Termination of employment contract

Any amendment or termination of an employment contract must be done in accordance with valid laws. If you feel that your employer has wronged you in amending or terminating the employment contract, turn to the labour dispute committee to protect your rights.

An employment contract ends:

  • by agreement of the parties – the parties are entitled to cancel both a fixed-term contract and a contract entered into for an unspecified term at any time, provided the parties reach an agreement;
  • upon the expiry of the term;
  • on the initiation of the employee;
  • on the initiation of the employer;
  • on the demand of third persons;
  • on circumstances not depending on the parties.

There must be a basis for the termination of an employment contract. The basis may be:

  • liquidation – the enterprise terminates its activities in full;
  • bankruptcy – a court has declared the employer’s bankruptcy;
  • redundancy – the employer is unable to provide work for the employee. The preferential rights of the enterprise’s employees must be taken into consideration for making someone redundant and the employee must be notified of the redundancy in sufficient time.

Liquidation can only be the basis for terminating a contract if the employer terminates its activities in full and no new legal person is established in the place of the liquidated legal person. However, if the enterprise merges with another, is divided or reorganised, then this cannot be deemed as sufficient basis for terminating an employment contract.

Bankruptcy can only be referred to as basis for terminating an employment contract if it has already been declared by a court judgment. Even if the employer continues its activities after its bankruptcy has been declared, bankruptcy is considered sufficient basis to terminate an employment contract.

Redundancy can be the basis for terminating an employment contract if the employer’s volume of work decreases, work is reorganised or a person who used to occupy the position is reinstated in employment. An employee who has received a notice of dismissal shall be aware that the employer is obligated to offer him/her another position that shall be associated with the redundancy, as the other position is considered an alternative to the redundancy.

Making an employee redundant begins with a written notice of dismissal and ends with the termination of the employment contract. According to law, the term for the advance notice on the redundancy is also regulated. The length of the employee’s employment with the employee is also taken into consideration in connection with the term of advance notice. The employer’s obligation to offer the employee another position is an integral part of redundancy. This is an alternative to redundancy and the employee is not obligated to accept another position.

However, the employer shall be obligated to offer another position to the employee – it is not allowed to make an employee redundant without doing so. If the employee does not wish to accept the position offered, the contract shall be terminated due to redundancy upon the expiry of the term for advance notice. The person made redundant should protect his/her interests and ensure that all the necessary papers are prepared during the redundancy proceedings.

The Employment Contracts Act provides that the employee shall make an entry on the termination of the employment contract. The entry shall include the basis for the termination of the contract along with a reference to the section, subsection and clause of the Act. In addition, the date of the termination of the contract shall be indicated, as well as the payment of compensation to either the employee or the employer and the return of what was what was received pursuant to the contract. Employees who for some reason have not entered into an employment contract with the employee, shall demand that the employer issue a written statement indicating which position the employee filled with the employer and for how long he/she worked for the employer. Both a terminated employment contract and a written statement form the basis of receiving the unemployment insurance benefit from the Estonian Unemployment Insurance Fund.

A situation, where a disagreement has arisen between the employee and the employer in applying laws or acts, is called a labour dispute. It is possible to turn to a labour dispute committee or a court to resolve disputes.

In the e-Tax system, you can see the employers with whom you have a contractual relationship.

Compiled by: Labour Inspectorate