Terminating the employment contract

Terminating a fixed-term employment contract

A fixed-term employment contract is binding on both parties until the end of the fixed term. A fixed-term employment contract expires without either party giving notice either when the agreed term ends or when the work agreed to be performed under the contract has been completed.

If the end date is only known to the employer (e.g. the employment relationship will end when the work is completed), he must notify the employee immediately on becoming aware of the end date.

Termination of a fixed-term employment contract must be agreed on

Principally, a fixed-term employment contract may not be terminated unless this has been specifically agreed on when the contract was concluded. However, terminating a fixed-term employment contract is possible if the employer and employee agree to do so.

If a fixed-term employment contract has a term of more than five years, after five years it may be terminated on the same grounds and procedure as an indefinitely valid employment contract.

If either the employer or the employee gives notice to terminate a fixed-term employment contract before the term expires and this has not been agreed on with the other party, the party giving notice is liable to compensate the other party for damage caused.

Terminating an indefinitely valid employment contract

An indefinitely valid employment contract is generally terminated by giving notice to terminate. In this case, the periods of notice specified in the Employment Contracts Act or in the applicable collective agreement and the employment contract must be observed.

The employee does not need to give any particular grounds for termination, but the period of notice must be observed.

The employer, on the other hand, may not terminate an employment relationship without proper and weighty reason. The following are acceptable as such a reason:

  • a serious breach or neglect of obligations having essential impact on the employment relationship,
  • essential changes in the conditions necessary for working related to the employee’s person as render the employee no more able to cope with his/her work duties, or
  • a significant and permanent reduction in the work that the employer may offer, unless the employee can be assigned to or retrained for other duties.

If the employee has neglected the obligations arising from the employment relationship, he/she may not be given notice before being issued a warning and given a chance to amend his/her conduct.

It is not acceptable to give notice to terminate because of the employee’s:

  • illness,
  • participation in industrial action,
  • opinions,
  • civic activities, or
  • resorting to legal protection.

The employer may also not give notice to terminate if:

  • the reduction in work is of a temporary nature,
  • new employees are being hired, or
  • arrangements seemingly intended to reduce the amount of work are made when the amount of work is not actually decreasing.