That an employee who leaves work of his own volition cannot become entitled to severance pay is the familiar starting point of labour law. Yet in practice this rule has a broad field of exceptions: if the employee has terminated the contract on a just cause, the entitlement to severance pay may arise even where the departure bears the appearance of a "resignation".
Alongside the special grounds for departure separately enumerated by statute, termination for just cause also keeps the entitlement to severance pay alive. Where wages go unpaid, working conditions are materially altered without the employee’s consent, a policy of intimidation is applied at the workplace or a situation arises that threatens the employee’s health, the employee’s departure is not in law regarded as an ordinary resignation; it is characterised as a termination for just cause, and severance pay becomes claimable.
In this briefing note we examine, with examples drawn from practice, the conditions under which an employee who resigns may become entitled to severance pay, the cases in which that entitlement does not arise, and the legal course to be followed.
The Legal Nature of Termination by the Employee
The Definition of Resignation
Resignation denotes the ending of the employment contract by the employee’s own volition. An employee who wishes to leave work without being under any compulsion may terminate his contract, and in everyday language this act is called "resignation". In law, resignation is a form of termination that ends the employment relationship by a unilateral declaration of intention.
The Definition of Termination for Just Cause
Termination for just cause, by contrast, is a right affording the employee the possibility of ending the contract immediately where grounds expressly enumerated in the statute exist. Where the compelling reasons, health-related situations and conduct contrary to the rules of morality and good faith falling within Art. 24 of the Labour Act arise, the employee may terminate his contract for just cause and leave the workplace.
For detail on the subject, our note entitled In Which Cases May an Employee Terminate the Contract for Just Cause? may be consulted.
The Distinction Between the Two Institutions
The source of the distinction is the reason that leads the employee to leave the workplace.
A departure that occurs without any just cause, purely on the employee’s personal preference, is in the nature of a resignation and as a rule gives rise to no entitlement to severance pay. Where, on the other hand, the employee has been compelled to leave the workplace because of unlawful conduct on the employer’s part or because the working conditions have become intolerable, there is a termination for just cause and entitlement to severance pay is possible.
For this reason the word the employee uses on departure is not decisive. The real question is whether or not there is a just cause behind the departure. Even if the letter contains the phrase "I resign", if there is a just cause underlying the departure the termination may in law be treated as having been founded on a just cause, and the entitlement to severance pay arises.
Special Grounds for Departure Recognised by Statute
The basic premise of labour law is that an employee who himself brings the contract to an end cannot receive severance pay. By contrast, in certain cases enumerated in Article 14 of Act No. 1475, the entitlement to severance pay arises even where the termination has come from the employee. Grouped in practice under the heading of "special grounds", these cases allow severance pay to be paid notwithstanding the appearance of a resignation.
Within this framework, an employee who leaves work on grounds of marriage, military service or retirement becomes entitled to severance pay, provided that he meets certain conditions.
Departure of a Female Employee on Marriage
A female employee who marries becomes entitled to severance pay where she terminates her contract of her own volition within one year from the date of the marriage. A departure of this kind is not regarded as an ordinary resignation; it is assessed as the exercise of a power of termination of a special character recognised by statute.
Two steps suffice in order to benefit from the right: leaving work within the one-year period following the date of the marriage, and providing the employer with an official document proving the marriage (such as a marriage certificate or a copy of the civil registry record). An employee who leaves by this route may claim severance pay without being bound by the notice period.
Departure on Account of Military Service
An employee who ends his employment contract in order to perform his military service obligation may likewise become entitled to severance pay. Even though the departure rests on the employee’s own volition, it is accepted here that a special power arising from statute is being exercised.
The right in question is not confined to long-term regular military service; provided that military service is actually commenced, it may also arise in the case of paid military service. In short, an employee who leaves the workplace on account of military service becomes entitled to severance pay.
Departure on Account of Retirement
An employee who has acquired the right to retire or who has completed the conditions required for retirement may become entitled to severance pay where he terminates his contract of his own volition. This departure too is distinguished from an ordinary resignation; it is in the nature of the exercise of a special power arising from statute.
