The provision that allows the employment relationship to be cut off in an instant by the employer is Article 25 of the Labour Act No. 4857. That provision permits the contract to be ended without the notice period being run and, in certain cases, without giving rise to any compensation. Although the power appears broad, it may in reality be exercised only within narrow limits: the ground relied upon must be one enumerated in the statute, the preclusive period must not have been missed, and the allegation must be evidenced.
The point most often confused in practice is the line between termination for just cause and termination for a valid reason. Whereas termination for a valid reason is tied to a notice period and, as a rule, to the payment of compensation, on a termination for just cause the contract ends immediately. The cases gathered under the heading of breach of the rules of morality and good faith (Art. 25(II)) in particular are both the most frequently invoked grounds and those that give rise to the greatest debate before the courts.
In this briefing note we assess in detail the grounds for termination within the framework of Art. 25 of the Labour Act, the periods that must be observed, the consequences arising in respect of severance and notice pay, and how the burden of proof is allocated.
The Nature of the Employer’s Right of Termination for Just Cause
The power of termination defined in Art. 25 of the Labour Act is an exceptional institution making it possible for the contract to be ended instantly without waiting for the notice period. The legislature has afforded the employer a unilateral and direct power of termination only where facts that are limited in number and of a defined gravity exist.
The Meaning of Immediate Termination
On an immediate termination the contract ceases to have effect at the moment the declaration of termination reaches the other party; no notice period runs in the interim. As a natural consequence of this structure, notice pay as a rule does not arise. On terminations resting on the heading of breach of the rules of morality and good faith (Art. 25(II) of the Labour Act), severance pay mostly does not come into play either. It would be wrong, by contrast, to say that every termination for just cause produces a result free of compensation; which sub-paragraph is invoked directly alters the consequences.
Points of Distinction from Termination with Notice
On a termination with notice, that is to say a termination for a valid reason, the employer is obliged to observe the statutory notice periods. This course is generally taken on account of operational requirements, insufficient productivity or lighter grounds arising from the employee’s conduct, and in many cases both severance and notice pay are paid to the employee. On a termination for just cause, by contrast, the continuation of the employment relationship has become intolerable for the employer; for that reason no waiting period is provided for and the relationship ends instantly.
The Line Between Termination for Just Cause and Termination for a Valid Reason
The criterion separating the two institutions is the degree of gravity of the fact leading to the termination and the legal consequence it produces. On a termination for just cause the situation that has arisen, or the employee’s conduct, is of an intensity that makes it impossible to expect the relationship to continue for even one more day. On a termination for a valid reason the gravity of the fact does not reach that threshold and the contract is ended by running the notice periods.
Drawing this line correctly is decisive in practice. A termination effected under the label of "just cause" without any statutory basis may be found invalid by the court; on such an outcome the employee may bring an action seeking reinstatement and may claim compensation for failure to reinstate together with the wages relating to the period during which he was not employed.
The Grounds for Termination Enumerated in Art. 25 of the Labour Act
Article 25 of the Act No. 4857 confers on the employer a power of immediate termination only in defined cases. The text of the article gathers those cases under four sub-paragraphs: on the one hand health-related situations, on the other conduct contrary to the rules of morality and good faith; and in addition to these, compelling reasons together with the cases of police custody and detention on remand.
The enumeration is exhaustive. Accordingly, a termination for just cause cannot be effected on a ground that has no counterpart in the statute; such an attempt may lead to the invalidity of the termination and to the consequences of reinstatement.
For an assessment of the subject from the other side, that is to say from the employee’s point of view, our note entitled The Employee’s Right of Immediate Termination for Just Cause (Art. 24 of the Labour Act) may be consulted.
Health-Related Grounds for Termination (Art. 25(I))
The first sub-paragraph of the article affords the employer a possibility of immediate termination where certain health situations arise. Here too, however, the periods and conditions must be measured with care.
