A Guide to Employment in the European Union

A Guide to Employment in the European Union

Clifford Chance 3

Introduction 4

Clifford Chance Offices Worldwide 5

Austria 6

Belgium 13

Bulgaria 24

Cyprus 39

The Czech Republic 45

Denmark 57

Estonia 67

Finland 75

France 82

Germany 93

Greece 107

Hungary 116

Ireland 125

Italy 135

Latvia 147

Lithuania 154

Luxembourg 162

Malta 176

The Netherlands 183

Poland 193

Portugal 202

Romania 210

Slovakia 219

Slovenia 226

Spain 233

Sweden 242

United Kingdom 252

European Union Law 263

Appendix Country by Country Comparisons 269

Contacts 284

cont

ents

© Clifford Chance, 2013

Clifford Chance is the first fully integrated global law firm, with 35 offices in 25 countries. The firm provides unified legal solutions to theworld’s leading financial institutions and multinational businesses. It has pan-European domestic capability, in-depth US law resourcesand market-leading practices in Asia, Latin America and the Middle East. Clifford Chance provides legal advice on complex cross-border transactions, common and civil law. The firm gives practical tailored solutions to clients based on a thorough understanding oftheir business needs.

For both local and cross-border issues our Employment Practice offers unrivalled expertise. Clients ranging from global businesses tosmall enterprises have come to trust and rely on the experience of our dedicated employment teams.

Day-to-day experience of dealing with a broad range of sectors, cases and employment issues puts us in a strong position to adviseon developments in employment law, their implications and the practical steps needed to address these. We also work closely withour market-leading Employee Benefits and Pensions groups who advise on all areas of employee benefits, pensions, share schemesand related tax issues.

Informed, confidential advice is provided on the full range of employment and benefits law and best practice including:

n Tribunal litigation (such as unfair dismissal and discrimination claims)

n High Court litigation (such as enforcement of restrictive covenants and dealing with claims for unpaid bonuses)

n Alternative dispute resolution (mediation and arbitration)

n Drafting and negotiating employment contracts, consultancy and secondment arrangements

n Discrimination and equal opportunities issues

n Appointment and termination of senior executives

n Redundancies and collective dismissals

n Employment aspects of mergers and acquisitions

n Outsourcing of services, both domestically and internationally

n European Works Councils, domestic works councils and workers consultation

n Trade unions, collective disputes and industrial action

n The application of TUPE and the Acquired Rights Directive

n Protecting confidential information

n Health and safety

n Whistleblowing

n European legislation and its implications for employers

n Work permits and other immigration issues

n Preparation and negotiation of social plans

The Brussels office has direct access to the Commission Directorate responsible and can enter into dialogue with the Commission onbehalf of clients.

Clifford Chance


4 A Guide to Employment in the European UnionIntroduction

IntroductionThe purpose of this guideThis guide is designed to provide anoverview of employment law in each ofthe 27 member states of the EuropeanUnion (“EU”). It has been limited to ageneral description of the areas ofemployment law in each Member Statethat are of most interest:

n how employees are engagedand dismissed;

n the costs associated with employment;

n the rights of employees at the end ofthe period of employment.

Despite the complexity of modernemployment law, there are some generalprinciples common to Member Statesarising from the impact of EU Directiveson the domestic law of each of thecountries. A good illustration of this is theAcquired Rights Directive, which protectsemployees in the event of the acquisitionof businesses and economic entities, andthe legislation this has given rise to inMember States. Harmonisation isincreased by the fact that, in theinterpretation and application of lawbased on EU Directives, the decisions ofthe Court of Justice of the European

Union guide domestic Courts andTribunals in each state.

However, whilst common principles areevident, so too is a surprising degree ofdiversity. This is perhaps most noticeablein the cases of the United Kingdom andIreland but is also apparent in the otherEU Member States.

The pace of development both in termsof EU and domestic employment lawcontinues unabated. For these reasonsthis publication cannot serve as asubstitute for current and necessarilydetailed advice on particular employmentlaw problems which may arise, but it ishoped that it will provide a valuable andinformative outline of the relevant law inthe countries covered for our clients.

Unless the context otherwise requires,references in this publication to themasculine include the feminine, andreferences to “European Union” and“EU”, where the context requires, includereferences to “European Community” and“EC”. References to the “EuropeanEconomic Area” and the “EEA” arereferences to the European Union andIceland, Norway and Liechtenstein.

This publication is designed to provide ageneral summary of EU countries’approaches to employment related law asat 1 January 2013 (unless otherwisestated). It does not purport to becomprehensive or to render legal adviceand consequently no responsibility can beaccepted for loss occasioned to anyperson acting or refraining from acting as aresult of any statement in this publication.

Further informationWe also have the following additionalguides: an International Guide toEmployment (covering Australia, China,Dubai, Hong Kong, India, Japan,Russia, Singapore, Turkey, the UAE andthe US), Employment Law in the UnitedKingdom, Employee Share Plans in theUnited Kingdom and Employee SharePlans in Europe and the United States.

Our regular newsletters are designed tokeep you up-to-date with newdevelopments in the world ofemployment law. If you would like to joinour distribution list please contact TaniaStevenson ([email protected]) or your usualClifford Chance contact.


5A Guide to Employment in the European UnionOffices Worldwide

Clifford Chance Offices Worldwide Abu DhabiTel: +971 2 613 2300Fax: +971 2 613 2400

AmsterdamTel: +31 20 7119 000Fax: +31 20 7119 999

BangkokTel: +66 2 401 8800Fax: +66 2 401 8801

BarcelonaTel: +34 93 344 2200Fax: +34 93 344 2222

BeijingTel: +86 10 6535 2288Fax: +86 10 6505 9028

BrusselsTel: +32 2 533 5911Fax: +32 2 533 5959

Bucharest (associated office)

Tel: +40 21 666 6100Fax: +40 21 666 6111

CasablancaTel: +212 520 132 080Fax: +212 520 132 079

DohaTel: +974 4 491 7040 Fax: +974 4 491 7050

DubaiTel: +971 4 362 0444Fax: +971 4 362 0445

DüsseldorfTel: +49 2 11 43 550 Fax: +49 2 11 43 555 600

FrankfurtTel: +49 69 71 99 01Fax: +49 69 71 99 4000

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MadridTel: +34 91 590 75 00Fax: +34 91 590 75 75

MilanTel: +39 02 806 341Fax: +39 02 806 34200

MoscowTel: +7 495 258 5050Fax: +7 495 258 5051

MunichTel: +49 892 16 32 0Fax: +49 892 16 32 8600

New YorkTel: +1 212 878 8000Fax: +1 212 878 8375

ParisTel: +33 1 44 05 52 52Fax: +33 1 44 05 52 00

PerthTel: +61 8 9262 5555 Fax: +61 8 9262 5522

PragueTel: +420 2 22 555 222Fax: +420 2 22 555 000

Riyadh**Tel: +966 1 250 6500Fax: +966 1 400 4201

RomeTel: +39 06 422 911Fax: +39 06 422 912 00

São PauloTel: +55 11 3019 6000Fax: +55 11 3019 6001

SeoulTel: +82 26363 8100Fax: +82 26363 8101

ShanghaiTel: +86 21 2320 7288Fax: +86 21 2320 7256

SingaporeTel: +65 6410 2200Fax: +65 6410 2288

SydneyTel: +61 2 8922 8000 Fax: +61 2 8922 8088

TokyoTel: +81 3 5561 6600Fax: +81 3 5561 6699

WarsawTel: +48 22 627 1177Fax: +48 22 627 1466

Washington, D.C.Tel: +1 202 912 5000Fax: +1 202 912 6000

*Clifford Chance operates in co-operation with Yegin Legal Consultancy, its associated Turkish law firm**Clifford Chance has a co-operation agreement with Al-Jadaan & Partners Law Firm

Further details of our offices worldwide can be found at www.cliffordchance.com

6 A Guide to Employment in the European UnionAustria


Austria1. IntroductionWhilst there is no single statute governingall aspects of individual and collectiveemployment law, the most importantareas of Austrian labour law are codifiedin a wealth of detailed statutes andregulations. These provisions seekprimarily to protect the rights ofemployees. There are four main sourcesof Austrian labour law: legislation,collective agreements, work agreementsand individual employment contracts.Statutory provisions are normally for thebenefit of the employee and thereforecollective agreements, works agreementsor individual employment contracts mustnot contain terms less advantageous toemployees. However, the “favourablenessprinciple” (Günstigkeitsprinzip) allowsamendments to be made to agreementsat a lower level, provided that they arebeneficial to the employee. The primarypiece of legislation in this area is theLabour Constitution Act 1974 (ArbVG - Arbeitsverfassungsgesetz).

The low incidence of industrial disputes inAustria is the direct result of harmoniousrelations between Government, employersand trade unions, built on a socialpartnership between employers’ andemployees’ representative organisations.The frequent use of collective bargainingas a method of resolving disputes hasplayed a fundamental role in ensuring ahistory of industrial peace. Strikes are rareeven where a new agreement is beingnegotiated and are often considered to beillegal during the effective period of anexisting agreement.

Austria has two organisations thatrepresent employees’ interests at supra-enterprise national level; these arethe Trade Unions Federation (ÖGB –Österreichischer Gewerkschaftsbund),based on voluntary association, and thestatutorily created Labour Chambers (AK- Arbeiterkammern). The majority ofemployees in the private sector arecompulsory members of theArbeiterkammern. The statutory

organisation for employers is theChamber of Commerce (WKO –Österreichische Wirtschaftskammer),membership of which is also compulsory.

There is a well-developed system of“co-determination” which ensuresemployee participation in the workplace,and Works Councils protect the interestsof employees on issues affectingwork practices.

Both collective and individual disputes arehandled by special labour courts.

2. Categories ofEmployees

2.1 GeneralAustrian employment legislation hastraditionally drawn a distinction betweenblue-collar (Arbeiter) and white-collar(Angestellte) workers. Legislation hastraditionally been used to regulateconditions affecting white-collar workers,whilst most of the provisions for blue-collarworkers have developed within collectiveagreements. However, relatively recentchanges in Austrian labour law are aimedat treating blue-collar and white-collarworkers more equally in the future.

2.2 DirectorsSenior executives and directors have aspecial position in labour law. Certainprotective laws (particularly the Hours ofWork Act 1969 (AZG- Arbeitszeitgesetz),do not apply to managing directors(Vorstandsmitglied of anAktiengesellschaft and Geschäftsführer ofa GmbH) and only partly to seniorexecutives. Senior executives are notrepresented by the Works Council.

The Employees’ Act 1921 (AngG-Angestelltengesetz) also applies to theGeschäftsführer of a GmbH if he is not acontrolling shareholder, but never appliesto Vorstandsmitglieder of a stockcorporation unless explicitly agreedbetween the parties. TheVorstandsmitglieder only have a servicecontract (freier Dienstvertrag).

3. Hiring3.1 RecruitmentThere are no provisions regulatingemployee recruitment. However,according to the ArbVG employers mustconsult the Works Council, if any, inconnection with general personnelplanning. The employer must also informthe Works Council whenever anemployee is recruited.

Employers with 25 or more employeesare obliged by law to employ onedisabled person for every 25 employeesor to pay a monthly compensation tax.

3.2 Work PermitsNon-EEA nationals need a work permitfor all types of employment, which canonly be applied for in Austria by theprospective employer. A residence permitis also required for non-EEA nationalsstaying for a period exceeding sixmonths. Once a work permit is granted,generally, an application for a residencepermit must be made from abroad to thelocal representative authority (Austrianembassy or consulate general).

EEA nationals or Swiss nationals makinguse of their right of free movement andstaying longer than three months withinthe federal territory have to apply for aconfirmation of registration(Anmeldebescheinigung). In general EEAnationals do not need any kind of workpermit, but there are various temporaryprovisions for nationals of the newEU-accession countries Romania andBulgaria, limiting free access to theemployment market until 1 January 2014.From 1 January 2014, nationals of thesecountries will have unlimited free accessto the employment market in Austria.

On 1 July 2011 Austria implemented anew criteria based immigration scheme:the Red-White-Red-Card (RWR-C).

By means of this new immigrationscheme Austria intends to attract highlyskilled international employees.


7A Guide to Employment in the European UnionAustria

The RWR-C entitles its holder toresidence and employment with aspecific employer. RWR-C holders mayapply for a Red-White-Red Card plus(RWR-C plus), if they have beenemployed for 10 months in the last12 months. The RWR-C plus grants itsholder unlimited access to the labourmarket. The RWR-C is available to thefollowing groups of foreigners:

(a) Highly qualified specialists

(b) Skilled worker in shortageprofessions

(c) Other key workers

(d) Graduates of higher education(universities and colleges) in Austria

The most important criteria which have tobe fulfilled by the applicant arequalification, work experience, languageskills, an offer of employment relevant tothe individual’s qualifications andminimum remuneration.

Graduates of foreign universities whohave a binding employment offer with anannual gross salary of at least 150% ofthe average yearly gross salary of full-timeemployees in Austria (2012: €53,211)may apply for a Blue Card-EU (BC-EU).The BC-EU is valid for a period of twoyears and entitles its holder to residenceand employment with a certain employer.After 21 months of employment in thelast 24 months the BC-EU holder canapply for a RWR-C plus.

4. DiscriminationDiscrimination on the grounds of gender,ethnic affiliation, religion or philosophicalbelief, age or sexual orientation isexpressly forbidden by the EqualTreatment Act 2004 (GlBG -Gleichbehandlungsgesetz). This Act alsorequires equal pay for equal work. Acommission and an attorneyship forequal treatment has been established toensure compliance with the principle ofequal treatment. Moreover, discriminationon the ground of a disability is prohibited

by the Disabled Persons Employment Act1970 (BEinstG-Behinderteneinstellungsgesetz).

Protection also exists for those involved intrade union activities. The ArbVGexpressly forbids discrimination againstpersonnel who exercise their statutoryworks representation powers. Specialprotection also exists againstunwarranted dismissal.

As a result of Austria’s accession to theEU, the Act on the Adjustment ofEmployment Contracts (AVRAG –Arbeitsvertragsrechts-Anpassungsgesetz)has been enacted.

The AVRAG was amended in 2011 tooutlaw discrimination in relation to pay andsocial benefits. Breach of these provisionsare sanctioned by administrative penaltyfees (up to €50,000 per employee in caseof repeated infringement) being imposedon the employer.

5. Contracts ofEmployment

5.1 Freedom of ContractEmployment relationships are regulatedthrough individual employment contracts,which are subject to common law.However, the freedom to contract is, inpractice, limited. The ArbVG specifiesthat collective agreements concludedbetween statutory employer associationsand trade unions also apply toemployees who do not belong to one ofthe bodies concluding them. As a result,Austrian collective agreements cover themajority of employees and employers.Contracts of employment betweenemployers and white-collar workers aregoverned by the AngG.

5.2 FormIn general, there is no special formrequired for an Austrian employmentcontract, which can be concluded orallyor in writing. In practice, legislation andcollective agreements cover the mostimportant conditions of employment.

Individual contracts are often used forthose employed at management level,specifying particular terms and conditionsof employment.

The AVRAG provides that every employeeis entitled to an employment document(Dienstzettel) which must contain theessentials of the terms of employment,such as name and address of employer,date of start of employment, noticeperiods, starting salary and holidays.

5.3 Trial PeriodsA probationary period must not exceedone month. During this period, eitherparty may terminate the employment withimmediate effect without cause.

5.4 Confidentiality and Non-Competition

During employment, employees aresubject to a general duty of loyalty. Anemployee is therefore not allowed tocompete with the employer during theemployment or to disclose businesssecrets. Post-termination restrictions oncompetitive activities must not exceedone year and may only limit activitiesrelating to the previous employer’sbusiness. The restrictions must notunreasonably restrict the employee.

5.5 Intellectual PropertyThe patent right to inventions made byemployees during the term of theiremployment will belong to the employee.Employers may enter into writtenagreements with employees conferring aright on the employers to futureinventions or a right of use of futureinventions. In such cases the employeemust receive adequate remuneration.

6. Pay and Benefits6.1 Basic PayWhilst there is no national statutoryminimum wage, minimum rates of payare fixed by collective agreementscovering virtually all employees. Throughthese legally binding agreements,employees are entitled to a 13th-month

A Guide to Employment in the European UnionAustria

8


(holiday) bonus and a 14th-month(Christmas) bonus. In practice, the paygiven by many employers is higher thanthe agreed rates.

Works Councils and employers can onlydetermine incentive pay, whilst otherpayments can only be regulated by aworkers’ agreement to the extent allowedfor by the collective agreement in force.

Regular benefits paid every year willbecome part of salary unless provided ona voluntary basis and stated to besubject to unilateral withdrawal.

6.2 PensionsThe majority of higher paid employees arecovered by company plans. The pensiontarget, inclusive of social security, is usuallyaround 60 to 75% of final averageearnings over a full career. Other benefitsnormally provided are disability pensionsand spouses’ pensions with childsupplements. Statutory vesting of accruedbenefits applies after five years’membership or ten years’ service, if earlier.

Private pensions for employees aregoverned by the Company Pension Act1990 (BPG-Betriebspensionsgesetz).

6.3 Incentive SchemesMost agreements with executives containprovision for profit-related payments.

6.4 Fringe BenefitsSenior executives are often entitled to acompany car and various insurances asfringe benefits.

6.5 DeductionsEmployers are under a statutory obligationto deduct income tax and social securitycontributions from the earnings of theiremployees and to account to the taxauthorities for these deductions.

7. Social Security7.1 CoverageThe state social security system providesbenefits in the case of retirement,disability, death, sickness, industrial injury

and unemployment, as well as coveringhealth insurance and family allowances.

7.2 ContributionsBoth employees and employerscontribute to the financing of the socialsecurity system. Contributions arepayable up to a maximum assessmentbasis of €4,230 (2012); (approximately€4,440 (2013)) per month. There aredifferent rates of contribution dependingupon whether the employee is a white orblue-collar worker.

In addition to his or her social securitycontributions, both white and blue-collaremployees pay Chambers Labour fees(Arbeiterkammerumlage) at a rate of 0.5%,and an employer has to bear an additionalcharge under the Insolvency CompensationAct (Insolvenz-Entgeltsicherungsgesetz-Zuschlag) at the rate of 0.55%. There areother contributions for particular categoriesof work.

8. Hours of WorkThe number of working hours is regulatedeither by statute or by collective

agreement. Under the Working Hours Act1969 (AZG - Arbeitszeitgesetz) statutoryworking hours are limited to eight per dayand 40 per week, although more may bepossible in certain industries (for example,where drivers or shift workers areemployed), provided that the averageweekly working hours over a specifiedperiod do not exceed 40 hours. Longerworking hours can be provided for bycollective agreements, to the extentpermitted by the AZG.

Under collective agreements the averageworking week is about 38.5 hours.Overtime is permissible as long as nomore than 10 hours are worked in totalon any one day. The permitted statutorymaximum amount of overtime per weekis generally 10 hours; these 10 hoursconsist of five hours overtime per weekand a further 60 hours overtime annually.Thus, per year the maximum numbers ofweeks with 10 hours overtime is 12(60 divided by five). Once the 60 hoursannual overtime are worked only fivehours overtime may be worked per week.However, under certain circumstancesfurther exceptions may apply.

The rates for white-collar workers and their employers as a percentage of payare as follows:

Insurance Employee Employer Total

Health 3.82 3.83 7.65

Accidents at work none 1.4 1.4

Pensions 10.25 12.55 22.8

Unemployment 3.0 3.0 6.0

The rates for blue-collar workers and their employers as a percentage of payare as follows:

Insurance Employee Employer Total

Health 3.95 3.70 7.65

Accidents at work none 1.4 1.4

Pensions 10.25 12.55 22.8

Unemployment 3.0 3.0 6.0



The AZG also makes provision for workbreaks and rest periods. Further provisionsfor work breaks and rest periods aredetermined in the Hours of Rest Act 1983(ARG-Arbeitsruhegesetz). However, theAZG as well as the ARG does not apply tosenior executives or Geschäftsführer of aGmbH, unless otherwise provided in thecollective agreement.

The working hours of young persons aregoverned by the Children and YoungPersons Work Act 1987 (KJBG - Kinderund Jugendlichenbeschäftigungsgesetz).

Hours in excess of normal working timeconstitute overtime. An employeeworking overtime receives payment at ahigher rate than for normal working timeor time off. The AZG provides for a 50%increase in pay for normal overtime andcollective agreements frequently providefor a 100% increase for work on publicholidays and Sundays.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled to paid absencefrom work on any public holiday, unlessthe public holiday falls on a Sunday inrespect of which the employer has noobligation to provide regular pay. Allemployees are statutorily entitled to aminimum of 30 working days holiday ayear (36 working days after 25 years’service). Saturdays are counted asworking days for this purpose.

9.2 Family LeavePregnant women are entitled to takematernity leave starting eight weeks priorto confinement, and are entitled to afurther period of eight weeks after havinggiven birth. Throughout the maternity leaveperiod they receive full pay. Either parentalso has the right to take unpaid parentalleave for a period of up to two years.

There are various statutory provisionsregulating the type of work and length ofworking hours that can be undertaken bypregnant women.

9.3 IllnessEmployers are liable to pay full salary towhite-collar workers as well as blue-collarworkers for the first six weeks of sickness,with a further period of four weeks on halfpay when the full pay period ends. Theperiod of full pay increases with the lengthof the employment relationship up to12 weeks’ pay.

9.4 Other time offThe applicable collective agreements,work agreements or the employmentcontract may entitle the employee torequest flexible working arrangements.These agreements may also includeprovisions giving employees specifiedtime off on particular occasions.

10. Health and Safety10.1 AccidentsEmployers are responsible for equippingand running places of work so thatemployees are protected from avoidablework-associated accidents and illness.The Work Inspection Office(Arbeitsinspektorat) has the authority toensure that health and safety regulationsare complied with.

10.2 Health and Safety ConsultationWorks Councils set up by statutoryauthority in all companies employing fiveor more permanent employees have aright to co-determination on matters ofhealth and safety.

11. Industrial Relations11.1 Trade UnionsEmployees have a right of freedom ofassociation and the right to engage inunion activity. Since the establishment ofthe Austrian Trade Union Confederation(ÖGB - ÖsterreichischerGewerkschaftsbund) all politicalviewpoints and groups of employeeshave been represented within it.

However, there is no direct trade unionrepresentation in the workplace. Instead,employees are represented by statutorily

elected Works Councils. The ArbVGrequires the creation of Works Councilsin all establishments employing at leastfive employees if employees or a tradeunion request the establishment of aWorks Council.

The number of members of the WorksCouncil depends on the number ofemployees it represents.

11.2 Collective AgreementsThe ArbVG gives legal authority for theconclusion of collective agreements. Thisauthority is restricted to the statutoryrepresentatives of employees (such asChambers of Labour) and employers(Economic Chambers). However,agreements concluded between voluntaryorganisations are effective if they receiverecognition from the Federal ConciliationOffice (Bundeseinigungsamt), which oftenrequires proof that the organisation’sactivities extend over a significantgeographical and occupational area.

Single employer agreements areuncommon, as it is extremely rare forindividual employers to be given theauthority to conclude collectiveagreements.

Agreements must be registered with theFederal Ministry of Labour, Social Affairsand Consumer Protection(Bundesministerium für Arbeit, Sozialesund Konsumentenschutz) and bepublished in the official journal before theyare valid. Their content is limited by theArbVG to covering issues essential to payand working conditions, rights andobligations. The vast majority ofemployment relationships are regulatedby collective agreements.

Collective agreements are usually put inplace for particular industries or branchesof industries.

11.3 Trade DisputesThe negligible level of industrial conflictand the relative neutrality of the state inindustrial conflict have led to a notable


10


absence of specific statutory regulation ofthe conduct or resolution of industrialdisputes. The general law does notexplicitly recognise a right to strike,although Austria has ratified variousinternational conventions whichguarantee the right to strike. However,strikes aimed directly at the state areconsidered unlawful, and some publicsector workers are banned from striking.

The “social partnership” based on co-operation between Government,employers and unions, is the mainmethod by which strikes and industrialconflict are regulated.

11.4 Information, Consultationand Participation

The concept of “co-determination” allowsemployees significant input in thedecision-making process and shouldexist when staff have an equal status tomanagement in respect of establishmentissues. However, in realityco-determination is limited to what areseen as social issues, in particulardismissals, and does not exist in relationto commercial or economic matters.

Employee rights are enhanced by WorksCouncils, which have rights ofco-determination in respect of fundamentalorganisational changes and changes inworking practices. A Works Council hasthe right of access to information regardingthe financial position of the company, andis entitled to one-third of the seats on itscompany’s supervisory board. The WorksCouncil can meet with management atleast four times a year.

12. Acquisitions andmergers

12.1 GeneralThe employer must inform the WorksCouncil, if any, of any proposed changesto the business. A merger with othercompanies will qualify as such a change.Although no strict time limit applies, theemployer must notify the Works Councilas soon as possible and sufficiently in

advance for the proposed change to bethoroughly discussed. As a generalguideline, Works Councils are ofteninformed roughly two to four weeks inadvance. The Works Council may requestthat a representative of the competenttrade union joins the consultations. Theextent of the information to be given tothe Works Council is not governed bylaw, however, the information must bedetailed enough to allow for a thoroughconsultation with the Works Council.

Notice of termination given by a sellingentity on account of a business transfer isnull and void, as is notice of terminationgiven by the purchasing entity after thetransfer on account of the transfer.Transferring employees can be dismissedif the dismissal is not motivated by thebusiness transfer (e.g. for misconduct).However, the employer has to provideclear evidence that the reason for thedismissal was not the transfer.

12.2 Information and ConsultationRequirements

During the consultation process, theWorks Council may propose measures tominimize any adverse consequences forthe employees arising from the change tothe business. If the business has morethan 20 employees and the change isdetrimental for all or a substantial numberof them, the employer and the WorksCouncil may agree on a social plan inorder to minimize such detrimentalconsequences for the respectiveemployees. If the employer and theWorks Council cannot agree on a socialplan, the Works Council may address aspecial conciliation body(Schlichtungsstelle) at the competentlabour court. The Schlichtungsstelle isentitled to decide the terms of a socialplan after hearing the employer and theWorks Council on the matter.

Non-compliance with any of theinformation/consultation procedures doesnot carry any criminal sanctions. Ingeneral, the Works Council cannot hinderor delay the transaction from proceeding.

One exception exists in relation to theclosure of undertakings with more than200 employees. In such circumstancesthe Works Council can file an objection inrespect of a failure to consult which couldlead to a delay in the closure taking effect.

However, in practice this legal provisionis seldom applied and it is thereforelargely irrelevant. Should a social planbe drafted by the special conciliationbody, the adjustment may be morefavourable to employees in the event ofa delay in informing and consulting theWorks Council.

If no Works Council exists, the employerhas to inform all transferring employees inwriting about the proposed transfer ofbusiness. There is no specific time limitfor such information. As a generalguideline, employees are often informedtwo to four weeks in advance. Theinformation has to be given in writing andno consultation is required.

The information/consultation process hasto be completed before the “transfer ofthe undertaking”. Under Austrianemployment law, this is neithernecessarily signing norclosing/completion, but the point in time,when the purchaser is executing the mainemployer functions over the employees ofthe transferring unit. Effectively, however,this point in time often coincides with theclosing/completion.

12.3 Notification of AuthoritiesFrom an employment perspective there isno need to notify the authorities of anacquisition or merger.

12.4 LiabilitiesA sale and purchase agreement can besigned before the information orconsultation is completed. Non-compliance with the informationand consultation obligation would notaffect the validity of a sale and purchaseagreement, thus, the Works Councilcannot delay or prevent a merger oracquisition. In the case of collective



dismissals which qualify as a change tothe business non compliance withinformation obligations may triggeradministrative penalty fees in the amountof €2,180.

13. Termination13.1 Individual TerminationA white or blue-collar employee whoseemployment is terminated by theemployer giving notice or by theemployee for good cause is entitled toseverance pay (Abfertigung), provided heor she has completed three years’service. This system is applicable toemployment relationships thatcommenced before 1 January 2003. Theamount of the payment depends on thelength of service and ranges from 2 to12 months’ salary.

The Statutory Corporate EmployeeRetirement Schemes Act 2002 (BMSVG -Betriebliches Mitarbeiter- undSelbstständigenvorsorgegesetz) imposes anew severance pay regime in relation to allemployees whose employmentcommences after 31 December 2002.This replaces the old severance payregime described above. In principle, theemployer is obliged to make contributionsof 1.53% of the monthly remuneration(plus special payments) for each employeeto a fund (Mitarbeitervorsorgekasse) andthe employees are entitled to receive thebalance of these contributions upontermination of their employmentcontracts, provided that certain conditionsare satisfied.

For employment contracts entered intoon or before 31 December 2002, the oldseverance pay scheme will continue toapply unless employer and employeeagree that the new BMVG shall applyinstead. They may also agree to transferaccrued entitlements to severance payinto the new scheme. The law also allowsmixed systems and/or overall transfersfrom the old system to the new system.Overall transfers were only permissible upto 31 December 2012.

With effect from 1 January 2013 on thetermination of an employment or serviceagreement that was subject to mandatoryunemployment insurance the employerhas to pay a levy of approximately€113 (2013) to the statutory healthinsurance fund (Krankenkasse). Thisamount will be adjusted annually.

However, in certain cases (e.g. where theemployee terminated the contract,termination by the employer for causeand with immediate effect, termination inthe course of the one month probationaryperiod, etc) the employer is exempt frompaying the levy.

13.2 Notice There are different notice periods forblue-collar and white-collar workers. Thenotice period in respect of blue-collarworkers is generally 14 days. Collectiveagreements provide for different noticeperiods. In respect of white-collarworkers, employers may terminate anemployment on six weeks’ notice,expiring at the end of a quarter.Depending on length of service, thisperiod increases to five months after25 years’ service. White-collar employeesmay terminate their employment on onemonth’s notice expiring at the end of amonth. Employees’ notice obligations ofup to six months may be agreed subjectto the overall requirement that it cannotbe shorter than the notice required to begiven by the employer.

Notice of dismissal will only be effectiveif the relevant Works Council has beennotified in advance. The Works Councilhas one calendar week in which toconsult about the intended dismissaland comment on it. Thereafter theemployer can give notice to theemployee, although the Works Councilmust again be notified. Should theWorks Council agree, the notice is final,otherwise the notice can be appealedagainst by either the Works Council orthe employee concerned. Such anappeal will be heard by a Labour Court,but will only succeed if it can be shown

that the motives for dismissal aresocially unjustifiable.

An employment contract may beterminated without notice only for goodcause. A good cause justifying theimmediate dismissal of an employeeexists, for instance, if the employee hascaused serious harm to the employer’sinterests and it is, therefore,unreasonable for the employer to employthe employee until the end of theapplicable notice period.

13.3 Reasons for DismissalGenerally, both parties have the right toterminate an employment for any reason.Restrictions on the employer derive frompublic policy aimed at the protection ofemployees from unwarranted dismissal.

If an employer’s motives for dismissal aresocially justifiable, then the dismissal islikely to be lawful. Dismissal will beunlawful, for instance, where the contractis terminated because of the employee’sinvolvement in a Works Council, orinvolvement as an employee representativefor health and safety, or due to anemployee’s call-up for national service.

As a matter of general principle, only theWorks Council is allowed to contestdismissals but, if there is no Works Councilor the Works Council does not react, theemployee may contest his dismissal.

13.4 Special ProtectionIt is recognised that certain groups ofemployees are vulnerable to unwarrantednotice of dismissal. Legislation thereforegives special protection to, for example,Works Council members, pregnantemployees, apprentices, disabled personsand employees on military service.

13.5 Closures and CollectiveDismissals

Special rules apply to collectivedismissals, but the classification ofcollective dismissals depends on thenumber of employees in the companyand the number of employees to be


12


dismissed. For example, the dismissal offive or more employees of a companywith more than 20 and less than100 employees will qualify as a collectivedismissal for the purposes of employmentprotection legislation.

An employer must give 30 days’ priornotice to the competent regional labouroffice if collective dismissals within aperiod of another 30 days are planned.At the same time, the employer has tosubmit evidence to the authorities thatconsultations have been held with theWorks Council in accordance with theArbVG. Failure to comply with theseobligations may render thedismissals invalid.

A social plan may be required in respectof companies employing 20 or moreemployees in order to avoid, remove oralleviate the consequences resultingfrom collective dismissals. The socialplan has to be negotiated with theWorks Council and put into effect as aworks, or shop, agreement.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about their(prospective, current and past)employees and workers are governed bythe Austrian Data Protection Act 2000(DSG 2000 - Datenschutzgesetz 2000).

Employee data may only be processedas far as the purpose and content of thedata is justified by the statutoryrequirements imposed on the employerand provided the employee’sconfidentiality is safeguarded.

Generally, the processing of employeedata is permissible to the extentnecessary to operate an ordinaryemployer-employee relationship.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access requesteither in writing or, in agreement with theemployer, orally. This entitles them to beadvised of what data is held about them,to whom it is disclosed and to be given acopy of their personal data. The employermay resist a subject access request ifjustified interests of the employer or athird person would otherwise beendangered. Requests must beanswered within eight weeks. Generally,the employer has to comply with such arequest without charging the employee.Legally, a charge of €18.89 may,however, be levied if a request does notconcern the current data of the employeeor the employee has previously requestedaccess to data during the current year.

14.3 MonitoringThe monitoring of employee email,internet and telephone use and Closed

Circuit TV monitoring is governed by theArbVG and the DSG 2000. Monitoring ispermissible unless it affects a person’sdignity. Control measures introduced toprotect the dignity of data subjectsrequire an agreement between the WorksCouncil and the employing companybefore any monitoring can take place. Ifno works agreement can be concludedwith the Works Council, the employermust not take the proposed measures.

14.4 Transmission of Data toThird Parties

An employer who wishes to provideemployee data to third parties must doso in accordance with the DSG 2000principles and processing conditions.Data may be transmitted only if theconfidentiality of the data subjectconcerned is safeguarded. If the datasubject concerned has consented to thetransmission of data, the confidentialityrequirement is deemed to be satisfied.Such consent may be revoked at anytime. Where the third party is basedwithin the European Union, permission totransfer data is not required in general.The transmission of data to third partiesnot based in the European Unionrequires the permission of the DataProtection Commission unless certainexceptions apply.

Contributed by Schönherr RechtsanwälteGmbh Attorneys at Law


13A Guide to Employment in the European UnionBelgium

Belgium1. IntroductionThe legal relationship between employeesand employers is mainly governed by the1978 Law on Employment Contracts (Loidu 3 juillet 1978 relative aux contrats detravail - Wet van 3 juli 1978 betreffendede arbeidsovereenkomsten) and otherlegislation. Collective labour agreements(“CLA”), individual contracts ofemployment, work rules and normalpractice are other important sources ofemployment law and are classified assuch by a 1968 Law.

Collective labour agreements areagreements negotiated betweenemployers and employee representativesat national, industry or individualcompany level. They are automaticallylegally binding in respect of all employersand their employees in, for example, aparticular industry. Some of the terms ofthe collective labour agreement createindividual rights for the employees andform part of the individual contractsof employment.

The employer must provide eachemployee with a copy of work rules(arbeidsreglement - règlement de travail)which sets out the basic common termsand conditions of employment (such ashours of work, methods of payment anddisciplinary procedures), independentlyfrom the employment contract.

Belgium is officially trilingual (Dutch,French and German). There are strictrules on the use of Dutch, French orGerman in employment documents andin connection with working relations.These vary according to thegeographical area where the place ofbusiness is located to which theemployee is attached; the language isFrench in Wallonia, Dutch in Flandersand German in the relatively smallGerman speaking area. Brussels isofficially a bilingual city (Dutch andFrench) and the language to be used willnormally depend on the mother tongueof the individual employee.

Labour disputes are settled by locallabour Tribunals and by the labourCourts, at appeal level. These Courts arepresided over by a professional judge andtwo lay members - one representingemployers, and the other employees.

There are a number of Governmentagencies that are responsible forenforcing the various health and safety,employment and social security laws.


2.1 GeneralBelgian employment law distinguishesbetween the blue-collar worker (carryingout principally manual work) and thewhite-collar worker (carrying outprincipally intellectual work). A number ofthe regulations applicable to blue-collarworkers differ substantially from thoseapplicable to white-collar workers.Although the Belgian Constitutional Courtruled in 2011 that this differentialtreatment is discriminatory and should beamended by mid-2013, the Belgiangovernment has not yet made anyprogress in the harmonisation of blue andwhite-collar workers’ status.

Management and senior supervisorypersonnel are distinguished from otherwhite-collar workers for the purpose ofcertain labour law provisions. The lawalso contains special provisions inrespect of other categories, for example,sales representatives, domesticservants, employees working from homeand students.

2.2 DirectorsDepending on the function they perform,directors of limited companies may betreated for employment law and socialsecurity purposes as both office holdersand employees. Normally separate rulesapply to each capacity. A director forinstance may be dismissed as a directorwith immediate effect and withoutcompensation; if the director is also anemployee, the stricter rules for

terminating an employment contract haveto be complied with to terminate theemployment relationship.

Directors, who are remunerated throughdirectors’ fees, need to register and paysocial security contributions asself-employed persons. Non-remunerateddirectors do not have to pay socialsecurity contributions provided that theycan actually prove that their mandate isnon-remunerated.

Managing directors of small ormedium-sized companies which do notform part of a larger group of companieswill also need to obtain and submit acertificate which proves that they havesufficient knowledge and/or professionalexperience to run the company(“attestation connaissances de gestion debase - bekwaamheidsattest”).

2.3 OtherEmployers may employ temporary staffeither to replace an employee, or in orderto respond to an extraordinary increase ofwork, or to carry out exceptional work.Temporary employees must be paid awage which pro rata is not less than whatthey would be entitled to if they were apermanent employee. Temporary (orinterim) staff supplied through anemployment agency may be employed inthe same circumstances; they areemployed by the agency but are entitledto the same employment rights as if theywere a normal employee of the company.

A part-time employment contract mustbe made in writing before the employeestarts work. Part-time employees mustnormally work a minimum of one third ofthe usual full-time hours per week and aminimum of three hours each workingperiod. Part-time employees have priorityin applying for similar full-time positionsthat become available and for which theyhave the required qualifications. Theirsalary must be proportionately equivalentto that paid to full-time employees. Thisalso applies to other employment rights.

A Guide to Employment in the European UnionBelgium

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Secondment in Belgium is only allowed inexceptional circumstances and providedcertain procedures have been followed.For example, intra-group secondments orsecondment aimed at a short-termexecution of specialised tasks whichrequire specific professional qualifications,are allowed provided advance notificationis given to the Social Inspection. Othersecondments require the prior consent ofthe Social Inspection. In both cases a priorwritten agreement between the employer,the seconded employee and the recipientof the employee’s services must set outthe terms of the secondment.

The above secondment rules do notapply however when an employerseconds one or more employees toanother company to perform servicesprovided (i) there is a written agreementbetween the employer and the companybenefiting from the services; (ii) thisagreement explicitly and preciselydetermines which instructions can begiven to the employees by the companybenefiting from the services; (iii) theemployer’s authority remains with theemployer; and (iv) the execution of theagreement in practice between theemployer and the company benefitingfrom the services must be completely inline with the provisions of this agreement.The company benefiting from the serviceswill, in any event, always be able to giveinstructions to the employees in relationto the applicable health and safety rules.Finally, the company benefiting from theservices should inform its works councilabout the existence of the secondmentarrangement and should provide theworks council (at its request) with a copyof the relevant clauses of the writtenagreement that contain an overview ofthe instructions that can be given to theemployees. In the absence of a workscouncil, this information should be givento the Health and Safety Committee and,in the absence of such committee, to theTrade Union Delegation. The procedure tobe followed in relation to such informationprovision is yet to be established by theBelgian government.

Civil and criminal sanctions may beimposed in the event of unauthorisedsecondment. In the event that anemployee is seconded in breach of themandatory rules, the company who usesthe service of the seconded employee isconsidered to have an employmentcontract of indefinite duration with theseconde d employee and the employerand the user are jointly liable vis-à-visthe employee.

3. Hiring3.1 RecruitmentEmployers are free to select personnel asthey wish (see however section 4“Discrimination”). Nevertheless, there aresome obligations imposed upon employerswhen recruiting and selecting (such aspaying the job candidate’s expenses, givingproper information to the candidate etc).Companies with at least 50 employeesmust hire a certain percentage of traineesand young employed persons (“Rosetta”jobs). There are also special rulesconcerning disabled people.

3.2 Work PermitsWork permits are required fornon-European Economic Area (EEA)nationals and should be applied forbefore the employee enters Belgium.They are usually only granted topersons in middle or seniormanagement for a period of one year,but are renewable. In addition,residence permits are required both forthe employee and his or her family andshould be applied for as soon as thework permit has been granted. Inaddition, if the employee is not subjectto the Belgian social security regimeand employed by a non-Belgianemployer, a Limosa declaration must besubmitted before the employee startsworking in Belgium.

4. DiscriminationBesides various specific legislation (forexample the Acts dd. 5 March and 5 June2002 prohibiting discrimination againstpart-time employees and employees with

a fixed-term contract), the general Belgiananti-discrimination legislation is laid downin the following acts:

(a) Anti-racism act dd. 10 May 2007;

(b) Gender act dd. 10 May 2007;

(c) General anti-discrimination act dd.10 May 2007.