Just as an employee who becomes entitled to an old-age pension and retires may claim his severance pay, so too an employee who has completed the insurance period and the number of premium days but has not yet satisfied the age condition may, relying on a letter obtained from the Social Security Institution (SGK), terminate his contract and claim severance pay.
Grounds Entitling the Employee to Terminate for Just Cause
Article 24 of the Labour Act No. 4857 governs the cases conferring on the employee a right of termination for just cause. Working conditions that endanger health, conduct on the employer’s part incompatible with the rules of morality and good faith, non-payment of wages and other employment claims, material changes to working conditions, and failure to take occupational health and safety measures are foremost among these cases.
In such a situation, even though the employee has left the workplace of his own volition, the act performed is in law regarded not as a resignation but as a termination for just cause, and the entitlement to severance pay arises.
Health Grounds
Where the work performed becomes dangerous for the employee’s health, or where conditions at the workplace adversely affect his health, the employee may terminate the contract for just cause. Such a situation arises in two cases in particular: the emergence of ailments arising from the nature of the work, and the failure to meet the hygiene and health standards required at the workplace.
The right of termination on health grounds may take various forms. The first is the deterioration of the employee’s health, or his contracting an occupational disease, because of the work he carries out. Secondly, there is the adverse effect on the employee’s constitution of harsh and unhealthy conditions at the workplace. A third form is the failure to employ the employee in work suited to his condition despite an ailment documented by a medical report. To these are added the complete failure to provide health and hygiene conditions at the workplace, and the contracting of a contagious disease by the employer or another worker with whom the employee is in constant close contact.
Nevertheless, for health problems to give rise to a just cause for termination, the ailment that has emerged is required to be connected with the workplace or the working conditions.
Breach by the Employer of the Rules of Morality and Good Faith
The display by the employer, towards the employee, of conduct incompatible with the rules of morality and good faith confers on the employee a power of termination for just cause. Attitudes of this nature make the continuation of the employment relationship something that cannot be expected of the employee and give rise to a possibility of immediate termination.
The following cases may be assessed within this scope:
- Words and conduct damaging the employee’s dignity: The employer’s directing of demeaning expressions at the employee, use of degrading language, or engagement in conduct targeting his personality rights justifies termination.
- Systematic pressure, intimidation and mobbing: Keeping the employee under constant pressure, needlessly making his duties more onerous, excluding him from the working environment, or compelling him to leave by psychological means is characterised as mobbing and gives rise to a just cause for termination.
- Sexual harassment: Where words, conduct or contact of a sexual nature directed at the employee are carried out by the employer or by another person at the workplace, the employee may terminate the contract immediately and becomes entitled to severance pay.
- Threats and intimidation: Conduct aimed at intimidation by threatening dismissal, wage deductions or the infliction of some other loss is among the unlawful attitudes that make the continuation of the employment relationship difficult.
- Discrimination and ill-treatment: Subjecting the employee to treatment different from that of other workers on grounds such as sex, age, religion, language or political opinion, or exposing him to ill-treatment at the workplace, is a just cause for termination.
- Attacks directed at family members: The employer’s insulting of the employee’s spouse, child or other family members, or the display of demeaning conduct targeting them, likewise allows the contract to be terminated for just cause.
Where such conduct exists, the employee may end the employment relationship immediately on a just cause.
Non-Payment of Wages and Employment Claims
The employer’s most fundamental obligation is to pay the employee’s wages and other claims in full and on time. Failure to meet this obligation gives the employee a right of termination for just cause. The complete non-payment of wages, their regular delay, or the failure to make other payments that have been earned, makes the continuation of the employment relationship something that cannot be expected of the employee.
The principal situations encountered under this heading are as follows:
- Non-payment or persistent late payment of wages: The complete non-payment of wages, or their regular late payment, gives rise to a right of termination for just cause. Since timely payment of wages is the employer’s principal obligation, breach of that obligation is regarded as a serious infringement of rights from the employee’s standpoint.