Illness or Disability of the Employee
An illness or disability arising from the employee’s own intent, from his disorderly way of life or from his addiction to drink may confer on the employer a right of termination once it exceeds a certain threshold of absence. The threshold required is that the absence reach three working days without interruption, or that it exceed five working days in total within a one-month span.
Beyond this, the route to termination is also opened where the ailment permanently prevents the employee from working and the period of medical certification goes beyond the statutory limit. The criterion here is that the period of absence have exceeded by 6 weeks the notice period corresponding to the employee’s length of service.
To make this concrete with an example: for an employee with 1 year of service the notice period is 4 weeks. For that employee, a termination for just cause becomes arguable once the period of medical certification exceeds 10 weeks, being the sum of 4 weeks and 6 weeks.
A finding by the Health Board that treatment of the illness the employee has contracted is not possible and that his working at the workplace is inadvisable is likewise a separate case giving rise to the right of termination.
Diseases of a Contagious Nature
Where the employee’s ailment creates a serious danger for other workers and makes his presence at the workplace inadvisable, this too may be assessed within the scope of this sub-paragraph. For such a conclusion to be reached, the disease is required to place the working arrangements at the workplace at risk in a concrete rather than an abstract manner.
Not every ailment justifies termination. The type of the disease, how long it will last and its effect on the workplace are weighed as a whole. The employer is expected to base this assessment on medical reports and objective data.
Breach of the Rules of Morality and Good Faith (Art. 25(II))
The cases gathered in the second sub-paragraph are the ground for termination on which employers most often rely in practice. The acts within the scope of the sub-paragraph are conduct that gravely destroys the bond of trust between the parties. Where this situation arises the employer may end the contract instantly, without having to run a notice period or, in most cases, to pay severance pay.
Even so, it is essential that each file be dealt with within its own circumstances. In judicial decisions, whether the conduct has genuinely made the employment relationship intolerable, whether proportionality has been observed in the termination, and the evidential position of the allegation, play a decisive role.
Misleading the Employer at the Recruitment Stage
Giving the appearance of possessing a required quality on an essential point at the time the contract is concluded when in fact one does not possess it, or making a declaration inconsistent with the truth, is a ground for termination within the scope of this sub-paragraph. Forgery of a diploma, the declaration of work experience not in fact acquired, or the presentation of a professional competence certificate that is not held as though it existed, are the principal examples that may be given of this situation. The condition required is that the misleading declaration carry decisive weight in the conclusion of the contract.
Words and Conduct Directed at Honour and Reputation
The employee’s making of statements or engaging in acts targeting the honour and reputation of the employer or of the employer’s family members, and in addition his directing of baseless and dignity-damaging imputations against the employer, gives rise to a just cause for termination.
Under this heading it is necessary to distinguish insult from criticism. Measured assessments that remain within the limits of freedom of expression cannot in themselves be a ground for bringing the contract to an end.
Provocation and Cases of Alcohol and Narcotic Substances
Provoking the employer, the employer’s family or another worker; coming to the workplace drunk or under the influence of narcotic substances; and using such substances within the workplace, are among the grounds for termination. In reaching a decision, the manner in which the incident occurred, whether or not there was provocation, and the content of the defence are weighed together.
Commission of an Offence at the Workplace
The employee’s commission at the workplace of an offence requiring more than seven days’ imprisonment and not capable of being suspended also falls within the scope of this sub-paragraph. The element required here is that the act have taken place within the boundaries of the workplace.
Abuse of Trust
Abuse of the trust the employer places in the employee constitutes a grave breach for the purposes of Art. 25(II). Use of property belonging to the employer without permission, embezzlement of money, transmission of trade secrets to third parties, and use of the authority and duties conferred for purposes other than those intended may be enumerated in this framework. A conviction in criminal proceedings is not required; it is sufficient for the act to be established by concrete evidence.