According to this legislation, discriminationon specific grounds (i.e. sex, skin colour,national or ethnic origin, age, disability,language, political conviction, wealth, etc.)is prohibited. Most of these groundsoriginate from the EC DiscriminationDirectives. For grounds not originatingfrom EC Discrimination Directives, Belgianlaw allows direct or indirect discriminatorytreatment if the employer can objectivelyjustify such treatment by a legitimate aimand the means of achieving that aim areappropriate and necessary. For groundsoriginating from EC DiscriminationDirectives, it is only possible to justifyindirect discriminatory treatment (i.e. whenan apparently neutral provision or practiceprejudices a certain group of people).

The anti-discrimination legislation givesspecific legal protection to those whoraise a discrimination complaint and abreach of the Discrimination Acts canlead to civil and criminal penalties.


5.1 Freedom of ContractThere are certain restrictions on freedomof contract. No contractual term may beless favourable to the employee thanany mandatory legislative provision orany applicable collective agreement.Indeed most of the provisions protectingemployees are deemed to be mandatory(“imperative - dwingend”). Additionally,provisions in the individual contract thatallow the employer to unilaterally varythe essential elements of the contract, orto automatically terminate the contract(for instance, in the case of an employeereaching the standard retirement age)are void.


15A Guide to Employment in the European UnionBelgium

5.2 FormA contract for an indefinite term need notbe in writing. However, a provisionpurporting to contract out of a legislativeprovision or a collective labour agreement(where this is allowed) must be in writing,as must certain specific clauses such asa non-competition provision, a clauseproviding for a trial period or a clausecapping the termination entitlement of ahigher-paid employee. Some of theseprovisions must be agreed in writing priorto the commencement of employment.

Several types of contracts such as fixed-term contracts or contracts for a specificassignment must be in writing. Suchcontracts may be renewed but not forseveral successive periods, except injustified circumstances. They are closelyregulated to ensure that they are notused to evade the application of legalrules on indefinite contracts, for example,those on termination of employment.

However, a certain degree of flexibilityexists to conclude successive fixed-termcontracts. The parties may agree toconclude a sequence of a maximum offour fixed-term contracts, each contracthaving a minimum term of three months(not exceeding in aggregate a period oftwo years; in some circumstances andprovided consent is obtained from theSocial Inspection, a period of three yearsis permitted provided each contract has aminimum term of six months).

5.3 Trial PeriodsThe parties can agree (before thecommencement of employment and inwriting only) to a trial period. The lawprovides trial periods which are differentfor blue-collar workers (seven to 14 days),white-collar workers (one to six months)and employees earning above a paythreshold (one to 12 months). During thetrial period, the contract can beterminated on short notice which variesaccording to the category of employee.

Special rules apply when the contract issuspended (due to sickness, for instance)

and different periods apply for studentsand servants.

5.4 Confidentiality andNon-Competition

The law provides that an employee has aduty to refrain from disclosing businesssecrets and any other secrets of aconfidential nature during the contract orafter its expiry; nor may an employeeengage in unfair competition. The termsof an employment contract can reaffirmthese employee obligations but may notcontain more restrictive obligations thanthose imposed by law.

Restrictions on competition applicableafter the employment has ended are onlyvalid if certain conditions are met (therestriction is limited to similar activities,geographically limited and does notextend beyond Belgium, applies for amaximum duration of one year andprovides for non compete compensation)and if these conditions have beenexpressly set out in the non-competitionprovision. The provision will not beeffective if the employer dismisses otherthan in circumstances involving seriousfault on the part of the employee. Wherea non-competition provision is enforcedthe employer must make a payment tothe employee equal to at least half theremuneration which would have beenearned during the non-competition periodhad the employment continued.International companies and companieswith a research and development unitbenefit from more flexibility as regards theconditions of application of non-competeclauses and may also increase theduration and geographical limitationsapplicable to such clauses.

5.5 Intellectual PropertyIn general, the employee is owner of hisinventions. It is however possible tocontractually provide otherwise in respectof inventions made by an employeeduring his/her working hours, in thecourse of his/her work and with materialsprovided by the employer. Other than inthese circumstances, there is some legal

debate as to whether an employer cancontractually provide that patents willbelong to it instead of to the employee.

Works protected by copyright alsobelong to the employee and may only betransferred to the employer by expressagreement. In contrast, the patrimonialrights to software programmes anddatabases protected by copyrightdeveloped by employees automaticallybelong to the employer.

6. Pay and Benefits6.1 Basic PayThe National Labour Council negotiatesannually a national collective labouragreement on minimum wages which isbinding on all employers. As at February2012, the standard minimum monthlygross wage amounts to €1,472.40. Forfull-time employees of 21½ years of agewith more than six months’ service thisminimum wage amounts to €1,511.48.For employees of 22 or over with morethan twelve months’ service this minimumwage amounts to €1,528.88. In somesectors the collective labour agreementsprovide for remuneration scales.

Pay, including that of managers andexecutives, is usually index-linked as aresult of compulsory collective labouragreements. The system is not uniformand different rules for the index-linking ofsalaries apply depending on the relevantcollective agreement.

“Wage moderation” measures have beenintroduced that dictate salary increases ata national level. Whereas in 2012 salariescould still increase up to a maximum of0.3%, the Belgian government hasimposed a salary freeze for the period2013 and 2014 (excluding increasesresulting from the automatic indexation ofsalaries and the application of regularsalary scale increases).

Collective labour agreements in manyindustry sectors require that on top of themonthly basic salary, employers pay an

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additional year-end bonus in the form of athirteenth month, or in some rareinstances, even a fourteenth month salary.During his/her holiday, a white-collarworker is entitled to his normalremuneration (simple holiday pay) and anadditional 92% of his monthly gross salary(double holiday pay). A white-collarworker’s holiday entitlement and holidaypay is calculated by reference to the workcarried out the previous year. Upontermination of a white-collar worker’semployment contract, the employer islegally compelled to pay to the employeean end of service holiday payment for(i) accrued but untaken holiday in the yearof termination (i.e. 15.34% of the grossremuneration earned by the employeeduring the year preceding the termination)and (ii) the holidays to which he/she isentitled in the year following the year oftermination, based on his/her employmentwith the employer in the year oftermination (i.e. 15.34% of the grossremuneration earned by the employeeduring the year of termination).

Blue-collar workers are entitled to aholiday allowance paid by the NationalOffice of Annual Holiday (“Office Nationaldes Vacances Annuelles - Rijksdienstvoor Jaarlijkse Vakantie”). In order tofinance this, the employer must pay acontribution each quarter equal to 6% of(108% of) the gross salaries and anannual contribution equal to 10.27% of(108% of) the gross salaries.

6.2 PensionsThe Belgian pension system is made upof: (i) state pension, (ii) occupationalpension at company or industry level and(iii) individual pension arrangements.

There is no obligation on employersgenerally to provide an occupationalpension arrangement to their employees.However, as a result of mandatoryindustry or company pension schemes, alarge percentage of Belgian employeesdo benefit from such occupationalpension benefits.

The following requirements are applicableto occupational pension schemes:

(a) the scheme must be operated by apension fund, an insurancecompany or a pension institutionfrom another EU member state

(b) membership is compulsory for allemployees fulfilling the eligibilitycriteria for membership

(c) the regular legal retirement age is65 but employees who work longermust remain covered by thepension plan

(d) access to benefits prior to (early)retirement is only permitted inspecific circumstances

(e) the employees’ entitlements tovested rights can be postponeduntil one year after the employees’affiliation to the pension scheme foremployer contributions (providedthis is specified in the pensionscheme rules). Immediate vestingapplies in relation toemployee contributions

(f) for tax reasons, the pension benefitshould be capped at 80% of theemployee’s last salary

(g) minimum investment returns areapplicable (3.75% on employeecontributions and 3.25% onemployer contributions in DC plans)

(h) upon leaving the company/industry,employees have the option totransfer their benefits to anotherpension fund or insurance company(or to leave them in the formeremployer’s scheme).

6.3 Incentive SchemesA Law of 26 March 1999 introduced afavourable tax regime for stock optionsgenerally applicable to Belgian residentindividuals. This law provides that the grantof stock options constitutes a taxablebenefit, calculated on the basis of apercentage of the value of the underlyingshares. The grant of stock options will bedeemed to have been refused on the

60th day following the date of the offer ofsuch stock options, in the absence of anexpress acceptance of the offer by theemployee. For listed options, the taxablebenefit is determined on the basis of thestock market price preceding the offer. Fornon-listed options, the taxable benefit isequal to 18% (15% for options offered until31 December 2011) of the value of theunderlying shares, such percentage beingincreased by 1% per year or fraction of ayear for the duration of the life of the optionexceeding five years from the date of theoffer. If certain conditions are met, thetaxable benefit can be reduced to half. Anypositive difference between the value of theunderlying shares and the exercise price isalso subject to tax. Provided specificconditions are met, the benefit derivedfrom the grant of the stock options is notsubject to social security contributions.

With effect from 1 January 2008, a bonusregime for “non-recurring benefits linkedto results” was implemented in Belgium.This bonus regime is aimed at softeningBelgium’s reputation for having some ofthe most onerous taxes in Europe. Whilst“normal” remuneration is, broadlyspeaking, subject to combined employerand white-collar worker social securityand income tax charges of 48% and53.5% respectively, by contrast theregime of non-recurring benefits linked toresults only provides for an employercontribution of 33% and an employeecontribution of 13.07%.

For a bonus to be subject to thisfavourable regime, various conditionsmust be met. The key features of thescheme are as follows:

(a) The bonus plan must be applicableto all employees or to certaincategories of employees

(b) The bonus plan must set clear andwell-defined collective targets that acompany, a group of companies ora certain category of employeesneeds to achieve. Targets that areguaranteed to be met at the timethat they are set, or which are linked



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to the fluctuation of the value in thecompany’s shares, are excluded

(c) The bonus amounts cannot exceed€3,100 net per employee per year(this amounts applies for 2013)

(d) The bonus cannot replace other(existing) forms of remuneration (anexisting bonus scheme can only bereplaced under certain conditions)

(e) The bonus plan must be introducedeither through a collectivebargaining agreement or, in theabsence of a Trade UnionDelegation for the workers involvedin the bonus plan, through acollective bargaining agreement orthrough a so-called “act ofaccession” (this is a documentdrafted by the employerin accordance withspecified procedures).

6.4 Fringe BenefitsThere is a comprehensive state healthsystem, but private medical plans thatprovide insurance for medical expensesnot covered by the social securityprogramme are not uncommon forsalaried employees.

Other fringe benefits such as cars, mealvouchers and life insurance cover arecommon. The procedure for agreeing,amending or withdrawing them cansometimes be cumbersome and require anumber of formalities to be complied with.

6.5 DeductionsTax on employees’ earnings is deductedby employers at source. The tax year isfrom 1 January to 31 December.Employees’ social security contributionsmust also be deducted at source. Thereare concessions and deductions allowedfor non-resident executives.

7. Social Security7.1 CoverageThe Belgian social security schemecovers: (i) old-age and survivor’spensions; (ii) unemployment; (iii) work

accidents; (iv) occupational diseases;(v) family benefits; (vi) medical care andbenefits; and (vii) annual vacation.

7.2 ContributionsEvery employer should be registered withthe Office National de Sécurité Sociale andis liable to pay social securitycontributions. The scheme is funded byemployers deducting social securitycontributions from employees’ pay atsource and by employers’ owncontributions. Both employees’ andemployers’ contributions are based on apercentage of total earnings. Contributionsare due in respect of all persons employedin Belgium. Exceptions may apply toEuropean Union nationals who aresimultaneously working in more than oneEU member state or are working onlytemporarily in Belgium and are continuingto contribute to their home countryscheme, or to nationals from countriesthat have reciprocal agreements withBelgium that provide for such exemptions.

Employees’ social security contributionsamount to 13.07% of salary and must bewithheld from the gross salary.Employers’ contributions must be paid ontop of the gross salary and varydepending on whether they are forblue-collar (approximately 50%) or white-collar workers (approximately 35%).However, in certain sectors, thesepercentages can be much higher. Thisdifference is mainly due to the fact thatfor blue-collar workers holiday pay is paidby the employer indirectly through socialsecurity contributions but for white-collarworkers holiday pay is paid directly by theemployer to the employee.

8. Hours of WorkSubject to exceptions, the maximumpermissible hours of work are 38 hoursper week. Collective agreementssometimes provide for less than themaximum. Overtime is allowed in certaincircumstances within specific limits. Inaddition to compensatory rest periods,overtime must be paid at a premium of

50% of hourly pay, increased to 100% forSundays and public holidays.

Work at night, on Sundays and duringpublic holidays is only allowed underspecific and strictlyregulated circumstances.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled to a minimum of20 days per year, although collectivelabour agreements (or individualemployment contracts) can increase suchholiday entitlement. A holiday allowanceis paid annually to blue-collar workers bya special fund. Employers pay a holidaybonus (so-called “double holiday pay”) towhite-collar workers in addition to thenormal remuneration during the period ofabsence; the double holiday pay amountsto 92% of monthly gross salary.

There are ten paid public holidays.

There is a system of paid educationalleave that allows employees to attendrecognised courses and take a specifiednumber of hours off work for this purposewhile maintaining their salary. During theeducational leave the employee is entitledto his/her regular wages, subject to amaximum ceiling provided by law. Theemployer receives a limitedreimbursement from the state.

9.2 Family LeaveWomen are entitled to 15 weeks’maternity leave. Maternity pay is providedby the social security fund; it amounts to82% of the daily gross salary (uncapped)for the first 30 days and 75% of the dailygross salary (up to €94.87) for theremaining period. The father is alsoentitled to ten days’ paid paternity leaveafter the birth. The first three days ofpaternity leave are paid by the employer.The seven remaining days are paid by themedical cost insurance to which theemployer is affiliated. Paternity pay forthis period amounts to 82% of the dailygross salary (up to €103.72).


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Women are also entitled during theirworking hours to take one or twobreast-feeding breaks of 30 minutes eachday during a nine month period afterthe birth.

Both the mother and the father areentitled to parental leave up to a child’s12th birthday. The parents have anumber of options: (i) they can choose toentirely suspend their employment for amaximum period of four months (thisperiod may be split up into four separatemonthly periods); (ii) the parents mayprefer to work part-time during anuninterrupted period of eight months(this period may be split up into periodsof a minimum two months); (iii) theparents may opt to reduce their workingtime from 100% to 80% during a periodof 20 months (this period may be split upinto periods of a minimum five months).Each parent is entitled to parental leaveregardless of which parental leave option(if any) the other parent chooses.

If the employer terminates theemployment contract for a reason relatedto parental leave, it will be compelled topay an indemnity of six months’remuneration in addition to the ordinarytermination package.

9.3 IllnessEmployees are entitled to guaranteedwages in the event of sickness. Thearrangement depends on the classificationof the employee (white-collar workers orblue-collar workers), seniority and onwhether the employee is in his trial periodor not. White-collar workers engagedunder an indefinite contract who are sickafter the end of their trial period areentitled to guaranteed wages during thefirst 30 days of their absence. After theperiod covered by the guaranteed wages,the employee is entitled to benefits fromthe social security fund.

10. Health and Safety10.1 AccidentsEmployers are liable for their employees’

work related accidents including thoseoccurring on the way to or from work orduring and as a result of the employment.Insurance covering such liability iscompulsory. Also, every employer mustorganise or subscribe to a companymedical service responsible for the healthand safety of workers.

10.2 Health and Safety ConsultationAny undertaking with 50 or moreemployees must establish a Health andSafety Committee (“Comité pour laPrévention et Protection au Travail –Comité voor Preventie en Bescherming ophet werk”) with employer and employeerepresentatives. The committee is entitledto receive a monthly report on health andsafety conditions, information on potentialrisks and reports on the activities of thesafety officer and medical service from theemployer. It must be consulted on healthand safety policy, the purchase ofprotective equipment and changes in theworking environment. It does not havepower to stop the work of the undertakingon health and safety grounds.

All companies irrespective of the size ofworkforce must create an internal orexternal safety and security service in thework place, which must collaborate withthe Health and Safety Committee, if any.

11. Industrial Relations11.1 Trade UnionsThere is a legally guaranteed right toform, belong to or not to belong to atrade union. Unions are not incorporated,have no liability at law and can inprinciple not be sued. However, a unionrecognised by the Ministry of Labour haslocus standi in the labour Court to sue forenforcement of legal rights granted to itsmembers. The three major unionconfederations, which are closely linkedwith the three major political parties, areas follows:

(a) ACV-CSC (Confederation ofChristian Trade Union) – linked tothe Christian Democrats

(b) ABVV-FGTB (Belgian GeneralFederation of Labour) – linked tothe Socialists

(c) ACLVB-CGSLB (Federation ofLiberal Unions of Belgium) – linkedto the Belgian Liberal Party.

Unions tend to be industry based. Theyusually have separate sections for whiteand blue-collar workers and for Frenchand Dutch speakers. Local groups areco-ordinated at national level where themost important negotiation anddecision-making occur, although therehas been a trend to morecompany-based agreements tosupplement national agreements,particularly in more prosperous, stronglyunionised undertakings.

11.2 Collective AgreementsCollective agreements are concluded:

(a) at national level by the NationalLabour Council which has a generaljurisdiction in matters such asminimum wages, recruitment, hoursof work, etc

(b) at industry sector level in JointCommittees with representatives ofboth employers and employees indifferent types of trades andindustries and cover matters suchas minimum wages, index linking ofremuneration, hours of work,annual holidays, restriction on theemployers’ rights of dismissal,annual bonus etc

(c) at the individual undertaking levelby agreement between theemployer and the relevant unions.

11.3 Trade DisputesBelgium has no comprehensive strike law,but, in the case of “official” strike action,participation is neither a crime nor abreach of contract. The contracts of theemployees who are striking and of thosewho are prevented from working aresuspended for the duration of the strike;the employees are not entitled to theirwages. Employees who participate in the



19

strike will normally receive a daily paymentfrom their respective union organisations.Employees who do not participate in thestrike but cannot work as a result of thestrike are entitled to salary from theemployer or to unemployment benefitssubject to the approval of theunemployment authorities. Lock-outs,although possible, are rarely initiated byemployers in Belgium.


Trade unions, via their representatives inthe National Labour Council, have theright to be consulted by the Governmenton proposed regulations in certain fieldsof labour law. Also, unions participate inthe management of, for example, theNational Social Security Office, theNational Employment Office and the WorkAccident Fund.

At plant or undertaking level, information isprovided to and consultation/negotiationcan be conducted with or through:

(a) Trade Union Delegation – theserepresent union members and dealwith plant or undertaking levelnegotiations and disputes;collective labour agreements ineach sector of industry determinethe terms upon which a uniondelegation may be established inan undertaking;

(b) Works Council – undertakings withat least 100 employees mustestablish a Works Council. Thecouncil is made up of employeeand employer representatives andhas a right to certain informationabout the business and a right tobe consulted before certainmanagement decisions are taken –there is a limited right ofco-decision-making (principally on“social matters” like annual holidaydates). Consultation is required inrespect of collective redundanciesand take-overs. The Works Councilmust meet at least once a monthand upon the request of at least

half the employees. Time spent oncouncil activities is treated asnormal working time; and

(c) Health and Safety Committee –undertakings with 50 or moreemployees must have sucha committee.

12. Acquisitions andMergers

12.1 GeneralThe Acquired Rights Directive has beenimplemented in Belgium under CLA nº32 bis. This CLA implements the EuropeanAcquired Rights Directive and deals withthe employment law implications of atake-over or acquisition of a business. Inessence, it provides for an automatic andmandatory transfer of the employees (withtheir existing employment contract) of thetransferred undertaking (or transferred partof undertaking) from the transferor to thetransferee. Moreover, it makes thetransferee liable together with thetransferor for any obligations resulting fromthe transferred employment contractsexisting at the time of the transfer. Inprinciple the sale or transfer of thebusiness cannot be used as a reason fordismissal. Likewise, unless there has beena change in the terms and conditions ofemployment, an employee cannot treatthe sale as a breach of contract.

An undertaking that takes over anothermust also respect the terms of anypreviously agreed collective labouragreement until the expiry of thatagreement. In addition, the terms of anysuch collective labour agreement whichare deemed to form part of theindividual employment contracts cannotbe withdrawn or modified unilaterally bythe employer.

Special rules apply when the undertakingtransferred is that of an insolvent company.


With the exception of article 15 bis, theCLA nº 32 bis does not contain any

provisions imposing special informationand/or consultation requirements in theevent of a transfer of an undertaking or apart of an undertaking. Therefore, thegeneral rules on information andconsultation set out in the CLA n° 9 of9 March 1972 apply. This provides that inthe case of a merger or acquisition,closure or other significant structuralchanges in respect of which theundertaking is conducting negotiations,the Works Council needs to be informedat an appropriate time and before anyannouncement is made. It must beconsulted in advance on the impact ofthe transaction on the employmentprospects, the organisation of the workand the employment policy in general.

If the company does not have a WorksCouncil, the information and consultationmust take place with the Trade UnionDelegation. If the company does not havea Trade Union Delegation, the informationand consultation must take place with theHealth and Safety Committee. In theabsence of a Health and SafetyCommittee, there is no legal obligation toinform the employees directly (except inthe case of a transfer of undertaking thatcomes within the scope of CLA n°32 bis), but it is prudent to do so.

The employer must inform the employees’representatives of the economic, financialor technical reasons for the contemplatedtransaction as well as of the possibleeconomic, financial and socialconsequences of the transaction. Inaddition, the employees’ representativesmust be effectively consulted on suchmeasures, in particular on employmentforecasts, on work organisation and onthe company’s employment policy.

It should be noted that CLA n° 9 doesnot set out how the procedure ofinformation and consultation should beconducted. Although the informationcould be provided verbally, it is howeveradvisable to have written proof (e.g. astatement in the minutes of the council’sor union’s meeting). The consultation


20


should be interactive: the employer willhave to give its employees’representatives the opportunity to askquestions in relation to the contemplatedtransaction, to formulate arguments andmake counter propositions, and will haveto examine and answer the questions,arguments and counter propositions.

It is important to note that, although thereis a duty to effectively consult (i.e. to try toreach a consensus), the employer will notneed to obtain an actual agreement with itsemployees’ representatives; they have nopower of veto. Accordingly, the employees’representatives will in principle not have theability to delay or to prevent thecontemplated transaction. However, caselaw demonstrates that trade unions cannevertheless have a significant impact on atransaction: in the case in question, tradeunions (who were not informed/consultedin relation to a contemplated transfer ofundertaking) started summary judicialproceedings the day before signing of thecommercial agreement. The Court ruledthat the company first had to duly informand consult its employees before enteringinto the agreement.

Article 11 of the CLA n° 9, provides thatthe information must take place “in duecourse and before any announcement ismade”, and consultation must“effectively” take place “in advance”.Article 3 of the CLA n° 9, provides thatthe information and consultation musttake place “prior to the decision beingtaken. (…) This must enable the workscouncil to expertly conduct discussionsduring which the members will be able toadvise, make suggestions or objections.”Accordingly, the information andconsultation process must take placeprior to the decision on the plannedchange in structure. The employees’representatives cannot be presented witha “fait accompli” and the employer maynot reduce the information andconsultation to a mere formality. Inaddition, the Works Council must beinformed before any public statementis made.

Even if a company does not have toinform and consult with the employees’representatives according to article 11 ofCLA n° 9, it may nevertheless have anobligation to inform on the basis of article25 of the Royal Decree of 27 November1973, when (i) it has a Works Counciland (ii) the contemplated transactioncould have a significant impact on thesocial, financial and economic situationof the company.

Under the Royal Decree, the employees’representatives need to be informed ofthe consequences of the events or thedecisions for the development of thecompany’s activities and for theemployees’ situation. The Royal Decreedoes not require consultation as such.The information must be provided “ifpossible, before the decision isimplemented”. The information maytherefore be given after signing but beforeclosing. The words “if possible” mean thatthese decisions have to be communicatedbefore they are implemented, unless it ispractically impossible for the employer toconvene the Works Council or theemployer has an obligation ofconfidentiality based on other regulations.

Finally, if redundancies are contemplated,the employer will be obliged to follow anadditional information and consultationprocedure if it is facing a collectivedismissal. However, the rules that mustbe applied in such situation are different(and stricter) than those described above.

12.3 Notification of AuthoritiesThe Federal Ministers of Finance and ofEconomic Affairs and the Minister ofEconomic Affairs of the Brussels regionmust be notified in advance of a transferof one-third or more of the equity of acompany conducting its business inBelgium if that company’s net assets are€2,500,000 or more, but no governmentconsent or response is required and thelaw does not provide for any penalty incase of a failure to notify. This notificationobligation does not apply in relation tothe Walloon and Flemish region.

12.4 LiabilitiesFailure to comply with the informationand consultation obligations of CLA n° 9does not affect the validity of a transaction.However, it can result in a criminal fine ofbetween €300 and €3,000 (multiplied bythe number of employees, but subject to amaximum amount of €300,000) or anadministrative fine of between €150 and€1,500 (multiplied by the number ofemployees, but subject to a maximumamount of €150,000). In addition,employees could claim damages for actuallosses suffered as a consequence of thenon-compliance. However, in practice, itwould be difficult for them to show such aloss. Finally, there is also a very limited riskthat summary proceedings will be broughtto delay the completion of the transactionuntil consultation has occurred. Oncecompleted, the transaction cannotbe revoked.

Failure to comply with the informationobligations of the Royal Decree can alsoresult in criminal fine of between€300 and €3,000 or administrative finesof between €150 and €1,500. Howeverthese fines are more of a theoretical risk.

In the event of a collective dismissal,failure to comply with the information andconsultation obligations may also giverise to criminal sanctions. In addition, theemployees may challenge the validity ofthe information procedure. If thechallenge is found to be justified, theemployees can ask to be reinstated, andfailure to reinstate them will result in anadditional indemnity.

13. Termination13.1 Individual TerminationAn employment contract entered into fora fixed-term or for a specific assignmentexpires automatically when the agreedperiod has elapsed or when the agreedassignment is completed.

An employment contract entered into foran indefinite period of time can beterminated by giving notice or by payingcompensation in lieu of notice.



21

13.2 NoticeA contract concluded for an indefiniteperiod of time may be terminated by theemployer or the employee by givingnotice. Notification of the start date andthe duration of the notice period must be

in writing and sent by registered mail tothe other party. The notice is deemed tohave been received three working daysafter the date of the dispatch of thenotice and takes effect on the first day ofthe following week in the case of

blue-collar workers, and on the first dayof the following month in the case ofwhite-collar workers. In urgent cases, thisprocess can be expedited, using a bailiffnotification. Notice periods are:

For blue-collar workers, collectiveagreements regularly provide for longernotice periods and for white-collarworkers, collective labour agreements canprovide for certain special procedures orcan impose restrictions on dismissalswhich may entitle the dismissedemployees to additional indemnities.

Highly paid white-collar workers aredefined as those earning above a paythreshold which is adjusted annually(€32,254 per annum for the year 2013).For white-collar workers hired before1 January 2012, the notice period has tobe agreed at the time of the dismissalfailing which it has to be fixed by theLabour Court. In fixing a reasonableperiod of notice, the Court will take intoaccount factors such as the age of theemployee, his or her period of servicewith the employer, the position held, theremuneration as well as all circumstancesof the case including the employee’sprospects of finding a new job. Severalformulae based on statistical analysis ofrelevant cases are used for calculatingnotice periods, but Courts are not bound

Blue-collar

Notice by Employer Notice byEmployee

Seniority Employees hiredbefore 01/01/2012

Employees hiredafter 01/01/2012

< 6 months 28 days 28 days 14 days

≥ 6 months and < 5 years 35 days 40 days 14 days

≥ 5 years and < 10 years 42 days 48 days 14 days



≥ 20 years 112 days 129 days 28 days

White-collar earning more than €32,254 per annum

Seniority Employees hiredbefore 01/01/2012



Notice by Employer

< 3 years “reasonable notice”(not less than 3months for eachperiod of five years'servicecommenced)

91 days 91 days

≥ 3 years and < 4 years 120 days 116 days





for every further year ofservice

a further 30 days

a further 29 days

Notice by Employee

< 5 years max 4, 5 or 6months dependingon whether theannual salary islower or higherthan €64,508

45 days

≥ 5 years and < 10 years 90 days

≥ 10 years 135 days

≥ 15 years and a annualsalary > EUR 64,508

180 days

White-collar earning €32,254 perannum or less

Seniority Notice byEmployer

Notice byEmployee

< 5 years not lessthan 3months

1,5 month

for everyfurthercommencedperiod of5 years'service

a further 3months

max 3months


22


by any of them. There is a recenttendency in case law to fix thereasonable notice period at one monthper year of service. For white-collarworkers hired after 1 January 2012, thenotice periods are fixed by statute (seeabove) and any of the above formulaslose their relevance.

A period of notice fixed in advance will notbind the parties, except in the case ofhigher paid white-collar workers (i) earningsalaries above a threshold level (in 2013,€64,508 per annum); (ii) employed after1 April 1994; and (iii) with whom a noticeperiod was agreed before thecommencement of the employment. Suchpreviously agreed notice periods may notbe less than three months for each periodof five years’ service commenced.

The employer can also terminate thecontract by paying compensation in lieu ofnotice. In this case, there are no particularformalities and the termination can takeeffect immediately. The compensationequals the amount of the monthlyremuneration (including all benefits) timesthe number of months/days’ notice periodthat should otherwise have been given tothe employee.

13.3 Reasons for DismissalThere is, in principle, no obligation tojustify a decision to give notice but theright to give notice must not be exercised“abusively” otherwise the other party maybe entitled to claim damages. However,with regard to blue-collar workers, thelaw considers a termination to be“abusive” if the blue-collar worker canshow that he or she was not dismissedfor reasons connected with his or herconduct or competence or some bonafide economic reason connected with therunning of the business. In addition,Belgian anti-discrimination legislationprovides that it is unlawful to selectemployees for redundancy ondiscriminatory grounds.

The employer can terminate the contractimmediately for gross misconduct (“motif

grave - dringende reden”), i.e. anyculpable act or omission immediatelyrendering the continued workingrelationship impossible. The terminationmust be notified in writing but is operativeinstantly. If the employer does not actwithin three working days of discoveringan employee’s gross misconduct, itcannot be used to justify instant dismissalwithout notice or payment in lieu of notice.

Until 30 June 1997, the normal retirementage was 60 years for women and65 years for men. As of that date,however, the retirement age for women isprogressively being increased so that witheffect from 2009, the normal retirementage is 65 years for both men and women.

Termination is not automatic in the caseof retirement and notice has to be givenby the employer but reduced noticeperiods apply from age 60 (in the event ofa resignation by the employee) and fromthe age of 65 (in the event of dismissal bythe employer).

Employees meeting specific age andseniority conditions are, upon dismissal,entitled to a kind of early retirementregime (stelsel van werkloosheid metbedrijfstoeslag - Régime de chômageavec complément d’entreprise). Underthis regime, these employees are entitledto supplementary unemploymentallowances payable by the employer forthe period from the end of the noticeperiod until the employee reaches theage of retirement (i.e. 65 years). Theamount of the supplementaryunemployment allowance is equal to halfof the difference between the net salary(calculated by reference to the monthlygross salary up to a ceiling) andunemployment benefits. The general earlyretirement regime is available to personsover 60 years of age with at least40 years’ service. In addition to thegeneral early retirement regime, specificearly retirement regimes exist for variouscategories of employees (e.g. foremployees with a long career, employeesworking night shifts, etc).

13.4 Special ProtectionThe law provides special protection forseveral categories of employees who areconsidered particularly vulnerable such aspregnant women, candidates andemployees’ representatives in the WorksCouncils and Health and SafetyCommittees, safety advisers, employeesholding political office and those called upfor service with the armed forces, etc.

Such protection generally includes aprohibition against dismissal and anobligation to pay a variable sum by way ofcompensation if the prohibition is infringed.For instance, an employees’ representativein the Works Council at the beginning ofhis or her mandate and with more than20 years’ service could claim a specialpayment of up to eight years’ salary.


In the event of the closure of anundertaking with an average of at least20 employees in the four previousquarters, or in the event of a largereduction in its workforce (i.e. to belowone quarter of the average number ofpersons employed in the four precedingquarters), an additional redundancypayment must be paid to employees withmore than one year’s service whoseemployment has been terminated duringa stipulated period before or after theclosure of the undertaking or reduction inits workforce.

There are other procedures and paymentsin the event of collective dismissals by anundertaking that had an average of at least20 employees in the previous calendaryear. How the rules on collectivedismissals will apply depend upon the sizeof the undertaking and the number ofdismissed employees. In addition to thenotice or payment in lieu of notice, apayment must be made to employeeswho, following their redundancy, are eitherunemployed or have found newemployment but at lower pay. Anemployee is not entitled to receive bothcollective dismissal and closure payments.



23

In the event of either closure or collectivedismissals, there is an obligation to informand consult with employees. Theemployer must inform the Works Councilor, if there is no Works Council, the TradeUnion Delegation or, if there is no TradeUnion Delegation, the Health and SafetyCommittee (or the employees directly ifnone of these bodies exist) of theproposed redundancies or closure. Inaddition, various Governmental agentsmust be informed such as the Ministry ofLabour and the Regional Office ofEmployment. Specific procedures,formalities and waiting periods apply inboth circumstances. Failure to complywith the information and consultationprocedure may give rise to severe civil,criminal and/or administrative sanctions.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about theiremployees and workers (prospective,current and past) are regulated by the lawof 8 December 1992 on the protection ofprivacy in relation to the processing ofpersonal data (the “Privacy Law”). ThePrivacy Law was amended with effectfrom 1 September 2001 by the law of11 December 1998 implementing the EUData Protection Directive. Infringement ofthe Privacy Law can lead to fines,compensation claims from affectedemployees or regulatory action.

Essentially employers, as data controllers,are under an obligation to ensure thatthey process personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principles including thefollowing: a requirement to ensure thatdata is accurate, up to date, and is notkept longer than is necessary and arequirement that it is stored securely toavoid unlawful access or accidentaldestruction or damage to it.

Employers are generally advised toensure they have some sort of document

retention policy in place and to ensurethat staff are aware of their dataprotection obligations. Employers will alsoneed to provide certain information to theemployees in respect of the dataprocessing. A notification to the PrivacyCommission (the Belgian data protectionregulator) will often be required. Thenotification is essentially a registration ofwhat data is processed and the purposesof the processing.

The processing of sensitive personaldata, (meaning data which reveals racialor ethnic origin, political opinions,religious or philosophical beliefs ortrade-union membership and dataconcerning sex life as well as judicialdata), can only be processed if theemployer can rely on one of the statutoryjustifications for such processing.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make an access request. Thisentitles them, subject to certain limitedexceptions, to be told what data is heldabout them, how it has been obtainedand to whom it has been disclosed andto be provided with a copy of theirpersonal data. Subject access requestsare uncommon and there is no standardapproach in respect of whether fees arelevied for the provision of this information.

14.3 MonitoringThe monitoring of employee e-mail,Internet and telephone usage and ClosedCircuit TV monitoring is regulated by thePrivacy Law, among other pieces oflegislation. On 26 April 2002, the NationalLabour Council approved a collectivelabour agreement which deals specificallywith the protection of employee privacy inthe context of the monitoring of electroniccommunications data. This agreement isbinding on all employers.

Monitoring is permissible provided that itis carried out in accordance with thePrivacy Law principles and processingconditions. In addition, the collectivelabour agreement specifies that

monitoring is only permitted for certainpurposes and that the infringement of theprivacy of employees should beminimised; so for example, data shouldbe collected about the duration ofInternet connections rather than dataabout individual sites visited. Expressemployee consent to monitoring willusually be required. In addition, both theWorks Council and the individualemployees should be made aware of thepurpose for which the monitoring is beingconducted. Where disciplinary action is apossible consequence of anythingdiscovered, this too should be madeclear to employees. The collective labouragreement sets out specific proceduralrequirements when the monitoring givesrise to a need to link the data to aspecific employee.


An employer who wishes to provideemployee data to third parties must do soin accordance with the Privacy Lawprinciples and processing conditions. Inmany cases it may be necessary to obtainexpress consent to such disclosure in theabsence of a legitimate business purposefor the disclosure and depending on thenature of the information in question andthe location of the third party. Where thethird party is based outside the EEA, itshould be noted that the Privacy Lawprohibits the transfer of data to a countryoutside the EEA unless that countryensures an adequate level of protectionfor personal data or one of a series oflimited exceptions applies. In the contextof commercial transactions whereemployee data is requested, care must betaken to comply with the Privacy Law.Where possible anonymised data shouldbe provided.

Contributed by Clifford Chance, Brussels


A Guide to Employment in the European UnionBulgaria

24


Bulgaria1. IntroductionUnder the Bulgarian Constitution the rightto work is recognised as a fundamentalright of citizens and the Bulgarian state isobliged to facilitate the exercise of thatright by all persons, including those withphysical or mental impairments. TheConstitution expressly prohibits forcedlabour and sets out the following basicrights for employees: (i) the freedom tochoose employment; (ii) healthy and safeworking conditions; (iii) a minimum salary;(iv) remuneration corresponding to thework performed; and (v) a right to restand leave. Each of these rights is to beexercised in accordance with the relevantlegislative provisions.

The Labour Code is the principle sourceof law regulating the legal relationshipbetween an employer and an employeeand includes the following: addressingtrade unions and employers’organisations, collective agreements,employment contracts, information andconsultation rules, working time, leave,work discipline, disciplinary liability andother employer’s and employee’sliabilities, remuneration, health and safetyand termination of the employmentrelationship. The majority of the provisionsof the Labour Code are statutory and,therefore, may not be amended orwaived even by the mutual consent ofemployer and employee. The LabourCode was adopted in 1986 and has beenamended a number of times with a viewto implementing the relevant EUDirectives applicable to labour issues.

It is a fundamental principle of the LabourCode that the State must consult with therepresentative organisations of theemployees and the employers beforelabour legislation is implemented. Thisconcept is referred to as the “socialdialogue”. Social dialogue is achieved bymeans of trilateral collaboration (the“tripartite principle”). Trilateralcollaboration is performed by the NationalCouncil for Tripartite Cooperation (theNCTC) which is comprised of

representatives of the Council of Ministersand the employees’ and the employers’representative organisations.

State control over the implementation oflabour legislation is executed by the“General Labour Inspectorate”, thespecial executive agency to the Ministryof Labour and Social Security Policy.

It is not possible to contract out of thestatutory protection conferred onemployees, and contracts of employmentor clauses of such contracts that arecontrary to mandatory statutoryprovisions or to collective agreements arenull and void.

Some specific areas of employment law(e.g. health and safety at work,employment promotion, collective labourdisputes etc.) are governed by specificlegislation (for example Health and Safetyat Work Act, Employment Promotion Act,Settlement of Collective Legal DisputesAct). Bulgarian law provides that thelegislative provisions of such specificlegislation prevail over the more generalprovisions of the Labour Code.

In addition, certain labour issues areregulated in more detail bysecondary legislation.

It should also be noted that otherlegislation also contains specificprovisions regulating employmentrelationships, such as the HigherEducation Act and Republic of BulgariaDefence and Armed Forces Act.

Bulgaria has been a member of theInternational Labour Organisation since1920 and it has ratified numerousinternational treaties governing labourmatters such as forced labour,trade-union freedom, discrimination,minimum age for employment etc.Bulgaria ratified the European SocialCharter in 2000. Such internationaltreaties take priority over any conflictingprovisions of domestic legislation.

Collective agreements are regulated bythe Labour Code and have a dual nature.On the one hand they have contractualeffect and on the other hand they are asource of law in the sense that theyestablish minimum rights and obligationsin respect of certain categories ofemployee which are more favourable forthe relevant employees than the minimumterms and conditions prescribed by theLabour Code.

The civil departments of the relevantRegional Court settle labour disputesbetween employees and employers.Collective labour disputes betweenemployees’ organisations and employersare settled under the proceduresregulated by the Collective LabourDisputes Settlement Act, i.e. throughnegotiations, mediation and/or arbitration,where the arbitration is performed by theNational Institute for Conciliation andArbitration at the Ministry of Labour andSocial Policy.


2.1 GeneralThe terms “factory workers” (applicable toblue-collar employees who are directlyinvolved in production or other activitiesprincipally requiring manual work) and“office workers” (applicable to white-collaremployees performing mainly intellectualwork) are used in the Labour Code todifferentiate these two categories from apurely linguistic point of view. Bulgarianlabour legislation does not includespecific regulations providing fordifferential treatment of blue andwhite-collar staff.

There are currently three labourcategories in Bulgaria: first, second andthird and these categories aresignificant for the purposes of the rightto retire as employees who come withinthe first or second labour categories areentitled to retire earlier than employeesin the third category.


25A Guide to Employment in the European UnionBulgaria

2.2 DirectorsDirectors who manage and representcompanies perform their duties pursuantto management agreements. By theirlegal nature, those agreements are notcontracts of employment but “specialmandate” agreements, which areregulated by Bulgarian commercial andcivil law. For social insurance purposes(see further below) company directors aretreated as compulsory insured personsagainst all social insurance risks.

2.3 OtherThe Civil Servants Act (the “CSA”) definescivil servants as persons holding salariedtenured positions in the stateadministration and assisting a body ofstate power in the exercise of its powers.

The CSA regulates the requirements thatmust be met by a person in order to beappointed as a civil servant. One of thekey requirements is that such a personmust be a Bulgarian citizen, a citizen ofanother EU Member State, a citizen of aEuropean Economic Community TreatyMember State or a citizen of the SwissConfederation. Civil servants do notwork under an employment relationshipregulated by the Labour Code but undera civil-service relationship that isgoverned by the CSA. Theestablishment of a civil-servicerelationship is always preceded by anopen competition procedure.