- Failure to pay for overtime: Failure to pay for the overtime the employee has worked, or failure to reflect it in the payroll, amounts to underpayment of wages and confers a right of termination.
- Failure to grant annual leave or to pay annual leave pay: Failure to grant the annual leave earned, or failure to pay for unused leave when the contract comes to an end, is likewise among the grounds justifying termination.
- Non-payment of premiums, bonuses and ancillary entitlements: Failure to pay items such as transport and meal allowances, bonuses or premiums, despite their arising from the individual contract, from a collective labour agreement or from settled workplace practice, justifies termination.
- Underpayment and unlawful deductions: The employer’s making of deductions from wages contrary to the legislation, or its failure to pay part of the wages earned, is also regarded as a just cause for termination.
Where these grounds exist, the employee may end the employment relationship on a just cause. For detail on the severance pay claim, reference may be made to our note entitled The Severance Pay Claim and the Litigation Process.
Material Change in Working Conditions
The employer’s making of a material change to the working conditions without obtaining the employee’s consent gives rise to a right of termination for just cause. By material change is meant practices that touch upon the essential elements of the employment contract and appreciably worsen the employee’s working conditions. Interventions of this nature may make the continuation of the employment relationship something that cannot be expected of the employee.
- Change of place of duty or relocation of the workplace: Where the place of work is changed in a manner that will seriously complicate the employee’s daily life, or where the workplace is moved to a distant location, a right of termination arises.
- Reduction of wages or disruption of the wage structure: Reducing wages, abolishing premiums and ancillary entitlements, or making arrangements leading to a marked fall in income affords the employee a just cause for termination.
- Extension of working time or intensification of the working arrangements: Extending working hours, narrowing rest breaks, or restructuring the shift system in a manner that disrupts the employee’s pattern of life may be regarded as a material change.
- Radical alteration of the job description: An employee who is employed in work that does not correspond to his professional qualifications, or who is forced into a heavier or wholly different role, may terminate his contract for just cause.
Where these cases exist, the employee may end his contract for just cause on the basis of the material change in working conditions.
Under-Declaration or Non-Declaration of Social Insurance Premiums
The employer’s failure to pay social insurance premiums in a manner corresponding to the true position, or its failure to pay them at all, gives the employee a right of termination for just cause. Since declaring premiums below their true level directly damages the employee’s social security, health and pension entitlements, it is regarded in law as a serious breach. Failure to meet this obligation may make the continuation of the employment relationship intolerable for the employee.
The principal forms encountered in practice are as follows:
- Understating the real wage: Paying premiums on a base equal to or below the minimum wage although the wage actually received is higher gives rise to a just cause for termination.
- Delay in, or complete absence of, social insurance registration: Opening the insurance record after the date of commencement of work, or not opening it at all, is a ground for termination since it damages social security entitlements.
- Declaration of missing days: Declaring fewer days than worked to the Social Security Institution (SGK), or creating records as though there were days not worked, although the employee works full time, confers a right of termination for just cause.
- Non-payment or irregular payment of premiums: Where the employer does not pay the premiums at all or delays them for a long period, the employee may exercise this right.
Where the situations enumerated exist, the employee may terminate his contract for just cause. In practice these allegations are expected to be supported by the service record, bank records and a comparison of payslips.
The Emergence of Compelling Reasons
Where a compelling situation arises at the workplace that makes the performance of the work impossible, the employee may likewise proceed to terminate for just cause. Compelling reasons are extraordinary situations that develop outside the will of the parties, that could not be foreseen and that actually prevent the work from being continued. Since the continuation of the employment relationship cannot be expected of the employee in such a situation, the contract may be terminated for just cause.
- Natural disasters halting operations: Where the workplace becomes inoperable, or remains closed for a long period, as a result of an earthquake, flood, fire or similar disaster, a right of termination arises.
- Epidemics and extraordinary situations: Where quarantine measures, an epidemic disease or mandatory measures taken by the public authorities prevent the work from being performed for a long period, the employee may exercise this power.
- Closure of the workplace or suspension of its activity: The employer’s closing of the workplace, or suspension of its activity, on economic, legal or administrative grounds falls within this scope.