Theft
The theft of property belonging to the employer or to the workplace is a just cause for termination irrespective of the value of the item stolen. Once the act has been established, the employer may bring the contract to an end immediately. Here too it is not necessary that criminal proceedings have been brought; it is regarded as sufficient for the employer to prove the incident by the concrete evidence in its hands.
Fighting and Serious Insult at the Workplace
The employee’s involvement in a fight within the workplace, his disruption of the working arrangements, or his directing conduct amounting to serious insult at his superiors, is a ground for termination. By contrast, the manner in which the incident occurred, whether or not the employee was acting in self-defence, the element of provocation and the gravity of the words uttered are assessed together.
Absence Not Resting on a Valid Excuse
Failure to attend work without an excuse being given is likewise dealt with within breach of the rules of morality and good faith. The statute has provided for three separate thresholds in this respect: that the absence last 2 working days without interruption, that it be repeated twice on the working day following a holiday within one month, or that it reach a total of 3 working days within the same month. Where one of these thresholds is met, the employer’s right of termination arises. In practice, recording the absence in a report, sending a warning to the employee and taking his defence are of further importance.
Sexual Harassment
The employee’s sexual harassment of another person employed by the employer is a just cause for termination. It is not a condition that the act have been made the subject of criminal proceedings; what is required is that the employer prove the incident by concrete evidence.
Endangering Workplace Safety and Serious Damage
The employee’s endangering of workplace safety, whether knowingly or by neglect, falls within the scope of this sub-paragraph. In the same way, his causing of damage exceeding thirty days’ wages to items and machinery belonging to the workplace or entrusted to him also gives rise to a right of termination. In this case the amount of the damage must be established in a concrete manner.
Persistence in Failing to Perform Duties
The employee’s persistence in not performing the work he has undertaken despite being reminded of it is a just cause for termination. A single instance of neglect is not regarded as sufficient here; the element of persistence is required.
Production of Forged Documents
The production of documents not corresponding to the truth, for example the drawing up of a forged medical report, a forged invoice or a forged expenses document, is regarded as a ground for termination since it destroys the trust between the parties. Forgery relating to a payslip, an expenditure note or a medical report is characterised in the case law of the Court of Cassation as a grave breach.
Is Low Productivity a Just Cause?
Insufficient productivity does not of itself constitute a just cause for termination; at most it may be dealt with within the scope of termination for a valid reason. An employee’s performance falling short of expectations is not seen as grave conduct making the continuation of the employment relationship impossible. For this reason, on performance-based terminations the notice period must be applied and, if the conditions are met, severance pay must be paid.
For performance to reach the level of a just cause for termination, it is required that the employee deliberately disrupt or sabotage the work, or gravely breach his obligation to perform work. Where these elements are absent, the termination may meet with invalidity and the consequences of reinstatement may come into play.
For detail on the subject, reference may be made to our note entitled Termination of the Employment Contract on Grounds of Poor Performance.
Compelling Reasons (Art. 25(III))
The third sub-paragraph confers on the employer a power of immediate termination where compelling reasons arise that prevent the employee from working at the workplace. By compelling reason is meant events that develop independently of the will of the parties, that cannot be foreseen and whose prevention is not within one’s power.
For this sub-paragraph to be relied upon it is essential that the impediment continue for a period exceeding one week. During that one-week period the employment contract is suspended and, by operation of the statute, half wages are paid to the employee. Once the period is exceeded, the employer’s right of termination comes into play.
Cessation of Workplace Activity
Where activity at the workplace ceases entirely on account of a compelling event, or the employee’s working becomes actually impossible, the employer may exercise this power. By contrast, economic difficulties, a contraction in the volume of work or risks of a commercial nature do not of themselves constitute compelling reasons; these grounds are as a rule dealt with under the heading of termination for a valid reason.
Natural Disasters
Where extraordinary events such as an earthquake, flood, fire or epidemic disease have halted the activity of the workplace and made the employee’s working impossible, there is a compelling reason. Once the one-week period of suspension has been completed, the employer may bring the contract to an end for just cause.