3. Hiring3.1 RecruitmentEmployers are free to select and employpersonnel corresponding to theirparticular requirements provided that theselection and employment proceduresare not discriminatory.

Employers recruit via a variety of sourcessuch as internet or media advertising andpersonnel recruitment agencies.Employers may at their discretion informthe National Employment Agency ofvacant positions and are further obligedto inform the Agency: (i) when such

positions are filled or are withdrawnwithout being filled; (ii) of those employedpersons who have been notified of thevacant positions by the NationalEmployment Agency; (iii) of thoseunemployed persons who have refusedto accept a vacant position; and (iv) oftheir refusal to hire persons who havebeen notified of the vacant positions bythe National Employment Agency.

The state policy on employment isgoverned by the Employment PromotionAct. This provides that each Bulgariancitizen, as well as each citizen of anotherEuropean Union Member State, EuropeanEconomic Area Member State or of theSwiss Confederation, is entitled to workin Bulgaria without a work permit andwhen they seek a job they are entitled toregister with the competent localdepartment of the National EmploymentAgency (see further below).

3.2 Work PermitsBulgaria strictly applies the EU regulationspertaining to the free movement ofpeople. Citizens of the EU and EEA andthe Swiss Confederation do not requirework permits to work in Bulgaria and areallowed to enter freely into anemployment relationship with a localemployer; however, they will have toapply for a long-term residence permit.

Other foreigners must follow theprocedure prescribed by the BulgarianPromotion of Employment Act. Thisprovides that foreign citizens are entitledto employment in Bulgaria only afterreceiving a work permit by the NationalEmployment Agency. The work permit isspecific to an individual. A work permitentitles the holder to employment inBulgaria for a prescribed period in aspecified role for an employer which isthe physical or legal entity registeredunder Bulgarian law that has applied forthe work permit. A work permit is issuedfor one year and may be re-issued for upto three years. As an exception, a workpermit may exceed three years in

duration in the case of: (i) the managerialstaff of companies and branches ofcompanies established in Bulgaria;(ii) teachers in secondary schools anduniversities; and (iii) professional athletesand coaches in professional sports clubs.

Work permits will be issued to foreignersfor positions in respect of which Bulgariancitizenship is not required if the followingconditions are satisfied:

(a) the state, development and publicinterests of the national labourmarket are satisfied;

(b) the total number of foreignersworking for the local employer doesnot exceed 10% of the averagenumber of Bulgarian citizens,citizens of Member States of theEuropean Union, citizens of otherStates which are parties to theAgreement on the EuropeanEconomic Area, citizens of theSwiss Confederation and thepersons under Art. 18, para. 3 ofthe Employment Promotion Acthired under an employmentrelationship within the precedingtwelve months;

(c) the conditions of work and payoffered are not less favourable thanthe conditions available to Bulgariancitizens for the relevant workcategory; and

(d) the remuneration meets nationalminimum wage requirements.

The employment of foreigners illegallystaying in Bulgaria is prohibited by law. Inthe event that an employer hires aforeigner illegally staying in Bulgaria inbreach of this prohibition, the employermust pay the remuneration agreed withthe employee for a period of threemonths, unless the employer or theemployee proves a different duration ofemployment. The remuneration may notbe lower than the minimum salaryestablished for Bulgaria or for theeconomic activity concerned.

26


In addition, the penalty for a legal personwho has hired a foreigner illegally stayingin Bulgaria is between BGN 3,000 andBGN 30,000. When the violation has beencommitted by an individual, the penalty isbetween BGN 750 and BGN 7,500.

4. DiscriminationThe Labour Code prohibits direct orindirect discrimination on the grounds ofethnicity, origin, gender, sexual orientation,race, skin colour, age, political andreligious convictions, affiliation to tradeunion and other public organisations andmovements, family and property status,mental or physical disabilities, as well asdifferences in the contract term and theduration of working time.

The Protection Against Discrimination Act(the “PADA”) also prohibits direct orindirect discrimination on the grounds ofgender, race, nationality, ethnicity,genetics, citizenship, origin, religion orbelief, education, personal convictions,political affiliation, personal or social status,disability, age, sexual orientation, maritalstatus and financial status (ProtectedGrounds) or any other grounds establishedby law or international agreement to whichthe Republic of Bulgaria is a party.

Direct discrimination is legally defined asany less favourable treatment of aperson, on one of the prohibited groundsspecified in PADA, than the treatmentanother person is receiving, received, orwould receive in comparablecircumstances. Indirect discriminationarises where a person is placed in a lessfavourable position compared to otherpersons through an apparently neutralprovision, criterion or practice, as anindirect consequence of falling within oneof the protected categories specified inPADA, unless that provision, criterion orpractice is objectively justified in view of alegal aim and the means of achieving thisaim are appropriate and necessary.

Discrimination during the recruitmentprocess is expressly prohibited.

Employers may not set requirements orrequire information with regard to theProtected Grounds, unless one of thelegislative exceptions applies. In addition,employers may not refuse to employ aperson on the grounds of pregnancy,maternity or parental responsibility.

Employers are also obliged to ensureequal working conditions for allemployees, including: (i) equal pay for thesame job or for a job of equivalent value;(ii) equal opportunities for training with aview to improving skills and qualifications;and (iii) equal criteria when terminatingemployment contracts and imposingdisciplinary sanctions. One of the mostsignificant obligations on an employer isthe requirement to adapt the workplaceto meet the particular needs of disabledemployees unless the costs of suchchanges are unreasonably high.

Harassment, including sexualharassment, is expressly outlawed.Harassment is any unwanted physical,verbal or other conduct on one of theprohibited grounds aimed at, or resultingin, a violation of a person’s dignity andthe creation of a hostile, offensive orintimidating environment. Sexualharassment is any unwanted physical,verbal or other conduct of a sexualnature, which violates dignity or honourand creates a hostile, offensive,degrading or intimidating environmentand in particular where the rejection ofand/or pressure to accept such conductmay influence any decision-makingaffecting the person.

On receipt of a complaint from anemployee about being harassed inhis/her workplace the employer isobliged to hold an inquiry immediatelyand take measures to stop theharassment, including disciplinarymeasures where the harassment wascaused by another employee.

PADA specifies limited situations in whichdifferent treatment will not amount todiscrimination. For example, when different

treatment of persons on the grounds oftheir religion is necessary with regard tooccupations in religious institutions.

The Commission for Protection againstDiscrimination is the competent Bulgarianinstitution which ensures equalopportunities and compliance with PADAand other legislative provisions regulatingequal treatment. Every individual, legalentity or institution may bring a case to theCommission. The Commission may alsoinitiate a case in circumstances where itbecomes aware of discriminatory practices.

When exercising its powers, theCommission is competent to assesswhether there have been violations ofequal treatment legislation and has thepower to: (i) order the cessation ofdiscriminatory treatment and require thestatus quo to be re-established;(ii) impose administrative sanctions andenforcement measures; and (iii) issuemandatory directions for compliance withequal treatment legislation. In cases ofdiscrimination, the Commission canimpose pecuniary sanctions ranging fromBGN 250 to BGN 2,500. More severesanctions may be imposed in seriouscases. Sanctions ranging from BGN 500to BGN 2000 can be imposed incircumstances where an employer fails toprovide the Commission with evidence orinformation that has been requested orfails to allow access to its premises.

The decisions of the Commission aresubject to appeal to the SupremeAdministrative Court.


5.1 Freedom of ContractThe Labour Code regulates freedom ofcontract. Contracts of employmentestablishing terms and conditions whichare less favourable for employees thanmandatory provisions of law or collectiveagreements are null and void. Generally,neither the employer nor the employeemay unilaterally modify the employment



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relationship, although there are someexceptions provided by law. For example,the employer may, where production sorequires or in the case of a temporarysuspension of work, unilaterally assignthe employee temporarily to other work inthe same or in another enterprise for aperiod of up to 45 calendar days withinone calendar year, and in the case of atemporary suspension for the duration ofthe suspension. Where the assignmentexceeds 45 days, the consent of theemployee is required. In addition, theemployer may unilaterally increase anemployee’s pay.

However, the situation when an employeeis transferred to another job within thesame enterprise, without changing thespecified place of work, the position andthe amount of the basic wage, is nottreated as a modification of theemployment relationship.

5.2 FormThe Labour Code requires contracts ofemployment to be in writing. Theemployer is obliged to notify therespective territorial directorate of theNational Revenue Agency within threedays of concluding or amending theemployment contract and within sevendays of its termination.

Under Bulgarian law employmentcontracts may be concluded for anindefinite period or as fixed-term contracts.

An employment contract is deemed tobe for an indefinite period, unlessotherwise agreed.

Fixed-term contracts of employment maybe entered into: (i) for a period notexceeding three years, unless otherwiseprovided for by legislation or an act of theCouncil of Ministers; (ii) for the duration ofa specific project; (iii) for the temporaryreplacement of an employee who isabsent from work; (iv) to temporarily fill aposition until a permanent employee isappointed following a competitiveexamination; or (v) for a fixed term of

office where the relevant authority hasspecified a fixed term.

Fixed-term employment contracts for aperiod not exceeding three years arenormally entered into for casual, seasonalor short-term work, as well as with newlyemployed persons in enterprises thathave been pronounced bankrupt or putinto liquidation. As an exception, afixed-term employment contract may beconcluded for a period of more than oneyear for work that is not of a casual,seasonal or short-term nature. Theemployee may also conclude such anemployment contract for a shorter periodupon request in writing. In both cases, thefixed-term employment contract may berenewed once only for a term of at leastone year. Any fixed-term employmentcontract concluded in violation of theselegislative requirements will be treated asa contract of indefinite duration.

In line with Council Directive 1999/70/ECof 28 June 1999, Bulgarian employeesengaged under fixed-term contracts ofemployment enjoy the same rights andobligations as employees engagedunder contracts of indefinite duration.Fixed-term employees may not betreated in a less favourable manner thancomparable permanent employeesperforming the same or similar work atthe enterprise solely because of thefixed-term nature of the employmentrelationship except where certain rightsare contingent on the possession ofqualifications or the acquisition of skillsas a matter of law.

5.3 Trial PeriodsThe Labour Code regulates contracts ofemployment with a trial period. Wherethe work requires the abilities of theemployee to be assessed, his or herpermanent appointment may bepreceded by a contract of employmentwith a trial period of up to six months.Such a contract may also be concludedwhere the employee wants to verifywhether the work is suitable for him/her.

A trial period contract must expresslystate whose benefit the trial period isbeing established for. Where the contractdoes not include such a statement, thetrial period is presumed to be for thebenefit of both parties.

During the trial period, the parties havethe same rights and obligations as undera permanent contract of employment.

After the expiry of the trial period no othertrial period contract may be concludedbetween the same employer andemployee for the same type of work atthe same establishment.

The party for whose benefit the trialperiod is established may terminate thecontract without notice at any time priorto the expiry of the trial period. If thecontract is not terminated until the expiryof the trial period, it is then considered apermanent contract of employment.


Under the provisions of the Labour Code,an employee is obliged to be loyal to theemployer, not to abuse the employer’strust, not to disclose any confidential dataand to protect the reputation andgoodwill of the enterprise.

An express non-competition clauseoperating during the employmentrelationship may be included in a contractof employment. According to recentdecisions of the Bulgarian Supreme Courtof Cassation, non-competition clauseslimiting the employee’s right to work afterthe termination of the employmentrelationship are contrary to the LabourCode and the Constitution of theRepublic of Bulgaria. The Constitutionprovides that every citizen has the right tofreely choose an occupation and place ofwork. This right may not be a subject torestriction in a private agreement,including through a clause in anemployment agreement. In addition, theLabour Code expressly prohibits therefusal of the personal right to work.


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5.5 Intellectual PropertyThe general rule under the Copyright andRelated Rights Act is that copyright overwork created by an employee during thecourse of an employment relationshipbelongs to the author. The employer is,however, granted the exclusive right touse such copyrighted work for its ownpurposes, without permission from theauthor and without payingcompensation, unless the contract ofemployment provides otherwise. Theemployer is allowed to exercise that rightin a manner that is consistent with theusual business activity of the enterprise.If the employee’s remuneration during theperiod when the copyrighted work wascreated is obviously disproportionate tothe revenues collected as a result of thecopyrighted work’s use, the employee,as author, is entitled to demandadditional remuneration.

An exception to this general rule is thecopyright over computer software anddatabases. When the latter are createdunder the terms of the employmentcontract, the copyright belongs to theemployer, unless otherwise agreed.

6. Pay and Benefits6.1 Basic PayUsually, the national minimum wage isdetermined by the Council of Ministersannually at the beginning of the relevantyear, and the minimum wage applies witheffect from 1 January of that year.

The minimum monthly wage applicableuntil the end of 2012 was BGN 290(approx. €148) and the minimum hourlywage was BGN 1.72 (for an eight-hourworking day, five-day working week).With effect from 1 January 2013 theminimum monthly wage will be BGN 310(approx. €158).

Collective agreements in some industrialand business sectors also may establishmore generous minimum remunerationlevels for the relevant industry sectors.

Employers are not obliged to indexsalaries. The employer and the employeemay agree on index linking whenconcluding an individual contract ofemployment or index linking may beagreed in a collective labour agreement.

Normally the salaries in the so-called“budget sphere” (i.e. institutions andestablishments financed by the statebudget) are indexed on an annual basispursuant to the State Budget Act.

6.2 PensionsSupplementary social insurance inBulgaria is organised by compulsory andvoluntary supplementary social insurance.It is implemented through participation insupplementary, compulsory, universaland/or occupational pension funds,supplementary voluntary retirementinsurance funds and/or funds forsupplementary voluntary retirementinsurance under occupational schemes. Itis also implemented throughsupplementary voluntary unemploymentor vocational-training insurance funds,which are incorporated and managed byinsurance companies or by companiesfor supplementary voluntary insurance forunemployment and/or professionalqualification licensed according to theprocedure established by the SocialInsurance Code. The Bulgarian Stateregulates the activity of supplementarysocial insurance companies and funds forthe purpose of protecting the interests ofthe insured persons and the pensioners.The Financial Supervision Commission (astate-funded body accountable to theBulgarian Parliament) also regulates theactivity of supplementary social insurancecompanies and funds.

Current Bulgarian legislation givesemployers the opportunity to pay socialinsurance contributions for theiremployees to supplementary voluntarysocial insurance companies and fundsand many employers do so. Employersare not, however, legally obliged to paysuch contributions for the supplementaryvoluntary social insurance of their

employees. As far as compulsoryinsurance is concerned, the socialinsurance contributions for universalpension funds (5% of remuneration) arecompulsory and they are split betweenthe employer and the employee (2.2% ispayable by the employee and 2.8% bythe employer), whereas the contributionsfor professional pension funds (12% ofremuneration for employees working infirst work category and 7% for employeesworking in second work category) arepayable by the employer. Compulsoryvoluntary insurance applies to employeesborn after 31 December 1959.

6.3 Incentive SchemesBulgarian law does not specificallyregulate share schemes and they are notmandatory. However, such schemes maybe operated as a means of incentivisingemployees and may be covered bycollective agreements.

6.4 Fringe BenefitsFringe benefits, such as company carsand mobile phones, are not mandatory,though such benefits are normallyprovided to managerial staff. Individualcontracts of employment will regulate thenature of any such benefits to be provided.

6.5 Deductions Without the employee’s consent,deductions from his/her salary may bemade by the employer only on thegrounds expressly stipulated in theLabour Code, for example, employers areobliged to make deductions fromemployees’ salaries for income tax andsocial security payments borne by theemployees on a monthly basis. However,an employer may not make deductionsfrom the employee’s salary as a “fine” forbreach of labour discipline, for example,when the employee is late for work orsmokes in unauthorized areas.

7. Social security7.1 CoverageThe social security system regardingpersons employed in Bulgaria is



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administered by the State. The SocialInsurance Code requires employees to becompulsorily insured against all social riskswhere they are employed for more than fiveworking days (or 40 hours) within onecalendar month, irrespective of the natureand duration of their work and the methodof calculating and paying theirremuneration. Directors who manage andrepresent companies under managementagreements and civil servants also have tobe insured against all social insurance risks.

The public social insurance system inBulgaria provides benefits, allowances andpensions for: (i) temporary disability;(ii) temporarily reduced working capacity;(iii) disablement; (iv) maternity;(v) unemployment; (vi) old age; and(vii) death.

These benefits are funded through thesocial security payments of the employerand the employee, the amounts of whichare determined on an annual basis.

The mandatory health insurance inBulgaria guarantees insured personsaccess to medical assistance and a rightto choose a general practitioner anddentist. The amount of the healthinsurance contribution is determined onan annual basis.

Employees may also subscribe tovoluntary health insurance. Suchinsurance is provided by joint-stockcompanies, registered and licensed underthe Commerce Act.

7.2 ContributionsContribution rates for public socialinsurance funds are determined by theSocial Insurance Code and depend onwhat work category (one, two or three)the employee is in and whether theinsurance is against all risks or providesmore limited cover. Contribution rates areas follows:

(a) for pensions fund contributions –

(i) 17.8% for employees bornbefore 1 January 1960 whereas,

for work category one and twothe contribution rate is 20.8%;

(ii) 12.8% for employees born after31 December 1959 whereas, forwork category one and two thecontribution rate is 15.8%;

(b) general sickness and maternity fundcontributions – 3.5%; and

(c) unemployment fund contributions – 1%.

In addition to the above contributions, afurther contribution is made in relation toemployment injury and occupationaldisease that varies from 0.4% to 1.1% ofremuneration. The Public Social InsuranceBudget Act determines the rate ofcontributions for the relevant year,according to the area of economic activity.

Social insurance contributions arecalculated on the employee’s grossmonthly remuneration. If, however, themonthly remuneration is less than theminimum level of social insurance incomelaid down for employees in thatprofession for the relevant calendar yearthen the contributions are based on thatminimum level. If the employee’s grossmonthly remuneration is in excess of themaximum level of social insuranceincome stipulated for the relevantcalendar year the contribution is basedon the maximum income level rather thanthe actual salary.

For example, Bulgarian law provides thatthe minimum amount of social insuranceincome for clerical staff engaged in theelectrical energy production industry isBGN 380. If such a clerical employeereceives gross monthly remuneration ofBGN 300, then the social insurancecontributions will be calculated on theamount of BGN 380, as this is theminimum social insurance incomestipulated for employees in thatprofession. However, if the employeereceives gross monthly remuneration ofBGN 400, then the social insurancecontributions are calculated on theamount of BGN 400. If the employee’s

gross remuneration is BGN 2500, thenthe mandatory social insurancecontributions are calculated on BGN2000, as this is the maximum monthlysocial insurance income envisaged byBulgarian law for 2012. The draft of the2013 Social Security Budget Act providesfor maximum social insurance income ofBGN 2200.

From 1 January 2009 the socialinsurance contributions for the generalsickness and maternity fund (3.5%) issplit 60:40 between the employers andthe employees. The social insurancecontributions for the pensions fund aresplit between the employee and theemployer as follows: (i) for employeesborn before 1 January 1960, 7.9% ispayable by the employee and 9.9% ispayable by the employer (12.9% for workcategory one and two); and (ii) foremployees born after 31 December1959, 5.7% is payable by the employeeand 7.1% is payable by the employer(10.1% for work category one and two).

The health insurance contribution rate for2013 is 8% of remuneration and thepayment of health insurancecontributions are shared between theemployer and the employee in thefollowing ratio: 4.8% - paid by theemployer, 3.2% - paid by the employee.

8. Hours of WorkThe normal working week in Bulgariaconsists of five days with a maximumdaily working time of eight hours and amaximum weekly working time of40 hours. Working hours are establishedby the internal activity rules of eachenterprise. Flexible working time may beestablished where the organisation ofwork so allows.

The Labour Code sets out thecircumstances in which the above dailyand weekly maximum limits can beextended, in which case the length of thenormal working day may not exceed10 hours and the total weekly working


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time may not exceed 48 hours. Suchextensions are permissible for a period ofnot more than 60 working days in onecalendar year and for not more than 20successive working days.

The normal working week can beextended in the following circumstances:(i) where production reasons so demand;(ii) after preliminary consultations by theemployer with the trade unionrepresentatives and employees’representatives; (iii) after prior notificationto the Labour Inspectorate; and (iv) aftera written order issued by the employer. Inthe event the employer extends theemployee’s working time it is obliged tocompensate the employee by granting acorresponding reduction in working timewithin four months.

Lower maximum working time limits existin relation to: (i) certain jobs where therisks to the employee’s life and healthcannot be completely eliminated but areduction in the working time leads tocontainment of those risks; and(ii) employees under the age of 18.Secondary legislation prescribes thoseareas of work subject to reduced workingtime. Where there is a reduction inworking time, the employee’sremuneration and other entitlements maynot be reduced.

An employer, after consulting with tradeunion representatives and employees’representatives, may establish open-ended working hours for certain positionswhere the nature of the work so requires.Employees to whom open-endedworking time applies are obliged tocontinue performing their duties beyondnormal working hours, if necessary.

The employer is obliged to compensateemployees for open-ended working hourson work days by granting additional annualpaid leave (not less than five workingdays). In the case of open-ended workinghours on weekends and holidays theemployees have to be compensated byincreased remuneration for overtime work.

Work between 10.00 p.m. and 6.00 a.m.(between 8.00 p.m. and 6.00 a.m. foremployees under 18 years of age) islegally defined as night work. Themaximum daily limit for night work isseven hours and the maximum weeklylimit is 35 hours.

Night work is prohibited for employeesunder the age of 18, pregnant womenand female workers at an advancedstage of IVF treatment. It is alsoprohibited for mothers with children underthe age of six or with disabled children,employees who continue to study whilstworking and reassigned employees,except where such employees consent.In the case of reassigned employees thehealth authorities must also be of theopinion that the night work will notadversely affect the employee’s health.

Shift work is also permissible if the natureof the production process so requires.However, assigning work during twosuccessive work shifts is prohibited.

The general rule is that overtime work(i.e. work done on the order of, or with theknowledge of and with no objection fromthe employer or the relevant line managerin excess of the employee’s normalworking hours) is prohibited and ispermissible only as an exception in thefollowing cases strictly prescribed by theLabour Code: (i) in the case of workrelated to national defence; (ii) to prevent,manage and mitigate the effects of crisesand disasters; (iii) for the urgent repair ofpublic utilities, transport infrastructure andfor provision of medical aid; (iv) for theperformance of emergency repair work topremises, machinery or equipment; (v) inorder to complete work which cannot beperformed within the normal working time;or (vi) to perform seasonal hard work.

The duration of overtime work performedby an employee may not exceed 150 hourswithin one calendar year, 30 hours of daywork or 20 hours of night work within onecalendar month, six hours of day work orfour hours of night work during one

calendar week, or three hours of day workand two hours of night work during twosuccessive working days. These limits maybe exceeded only in the circumstancesunder points (i), (ii) and (iii) above.

Overtime is prohibited for certaincategories of employee, such as personsunder the age of 18 or pregnant women.

The rate of pay for overtime work isagreed between employer andemployee but may not be less than:(i) 50% of the normal rate of pay forwork on working days; (ii) 75% of thenormal rate of pay for work onweekends; or (iii) 100% of the normalrate of pay for work on public holidays.

An employer and an employee may agreeon part-time employment provided thatthe part-time employee is not treated lessfavourably than a comparable full-timeemployee who performs the same orsimilar work at the enterprise. Part-timeemployees are entitled to the same rightsand have the same duties as employeesworking on a full-time basis, exceptwhere the law makes the enjoyment ofcertain rights contingent on the numberof hours worked, length of service,qualifications possessed etc.

The Labour Code defines secondment asthe performance of labour duties outsidethe place of the employee’s permanentwork. The maximum permissible periodof secondment is 30 calendar days. �secondment for a period in excess of30 days requires the express writtenconsent of the employee. Pregnantwomen, female workers at an advancedstage of IVF treatment and mothers ofchildren under the age of three may onlybe seconded with their written consent.

Where the secondment period relates tothe provision of services in an EU or EEAState or in the Swiss Confederationexceeds 30 calendar days, then duringthe period of secondment the employeeis entitled to at least the minimum workconditions as those established for



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employees who perform the same orsimilar work in the host country.

During a period of secondment theemployee is entitled to receive his/hergross salary plus a travelling allowancefor the secondment period.

9. Holidays and Time Off9.1 HolidaysThe public holidays in Bulgaria are:1 January; 3 March (National Day);1 May; 6 May; 24 May; 6 September;22 September; 1 November (non-studyday for all educational establishments);24, 25 and 26 December for Christmas;Good Friday, Holy Saturday and Easter,including the Sunday and Mondayallocated for its celebration in therespective year.

The basic annual paid leave to whichevery employee is entitled by virtue of theLabour Code is not less than 20 workingdays. Longer basic annual paid leavemay be agreed by collective agreementor by the parties to the labourrelationship. During the first year ofemployment, an employee is only entitledto take paid annual leave after acquiringat least eight months’ service.

Certain categories of employee areentitled to extended paid annual leave, inaddition to the basic annual entitlementbecause of the special nature of theirwork, such as teachers. The amount ofthe extended annual paid leave rangesfrom 26 to 48 working days. The LabourCode stipulates that employees that:(i) work in conditions in which there is arisk to life and health, regardless of thesafety measures taken; and (ii) haveopen-ended working hours, are entitledto additional annual paid leave of not lessthan five working days.

Recent amendments to the BulgarianLabour Code oblige employers toapprove a schedule for the use ofemployees’ paid annual leave for the nextcalendar year. The schedule has to be

prepared by December 31 of thepreceding year after consultations withthe trade unions and employees’representatives. It has to be drafted so asto enable all employees to use their paidannual leave by the end of the calendaryear in which leave accrues.

The general rule is that annual leaveshould be used in the year in which itaccrues. However, not more than10 working days of the paid annual leavemay be postponed to the next calendaryear (i) by the employer for importantproduction reasons; and (ii) where theemployer consents to the employee’swritten request to postpone for goodcause. In addition, leave may bepostponed when the employee wasunable to use it, in whole or in part,during the year as a consequence oftaking statutory leave.

If paid annual leave remains untaken twoyears after the leave year to which itrelates, the right to use it automaticallylapses regardless of the reasons of notusing it. This rule applies to paid leave duefrom 2010 onwards. Paid leave referable tothe years before 2010 does not lapseautomatically and may be used until thetermination of the employment relationship.

9.2 Family LeaveFemale employees are entitled topregnancy and childbirth leave of 410days for each child. 45 days of this leavemust be used before the birth of thechild. In addition, an employee may takechildcare leave until the child reaches theage of two. This leave is in addition to thechildbirth leave and it is available inrespect of the first, second and thirdchild. For subsequent children, childcareleave of six months is available for eachadditional child.

Benefit payments will be made duringpregnancy and childbirth leave providedthat the employee has made the requisitesocial insurance contributions for at leasttwelve months. The daily cash benefit forpregnancy and childbirth leave is 90% of

the average daily remuneration or of theaverage daily insurance income asdetermined under Article 48 of the SocialInsurance Code. The daily cash benefitmay not exceed the average daily netremuneration for the period for which thebenefit is calculated and may not be lessthan the national minimum daily wage.The qualifying conditions for childcarebenefit are the same conditions as thosefor the pregnancy and childbirth benefit.

Childcare leave may be used by thefather of the child or by one of the child’sgrandparents if they are working under anemployment contract; however, in thesecases the child’s mother must consent toleave being used by such persons.Where childcare leave is taken by thefather or a grandparent they are entitledto receive childcare benefit too. The leaveof the mother is suspended during anyperiod when the father (or grandparent)takes childcare leave. Any period ofchildcare leave counts as a period ofemployment service.

If the mother and the father of the childare married or live together, the father isentitled to 15 calendar days paidchildbirth leave commencing when thechild is discharged from hospital if he hasmade the requisite social insurancecontributions for at least twelve months.

Pregnancy, childbirth and childcarepayments are paid by the relevantregional office of the National SocialSecurity Institute upon presentation of therelevant documents.

9.3 IllnessPersons insured against all socialinsurance risks (see Section 7.1 above)are entitled to the following benefits(amongst others):

(a) cash compensation for, amongstother things, temporary disabilitythrough general sickness andoccupational disease, urgentmedical examinations, preventivecare and rehabilitation;


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(b) cash allowances for disability as aresult of general sickness,preventive care and rehabilitationand technical aids related to theimpairment; and

(c) pensions for disability arising fromworkplace injury, occupationaldisease or general sickness.

These Social Insurance Code paymentsact as an income substitute whereemployment income is lost or reduced.

9.4 Other time offIn addition to the paid annual leave andsubject to employer�s consent, employeesare entitled to unpaid time off. Unpaidtime off of up to 30 days per calendaryear counts towards the employee’slength of service, whereas time off inexcess of 30 days per calendar year willonly count towards length of service ifstatutory legal provisions so provide.

10. Health and Safety10.1 AccidentsThe Health and Safety at Work Actregulates health and safety at work.

Employers are obliged to ensure healthand safety at work so that any risks tothe employees’ health and safety areeliminated, restricted or mitigated. Everyemployer must establish health andsafety rules and these must comply withthe legislative provisions of the Healthand Safety at Work Act. Employers arealso obliged to provide medical servicesfor their employees and free protectiveclothing and equipment for employeeswho work in conditions where there isrisk to their health and safety. Employeesalso have to be instructed and trained onsafe methods of work.

A failure to ensure health and safetyconditions will result in financial penaltiesranging from BGN 1500 to BGN 15 000(employers) or from BGN 1000 to BGN10 000 (liable official), unless they aresubject to more severe punishment underlegislation relevant to the sector or

criminal liability under the BulgarianPenalty Code.

10.2 Health and Safety ConsultationWorking Conditions Committees have tobe established in any enterprise whoseworkforce exceeds 50 employees. Suchcommittees may not have more than10 members - half of them beingemployees’ representatives and the otherhalf being representatives of the employer.In large companies such committees maybe established not only for the enterprisebut also for its constituent departments.

Working Conditions Groups must be setup in companies/organizations employingbetween 5 and 50 persons, as well as ineach separate structural department ofcompanies/organizations employing over50 persons. The group consists of theemployer or the head of the respectivestructural unit and one representative ofthe employees responsible for safety andhealth at work.

The purpose of Working ConditionsCommittees and Groups is to provide aforum for the regular discussion of healthand safety issues, to considerrecommendations for improving health andsafety and to verify that health and safetyobligations are being complied with.

11. Industrial Relations11.1 Trade UnionsEmployees are free to form trade unionsand to join and leave them at will, subjectonly to the terms of the trade union’sstatutes. Trade unions protect andpromote employees’ interests throughcollective bargaining, participation intrilateral collaboration, strikes and otherlawful actions. There is no minimummembership requirement in order for atrade union to be qualified to representthe employees’ rights and interests forthe purposes of concluding a collectiveagreement with the relevant employer.

In order for a trade union to berecognised as a representative

organisation of employees at a nationallevel it must have: (i) at least 75,000members; (ii) employees organisations inat least 25 of the two-digit codeeconomic activities identified in theBulgarian Classification of EconomicActivities and at least 51% of the peopleengaged in each economic activity beingtrade union members, or at least50 organisations with at least five tradeunion members in each economicactivity; (iii) local bodies in more than onefourth of the municipalities in the countryand a national governing body; and(iv) legal capacity acquired in accordancewith the Labour Code provisions at leastthree years before filing the application.

National recognition is a pre-requisite fora trade union to participate in the trilateralcooperation and the social dialogue asregulated by the Labour Code. Tradeunions can influence the social andeconomic development of the country.

11.2 Collective AgreementsThe subject matter and contents ofcollective agreements are in generalregulated by the Labour Code.

Bulgarian labour legislation establishesmandatory minimum standards forprotecting employees’ rights andinterests. More beneficial rights andstandards can, however, be agreed undercollective agreements. The main purposeof collective agreements is to regulate inmore detail the specific relationshipbetween employers and employees in thecontext of the working conditions in anyparticular industrial sector.

A collective agreement may beconcluded at a company, branch,industry or municipality (for activitiesfunded by the municipal budget) level. Atthe first three levels only one collectiveagreement may be concluded.

A collective agreement at a company levelmust be concluded between the employerand the trade union organization, whilecollective agreements at branch, industry



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and municipality levels are concludedbetween the representative trade unionorganisation and the representativeemployers’ organisation.

A collective agreement must be in writingin order to be valid. It must also beregistered with the labour inspectoratedivision where the employer’s registeredoffice is located. Agreements of sectoraland national significance are registeredwith the Executive Agency “GeneralLabour Inspectorate”.

The procedure for drafting, negotiating andexecuting a collective agreement isregulated by the Labour Code. A collectiveagreement will have effect in relation to theemployees who are members of the tradeunion which is party to the agreement.Those employees who are not membersof the trade union may accede to aconcluded collective agreement by writtenapplication to the employer or theleadership of the trade union, inaccordance with the pre-determinedprocedure set out in the collectiveagreement. As a result, the employees willbe entitled to the labour and social-security advantages of the collectiveagreement without being members of thetrade union.

An employer is obliged to notify itsemployees of all collective agreementsapplicable to the enterprise or branch orindustrial sector level and to have copiesof the full texts of those agreementsavailable for inspection by the employees.

The collective agreement is deemed tohave a duration of one year, unlessotherwise stipulated in the agreement. Theagreement may not, however, exceed twoyears. The parties to the agreement mayagree that individual clauses of theagreement shall apply for a shorter term.

The negotiations for concluding a newcollective agreement must commencenot later than three months prior to theexpiry of the collective agreementcurrently in force.

In addition, a collective agreementconcluded between an employers’organisation and trade unions (i.e. anagreement that has been concluded atbranch, industry or municipality level)continues to be binding on an employerwho has terminated its membership in theemployers’ organisation after thecollective agreement has been concluded.

11.3 Trade DisputesThere is no legal definition of “tradedispute” (also referred to as a collectivelabour dispute).

Generally, such disputes arise in thecontext of the implementation, variationor termination of a collective agreement,but disputes may also arise in relation toother issues including those relatingto employment.

There are two types of trade dispute:(i) disputes relating to “rights” arising fromlegislation or collective agreements; and(ii) disputes relating to interests. An“interest” dispute arises from a differenceof opinion between the parties in relationto the expediency of certain decisionsaffecting the interests of the parties. Acompetent court can resolve “rights”disputes, whereas disputes relating to“interests” cannot be brought to a courtfor resolution.

The Settlement of Collective LabourDisputes Act (the “SCLDA”) regulates themeans by which a trade dispute can beresolved. It provides that resolution canbe achieved via the following means:(i) negotiation; (ii) mediation and/orvoluntary arbitration by trade union andemployers’ organizations and/or theNational Conciliation and ArbitrationInstitute); and (iii) strike action.

In order for a strike to be lawful it must beconducted in strict conformity with theprocedures prescribed by the SCLDAwhich apply to both parties to thedispute. Both employer and non-strikingemployees may bring an action for adeclaration that the strike is unlawful.

The SCLDA prohibits an employer fromdismissing employees for the purpose ofpreventing or ending a lawful strike. Theemployer is also prohibited fromemploying new workers in place of thosestriking lawfully, except in limitedprescribed circumstances (“lockout”).

11.4 Information, Consultation andParticipation

An employer is legally obliged to providecertain information to the trade unionsand to the employees’ representatives atthe enterprise and to consult with them.Such information includes (i) the plannedcollective dismissals, (ii) the change ofemployer under Art. 123, para. 1 of theLabour Code; and (iii) the current financialand business status of the enterprise,among others.

The trade unions and the employees’representatives are obliged to make theemployees aware of the informationreceived from the employer and take intoaccount employees’ opinions on therelevant issues when consulting with theemployer. Employees are entitled toprompt, reliable and intelligibleinformation about the economic andfinancial situation of the employer whichare relevant to their labour rights andduties. Pursuant to the Labour Code, anemployer who fails to comply with itsinformation and consultation obligationsis subject to a pecuniary penalty ofbetween BGN 1500 and BGN 15,000,whereas the specific individual who isresponsible for the breach is liable to afine between BGN 1000 and BGN10,000. In the case of a repeatedviolation, the penalty is between BGN20,000 and BGN 30,000 (employer) orBGN 5000 and BGN 20,000 (individual).


12.1 GeneralThe employment relationship with anemployee is not terminated in the eventof a change of employer in any of thefollowing situations: (i) as a result of the


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creation of a new enterprise following amerger of enterprises; (ii) a mergerfollowing the acquisition of one enterpriseby another; (iii) the distribution of theoperations of one enterprise among twoor more enterprises; (iv) the transfer ofpart of a business to another; (v) achange of the legal status of a businessorganisation; (vi) a change of ownershipof all or part of a business; (vii) thecession or transfer of activity from onebusiness to another (including a transferof tangible assets); or (viii) in the case of agrant of a lease over or concession inall/part of the enterprise. The twoemployers are jointly and severally liableto the employee in respect of anyemployment obligations that arose priorto the change of the employer inscenarios (iii), (iv), (vi), (vii) and (viii) above,whereas in the cases of scenarios (i), (ii)and (v) the transferee employer is solelyliable to the employees with regard theseissues. The terms and conditions of theemployment relationship remainunchanged following such a transfer to anew employer.


Prior to a transfer to a new employer, theLabour Code requires the transferoremployer and the transferee employer toinform the trade unions’ representativesand the employees’ representatives attheir enterprises of: (i) the proposedchange and the date of the transfer; (ii) thereasons for the transfer; (iii) the possiblelegal, economic and social implications ofthe transfer for the employees; and (iv) themeasures with regards to the employeesin relation to the transfer.

The transferor employer is obliged toprovide the above information no laterthan two months before the transfertakes place. The transferee employer isequally obliged to provide the informationin good time and in any event no laterthan two months prior to the transfer.

If either the transferor or transfereeemployer envisages that measures will be

taken in relation to their respectiveemployees in connection with thetransfer, such employer is obliged toconsult the trade unions’ representativesand employees’ representatives in goodtime in relation to the measures and toattempt to reach an agreement in respectof such measures. In practice it isrecommended that the consultationprocess be completed prior tocompletion of the transaction.

12.3 Notification of AuthoritiesDepending on the precise circumstancesof a business or share sale the Bulgariantax authorities may need to be notified.

12.4 LiabilitiesIf an employer fails to fulfil its informationand consultation obligations, the tradeunions’ representatives and theemployees’ representatives or theemployees, themselves can notify theGeneral Labour Inspectorate which mayimpose a fine ranging from BGN 1500 toBGN 5000 (employer) or BGN 250 toBGN 1000 (individual employeeassigned to manage this process). TheGeneral Labour Inspectorate may alsoissue mandatory orders to the employerto end the infringement of theconsultation obligations, for example, arequirement to provide the employeeswith the information required or toconclude an agreement with theemployees in respect of the measuresthat will be taken in connection with thetransfer. The General LabourInspectorate does not have the powersto prevent a transaction completing.

13. Termination13.1 Individual TerminationA contract of employment (of fixed-term orindefinite duration) may be terminated onlyon the grounds specified in the LabourCode. The general grounds for terminationof an employment contract without apreliminary written notice are as follows:

(a) by written agreement between theemployer and the employee;

(b) where the dismissal of an employeeis declared illegal by the court or ifthe employee is reinstated by thecourt/the employer but theemployee fails to report for workwithin two weeks of receipt of thecourt/employer notice;

(c) upon the expiry of the agreed term;

(d) upon the completion of the workas specified;

(e) upon the return to work of theemployee for whom cover hasbeen provided;

(f) where the position has beendesignated for occupation by apregnant woman or anoccupational rehabilitee, and aneligible applicant is appointed;

(g) where the employee who waselected or who won a competitiveexamination starts to work (for civilservice only);

(h) if the employee is unable to executethe work assigned by reason ofillness which has led to permanentincapacity (disablement);

(i) upon the death of the person withwhom the employee concluded theemployment contract;

(j) upon the death of the employee;

(k) owing to the position beingdesignated for performance by acivil servant.

13.2 NoticeThe Bulgarian Labour Code differentiatesthe legal grounds on which an employeemay terminate his/her employment contractwith written notice and the grounds onwhich the employer is entitled to do so. Thegeneral rule is that the notice period is thesame for employer and employee.Contracts of employment for an indefiniteterm may be terminated with 30 days’written notice. However, the parties mayagree on a longer notice period, not inexcess of three months. Fixed termcontracts may be terminated with up to



35

three months’ written notice but the noticecannot be longer than the unexpired part ofthe fixed term. Notice starts to run on theday after the notice is received.

An employee may terminate the labourcontract with prior written notice for anyreason. However, an employer may onlyterminate the contract of employment inthe circumstances set out in the LabourCode. An employer wishing to terminatean employment contract must ensure itcomplies with applicable statutoryrequirements as well as the contractualrequirements and ensure that anyapplicable procedures are strictly followed.

13.3 Reasons for DismissalAn employer may only give notice toterminate the employment contract in thefollowing circumstances:

(a) upon closure of the enterprise;

(b) upon closure of part of theenterprise or a reductionin workforce;

(c) where there is a reduction in thevolume of work;

(d) when work is suspended for morethan 15 working days;

(e) where the employee lacks thecapacity to perform the work;

(f) where the employee does notpossess the necessary educationalor professional qualifications toperform the role;

(g) where an employee refuses tomove with the enterprise/divisionin which he/she works when itis relocated;

(h) where the employee’s post mustbe vacated in order to reinstate awrongfully dismissed employeewho previously occupiedthat position;

(i) upon reaching the age of 65 in thecase of professors, associateprofessors or persons holding adoctoral degree;

(j) where the employment relationshiphas arisen after the employee hasacquired and exercised his/her rightto a length of service and agerelated pension;

(k) where the requirements forexecution of the respective dutychange and the employee does notsatisfy the new requirements;

(l) if the performance of theemployment contract is objectivelyimpossible (e.g. a driver has beenbanned from driving).