- Unforeseen events preventing work: Events developing outside the employee’s control that make it impossible for him to perform his work may also be regarded as compelling reasons.
In these cases the employee may end his contract for just cause by relying on the compelling reason.
Failure to Take Occupational Health and Safety Measures
The employer’s failure to take the necessary occupational health and safety measures at the workplace, or to provide protective measures, gives the employee a right of termination for just cause. The employer is under a duty to protect the worker’s health and safety; breach of that duty creates a serious risk for the employee and may make the employment relationship intolerable.
- Failure to supply protective equipment: Failure to provide a helmet, gloves, a mask, protective goggles or similar equipment although the nature of the work requires it gives rise to a right of termination.
- Failure to take precautions for dangerous machinery and environments: Failure to take the measures that would ensure the safe use of machinery and equipment, or failure to make the necessary arrangements despite the existence of a serious safety deficiency at the workplace, is a just cause for termination.
- Failure to make improvements despite the risk of accident: Failure to carry out the necessary improvements despite an occupational accident having previously occurred at the workplace, or acquiescence in the continuation of the risks, affords the employee a possibility of termination.
- Continuation of an unhealthy working environment: Where ventilation, cleanliness, hygiene or safety conditions remain inadequate and this threatens the employee’s health, the right of termination for just cause may be exercised.
Where these cases exist, the employee may terminate his contract for just cause on the ground that the employer has failed to take occupational health and safety measures.
Resignation Letters Obtained Under Pressure or Made Conditional
One of the situations frequently encountered in practice is that in which the employee is left having to give a letter of resignation not by his true volition but as a result of pressure or steering by the employer. Since the departure does not in reality rest on a free will, the document given may not be regarded as a valid resignation in the eyes of the legal order. Where the will has been vitiated, or the resignation has been made subject to a condition, the ending of the contract may be characterised as a termination by the employer or, depending on the features of the file, may also be assessed as a termination for just cause.
Letters of this nature arise in particular in the following situations:
- Obtaining a letter under threat of dismissal: Where the employer applies pressure to the effect that "if you do not resign you will be dismissed without compensation", or creates a fear of dismissal, the letter obtained may not be regarded as a genuine resignation.
- Having a blank or pre-prepared letter signed: Having an undated letter of resignation signed at the time of recruitment or in return for being allowed to continue working is unlawful; documents obtained in this way may not be accepted as valid resignations.
- Making the resignation subject to a condition: A letter given by advancing a condition in the form of "I will leave if my compensation is paid" or "I will resign if my claims are met" is in most files not accepted as a genuine resignation.
- Departure as a result of psychological pressure: The constant and unjustified alteration of duties, keeping the employee under pressure, or steering him towards departure may indicate that the declaration was not given by a free will.
A letter obtained in these circumstances does not of itself extinguish the entitlement to severance pay. If it can be proved that the departure took place under pressure, the conclusion may be reached that the termination came from the employer, and the employee’s entitlement to severance pay arises.
Cases in Which No Entitlement to Severance Pay Arises
The basic premise of labour law is that an employee who ends the contract by his own volition cannot receive severance pay. If the departure does not rest on a just cause and there is no case specially regulated by statute either, the termination is characterised as a resignation and no entitlement to severance pay arises.
For this reason the correct determination of the legal nature of the ground for departure is of great importance. The cases frequently encountered in practice that give rise to no entitlement to severance pay are explained below with examples.
Departure Based on Personal Preference
It is not possible for an employee who leaves work simply of his own wish, without any just cause, to become entitled to severance pay. If the decision to leave rests wholly on a personal preference, there is a resignation and no severance pay may be claimed.
Securing a better job opportunity, being dissatisfied with the current job, wishing to change workplace or city of residence, or leaving for personal reasons are examples falling within this scope; none of these is regarded as a just cause for termination. On such a departure the employee cannot become entitled to severance pay.
Termination in Order to Take Up Public Office
An employee who ends his employment contract in order to enter the civil service or another public office cannot as a rule become entitled to severance pay. Since a move into public office means that the employee is leaving by his own preference, this situation is not accepted as a just cause for termination.
