question and (possibly) their union representative. During this meeting the employer must explain the reasons why dismissal is being considered. The employee must be given the opportunity to make their own statement. The employer must not make any final decision about dismissal before the employee’s statement and information have been submitted and evaluated.  

A dismissal must be given in a specific format

The Working Environment Act section 15-4 stipulates that an employer’s dismissal must be in a written format that is either delivered personally or sent by registered mail to the employee. The dismissal must contain information about the employee’s right to demand negotiations and file a lawsuit, the right to remain in the position while the case is pending in the court system, along with all deadlines in this regard. The dismissal must also contain information about how to legally file a lawsuit against the employer in the event of a dispute. Finally, the dismissal must provide information about the employee’s first right of hire if the dismissal has been caused by a lack of work.

The consequence for non-compliance with these requirements is that no time limit may be set for the employee to take legal action. If the employee files a lawsuit within 4 months after receiving an unfair dismissal, as a general rule the court must declare this dismissal invalid. In practice the employer will then provide a new, properly drafted dismissal as soon as they are informed of the error.

The abovementioned formal requirements do not apply to situations where the employee has resigned; however, this resignation must be given in writing.

The employer must have an objective reason for dismissal

A dismissal from an employer is based on either employee or organizational circumstances. In both instances the dismissal must be objectively justified, and the employer must carry out a factual case process. 

Dismissal based on organizational circumstances

A dismissal that is based on organizational circumstances is usually a situation where reorganization/rationalization leads to a need for downsizing.

There are several factors involved when evaluating the validity of these actions.

According to the Civil Service Act section 10, dismissing a civil servant who has more than 2 years of consecutive service (or temporary employees with more than 4 years of consecutive service) may only take place when the position is revoked or the amount of work declines. A dismissal may also be given if the employee is permanently unfit for service. 

First right of hire

An employee who has been dismissed due to downsizing has the first right of hire for a new position in the same organization, according to the Working Environment Act section 14-2. While the employee must be qualified for the position, it is also important to note that this individual does not have to be the most qualified applicant. In other words the employer cannot choose to hire someone who is better qualified and displace the applicant who has the first right of hire.

The first right of hire rule applies only to an employee who has been employed in the organization for a total of at least 12 months over the previous two years. The first right of hire rule applies from the dismissal date and up to one year after the end of the notice period. If the employee does not accept an offer of a new position, the first right of hire advantage falls away. The deadline is 14 days after receiving the job offer.

Dissmissal based on organizational change

An employer has the managerial right to relocate an employee if needed. But if this relocation causes a significant change with regard to work tasks or other work-related conditions, the employer must give the employee a so-called ‘change dismissal’. This means that the employee is dismissed from their current position while receiving an offer of a new position at the same time. This type of dismissal follows the normal rules for dismissal and requires objective reasons for being given. 

Dismissal based on employee circumstances

This type of dismissal is given when an employee has been negligent in their duties. Examples of negligence include unregulated absence, disloyal behavior or lack of collaborative ability. The degree of negligence is decisive for determining whether the employee will be dismissed or fired. In cases where the employment contract has been seriously breached, firing will be considered (which is a far more serious reaction).

When evaluating whether a dismissal due to employee circumstances is valid, an important point to consider is if the employer has given the employee an opportunity to correct their behavior. The employer is also required to give clear feedback if they are dissatisfied with an employee.

Termination of working conditions before starting

Sometimes an employer – after an employment contract has been signed but before an employee has started in the position – no longer has need of an employee. This particularly happens in cases when the employee’s agreed starting date is set at some point in the future. In the meantime market-related or other changes might take place, which might cause the employer to no longer want this new employee to start work.

In this situation the employer is bound by the terms of the employment contract, meaning that they must give a regular dismissal and pay wages during the notice period. At the same time the employee must work during this period. In practice, these cases can be easily solved by having the employer give financial compensation to the employee without their needing to start work.

Tekna takes the position that a notice period does not start before the starting date that appears in the employment contract. Although this point is legally unclear, the employer should be willing to discuss a form of compensation anyway. The employer should assume their portion of the responsibility for placing people (especially students) in an extremely difficult situation by entering into an employment contract with them far in advance only to break this contract before the starting date.

Dismissal deadlines

According to the Working Environment Act section 15-3, as a general rule either the employee or employer may give a 1-month notice if no other agreement appears in the employment contract or collective bargaining agreement. In practice most Tekna members have an individual agreement allowing them a 3-month notice period.  

The notice period starts running from the first day of the month after which the dismissal has been received by the employee. In cases where the notice period is longer than 1 month, an agreement may be made stating that this period will run from date to date.

Extended notice period

The notice period may be extended due to increased age and continuous employment.

Employees with 5 years of continuous employment have a minimum of 2 months’ notice and a minimum of 3 months’ notice in cases of continuous employment lasting 10 years or more. In the latter case the notice period increases with age in the following manner:
50 years - 4 months
55 years - 5 months
60 years - 6 months

However, the employee can end the employment relationship with a 3-month notice period.