In addition to the above cases, employeesof the company’s management can bedismissed with notice if a newmanagement agreement of the companyhas been entered into. Such a dismissalmay only be effected uponcommencement of the new managementagreement but not later than nine monthsafter the commencement of themanagement agreement.

An employer may unilaterally terminatethe contract of employment without priorwritten notice on a number of groundsincluding when:

(a) where the employee is unable toexecute the work assigned byreason of illness and the employerfails to provide the employee withsuitable alternative work conformingto the requirements of the healthauthorities;

(b) where the employer delays thepayment of remuneration or LabourCode compensation or socialinsurance compensation;

(c) if the employer changes the placeor nature of work or the agreed rateof remuneration, except in thecases where the employer has theright to make such changes;

(d) if the employer fails to fullfil otherobligations agreed in theemployment contract or in thecollective agreement, or establishedby a statutory provision;

(e) where as a consequence of thechange of employer the workingconditions under the new employerdeteriorate substantially;

(f) if the employee continues his/herstudies as a full-time student atan educational institution, orenters a full-time doctoraldegree course;

(g) in the event that the employeeenters the civil service;

(h) the employer terminates its activityand the employee cannot submitthe application for terminationbecause the employer is no longerlocated at the registered addressset out in the employmentagreement the application may besubmitted to the relevant LaborInspectorate according to theemployer’s registered seat. If it isestablished that the employer hasterminated its activity, theemployment contract is consideredterminated as of the date when theapplication for termination wassubmitted to the LabourInspectorate; and/or

(i) in the event that the employer hasunilaterally placed the employee onunpaid leave.An employer mustprove the existence of one of thelawful grounds for dismissal andthat the dismissal has beeneffected following the legallyprescribed procedure.

The employee may unilaterally terminatethe labour contract without prior writtennotice to the employer in a number ofcircumstances including the following:

(a) where the employee is unable toexecute the work assigned byreason of illness and the employerfails to provide the employee withsuitable alternative workconforming to the requirements ofthe health authorities;

(b) where the employer delays thepayment of remuneration or Labour


36


Code compensation or socialinsurance compensation;

(c) if the employer changes the placeor nature of work or the agreed rateof remuneration, except in thecases where the employer has theright to make such changes;

(d) if the employer fails to fullfil otherobligations agreed in theemployment contract or in thecollective agreement, or establishedby a statutory provision;

(e) where as a consequence of thechange of employer the workingconditions under the new employerdeteriorate substantially;

(f) if the employee continues his/herstudies as a full-time student at aneducational institution, or enters afull-time doctoral degree course;

(g) in the event that the employeeenters the civil service;

(h) the employer terminates its activityand the employee cannot submitthe application for terminationbecause the employer is no longerlocated at the registered addressset out in the employmentagreement the application may besubmitted to the relevant LaborInspectorate according to theemployer’s registered seat. If it isestablished that the employer hasterminated its activity, theemployment contract is consideredterminated as of the date when theapplication for termination wassubmitted to the LabourInspectorate; and/or

(i) in the event that the employer hasunilaterally placed the employee onunpaid leave.

Where an employment contract isterminated at the employer’s initiative inconsideration of compensation theemployee must consent in writing in orderfor the termination to be valid. If theemployee fails to respond in writing tosuch an offer within seven days, the

employee is deemed to have rejected theproposal. If the employee accepts theoffer, the employer must pay theemployee a compensation sum of notless than the aggregate of the employee’sprevious four months’ gross remuneration,unless the parties have agreed on ahigher level of compensation.

The Labour Code strictly regulates thecompensation payable in the case ofdismissal. The potential compensationpayable in the event of dismissal includesthe following:

(a) in the case of dismissal for breachof work discipline or because theemployee is serving a custodialsentence, the employee must paythe employer compensation equalto the employee’s grossremuneration for the notice period ifemployed under a contract ofindefinite duration or a sum equal tothe actual detriment in the case of afixed-term employment relationship.For these purposes the detriment isthe gross remuneration for anyperiod during which the employerhas been left without an employeeto do the work during theremainder of the fixed-termemployment contract;

(b) in the event of dismissal by reasonof closure of all or part of theenterprise, a reduction in staff orthe volume of work or a suspensionof work for more than 15 workingdays, the employee’s refusal torelocate when theenterprise/division has moved toanother location or because theemployee’s post must be vacatedin order to reinstate a wrongfullydismissed employee, whopreviously occupied that position,the employee is entitled tocompensation equal to his/hergross remuneration for the period ofunemployment up to a maximum ofone month’s pay. A higher level ofcompensation may be provided forby an act of the Council of

Ministers, by a collective agreementor by the employment contract. Ifthe employee obtains alternativework at a lower level of pay duringthe compensation period, theemployee is entitled to becompensated for the difference inpay for the said period;

(c) upon termination of theemployment relationship (forwhatever reason), if the employee iseligible for a retirement-agepension, he/she is entitled tocompensation equal to twomonths’ gross remuneration; if theemployee has worked for the sameemployer for the last 10 years ofhis/her employment, thecompensation is equal tosix months’ gross remuneration.

An employee may object to the dismissalclaiming that it is unjust either throughfiling a petition with the employer, or bylodging a claim of unjust dismissal atcourt. There is no term within which theemployee must file the petition with theemployer nor within which the employermust respond to the petition. In practiceit is normal for this procedure to beinitiated and finalised shortly after thedismissal. An employee must file a claimat court within two months of the date ofthe alleged unjust dismissal.

13.4 Special ProtectionSpecial rules apply to the dismissal ofcertain categories of employees, forexample, mothers of children under theage of three, employees who havecommenced statutory leave, employeessuffering from a disease prescribed by anordinance of the Minister of Health or anoccupational-rehabilitee employee. Theprior written approval of the relevantLabour Inspectorate must be obtainedbefore dismissing an employee who fallswithin one of the protected categories.

An employee who holds a trade unionposition at an enterprise, sector ornational level may only be dismissedduring the term of the position and for a



37

period of six months thereafter with theprior consent of the central leadership ofthe trade union concerned.

A pregnant employee or a female workerwho is at an advanced stage of IVFtreatment may be dismissed with priorwritten notice only in the followingcircumstances: (i) upon closure of theenterprise; (ii) if he/she refuses to movewith the enterprise or division in whichhe/she works when the enterprise ordivision is relocated; (iii) where theemployee’s post must be vacated inorder to reinstate a wrongfully dismissedemployee who previously occupied thisposition; and (iv) if the performance of theemployment contract is objectivelyimpossible. The Labour Code providesthat the employer may unilaterallyterminate the contract of employment ofa pregnant employee without prior writtennotice on the following grounds: (i) in thecase of dismissal as a consequence ofthe employee serving a custodialsentence; and (ii) in cases of dismissal forbreaches of work discipline. In the eventof dismissal for breaches of workdiscipline the prior permission of theLabour Inspectorate is required.

An employee who is taking pregnancy orchild-birth leave may be dismissed onlyupon closure of the enterprise. Dismissalon other grounds is unlawful.


“Collective dismissals” are statutorilydefined as dismissals effected by theemployer for one or more reasonsunrelated to the individual employee,where the number of dismissals is: (i) atleast 10 in an enterprise employing morethan 20 and less than 100 employeesduring the month preceding the collectivedismissals and the dismissals are carriedout over a period of 30 days; (ii) at least10% of the employees in an enterpriseemploying at least 100 but not more than300 employees during the monthpreceding the collective dismissals andthe dismissals are carried out over a

period of 30 days; or (iii) at least 30 in anenterprise employing 300 or moreemployees during the month precedingthe collective dismissals and thedismissals are carried out over a period of30 days. If an employer has dismissed atleast five employees within the periodsspecified at (i) to (iii) above, eachsubsequent termination of employmentwhich is for a reason unrelated to theindividual employee must be aggregatedwith the preceding dismissals for thepurposes of establishing whether there isa collective dismissal.

The Labour Code and EmploymentPromotion Act regulate the collectivedismissal notification procedures.

The employer must start consultations withthe trade union representatives and withthe employees’ representatives not laterthan 45 days before the proposeddismissals are to take effect, with a view toreaching agreement with therepresentatives on how to avoid or reducethe number of dismissals and to mitigatethe consequences of these dismissals.Prior to the consultation, the employer hasto provide the trade union representativesand the employees’ representatives withwritten information setting out: (i) thereasons for the proposed dismissals; (ii) thenumber and categories of employees to bedismissed; (iii) the redundancy selectioncriteria; (iv) the number of employeesemployed in the main economic activities,groups of professions and positions at theenterprise; (v) the period during which thedismissals due to be executed; and (vi) thecompensation due in connection withthe dismissals.

The employer must also forward a copyof the information to the competentdivision of the National EmploymentAgency within three days of providing thisinformation to the employees’representatives. The proposedredundancies cannot take effect earlierthan 30 days after the NationalEmployment Agency is notified,irrespective of the notice periods.

14. Data Protection14.1 Employment RecordsAn employer’s collection, retention andprocessing of information and data aboutits employees, is regulated by thePersonnel Data Protection Act (the“PDPA”) which implements the DataProtection Directive 95/46/EC.

The PDPA defines “personal dataprocessing” as collecting, recording,organising, keeping, adapting oramending, restoring, consulting, using,disclosing, distributing, providing,updating, combining, blocking, deletingor destroying personal data. Allemployers are regarded as personal dataadministrators. Employers must ensurethat personal data processing isperformed strictly in accordance with theprinciples and for the purposesprescribed by statute.

14.2 Employee Access to DataEmployees have a right to access theirpersonal data which is being processedby the public data administrator,provided that third party rights or otherinterests pertaining to national securityand public order would not be harmedby such access.

14.3 MonitoringThe Bulgarian Constitution provides thatthe freedom and confidentiality ofcorrespondence is inviolable. The onlyexception to this rule is where monitoringoccurs with express judicial consent incircumstances where it is necessary forthe purposes of detecting or preventingcrime. It is also possible to incorporatemonitoring clauses into individualemployment contracts, stipulating thatcomputer systems are providedexclusively for work purposes andaccordingly the employer has the right toaccess the employee’s communicationsthat are not marked as personal. Byexecuting the contract of employment theemployee grants his/her explicit consentto such monitoring.



38


The Constitution provides that no onemay be followed, photographed, filmed,recorded, or subjected to similar actionswithout their knowledge or where theyhave expressed their disapproval exceptas provided for by legislation. Videomonitoring systems may be installed inthe workplace with the express consent ofthe employees who will be filmed. Videomonitoring may also be installed if it is forthe purpose of protection of human lifeand safeguarding assets and the personswho will be filmed are duly notified.


The transmission of personal data by theemployer (as data administrators) to anythird party is permitted in thecircumstances set out in the PersonalData Protection Act. Generally, these arethe same circumstances in whichpersonal data may be processed.

The transfer of personal data to anyEuropean Union Member State or any

European Economic Area membercountry is permitted freely subject tocompliance with the requirements of thePDPA. The transfer of personal data to athird country is permitted only in caseswhere the destination country ensures anadequate level of personal dataprotection within its territory. Theadequacy of the level of protection ofpersonal data afforded by non-EEC/EEAcountries is assessed by the Commissionfor Personal Data Protection havingregard to all the circumstances includingthe nature of data, the purpose andduration of their processing and the legalbasis for and security measures providedin that country. No assessment is carriedout where the European Commission hasalready assessed the adequacy of aparticular jurisdiction’s personal dataprotection regime.

In those cases where the destinationcountry does not ensure an adequatelevel of personal data protection or wherethe European Commission has not

assessed the adequacy of personal dataprotection, personal data may only betransferred to the non-EEC/EEA countriesif: (i) the individual to whom such datarelates has given his or her explicitconsent; (ii) the transfer is necessary forthe performance of a contract executedbetween the individual and the dataadministrator or is being performed atsuch person’s request; (iii) the transfer isnecessary for the performance of acontract executed in the interest of theindividual between the data administratorand a third party; (iv) the transfer is for theexercising of any function required by law,or is necessary for the purposes ofestablishing, exercising, or defending legalrights; (v) the transfer is necessary in orderto protect the life and health of the datasubject; or (vi) the transfer concerns datawhich is already in the public domain.

Contributed by Penev LLP


39A Guide to Employment in the European UnionCyprus

Cyprus1. IntroductionLabour law in Cyprus is an amalgam ofcommon law and statute law.Employment relationships are primarilygoverned by ordinary contract lawprinciples and supplemented whereappropriate by statutory rights andobligations. Industrial relations in Cyprusare regulated by a number of statutes,the main ones being the Termination ofEmployment Law and the AnnualHoliday with Payment Law. Cyprus has,in addition, ratified a great number ofILO Conventions.

Trade unions and employers’organizations have generally adopted aresponsible attitude. Successivegovernment’s policies have adopted theapproach of keeping out of disputesand promoting the idea that labour-management relations are first andforemost the business of the partiesthemselves and seeking the activeparticipation of workers and employersin the formulation and implementation ofsocial and economic policies throughtripartite bodies. Effecting proceduralagreements for the settlement ofdisputes has contributed immensely toindustrial relations stability on the Island.The Industrial Relations Service of theMinistry of Labour has also played aninstrumental role in maintainingindustrial peace through thedevelopment and preservation of soundindustrial relations.

Although mediation has becomepractically the only way of providing helpfor the resolution of disputes, the twosides may still resort to arbitration,directly or after mediation.


2.1 GeneralThe law does not draw any distinctionbetween blue and white collar employees.

3. Hiring3.1 RecruitmentEmployees are typically recruited viaadvertising in newspapers and journalsand to a lesser extent recruitmentagencies and internal advertising.

3.2 Work PermitsIt is very difficult for a non-Cypriot, otherthan a EU citizen, to obtain a workpermit to work in Cyprus for a localemployer. In order for a work permit tobe granted, it must be shown that,because of qualifications and know-how,no Cypriots are readily available for thatparticular post. The process issupervised by the Ministry of Labourthrough the local Labour Office. Workpermits are usually given for six months,and they are renewable. EU citizens arefreely able to work and do not need toobtain any work permits.

In the case of non-Cypriots (excluding EUcitizens) employed by internationalbusiness companies, obtaining a workpermit for the first six months is a simpleprocedure. Renewals are given annuallythereafter, provided that the employeeand employer comply with the regulationsimposed by the Central Bank andImmigration authorities.

Foreign workers are divided into twoclasses, “executive” staff and “non-executive” staff. The term “executive”includes expatriates registered asdirectors or partners with the Registrar ofCompanies and Official Receiver. It alsoincludes general managers ofsubsidiaries and branches of publiclyquoted overseas companies, as well asdepartmental managers of internationalbusiness companies operating fromCyprus for at least two years inaccordance with the conditions andrequirements of the Central Bank ofCyprus. International businesscompanies are allowed to employ amaximum of three executives, unlessthey persuade the Central Bank that agreater number is justified. An expatriate

who wishes to be employed in anexecutive position must:

(a) Be at least 24 years old;

(b) Have the necessary qualifications;and

(c) Receive appropriate remuneration(the minimum acceptable annualsalary for newly appointedexecutives is €41,000). This amountmay be adjusted annually by theauthorities according to fluctuationsin the salaries’ index.

Expatriates employed in professional,administrative, managerial, technical, orclerical positions are classified as “non-executive” personnel. “Non-executive”staff must be recruited from withinCyprus. If all formal procedures arefollowed, such as announcing a positionin the local press, and no suitable Cypriotcandidates can be found, internationalbusiness companies are allowed toemploy an expatriate for the position.

The Migration Officer at the Ministry ofInterior is the responsible authority for theinitial grant and subsequent renewals ofTemporary Residence and Employment(TRE) permits granted to all expatriatesemployed by international businesscompanies in Cyprus. Any TRE permitcan be revoked by the Minister of theInterior if he deems it to be in the publicinterest; a TRE permit will be consideredautomatically cancelled if the conditionsunder which it was granted cease to exist.

The application for an executive’s FirstTemporary Residence Permit is made tothe Civil Registry and MigrationDepartment. The Civil Registry andMigration which issues the applicantexecutive his first Temporary ResidencePermit within one month, unless his casewarrants further consideration.

For the renewal of the TemporaryResidence and Work Permit of aliens, it isnecessary to submit an application onForm M.61 through the District Aliens and

A Guide to Employment in the European UnionCyprus

40

Immigration Branch of the Police and topay a fee of €34.17.

International business companiesshould inform the Central Bank, theMigration Officer, and the Department ofCustoms as soon as any of theirexpatriate staff resign or are no longer intheir employment.

4. DiscriminationAll forms of discrimination are prohibited byArticle 28 of the Constitution includingdiscrimination on the grounds of sexualorientation, age and religion. In addition toArticle 28, a number of other laws havebeen implemented aimed at the eliminationof sex discrimination in respect of equal payand equal treatment. The source of theselaws are various international conventions,most notably the ILO Conventions, whichthe Republic of Cyprus has ratified. Inaddition, case law has offered someassistance towards the development of thelaw, albeit of limited impact.

The Cyprus Government has alsoaccepted Article 19 of the RevisedEuropean Social Charter, which provides,inter alia, for no less favourable treatmentof migrant workers than that of nationals.

A number of additional measures aimedat removing discrimination have alsobeen implemented:

(a) Discrimination in social insurancelegislation has been abolishedalmost completely.

(b) Maternity protection legislation hasbeen improved.

(c) The health and safety of pregnantwomen and nursing mothers in thework place are better protected.

(d) A pioneering scheme for parentalleave and for leave for reasons offorce majeure has been introduced.

(e) Equal treatment in employmentpensions has been secured.

(f) Equality in pay, not only for the sameor similar work, but also for work ofequal value has been secured.

If the employer breaches the obligation ofequal pay for equal work, he is guilty of acriminal offence and he could face a fine.Legislation also suspends the effect ofany contractual terms discriminatingagainst women.

Dismissal of and/or discrimination againstan employee who has complained, orgiven evidence of a breach of the equalpay legislation by the employer is unlawful.

Although the ILO Convention ondiscrimination in employment andoccupation has been incorporated intoCypriot legislation no measures have, todate, been taken to implement theseprovisions. Again due to lack ofimplementing legislation, there is, inessence, no protection and,consequently, no remedy in relation topre-employment discrimination matters.

Equal Pay claims may be brought beforethe Industrial Disputes Court. Ifsuccessful, the Court may make adeclaratory juCould I please book adining room on the 30th floor? Thankyoudgment, give directions for thetermination of the discrimination or awardcompensation to cover damages andorder the employer to make up theshortfall from the date that thediscriminatory practice arose.

The Equal Pay and Pregnancy Laws docreate criminal offences. This is howeverof no value to the victim in financialterms. It appears that the criminalsanctions were introduced to show thewillingness of the state to enforce the lawbut, unfortunately, no prosecutions havebeen initiated.


5.1 Freedom of ContractParties are free to contract on whateverterms they may choose. There are,however, restrictions on the successiveuse of fixed-term contracts.

5.2 FormIn order to have legal effect, contractsmust be in writing. The contract mustinclude amongst other things details ofcommencement date, duration (if it is fora fixed term), the wage payable, place ofwork, and holiday entitlement.

5.3 Trial PeriodsIt is common to include an initial trialperiod in a contract and the typicalduration is six months.


A contract may contain terms preventingcompetition and/or the disclosure ofconfidential information after thetermination of employment but suchterms are not commonly used. Suchclauses will only be upheld if they areconsidered reasonable.

5.5 Intellectual PropertyIntellectual property created during thecourse of employment belongs to theemployer without compensation beingpayable to the employee.

6. Pay and Benefits6.1 Basic PayThe Government has the power toestablish minimum wages by ministerialOrders. To date, the Orders issued coverthe minimum wage of office clerks andshop assistants, which presently is€855 per month on engagement rising to€909 after six months’ employment.

Obligations to increase wages exist if aparty to the contract is a trade union or amember of a trade union is a party to thecontract and wages will be reviewed atintervals in accordance with the provisionof applicable collective agreements.

Wages are subject to increase twice ayear by means of the review of theautomatic cost-of-living adjustment.

6.2 PensionsPrivate pension arrangements areprovided by employers.



41A Guide to Employment in the European UnionCyprus

Workers who reach the pensionable ageof 65 are entitled to a pension from theSocial Insurance Fund based on theircontributions, regardless of whether theychoose to retire or continue working. Incertain circumstances, the pension can betaken at the age of 63. Many enterprisesprovide additional retirement benefitseither by making a lump sum payment orby paying a pension of their own. Thepension scheme used may be based oncontributions from both the employer andthe employee, or from the employer only.

6.3 Incentive SchemesShare scheme arrangements areadministered by employers in Cyprus.

6.4 Fringe BenefitsFringe benefits such as cars, houses,phones, etc are made available byemployers to employees inmanagerial positions.

6.5 DeductionsEmployers are obliged to deduct incometax and social security contributions fromemployees’ salaries.

7. Social Security7.1 CoverageIn October 1980, a new social Insurancescheme (the Scheme) was put intooperation. With some minor exceptions,the Scheme covers all employed andself-employed persons in the island. Non-employed persons may, undercertain conditions, join the Scheme on avoluntary basis. The Scheme providesbenefits by way of maternity allowance,sickness benefit, unemployment benefit,old-age pension, invalidity pension,widow’s pension, orphan’s benefit,missing person’s allowance, marriagegrant, maternity grant, funeral grant, andbenefits for employment accidents andoccupational diseases, i.e. injury benefit,disablement benefit, and death benefit.

7.2 ContributionsThe contribution to the Scheme in thecase of employees is 17.9% of their

insurable earnings, of which 6.8% is paidby the employee himself, 6.8% by theemployer, and 4.3% from the GeneralRevenues of the Republic of Cyprus.

The contribution in respect of self-employed persons is 16.9% of theirincome of which 12.6% is paid bythemselves, and 4.3% from the GeneralRevenues of the Republic of Cyprus.

In respect of voluntary contributors, thecontribution is 14.8% of their insurableincome, or 17.9% for a person residing inCyprus but working abroad for a Cypriotemployer, of which 11% and 13.6%respectively is paid by the voluntarycontributor, and the balance from theGeneral Revenues of the Republic ofCyprus (from 1 April 2009).

8. Hours of WorkMost offices observe a 40-hour weekfrom Monday to Friday. Office hours arefrom 8 am to 5:30 pm, with a 90-minutelunch break during the winter, and 8 amto 7 pm, with a three-hour break duringthe summer. Government offices operatefrom 7:30 am to 2:30 pm from Mondayto Friday. They are also open onWednesday afternoons from 3 pm to6 pm. There is a maximum working weekof 48 hours including overtime.

The working time of young people andchildren is regulated by legislation.Persons of 15 to 18 years of age are notallowed to work more than 38 hours aweek and must not work between23.00pm and 7.00am.

9. Holidays and Time Off9.1 HolidaysUnder the Annual Holidays with Pay Law,the provision of annual holidays for allpersons employed under a contract ofservice is mandatory. Presently, theminimum period of annual leave providedunder the legislation is four weeks,20 working days for employees working afive-day week, and 24 working days for

employees working a six-day week.Payments in lieu of any unusedentitlement may be made or alternativelycan be carried forward for a maximum oftwo years (employers contribute to theCentral Holiday Fund at the rate ofbetween 8% and 16% of theiremployees’ wages (up to a wages ceiling)per month depending on the holidayentitlement). To be entitled to an annualholiday payment from the Fund,employees must have worked at least13 weeks during the previous leave year.

Employers whose arrangementsregarding holidays with pay are morefavourable than the provisions of the Lawmay be exempted from contributing tothe Fund. In such cases, annual leave isgranted directly by the employers to theiremployees. Where an employed personis, by virtue of any Law, collectiveagreement, custom or otherwise, entitledto a longer period of holiday than threeweeks, this right is guaranteed by theAnnual Holidays with Pay legislation.

With respect to public holidays, there areno statutory provisions to indicate whichdays in the year are public holidays,except for Sunday. The public holidaysgiven in the private sector are governedby collective agreements betweenemployers and trade unions, and theyusually follow the public holidays given inthe public sector. In cases where theemployer is not bound by a collectiveagreement, it is at his discretion to offerany of the public holidays given in thepublic sector.

9.2 Family LeavePregnant workers have the right to18 weeks’ paid maternity leave. 11 of the18 weeks must be taken during theperiod beginning at the second weekbefore the week in which birth isexpected. The 18-week period may, incertain circumstances, be extended incases where there is a delay in delivery ofthe child. Women who undertake thecare of a child under 12 years old for

42


adoption are entitled to 16 weeks’maternity leave. Maternity pay is paidaccording to the Social Security Laws.

Female employees also have the right toone hour off (paid) per working day for aperiod of nine months after delivery forchild care and breast-feeding. There is noright to paternity. Every employed parent(father and mother) who has worked forone employer for at least six months isentitled to parental leave totalling18 weeks subsequent to a birth oradoption, in order to attend to the careand upbringing of the child. This leave isunpaid but the employee is credited withinsurable earnings while taking it. Parentalleave can be taken between the end ofmaternity leave and the child’s sixthbirthday for a minimum of one week anda maximum of four weeks in any year.Parents are also entitled to up to sevendays’ unpaid leave a year for urgentfamily reasons.

9.3 IllnessIf an employee’s doctor recommendsleave on ill-health grounds then theemployer may require the employee to beseen by its doctor if it is not willing togrant leave. In cases where leave ofabsence on ill-health grounds is granted,70% of an employee’s wage is paid bythe Ministry of Labour and 30% by theemployer. The period over which paymentwill continue to be made will depend onthe length of the employee’s employmentand the reason why leave is granted.

10. Health and Safety10.1 AccidentsThe workers’ right to safe and healthyworking conditions is safeguarded byappropriate legislation. The corelegislation is the Safety and Health atWork Law, which is in line with theprovisions of ILO Convention 155 of1981 on Occupational Safety andHealth, as well as with the principles andmost of the provisions of the EUFramework Directive.

The Law covers all branches of economicactivity and imposes duties on employers,self-employed persons, and employees,as well as on designers, manufacturers,importers, and suppliers of articles andsubstances for use at work. Enforcementof the legislation is imposed throughinspections by qualified inspectors whomake regular visits to workplaces toensure continued compliance.

Additional health and safety legislation isgradually being implemented; thefollowing have all recently come intoeffect: The Safety and Health at Work(Protection from Noise) Regulations of2006 (P.I. 317/2006), The Safety andHealth at Work (Protection fromAsbestos) Regulations of 2006 (P.I.316/2006) and The Asbestos (Safety andHealth of Persons at Work) (Revoked)Law of 2006, Law 111(I)/2006.

10.2 Health and Safety ConsultationThe Cypriot government promotes theactive involvement of both employers andworkers in securing a safe and healthyworking environment by introducing andimplementing legislation on theestablishment and operation of SafetyCommittees in the place of work. Withrespect to health and safety there is anobligation to consult with employees.Employers are also required to obtainemployer’s liability insurance.

11. Industrial Relations11.1 Trade UnionsThe business community of Cyprus isrepresented by the employers andIndustrialist Federation (OEB), aPancyprian independent organizationcomprising 40 professional associationsand 400 major individual enterprises in themanufacturing, services, construction, andagricultural sectors of the economy. TheOEB is the acknowledged spokesman forthe business community and is consultedas such by the government.

The principal unions in Cyprus are thePancyprian Federation of Labour (PEO)

and the Cyprus Workers’ Confederation(SEK). However there are numerous othertrade unions and occupationalorganisations such as PASYDY, POED,OELMEK, OLTEK, ETYK, POAS, andDEOK. Conflict between trade unions inCyprus is rare and joint action among theleadership of the PEO and the SEK andthe other occupational organisationsis common.

11.2 Collective AgreementsThere are collective agreements betweenemployers and trade unions in manyindustry sectors and they are the mainmeans by which terms and conditions ofemployment are determined. Collectiveagreements usually have a two or threeyear duration.

11.3 Trade DisputesArticle 27 of the Constitution safeguardsthe right to strike of every employeesubject to some exceptions in relation tothe army and police.

The Trade Unions Law provides that noone can be sued for conspiracy if he wasacting with another in the furtherance of atrade dispute. In addition inducement tobreach a contract in the furtherance of atrade dispute is not actionable.

Strikes in Cyprus are generally rare asindustrial relations partners almost alwaysfind a way to agree on all issues relatingto employment. The settlement of labourdisputes is governed by the provisions ofthe Industrial Relations Code.


Employers are under a duty to consultwith their employees, if their employeesbelong to a Trade Union.


12.1 GeneralThe provisions of the Acquired RightsDirective have been implemented inCyprus. If the employer changes due to



43

the legal transfer of a business, thecontractual and other rights andobligations arising from the employmentrelationship existing on the date of thetransfer, automatically transfer to thetransferee subject to a number ofexceptions in relation to pensions. Thetransferee is obliged to continue toobserve the agreed terms and conditionsof any applicable collective agreementuntil the date of termination or expiry.

If an employee is dismissed in connectionwith a transfer other than for financial,technical or organisational reasons, thedismissal is illegal and the employee isentitled to damages, which are calculatedaccording to length of service.


In the context of acquisitions and mergersthere is an obligation to supply informationand/or consult or negotiate with employeerepresentatives, employees, workscouncils and trade unions.

The obligation to inform and consult istriggered when the vital interests (e.g.wages, social insurance and benefits) ofemployees of the trade unions areaffected. The employees, or workers’representatives must be informed of thedate, reasons for, and legal, financial andsocial implications of the transfer and ofany anticipated measures. This informationmust be provided in good time, and in anyevent before the employees are directlyaffected by the transfer.

A sale and purchase agreement cannotbe signed before the information andconsultation is completed if the vitalinterests of trade union members willbe affected.

There is no statutory minimum periodover which the information/consultationprocess must take place; it is simply aquestion of fact and degree according tothe circumstances of a given merger.

12.3 Notification of AuthoritiesThere is a governmental body thatregulates mergers and acquisitions. Thismust be consulted in the context of amerger or acquisition when the vitalinterests of trade union members aregoing to be affected.

The minimum period over which thisconsultation process can be completedwill depend on the facts of each case.

Failure to comply with theseconsultation obligations may lead to theimposition of large fines of up to €1,700and possible injunctions.

12.4 LiabilitiesFailure to comply with the employeeinformation and consultation obligationsmay lead to the imposition of fines notexceeding €850 and compensation mayalso be payable to the employees. Thelegislation does not specify whether thefine is multiplied by the number ofemployees involved and there is no caselaw on this point. The compensationpayable to employees is calculated byreference to length and terms of serviceand field of work.

In addition the courts may grant aninjunction preventing the transactionfrom completing until theinformation/consultation obligationsare satisfied.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must becareful to comply with the statutoryreasons for dismissal.

13.2 Notice Except where summary dismissal isallowed, employers are required by law togive a minimum notice period of:

(a) 1 week’s notice for 6 months to1 year of service;

(b) 2 weeks’ notice for 1 to 2 years ofservice;

(c) 4 weeks’ notice for 2 to 3 years ofservice;

(d) 5 weeks’ notice for 3 to 4 years ofservice;

(e) 6 weeks’ notice for 4 to 5 years ofservice;

(f) 7 weeks’ notice for 5 to 6 years ofservice; and

(g) 8 weeks’ notice for more than6 years of service.

An employer may terminate summarily inthe circumstances listed in section 13.3below. In addition, an employee may besummarily dismissed in othercircumstances, e.g. where he/she has liedto the employer or has committed an actof gross misconduct or a criminal offence.

Notice provisions apply to redundancydismissals as well. Employees are paidduring the notice period but the employercan require the employee to acceptpayment in lieu of notice. An employeewho receives pay in lieu of notice andfinds another job keeps the pay but, if heleaves for another job while serving out hisnotice with the old employer, he loses therest of the pay for the period of notice.

An employee who has been continuouslyemployed for 26 weeks or more isrequired to give to his employer aminimum notice of one week. However,on notice from his employer, an employeewho wishes to seek other employmentmay have up to five hours a week offduring working hours without loss of pay.

13.3 Reasons for DismissalThe basic rule is that a dismissal is unfairif the employer terminates theemployment for any reason other thanthe exceptions provided by statute.

Before any employee can qualify for unfairdismissal compensation, he must be lessthan 65 years of age and must have been



44


continuously employed by the employerfor not less than 26 weeks, unless thereis a written agreement that may extendthe qualifying period of continuousemployment up to 104 weeks.

In cases where a dismissal is declaredunfair, compensation is payable to theemployee. The minimum amount payableis two weeks’ pay up to a maximum oftwo years’ wages. Factors to beconsidered in the award are wages,length of service, loss of careerprospects, circumstances of thedismissal, and the employee’s age. Themaximum period of continuousemployment with one employer that canbe taken into account is 25 years (75.5 weeks’ compensation). Moreover,the amount of compensation is decidedby the Industrial Disputes Court after anapplication by the employee.

Termination will be considered fair and willnot give rise to compensation in thefollowing circumstances:

(a) The employee fails to carry outhis work in a reasonablyefficient manner;

(b) The employee is redundant;

(c) The termination is due to an act ofGod or force majeure;

(d) The contract is for a fixed term andhas expired;

(e) The employee renders himself liableto dismissal without notice; or

(f) The contract of the employee issuch that it is clear that theemployer–employee relationshipcannot reasonably be expectedto continue.

13.4 Special ProtectionPregnant employees and maternityleavers may not be dismissed unlessguilty of a serious offence or conduct thatjustifies termination.

Trade union officials are also protectedfrom dismissal without cause.


As stated above, redundancy is a validreason for dismissal. Redundancy isdefined by statute.

Employees are entitled to receive astatutory redundancy payment if theyhave been employed for a period of sixmonths or more. Redundancy paymentsare not made by the employer but by theGovernment Redundancy Fund into whichemployers pay monthly contributions.

The Protection of Employees’ Rights inthe Event of Insolvency of the EmployerLaw provides for employees to be paidwages and annual leave pay due fromtheir employer from a special fund if theemployer becomes insolvent.

There are prescribed information andconsultation procedures in the event ofcollective redundancies, i.e. where atleast 10 employees in an undertakingemploying between 21 and100 employees or 10% of employees inan undertaking of between 100 and300 employees are dismissed within30 days.

An employer who proposes to makecollective redundancies must consult therepresentatives of the employees in atimely manner with the aim of getting anagreement. The legislation does notstipulate a specific timetable. The

representatives must be notified in writingof the reasons for the dismissals, thecriteria to be used, the period in whichthey will take place, the number andcategories of employees who are to losetheir jobs and the method of calculatingany payment relating to dismissals. Inaddition, written notice of the collectivedismissals must be given to the Ministryof Labour and Social Insurance and acopy of this notice provided to theemployee representatives.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation by employers is regulated bythe Data Protection Law whicheffectively implements the EU DataProtection Directive.

14.2 Employee Access to DataEmployees do have the right to requestaccess to their data that is being held bytheir employer.

14.3 MonitoringEmployers can monitor their employees’email, internet and telephone usage tothe extent that such usage is not workrelated if monitoring is reasonable in allthe circumstances.

14.4 Transmission of Data to ThirdParties

The Data Protection Act does not permitemployers to provide their employees’data to third parties. However, if suchdata is required by state authorities asregards the public interest and nationalsecurity then such provision is notcontrary to the law provided that theprinciple of proportionality is observed.

Contributed by Xenios L. Xenopoulos LLC


45A Guide to Employment in the European UnionThe Czech Republic

The Czech Republic1. IntroductionThe institutional framework for and thefunctioning of the labour market in theCzech Republic are regulated by theEmployment Act (N° 435/2004 Coll.),which covers, for example, theprohibition of discrimination, theoperation of the state-run Labour Offices(i.e. job centres) and private labouragencies, the qualification criteria forunemployment benefits, employment offoreigners and special provisions ofemployment relating to disabled persons.

The principal source of law regulatingthe employment relationship is theLabour Code (N° 262/2006 Coll.), whichcovers all areas of the individualemployment relationship between anemployer and an employee, includingfor example equal treatment andprohibition of discrimination, access toinformation, agency employment,working conditions, health and safety atwork, liability for damages anddismissal. The Labour Code onlycontains a general prohibition ofdiscrimination. The Anti-DiscriminationAct (N° 198/2009 Coll.) contains morespecific provisions on equal treatmentand the prohibition of discrimination. Inaddition, more specific provisionsregarding medical checks of employeesare to be found in the Act on SpecificMedical Services (N° 373/2011 Coll.). Ingeneral, the Labour Code allows forcontractual freedom of parties within thelimits set by the regulatory framework; itis not therefore possible to contract outof statutory employee protection.

Although the Labour Code contains basicprovisions regarding trade unions,collective labour law rules (in particularthe collective bargaining procedure) arecontained in the Collective Bargaining Act(N° 2/1991 Coll.). Individual employeeentitlements arising from collectiveagreements are legally enforceable in thesame manner as other rights arising froman individual employment contract.

The state carries out its supervisoryfunction through Work Inspectorates andLabour Offices that control and monitorcompliance with the obligations arisingfrom a great variety of labour lawregulations regarding, amongst otherthings, wages, salaries, hours of work,work safety, employment of minors andfemale workers.

Disputes between an employer andemployee are settled in ordinary DistrictCourts where there are specialisedLabour Law senates of judges andlayman jurors.

2. Categories of Employee2.1 GeneralCzech employment legislation appliesequally to employees at every level, i.e.employees, agency workers andcontract staff, with some minordistinctions, which apply to so called toplevel managers (e.g. certain rights andobligations are determined differently forthe top level manager, the employer hasadditional obligations when the top levelmanager was removed or resigned fromthe position and his/her employment isto be terminated).

Under the Labour Code, a top levelmanager is an employee who fulfils bothof the following conditions: (i) theemployee is considered to be a manager(i.e. an employee who is entrusted withthe management of individuals, and isauthorised to determine and assign workto subordinates as well as to organise,manage and supervise work and givebinding instructions) and (ii) the employeeis in a top position within the employer’soperations, being directly subordinate to:(a) the employer’s statutory body (theboard of directors of a joint stockcompany or executive director of a limitedliability company); or (b) another managerwho is directly subordinate to theemployer’s statutory body, but only ifsuch employee has another subordinatemanager (rather than “ordinaryemployee”) below him - i.e. if there are

(at least) three levels of managers underthe statutory body, only the top two areconsidered to be top level managers.

2.2 DirectorsThe position of directors of private andpublic limited companies, who may ormay not also be employees of thecompany, is further regulated bycorporate law.

2.3 OtherPart-time employees and employees onfixed-term contracts have a statutoryright, which, broadly speaking, entitlesthose employees to be treated no lessfavourably in respect of their terms andconditions of employment than acomparable full-time indefinite employee.

The Labour Code stipulates that outside atraditional employment relationship, anemployer and a worker can conclude twoother types of agreement relating to workthat are of a similar nature to theemployment contract; an agreement forthe performance of a work assignment, oran agreement on working activity. Theseagreements must be concluded in writing.

An employer and a worker may concludean agreement for the performance of awork assignment if the expected durationof the assigned project is no longer than300 hours in a calendar year.

An employer and a worker can concludean agreement on working activityregarding work that does not exceed onaverage half of the prescribed weeklyworking hours (i.e. 20 hours per week).

3. Hiring3.1 RecruitmentEmployers recruit employees through avariety of sources, including via theInternet and by advertising innewspapers and/or journals. Recruitmentagencies are also commonly used.State-run Labour Offices function interalia as “Job Centres” and provide a freerecruitment service. Employers are

A Guide to Employment in the European UnionThe Czech Republic

46


obliged to notify the Labour Office of allvacant positions (the Labour Officekeeps a database of all vacant positionsand of all job applicants) for which theywish to employ non-EEA nationals.

3.2 Work PermitsEmployers may hire non-EEA nationalsonly if there are no EEA national jobapplicants suitable who are available atthe relevant time. Prior to such hiring theemployers are obliged to notify theLabour Office about the vacant positionsand to provide additional information.Work permits are required for employeeswho are non-EEA nationals, and may begranted for up to a maximum of twoyears with the possibility of prolongingthem after this period. Swiss nationals aretreated in the same way as EEAnationals. The application shall be madeand the Labour Office shall issue thework permit before the employee arrivesin the Czech Republic (the work permit isalso a qualification for a residencepermit). It is an administrative offence foran employer to employ a non-EEAnational without an appropriate workpermit in the Czech Republic or toemploy such employees in contraventionof the terms of the issued work permit. Inthe event of breach, the Labour Officemay impose a fine from CZK 250,000(around €10,000) up to CZK 10,000,000(around €400,000).

4. DiscriminationAny direct or indirect discriminationperpetrated in the workplace on certainselected grounds (primarily gender, sexualorientation, religion, marital status, racialor ethnic origin, age, social origin orpolitical association) is unlawful. Suchdiscrimination in connection withrecruitment is prohibited by theEmployment Act and by the Labour Codein connection with treatment during thecourse of employment and with respectto termination of employment. TheEmployment Act and the Labour Codealso guarantee equal treatment to allemployees. The provisions of the Labour

Code only contain a general prohibition ofdiscrimination. More specific non-discrimination and equal treatmentprovisions are contained in the Anti-Discrimination Act.


5.1 Freedom of ContractThe basic principle that parties are free tocontract on whatever terms they chooseis modified by Czech Labour Law, whichallows for contractual freedom of partiesonly within the limits set by the regulatoryframework. It is therefore not possible tocontract out of statutory employeeprotection or the mandatory provisions ofthe Labour Code.