Accordingly, no entitlement to severance pay arises as a rule in respect of an employee who leaves the workplace in order to become a public official.
Termination Made Subject to a Condition
Where the employee ends his contract by making it subject to a particular condition, the conclusion may be reached that there is no genuine termination. The advancing of a condition in the form of "I will resign if my compensation is paid" or "I will leave if my claims are met" may not be assessed as a legally valid intention to terminate.
Since it is difficult to accept that the contract has been ended clearly and definitively by declarations of this kind, no entitlement to severance pay may arise.
The Position as Regards Notice Pay
The rule in labour law is that notice pay is not payable to an employee who ends his contract by his own volition. This item is a sum that the party effecting the termination is obliged to pay to the other party where it fails to observe the notice period. For this reason an employee who leaves of his own wish cannot as a rule claim notice pay.
The position changes, by contrast, where the employee terminates his contract on a just cause. On a termination for just cause the contract may be ended immediately and there is no obligation to observe the notice period. In that case the employee cannot claim notice pay; but nor does an obligation to pay notice pay arise on the employer’s part.
The position may be summarised in three propositions: an employee who resigns of his own wish cannot receive notice pay; an employee who leaves on a just cause is not obliged to pay notice pay but nor may he claim it himself; whereas on a termination effected by the employer without observance of the notice period the employee’s entitlement to notice pay arises.
In short, whether or not this item arises must be determined by looking at which party the termination came from and on what ground it rests.
For detailed information on the subject, our note entitled The Notice Pay Claim and the Litigation Process may be consulted.
The Position as Regards Unemployment Benefit
Unemployment benefit is a social security entitlement conferred on insured persons whose employment relationship ends outside their own volition and fault. For this reason it is as a rule not possible for an employee who leaves work of his own volition, that is to say who resigns, to benefit from that allowance.
Where the contract has been ended on a just cause, however, the departure cannot be attributed to the employee’s fault and an entitlement to unemployment benefit may arise. An employee who leaves on the ground of exposure to mobbing, the worsening of working conditions, the non-payment of wages or the failure to take occupational health and safety measures may claim this allowance if he also meets the other conditions.
On the other hand, the suitability of the ground for departure is not sufficient on its own. The employee must in addition have completed a certain insurance period and number of premium days.
In brief: an employee who resigns of his own wish cannot as a rule receive unemployment benefit; in respect of an employee who leaves on a just cause this entitlement may arise; and in both cases the premium and insurance conditions must additionally be satisfied.
Independent Legal Assessment
In practice the line between resignation and termination for just cause is most often drawn not by looking at the heading of the letter but by looking at the traffic of correspondence and records generated in the months preceding the departure. The employee’s failure to set out the ground for his departure clearly at the moment of termination is the weak point most frequently encountered in an action brought afterwards. On the employer’s side, by contrast, it is observed that defences resting on blank letters signed in advance do not find favour before the courts.
What is decisive in disputes in this field is how the intention to terminate was declared and whether the ground relied upon was committed to a document at the moment of termination. Grounds produced after the departure has taken place are of limited evidential force.
In a concrete file we recommend that the following points be observed:
- Setting out clearly in the notice of termination the just cause relied upon, and avoiding the word "resignation" in the letter
- Documenting in advance, by means of bank records and payslips, the deficiencies relating to wage, overtime and premium payments
- Establishing by concrete evidence, in allegations resting on declarations to the Social Security Institution (SGK), the difference between the service record and the real wage
- Completing in good time the periods and documents required by statute in respect of the marriage, military service and retirement grounds
- Collecting witness, correspondence and chronology material at a time close to the date of termination where it is alleged that a letter was obtained under pressure
- Checking, on an application for unemployment benefit, whether the exit code declared is consistent with the ground for termination
- Not delaying the mediation application, bearing in mind that the five-year limitation period begins to run on the date of termination
Independent Legal provides advisory and representation services in processes involving the ending of the employment contract by the employee, from the pre-termination assessment to the conduct of actions for employment claims.