Termination of the employment contract is one of the most sensitive moments in the employment relationship, and the most likely to spark a dispute. The rules governing it changed fundamentally after the in-force amendments of Royal Decree (M/44), especially the notice period. This guide explains to you — whether worker or employer — how a contract ends properly, when termination is arbitrary and warrants compensation, and how to protect your position.
First: how does an employment contract end in law?
The law (as amended) specified the cases for the contract's end, including: agreement of the parties to terminate (provided the worker's consent is written), expiry of the term of a fixed-term contract, the will of one party in an open-ended contract (per the notice period), reaching retirement age under the Social Insurance Law, force majeure, permanent closure of the establishment, termination of the activity in which the worker is employed, and resignation (which was given new provisions).
Second: the notice period — the most important change
In open-ended contracts, it is not enough for one party to decide to terminate suddenly. The other party must be notified in writing in advance, based on a lawful reason. Here is the fundamental change after the amendment:
- If the wage is monthly and termination is by the employer: notice of at least sixty days.
- If the wage is monthly and termination is by the worker: notice of at least thirty days.
- If the wage is not monthly: notice of at least thirty days from the terminating party.
Note: the change from the old text
Previously the period was thirty days for both parties for monthly wages. Now the employer is bound by a doubled period (sixty days). Many contracts and decisions still rely on the old period — and this is an error that may cost the employer compensation.
What if a party does not observe the notice period?
A party who terminates the contract without observing the notice period is obliged to pay the other party an amount equal to the worker's wage for the notice period (or what remains of it), unless they agree on more. This is known as "payment in lieu of notice."
And an advantage for the worker: if the notice is from the employer, the worker has the right to be absent one full day per week (or eight hours) to search for other work, while still entitled to the wage for that day.
Third: dismissal without award or notice — the exhaustive cases
The employer may not rescind the contract without award, notice, or compensation except in cases specified exhaustively by the law, and provided the worker is given the opportunity to present their reasons for opposing it. The most notable are:
- the worker's assault on the employer, the responsible manager, their superiors, or subordinates during or because of work.
- failure to perform their essential obligations or disobeying lawful orders despite a written warning.
- proven bad conduct or an act breaching honor or trust.
- intentionally causing material loss to the employer (with notifying the authorities within 24 hours).
- resorting to forgery to obtain the job.
- absence without a lawful reason for more than thirty days in a year, or more than fifteen consecutive days (subject to a prior written warning).
- disclosing industrial or commercial secrets.
An essential condition for the validity of dismissal
Even in these cases, dismissal is valid only after giving the worker the opportunity to present their defense, and in absence cases a prior written warning is required. An employer who dismisses without following these procedures may find the dismissal described as arbitrary despite the existence of grounds.
Fourth: when may the worker leave without notice while keeping their rights?
Conversely, the worker may leave work without notice while retaining all their rights if the employer breaches their essential obligations, deceives them at the time of contracting, assigns them work substantially different from what was agreed, assaults them or treats them harshly or insultingly, or there is a serious hazard to their safety that was not addressed.
Fifth: termination for an unlawful reason — compensation
If the contract is terminated for an unlawful reason, the injured party is entitled to compensation. The amended law set a clear formula (unless the contract includes specified compensation):
- In an open-ended contract: the wage of fifteen days for each year of service.
- In a fixed-term contract: the wage of the remaining period of the contract.
- And in both cases: the compensation must not be less than two months' wage.
Conclusion
Proper termination begins with knowing your contract type and the in-force notice period, and passes through a lawful reason and correct procedures. Ignoring any of these may turn ordinary termination into a costly arbitrary dismissal. The golden rule: do not terminate a contract — nor sign off on its termination — before you verify the in-force notice period, that the reason is lawful and documented, and that the opportunity for defense is given. The correct procedure protects both parties from compensation that need not have arisen.
How does LEXIUM help?
We assess the lawfulness of termination before it is taken, draft notices and warnings correctly, represent the arbitrarily dismissed worker or the employer in dismissal cases before the labor courts, and calculate the due compensation precisely.
Note: Termination cases are precise and their details differ from one contract to another, and consulting a specialist is advised before taking any decision to terminate or dismiss.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. See our full disclaimer.