Generally, employers are free to choosetheir employees. However, employmentof persons under the age of 15 yearsand/or of those persons who have notcompleted their compulsory education isprohibited except for various artistic,cultural, advertising and sports activitiesas specified in the Employment Act.

Contracts may be for a fixed or anindefinite period of time (i.e. terminable bynotice), as the parties think mostappropriate. For the purposes of statutoryprotection, there is little distinctionbetween the position of employees onfixed-term and indefinite contracts, asemployers may not treat employees onfixed-term contracts less favourably thansimilar permanent employees. However,the use of successive fixed-term contractsis restricted. A fixed-term contractbetween the same parties may beconcluded (or extended) for a maximumperiod of three years. Fixed-termcontracts may be renewed/reissued twiceonly, therefore employment based onfixed-term contracts may not exceed nineyears in total (3 x 3 years). If, contrary tothe law, an employee has been engagedunder a fixed-term contract for a periodexceeding three years (or six or nine yearsin case of renewal/re-engagement of thefixed-term contract or employment

commenced within three years of aprevious fixed-term contract), theemployee may make a written request tothe employer that the employmentcontinue for an indefinite period.

There are exceptions to the abovelimitations on the use of fixed-termcontracts in certain cases, i.e. where:

(a) the use of a fixed-term contract isrequired by specific legislation (e.g.the Employment Act in respect ofemployment of non-EEA citizens);

(b) employees working under anagency employment; or

(c) the employee’s regular place ofwork is outside the Czech Republic.

Either the employer or the employee mayseek a court decision regarding thefulfilment of the above statutoryconditions for a fixed-term contract withintwo months of the termination date of theoriginal fixed-term contract.

5.2 FormAn employer is obliged to conclude anemployment contract in writing. However,failure to reduce the contract to writingdoes not invalidate the employment.

An employment contract must specify thetype of work, the place of work and thedate of commencement of theemployment. If an employment contractdoes not specifically stipulate particularsof the employee’s rights and dutiesarising out of the employment (e.g. theholiday entitlement, the length oftermination period, the level of wages andthe mode of payment, the schedule ofweekly working hours, etc) an employer isobliged to provide the employee with awritten document containing such detailswithin one month of commencement ofthe employment.

5.3 Trial PeriodsAn employer and employee may agree ona trial (probationary) period of up to threemonths, or six months if the employee is


47A Guide to Employment in the European UnionThe Czech Republic

going to work as a manager. In any casethe trial period may not exceed half of thelength of the employment. The agreementmust be in writing before thecommencement of the employment (or atthe latest on the same day) and onceagreed upon, the trial period cannot besubsequently extended (except for dayswhen an employee did not perform thework due to whole day impediments orbecause s/he was on holiday). During thetrial period, the employment can beterminated immediately, by either theemployer or the employee, for any reasonor without stating the reason.


Although there are generally no applicablestatutory rules governing confidentialinformation in employment, there areparticular statutory rules governingtreatment of confidential information thatapply to specified categories ofemployees. In general, employees ofstate administrative authorities and localauthorities are obliged to keepconfidential all facts and informationwhich they learn whilst carrying out theirduties and which, in the employer’sinterest, should not be communicated toanother person. All other employees arebound by a general duty of good faithand a duty not to disclose the employer’sconfidential information. The extent ofthese general duties is not in all caseswell defined and a prudent employer may,depending on the nature of the business,consider including an expressconfidentiality provision in the contract ofemployment. Express confidentialityprovisions are permissible and often usedin the contracts of employment.

An employer is obliged to issue allemployees whose employment hasterminated a confirmation of the formeremployment and a reference (if requestedby an employee). Without the employee’sconsent, an employer may notcommunicate any other informationconcerning the employee.

An employer and an employee mayconclude a non-competition agreementwhereby the employee may not, for acertain period not exceeding one yearafter the termination of the employment,engage in gainful activity identical to theemployer’s scope of business, or anyother activity which would compete withthe business activities of the currentemployer. The non-compete undertakingmay only be assumed by the employee ifsuch an obligation is justifiably requiredfrom the employee given the nature of theknowledge and information the employeewill have gained during the employment.The non-compete clause may beincluded in the employment contract or itmay be entered into by separateagreement in written form. The employermust pay the former employeecompensation of at least half of his/heraverage monthly earnings for each monthof the period of the restrictiveundertaking. The agreement may alsoinclude a penalty that the formeremployee must pay to the employer inthe event that he breaches his/herobligation not to compete. Upon paymentof the penalty the employee’s duty not tocompete terminates. The employer mayterminate a non-competition agreementonly during the course of theemployment. Provisions concerned withpreventing competition by a formeremployee are likely not to be enforced bythe courts if the courts consider that itwould be unjustified and in restraint oftrade having regard, amongst otherthings, to the position of the formeremployee and the nature of theinformation/knowledge acquired duringthe course of employment.

5.5 Intellectual PropertyBroadly speaking, unless theemployment contract stipulatesotherwise, if intellectual property iscreated by an employee during thecourse of employment, the intellectualproperty rights belong to the employer.Additional compensation will only bepayable to the employee if the

employee’s ordinary salary isdisproportionately small in comparison tothe employer’s profits derived from theintellectual property created. However,this rule applies only to a limited extent inrelation to computer programs,databases and cartographic works.

6. Pay and Benefits6.1 Basic PayA wage may not be lower than thenational minimum wage, which isdetermined by a Government Decree andis currently CZK 8,000 per month or CZK48.10 per hour.

Lower-grade workers in the CzechRepublic are generally paid a monthlywage, often determined by reference toan hourly rate, although in someindustries it is customary for workers tobe paid “piece-rates” according to theamount of work done. Overtime at apremium rate must be paid in respect ofadditional hours worked and workperformed on bank holidays and/orweekends. Senior employees (managers)are normally paid monthly in arrears.

It is not common for pay to be index-linkedand, subject to the national minimumwage, there are no legal obligations onemployers to increase wages.

6.2 PensionsIn the Czech Republic employees musttake part in the mandatory public socialsecurity system including a publicretirement and old-age pension scheme.However, anyone may choose to takepart in a private pension plan in additionto the mandatory scheme by enteringinto a contractual relationship with any ofthe licensed private pension funds. Theemployee, however, usually receives statecontributions to his insurance premiumspaid to a private pension plan.

From 2013 a capital pension plan systemis being introduced in the CzechRepublic. The capital pension plansystem represents a hybrid between a

48


mandatory public security system and aprivate pension plan system, as it allowsfor part of the mandatory contribution tothe social security system to betransferred to the private pension fundbut participation in the capital pensionplan is voluntary.

Although private pension plans may beagreed as employer-sponsoredoccupational pension schemes, they areabsolutely independent of the particularemployment of the person taking part insuch pension plans. Therefore, anemployer bears no responsibility towardsits employee or her/his contractual privatepension funds, except for paying theagreed contributions (if applicable). Theemployer’s contributions made under theprivate pension plan are classified as tax-deductible costs.

6.3 Incentive SchemesShare schemes are not specificallyprovided for under Czech law and areimplemented mostly in foreign ownedcompanies as a part of their globalincentive schemes.

6.4 Fringe BenefitsMore senior employees’ employmentcontracts may include fringe benefits;typically free use of a mobile telephone, acomputer and a car for the duration ofthe employment. As benefits are usuallycontractual, the agreement shouldresolve the mode and timing of return ifthe employer proposes to withdrawthe benefit.

6.5 DeductionsAlthough generally employers areprohibited from making deductions frompay, they are obliged to deduct incometax and employees’ social securitycontributions (which are paid monthly bythe employer both for itself and on behalfof the employee). They are also obligedto deduct employees’ contributions to themandatory health insurance system.Otherwise, the employer may be obligedto make deductions pursuant to a validcourt resolution on deductions from

employees’ salaries. The list of thesedeductions and their order is given in theCzech Code of Civil Proceedings Rules(N° 99/1963 Coll.).

7. Social Security7.1 CoverageThe single state-administered socialsecurity system provides benefits by wayof pensions, unemployment benefits,family-based benefits and support forindividuals with a low income. Employersshould be aware of the administrativeburden (i.e. paperwork) connected withthe contributions to some of these statebenefits (for example, statutory sick pay).

The contributions for these benefits areincluded in the social securitycontributions of the employer and theemployee (see 7.2 below). The employer,therefore, does not have to pay thesebenefits as they are provided by therelevant state authority. Note howeverthat during the first 14 calendar days ofthe sick leave (and in 2013 during the first21 calendar days of the sick leave),except for the first three days of the sickleave, sick pay must be paid to theemployee by the employer.

Mandatory health insurance is provided byspecially licensed health insurers, themajor one being the state owned VZP(Všeobecná zdravotní pojiš�ovna). It is theemployer’s obligation to deduct anemployee’s compulsory contribution fromhis/her gross salary and send it to thehealth insurer of that employee’s choice.However, anyone may choose to take part

in a private health insurance plan inaddition to the mandatory scheme byentering into a contractual relationship withany of the licensed health insurers and payadditional contributions for extra services.

7.2 ContributionsEmployers must deduct from theiremployees’ gross salaries social securityand health insurance contributionspayable by employees and make anemployer’s contributions in respect ofeach employee. Employers andemployees must contribute the followingpercentages of the employee’s income tosocial security and health insurance:

8. Hours of WorkHours of work must not exceed 40 hoursper week (employees under the age of 18shall not work more than eight hours perday). Specific limitations are imposed bythe Labour Code on the hours workedeach day and each week by personsworking underground in miningprofessions and persons in the three-shiftand non-stop working regime, whoseworking hours must not exceed37.5 hours per week, and in the two-shiftworking regime, whose working hoursmust not exceed 38.75 hours per week.Further reduction of hours of workwithout an attendant reduction in wagesmay be provided for in a collectiveagreement and/or an internal instruction.

The employer decides on the massscheduling of weekly hours of work andstarting times for work after discussion

Type of Insurance Paid by Employer (%)

Paid by Employee (%)

Total (%)

Social Security 25.0 6.5 (or 8.51) 31.5 (or 33.52)

Health Insurance 9.0 4.5 13.5

Total 34.0 11.0 45.0 (or 473)

1 In case of participation in the capital pension plan system.2 In case of participation in the capital pension plan system.3 In case of participation in the capital pension plan system.



49

with the trade unions. Hours of work aregenerally scheduled into a five-dayworking week, however flexible workinghours may be introduced after discussionswith the trade union, if applicable.

An employee is entitled to a break (forfood and rest) of at least 30 minutes forevery six hours of continuous work (andfor every 4.5 hours of continuous work inthe case of employees under the age of18). Breaks for food and rest are notcounted as part of the hours of work.

The employer is obliged to schedulehours of work so that employeeswill have:

(a) an uninterrupted period of daily restof at least 12 consecutive hoursbetween the end of one shift andthe beginning of the following shiftwithin a 24-hour period; and

(b) an uninterrupted period of at least35 consecutive hours (or of at least48 hours in the case of employeesunder the age of 18) every week.

The Labour Code contains exceptionswhere the uninterrupted period of restmay be reduced below the hours setout above.

Generally, overtime work prescribed bythe employer must not exceed eighthours per week and 150 hours percalendar year. Overtime work exceedingthese limits may be performed onlyexceptionally and with the employee’sconsent. However, the average numberof overtime working hours must not bemore than eight hours per week during areference period of 26 weeks or 52weeks if agreed in a collective agreement.It is possible to agree with managers thattheir salary covers up to 416 hoursovertime per year and/or with the“regular” employees that their salarycovers up to 150 hours overtime percalendar year (managers are employeeswho are entrusted with the managementof individuals, and are authorised todetermine and assign work to

subordinates as well as to organise,manage and supervise work and givebinding instructions).

Night workers (i.e. where hours of workare worked between 10pm and 6am)are workers who work during the nighton average, not less than three hourswithin 24 consecutive hours at leastonce a week.

An employer is obliged to keep recordsof hours of work, overtime work,standby duties for operatingemergencies and work at night, inrespect of each employee.

The Labour Code provides for severaltypes of flexible employmentarrangements: the uneven spread ofworking hours, flexible working hours,reduced working hours, and an accountof working hours.

If the nature of work requires an unevencollective schedule in individual weeks,then the employer may, after a discussionwith the trade unions, decide on anuneven spread of working hoursthroughout a period of 26 weeks or52 weeks, the latter only if agreed in thecollective agreement. In this period, theaverage weekly working hours may notexceed the standard weekly limit ofworking hours (i.e. 40) and the length ofone shift may not be more than 12 hours.

Flexible hours may be agreed to meet theinterests of employees’ personal needs,after discussion with the trade unions, ifapplicable. An employee chooses thestart and/or the end of his working daywhile the employer can stipulate specifictimes of the day during which anemployee must perform his duties. Thetotal length of an individual shift may notexceed 12 hours.

Reduced working hours may be workedby agreement between the employee andthe employer. The agreement can allowfor an employee to work for fewer hourseach day or only on certain weekdays.

The employee is paid only for the hoursactually worked.

An account of working hours arrangementis used by employers who have fluctuatingneeds for a work force (e.g. in relation tounstable sales) and therefore employeeshave an uneven spread of working hours.Unevenly distributed working hours mustat the end of the reference period of26 weeks (or 52 if approved in thecollective agreement) in aggregate equalthe number of working hours which wouldhave been worked if the employee hadworked regular working hours (i.e.40 hours a week). The employer mustkeep a record of the working hours andsalary for each employee. If approved inthe collective agreement, overtime work ofup to 120 hours may be recorded ashours already worked in respect of thesubsequent reference period. The recordof working hours arrangement can onlybe introduced under the auspices ofa collective agreement or aninternal regulation.

9. Holidays and Time Off9.1 HolidaysThere are 12 statutory public holidays perannum in the Czech Republic. However, ifthey fall on a weekend they are notreplaced, so the number of publicholidays varies each year. In addition, allemployees are entitled to a minimum offour weeks’ (five weeks at stateadministrative bodies) paid annual holidayper year, which accrues on a pro ratabasis from the first day of employment.Money may not be paid in lieu of untakenstatutory holiday entitlement except ontermination of employment.

The employer shall determine the periodin which employees can take their holidayin accordance with a schedule of holidaysand with the prior consent of the tradeunions and/or work councils (ifapplicable), so that the employee will, as arule, be able to take the holiday at onceand before the end of the calendar year inwhich the entitlement has been


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generated. If an employee is grantedholiday in several instalments, at least oneof the instalments must be not less thantwo weeks long, unless the employer andemployee have agreed otherwise.

If the employer does not specify to theemployee when the holiday should betaken (or does not approve the requestedholiday) by 30 June of the calendar yearfollowing the year in which the entitlementhas been accrued, the employee has theright to decide to take the holiday.

Where holiday has not been taken by theend of the subsequent calendar yearbecause the employee has beenrecognized as temporarily unfit for workor as a result of taking maternity orparental leave, the employer must permitsuch leave to be taken after theobstacle(s) to working have gone.

9.2 Family Leave The Labour Code stipulates that awoman is entitled to 28 weeks’maternity leave (37 weeks if the mothergave birth to more than one child). Inaddition, if either the mother and/or thefather so requests, the employer is,after the maternity leave period of 28 (or 37) weeks (or after the birth of thechild in case of the father), obliged togrant her/him additional parental leaveuntil the child reaches the age of threeyears. For the maternity leave period of28 (or 37) weeks the employer isobliged to retain for the employee anidentical position (at the same place ofwork). However, during additionalparental leave the employer is onlyobliged to retain a vacant position inaccordance with the employee’semployment contract.

During maternity/parental leave anemployee is not entitled to his wages butreceives a statutory maternity pay or aparental allowance. The parentalallowance may be provided even after thetermination of the additional parentalleave, but until the child reaches fouryears of age at a maximum. However, the

employer is not obliged to retain the jobfor the parent during the fourth year.

Adoptive parents are entitled to take paidmaternity leave for a period of 22 weeks(31 weeks if the adoptive parent hasadopted more than one child) up until thechild(ren) reaches the age of one andparental leave is available until the childreaches the age of three. If the child wasadopted between the ages of 3 to 7parental leave of up to 22 weeks mustbe granted.

9.3 IllnessEmployees who are absent from work byreason of sickness or injury have a rightto receive statutory sick pay. During thefirst 14 calendar days of the sick leave(and in 2013 during the first 21 calendardays of the sick leave), except for the firstthree days of the sick leave, sick paymust be paid to the employee by theemployer. After the first three or twoweeks (as applicable) the sick pay is paidby the Czech Social Security Authority.

In this respect, some employers agree topay employees an amount greater thanstatutory sick pay for a limited period, thelength of which will vary depending uponthe custom of the industry and the statusof the employee.

10. Health and Safety10.1 AccidentsThe Labour Code lays down the generalprinciples to be followed by an employerin relation to health and safety. Employersare under a duty to have regard for thehealth and safety of their employees whileat work (but not travelling to or fromwork), and are obliged by law to maintaininsurance against liability for injury anddisease arising out of employment. Afailure to comply with the provisions ofthe Labour Code may result in liability. Anemployer is obliged to investigate thecause of any accident, report anyaccident to the relevant authorities andkeep records of all accidents in the workplace. In addition to the general principleslaid down by the Labour Code, there are

numerous specific Acts and regulationsgoverning certain types of workplace andcertain types of work activity (e.g. Act onProtection of Public Health No. 20/1966Coll., Act on Accident Insurance No.266/2006 Coll., Act on FurtherRequirements on Occupational Healthand Safety No. 309/2006 Coll., etc).

10.2 Health and Safety ConsultationEmployers in the Czech Republic are underan obligation to consult with theiremployees on health and safety matters.Consultation must be carried out through:(i) a representative nominated by a tradeunion; (ii) an elected representativeresponsible for safety and protection ofhealth at work; or (iii) directly withemployees, if neither of the elected bodiesat (i) or (ii) exists. Specified informationmust be made available by the employer. Arepresentative responsible for safety andprotection of health at work may beelected, but such election is optional.Should a representative be elected, theemployer must then inform and consult thisrepresentative in matters relating to safetyand protection of health at work. Theemployer can have both a representativeresponsible for safety and protection ofhealth at work and a trade union/workcouncil. Depending on the nature of theemployees’ resolution when establishingsuch representative bodies, the employermay have an obligation to consult inrelation to health and safety issues with arepresentative responsible for safety andprotection of health at work and to consultwith the works council/trade unions inrelation to other matters.

Where there is neither a trade union,works council nor representativeresponsible for safety and protection ofhealth at work, the employer is obligedto inform and consult with theemployees directly.

11. Industrial Relations11.1 Trade UnionsThe Collective Bargaining Act is alegislative scheme providing forrecognition of a trade union by an



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employer. In principle, an employer mustrecognise any trade union legallyestablished in the business. In order toestablish a trade union, three employeesof the relevant workforce suffice (there isno requirement for the workforce to be ofa specific size). If a trade union isestablished, it becomes an authorisedrepresentative of the employer’semployees. Once established, the tradeunion must try to conclude an agreementwith the employer regulating theirrelationship and determining the mattersthat should be the subject of negotiation.In the absence of an agreement, astandard model procedure applies.

Besides the trade union, employees canelect a works council and/or arepresentative responsible for safety andprotection of health at work. Employeesworking for an employer who has over1,000 employees with at least150 employees in two different EEAcountries may also establish a EuropeanWorks Council.

Each of the various employeerepresentative bodies mentioned abovecan exist simultaneously.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually found in the industrial sector or inthe health services and often regulatematters such as pay, working hours,holidays, dispute procedures andprocedures to deal with redundancy.Such collective agreements may havedirect legal consequences for theemployer, since certain terms in suchagreements may become incorporated(either expressly or by implication) intoindividual employee’s contracts ofemployment and where this happenssuch terms become directly enforceablein court (for example collectively agreedwage rates). Furthermore, in someindustries unionisation remains sufficientlystrong for industrial pressure to prove aneffective means of securing observanceof otherwise legally unenforceable

provisions contained in collectiveagreements. Basically, collectiveagreements can be negotiated on twolevels, either as house collectiveagreements (binding on a single employerand the trade union operating with thatemployer), or as sectoral collectiveagreements (binding on all employers andtrade unions operating with thoseemployers in a whole economic sector).

11.3 Trade DisputesIn general, trade disputes usually concernthe conclusion of a collective agreementand the fulfilment of obligations arisingfrom a collective agreement (except thoseobligations relating to the claims of anindividual employee).

Contracting parties may agree to appointa mediator to act in the settlement oftheir dispute. If the parties fail to agree onthe mediator, he/she shall be appointedby the Ministry of Labour and SocialAffairs, acting on the basis of anapplication made by either of thecontracting parties.

If the proceedings before the mediatorare unsuccessful, the contractingparties, if they so agree, may apply inwriting to an arbitrator to decide theirdispute. The proceedings before thearbitrator commence on his/her receiptof such application.

The Czech Republic does not have acomprehensive “strike/lockout law.”Rather, businesses, individuals and tradeunions are granted certain limitedstatutory protection from liability, whichthey would otherwise incur, when takingindustrial action pursuant to a tradedispute. The Collective Bargaining Actdeals with employees’ rights to strike onlywith the aim of concluding a collectiveagreement, provided that the collectivebargaining procedure and subsequentmediation and/or arbitration processeshave been exhausted without success. Itfollows that if a collective agreement isnot concluded even after proceedingsbefore a mediator and/or arbitrator, or the

contracting parties do not apply for anarbitrator’s award regarding their dispute,a strike (partial or full interruption of workby employees) or lock-out (partial or totalcessation of work by the employer) maybe used as the last resort, unless theindustrial action is declared illegal by thecourt at the request of the other party. Anemployee who takes industrial actionloses the right to pay during that periodand is not entitled to receiveunemployment benefits and/or sick pay. Itis unfair to dismiss an employee who istaking “protected” industrial action.


Employers have obligations with respectto consultation and the provision ofinformation to employees either directly orto their appropriate representatives (theseare usually either a trade union or aworks council). There are somedifferences as to the scope of theemployer’s obligation with respect toconsultation and the provision ofinformation vis-à-vis a trade union and aworks council. In general, a trade unionhas a privileged position and must beinformed and/or consulted in all matterslike a works council, and also in mattersrelated to health and safety at work,which would otherwise be discussed witha representative responsible for safetyand protection of health at work, ifelected (see above).

An employer is obliged to provideinformation in relation to:

(a) the employer’s economic andfinancial situation and probabledevelopment;

(b) the employer’s activities, theirprobable development and theirimpact on the environment, andecological measures related thereto;

(c) the employer’s legal status andchanges in such status, internalorganisational structure and theperson authorised to act in thename and on behalf of the employer


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in labour (industrial) relations, theprevailing activity of the employerwith the relevant code according tothe Economic ActivitiesClassification and changes in theemployer’s business activities;

(d) fundamental issues concerningworking conditions andtheir changes;

(e) matters in respect of which theemployer has consultationobligations (see further below);

(f) measures taken to secure equaltreatment of employees and theprevention of discrimination;

(g) details of any open-endedemployment vacancies whichwould be suitable for employeescurrently engaged under fixed-term contracts;

(h) occupational health and safetyprotection; and

(i) any issues coming within the scopeof consultation obligations set out ina European Works Councilagreement or some other agreedprocedure for transnationalinformation and consultation ofemployees or other procedurespecified by the Labour Code.

The duties under subsections (a) and(b) do not apply to employers employingless than 10 employees.

An employer is obliged to consultemployees in relation to the following:

(a) the probable economicdevelopment of the employer;

(b) envisaged structural changes withinthe employer, rationalisation ororganisational measures, anymeasures that may have an impacton employment, in particularmeasures in connection withcollective dismissals;

(c) the latest number of employees andstructure of the workforce,

proposed employmentdevelopments, fundamentalworking conditions and anychanges to them;

(d) the automatic transfer(s)of employees;

(e) occupational health and safetyprotection; and

(f) any issues coming within the scopeof consultation obligations set out ina European Works Councilagreement or some other agreedprocedure for transnationalinformation and consultation ofemployees or other procedurespecified by the Labour Code.

The duties described at (a) to (c) do notapply to an employer employing less than10 employees.

The employer’s obligations with respect tothe participation of a trade union includesafety and working conditions andworkload as well as other measures whichrelate to a larger number of employees.

The European Works Council Directivehas been implemented in the CzechRepublic, and while the initialestablishment of the employeenegotiating body is quite clearlyregulated, subsequent negotiations aregenerally up to the parties to regulate.


12.1 GeneralUpon the transfer of an undertaking,employees are provided with protectionin that their entire contract automaticallytransfers from the transferor to thetransferee. Employees who do not wishto be transferred may serve notice tothat effect on the transferring employer.The employment of such employeesterminates on the day preceding the daywhen the transfer takes effect at thelatest. Aside from the right to serve suchnotice, employees have no right to

object to their automatic transfer and itslegal consequence (and may not insiston for example, the continuation ofemployment with the transferor).Dismissals based solely on the transfer,or changes to existing terms andconditions of employment (i.e. contractof employment or collectiveagreements), by reason of the transferare void, even if agreed toby employees.

Where notice of termination is given byan employee within two months of “theeffective date of transfer of rights andobligations arising from employmentrelations” or within two months of “thetransfer effective date of performance ofrights and obligations arising fromemployment relations” or where, withinthe same time-limit, the employmentrelationship is terminated by agreement,the employee may ask the court todetermine that the employmentrelationship was terminated as aconsequence of a substantialdeterioration in working conditions inconnection with the transfer. This is anew provision introduced by the CzechLabour Code and at the time of writing itwas unclear what the distinction betweenthe first two triggers is. Where terminationis held to be for this reason, theemployee is entitled to standardseverance pay (see section 13 below).

Termination of employment is possible inthe context of envisaged restructuring, asthere are no specific rules prohibitingdismissal of employees prior to, during,or after the transfer (however it is notadvisable to dismiss employees duringthe transfer of the undertaking becauseof a higher risk of the dismissals beingchallenged). The transfer of businessitself, however, can never serve as areason for dismissal and all of the generalrules mentioned below, which areapplicable to terminations of employment,must be complied with, i.e. termination ofemployment must be based on thegrounds explicitly determined in theLabour Code.



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Regardless of the numbers ofemployees involved, employers haveinformation and consultation obligationsto a trade union or a works council(if established). The transferor and thetransferee are obliged to inform and toconsult about the following:

(a) the fact that the relevant transfer isto take place, including theestablished or proposed date ofthe transfer;

(b) the reasons for such transfer;

(c) the legal, economic and socialimplications of the transfer for theemployees; and

(d) the envisaged measures (if any)which the transferor and thetransferee envisage in connectionwith the transfer and in relation tothe employees.

The employer must fulfil hisinformation/consultation duty 30 daysbefore the envisaged transfer, at thelatest. In this respect, the information andconsultation process does not have tolead to a mutual agreement between theparties. The absence of any suchagreement cannot affect the validity ofthe transfer.

Where neither a trade union nor workscouncil operates in the company, thetransferor and the transferee employershall inform (but not consult) theemployees, who will be directly affectedby the transfer in relation to the aboveitems 30 days before the effective date ofthe transfer at the latest.

12.3 Notification of AuthoritiesThere is no obligation on an employer tosupply information and/or consult ornegotiate with any governmental orregulatory body.

12.4 LiabilitiesIn the event of a failure to comply with theconsultation and information obligations,

the Work Inspectorate may impose a fineof up to CZK 200,000 (approximately€8,000), however the validity of thetransfer cannot be affected. Nocompensation is payable to employeesand it is not possible to obtain aninjunction or other judicial remedy.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto ensure compliance with both thestatutory and any contractualrequirements with regard to reasons forand procedures leading to dismissal.

An employment relationship may only beterminated by one of the following:

(a) an agreement between theemployer and the employee;

(b) a notice of termination (given by theemployer or by the employee);

(c) an immediate cancellation (effectedby the employer or by theemployee); or

(d) a cancellation during the trialperiod (by the employer or bythe employee).

As far as the top level managers (withinthe meaning of the Labour Code) areconcerned, if agreed in the employmentcontract the employer may remove thetop level manager from the positionprovided that the top level manager mayresign from the position. The top levelmanager’s position then terminates theday following receipt of written notice oftermination/resignation, unless a latertermination date is specified. The LabourCode provides, however, that theemployment relationship between the toplevel manager and the employer does notterminate upon the top level manager’sremoval/resignation from the position. Assoon as the top level manager isremoved from the position or resigns, theemployer agrees with the top levelmanager on her/his reassignment to

another position within the employer’sorganisation. The employment with theemployer will be terminated only if theemployer is unable to offer the top levelmanager another suitable position or thetop level manager refuses the offeredposition; such a situation would allow themanager’s employment to be terminatedon the grounds of redundancy. The toplevel managers are entitled to severancepay only if they are removed becausetheir position ceases to exist due toorganisational changes.

13.2 NoticeTo be valid, any notice given by either theemployer or the employee must be inwriting and delivered to the counterparty.The delivery of the notice must alsocomply with the procedural rules set outin the Labour Code. The minimum noticeperiod is two months (with the exceptionof notice served by employees who donot wish to be transferred to the newemployer in which case the notice periodmay be shorter (see 12.1 above)). Alonger period can be agreed, however itmust always be the same for bothparties. The notice period begins to runon the first day of the month following themonth in which the termination noticewas given.

13.3 Reasons for DismissalAn employee may at any time serve anotice of termination upon his employer toterminate the employment for any reason,or without stating a reason. An employer,on the other hand, may serve a notice oftermination on an employee only for agood cause expressly listed in Section 52of the Labour Code, as follows:

(a) closure or relocation of theemployer or its part;

(b) the employee’s redundancy as aresult of the employer’s decision tochange the goals of the enterpriseor to reduce the number ofemployees in order to increasework efficiency;


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(c) if a relevant medical expertconsiders that the employee mustcease to perform the current workdue to a work-related injury or ill-health or the relevant publichealth authorities consider that theemployee has attained themaximum permissible limits ofexposure (e.g. to dangeroussubstances, underground work,etc) in the workplace;

(d) if the employee has been certifiedas incapable of performing hiswork for a prolonged period asa consequence of amedical condition;

(e) if the employee does not fulfil thelegal or regulatory prerequisites forthe performance of the work;

(f) if the employee fails to meet thestandards required by the employerand has failed to improve hisperformance within a stipulatedtime frame after a written warningfrom the employer to do so;

(g) grounds for immediate terminationor if the employee has committedserious breaches of his/herobligations arising from the legalrules and regulations related to thework performed. In the event of acontinuous, less serious breach ofan obligation arising from the legalrules and regulations related to thework performed it is possible to givethe employee notice of termination,if within the preceding six monthsthe employee was warned in writingof the possibility of dismissal inrelation to such a breach;

(h) if an employee who should be onill-health absence fails to complywith the terms of his temporaryincapacity to work e.g. by failing toremain at home.

The employer must prove that one of theabove reasons existed at the time of thedismissal and that it acted fairly andreasonably in deciding to dismiss the

employee. The employer must, therefore,be careful to ensure not only that there isa permissible statutory reason fordismissing the employee, but that a fairand reasonable procedure has beenfollowed in implementing the dismissal.

If the employer terminates the employmentfor grounds (a) or (b) above, the employerhas an obligation to pay the employeecompensation (severance pay). Theseverance pay is calculated as follows:

(a) employee’s average monthly salarywhere the employment relationshiplasted less than one year;

(b) twice employee’s average monthlysalary where the employmentrelationship lasted at least one yearand less than two years;

(c) triple employee’s average monthlysalary where the employmentrelationship lasted at least two years;

(d) triple employee’s average monthlysalary plus amount specified under(a), (b) or (c) as appropriate wherethe employee works under a recordof working hours arrangementwhere hours worked are transferredto the next period.

An employee’s reference period ofemployment also takes into account apreceding period of employment with theemployer provided that the gap betweenthe two periods of employment did notexceed six months. For calculation of theseverance pay the average salary iscalculated on the basis of totalremuneration paid to the employee duringthe previous calendar quarter. Severancepay where the reason for termination isground (c) above will be a minimum of12 months’ salary.

The severance pay must be paid by theemployer not only in the event of a noticeserved by the employer, but also in caseswhere the employer and the employeehave concluded an agreement ontermination of employment for grounds(a), (b) or (c).

If an employee is dismissed without goodcause and the employee insists on beingfurther employed, the employmentcontinues to exist and the employee isentitled to salary compensation, providedthat the employee has successfully filedan action at court. The employee may filean action for unjust dismissal within twomonths from the alleged unjusttermination of the employment. If theemployee’s action is successful he mayreceive compensation in the amount ofhis salary and benefits which theemployee would have received if theemployment had continued or during thenotice period which would have beentriggered by a lawful termination. Where atotal period for which the employeeshould be entitled to salary compensationexceeds six months, the court may,based on an application made action bythe employer, reduce the amount of thesalary compensation for the period inexcess of six months.

13.4 Special ProtectionSpecial rules apply to dismissalsconnected with, for example, pregnancyor maternity/family leave, the duties ofemployee representatives, asserting astatutory right, trade union membershipor activities, transfers of undertakings andpublic interest activities. The LabourCode sets out in detail the situations inwhich the employer is not allowed toserve a termination notice on theemployee at all (pregnancy, maternityleave, sick leave, etc). It also contains anumber of complex exceptions underwhich these restrictions do not apply.


Redundancy constitutes a good statutoryreason for dismissal and although it maybe applicable to individual termination(for example, if one employee’s specific jobdisappears), it is commonly associated withthe partial or total closure of a business.

A collective dismissal arises if a specifiednumber of employees are dismissed ortheir employment is terminated by



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agreement for specified reasons within aspecified period of time provided that, inthe latter case, at least five employeesare served notice. The specified period is30 calendar days, the specified reasonsfor dismissal are closure or relocation ofthe employer or his branch andemployees’ redundancy, and thespecified number of dismissedemployees varies according to the size ofthe employer and is as follows:

(a) 10 employees if the employeremploys from 20 to 100 people;

(b) 10% of employees if the employeremploys from 101 to 300 people;

(c) 30 employees if the employeremploys more than 300 people.

This statutory rule is to preventemployers from circumventing theirstatutory collective dismissal duties bydismissing their employees on the basisof “formal” termination agreementsinstead of dismissal.

No later than 30 days before serving thenotices the employer must:

(a) Inform the trade union or theworks council (or the affectedemployees if there are noemployee representatives) inwriting of the intention to carry outa collective dismissal.

(b) Inform the trade union or the workscouncil of:

(i) the reasons leading to thecollective dismissals;

(ii) the total number ofemployees employed bythe employer and theroles involved;

(iii) the number of thoseemployees to be dismissedand the roles of thoseemployers;

(iv) the period within whichcollective dismissals areplanned to take place;

(v) the criteria proposed forselecting employees to bemade redundant; and

(vi) the severance pay and, ifrelevant, other rights of theemployees being maderedundant.

(c) Discuss the intended action withthe trade union or the workscouncil. During such discussionsthe following issues should beaddressed:

(i) measures that could preventor limit the collectivedismissal; and

(ii) measures that could mitigatethe adverse consequences forthe dismissed employees, inparticular the possibility oftheir relocation to otherpositions within theemployer’s business.

(d) Provide the trade union or the WorksCouncil with information and data toallow them to be prepared for thediscussions. The content and theamount of such information is notspecified by the Labour Code andwill depend on the actual situationand on the reasons leading to theproposed collective dismissals.

(e) Notify the Labour Office of theintended dismissals in writing (onecopy of such notification needs tobe provided to the trade union orthe Work Council), and in thenotice include especially thefollowing information:

(i) the reasons leading to thecollective dismissals;

(ii) the total number ofemployees to be dismissed;

(iii) the number and list ofoccupations of thoseemployees to be dismissed;

(iv) the period of time duringwhich the collectivedismissals will take place;

(v) the criteria for selection of theemployees to be dismissed;and

(vi) the date of commencementof discussions with the tradeunion or the works council.

The employer is obliged to deliver to theLabour Office a written notice containingits decision to carry out a collectivedismissal and inform the Labour Officeabout the results of negotiations with thetrade union or Works Council and delivera copy of the notice to the trade union forits comments. The employment will notend until 30 days after this notice isdelivered to the Labour Office, unless thedismissed employee does not insist onthis extension of the notice period. In thisrespect, the fact that the employer andthe trade union or Works Council do notreach a consensual agreement duringtheir discussions does not have an impacton the validity of the termination notices.

If there is no trade union or WorksCouncils active within the employer, theemployer is required to fulfil the aboveobligations in respect of each employeeto whom the collective dismissal applies.

14. Data Protection14.1 Employment RecordsThe collection and processing ofemployees’ personal data by theiremployers (prospective, current and past)are regulated by the Data Protection Act(as amended), which implements the EUData Protection Directive.

Essentially employers, as data controllers,are under an obligation to ensure thatthey process personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principles including thefollowing: a requirement to ensure thatdata is accurate, up to date, and is notkept longer than is necessary; aprohibition of pooling of personal datacollected for different purposes; and arequirement that information is stored


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securely to avoid unlawful access oraccidental destruction or damage to it. Ifthe employer processes the personaldata of its employees in a mannerbeyond that which is legally necessary forthe employment relationship, writtenconsent must be obtained from theemployees and the Data Protection Officemust be notified.

Under the Data Protection Act,disclosure of personal data is considereda form of data processing and istherefore subject to the general principlesunder the Act. Data controllers mustprotect personal data and the entiredatabase system against accidental orillegal access, destruction of data,changes to or loss of data, illegaldisclosure or processing of data, andother forms of misuse of data. Employersare obliged to ensure and evidence thatthey have a document retention policy inplace (including technical andorganisational measures) and to ensurethat staff are aware of their dataprotection obligations. Employers mustalso define conditions under which, andthe extent to which, personal data will beprocessed by employees or by otherpersons under an agreement with theemployer. In general, employees andother individuals who process data underan agreement with the employer or whocome into contact with personal datawhen exercising a statutory right or dutyare under a duty of confidentiality andare prohibited from disclosing thepersonal data to third parties.

14.2 Employee Access to DataEmployees, as data subjects, have theright to request information on theprocessing of their personal data. Theemployer as a data controller must,without undue delay, provide to anyemployees who make a request,information concerning the processing oftheir personal data. The information that

must be provided includes, amongstother things, the personal data orcategories of personal data processed,the purpose of the processing, thesource of the data and the recipients orcategories of recipients of the data. Thedata controller is permitted to require areasonable fee for the provision of thisinformation; however this should notexceed the necessary costs incurred inproviding it.

14.3 MonitoringUnder the Labour Code, the employermay not, without good cause related tothe nature of the employer’s activities,encroach upon employees’ privacy inthe workplace (including communalareas) by means of open or covertmonitoring of employees, including therecording of telephone calls, checkingtheir email or post.

Moreover under Article 13 of the HumanRights Charter of the Czech Constitution,citizens’ rights to confidentiality ofmessages sent by post or other means ofcommunication is guaranteed and underthe Czech Penal Code, it is a criminaloffence to breach the confidentiality ofprivate communications.

Monitoring of employees may be carriedout without the employees’ consent, in allother cases the consent of theemployees is necessary. It is advisable toregulate the scope of monitoring inemployment contracts and in internalregulations communicated to theemployees. Additional notification e.g. viacomputer screen warnings is helpful.

Under Czech law employees may not,without the employer’s consent, use fortheir personal needs the employer’sproduction equipment and otherfacilities necessary for the performanceof their duties, including computers andtelecommunication equipment. The

employer is authorised to check, in anappropriate manner, compliance withthis prohibition. Permission granted toemployees by the employer to use itsequipment for private purposes doesnot release the employer from itsobligation to respect the employees’right to privacy.


An employer who wishes to discloseemployee personal data to third partiesmust do so in accordance with the DataProtection Act principles and processingconditions. In many cases it may benecessary to obtain the express consentof the employees concerned to suchdisclosure in the absence of a statutoryor legitimate business purpose for thedisclosure and depending on the natureof the personal data in question and thelocation of the third party. Transfers ofpersonal data from the Czech Republic toother EU Member States are notrestricted. However, where the third partyis based outside of the EU it should benoted that the Data Protection Actprohibits the transfer of data unless suchtransfer is permitted by: (i) internationaltreaty binding on the Czech Republic;(ii) a decision of the European Union’sbody; or (iii) one of the exceptions listedin the Data Protection Act. Theseexceptions include, for example, transfersmade with the employee’s consent ortransfers necessary for the purposes of asignificant public interest or transfers tocountries with an adequate level ofprotection for personal data (by adducingadequate safeguards for the protection ofthe transferred personal data). Even if oneof these exceptions arises, authorisationby the Office for the Protection ofPersonal Data is required for internationaldata transfers other than to other EUMember States.

Contributed by Clifford Chance, Prague



57A Guide to Employment in the European UnionDenmark

Denmark1. IntroductionThe Constitution, legislation, collectiveagreements, individual contracts ofemployment and customary practicesare the main sources of employment lawin Denmark.

Collective agreements are by far the mostimportant source of labour law. There is astrong tradition whereby the rulesregulating employment contracts areformulated in the first instance by theparties to collective agreements. Theseagreements are then interpreted by labourCourts and arbitration boards whichformulate customary practice rules. Mostcollective agreements regulate workingconditions and industrial relations.

Individual labour law is made up of generalrules of contract law and provisions oflegislation which protect employees.Legislation on this subject can be dividedinto two categories: the first categoryincludes laws which regulate particulartypes of employees like salariedemployees, apprentices, agriculturalworkers, civil servants etc. The secondcategory of laws regulate certain employeerights like holidays, leave of absence, wageprotection in case of insolvency etc withouttargeting specific classes of employees.

