“At-will employment” is uniquely American. If your company employs people internationally, terminating those employment relationships comes with a range of challenges.
By Nancy Cremins, Chief Administrative Officer & General Counsel, Globalization Partners
The concept of “at-will” employment, which refers to the idea that an employment relationship can be terminated at any time for any reason (as long as that reason doesn’t violate the law) or for no reason at all, is relatively unheard of outside of the United States. Termination laws in other countries are heavily weighted in favor of the employee.
As a result, when a company that has employees in countries outside of the United States must end the employment relationship—whether due to a layoff, restructuring, or otherwise—that employer must proceed with caution.
If an international termination is handled incorrectly, the employer could find itself on the hook for significant damages including back pay, front pay, emotional distress damages, and more.
Below are several key issues to consider when terminating international employees.
Are there risks to terminating overseas employees?
While terminating an international employee seems like a straightforward task, it comes with consequences you may not expect. The most notable risks related to the termination of employment are the legal implications and costs.
If you fail to meet a country’s requirements surrounding termination, you’ll likely experience hefty penalties. With every country having nuances to its termination laws, it’s easy to miss something and take on massive charges as a result. Some countries even allow terminated employees to file a claim, which leads to lawsuit expenses on top of legal penalties.
These legal repercussions, in turn, lead to another risk — a damaged reputation. It’s challenging to build your brand abroad as it is, but if you attach various legal violations to your name, it can be difficult to recover. You might struggle to recruit new employees with this reputation, and it can generally hurt your company’s chance for success in a new market.
Review the Employment Contract
Before making any termination decisions, it is always a good rule of thumb to review the operative employment contract. There will be key elements to consider including seniority, contractual notice period, severance provision, benefits, and/or whether a collective labor agreement applies that will help to determine the timing and related costs involved in terminating a particular employee.
Another critical component to consider is the basis for the termination. Does your company need to undergo a reduction in force? Are the needs of your business changing? Or must you terminate because an employee is failing to meet performance standards or engaging in misconduct? There are different paths and requirements to follow to properly effectuate a termination depending on the grounds for termination.
Perhaps the most challenging is to be able to properly establish cause. Labor regulations often define what classifies as just cause for dismissal. Many of these lists include actions like theft and frequent unexcused absences. Employees also often have the option to refute termination if they feel your cause wasn’t justified.
Many process requirements to correctly terminate for cause, which vary by country, come as a shock to U.S.-based employers. Some processes allow for two offenses with warnings, while a third offense allows for termination. Others require employers to explain an offense to a worker and give them a grace period to fix their behaviors before the termination can take effect. Failing to follow these processes can classify as unfair dismissal.
How employee termination works in other countries
Take a look at some of the termination laws in countries around the world.
In Singapore, an employer must grant the employee an “inquiry” in which the employee should be allowed to present his case. Additionally, an employer may suspend the to-be-terminated employee for no longer than one week, and must pay the employee at least half of his salary during the suspension period.
In Mexico, the employee must acknowledge wrongdoing in writing. This separation agreement should provide a detailed description of what motivated the termination and the rights associated with the employee dismissal. Employers are not obligated to provide severance pay in this instance, but any missed step in the termination process will require severance or back pay.
To terminate for cause in Germany, the notice of termination must be served in writing within two weeks of the employer gaining knowledge of the underlying facts leading to the termination. The writing cannot be in email or fax form and must include a handwritten signature.
Employers must provide two weeks’ written notice of termination. If employers do not provide notice, they must provide two weeks of wages. In some circumstances, severance pay is required. If an employee is dismissed for just cause as defined in the labor laws, written notice and severance pay are not required.
Employers must notify workers of their terminations in writing. The employer must register the dismissal with the worker’s employment booklet and notify the appropriate authorities. Termination falls into two categories — with and without cause. With-cause dismissals may include reasoning like dishonesty, sexual harassment or poor performance. Without-cause dismissals include cases of redundancy and other circumstances.
Termination with cause does not require severance pay or a notice period, but without-cause dismissals do.
6. United Kingdom
Employees can be dismissed as long as an employer’s reasoning aligns with the designated fair reasons outlined in the labor laws. In these instances, severance pay is not required. The law does not require separation agreements, but these are common. If you dismiss an employee based on redundancy, severance pay is required.
Dismissal in France must be for a personal or economic reason. Personal reasons include disciplinary grounds like poor performance, but it also encompasses other job limits, like the inability to relocate if the position moves elsewhere. Economic reasons include the need to restructure for competitiveness and other economic difficulties.
There is a multiple-stage process for dismissal. The steps are as follows:
- The employer must send the employee an invitation to a preliminary meeting.
- Within 5 days of receiving the invitation, the meeting will occur, and the employer will discuss the reasoning behind the dismissal. The employee may bring a third party to the meeting for assistance.
- The employer must send a dismissal letter within two days of the meeting.
8. The Netherlands
In the Netherlands, employees have 14 days after the notification of termination to revoke their consent for the dismissal. If your employee does not consent to the termination, you must receive permission from the Employee Insurance Agency or a sub-district court. These bodies will confirm if your reasoning is appropriate for enacting termination.
Italy has two categories for dismissal — termination with and without notice. Dismissal without notice includes serious breaches of employment contracts, like gross misconduct. Ordinary dismissal with notice includes subjective reasons, like a breach of contractual duties, and objective reasons, like economic factors. Severance pay is due in all circumstances.
10. United Arab Emirates
The UAE allows for termination without notice by any party whether a contract is limited or unlimited. Employers can terminate without notice when an employer commits misconduct as described in the labor laws. This behavior can include coming to work drunk, forging labor documents, committing an error that leads to a significant loss for the company, and many other actions.
Arbitrary dismissal occurs when there is not a justifiable reason for termination.
Employees have the right to a hearing regarding a dismissal before it takes place. The employer must provide enough warning for the employee to prepare for the hearing, and the notice should include the reasoning behind the potential termination. During the hearing, the employer is obligated to answer the employee’s questions and seriously consider them before committing to the dismissal.
Any people authorized to decide upon this termination will attend, like HR professionals or senior staff members. A decision should be reached based on both sides of the argument.
12. South Africa
In South Africa, there are three recognized grounds for dismissal — misconduct, operational requirements, and incapacity. In the case of misconduct, the employer must conduct an investigation and inquiry to determine if the employee committed the noted form of misconduct. Termination notice depends on how long an employee has worked for an employer. Notice can be anywhere from one to four weeks.
Generally, termination requires notice, but in some cases, immediate dismissal is allowed. Some examples of these instances include breaches of contract or clear proof that the employee is unfit for the position. In some cases, 30 days of notice is required for dismissal. These cases include:
- An employee’s inability to perform work due to medical leave or a non-work-related injury
- The employee is incompetent with work duties, even after training
- There has been a major change in objective circumstances that affect the employment contract, and a new agreement cannot be reached
Learn More About Employee Dismissal Worldwide
In each case, learning the laws of the land as they pertain to terminations—coupled with a review of the employment contract—will insulate you from sustaining damages from the outset.
To learn the other key issues when it comes to avoiding a painful international termination, read the rest of Nancy Cremins’ point of view on the topic here:
Globalization Partners helps companies manage employee termination in other countries with our Employer of Record service model. Learn more about our capabilities by contacting us today.