Any amendment or termination of an employment contract must be done in accordance with valid laws. Both the employee and employer can turn to the labour dispute committee or court to protect their rights.
The employment contract cannot be terminated on grounds not provided by the Employment Contracts Act.
There are several variants for the termination of an employment contract:
- Ending the employment relationship on mutual agreement;
- Fixed-term expiration;
- Employee’s death;
- The death of the physical person employer, if the contract was concluded considering the employer’s person;
- Cancellation.
Terminating the Employment Contract on Mutual Agreement
The employee and employer can terminate the employment contract at any time, on mutual agreement. Thus, it is irrelevant on whose initiative and for what reason the contract is terminated. Both parties must agree with the contract termination and must have reached an agreement on conditions related to the termination, like employment contract ending date, payment of possible compensations, etc.
To avoid later disputes, the termination of the employment contract on mutual agreement must be fixed in writing.
Termination of an employment contract by an employee
An employee has the options of an ordinary and extraordinary termination of their employment contract. In addition, an employee can at any time propose to their employer that the employment contract be terminated by agreement between the parties.
Ordinary termination of an employment contract without a term can be initiated by an employee at any time, i.e. the employee does not need a reason for initiating ordinary termination. By way of exception, ordinary termination of a fixed-term employment contract cannot be initiated by an employee, unless it has been concluded to find a replacement for another employee.
An employee can initiate extraordinary termination of their employment contract only if they have a valid excuse. An employee can request extraordinary termination of an employment contract in case of a substantial breach of obligations on the part of the employer (e.g. the employer treats the employee improperly, the employer significantly delays the payment of remuneration, the continuation of work may cause a real risk to the employee’s life or health, etc.). Extraordinary termination may also be based on the employee's personal circumstances, e.g. when their health or family obligations do not enable them to continue working as agreed.
In order to terminate an employment contract, an employee must submit to their employer a notice of termination by means which leaves a written record. In order for the notice of termination to become valid, the employer must receive it and have a chance to examine it. If an employment contract is exceptionally terminated, the employee must state in their notice of termination the reasons for employment contract termination.
An employee must inform their employer of ordinary termination at least 30 calendar days in advance. If an employee is subject to a probation period, notice of termination must be given at least 15 calendar days in advance. In the event of extraordinary termination of an employment contract, there is no notice period, and therefore, the employee does not have to inform the employer of extraordinary termination in advance if, in the light of all the circumstances and in the interests of both parties, the continuation of the contract may not reasonably be required until the end of the agreed period or the expiry of the notice period.
You can find out more about the termination of an employment contract at the employee's request on the work-life portal Tööelu.
Termination of an employment contract by an employer
An employer can only terminate an employment contract on an exceptional basis, i.e. the employer must always have a reason for terminating the employment contract. In addition, an employer can at any time propose to their employee that the employment contract be terminated by agreement between the parties.
The purpose of a probation period is to assess the employee’s suitability for the job, including whether their abilities, skills, personal characteristics, etc. are suitable for the job in question. If an employer terminates an employment contract of an employee on the grounds that the aim of the probation period has not been met, the employer must always base the decision on the aim of the probation period, i.e. in what way did the employee not meet the aim of the probation period.
An employer may terminate an employment contract based on the employee’s characteristics (e.g. due to the employee’s health the employee’s ability to work has reduced, the employee has not been able to perform their duties for a long time, the employee has committed a violation). Before the termination of the employment contract based on the employee’s characteristics a warning must be given, drawing the employee’s attention to the violation and demanding that it is stopped. A warning does not have to be given if an employment contract has to be terminated because the employee’s health prevents them from performing their duties.
An employer can terminate an employment contract on economic grounds, i.e. if it becomes impossible to continue an employment relationship under the agreed conditions due to reduced work volumes, restructuring, the employer declares bankruptcy (or bankruptcy proceedings are terminated by abatement without declaring bankruptcy), or the employer terminates their activities. An employee is made redundant. In the event of dismissal by reasons of redundancy, the employer must favour representatives of employees and employees raising children under the age of three.
In order to terminate an employment contract, the employer must submit to the employee a notice of termination by means which leaves a written record. In order for the notice of termination to become valid, the employee must receive it and have a chance to examine it. An employer must always explain in their notice of termination why the employment contract is being terminated.
In the event of extraordinary termination, an employer must comply with notice periods. The notice periods are tied to the length of the employee’s employment relationship with the employer. An employer must notify the employee of the extraordinary termination of the employment contract in advance if the employee’s employment relationship with the employer has lasted:
- less than 1 year of service – at least 15 calendar days;
- 1 to 5 years of service – at least 30 calendar days;
- 5 to 10 years of service – at least 60 calendar days;
- 10 or more years of service – at least 90 calendar days.
You can find out more about the termination of an employment contract at the employer’s request on the work-life portal Tööelu.
Final payment
When an employment contract is terminated, the employer makes the ‘final payment’ to the employee, i.e. the remuneration earned by the employee and compensation for unused annual leave. If an employment contract is terminated due to dismissal by reasons of redundancy, the employer must also make a redundancy payment to the employee, which must amount to the average monthly salary of the employee.
If an employer does not adhere to the notice period when terminating an employment contract, the employer must compensate the reduced advance notice period in cash.
In the e-MTA, you can see the employers with whom you have a contractual relationship.
Related articles
- Labour dispute
- Employment contract
- Contracts and the formalisation of a contract
- Breach of a contract
References
- Termination of employment contract
- Labour disputes
- Free counselling (helpline of the Labour Inspectorate)
- Contacts and work areas of Labour Dispute Committees