Labour disputes are resolved through theordinary Courts on the one hand andlabour Courts and arbitration boardsestablished by trade union organisationson the other hand. Ordinary Courts havejurisdiction over the interpretation oflegislation and individual contracts, whilelabour Courts and arbitration boards dealwith cases relating to individual andcollective labour rights derived fromcollective agreements as well as certaindisputes over legislation which givejurisdiction to the labour Courts.


2.1 GeneralEmployees can be divided into two broadcategories: salaried employees and

workers. Salaried employees(funktionaerer) are employees carrying outmainly non-manual work. Theiremployment status is governed by labourlaw and principally by the 1938 Act – lastamended in 2008 – on Employers andSalaried Employees (Funktionaerloven).Workers carrying out principally manualwork have no particular legislation applyingto them and their employment relationshipis mainly governed by collectiveagreements and customary practice.

Unless specific reference is made toone category, the word “employee” isused in this section to cover both typesof employment.

2.2 DirectorsSenior employees or directors belong toa special category. Their workingconditions are governed exclusively byindividual contracts and no specific rulesapply to them.

3. Hiring3.1 RecruitmentEmployers are free to recruit as theywish provided they do so on a non-discriminatory basis.

3.2 Work PermitsAll foreign citizens are, in principle,required to obtain a visa to enter and stayin Denmark, although citizens from alarge number of countries have beenexempted from that requirement. Forexample, citizens of the US and Japan donot require a visa to enter and stay inDenmark for an initial three-month period.Staying in Denmark for more thanthree months will require permission.

All foreign citizens also need to obtain awork permit before they take upemployment with a Danish employer.Normally, professional or labour marketconsiderations must warrant a residenceand work permit, for example, if there is alack of persons in Denmark who cancarry out work of a specific type.However, a number of schemes havebeen designed in order to make it easier

for highly qualified professionals to get aresidence and work permit in Denmark.

Nordic citizens do not need a residencepermit but are free to enter, live and workin Denmark.

EU/EEA as well as Swiss citizens canreside freely in Denmark for up to threemonths. If the person is seekingemployment during his/her stay, he/shecan stay for up to six months.

If the stay exceeds the three- or six-month limit, the person needs a proof ofregistration from the Regional StateAdministration. Unlike a residence permit,which is issued under the regulation ofthe Danish Aliens Act, a proof ofregistration is simply proof of the rightsthe person already holds according to theEU regulations on free movement ofpersons and services.

4. DiscriminationComprehensive legislation operates toprohibit discrimination on grounds of sex,age, race, marital status, military status,disability, sexual orientation, religion,political belief etc. Discriminationlegislation is allowed to protect certaincategories of people such as pregnantwomen or disabled persons.

According to the Law on Equal Wages(Lov om Ligeloen), men and women mustreceive equal pay for equal work. Thisright cannot be contracted out of and it isfor the employer to demonstrate that thepay system is not discriminatory.

The Act on Equal Treatment of Men andWomen (Lov om Ligebehanding) is aimedat preventing discrimination in areas suchas hiring, firing, training, and employmentterms and conditions. Compensation fordismissal on discriminatory grounds isuncapped, notwithstanding thiscompensation can be the same as thatfor unfair dismissal (see below) unless thedismissed employee is pregnant or onmaternity or paternity leave in which casethe compensation can be considerably

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higher. The Equality Council is the bodycharged with enforcing the legislation ondiscrimination and rulings made by theEquality Council can be enforced in theordinary Courts. Claims can also bebrought before the ordinary civil courts.


5.1 Freedom of ContractFreedom of contract is a fundamentalfeature of Danish law. However, becauseof the detailed regulation provided bylegislation and collective agreements,contracts of employment for employeesare generally brief. An individual contractcannot provide terms less favourablethan those provided by legislation orcollective agreements.

5.2 FormLegislation giving effect to the EUDirective dealing with the informationapplicable to contracts of employmentgoverns the form of the employmentcontract and its content. In many casescontracts are modelled on standardcontracts agreed between employers’organisations and trade unions. However,as the aforementioned legislation requiresthe principal terms of employment to beset out in the employment contract, manyemployment contracts will also ofteninclude individual terms.

Contracts are assumed to be for anindefinite period unless specifically statedto be otherwise. There are specificregulations relating to fixed-termcontracts. If a fixed-term employmentrelationship is prolonged or renewedmore than once after the expiry of thefixed-term, the contract is assumed tohave been converted into a contract foran indefinite period.

5.3 Trial Periods Any probationary period must bespecified in writing and may not be morethan three months for salariedemployees. There is no general rule ontrial periods for workers; however, most

collective agreements provide that acontract of employment can beterminated without notice during an initialperiod that can sometimes be as long asnine months.


The Marketing Practices Act(Markedsforingsloven) prohibitsemployees from disclosing businesssecrets during employment and for threeyears after its termination. Employers canclaim damages when the confidentialityduty has been breached and aninjunction may be awarded by a Courtpreventing violation of the law.

Post termination restrictions, such asfurther limitations on the exploitation ofknowledge gained during the employmentor the prohibiting of solicitation of a formeremployer’s customers or clients, are fairlycommon. Non-competition and non-solicitation clauses can be imposedon salaried employees and compensationequal to at least 50% of the employee’ssalary is due to the salaried employeeduring the term of the non-competitionand/or non-solicitation clause. Non-competition clauses, however, can onlybe imposed on salaried employeesholding a post of responsibility.

On 1 July 2008 a new Act on non-solicitation of employees(Jobklausulloven) came into effect. TheAct applies to non-solicitation ofemployees clauses concluded betweenan employer and other enterprises for thepurpose of preventing or restricting anemployee from taking up employment inanother enterprise and agreementsbetween an employer and an employeefor the purpose of preventing orrestricting other employees from takingup employment in another enterprise.

An employer can only enforce such anon-solicitation clause against anemployee if the employer and theemployee have concluded a writtenagreement to that effect and it describes

how the employee’s job opportunities arerestricted and sets out the employee’sright to compensation. The compensationmust be at least 50% of the employee’ssalary and is payable during the periodafter termination of the employmentduring which the employee’s jobopportunities are restricted.

5.5 Intellectual PropertyAn employer is entitled to ownership ofany invention made by an employeeduring the course of employment,provided compensation is given to theemployee. The compensationrequirement does not apply when theemployee is engaged in research andmay in other situations be considered tobe included in the fixed salary agreedbetween the employer and the employee.

6. Pay and Benefits6.1 Basic PayThere is no statutory minimum wage, butcollective agreements set a minimumwage for a large percentage of theDanish workforce. Those not covered bythese agreements are entitled to areasonable wage or to a customary wagefixed by reference to the trade andindustry in which they work.

The automatic adjustment of pay rates inline with the cost of living has beenabolished and accordingly there is no rulerequiring indexation of salaries.

6.2 PensionsOn top of the mandatory supplementarypension scheme for qualifying employees(the Labour Market Supplementary Plan– ATP), there are an increasing numberof private pension schemes. It iscustomary for both salaried employeesand workers to be covered by a pensionscheme with the schemes oftenproviding retirement, survivors’ anddisability benefits. Funding is obligatoryand schemes are arranged in the form ofindividual or collective accounts basedon defined contributions.


59A Guide to Employment in the European UnionDenmark

6.3 Incentive SchemesThere are favourable tax provisions whichare aimed at promoting individualownership of shares. A distinction isdrawn between profit sharing schemes(where employees may receive sharesfrom their employer tax-free up to acertain value) and stock option schemes(where employees are granted a right tosubscribe for shares from their employingcompany at a discount.)

Pursuant to the Danish Stock Option Act(enacted 1 July 2004) where an employerterminates an employee’s employmentprior to the employee’s exercise of theshare purchase or subscription rightsgranted to him, the employee is entitledto retain such rights pursuant to theexercise terms of the scheme oragreement as if the employee hadcontinued his employment. In addition,the employee is also entitled to receive ashare, proportionate to the length of hisemployment in the accounting year, ofthe grants to which he would have beenentitled according to agreement orcustom, had he still been employed atthe end of the accounting year or at thedate of grant.

Where an employee terminates hisemployment before exercising the sharepurchase or subscription rights grantedto him, he will forfeit such rights, unlessotherwise provided in the terms of thescheme or agreement. Also, the right toreceive further grants after termination ofthe employment will be forfeited.

The Stock Option Act applies only togrants made after 1 July 2004.Employees who were granted stockoptions prior to 1 July 2004 are entitledto retain all rights to these, regardlessof whether the termination ofemployment was voluntary, involuntaryfor cause or not.

6.4 Fringe BenefitsIt is common for company cars andsupplementary pension benefits to beprovided for senior employees and a staff

canteen with subsidised meals for theentire workforce.

6.5 DeductionsEmployers are entitled to makedeductions from employee’s wages incertain circumstances, for example,employee’s contributions to subsidisedmeals. However, all deductions must beagreed with the employees.

Employers are required to deduct taxesand employee social securitycontributions that are imposed fromemployees’ pay.

7. Social Security7.1 CoverageThe state social security system providesa comprehensive range of benefits:retirement pensions, survivors’ pensions,medical care, sickness and maternitybenefits, disability benefits, familyallowances and housing allowances.

On top of the basic flat rate pension, theATP covers all employees over the age of16 and provides a supplementarypension based on the contribution period.

Various unemployment insurance fundshave been set up under the control of theMinister of Labour. They cover a largepercentage of the workforce, mostlytrade union members. Membership ofthese funds is not compulsory andanyone who claims benefits from thesefunds must have been a member ofthese funds for a minimum period of oneyear in aggregate within the past threeyears and paid contributions equal to oneyear’s contributions, must demonstratemembership of a fund during that timeand willingness to take new employment.Benefits payable under such schemes areequal to a maximum of 90% of monthlysalary up to a ceiling whilst employed.Both the employee and the statecontribute towards the funds.

In case of industrial injuries andoccupational diseases, benefits are

provided by insurance companies underthe supervision of the National SocialSecurity Office and funded byemployers’ contributions.

7.2 ContributionsContributions to the social securitysystem are levied through the tax systemexcept in respect of ATP, education andindustrial injury.

Both employers and employeescontribute to ATP. Employers’contributions equal DKK 2,160 (in 2009-2012) per year per full-time employeeand full-time employees contribute DKK1,080 (in 2009-2012) annually. Theemployer’s premium to the industrialinjury scheme (AES) varies annually fromapproximately DKK 182 for salariedemployees and up to DKK 697 forworkers. The size of the premium isdependent on the number of employeesin the company and the sector in whichthe company operates. The employer’spremium to the employers’ apprenticerefund (AER) equals DKK 2,926 per yearper full time employee.

Private and/or foreign employers mustpay a Financing Contribution (FIB)equivalent to DKK 240.50 per quarter perfull-time employee (2012).

In addition, contributions must be paidinto a Maternity Fund. The annualcontribution for a full time employee isDKK 819.60. The contribution is payablefor employees in relation to whom theemployer contributes to ATP. Apprenticesbelow the age of 25 and who areregistered for AER are exempted.

A tax is also on gross wages levied toprovide revenue for allowances paid tothe unemployed and for education,training and sickness (AM-bidrag).Currently, the tax on gross wages is 8%.

8. Hours of WorkThere is no general legislation on normalworking hours. However, the Danish Act

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on Implementation of the Working TimeDirective provides that the averageworking hours per week, includingovertime, may not exceed 48 hours.Furthermore, the Working EnvironmentLaw provides for most employees to havean 11-hour break in any 24-hour periodand at least one day off in every sevenday period.

Hours of work are usually regulated bycollective agreement or the individualcontract of employment. Most privatesector employees work 37 hours a week.In the case of night work, the maximumaverage working hours may not exceedeight hours during any 24-hour period.There is no ban on Sunday work, butwork on Sundays and public holidays isregarded as overtime if there is no otherstipulation in the collective agreement.

Young people under the age of 18cannot work more than the agreed hoursfor the industrial sector subject to amaximum limit of eight hours a day and40 hours a week.

Most collective agreements containprovisions relating to overtime pay andCourts have interpreted them as givingemployers the right to require employeesto work overtime. If there is no collectiveagreement, by customary practice thereis an obligation on the employee to workovertime provided this right is notmisused by the employer. However, anemployee may refuse to work overtime ifthe obligation to work overtime is notstipulated in the employment contract orfor personal reasons which must becommunicated to the employer. Acollective refusal by employees may betreated as a breach of contract.

9. Holidays and Time Off9.1 HolidaysThe Holiday Act (Ferieloven) provides astatutory right to 2.08 days’ paid holidayper calendar month or five weeks’ holidayafter one year’s work.

Salaried employees receive normal salaryduring the vacation period, together witha holiday supplement equal to 1% ofannual salary. When a salaried employeeleaves the employer, the employer has tomake a payment in lieu of holiday knownas “holiday allowance” equal to 12.5% ofthe salary. Workers receive holiday pay inplace of their salary, which equals 12% ofthe previous year’s salary.

An employee and employer may agreethat the employee take educational leavefor a period determined according to thetype of education. During a period ofsuch educational leave, the employeemay be entitled to an allowance payableby the Government.

9.2 Family LeavePregnancy leave can be taken four weeksbefore the expected date of birth. Themother has 14 weeks of maternity leaveafter the birth. In addition, the father isentitled to two weeks’ leave to be takenduring the first 14 weeks after the birth.After the 14th week after birth, eachparent is entitled to an additional32 weeks’ leave which may be taken bythe parents consecutively or concurrently.This parental leave may be increased byan additional 14 weeks. The employee isentitled to postpone either the parentalleave or the additional parental leave bybetween eight and 13 weeks.

During the pregnancy and maternity leavefrom four weeks before the expectedbirth date and until 14 weeks after birth, afemale salaried employee is entitled to50% of her salary to be paid by heremployer but many employers pay fullsalary during this period. A number ofcollective agreements provide for thepayment of partial or full salary during thepregnancy leave for up to four weeksbefore the expected time of birth, duringmaternity leave for up to 14 weeks andduring paternity leave for up to twoweeks. Finally a number of collectiveagreements provide for the payment offull salary for up to six weeks following

the maternity/paternity leave. If theemployee is not entitled to salary duringthe pregnancy, maternity and two weeks’paternity leave, the parents are entitled toa fixed weekly allowance to be paid bythe Municipality. During the parental leaveafter the 14th week from birth, theparents are entitled to a fixed weeklyallowance to be paid by the Municipalityfor a period of up to 32 weeks. A numberof collective agreements grant leave forvarious other family reasons.

In addition, the Danish Act on Absencefor Special Family Reasons (Lov omfravær af saerlige familiemaessigeaarsager) affords employees unpaid leavein certain circumstances, such as wheresuch absence is necessary for compellingfamily reasons, i.e. the employee needsto care of a family member due to illnessor accident.

9.3 IllnessSalaried employees are entitled to full payduring absence because of illness. Theemployer is responsible for the paymentbut, after the first 21 days of sick pay, theemployer is entitled to a refund of a fixedallowance for up to 52 weeks of absencein an 18 calendar month period.

Workers are entitled to a fixed weeklyallowance paid by the Municipality.However, a number of collectiveagreements provide for full salary duringany period of absence due to illness, butafter 21 days of sick pay, the employer isentitled to a refund of a fixed allowancefor up to 52 weeks of ill-health absencein a period of 18 calendar months.

For both types of employee, the cost ofabsence due to illness or family leave isborne by the tax system.

9.4 Other time offEmployees may at any time requestflexible working arrangements and/orpart-time employment. However,employers are not obliged to comply withsuch a request.



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10. Health and Safety10.1 AccidentsEmployers must be insured againstaccidents at work with an insurancecompany recognised by the state.Employers may also be held liablefor negligence.

10.2 Health and Safety ConsultationThe Working Environment Act(Arbejdsmiljoeloven) has been amendedwith effect from 1 January 2012. The Actaims to ensure safe and healthy workingconditions in the workplace. To this end,the Act provides that in workplaces withup to nine employees, health and safetyissues shall be dealt with between theemployer and the employees. Inundertakings employing more than 10but less than 35 employees, theemployer is obliged to establish a workenvironment organisation with one ormore work environment representatives,who are responsible for attending to thedaily and overall health and safety tasksin the company.

In undertakings employing more than35 employees, health and safety isaddressed at two levels. Daily tasks arehandled by one or more groupsconsisting of a supervisor and anelected working environmentrepresentative while overall health andsafety planning and coordination is dealtwith by one or more committees.

11. Industrial Relations11.1 Trade UnionsA large percentage of Danish employeesare members of a trade union, most ofwhich are affiliated to theLandsorganisationen (“LO”) (by traditionlinked to the Social Democratic Party).A congress is held every four years todetermine LO policy.

There is little legislation on collectivelabour relations. The General Agreement(Hovedaftalen), last amended in 1993,between the LO and the biggest

employers’ association (“DA”) regulatesthe right to join a trade union and to takepart in its activities. Local trade unionswhich are co-ordinated at sectorial levelhave legal personality. These local unionsare organised at national level and mostof their statutes do not allow local unionsto conclude collective agreementswithout the consent of the national union.

Closed shop agreements have beenprohibited by law.

11.2 Collective AgreementsCollective agreements are legally bindingon both parties and their members, andare also applicable to employees who arenot members of one of the signatoryunions provided the employer was aparty to the agreement. Collectiveagreements can cover all aspects of theemployment relationship including wages,working hours, holidays and terminationand are automatically transferred on thesale of a business. Collective agreementsare usually signed for a period of fouryears. They cannot be extended byadministrative decree to employers andtheir organisations or their members whowere not parties to the agreement.

11.3 Trade DisputesIndustrial action tends to be moreinfrequent than in other jurisdictions asDanish law has developed an efficientsystem to resolve disputes.

There is a right to strike if there is aconflict of interest (interesse-konflikter),i.e. where parties disagree about wagesor the working conditions applicable to aparticular job and where no collectiveagreement is applicable. Such a conflictmay arise, for example, when a collectiveagreement falls due for renewal, or whenthe contract of employment provides foran opportunity to renegotiate pay. It isunlawful, on the other hand, to strike ifthere is a conflict of right (rets-konflikter)i.e. during the period of validity of acollective agreement when there is abreach of a collective agreement or adispute over the interpretation of such

agreement. In this case, strike action isunlawful and there is an obligation to referthe dispute to an industrial arbitrator or, ifthis fails, to the industrial Court. TheCourts have power to fine both parties toan agreement and their members if thereis a breach of it. No sanction can beimposed on an employee who refuses todo the work usually done by personstaking part in industrial action.

Where a conflict of interest arises, thematter may be referred to the ConciliationBoard (Forligsinstitutionen) at the requestof either party in accordance with theLaw on Mediation Procedures. The PublicConciliator will lead negotiations, putforward proposals for a settlement andmay also order the postponement ofstrike action for up to two weeks if thereis a chance of a settlement.

In cases where there is no alternative to astrike and such action is on the face of itlegal, 14 days’ notice of any strike shouldnormally be given to the employer.


Information, consultation and participationis required at various levels:

(a) The Companies Act allowsemployees to elect representativesto the board of directors ofcompanies with at least35 employees. The number ofemployee representatives on theboard is up to half the number ofboard members elected in generalmeeting subject to a minimum oftwo. These representatives have thesame rights, duties and liabilities asthe other members elected ingeneral meeting.

(b) Work environment representatives,groups and committees must beconsulted on all matters related tohealth and safety.

(c) The Agreement on Co-operationCommittees between LO and DA(samarbejdsaftalen) requires


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companies that are party to thecollective agreements in the LO andDA area to be managed in a waythat ensures maximum co-operation between employer andemployees. To this end, companieswith more than 35 employees mustset up a Work Council consisting ofequal numbers of employee andemployer representatives. TheCouncil has a role in the decision-making and the planning processesin relation to working conditionsand day-to-day production. It mayintervene in other areas such astraining methods, wage systems,introduction of new technology etc.Employee representatives areelected for two years and the timespent on Council matters is treatedas normal working time.

(d) The Act on Information andConsultation of Employees (lov ominformation og hoering) implementsthe Employee Information andConsultation Directive. Pursuant tothe Act, any company employingmore than 35 employees, andwhich is not part of any collectiveagreement that provides for equalrules on information andconsultation, is obliged to informand consult the employeerepresentatives or the employeeswith any relevant informationregarding the employees’ workingconditions. The employeerepresentatives must be informedand consulted as early as possibleto allow the employees’ opinions,views and proposals to be takeninto consideration when thecompany makes its final decisions.

(e) Employees in a European companyare covered by the rules in the Acton Information and Consultation ofEmployees in European Companies(lov om medarbejderindflydelse iSE-selskaber). The Act implementsthe Workers Participation Directivein respect of employee involvement

in the affairs of Europeancompanies. The rules on employeerepresentation in SE-companies arevery complicated. Basically, when aDanish SE-company is established,a special negotiation body ofemployee representatives musteither (i) commence negotiationsand draw up a plan for employeeinvolvement; (ii) decide not to opennegations; or (iii) terminatenegotiations already commenced. Ifthe special negotiation body drawsup a plan for employeeinvolvement, this plan will set theguidelines for employeerepresentation. If the specialnegotiation body decides not toopen negotiations, the act onemployee representation contains aset of standard rules, which willapply. If the special negotiationbody terminates negotiationsalready opened, they will have torely on the Danish rules onemployee representation.Regardless of whichever set ofrules apply, the employeerepresentatives are entitled toinformation and consultation beforeimportant decisions concerning theemployees’ working conditionsare made.

(f) Pursuant to the Danish Act onEuropean Works Councils (Lov omEuropaeiske Samarbejdsudvalg),which implemented Directive94/45/EC Community Scale, acommunity-scale undertaking isrequired to establish a EuropeanWorks Council following the writtenrequest of at least 100 employeesor their representatives in at leasttwo undertakings or establishmentsin at least two different EU memberstates. A community-scaleundertaking means any undertakingwith at least 1,000 employeeswithin the member states and atleast 150 employees in each of atleast two member states. TheEuropean Works Council is mainly

intended to deal with cross-borderissues of significant importance tothe employees in more than onemember state. For the purpose ofestablishing the European WorksCouncil and negotiating anagreement regarding informationand consultation procedures, aspecial negotiating body must beestablished. If the centralmanagement of community-scaleundertaking reaches an agreementwith the special negotiating body,the agreement will govern theinformation and consultation. If anagreement cannot be reached, theprocedure outlined in the DanishAct on European Works Councilsmust be applied instead.

The Act also applies to a community-scale group of companies, meaning agroup with: (i) at least 1,000 employeeswithin the member states; (ii) at least twogroup undertakings in different memberstates; or (iii) at least one groupundertaking with at least 150 employeesin one member state and at least oneother group undertaking with at least150 employees in another member state.


12.1 GeneralOn the sale of a business, all thetransferor’s rights and liabilities connectedwith the transferor’s employees areassigned to the transferee in accordancewith the Employees’ Rights on Transfersof Undertakings Act (Lov omLoenmodtageres retsstilling vedvirksomhedsoverdragelse). The transfereeis not entitled to dismiss employeesbecause of the transfer unless thedismissal is for economic, technical ororganisational reasons.


A transferor is obliged to informemployees of any intention to sell thebusiness and if the transferor or the



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transferee envisages measures in relationto his employees, the transferor mustnegotiate ways of safeguarding theirposition with a view to seeking anagreement. The transferor must informand negotiate/consult with the company’semployee representatives. If there are noemployee representatives in thecompany, the information must besupplied to all employees. In addition thetransferor is obliged to inform and consultthe employee representatives from theco-operation committee if the company isparty to a co-operation agreement. Thiswill apply to companies with more than35 employees, which are party tocollective bargaining agreements. Inaddition, companies who are not party toany collective agreement are bound bythe Act on Information and Consultationof Employees (see above). Thus, thereare three sets of rules governing theinformation and consultation procedurewhen a business is sold.

The information must be given to theemployees within a reasonable time beforethe transfer of the business. There is nodefinitive case law on the meaning of“within a reasonable time”. In somesituations, information pursuant to the Actcan be given after the signing of anagreement, but before the actual transfer ofa business, provided that the employeesare given reasonable time to consider theconsequences of the sale. This will,however, in most situations be too late. Ifthe transferor is afraid that the informationgiven to the employee representatives willhave an adverse impact on his ability toreach an agreement on the sale of hisbusiness, the transferor is entitled toimpose a duty of confidentiality on theemployee representatives.

The Danish Employees’ Rights onTransfer of Undertakings Act does notcontain any minimum requirementsregarding the length of theinformation/consultation period. Normally,the duration of such a period depends onthe speed in which the parties reachresults in their negotiations.

The transferor and the transferee areentitled to complete an agreement onthe sale of a business regardless ofwhether the employees have beeninformed or consulted. Thus, aninfringement of the rules of informationand consultation does not affect thevalidity of such an agreement.

None of the obligations outlined aboveare affected if redundancies arecontemplated prior to or after thebusiness transfer. The obligation to informand consult the employee representativesexists regardless of whether the businesstransfer involves redundancies or not.However, other sets of rules may delaythe process if the business transferinvolves redundancies of more than10 employees (see below).

12.3 Notification of AuthoritiesThere is no obligation under Danish lawto inform, consult or negotiate with anygovernmental body, but some collectiveagreements contain rules saying that thenegotiations must take place with thetrade unions before the transfer of abusiness. If a transferor fails to complywith this obligation it may be fined forbreaching the collective agreement.

12.4 LiabilitiesIf the transferor fails to comply with theinformation and consultation rules it willface criminal sanctions. Thus, any failureto comply with the rules may, in theory besanctioned with a fine, however, there arenot yet any reported cases of a finehaving been imposed.

13. Termination13.1 Individual Termination The right of employers to terminatecontracts of employment is limited bylegislation and collective agreements.Different rules apply for terminating theemployment contracts of salariedemployees and workers.

13.2 NoticeThe termination of employment ofworkers is regulated by the applicable

collective agreement. Most agreementslink the length of notice with seniority andage. In general, employers must givenotice of between 14 and 120 days.

The law provides minimum noticeperiods to be given to salariedemployees. These vary according tolength of service. They amount to onemonth for employees with one to sixmonths’ service and three months forthose with six months’ to three years’service. An extra month’s notice has tobe given for each third year of servicestarting from the fourth year ofemployment up to a maximum ofsix months.

Regardless of the reason for dismissal,salaried employees with 12, 15 and18 years’ service are entitled toseverance pay of one, two or threemonths’ salary respectively. There is noequivalent for workers.

When the contract of a salaried employeehas been wrongfully terminated withoutnotice, the employee is entitled to apayment equal to the notice period.However, if the notice period exceedsthree months, payment in excess of thethree months is only due if theemployee’s loss exceeds three months’salary. Workers whose contracts havebeen terminated without notice areentitled to damages equal to salary in lieuof notice.

If the contract of employment is notcovered by legislation or a collectiveagreement and there is no expressprovision in the contract dealing withtermination, Courts will apply thecustomary practice for the industry sector.

13.3 Reasons for DismissalWhere the employee is in serious breach ofcontract, the agreement can be terminatedwithout notice or compensation.

Workers with more than nine months’service are entitled to know the reasonsfor the dismissal if they request it. The


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same rule applies to salaried employeesregardless of their length of service.

When the dismissal of a salariedemployee with at least one year’s serviceis considered unfair and where nocollective agreement is applicable,compensation can be granted.

The dismissal will be considered unfair itis not justified by the conduct of thesalaried employee or the circumstancesof the employer.

In general, if a dismissal is caused byrestructuring or redundancy, the salariedemployee will not be entitled to anycompensation because the fairness ofthe salaried dismissal will normally beconsidered justified by the circumstancesof the employer. In the case of dismissalfor economic reasons, the law does notlay down any specific selection criteria.However, good industrial relations maydictate that an employer formulates aredundancy policy.

If a dismissal is based on theemployee’s circumstances, such asperformance attitude, it is generallyrequired that the salaried employeereceives a warning before a dismissal.In order for a warning to constitutesufficient grounds for termination, thewarning must specifically address theunacceptable circumstances and thebehaviour required from the employee.Furthermore, the warning must statethat the employee’s non-compliance willresult in disciplinary consequences,including dismissal.

The following compensation limits apply:

For workers with at least nine months’service, compensation for unfairdismissal is regulated by the GeneralAgreement between DA and LO. ThisAgreement provides a procedure ofnegotiation when the dismissal isconsidered unfair by the worker.

As a general rule, the dismissal will beconsidered unfair if it is not justified eitherby the conduct of the worker or thecircumstances of the employer.

If a worker is not covered by a collectiveagreement, no general rules on unfairtermination exist, (however, note thatthere are certain rules on various types ofdiscrimination, see comments below).

The maximum compensation for unfairdismissal is fixed at 52 weeks’ pay. Apermanent Tribunal on Dismissals dealswith dismissal claims.

13.4 Special ProtectionSeveral categories of employees arespecially protected against dismissal.An employer cannot terminate thecontracts of pregnant women oremployees on leave in connection withbirth because of their physical conditionor because of the employees’pregnancy, maternity, paternity and/orparental leave. If the employer cannotprove that the contract has beenterminated for reasons other thanpregnancy or leave in connection withbirth, compensation can be awarded.The maximum limit on suchcompensation has been removed. Caselaw indicates that the compensationawarded typically equals 6-12 months’remuneration depending on the

employee’s length of service and on thecircumstances of the specific case.

An employer is not allowed to discriminateagainst employees or applicants inrespect of recruitment, dismissal, transfer,promotion, salary or working conditionsbecause of age, disability, race, religion,political or sexual orientation, national,social or ethnic origin.

Persons who are discriminated against areentitled to compensation. The employerhas the burden of proof in discriminationcases if the employee can establish factsthat may give rise to the presumption thatdiscrimination has taken place.

Employee representatives on Health andSafety Committees, Works Councils,shop stewards and on boards ofdirectors are protected in accordancewith the applicable collective agreement.Employee representatives who areelected to participate in a co-operationcommittee pursuant to the Act onInformation and Consultation ofEmployees and employeerepresentatives who are elected toparticipate in the special negotiationbody pursuant to the Act on Informationand Consultation of Employees inEuropean Companies are entitled to thesame protection as shop stewards.

If a salaried employee has been ill for atotal of 120 days within a year, he or shemay be dismissed on one month’snotice provided there is a provision tothat effect in the contract. Somecollective agreements provide thatworkers with more than nine months’service cannot be dismissed during thefirst four months of illness.

Under the General Agreement, tradeunion members who claim unfair dismissalcan first require negotiation at companylevel between employee representativesand employer. If the parties do not reachany agreement, the case may be broughtto the Dismissals Board.

Age Length of Service Compensation

Under 30 1 year Maximum of half the salary for the relevantnotice period

Over 30 1 to 10 years Maximum of 3 months’ pay

10 years Maximum of 4 months’ pay

15 years Maximum of 6 months’ pay




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The rules on collective dismissals willapply if, within 30 days, the followingchanges are planned in relation tothe workforce:

In those circumstances, employers areobliged to consult the employees or theirrepresentatives and a special proceduremust be followed.

The purpose of the relevant regulations isto ensure that negotiations take placewith employee representatives in order tolimit the number of dismissals or theconsequences of them. In case ofinfringement of the applicable law, finesmay be imposed and compensation of30 days’ salary is due to each employee;any payment in lieu of notice may be setoff against this compensation.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Danish Act onProcessing of Personal Data (Lov ombehandling af personoplysninger) (theAct), which implements the EU DataProtection Directive. Infringement of dataprotection law can lead to fines and theemployer may be obliged to indemnifyany damage caused by any processingcontrary to the Act.

Broadly speaking the Act requires theprocessing of personal data to bereasonable and lawful, that datacollection takes place for specified explicitand legitimate purposes and that datashall not be further processed in amanner incompatible with thesepurposes. Accordingly the employer mayonly handle personnel information that isnecessary for the employer to maintain aproper employment relationship.

In addition, the employer may, in general,only process personal data if theemployees have given their consent. Theemployees’ consent must take the formof an express consent to the employer’sprocessing of data contained in thepersonnel file, and consent may bewithdrawn at any time. The employer isobliged to specify to the employees whatthe data will be used for. For theavoidance of doubt, irrespective of anyconsent the processing must fulfil thebasic requirements mentioned in theprevious paragraph, i.e. be reasonable,lawful, etc.

The Act does not prevent employers frommaintaining ordinary personnel files to theextent necessary for the employer tomaintain a proper employmentrelationship or where the employer’sinterests outweigh the employees’interests. Accordingly, ordinary personnelfiles may only include basic informationsuch as name, address, next of kininformation, tax information, bankaccount details, the education details,career details, normal curriculum vitaeinformation and references. The employermay also process information that arisesout of the employment relationship suchas details of duties, salary, pensionarrangements, sickness absence,warnings and appraisals, unless it issensitive personal data.

In order to process other information,including sensitive personal data andstrictly private data, the employer mustobtain express employee consent.Sensitive personal data includes

information relating to an employee’shealth, alcohol and drug abuse, tradeunion membership, criminal offences,dismissal without notice, personality testsand the employee’s race or ethnicbackground, political, religious orphilosophical belief, sexual orientation ormaterial social problems. Examples ofstrictly private data are personal data oncriminal actions, significant socialproblems, disciplinary issues and theresult of a personality test.

If an employer processes any kind ofsensitive and/or strictly private personaldata, it must notify the Danish DataProtection Agency (Datatilsynet) andobtain the Agency’s permission beforesuch processing is carried out.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them to be informed aboutthe data held about them, the purposeof the registration, to whom it isdisclosed and from where theinformation is obtained.

If the employee does make a subjectaccess request and has requestedwritten information, the employer maycharge DKK 10 per page. However, thetotal amount is limited to a maximum ofDKK 200.

Furthermore, the employees have certainother rights according to the Act.

As a general rule, any collection ofpersonal data requires notification of thedata subject(s). The notification must begiven no later than 10 days after thecollection. It is required that thenotification includes information on:

(a) the identity of the controller;

(b) the purposes of the processing forwhich the personal data is intended;

(c) any further information which isnecessary, having regard to thespecific circumstances in which the

Size ofworkforce

Minimum numberof employees tobe dismissed

More than 20and less than100 employees

10 employees

More than 100and less than300 employees

10% of theworkforce

More than 300employees

30 employees


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personal data is collected, toenable the data subject tosafeguard his interests, such as:

(i) the categories of recipients;

(ii) whether replies to thequestions are obligatory orvoluntary, as well as possibleconsequences of failureto reply;

(iii) the rules on the right ofaccess to and the right torectify the data relating to thedata subject.

The duty of notification only applies to theextent that the data subject has notalready received such information.

Other data subject rights are laid down inthe Act, including the right to rectifypersonal data, withdraw consent, file acomplaint to the DPA, etc.

14.3 MonitoringThe monitoring of employee email,internet, telephone usage and ClosedCircuit TV monitoring is regarded as dataprocessing for the purposes of the Actand, therefore, any monitoring must

comply with the provisions of the Act andthe Act on TV Monitoring.

An employer may not, however, monitorconversations and the like as part of anyClosed Circuit TV monitoring. In addition,an employer may not make anyautomatic monitoring of the phonenumbers called by its employees withouta prior special permission from theDanish Data Protection Agency.

The employee’s express consent tomonitoring is not usually required,however, the employees must beexpressly informed about the fact thatmonitoring is being carried out and thepurpose for which it is being conductedpursuant to the Danish Act on Processingof Personal Data.


An employer who wishes to provideemployee data to third parties may do soin accordance with the principles andprocessing conditions of the Act. Thetransfer of personnel files from anemployer to a third party is covered bythe Act. Accordingly, such transfers either

require the consent of the employee ormust be authorised under the Act.

Where the third party is based outsidethe EEA, it should be noted that the Actprohibits the transfer of data to a countryoutside the EEA unless that countryensures an adequate level of protectionfor personal data or one of a series oflimited exceptions apply. As a generalrule, such transfer requires employeeconsent or a prior permission from theDanish Data Protection Agency. Transferof non-sensitive personal data to the UScan be based on the US recipient beingsafe harbour certified.

In the context of commercialtransactions, where employee data isrequested, care must be taken to complywith the Act. Where it is possible,anonymous data should be provided.Where this is not possible, the recipientshould be required to undertake in writingthat it will only use it in respect of thetransaction in question, will keep it secureand will return or destroy it at the end ofthe exercise.

Contributed by Kromann Reumert



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Estonia1. IntroductionEmployment relations are regulatedmainly by the Employment Contracts Act(“ECA”) and a number of additionalrelated laws.

The ECA deals with the formation,suspension, modification, termination andinvalidity of employment contractsincluding respective rights andobligations, and sets out the rules ofsettlement of employment disputes aswell as regulations concerningremuneration, holidays, working hoursand time off. Government regulationsregulate a number of areas including theissue of work permits to foreignemployees, the employment of minorsunder 15 years of age, outlawing theperformance of hazardous labour byminors, and provides guidance on thecalculation of the average salary.

Employment contract terms that are lessfavourable to employees than thoseprescribed by law, administrativelegislation or a collective agreement areinvalid. Trade unions do not have asignificant influence in Estonia. Therefore,collective agreements do not generallyhave a significant impact on employmentrelations and are considered voluntary andhave been concluded in a limited numberof economic sectors and companies only.


2.1 GeneralEmployees can work full-time (i.e. eighthours per day and 40 hours per week) orpart time.

Part-time employees cannot be treatedin a less favourable manner than full-timeemployees. Part-time employees havethe same rights and obligations arisingfrom the employment relationship as full-time employees.

2.2 Directors The ECA does not apply to therelationship between management board

members and a company. Therefore, it isessential to draw up a comprehensiveagreement between the company and amanagement board member clearlyidentifying the tasks and duties of themanagement board member, as well asthe remuneration and benefits, holidayentitlement, liability of the managementboard member for breach of duties, andgrounds and means of terminatingthe contract.

3. Hiring3.1 RecruitmentEmployers are free to recruit at theirdiscretion. However, an employer isprohibited from discriminating againstapplicants for employment on a numberof grounds including sex, racial origin,age, ethnic origin, level of languageproficiency, disability and sexualorientation (see further section 4 below).In cases of such discrimination theprospective employee may be entitled tocompensation (for economic and non-economic damage sustained) buthas no right to insist on being employed.

3.2 Work PermitsIn order to work in Estonia, a non-EEAnational must obtain a work and residencepermit from the Citizenship and MigrationBoard of Estonia. The procedure for non-EEA citizens takes up to six months andthe state fees are as follows:

(a) on applying for a work permit orextending it - €47,93 (£ 39);

(b) on applying for a residence permitfor employment or extending it -€63,91 (£52).

Various conditions must be satisfied sothere is no guarantee that a residence orwork permit will be granted. Uponrecruitment the employer must check thatthe individual has the relevant permit (in cases where the employer has notparticipated in the application processitself). The employer is not allowed toconclude an employment contract with aperson who does not hold a valid permitand must terminate the employment

contract with an employee who does nothold a permit for employment in Estonia.

4. DiscriminationAll employees have the right to equalwork, fair remuneration and fair, safe andnon-hazardous working conditions.Employers may not, at any stage of theemployment relationship (including at therecruitment stage), discriminate, directly orindirectly, against employees on thegrounds of sex, racial origin, age, ethnicorigin, level of language proficiency,disability, sexual orientation, duty to servein defence forces, marital or family status,family-related duties, social status,representation of the interests ofemployees or membership of workers’associations, political opinions ormembership of a political party or religiousor other beliefs. Treating part-time andfixed-term employees or temporaryagency workers in a less favourablemanner than comparable full-time orpermanent employees is also unlawful.

However, the law permits thepreferential treatment of someemployees, including employees whoare pregnant, on maternity or paternityleave or who are carers for minors orincapacitated adult children.


5.1 Freedom of ContractThe terms of the employment contract,as well as terms established by unilateraldecisions of employers, cannot be lessfavourable to the employee than theprovisions of the ECA, administrativelegislation or the provision of thecollective agreement.

However, in certain circumstances asprescribed by law, the employer oremployee may require changes to theemployment terms. An employee mayrequest temporary amendments toworking conditions or a temporary transferto another position on the grounds ofhealth based on a doctor’s certificate. An

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employer may require adjustments to theemployee’s working terms if necessaryand reasonable for both parties. Inaddition, an employer can temporarilychange the employee’s remuneration inconnection with unforeseeable andunavoidable changes in production (3-12 months). Employees can terminatetheir employment contracts if they do notconsent to such amendment relating toremuneration. In the event of terminationon these grounds the employer must paycompensation to the employee. In thecase of an employment agreemententered into for an indefinite period,compensation is equal to one month’saverage salary and in the case of acontract concluded for a fixed periodcompensation is equal to the averagesalary until the expiry of the fixed term.

5.2 FormEmployment contracts can be concludedeither orally or in writing. Employmentcontracts concerning work periods inexcess of two weeks must be concludedin writing.

Employment contracts may be enteredinto for an indefinite or fixed term.However, fixed-term employment isallowed only for a good reason, forexample, for the performance of aspecific task, the replacement of anemployee who is temporarily absent, atemporary increase in the volume of workor for the performance of seasonal work.The maximum aggregate term of a fixed-term employment contract is five years. Inaddition, where a fixed-term contract forthe performance of the same work isconcluded on more than two consecutiveoccasions or if it is extended more thanonce in a period of five years, thecontract will be deemed to be of anindefinite duration.

5.3 Trial PeriodsUse of a probation period is common inpractice. A probation period may notexceed four months, excluding temporaryemployee incapacity and holidays. In thecase of a fixed-term contract of less than

eight months, the probation period maynot exceed more than half the duration ofthe contract.

