Two concepts used in the ending of an employment contract are frequently confused: termination for just cause and termination for valid reason. The difference between them is not merely terminological; it directly determines whether severance pay will be paid, whether the notice period must be observed, and whether a reinstatement action can be brought.
Termination for just cause and termination for valid reason
Termination for just cause is termination effected immediately, without waiting for the notice period, where a serious ground exists that makes it intolerable for one of the parties to continue the employment relationship. The instances of breach of the rules of morality and good faith listed in the law are the typical example. The right of termination for just cause must be exercised within six working days of learning of the ground and, in any event, within one year of the act occurring.
Termination for valid reason, by contrast, rests on grounds arising from the employee's inadequacy or conduct, or from the requirements of the undertaking, the workplace or the work — but which are not serious enough to justify immediate termination. In that case the notice period is observed or notice pay is made, and severance pay arises where the conditions are met.
Severance pay
The basic condition for entitlement to severance pay is at least one year's service with the same employer and termination of the employment contract in one of the circumstances prescribed by law. The calculation is made on the basis of thirty days' all-inclusive gross wage for each full year of service and cannot exceed the statutory ceiling. Periods exceeding a full year are apportioned pro rata.
The concept of the “all-inclusive wage” is important: alongside the bare wage, transport, meals, bonuses, premiums and regularly provided social benefits are also included in the calculation. In practice a significant proportion of actions for differences in compensation arise precisely from the failure to take these items into account.
Notice periods
The notice periods to be observed on termination of an indefinite-term employment contract vary according to length of service:
- 2 weeks for an employee with less than 6 months' service
- 4 weeks for an employee with between 6 months and 1.5 years' service
- 6 weeks for an employee with between 1.5 and 3 years' service
- 8 weeks for an employee with more than 3 years' service
These periods are minimums and may be increased by contract. Where the period is not observed, notice pay in the amount of the wage for that period is paid.
Reinstatement: a narrow window of time
In workplaces employing thirty or more employees, an employee with at least six months' service working under an indefinite-term contract may seek reinstatement on the ground that the termination did not rest on a valid reason. Here the timetable is extremely tight:
- Application must be made to a mediator within one month of service of the termination notice.
- If no agreement is reached in mediation, the action must be brought within two weeks of the date the final minutes were drawn up.
These are forfeiture periods. Once missed, how unlawful the termination may have been can no longer be argued.
In employment law it is not enough to be in the right; you must establish that you are in the right, within time and by documentary evidence.
Procedure on the employer's side
For a valid termination, three elements are required together on the employer's side: the existence of the ground, the taking of the employee's written defence (in terminations arising from conduct or performance), and a termination notice given in writing with a clear and definite reason. In addition, under the principle that termination is the last resort, it must be examined whether the employee could be considered for another position.
The reason stated in the termination notice limits the ground on which the employer may rely in proceedings. Drafting the notice is therefore as important as the termination itself.
Overtime and other claims
In many files the item making up the principal amount is not compensation but overtime, weekly rest day, national holiday and public holiday pay, together with untaken annual leave entitlement. Workplace records, entry and exit systems, bank movements and witness statements are decisive in proving these claims. An employer's failure to comply with its statutory record-keeping obligation produces a result against the employer in the assessment of the burden of proof.
