Termination of employment contract
- An employment contract may be terminated by agreement of the parties, upon expiry of term, due to the death of a party, or cancellation.
- An employment contract entered into for a specified term automatically expires upon the expiry of the term.
- The payment of the final settlement is due on the last day of the employment contract.
How does an employment contract expire?
An employment contract may expire on the following grounds:
- by agreement of the parties;
- upon expiry of term;
- due to the death of an employee;
- due to the death of an employer who is a natural person;
- upon cancellation.
Expiry of an employment contract entered into for a specified term
An employment contract entered into for a specified term expires upon the expiry of the term. The parties do not have to give special notice of the expiry of the employment contract, unless advance notice has been agreed upon.
An employment contract entered into for a specified term may expire on the expiry of term, regardless of whether the employee is on maternity leave or parental leave.
If an employment contract was entered into for a specified term for the period of substitution of an employee who is temporarily absent, the employment contract of the substitute employee expires when the regular employee returns to work or when the regular employee terminates his or her employment contract.
An employment contract entered into for a specified term shall be deemed a contract entered into for an unspecified term after the expiry of the term if:
- an employee continues to perform work after the expiry of the term of employment contract; and
- the employer has not expressed a different wish within five working days as of learning that the employee was continuing to perform the employment contract.
In a situation where an employment contract entered into for a specified term becomes a contract entered into for an unspecified term, it should be formulated in writing, for example as an annex to the employment contract to avoid misunderstandings in the future.
Pursuant to the principle of concluding a contract entered into for a specified term, it is not possible to terminate a contract entered into for a specified term before the term or condition arrives. Both the employer and the employee have a legitimate expectation of having work and labour at the time agreed in the contract. Thus, early termination of a contract entered into for a specified term shall have a good reason, meaning that both the employer and the employee can terminate a contract entered into for a specified term extraordinary. In order to terminate a contract entered into for a specified term, the reason for the termination shall be so good that the parties cannot reasonably be expected to continue the employment relationship until the agreed term. This could be, for example, a fundamental breach of the employment contract by the employee.
As an exception, a contract entered into for a specified term can be terminated ordinarily, i.e. without good reason, if the employment contract has been entered into for substitution of another employee. For example, a substitute for an employee on parental leave may ordinarily terminate the contract by giving 30 calendar days of advance notice.
Expiry of employment contract upon death of employee
An employment contract expires upon the death of the employee. As an employee performs obligations arising from the employment contract personally, the employee’s obligations arising from the employment contract cannot be transferred to the employee’s heirs in the event of the employee’s death and the contract expires automatically.
In the event of an employee’s death, the cancellation of the employment contract is based on a death certificate. In justified cases, an employer can inquire information regarding the death from the population register for a fee. A death certificate shall be issued within 30 calendar days.
Validity of employment contract in the case of the death of the employer
In case of the death of an employer who is a natural person, an employment contract shall transfer to the employer’s successors. In this case, the employee may cancel an employment contract entered into for a specified term and an employment contract entered into for an unspecified term within two weeks as of the time when the employee learnt or should have learnt of the transfer of the employment contract, notifying thereof 30 calendar days in advance. The successor of an employer may cancel an employment contract entered into for a specified term and an employment contract entered into for an unspecified term within two weeks as of the time when the successor learnt or should have learnt of the transfer of the employment contract, adhering to the term for advance notice specified in subsection 97(2) of this Employment Contracts Act. This does not restrict cancellation of the employment contract on other grounds.
An employment contract expires upon the death of an employer who is a natural person if the employment contract has been entered into significantly considering the person of the employer.
Expiry of employment relationship in the Employment Register
An employer shall make an entry in the Employment Register regarding expiry of the employment relationship within ten days as from the date of expiry of employment relationship.
The Employment Contracts Act provides exhaustive grounds for expiry of an employment contract. This means that an employment contract cannot expire on grounds not provided by law. The grounds for expiry of an employment contract are termination of employment contract by agreement, expiry of term, death of employee, death of an employer who is a natural person if the employment contract has been entered into significantly considering the person of the employer, and cancellation. Consequently, an employment relationship cannot be terminated solely on the basis of an entry in the Employment Register.
NB! Until the labour dispute committee or the court decides otherwise, the legal basis for making an entry is a declaration for cancellation of an employment contract submitted by an employee together with the legal basis contained therein, i.e. a section of the Employment Contracts Act. An employer is entitled to contest the extraordinary cancellation by an employee in the labour dispute committee or court and the grounds for expiry of the employment relationship may be changed as a result. An employer cannot do this on his or her own initiative.