An employee can terminate theemployment contract during theprobation period by giving 15 calendardays’ notice. An employer can terminatethe employment contract at any timeduring the probation period on thegrounds of unsatisfactory performance bygiving 15 calendar days’ written notice.The notice must include a description ofthe unsatisfactory performance. In thecase of severe breach termination ispossible without following the advancenotice process.


According to the ECA an employee mustrefrain from competing with the employerwithout the employer’s permission ifterms to that effect are included in theemployment contract. An employee canalso be subject to such non-competitionrestrictions following the termination ofemployment if a written agreement to thateffect is entered into with the employer,pursuant to which the employee receivesmonthly compensation from the employerof a reasonable amount. The duration ofthe aforementioned provision may notexceed one year. A contractual penalty inthe event of breach of a non-competitionclause may be agreed on.

Pursuant to the ECA an employee isobliged to maintain the business andproduction secrets of the employer. Post-termination confidentiality restrictionsapply without the need for a specificagreement, but the employer mustdetermine the scope of the confidentialinformation beforehand. A contractualpenalty in the event of breach of aconfidentiality restriction may be agreedon as well. This is typically in the region oftwo to eight months’ salary, but there isno general rule. Case law provides thatthe duration of a post-terminationconfidentially provision must be for a‘reasonable’ period. The reasonableness

of the limitation period depends on thenature of the information the employeehas received during his employment andthe level of possible loss that thecompetition might cause to the company.The limitation period could be six monthsin some cases and unlimited if theinformation is very sensitive.

5.5 Intellectual PropertyGenerally, if an employee creates a workthat is subject to copyright during theperformance of his employment duties, alleconomic rights attached to the work aretransferred to the employer for thepurpose and to the extent prescribed bythe employment duties unless otherwiseprescribed by the contract. If theemployee wishes to use the work for anindependent non-work related activity, hemay do so. If a work is used in such amanner, specific reference must be madeto the name of the employer.

It is recommended that the employmentcontract contains a provision pursuant towhich the employee grants a gratuitous,perpetual, irrevocable and worldwidelicence of all moral rights to the employer.This includes inter alia the right to changethe created work.

6. Pay and Benefits6.1 Basic PayAn employee’s remuneration may not beless than the minimum pay limitestablished by the Estonian government,which is €290 (£235) per month and€1.80 per hour (approx £1.45). Salariesare paid by bank transfer or in cash.

The employer is obliged to ensure equalpay for equal work and remunerationdifferentiation on the grounds of sex isprohibited. Remuneration terms whichhave been agreed in an employmentcontract may be changed only byagreement of the parties. It is unlawful toincrease or reduce remuneration on thegrounds of an employee’s sex, nationality,colour, race, native language, socialorigin, social status, previous activities,


69A Guide to Employment in the European UnionEstonia

religion, political or other opinion, attitudetowards the duty to serve in the DefenceForces or other discriminatory reasons. Itis also unlawful to reduce remunerationon the grounds of marital status, familyobligations, and membership of citizens’associations or representation of theinterests of employees or employers.

In the event of an employer’s breach ofthe principle of equal remuneration, theemployee has the right to claimcompensation based on the duration,extent and nature of the inequality.

The employee is entitled to receive bonusfees, if this is agreed in the employmentcontract. Generally, the payment of bonusfees is at the employer’s discretion.

6.2 PensionsThere is a “three-pillar” pension systemin place in Estonia. The first pillar is theobligatory state pension; the secondpillar is the mandatory funded pensionsystem implemented in 2002 and thethird pillar is a voluntary supplementarypension system. There is no obligationon employers to provide privatepensions arrangements.

6.3 Incentive SchemesThere is no legislative requirement foremployers to operate share option or profitrelated pay schemes. Such schemes arenot widely used, although they arebecoming more common in contracts withsenior employees and managers.

6.4 Fringe BenefitsFor the purposes of the Estonian IncomeTax Act, fringe benefits include any goods,services, remuneration in kind or monetarilyappraisable benefits, which are given to anemployee in connection with anemployment or service relationship. Fringebenefits are common for senior employeesand managers and typically comprise thereimbursement of mobile phone expenses,use of company car, laptop etc.

It should be noted that in addition toincome tax, the employer is also required

to pay social tax on fringe benefits, thusfringe benefits give rise to a heavy taxburden on the employer.

6.5 DeductionsAn employer is obliged to withhold 21%of the gross salary paid to the employeeby way of income tax contribution. Inaddition, the employer must deduct 2%of gross salary by way of unemploymentinsurance and 2% of gross salary as afunded pension payment if the employeehas joined the mandatory funded pensionsystem (second pillar). This is obligatoryfor employees born in 1983 or later. SeeSection 7.2 below for a more in-depthoverview of unemployment insurance tax.

Other deductions, such as monetaryclaims against an employee, can also bemade in certain circumstances.

7. Social Security7.1 CoverageSocial tax is a state tax, which is payableby employers and private entrepreneursoperating in Estonia, i.e. by legal entitiesregistered in Estonia and branches offoreign companies and sole proprietors(private entrepreneurs). As the employermust pay the social tax, the exact placeof residence of the employee (withinEstonia) is not taken into consideration.

7.2 ContributionsSocial tax is a mandatory monthly taxfrom which public pensions, socialsecurity benefits and health insuranceservices are financed, in accordance withthe Estonian Social Tax Act. The social taxrate is 33% of the gross taxable salary,made up of 20% social security paymentsand 13% health insurance contributions.

Another monetary instrument for helpingguarantee social security isunemployment insurance, which isdeducted from an employee’s salary. Theobligation is shared between theemployee and the employer. Theemployer must withhold the premium atthe current rate of 2% of the employee’s

gross salary and pay an additionalpremium equal to 1% of the employee’sgross salary.

8. Hours of WorkAs a general rule, a full-time employee’sworking hours must not exceed eighthours per day or 40 hours per week. Ingeneral the working week is five days -Monday to Friday. The maximum weeklyworking time for minors is shorter andvaries from 15 to 35 hours per weekdepending on the age of the minor. Themaximum weekly working time for schooland kindergarten teachers and othereducators is also shorter.

Any work performed outside thecontractually set hours is consideredovertime work. As a rule, the employermust obtain the employee’s consentbefore the employee is made to workovertime. Exceptionally, the employermay require an employee to workovertime in cases such as force majeure,for example to deal with theconsequences of a natural disaster or aproduction accident etc.

Regardless of whether overtime work isperformed on a voluntary basis or onaccount of a compulsory request by theemployer, overtime work must becompensated by time off in lieu(preferred) or additional payment.Additional remuneration for overtime mustnot be less than 50% higher than theemployee’s hourly rate of pay.

9. Holidays and Time Off9.1 HolidaysThere are three basic types of leave: annualleave, parental leave and study leave.

The statutory annual holiday entitlementis 28 calendar days. Should the durationof employment be less than a calendaryear, the annual leave entitlement iscalculated pro rata. New employees areentitled to annual leave after six monthsof employment. If a state holiday falls

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during a period of holiday, the holiday isextended by the equivalent number ofdays. In the event of illness during aperiod of leave, the employee has theright to take sick leave and postpone thevacation if he provides a relevantdoctor’s certificate. Unused annual leavehas a limitation period of one yearcommencing from the end of thecalendar year the leave was granted in.Annual leave is paid by the employeraccording to a formula based on theemployee’s average salary. Part-timeemployees are entitled to leaveaccording to the same rules as full-time employees.

9.2 Family LeaveParental leave includes pregnancy andmaternity leave, child nursing leave andadditional child-related leave.

Pregnancy and maternity leave of140 calendar days (starting at least70 days prior to the expected birth) isgranted to a woman on production of acertificate for maternity leave. During suchleave, a benefit equal to the average dailyincome is payable by the Estonian HealthInsurance Fund. A father has the right topaternity leave of 10 working days duringthe two month period prior to the expectedbirth of the child and the two month periodfollowing the birth of the child. Paternityleave is compensated by the state.

After the pregnancy and maternity leave,one of the parents is entitled to parentalbenefit. The mother is entitled to parentalbenefit with effect from the birth for aperiod of 435 days. The father or aguardian only becomes eligible forparental benefit after the child is 70 daysold, for 435 days. Parental benefit is paidby the state and is equal to theemployee’s average monthly income ofthe previous calendar year subject tosocial tax up to a maximum monthlyamount equal to three times the averageincome in Estonia per calendar month.

In addition, a mother or a father may useparental leave at his or her request for

raising a child of up to three years of age.The employee receives a childcareallowance from the local pensions boardpursuant to the Estonian State FamilyBenefits Act.

A mother or father is granted additionalchild care leave every calendar year at hisor her request of three to six daysdepending on the age and the number ofchildren. The leave is compensated bythe state at the minimum salary rate. Incertain cases the employer is obliged togrant unpaid leave of absence (of up to10 working days per calendar year) at theemployee’s request (e.g. in the event ofan employee raising a child under14 years of age).

9.3 IllnessHealth care coverage applies in respect ofpeople insured under the social securitysystem either due to contributions beingpaid by their employer, by themselves asself-employed or by the state. Benefits ofvarying percentages of the employee’ssalary will be paid by the Health InsuranceFund to the employee in the event ofabsence from work due to ill-health for upto 250 days per calendar year. The firstthree working days of illness are unpaid.With effect from the fourth working day ofillness, the employee is entitled to receivecompensation equal to 70% of a day’saverage salary from the employer up toand including the ninth working day ofillness. Thereafter the absent employee iscompensated by the Estonian HealthInsurance Fund pursuant to the HealthInsurance Act.

9.4 Other time offEmployees are also entitled to begranted study leave in order toparticipate in education and training. Forthe first 20 days of study leave theemployee is entitled to average salaryand the next 10 days are notcompensated. In addition employeesare entitled to 15 days study leave forthe completion of study. They areentitled to be paid minimum salaryduring such leave.

10. Health and Safety10.1 AccidentsThe Estonian Occupational Health andSafety Act provides that the employer hasa duty to provide a safe workingenvironment, and healthy workingconditions. The Estonian OccupationalHealth and Safety Act also describes howoccupational health and safety should beorganized in enterprises and sets out theliability for non-compliance with itsrequirements. There is no generalobligation on employers to provideinsurance for accidents at work.

10.2 Health and Safety ConsultationThe employer needs to appoint a workingenvironment specialist in every companyand an elected working environmentemployees’ representative in eachseparate workplace with more than tenemployees. Companies with at least50 employees must have a workingenvironment council with whom toconsult on all health and safety matters.

11. Industrial Relations11.1 Trade UnionsTrade union membership is generally lowin Estonia and the negotiating power ofthe unions is rather limited. There are twomain trade unions:

(a) The Association of Estonian TradeUnions (EAKL) established in 1990,being the largest, which representspredominantly blue-collar employees;

(b) The Estonian Employees’ Unions’Confederation (TALO) establishedin 1992, which represents white-collar employees.

The legal status of trade unions isregulated by the Estonian Trade UnionsAct. Employees have a general right tojoin trade unions. Participation in tradeunions is not, however, very wide andtrade union membership is morecommon in certain sectors such asshipping, transport, medicine.



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11.2 Collective AgreementsCollective agreements are usuallyconcluded at a company level, i.e.between a particular employer and atrade union. A collective agreementapplies to those employers andemployees who belong or whoseemployer belongs to the organisationsthat have entered into the collectiveagreement, unless the collectiveagreement provides otherwise. Collectivebargaining at various levels is still quiteweak, as the trade unions are quiteyoung and only a small number ofagreements have been concluded.Collective agreements tend topredominate in specific sectors of theeconomy, such as transport, engineering,wood, medicine and chemicals.

Collective agreements may cover anytopic or workplace issue. In practicethese deal, amongst other things, withsalary and other terms of employment,such as working time, severancepayments, retirement age and theprocedure for submitting demands in theevent of a collective labour dispute. Theterms and conditions of a collectiveagreement, which are less favourable toemployees than those prescribed by theEstonian Collective BargainingAgreements Act or other relevantlegislation, are invalid. In the event of aconflict between the provisions ofdifferent collective agreements applicableto employees, the provisions that aremore favourable to the employees apply.

As a general rule collective agreements donot apply to non-parties to the collectiveagreement. However, a collectiveagreement entered into between anassociation or federation of employersand a union or federation of employeesand a collective agreement entered intobetween the central federation ofemployers and the central federation ofemployees may be extended byagreement of the parties in respect ofcertain conditions (salary, working andrest time and working environment).

11.3 Trade DisputesStrikes are permitted in the case of acollective dispute of interests to which thelaw prescribes certain procedures. Adecision to organise a strike must beadopted by a general meeting ofemployees or a trade union. Strikes orlockouts which are not preceded bynegotiations with the opposite party areunlawful. Strike organizers must informthe undertakings concerned, theconciliator and local government of theplanned strike in writing at least twoweeks in advance. An employer isrequired to inform the parties with whomit has contracts, other interestedenterprises or agencies and the publicthrough the media of any such strike.

Participation in a strike is voluntary and itis prohibited to impede a non-strikingemployee’s ability to work. Where a non-striking employee is prevented fromperforming his duties because of thestrike, he is nevertheless remunerated bythe employer.

Employees may not be disciplined ordismissed for taking part in a lawful strike.


Employers are obliged to provideinformation to the employees and consultwith the employees’ representativesbefore taking any measures which canaffect the interest of the employees. Incertain circumstances, the employercannot complete a transaction withoutfirst consulting its employees, for examplein the event of a business transfer, wherethere is a restructuring of the businessand subsequent redundancies.

Employers must take into account theresults of the consultation with therepresentatives of the employees andwhere it refuses to consider employees’proposals, give reasons for doing so.

The European Works Councils’ Directivehas been implemented into national law.


12.1 GeneralThe effect of mergers and acquisitionsof companies on employment contractsis regulated by the ECA. The rights andobligations arising from an employmentcontract transfer to the purchaser ofthe business in which the employeesare employed.

The ECA provides that the reorganization,or change in the ownership of a businessdoes not terminate an employmentcontract nor serve as a ground fortermination of the contract. Employeeshave the right and obligation to continueworking at the business formed as aresult of a reorganization or following atransfer to a new owner.


The ECA sets out the procedure forinforming and consulting the employees’representatives (e.g. trade union) inrelation to the transfer of employmentcontracts or if there are no suchrepresentatives, the employees of thecompany. In the context of a share salethere is no obligation to inform andconsult employees.

The consultation obligation is triggered inthe event the former or new employerenvisages taking ‘measures’ in relation tothe employees in connection with thetransfer of employment contracts; theemployer is obliged to consult therepresentatives of the employees on suchmeasures with a view to reaching anagreement. There is no threshold numberof employees triggering this obligation.

The current and the prospective employermust provide the representatives of theemployees with all relevant information inwriting, or in the absence ofrepresentatives directly to the employees,in good time, but not later than onemonth prior to the transfer of theemployment contracts.


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During the consultation process, therepresentatives of the employees havethe right to meet with the representativesof the employer and the members of thedirecting bodies of the employer andsubmit, within 15 days of receipt of thewritten information, their writtenproposals with regard to the proposedmeasures in relation to the employees,unless a longer period is agreed upon.Although employees do not have a rightof veto regarding the merger oracquisition of the companies theemployers are, nevertheless, required togive reasons for any refusal to considerthe employees’ proposals.

A sale and purchase agreement of theentity can be signed before theinformation and consultation process isstarted, however, closing cannot occurbefore completion of the information andconsultation process; i.e. the employmentcontracts cannot transfer prior to theprocess being completed.

12.3 Notification of AuthoritiesThere is no general obligation to informgovernmental or regulatory bodies aboutthe transfer of employment contracts.However, collective lay-offs may triggerthe obligation to notify the UnemploymentInsurance Fund etc.

12.4 LiabilitiesAn employer who violates theinformation or consultation requirementmay be punished by a fine of up to€1300 (£1085). As a general rule theemployees cannot also claimcompensation for damages.

13. Termination13.1 Individual Termination Employers must be convinced that thereare suitable grounds for dismissal andensure that appropriate noticerequirements are adhered to.

If the court finds a dismissal unlawful, eitherparty can still claim that the court rules the

employment contract to be terminated atthe time of the unlawful termination.

Upon termination of the employmentcontract by a labour dispute committee,the employer may be ordered to pay theemployee compensation of up to threetimes the employee’s monthly averagesalary. Should the employee bepregnant, a representative of employeesor have the right to maternity leave, thecompensation may be up to six timesthe employee’s monthly average salary.The labour dispute resolution body hasthe right to alter the amount of thecompensation according to thegiven circumstances.

If the court finds that an employee hasterminated the employment contractunlawfully, the employer has the right toreceive reasonable compensation fromthe employee. One month’s salary isgenerally regarded as reasonable.

13.2 NoticeAn employer is required to give anemployee prior notice of termination ofthe employment contract in a formatwhich can be reproduced in writing (e.g.letter or email). However, a signed letteris recommended. Different notificationperiods apply depending on thestatutory grounds invoked forterminating the contract. Notice periodsvary from 15 calendar days to90 calendar days depending on thelength of employment of the employee.

If an employer fails to comply with itsnotice obligations, it is required to pay theemployee compensation equal to a dailyaverage remuneration for each day ofnotice not given.

Termination without notice orcompensation is permissible only inextreme circumstances where there hasbeen a severe violation of work dutiesby the employee which has aggravatingresults, for example conduct thatendangers the employer’s property,

other employees or third parties or inthe event of a loss of trust inthe employee.

13.3 Reasons for DismissalThe ECA permits termination of theemployment contract by the employer inlimited circumstances. These relate ingeneral to the employee’s conduct andcapabilities, or economic, organisationaland technological factors in theundertaking.

An employer is allowed to terminate anemployment contract for a good reason,connected with the conduct orcapabilities of the employee, and inparticular for the following reasons:

(a) a long-term inability to carry outduties of employment due to ahealth condition (i.e. four monthsor more);

(b) a long-term inability to carry outduties of employment due toinadequacy;

(c) a repeated breach of duties ofemployment;

(d) carrying out duties of employmentwhile intoxicated;

(e) committing a theft, mischief orsome other indication ofuntrustworthiness;

(f) inducing a third party to lose trust inthe employer;

(g) wrongfully causing damage to theassets of the employer;

(h) breaching the confidentialityobligation or a non-competitionagreement.

Termination of the contract by theemployer is also permissible on thegrounds of economic reasons, whichinclude: decrease in the volume of work,organisational changes, liquidation of theenterprise or declaration of bankruptcy ofthe employer.



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The employer must notify the employeeof the reasons for dismissal in a formatwhich can be reproduced in writing(e.g. email).

The employee can challenge the groundof termination at the labour disputebody or in court within 30 days ofreceiving notice of termination.Generally, if the termination of theemployment contract is found to beunjustified, the contract can still betreated as at an end (if this is theposition of either party) and theemployee is entitled to compensation ofup to three times the employee’saverage monthly salary.

13.4 Special ProtectionAn employer is prohibited fromdismissing pregnant women or anemployee on parental leave, except inlimited circumstances such as theliquidation of the employer, upon thedeclaration of bankruptcy of theemployer, in the event of unsatisfactoryperformance during a probationaryperiod, a breach of duty by theemployee, an indecent act by anemployee or loss of trust. An employer isalso prohibited from terminating anemployment contract on the groundsthat the employee has the right tomaternity leave, the employee is fulfillingimportant duties related to family forexample taking care of sick familymembers, the employee is temporarilyincapable of performing his duties, theemployee does not give consent toswitching from full-time work to part-timework or vice versa, the employee isperforming duties imposed on him by astate or local government authority, orthe employee is representing employeespursuant to a procedure provided by lawor a collective agreement.

The employment contract of anemployees’ representative cannot beterminated without considering theopinion of the employees the person isrepresenting or the Trade Union.


If a number of employees (dependent onthe number of employees working in thecompany, from five to 30 employees) arecollectively laid off within a 30 day periodfor economic reasons, the dismissal isclassified as a collective dismissal. In theevent of a collective dismissal, theemployer must follow a procedureprescribed by law in order to properlyinform and consult employees,representatives of the employees andUnemployment Insurance Fund.

Prior to a collective redundancy, anemployer must inform the employees ofthe collective dismissal and the reasonsfor the dismissal. In addition the employermust consult with the employees’representatives with the aim of reachingan agreement in relation to the possibilityof avoiding or reducing the number ofredundancies, possible measures toalleviate the consequences of theterminations and ways of supporting thedismissed employees in their search forwork, re-training or in-service training.During the consultation process theemployees’ representatives have the rightto meet with the representatives of theemployer and submit theirrepresentations within a period of 15 daysafter the receipt of the employer’sconsultation notice.

The employer must notify the EstonianUnemployment Insurance Fund of thecollective termination of the employmentcontracts and provide the relevantinformation as prescribed in the ECA. Thetermination of employment may not takeeffect earlier than 30 days after notifyingthe Estonian Unemployment InsuranceFund. In the event of earlier termination ofthe employment agreements theemployees may claim unlawfultermination, loss of certain compensationto employees paid upon collectivedismissals and overall unlawfulness of thecollective dismissal.

14. Data Protection14.1 Employment RecordsEmployers must maintain records on allemployees in personnel files. Theemployment contract must bemaintained for 10 years from the date oftermination of the employment contract.If the activities of the employer areterminated, the employer must transferthe documents to an archival agency.Upon the transfer of a business or partof a business, the employer musttransfer the documents to the legalsuccessor of the employer.

The Estonian Personal Data ProtectionAct applies to the processing of thepersonal data of employees. Theemployer is considered to be the chiefprocessor of the personal data as itmaintains the personal data of itsemployees. The employer must appoint aperson responsible for processing privatepersonal data (e.g. details of family lifeand data concerning trade unionmembership), and in the absence ofappointing such person, register itself atthe Estonian Data Protection Inspectorate.

14.2 Employee Access to DataAt the request of an employee, theemployer is required to provide theemployee with the employee’s personaldata collected by the employer. In additionthe employer must provide the employeewith a certificate of paid remuneration,personal income tax deductions andinsurance payments made for the benefitof the employee, at the end of eachcalendar year and upon the termination ofthe employment contract.

14.3 MonitoringThere is no regulation regarding anemployer’s ability to monitor anemployee’s use of email and internet.However the Data ProtectionInspectorate has issued instructionsregarding data protection in the contextof the employment relationship. Theseprovide that the employer should inform



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the employee about any such measurestaken. Therefore, it is advisable foremployers to agree in the employmentagreement or stipulate in internal rulesthat the employer has monitoring rights.

Employers are permitted to place CCTVwithin the workplace for the purpose ofprotecting staff and assets where suchmonitoring activity does not harmexcessively the legitimate interests of theemployee. Employees should beinformed about it.


Generally, the transmission of personaldata to third parties cannot occur withoutemployee consent. However, it ispermitted if the person to whom the datais transmitted processes personal datafor the purposes of performingobligations prescribed by law, for theprotection of the life, health or freedom ofthe employee or other persons, or if athird party requests information which isobtained or created during the

performance of public duties and accessto the information is not restricted. Thetransfer of data to other countries is notpermitted unless there is a sufficient levelof data protection.

Contributed by Sorainen Law Office


75A Guide to Employment in the European UnionFinland

Finland1. IntroductionThe most important concept in labour lawin Finland is the employment relationship.

Employment is based on statute,collective bargaining agreements and onthe principle of freedom of contract.Freedom of contract is limited both bycollective bargaining agreements, whenapplicable and by mandatory stipulationsenacted to protect the employee.

Traditionally central collective bargaininghas been the most important factor, andtoday collective agreements have inputfrom trade unions, employers and theGovernment. Such agreements aregenerally at sector or industry level.Agreements at company level have,however, during recent years becomean essential part of the collectivebargaining process. Even employerswho do not recognise trade unions(“non-organised employers”) are to alarge extent obliged to observe thesame terms of generally bindingcollective agreements, which employerswho recognise trade unions (“organisedemployers”) apply.


2.1 GeneralAll employees other than a managingdirector are subject to statutory labour law.

2.2 DirectorsThe managing director of a company isnot subject to statutory labour law. Theterms of employment of a managingdirector are governed by the individualcontract and general contractualprinciples provided for by the ContractsAct. The employment of seniorexecutives and directors is subject tostatutory labour law. Senior executivesworking directly under the managingdirector are, however, exempt from theapplication of the Working Hours Act.

3. Hiring3.1 RecruitmentUnder the provisions of the EmploymentContracts Act a part-time employeemust be given priority when applying fora similar full-time position. An employerwho in the previous nine months hasdismissed employees by reason ofredundancy must enquire at the locallabour office whether any of thoseformer employees are registered asseeking work via an employment office.If so, employment has to be offered inthe first instance to such formeremployees. Employers are otherwisefree to recruit as they wish on a non-discriminatory basis.

Executives are often recruited by head-hunting firms.

3.2 Work PermitsFor a non-EU national to work in Finland,he or she must obtain a worker’sresidence permit from a Finnish Embassyabroad. Depending on the duration andnature of the work a residence permitmay be sufficient and for specificcategories of short-term assignments nopermit may be necessary.

EU nationals and citizens of Iceland,Liechtenstein, Norway and Switzerlandcan freely work in Finland, provided thework lasts a maximum of three months.Where the duration exceeds threemonths they must register their right toreside in Finland, but they do not need aspecial residence permit.

4. DiscriminationAccording to the Employment ContractsAct, an employer must treat employeesimpartially without any unwarranteddiscrimination on the basis of ethnicorigin, religion, age, health, political orlabour union activity, or any comparablereason. The Act on Equality BetweenWomen and Men prohibitsdiscrimination on the basis of gender.

An employer violating these rules maybe liable for damages, compensation,fines or imprisonment.


5.1 Freedom of ContractIndividual employment contracts areregulated by the Employment ContractsAct (26.1.2001/55). The provisions arepartly optional and partly mandatory.Optional provisions will apply unless theparties have agreed otherwise, or anapplicable collective bargainingagreement provides otherwise.

If the terms of an individual employmentcontract fall short of the requirements ofany applicable collective agreement, theterms of the collective agreement apply.

5.2 FormA contract may be agreed orally or inwriting. However, an employer mustinform an employee of the basic terms ofthe employment relationship in writing, ifthe contract is oral or if these terms arenot included in a written contract. Theprovisions of the Employment ContractsAct (implementing the provisions ofDirective 91/533/EEC) deal with anemployer’s obligation to informemployees of the conditions applicable tothe contract of employment.

A fixed-term contract can only be enteredinto in special circumstances, e.g. thetemporary nature of the post, training orsimilar. If the contract is made for a fixed-term exceeding five years, after five yearsit may be terminated as if it was made foran unspecified period.

5.3 Trial PeriodsTrial periods cannot normally exceed fourmonths or, with regard to fixed-termemployments, half of the duration of thefixed term. They are usual but notcompulsory, and are applicable only ifexpressly agreed.

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Statutory rules provide that the employeeis not entitled to disclose or takeadvantage of his employer’s business andtrade secrets during the employmentrelationship. Gross breach of thisprohibition may entitle the employer toterminate the employment relationshipwithout notice. A smaller breach mayentitle the employer to terminate theemployment contract on notice.

Pursuant to the Employment ContractsAct, the employee is not entitled toundertake any activity that competes withhis employer during the currency of theemployment relationship. Gross breach ofthis prohibition may entitle the employerto terminate the employment withoutnotice. In less serious situations theemployer may still have grounds toterminate on notice.

The employer and the employee mayconclude non-compete and non-disclosure agreements when concludingthe employment contract or at any pointduring the employment relationship. Anon-compete agreement restricts theemployee’s rights to engage incompetitive activity after the terminationof employment. A non-competeagreement may only be concluded for alegitimate reason. When assessing thereason, both the nature of the employer’sactivities and the employer’s need forprotection and the employee’s positionand duties are taken into account.

The maximum term for a non-competerestriction is six months, starting from theend of the employment relationship. Ifthe employee is deemed to havereceived reasonable compensation forthe restrictions imposed by the non-compete agreement, the period ofrestriction can be one year. Theemployee may receive the compensationeither as a lump sum at the expiry ofemployment or in instalments during theperiod of restriction.

It is customary for non-competeagreements to include contractualpenalties. The contractual penalty maynot exceed the amount of pay theemployee has received in the six monthperiod prior to the end of theemployment relationship.

The non-compete agreement does notbind the employee if the employmentrelationship has been terminated due toreasons beyond the employer’s control.The restrictions set out above regardingthe duration of the non-competeagreement and the amount ofcontractual penalty do not apply toemployees who, by virtue of their dutiesand position, are deemed to be engagedin the executive management of theenterprise, corporate body or foundationor an independent part thereof or to havean independent status comparable tosuch managerial duties.

A non-compete agreement is null andvoid to the extent that it contravenes anyof the restrictions set out above. Thecourts may adjust a non-competeagreement in favour of the employee if itis considered unreasonable.

There are no specific restrictionsregarding the use of non-disclosureagreements, either in relation to durationor in terms of contractual penalties.However, non-disclosure agreements orprovisions may be adjusted by thecourts in favour of the employee ifconsidered unreasonable.

5.5 Intellectual PropertyStatute provides that the title toinventions created by employees duringemployment vests in the employer. Theemployee is, however, entitled toreasonable compensation.

Copyright issues are not dealt with understatute and thus the terms of theemployment contract must regulate thequestion of ownership of copyrightmaterial. There is, however, a customaryrule stating that should the employment

contract lack provisions dealing withcopyright ownership, employer ownershipis presumed if it is in the nature of theemployment relationship to createcopyright material. In addition, there arespecial rules in relation to computerprograms. These rules, which areincorporated into the Copyright Act andwhich are the result of implementation ofthe Directive 91/250/EEC, state that thecopyright belongs automatically to theemployer if not otherwise agreed in theemployment contract.

6. Pay and Benefits6.1 Basic PayThere is no defined statutory minimumwage, but most collective agreements seta minimum wage, which is normallynegotiated yearly or every two years. Theemployee is, however, entitled to areasonable and normal remuneration forthe work performed.

Unless otherwise agreed, salary must bepaid in cash at or near the place of work.In practice, the salary is usually paid tothe bank account of the employee.

6.2 PensionsIt is a legal requirement that all employersprovide a minimum level employmentpension plan. All pensions are reviewedannually and adjusted according to anindex taking into account prices andwages. During 2012, 5.15% of the grosssalary of employees under 53 years ofage and 6.50% of the gross salary ofemployees aged 53 years or over wascontributed by employees towards thecost of the plan, the average total costbeing 22.8%. Employers meet thebalance of the cost. Some companiesprovide additional pension coverage fortheir employees, especially inmanagement positions. The pensioncontribution percentages will remainunchanged in 2013.

6.3 Incentive SchemesVarious bonus arrangements or result-oriented salaries are a common means of


77A Guide to Employment in the European UnionFinland

incentivisation in several business fields.Share schemes are typically used formanagement level employees and selectkey-employees.

6.4 Fringe BenefitsCommon fringe benefits provided byemployers may typically include a lunchbenefit, mobile phone and company car(particularly for more senior employees).The employer may also supportemployees’ sport and cultural activities.More valuable benefits, for examplehousing, may be provided by theemployer, in certain cases.

6.5 DeductionsEmployers are obliged to make incometax deductions prior to the payment ofsalary. Other deductions includeemployer’s unemployment insurancecontributions and pension contributions.

7. Social Security7.1 CoverageThe state social security system providesa comprehensive range of benefits:retirement pensions, unemploymentbenefits, survivors’ benefits, disabilitypensions, industrial injury benefits, cashsickness benefits, health insurance,maternity benefits and family allowances.

7.2 ContributionsThe employer’s basic contribution during2012 was 2.12% for all employers. In2013, the employer’s basic contributionwill amount to 2.04%.

It is a legal requirement that all employeesshall be covered by unemploymentinsurance. During 2012 employeescontributed 0.60% of their gross salary tothe insurance. The employer’scontribution was 0.80% of the grosssalary up to €1,936,500.00 and thereafter3.20%. The contribution rate variesannually. In 2013, the percentages ofemployer’s and employee’s contributionswill remain unchanged. With respect tothe employer’s contribution, the monetary

threshold will be increased to€1,990,500.00 after which the employer’sunemployment insurance contribution willamount to 3.20%.

8. Hours of workDetailed laws exist on hours of work; thenormal maximum is 40 hours a week,eight hours per day. However, based oncollective bargaining agreements thelength of a working week is usuallybetween 37 and 39 hours.

There are specific provisions relating toovertime. The Working Hours Act, theprincipal statute relating to working hours,provides that daily overtime must becompensated at a rate equal to anincrease of 50% on normal pay for thefirst two hours of overtime and 100% onnormal pay for any extra hours. Workperformed on Sundays or on publicholidays must also be compensated withdouble pay. The parties can agree thatovertime work is compensated by timeoff. The length of the time off is calculatedas described above.

9. Holidays and Time Off9.1 HolidaysStatutory holiday is four to five weeksper year, depending on the length ofservice of the employee (two workingdays per month, if the length of serviceis less than one year at the end of theholiday accrual year; otherwise2.5 working days per month, Saturdaysbeing considered as working days).There are also several public holidays.Collective bargaining agreements usuallyprovide for a bonus of 50% of holidaypay for statutory holiday.

9.2 Family LeaveThe Social Insurance Institution of Finlandprovides allowances in the event ofsickness and for maternity, paternity andparental leave. There are specificstatutory provisions concerningemployees’ rights to take time off topursue education, union activities or to

take care of children. Female employeesare entitled to 105 days’ maternity leave(inclusive of Saturdays, but not Sundays)and male employees are entitled to18 days’ paternity leave. In addition, themother or the father may take parentalleave after the maternity leave.

The paternity leave regime was amendedwith effect from 1 January 2013 so thatthe father is entitled to a maximum of54 working days paternity leave. Asunder the previous regime, a maximum of18 working days of the paternity leavecan be taken simultaneously with themother, with the rest of the leave beingtaken after the maternity and parentalleave. The paternity leave will have to betaken before the child turns two.

The parental leave ends 263 days afterthe first day of the maternity leave.Depending on the taxable income of theparent in question, an average of 65% ofgross salary is paid by Social Securityduring maternity, paternity and/or parentalleave. Many collective bargainingagreements include an obligation on theemployer to pay salary during the firstweeks or months of the maternity leave.

9.3 IllnessThe employer is liable to pay wagesduring the employee’s sick leave. TheStatute provides that the sick pay mustbe paid until the end of the ninthweekday following the day theemployee’s sick leave began. Collectiveagreements commonly provide forconsiderably longer periods of paid sickleave. It is customary that the sick payperiod is adjusted according to the lengthof the employment relationship.

The Social Insurance Institution of Finlandwill pay a sickness allowance after thedisability has lasted for nine weekdays.The employer is entitled to receive thesickness allowance paid to the employee,if the employee has received pay from hisemployer during the same period.

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9.4 Other time offOther flexible working arrangementsinclude an employee’s right to take unpaidchild-care leave in order to care for theirchild until the child reaches the age ofthree. Further, an employee who has beenemployed by the same employer for atotal of at least six months during theprevious 12 months is entitled to takeunpaid partial child-care leave up to theend of the second year during which thechild attends elementary school.

In the case of sudden illness of a childunder 10 years of age, the parent may takeup to four working days off, unpaid. Inpractice under the terms of many collectivebargaining agreements employers will paysalary during such leave.

10. Health and Safety10.1 AccidentsHealth and safety in the workplace isgoverned by strict rules, to ensure thatthe working environment is suitable forthe nature of the work to be carried out.All employers are obliged to take outinsurance to cover personal injury anddisease suffered by their employeesduring, or because of, their employment.

10.2 Health and Safety ConsultationThe law requires, among other things,that there are health and safety managersin every company and elected health andsafety delegates in all companies withmore than 10 employees. Companieswith 20 or more employees must have ahealth and safety council (75% of themembers of which must be employeedelegates) to be consulted on all healthand safety matters.

11. Industrial Relations11.1 Trade UnionsAbout 80% of Finnish employees aremembers of a trade union.

The main employees’ unions are:

(a) SAK, the Central Organisation ofFinnish Trade Unions, representing

mainly blue-collar and low gradesalaried workers;

(b) STTK, the Confederation ofTechnically Skilled Employees,representing technically skilledemployees and mainly professionalsupervisors; and

(c) AKAVA, the Confederation ofUnions for Academic Professionalsrepresenting highly educated andacademically skilled employees.

The Act on Co-operation withinUndertakings (2007) and theRepresentation of Personnel within theManagement of Undertakings Act (1990)give employees the right to be consultedon decisions which affect theiremployment. These regulations alsoenable employees to influence decision-making to some extent. According to theAct on Co-operation WithinUndertakings, employers with 20 or moreemployees must consult the employeesor their representatives prior to makingdecisions on matters such asenlargement, redundancy, working timeorganisation, changes to jobspecification, employee transfers andchange of location. In companies with150 or more employees the employermust arrange employee representationon the supervisory board, on the boardof directors or in a corresponding organ,if the employees so request.

According to the Act on Co-operationwithin Undertakings, employees’representatives also have the right ofaccess to full statements of accounts andto information about the company’sfinancial situation.

11.2 Collective AgreementsCollective bargaining agreements aremade between employers and tradeunions generally at industry or sector levelbut also at company level. Theagreements usually have effect for one ortwo years, and cover a wide range ofissues, including minimum pay, employee

and employer co-operation and healthand safety matters.

Collective agreements bind not only theparties to the agreement, but also anyassociation of employers and employeesthat are, directly or indirectly, members ofeither signatory parties.

Generally binding collective bargainingagreements also bind “non organised”employers. A collective bargainingagreement is declared generally bindingwhen the number of employees workingin companies bound by the collectivebargaining agreement is approximately50% of all the employees in that sectorof business.

11.3 Trade DisputesCollective bargaining agreements imposean obligation to refrain from industrialaction, such as strikes, go-slows orlockouts. Such action is, however,forbidden only if the purpose of theindustrial action is to induce change incollective bargaining agreements or theCollective Bargaining Agreement Act.However, this obligation does not applyto individual employees.

Procedures and bodies exist in Finland todeal with disputes which arise betweenemployers and unions.

The National Conciliators’ office dealswith disputes which arise duringcollective bargaining. The two parties arefree either to reject or accept theproposals of the conciliator.

If a dispute arises from the interpretationof a collective bargaining agreement, it isdealt with by the Labour Court whosedecisions are final. The Labour Court hasthe power to impose penalties for breachof a collective bargaining agreement.


The Co-operation within UndertakingsAct includes provisions on the employer’s



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obligation to inform or consult with theemployees or their representatives priorto taking final decisions on differentmatters covered by the Act.


12.1 GeneralThe effect of acquisitions and mergerson employment contracts is regulated bythe Employment Contracts Actimplementing the relevant directives ofthe European Union.

The transfer of shares of a limitedliability company does not have anyeffect on employment contracts anddoes not generate any consultation orinformation obligations on the part ofthe employing entity.

The Employment Contracts Act providesthat when a business is transferred, allthe employees within that business aretransferred with it. The transferor’s rightsand obligations are automaticallyassigned to the transferee. The transferper se does not give the new employerthe right to dismiss employees, theemployer must have a valid ground fordismissals, for example, financial andproduction related reasons andorganisational restructuring of thebusiness due to the transfer. Theemployer has to justify the dismissal.

In the context of a business transfer theemployees of the business are entitled toterminate their employment relationshipswith effect from the date of transferregardless of their notice obligation or theduration of employment, if they havebeen informed of the transfer not lessthan one month before the date oftransfer. If the employees are informed ofthe transfer later than that, they areentitled to terminate their employmentrelationship with effect from the date oftransfer, or, on a later date provided it iswithin one month of having beeninformed of the transfer.

The information, consultation, negotiationand notification obligations outlinedbelow are equally applicable in thecontext of mergers, the mergingcompany assuming the transferor’sobligation and the receiving companyassuming those of the transferee.


Companies employing at least 20employees (on a regular basis) are obligedto supply information and/or consult ornegotiate with the employees affected bythe transfer of a business or a merger, ortheir representatives by virtue of the Acton Co-operation within Undertakings(30.3.2007/334 as amended).

The transferor and the transferee areobliged to provide the employeerepresentatives with specific information inrelation to the business transfer. Thetransferor has to inform the employeerepresentatives in good time before thetransfer is executed. In practice thetransferor has no obligation to inform theemployee representatives prior to thesigning of the transfer documentation, butshould inform them without delay after thesigning. The transferee should provide thecorresponding information to theemployee representatives no later thanseven days before the transfer. Thetransferee is also obliged to allow theemployee representatives the opportunityto ask questions, once they have receivedthe information. The transferee is obligedto respond to any questions raised. Inpractice the information sessions of thetransferor and the transferee may beorganised simultaneously.

The co-operation procedures set out inthe Act on Co-operation withinUndertakings must be followed in theevent of any post-transfer changes tofull-time contracts of employment intopart-time contracts, lay-offs andtermination of contracts. If the transfereeintends to execute such measures aseparate notification and co-operation

procedure must be carried out prior to afinal decision being taken in relation tothe measures.

12.3 Notification of AuthoritiesThe employer has no obligation from alabour law perspective to inform anygovernmental body of a mergeror transaction.

12.4 LiabilitiesA person belonging to the groupmanagement, the employing entity,employer or a representative of either,who intentionally or through carelessnessfails to observe the informationobligations will be liable to a fine, andpossibly to pay compensation in case thetransaction causes lay-offs. Failure toobserve the information obligations doesnot, however, prevent the transactionfrom completing.