Since on a termination effected under this sub-paragraph there is no fault attributable to the employee, severance pay is payable; notice pay, however, does not arise.
Police Custody and Detention on Remand (Art. 25(IV))
The fourth sub-paragraph confers on the employer a right of immediate termination where the absence arising as a result of the employee being taken into police custody or detained on remand exceeds a certain period.
The period taken as the measure here is the notice period calculated on the employee’s length of service. Where the period during which the employee has been unable to attend work on account of custody or detention exceeds that period, the employer may terminate the contract for just cause.
The notice periods according to length of service are as follows: 2 weeks for an employee whose service has not reached 6 months; 4 weeks for service between 6 months and 1.5 years; 6 weeks for service between 1.5 years and 3 years; and 8 weeks for service exceeding 3 years. Terminations effected before the relevant period has expired are not accepted as being for just cause.
Three points must be underlined in respect of this sub-paragraph. The fact of detention does not of itself constitute a ground for termination; it is also required that the period of absence have exceeded the notice period. Finally, a subsequent acquittal of the employee does not of itself render the termination invalid, since the assessment is made on the basis of the circumstances existing at the moment of termination.
On a termination resting on this sub-paragraph too, since no fault on the employee’s part is required, severance pay is payable, whereas notice pay does not arise.
The Six-Working-Day Preclusive Period
Article 26 of the Labour Act obliges an employer relying on the ground of breach of the rules of morality and good faith (Art. 25(II)) to exercise that power within 6 working days. The moment at which the period begins to run is the date on which the incident giving rise to the termination came to the employer’s knowledge.
The period in question is of a preclusive nature; once it has passed, a termination for just cause cannot be effected by relying on the same incident as a ground. Missing the period removes the justification for the termination and in most files produces the consequences of an invalid termination.
The Moment the Period Begins
The six working days are counted not from the day the incident took place but from the day the employer became aware of it. What is to be understood by knowledge here is that the competent superior or the employer’s representative has grasped the incident in all its elements. A rumour or a suspicion is not enough to start the period running.
In files where an internal investigation is conducted, the practice of the Court of Cassation is that the period runs from the date on which the incident was definitively established.
The One-Year Upper Limit
The statute has also provided for an upper limit: the power of termination must in every case be exercised within 1 year from the date on which the act took place. Where the employee has obtained a material benefit from the incident, however, this one-year limit does not apply.
The Consequences of Missing the Period
Once the six working days have passed, the employer cannot proceed to a termination for just cause by relying on the same incident as a ground. In such a situation the termination is no longer accepted as being for just cause and will in all probability be regarded as invalid; the way is opened for the employee to bring a reinstatement action; and the employer may be left having to pay the wages relating to the period during which the employee was not employed together with compensation for failure to reinstate.
One of the errors into which employers frequently fall is that of exhausting the preclusive period by spreading disciplinary steps over an unnecessarily long time although the incident has come to their knowledge. For this reason the termination process must be conducted on a documented basis and to a planned timetable.
May a Termination for Just Cause Be Effected Without Taking a Defence?
The taking of the employee’s defence is an important procedural requirement for the purposes of Article 19 of the Act No. 4857. That said, whether or not this obligation arises varies according to the ground on which the termination rests.
The Rule: A Defence Must Be Taken
Article 19 of the statute imposes on the employer an obligation, before terminations to be effected on grounds relating to the employee’s conduct or productivity, to take a written defence beforehand. Terminations effected without a defence being taken are in most files regarded as procedurally invalid and produce the consequences of reinstatement.
The Exception: Cases Within the Scope of Art. 25(II)
In the practice of the Court of Cassation, the taking of a defence is not regarded as obligatory where the termination rests on the ground of breach of the rules of morality and good faith (Art. 25(II)). The reason for this is that the conduct in that sub-paragraph is of a gravity that will end the employment relationship instantly, and that the continuation of the contract cannot be expected of the employer.
