Cancelling an employment contract

The reason given for cancellation must be extremely weighty.

Both employer and employee may only cancel the employment contract for an extremely weighty reason. In the case of cancellation, there is no notice period; the employment relationship ends immediately. An employment contract may be cancelled regardless of its duration (indefinitely valid or fixed-term).

The employer may cancel the employment contract if the employee has committed such a serious breach of his/her essential obligations arising from the contract that the employer cannot be reasonably expected to continue the employment relationship.

The employee may cancel the employment contract if the employer violates or neglects his responsibilities arising from the employment contract or the law in such a way as to have an essential impact on the employment relationship.

Cancellation must be announced within 14 days of the reason for cancellation becoming known.

The reason given for cancellation must be extremely weighty. What this means is that the reason must be such a serious breach or misconduct on the part of the other party that continuing the employment relationship cannot be reasonably expected. Cancellation must be announced within 14 days of the reason for cancellation becoming known.

Examples of extremely weighty reasons for cancellation:

  • giving misleading information when concluding the employment contract,
  • intentionally jeopardising occupational safety,
  • being intoxicated and using intoxicating substances at the workplace,
  • gross defamation or violence against another person,
  • disclosing business or professional secrets,
  • bribery,
  • neglecting job duties despite receiving a warning, or
  • continued and serious negligence of the employer’s obligations, e.g. failure to pay wages or threatening the employee with violence.

Cancellation of the employment relationship for financial or production reasons is not allowed; cancellation always requires a serious breach of contract on the part of the other party.

Cancellation of the employment contract during the trial period

If the employment relationship is to start with a trial period, this must be agreed in the employment contract. The purpose of the trial period is for the employer to evaluate whether the employee is suited for his/her intended job duties in terms of competence and capability and for the employee to find out whether the job is actually what he/she wants to do.

During the trial period, both the employer and the employee may cancel the employment relationship without notice. However, cancellation on discriminatory or inappropriate grounds is not allowed. There is a list of discriminatory grounds in the Non-discrimination Act. Whether the grounds given for cancelling the employment relationship during the trial period are acceptable must be evaluated in relationship to the overall situation and legal practice.

Grounds must be given for cancellation even during the trial period

The Employment Contracts Act does not contain a list of acceptable grounds for cancellation of an employment relationship during the trial period. According to legal practice, it has been found acceptable for the employer to cancel the employment relationship if the employee:

  • does not perform the work up to standard,
  • is often late or absent without leave,
  • is generally unsuited to the work, or
  • is unable to adapt to the circumstances of the workplace.

By contrast, according to legal practice it has been found unacceptable for the employer to cancel the employment relationship because of:

  • a mistake by the employer,
  • unfounded suspicions concerning the employee’s health,
  • the employer’s unfounded suspicion of theft or shortfall of cash,
  • actions at the workplace during working hours that cannot be blamed on the employee,
  • actions that in themselves are permitted (e.g. participating in lawful industrial action or exercising the rights of an employee), or
  • matters outside working hours and outside the workplace that have no bearing on the employment relationship.

For instance, an ordinary brief sickness absence cannot constitute grounds for cancelling the employment relationship during the trial period. On the other hand, illness may constitute valid grounds for cancellation if it affects the employee’s work capacity or if it lasts for so long that it prevents the employer from properly assessing the employee’s performance at work during the trial period.

Length of the trial period

The length of the trial period is provided for in the Employment Contracts Act and in most collective agreements. If there are any provisions concerning the trial period in the applicable collective agreement, the employer must inform the employee of them when the employment contract is concluded.

The trial period may be no more than four months from the beginning of the employment relationship, except in the case of a fixed-term employment relationship lasting less than eight months, in which the trial period may be no longer than half of the duration.

If the employer provides specific, work-related training for the employee at the beginning of the employment relationship, a trial period of no more than six months may be agreed on. In this context, ‘specific, work-related training’ means a continuous theoretical or practical training period for the employee that is more demanding than conventional induction training. Conventional induction training does not warrant an extended trial period.