Dismissal during a probationary period

An employer has the right to hire employees for a probationary period that may last up to a maximum of 6 months. It is important to be aware of the fact that an employee is considered to be permanently employed from day one even if both parties have agreed to a probationary period. The notice period during the probationary period is 14 days unless another agreement has been made. Tekna recommends a 1-month notice period. Although employees have somewhat weaker protection during their probationary period, any dismissal must be justified by employees’ ability to adapt to their work, professional competency or reliability, as stated by the Working Environment Act section 15-6. 

Termination of a temporary employment relationship

A temporary employment relationship ends naturally when the agreed time period is over or when a particular assignment has been completed. The parties can nonetheless make an agreement that the employment relationship may be terminated during the employment period. If there is no such agreement about termination, the employee will be required to work the remainder of the agreed time period. If the temporary employment relationship has lasted more than 1 year, the employee must receive at least 1 month’s notice about the date of their last working day in accordance with the Working Environment Act section 14-9 and the Civil Service Act section 7.  

Protection against termination due to illness

An employee who is away from work due to illness cannot be dismissed for this reason during the first 12 months after the incapacity for work occurred. It is important to note that the employee is not «protected» from dismissal for other reasons during this period. For example, an employer may dismiss an employee because they need to downsize.

Protection against termination due to pregnancy, childbirth and adoption

According to the Working Environment Act section 15-9, an employer is not allowed to dismiss a woman because of pregnancy. This also applies to employees who are on parental leave due to childbirth or adoption. This law also applies to government employees. If an employee has been lawfully dismissed for a different reason, with their last working day falling on a date when this employee is on leave, the notice period will be extended with the leave period. If lawful dismissal takes place during the leave period, the notice period will not start to run before the employee is back at work.

Disputing wrongful termination

If a member is in doubt about whether their dismissal is legal, they should contact Tekna for a legal evaluation of their case. Because of short deadlines in these cases, members should contact us immediately after receiving notice.

Right to negotiate with an employer

According to the Working Environment Act section 17-3, an employee who receives notice has the right to demand negotiations with their employer. The deadline for making this claim is 2 weeks from the date when notice was given. The employer is required in turn to suggest a negotiation meeting within 2 weeks after receiving the demand. A Tekna attorney will be able to assist members in these meetings.

Deadlines for lawsuits

If the dismissal case is not solved by negotiations meetings with the employer, it may be appropriate to file a lawsuit against the employer in order to get the dismissal declared invalid. Any lawsuit must be filed within 8 weeks after negotiations with the employer were concluded or the dismissal occurred. If the employee does not want to get their job back and is only demanding compensation, the deadline for filing is 6 months from the date notice was received, according to the Working Environment Act section 17-4. 

Right to continue working in the position

The employee has the right to continue working in the position as long as the dismissal case is being handled by the court system.

Outcome of litigation

If the court finds that the dismissal was unreasonable, it will be declared invalid. The employee will in this case keep their position and be awarded compensatory damages. In addition the court may award punitive damages.

Top-level executives with severance pay agreements can waive their legal right to protection against termination

According to the Working Environment Act section 15-6, a top-level executive can waive their job security for severance pay. This means that the employee among other things waives their right to file a lawsuit against their employer. In return the employee receives financial compensation in the form of severance pay. A top-level executive in an organization can also enter into agreements stating that any disputes in connection with terminating the employment relationship are to be solved through arbitration.

Legal costs If Tekna assists any member in a legal dispute, this aid is free for this member. This also applies to coverage of the counterpart’s legal costs if the member is ordered by the court to cover these expenses. Tekna’s legal department evaluates whether there is a basis for bringing the case to court.

Immediate dismissal/Firing

An employer may dismiss an employee with an order for their immediate resignation if this employee is guilty of a gross breach of duty (or any other serious breach of duty) of their employment contract, according to the Working Environment Act section 15-14. There is no notice period in this type of situation. A dismissal is an extremely serious reaction on an employer’s part, as the fired employee must leave the workplace immediately. This employee might also face problems getting hired somewhere else in the future. So if there is no need for immediately terminating the employment relationship, the employer should evaluate giving notice to the employee instead. One example of grounds for firing is if the employee is guilty of embezzlement.

Another example of grounds for firing is if an employee quits without informing their employer by simply disappearing from the workplace. If the employer suffers financial loss as a consequence of this disappearance, the employee will also be held liable for damages.

Generally speaking, in the event of firing, the same rules apply as those of dismissal with regard to format, requirements for proper processing of the case at hand and any subsequent disputes. However, the employee is not entitled to keep working in their position while their case is moving through the court system.

Employer breach of employment contract

When an employer has seriously breached an employment contract, the employee has the right to terminate this contract without giving notice. One example of a serious breach is that the employer repeatedly fails to pay wages on time. This may be because the employer does not want to pay (lack of willingness to pay), or it may be because the employer cannot pay (lack of ability to pay).

Contractual settlement of employment relationship – severance agreement

A severance agreement regulates the terms for an end to a working relationship between the parties. These agreements are typically made when an employer dismisses an employee or when an alternative is given for this dismissal. The employer will then offer compensation to the employee for quitting “voluntarily” if at the same time the employee waives the opportunity to file a lawsuit against the employer. This is based on the point that any agreed benefits from the employer are taxable; however, certain benefits may be tax-free, for example support for further education up to 1.5 G and takeover of old/used equipment such as PCs and mobile phones.

Tekna recommends that members submit agreement drafts to the legal department for quality assurance purposes before entering into any agreement.

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