Nevertheless, the taking of a defence is advisable in practice; it both provides ease of proof and shows that the process has been conducted soundly. In the event of a dispute, the record of the defence may carry evidential value in the employer’s favour.
The Risks Arising from Not Taking a Defence
Where this step is omitted in a file in which a defence ought to have been taken, the termination may be regarded as invalid; the employee may bring an action seeking reinstatement; and the employer may come under the burden of the wages relating to the period during which the employee was not employed together with compensation for failure to reinstate.
On terminations resting on insufficient performance, on conduct-related grounds or on operational reasons, the taking of a defence is obligatory. Where this step is omitted, the termination may be regarded as procedurally invalid even if it is substantively justified.
Consequences in Respect of Severance and Notice Pay
Whether severance and notice pay arise where the power of immediate termination is exercised differs according to the sub-paragraph relied upon. Termination for just cause and termination without compensation are not synonymous; for that reason the correct determination of the ground for termination at the outset is of critical importance.
Notice Pay
Since on an immediate termination for just cause the contract ends without the notice period being run, notice pay does not come into play. The employer is under no obligation to apply a notice period on this form of termination.
Severance Pay
As regards severance pay the position divides in two, according to which sub-paragraph is relied upon.
Cases in which no severance pay arises (Art. 25(II)): On terminations resting on conduct of the employee contrary to the rules of morality and good faith, severance pay is as a rule not paid. Theft, abuse of trust, insults directed at the employer, the production of forged documents and absence without excuse fall within this group. Since in these cases there is culpable conduct on the employee’s part, no entitlement to severance pay arises.
Cases in which severance pay arises: On terminations resting on the sub-paragraphs concerning health grounds (Art. 25(I)), compelling reasons (Art. 25(III)) and police custody and detention on remand (Art. 25(IV)), severance pay is payable since no fault is attributed to the employee. Even where the termination is regarded as being for just cause, this entitlement of the employee is preserved.
Other Employment Claims
Claims falling outside severance and notice pay are subject to a separate assessment. Even where the termination rests on a just cause, the employee may claim pay for unused annual leave, unpaid wage claims, sums due for overtime, and weekly rest day, national holiday and public holiday pay. These items are in the nature of the employee’s accrued entitlements, independently of the ground for the termination.
The Allocation of the Burden of Proof on a Termination for Just Cause
The party who brings the contract to an end on a just cause is as a rule obliged to prove the ground relied upon. The employer is expected to establish the truth of the ground it advances within the scope of Art. 25 by concrete and sufficient evidence. Where that burden cannot be discharged, the termination is not regarded as being for just cause and in most cases the consequences of an invalid termination arise.
What the Employer Must Prove
The employer is required to show that the incident on which it based the termination occurred, that the act was committed by the employee, and that this conduct made the continuation of the employment relationship intolerable. In allegations within the scope of Art. 25(II) in particular, the basis is required to be strong and concrete.
Assumption, opinion or suspicion will not on its own sustain a termination. In the practice of the Court of Cassation, the criterion of definite and convincing evidence has been adopted on the ground that a termination for just cause produces grave consequences.
Witness Statements
Since the incidents giving rise to termination generally take place within the workplace, witness accounts occupy an important position. It is necessary, however, that the witnesses have personally witnessed the incident and that their statements be found concrete and internally consistent. Accounts resting on hearsay, contradicting one another or remaining abstract may not suffice on their own to justify the termination.
Camera Recordings
Footage from security cameras at the workplace constitutes effective evidence in proving conduct contrary to workplace discipline, absence, fighting and allegations of theft. That said, it is essential that the recordings have been obtained by lawful methods. Footage obtained by breaching the rules on the protection of personal data or the privacy of the employee’s private life may not be taken into account in the proceedings.
Written Documents and Records
In proving absence, a breach of discipline or conduct contrary to workplace rules, records and written documents assume a decisive role. Absence records, warning letters sent, decisions taken by the disciplinary board, payslips bearing the employee’s signature and defence statements are the principal documents establishing that the process was conducted in due form.
The error most frequently encountered on the part of employers is that of effecting the termination without having built a sufficient documentary and evidential foundation. Where the burden of proof cannot be met, the termination may be regarded as invalid; the employee may bring a reinstatement action and claim compensation for failure to reinstate together with the wages relating to the period during which he was not employed.
The Remedies Available to the Employee
The use of the words "just cause" in the declaration of termination does not mean that the termination is lawful. Where the ground cannot be proved, where the preclusive period has been missed, where there has been a breach of procedural rules or where the ground does not reach the required gravity, various remedies are open to the employee.
The Reinstatement Action
Where a termination asserted to be for just cause is found invalid by the court, the employee may bring an action seeking reinstatement. The conditions of the action are gathered under two points: that the number of workers at the workplace be at least 30, and that the employee’s length of service have completed 6 months. Where judgment is given for reinstatement, the employee is paid a maximum of 4 months’ wages in respect of the period during which he was not employed; and if the employer does not agree to re-employ him, compensation for failure to reinstate in an amount of 4 to 8 months’ wages arises.
The situation most frequently encountered in reinstatement files is that the assertion of a just cause for termination cannot be supported by evidence.
The Action for Severance and Notice Pay
Where the termination is not accepted as being for just cause it takes on the character of an unfair termination; in that situation the employee becomes entitled to severance and notice pay. On terminations founded on the rules of morality and good faith but incapable of proof, the employer is mostly left having to pay these items.
Within the same action the employee may also advance claims for overtime, weekly rest days, annual leave not granted and similar employment claims.
Bad Faith Compensation
In respect of employees falling outside the scope of job security, bad faith compensation comes into play where the termination has been effected in bad faith. Where it is established that the termination was effected on account of participation in trade union activity, recourse to a complaint, the bringing of an action or a similar ground, the employee may claim bad faith compensation in an amount corresponding to three times the notice period.
Non-Pecuniary Damages
Where the employee’s personality rights are damaged during the termination process, where his honour and standing suffer harm, or where the allegations advanced as the ground for termination do not reflect the truth, a claim for non-pecuniary damages may arise. Claims of this kind are frequently encountered on terminations founded on an imputation of an offence involving moral turpitude, forgery or theft that cannot be proved.
Independent Legal Assessment
Immediate termination is the sharpest instrument conferred on the employer, and where it is used wrongly its consequences are correspondingly grave. In practice the greater part of files are lost not because the termination was substantively unjustified but because the process was not conducted in due form. Failure to document the moment at which the incident came to knowledge, the incomplete drawing up of records and the unnecessary prolongation of the disciplinary process are the structural errors most often repeated.
Before a decision to terminate is taken, the sub-paragraph to be relied upon must be correctly selected and it must be checked whether the conditions specific to that sub-paragraph are met one by one. Where the same incident is assessed under a different sub-paragraph, the consequences as to compensation may change entirely.
In a concrete file we recommend that the following headings be given priority:
- Clarifying at the outset which sub-paragraph of Art. 25 of the Labour Act the fact giving rise to the termination corresponds to
- Establishing the date of knowledge in writing and fixing the six-working-day period to a calendar
- Completing the evidential foundation before the termination; collecting witness, camera and record material in a lawful manner
- Assessing separately, according to the sub-paragraph to be relied upon, whether an obligation to take a defence exists
- Reflecting consistently in the notice of termination the distinction between the sub-paragraphs that give rise to severance pay and those that do not
- Calculating in advance the risk of reinstatement by reference to the number of workers at the workplace and the employee’s length of service
Independent Legal provides advisory services to both employer and employee parties throughout the processes of terminating employment contracts, from pre-termination risk analysis to representation at the litigation stage.