13. Termination13.1 Individual TerminationAn employment contract for an indefiniteperiod can only be terminated withimmediate effect during a trial period orbecause one party has committed a“serious offence”. In addition, an employermay be entitled to rescind the contract ifthe employee is permanently disabled orpersistently fails to fulfil his obligation towork, and an employee may be entitled torescind the contract if the employer failsto pay remuneration or provide sufficientwork. If the employer has terminated orwishes to terminate the employmentcontract with immediate effect, he has toshow that there are or were sufficientgrounds justifying the dismissal. Theburden of proof as to whether there are orwere grounds justifying a summarydismissal is on the employer.

An employment contract made for aspecific period is terminated withoutnotice when the period expires.

An employer failing to comply with therules concerning termination ofemployment is liable to the dismissed


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employee for damages and/orcompensation. The amount ofcompensation varies between 3-24 months’ salary of the employee.The amount is determined on a case-by-case basis taking into account all therelevant circumstances.

13.2 NoticeIf no “serious offence” has beencommitted, an employment contractcan only be terminated on the giving ofnotice. Under the EmploymentContracts Act, employer’s noticeperiods are as follows:

unless (i) otherwise agreed by the parties;or (ii) the applicable collective agreementstipulates otherwise.

If the employee wishes to terminate thecontract the period of notice is: (i) twoweeks if the employment has lasted lessthan five years; or (ii) one month if theemployment has lasted over five years,unless otherwise agreed by the parties.

Unless otherwise provided for in theapplicable collective bargaining agreement,the parties can agree on notice periodsnot exceeding six months and mayprovide that the notice to be given by theemployee may never be longer than thatto be given by the employer.

13.3 Reasons for DismissalEven with notice an employment contractfor an indefinite period cannot beterminated by an employer unless there isan “especially weighty reason”. Suchreasons are specified in the EmploymentContracts Act but in a negative manner

only, that is, the Act states grounds thatcannot be regarded as especially weighty.The listed grounds are the following:illness (if it has not caused a substantialand permanent reduction of workingcapacity in the employee); participation ina strike or other industrial action; political,religious or other views and activities inpublic or in any association andexercising a statutory or other legal right.It is for the employer to justify a dismissal.

13.4 Special ProtectionStatute prevents the termination ofemployment because of compulsory orvoluntary military service. Termination ofemployment during (or because of)pregnancy or during maternity, paternity,parental or childcare leave is with certainminor exceptions prohibited.


An employment contract for an indefiniteperiod can be terminated on the groundsthat there has been a major reduction inthe amount of work for economic orrelated reasons, provided the reduction isnot just temporary. However, dismissal isdeemed to be unjustified in the followingcircumstances: if prior to or after thedismissal a new employee has beenrecruited to perform the same orcorresponding duties to those performedby the former employee or anyreorganisation of duties which does not inreality reduce the amount of work to bedone. The employer has to be able toshow sufficient grounds for a dismissal.

If the Act on Co-operation withinUndertakings is applicable, the employermust consult the employees or theirrepresentatives prior to the dismissals.The notice of these consultations mustbe given in writing. The period of notice isfive days. The minimum duration of thenegotiations depends on how manyemployees are going to be maderedundant. If the termination of contractsinvolves less than 10 employees thenegotiation period is a minimum of14 days. If it involves 10 or more

employees the negotiation period issix weeks. The parties to the negotiationhave the right to agree on other and evenshorter negotiation periods.

The manpower authorities have to beinformed about planned measures toreduce personnel. The information has tobe delivered to the manpower authoritiesno later than the commencement of thenegotiation process. A separatenotification to the manpower authoritiesmust also be made following the actualterminations of employment on collectivegrounds, regardless of whether thedismissals were subject to the co-operation proceedings.

If the employer fails to comply with theco-operation obligations outlined above,whether deliberately or by negligentomission, an employee may be entitledto compensation from the employer ofup €30,000.

14. Data Protection14.1 Employment RecordsThe principal piece of legislationgoverning data protection in Finland isthe Personal Data Act 1999 (“FDPA”),which implements the Data ProtectionDirective. The Act on Protection ofPrivacy in Working Life 2004 (“WLA”) andthe Act on Co-operation withinUndertakings 2007 also regulate dataprotection. The FDPA regulates thecollection, storage and use of informationheld by employers about theiremployees. The Data ProtectionOmbudsman and the Data ProtectionBoard, among others, supervise theinterpretation of the law.

An employer, as the data controller, isunder an obligation to ensure that itprocesses all personal data inaccordance with the provisions of theFDPA. The collected data must be:required for a specific purpose, accurate,up to date, and not stored longer thannecessary. In addition, the personal datamust be stored securely to avoid unlawful

Employee Service Period ofNotice

Less than 1 year 14 days

1-4 years 1 month

4-8 years 2 months

8-12 years 4 months

More than 12 years 6 months



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access or accidental destruction ordamage. Sensitive data may only beprocessed in accordance with thespecific provisions of the FDPA. The WLAincludes separate provisions concerningprocessing of data on the use of drugs.In certain circumstances an employer isentitled to process data entered incertificates on drug tests.

The data controller must keep a recordwith details on the nature of the data heldand the purpose for which it isprocessed. The record must be heldavailable for the employees.

14.2 Employee Access to DataEmployees have the right to make anaccess request concerning the datastored about them by the employer. Theright to access includes also a right to begiven details of whom the data has beendisclosed to. The information requestedby the employee shall be providedwithout unnecessary delay. If theinformation has not been provided withinthree months of the request, it isclassified as a refusal of the subject

access request. The matter may then bebrought to the Data ProtectionOmbudsman. A reasonable fee may becharged if employees make requestsmore often than once a year. The feecannot exceed the actual expensesincurred by the employer.

14.3 MonitoringTechnical monitoring of email (i.e. wherethe contents of emails are not monitored)by the employer must be discussed withthe employee representatives inaccordance with the Act on Co-operationWithin Undertakings prior to theintroduction of such monitoring. Emailsbelonging to the employer can beopened and read by another person withthe employee’s consent according to therules agreed at the working place. If theemployee does not give his/her consent,the WLA includes provisions setting outthe procedure to be followed in order toretrieve and open email messagesbelonging to the employer. Thisprocedure is detailed and multi-phasedand is aimed at ensuring and protectingprivacy. Prior to embarking on such a

procedure an employer must have offeredthe employee an alternative option to beused in case of absence.

The WLA also regulates the use ofcamera surveillance in the work place.


An employer who wishes to providepersonal data to third parties must do soin accordance with the FDPA principlesand processing conditions. Transmissionwithin the EEA is allowed. The transfer ofdata to a third party based in a countryoutside the EEA is permissible only if thecountry ensures an adequate level ofdata protection or one of a number ofother specific provisions are satisfied.Such transfers are permissible, however,where the employee gives his expressconsent to the transfer of personal datato third parties outside the EEA.

Contributed by Hannes SnellmanAttorneys Ltd


A Guide to Employment in the European UnionFrance

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France1. IntroductionEmployment relationships in France areprincipally regulated by the Labour Code(Code du travail), the numbering of whichwas altered by a law of 21 January 2008and a decree of 7 March 2008.Collective-bargaining agreements, internalregulations and practices are also veryimportant. In the event of a conflictbetween the terms of the various sourcessubject only to legal requirements whichare matters of public policy, the termsthat are most favourable to employeeswill generally prevail.

The Labour Code is intended to grantindividual and collective rights at work. Itis not possible to contract out of most ofits provisions. The system is intended toallow trade unions to supplement andbuild upon the Code through legallyenforceable collective-bargainingagreements (conventions collectives)negotiated for each sector of industryand for each region.

Collective-bargaining agreements arelegally binding between the employersand unions in the relevant industrialsector. Successive Governments have“extended” the provisions of collective-bargaining agreements to all employers ina particular sector, even if they were notsignatories to a collective-bargainingagreement in that sector, thereforevirtually all sectors of the economy arecovered by these agreements.

Labour Courts (Conseils deprud’hommes) have exclusive firstinstance jurisdiction in individualemployment disputes. Cases are heardand judged by laymen, elected employerand employee representatives, and notby professional judges. Appeals (in so faras they are possible) are made to thelabour sections of the local Court ofAppeal and then to the Supreme Court(Cour de Cassation). Professional judgessit in these two higher Courts.

First instance courts (Tribunal d’instanceand Tribunal de Grande Instance) have

exclusive jurisdiction in relation tocollective litigation involving staffrepresentatives and trade unions.

Labour Inspectors (Inspecteurs du travail)have various responsibilities with regardto enforcing employment regulations.Although they concentrate most of theiractivities on industrial undertakings, anemployer can expect a prompt visit in theevent of, for example, an accident atwork, or a lengthy and detailedinvestigation when an employer wishes todismiss employees due to economicreasons or organisational changes.


2.1 GeneralLegislation and collective bargainingagreements make a distinction betweenexecutives (cadres) and other categoriesof employees. “Cadres” are employeeswho have the responsibility of managingother employees below them. Broadlyspeaking, higher-level white-collaremployees and senior executives areconsidered “cadres”.

This status is of particular significance inthe context of the working timeregulations (see further below).

2.2 DirectorsOffice holders such as Chairmen, BoardMembers, Managing Directors andManagers (Gérants) of limited companies(Société Anonyme – SA, Société parActions Simplifiée – SAS, or Société àResponsabilité Limitée – SARL) arenormally considered to be companyofficers and not employees. Companylaw, not employment law, governs theirrelationship with the company.

Generally, except on the incorporation ofa company, a director may not becomean employee (whilst remaining a director)but an employee may become a director(and remain employed). A companyofficer may only perform salaried duties inaddition to his director’s duties if he wasalready employed by the company,

continues his technical duties as asalaried employee (i.e. duties that areclearly separate from the management ofthe company that he assumes as acompany officer), receives remunerationand exercises his duties under thesupervision and control of anotherperson. When an employee becomes acompany officer, he or she may retainhis/her salaried functions. If those,however, are not separate from thecompany office, the contract ofemployment is normally consideredsuspended and is then revived when thedirectorship ceases.

3. Hiring3.1 RecruitmentEmployers can recruit from a variety ofsources. The employment service run bythe state (Pôle Emploi) provides a freerecruitment service for employers and jobseekers but employers do not extensivelyuse this. Executive recruitment agenciesmay be used for senior or specialist staff.Employers for direct recruitment use thelocal and national press. Advertisementsfor staff must be in French even when anemployer is looking to recruit senior staffwith foreign-language ability.

In the event that specific techniques areused in the framework of therecruitment process, there is a legalrequirement that the candidate isinformed of the use of such techniques.The results of the possible recruitingtests must be kept confidential andcommunicated to the candidate. Thereis also an obligation to inform the WorksCouncil (comité d’entreprise), if any, ofsuch recruiting techniques.

There is a requirement for companiesemploying at least 20 employees that apercentage of positions be reserved fordisabled persons (currently 6%). Failureto comply with this requirement obligesthe employer to contribute to a specificfund dedicated to the development ofemployment for disabled persons(AGEFIPH).


83A Guide to Employment in the European UnionFrance

3.2 Work Permits Non-EU nationals cannot usually beemployed without a work permit(autorisation de travail). A work permitshould be obtained outside France bysubmission of the appropriatedocuments, including the proposedemployment contract, to the Ministry ofLabour via the local French Consulate.

If residence of a non-EU national exceedsthree months, a residence permit (cartede séjour) is required. This is obtainedfrom the local representatives of theFrench Home Secretary (Préfectures, inParis Préfecture de Police).

Failure to renew a permit constitutes a“real and serious” ground for dismissali.e. can justify a dismissal.

4. Discrimination The Labour Code prohibits discriminationon the grounds of sex, sexual orientationor identity, lifestyle, race, age, physicalappearance, religion, political opinions,union activities, etc.

When discrimination is alleged, theemployee only needs to assert the factthat in his view, the act complained ofconstituted direct or indirectdiscrimination. The employer then has toprove that it has not acted in adiscriminatory manner and that therewere objective, non-discriminatoryreasons for its behaviour. Failure to provethis will lead to an award of damages bythe Labour Court (Conseil deprud’hommes).

Enforcement of the anti-discriminationrules is carried out through the work ofLabour Inspectors who may reportinfringements to the Public Prosecutor.

Civil action may be taken by aggrievedemployees before the Labour Courts.Direct criminal action may also be takenby employees before a Police Court.

Discrimination is a criminal offencesanctioned by a fine of up to €45,000

and/or a maximum three-year prisonsentence for the legal representative ofthe company and a fine of up to€225,000 for the company itself. Thesesanctions are increased in certainaggravating circumstances (e.g. perpetration in a public place or bya representative of the state).

In addition, there exists a generalprinciple of equal pay and treatment foremployees doing the same work.

Where at least 50 people are employed inthe company, the employer must preparean annual report on equal opportunities.The report reviews the measures taken toachieve equality at work for both menand women and sets objectives for thefollowing year.

Sexual harassment and mentalharassment at work are prohibited andconstitute a criminal offence.

The law defines moral harassment as:“Repeated actions of harassment whichare aimed at or trigger damage to theemployee’s work conditions in a way thathis/her rights or dignity, physical ormental health could be altered, or his/herprofessional perspectives damaged.”

The law provides that “no employeeshould be subjected to situations or actsof sexual harassment.”

Sexual harassment is defined as the“repeated infliction of sexually connotedwords or behaviour affecting a person’sdignity because of the degrading orhumiliating nature of the words orbehaviour, or give rise to an intimidating,hostile or offending situation for the person”

The following also constitutes sexualharassment:”any type of seriouspressure, including one-off acts, inflictedpursuant to the actual or apparentpurpose of obtaining an act of a sexualnature, regardless of whether such act isdesigned to benefit the harasser or athird party”.

The French Labour Code provides thatboth sexual and mental harassment are acriminal offence in France, sanctioned bya fine of up to €45,000 and/or amaximum two-year prison sentence forthe legal representative of the companyand a fine of up to €225,000 for thecompany itself. These sanctions areincreased in certain aggravatingcircumstances (e.g. where the victim is aminor or vulnerable person, etc).

The employer may, in addition, takedisciplinary action against the harasser.

The Labour Code provides for damagesto be awarded against the harasser andthe employer. As the employer has anabsolute obligation to maintain the safetyof employees it is accordingly alwaysliable for any harassment carried out byits employees.

Discriminatory measures against thevictims or witnesses of sexual or moralharassment are also sanctioned by a fineof up to €3,750 and a prison sentence ofup to one year.


5.1 Freedom of ContractFrench employment law is extensivelyregulated but where it is not, employersand employees are free to agree theterms they wish. Nevertheless, anemployee may not, in advance,contract out of or waive his/herstatutory rights.

The parties to the employmentrelationship are theoretically free tochoose the law applicable to the contractof employment.

However, as a result of Articles 8 and 9 ofthe EU Regulation n°593/2008, dated17 June 2008 (Rome I), a contract ofemployment cannot seek to avoid theapplication of local mandatory regulationsthat are more favourable to the employeein the country where the work is

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performed. These mandatory regulationsare as follows:

(a) Regulations regarding MinimumWage (SMIC);

(b) Working Time regulations (notablywork at night and on Sunday);

(c) Health and Safety at Workregulations, Occupational medicine;

(d) Public Holidays;

(e) Paid Holidays;

(f) Rules regarding the termination ofthe contract of employment. Forinstance, on termination of theemployment contract, eachemployee is entitled to notice(except in the case of gross orserious misconduct), accrued paidholiday rights not yet taken, andseverance pay (indemnité delicenciement). Moreover, a specifictermination procedure must becomplied with (notably a pre-dismissal meeting and a writtennotice of termination sent byregistered mail after a compulsorycooling-off period).

5.2 FormSince 1 July 1993, as a result of the EUDirective dealing with information to begiven to the employee in his contract ofemployment, employers must deliverwritten terms and conditions ofemployment (with a description of work,workplace, salary, etc) within the first twomonths of employment.

Most sectors of the French economy arecovered by collective-bargainingagreements which usually also require aletter or a contract of employmentsetting out the basic terms ofemployment. Written contracts are alsorequired for certain categories ofemployment (for instance, fixed-term orpart-time employment).

The norm is a permanent or unlimited-term contract (contrat à duréeindéterminée). Fixed-term contracts are

only permitted in limited circumstancessuch as for the carrying out of specifictasks or to cover for the absence of apermanent employee, or in the event thatthe company faces an increase of itsactivity, provided however that the fixed-term employment is not used to fill anormal permanent position in thecompany. In most instances, they maynot exceed 18 months. If they do, theywill automatically be recharacterised ascontracts for an indefinite period. Exceptin limited cases, the termination of afixed-term contract usually gives rise to aliability to make a payment of 10% of thetotal salary paid during the period ofemployment by way of severance pay.

The law of 25 June 2008 introduced anew fixed-term contract for a specifictask or a pre-defined objective (contrat àdurée déterminée à objet défini). Thesecontracts must have a minimum durationof 18 months and a maximum duration ofthree years; they cannot be renewed andare limited to engineers and managementlevel. They may only be put in place if asector-wide or company-wide collectivebargaining agreement permits.

5.3 Trial PeriodsAny probationary or trial period (or itsrenewal) must be expressly provided forin the employment contract.

In addition, Article L. 1221-19 of theFrench Labour Code imposes acompulsory maximum duration for a trialperiod: two months for manual workersand other employees; three months forsupervisors (agents de maîtrise) andtechnicians; four months for executives ormanagers (cadres). The probationaryperiod may be renewed once for a periodequivalent to the duration of the originalprobationary period if permitted by thesector-wide or company-wide collectivebargaining agreement.

During this period, either party mayterminate the contract without having tospecify a cause for dismissal.

The trial period may only be terminatedfollowing a notice period. The duration ofthe notice is established by law andvaries substantially depending on whethernotice is given by the employer or theemployee. The notice period may notresult in the trial period extending beyondits original duration so that the decision toterminate the trial must be taken beforethe end of the trial period. (ArticlesL. 1221-25 and L. 1221-26 of the FrenchLabour Code).


An employee owes a duty ofconfidentiality to the employer bothduring and after employment. Duringemployment, there is also a duty not toengage in competing activities.

Undertakings not to compete after theend of the employment are permitted andenforceable if they are restricted in scope,term and geographical area, do not act toprevent an employee from continuing toearn a living or practise his/her professionand are commensurate with thecompany’s business needs. Non-competition covenants must provide forfinancial compensation, failing which theyare null and void. If the employeecomplied with such an unlawful clause,he or she would nevertheless be entitledto receive compensation before the court.Non-competition clauses are fairlycommon for certain types of employeessuch as salesmen and executives.“Excessive” non-competition covenantsmay be held null and void; alternatively,the courts have the discretion to “revisedown” such covenants.

Clauses preventing the employee fromworking with the company’s clientele orcustomers after termination of theemployment contract are now deemed toconstitute a non-competition clause, andrequire adequate financial compensation.

5.5 Intellectual PropertyThe French Intellectual Property Codedescribes in detail the regime applicable



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to employee’s inventions. Patentableinventions made by an employee at theemployer’s request in the course of hisduties belong to the employer (inventionde mission). In certain circumstancesemployees are entitled to additionalremuneration for such inventions. It isvery common, especially in certainsectors (information technology,chemicals, etc), to include provisionsrelating to intellectual property rights inthe employment contract.

6. Pay and Benefits6.1 Basic PayThere is a national minimum salary(SMIC) which is reviewed on 1st Januaryeach year by reference to certain indices.With effect from June 2012, the hourlyrate is €9.40 i.e. €1,425.67 per month(for 35 hours per week).

However, most collective-bargainingagreements further regulate salaries intheir sector. In practice, the nationallyagreed rates usually act as startingpoints for negotiators at the lowerbargaining levels.

Linking salaries to the cost of living indexis prohibited.

6.2 PensionsThe French pensions system is mostlypublic and state controlled. Ordinaryemployees benefit from two mandatorypension schemes (the pension schemeprovided for by the Social Security and acomplementary mandatory pensionscheme (“ARRCO”). Executives (cadres)benefit from the same pension schemesas ordinary employees in addition toanother complementary mandatorypension scheme (“AGIRC”). Allcompulsory schemes are on a“répartition” basis (“pay as you go”).

The use of private pension schemes isfairly exceptional within Frenchcompanies but is becoming morewidespread, especially for SeniorExecutives “cadres”. Most of those

schemes are provided by insurancecompanies or similar institutions and arebased on defined contributions.

6.3 Incentive SchemesA mandatory profit-sharing scheme(accord de participation) must beconcluded in companies and in“economical and social units” employingat least 50 employees. Where the profitpermits, the establishment of a specialprofit-sharing reserve (réserve spéciale departicipation) can be established for thebenefit of the employees; the funds areusually placed by the employer in a fundrun by a specialised institution and areblocked for four years, accruing interestfor the employees.

Discretionary bonus schemes (accordd’intéressement) and savings schemes(plan d’épargne d’entreprise) are optional.These schemes have rapidly developedover recent years.

The amounts paid to employeesthrough these incentive schemes aresubject to certain limits andcircumstances, exempt from social-security contributions and income tax.However, those sums are subject to afixed taxation (forfait social) of 20% witheffect from 1 August 2012.

The Amended Social Security FinancingAct for 2011 introduced a profit-sharingbonus (prime de partage des profits)granted to employees, in the event that,pursuant to Article L.232-12 of theFrench Commercial Code, the companypays its members or shareholdersdividends, whose amount per share hasincreased in comparison to the averagedividends per share paid in respect of thecompany’s two prior fiscal years.

6.4 Fringe BenefitsIt is common practice to provide seniorexecutives with cars and other benefits inkind. Such fringe benefits are consideredas salary and subject as such to socialsecurity contributions and income tax.

In most cases, they may not bewithdrawn from the employee withouthis/her prior approval.

6.5 DeductionsEmployees are responsible for declaringto the tax authorities their own incometax. The employer is not required todeduct tax at source; however employersdeclare annually to the tax authorities theamount paid to employees andconsultants, enabling the tax authoritiesto crosscheck the information given bythe employee on his/her actual income.The tax year runs from 1 January to31 December.

7. Social Security7.1 CoverageA basic level of benefits is provided bythe state system: retirement andsurvivor’s pensions, including themandatory complementary schemes,AARRCI and AGIRC, disability andsickness benefits, and family allowances,disability and survivors’ benefits andunemployment benefits. These schemesare funded by both employee andemployer contributions. Those who donot qualify for assistance under one ofthese schemes are covered by thenational solidarity scheme, financed bythe state.

7.2 ContributionsBoth employers and employees arerequired to make contributions to thesocial security system and employersmust deduct employees’ contributionsfrom their pay. Contributions to thebasic social security system amount toapproximately 28% for the employerand 16% for the employee. Thepercentage is based on gross salarywith various ceilings depending on thetype of benefit insured.

Further contributions to thecomplementary pensions system must bepaid to the AGIRC fund for executives(cadres) and to the ARRCO fund for allemployees. Minimum contributions


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payable vary on the basis of employeecategory and the level of salary:employees’ contributions range from 3%to 8% on average; employers’contributions from 4% to 13% on average.

The total amount of contributions to bepaid by the employer is approximately45/50% of gross salary and 20/25% forthe employees, on ordinary remunerations.

8. Hours of WorkWith effect from 1 January 2002, theduration of the working week wasreduced to 35 hours per week for allcompanies. Subsequent amendmentshave been made, the last on 20 August2008, in order to provide greater flexibilityfor employers.

35 hours per week is not the maximumduration of work but only the number ofhours above which employees areentitled to overtime pay.

The working time is not necessarilycomputed per week. It can be computedon a monthly basis, and in some cases, onan annual basis (often 218 days of workper year). When the working time iscomputed in days over the year, theemployer does not need to check theemployee’s exact working time, save onlyfor compliance with (i) the daily rest of11 consecutive hours per working day;(ii) the weekly break of at least24 consecutive hours; and (iii) theprohibition on working more than six daysper week. In addition, the French SupremeCourt recently held that working timecomputed per week must be provided forin the applicable Collective BargainingAgreements and the company-levelworking time agreements. The FrenchSupreme Court established very strictconditions in relation to the computation ofweekly working time and invalidated theprovisions of several collective bargainingagreements on the grounds that they didnot ensure compliance with the maximumlegal limit on duration of working time andweekly and daily rest.

Computing the working time in days overthe year, thus paying the employee alump-sum remuneration for his/her work,irrespective of his/her actual workingtime, requires an express clause in theemployee’s contract to this effect.

Overtime is limited for each calendar year.The law of 20 August 2008 allows theovertime ceiling to be set by acompany-level agreement, or failing that,by a collective bargaining agreement atsector level, confirmed by a ministerialdecree (Article L. 3121-11 of the FrenchLabour Code). An authorisation from thelabour authorities is no longer required inthe event the overtime exceeds theallowed limit but works councilconsultation remains compulsory.

Overtime is paid with an additional 25%premium for the first eight hours perweek and a 50% premium thereafter.

In such cases, time-off in lieu(contrepartie obligatoire en repos) mustbe granted to the employee. In theabsence of a company-wide collectiveagreement or a sector-wide collectivebargaining agreement for companies withup to 20 employees, the law establishestime-off at an equivalent of 50% per hourand 100% per hour for companies over20 employees.

Nevertheless, employers must complywith legal limits and ensure thatemployees do not work in excess of10 hours per day or 48 hours per weekor an average of 44 hours per week in aperiod of 12 consecutive weeks (althoughthese restrictions do not apply toemployees subject to a lump-sumremuneration with a reference to aspecified number of days of work peryear). Authorisation to exceed these limitscan in some cases be obtained fromlabour authorities.

Only senior management employees inthe company (Cadres Dirigeants) areexempt from these rules. French case lawhas defined this category of employee

very narrowly. Cadres Dirigeants areexecutives who have the highestresponsibilities within the company(i.e. they must benefit from wide powersof attorney from the management board),a large degree of independence in theorganisation of their work schedule, andthe highest compensation packages inthe company.

Sunday work is in most cases forbidden,and subject to exceptional authorisationfrom the local authorities.

9. Holidays and Time Off9.1 HolidaysThere is a basic entitlement to five weeks’paid holiday per year. Collective-bargainingagreements or individual employmentcontracts may confer rights toadditional holiday.

In addition, there are 10 public holidays(equivalent to bank holidays) for whichalmost all employees get paid by virtue ofcollective-bargaining agreements.

9.2 Family LeaveA pregnant woman is entitled to up to atotal of 16 weeks’ maternity leave,although this period is extended to26 weeks for the birth or adoption of athird child and increases further with thenumber of children. The woman receivesup to 80.32% of her salary up to a ceilingpaid by a social security institution. Inmany cases, collective-bargainingagreements require the employer to topthis up to full normal pay and theadditional remuneration is usually coveredby the supplemental health cover in forcefor the company’s employees.

Three days’ paternity leave is granted tofathers on the birth of a child andincludes entitlement to full pay.

In addition, fathers are allowed elevendays’ paternity leave (18 days in case ofmultiple births). The father is not entitled tofull pay, unless more favourable conditionsare provided for by a collective-bargaining



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agreement or where this is a commonpractice in the company. During this leave,the father is however entitled to socialsecurity benefits.

Mothers and fathers alike are entitled totake time off on a full-time or part-timebasis during the first three years followingbirth of any of their children. This parentalleave is unpaid by the employer but theemployee is entitled to benefits fromthe government.

9.3 IllnessSickness normally has the effect ofsuspending the employment contract andrelieves the employer of the obligation topay the employee. From the eighth day ofill-health absence that is not caused bywork-related accidents and illnesses, anemployee is eligible to receive 90% ofhis/her normal salary for 30 days andtwo-thirds of it for another 30 days.These periods increase with length ofservice. The cost is borne by the social-security fund. However, most collectiveagreements provide that the employer isobliged to continue to pay the whole orpart of the employee’s remunerationduring some of the sickness period; thisis usually covered by the supplementalhealth cover in force in the company infavour of its employees.

10. Health and Safety10.1 AccidentsEmployers are obliged to contributetowards a social security fund to maintaininsurance against any liability which mightarise as a result of industrial accidentsand which are not due to the negligenceor gross misconduct of the employer.

The cost of insurance varies accordingto the size of the company and thehistory of industrial accidents in thatparticular undertaking.

10.2 Health and Safety ConsultationA Health and Safety Committee (Comitéd’Hygiène, de Sécurité et des Conditionsde Travail) must be set up in all

companies employing 50 or moreemployees. Its members are designatedby the Works Council and the StaffDelegates (Délégués du personnel) fromamongst all the company’s staff. Thiscommittee is responsible for ensuring thatthe employer complies with health andsafety regulations and the currenttendency is to require their opinion onany matter that may affect theemployees’ conditions of work, includingfor instance a redundancy program.When the Works Council is consulted onhealth and safety matters, it must beinformed of the opinion of the Health andSafety Committee in relation to thatmatter before giving its own opinion.

11. Industrial Relations11.1 Trade UnionsFrench law grants the right to negotiate,the right to be represented by andorganised into a trade union and thefreedom not to join a union. The Frenchtrade union movement has five mainfederations which used to beautomatically representative at all levelssince the Second World War:

(a) Confédération Générale duTravail (CGT);

(b) Force Ouvrière (FO);

(c) Confédération FrançaiseDémocratique du Travail (CFDT);

(d) Confédération Française deTravailleurs Chrétiens (CFTC);

(e) Confédération Française del’Encadrement-ConfédérationFrançaise des Cadres (CFE-CGC).

However, the Law of 20 August 2008introduced major changes in relation tounions’ representativeness and thenegotiating process. The trade unionslisted above are no longer automaticallydeemed to be representative of therelevant employees but instead have toprove that they are representative of theemployees, in accordance with ArticleL. 2121-1 of the French Labour Code.

This recent legislative change is likely tobring new unions to prominence and tocause some of the older establishedunions to lose their influence.

Almost all federations are represented insome form at a national level innegotiations with the employers’federation (formerly CNPF now namedMEDEF) and the Government.

11.2 Collective AgreementsAlthough less than 10% of the workforceare members of a trade union, around 95%of employees are covered by some form ofcollective bargaining agreement (for thereasons explained in the Introduction).

Employers must bargain every yearover rates of pay and working hours incompanies where there is at leastone trade union representative(délégué syndical).

They must also negotiate on an annualbasis on the equality between men andwomen and on the employment(engagement and continued employment)of senior staff.

With effect from 1 January 2009, theconclusion of a company level agreementdepends on two conditions beingsatisfied: first, the agreement must besigned by a trade union that obtained atleast 30% of votes cast at the lastelections; secondly, the unions thatobtained the majority at the last vote castmust not object to the signature duringthe eight-day period following signature.

11.3 Trade DisputesThe French constitution recognises theright to strike, whereas lockouts are onlylegal in exceptional cases. Picketing isprohibited if non-striking employees areprevented or deterred from working.Short strikes in industry at factory levelare quite common but statistics showthat the number and length of strikes isdiminishing (except in the public sectorand particularly in the transport sector).


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Whenever 11 or more employees areemployed in a company or establishment,the employer must organise elections forStaff Delegates.

In any company employing 50 people ormore, the employer must organiseelections for a Works Council.

For purposes of calculating the numberof employees, employees of consultantsand secondees may also have to betaken into consideration.

The unions may appoint a representativein the company and also to theWorks Council.

In the event there are no candidates forthe election, the Works Council or thestaff delegates institution cannot beestablished. However, elections must stillbe organised every four years, or at anytime in-between at the request ofany employee.

Where a Works Council exists, theemployer is required to pay a subsidyequal to 0.2% of the wage bill for thefunctioning of the Works Council, inaddition to one for the organisation ofsocial and cultural activities foremployees. There is no subsidy for theunions of the staff delegates nor thehealth and safety committee.

In the case of companies employing50 employees or more, the WorksCouncil has the right to appointrepresentatives to their board meetings orto the supervisory board meetings(depending on the form of the company)and to the shareholders meeting. Thenumber of representatives will depend onthe size of the company: they cannot beless than two or exceed more thanone-third of the board membership.

They have a right to attend and discussbut no voting power. However, companylaw allows for articles of association to

provide employees on the boards ofcompanies with full voting powers.

Companies or groups of companies withat least 1,000 employees in the EU andwith employees in France and at least oneother EU Member State may be requiredto establish a European Works Council ora procedure for informing and consultingemployees at the European level.

Staff delegates must be informed on arange of matters and the employer mustmeet with these representatives at leastonce a month. The principal function ofthe staff delegates is to present individualand collective complaints to management.

The Works Council is both an informationforum and a consultative body and mustmeet every two months (once a month incompanies with at least 150 employees).It must be consulted on bothemployment and certain economicmatters. Information on relevant mattersmust be supplied to the Council.

The Works Council must be informed andconsulted on: questions relating to theorganisation; the management and thegeneral running of the company and inparticular on the measures which mayaffect the volume or the structure of thestaff; the duration of work; the conditionsof engagement and employment and thetraining of the staff (Article L. 2323-6 ofthe French Labour Code). The WorksCouncil is informed and consulted on themodifications in the economic or legalorganisation of the company, in particularin the event of merger, sale, importantmodification of the production structures,as well as on acquiring or sellingsubsidiaries (controlled by the Company).The employer must also consult theWorks Council when it takes a share in acompany and inform it when it hasknowledge of a new shareholding in itscompany (Article L. 2323-19 of theFrench Labour Code).

The Works Council must be consulted inmany different situations including

acquisitions, mergers and collectiveredundancy situations (see further below).


12.1 General French law complies with the EUAcquired Rights Directive: upon abusiness sale, the employment contractsare automatically transferred to thetransferee on the same terms andconditions pursuant to Articles L. 1224-1et al. of the French Labour Code.Dismissal is normally only allowed inlimited circumstances and redundanciesare forbidden before transfer.

Articles L. 1224-1 et al. of the FrenchLabour Code apply in the event of amerger, sale, restructuring of the businessor of the company or whenever part ofthe business is transferred through anasset sale when such sale correspondsto the transfer of any autonomouseconomic entity as defined by Europeancase-law and the case law of the FrenchCour de Cassation.


As is always the case when the WorksCouncil needs to give its opinion on agiven project, the consultation must takeplace before any decision on thetransaction is taken (i.e. sufficiently inadvance and, in any event, beforesigning/closing). Both the seller and thebuyer of the business must inform andconsult their respective Works Councils,if any.

A detailed memorandum of informationon the operation itself and on itsconsequences for the company and thetransferred employees must be preparedand disclosed sufficiently in advance tothe Works Council, so that it can be in aposition to make its opinion on thecontemplated operation, if need be afterhaving consulted its expert (a lawyer orauditor in most cases).



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One meeting may be sufficient, but inpractice the Works Council may ask formore details and further meetings. TheWorks Council may also ask for theappointment of an outside expert.Therefore, this consultation process cantake from two weeks to four months ormore, and depends on the type ofrelationship that has been establishedbetween management and the WorksCouncil members/trade-unions, the riskswhich the employees perceive they maysustain as a consequence of theproposed operation, and whether anexpert is appointed.

The sale by the shareholder of themajority of the capital it holds in a Frenchcompany will often require priorconsultation of that company’s WorksCouncil pursuant to Article L. 2323-19 ofthe French Labour Code, as the sale ofthe capital equates to a sale of thebusiness, according to the French Courde Cassation.

Specific works council informationprovisions must also be complied withwhere a company is involved in a“concentration” transaction (implying ananti-trust notification), with regard toFrench competition law (Article L. 2323-20of the French Labour Code).

In all these situations, the Works Councilmust be consulted in all instances prior tothe decision being made, which meansthat the Works Council must deliver aformal vote on the basis of detailed(written) information provided by theemployer sufficiently in advance. Again,the Works Council may ask for theappointment of an expert.

12.3 Notification to AuthoritiesThere is an obligation to notify and obtainthe prior authorisation of the LabourInspection in the event of a partialtransfer of a business before staffrepresentatives may be transferred tothe purchaser.

12.4 LiabilitiesFailing to consult the Works Council indue time when legally required to do so isa criminal offence punishable by a fine ofup to €3,750 and/or a prison sentence ofa maximum of one year (the prisonsentence is in principle not applied for alack of consultation). Liability for thecriminal offence falls on the managerpersonally (the president of the companyor his duly appointed representative) andwill appear on his criminal records inFrance. It should be noted that criminalliability will arise not only for failing toconsult the Works Council, but also forgoing ahead with the proposals underconsultation after meeting with the WorksCouncil if the latter has not given its viewon the proposals. In addition, the legalentity itself also incurs criminal liability forsuch conduct; if it is found guilty, the finecan be as high as five times themaximum fine for its legal representativein addition to a number of ancillaryadministrative sanctions.

The Works Council may also obtaininjunctive relief and obtain a stay of theproposed prospect/transaction pendingfull consultation.

13. Termination13.1 Individual TerminationEmployees must give notice of terminationto their employer in accordance with therelevant legislation, collective-bargainingagreement or individual contract andrespect the required notice period.

The employer may dismiss or make anemployee redundant provided that it hassufficient grounds for doing so.

The procedure for an individual dismissal,whether for personal cause orredundancy, requires the employer toformally invite the employee in writing toattend a pre-dismissal meeting.

The employee may be accompanied byanother employee, an employeerepresentative or, in the absence of

representative institutions in the company,by an outside person chosen from a listpublished at the town hall and theLabour Inspection.

Dismissals must be notified in a lettersent by recorded delivery not earlier thantwo clear days following the day of themeeting in the event of dismissal forpersonal cause, seven days in the caseof redundancy and 15 days in the eventof a redundancy of a “cadre”.

The dismissal letter must expressly setout the reason for dismissal that wasalleged and discussed with the employeeduring the pre-dismissal meeting. Noother reason for dismissal can then beasserted before the court in the event ofa claim.

When a redundancy is envisaged, theemployer must, in addition, implementredeployment actions, depending on thenumber of employees working in thecompany or the group:

In companies and groups with less than1,000 employees, the employer has toobtain documents from theunemployment organisation to providethe employee with advanced training andassistance (Contrat de SécurisationProfessionnelle – CSP) and give them tothe employee at the pre-dismissalmeeting. If the employee accepts theCSP, the contract will be terminated atthe end of a 21-day period with no noticeperiod being worked. The employer willthen fund the system by paying:

(a) three months of the notice pay tothe unemployment organisation(Pôle Emploi) and the balance if anyto the employee;

(b) the amount needed to meet theemployee’s individual training rights.

In companies and groups with 1,000employees or more, all employees maderedundant are entitled to a leave ofabsence in order to participate in a“redeployment program” (Congé de


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reclassement). The employee maderedundant must be informed of the natureof this redeployment program (i.e. inhis/her dismissal letter). The length of theredeployment program (i.e. between 4 to9 months, notice period included) isdetermined by the employer according tothe financial means of the company orthe group. With effect from the receptionof his/her dismissal letter, the employeebenefits from an eight day period in orderto accept, or not, the redeploymentprogram. The employment contract isthen terminated at the end of theredeployment program.

In certain cases, the employer is alsoobliged to discuss with local authoritiesthe effects of a collective redundancy onlocal employment, and find an agreementwith the local representative of the Statein order to compensate for the effects ofthe collective closure or redundancy.

In cases where an employer has failed toobserve the procedural requirements or isunable to show that there were sufficient“real and serious” grounds (whether of apersonal or economic nature) for thetermination of employment, or that therewas no serious or fundamental breach,the Court may consider the dismissal tobe unfair (“abusive”).

If the company has at least 11 employees,the judge must award damages to theemployee of not less than six months’gross pay provided the employee hasmore than two years’ continuous service.In other instances, the damages will be inaccordance with the employee’s actualloss. It is unusual for the Courts to grantdamages in excess of 24 months’ salary.

The Court will also order repayment bythe employer to the Pôle Emploi (seeabove) of up to six months’unemployment benefit received by theemployee. The Courts do not normallyorder reinstatement of the employee savein exceptional circumstances.

The law of 25 June 2008 introduced theconcept of a Termination by Agreement(Rupture Conventionnelle). This new formof termination requires a special procedureand approval by the Labour Authorities. Itenables the employee to receiveseverance pay and obtain unemploymentbenefits, although the termination is not adismissal or a resignation.

A Termination by Agreement is also usefulto negotiate the termination of staffrepresentatives who usually contest theirtermination unless a financial agreementis reached to their satisfaction. TheRupture Conventionnelle does notremove the special protection of staffrepresentatives, and in particular the needfor specific authorisation from the labourinspector, but the latter will not check thevalidity of the dismissal but only that theagreement reached between the partieson the termination was effected correctly.

13.2 NoticeIf the reason for the dismissal (whethereconomic or personal) is not classified asrelating to serious or gross misconduct(faute grave or faute lourde) on the part ofthe employee, the employer must givenotice to the employee before thedismissal takes effect or must pay theemployee compensation in lieu of notice.

The length of the notice period willdepend upon the length of service andthe category, and sometimes the age ofthe employee concerned.

Unless more favourable terms areprovided in the collective-bargainingagreement or in the individual’s contractof employment, the minimum notice isequal to one month for an employee withsix months’ to two years’ service in thesame company and two months for anemployee with at least two years’ service.It is three months for executives andmanagement level staff.

The employer may release the employeefrom having to work his/her notice,

subject to payment of an indemnity in lieuof notice.

13.3 Reasons for DismissalThe dismissal of an employee must bebased on “real and serious” grounds,whether of a personal or economic nature.

The existence of personal reasons fordismissal is a matter of fact to bedecided by the Courts. A strict proceduremust be followed by the employer,whereby the employee must besummoned in writing to discuss thereason for the proposed dismissal.

Dismissals on economic grounds, forredundancy or resulting from theemployee’s refusal to accept a proposedmodification of the employment contract,are strictly defined by law and include thereorganisation or restructuring of theemployer’s business or a change in thegeographical location of the business, etc.The law provides that the employer mustdefine the criteria for selection after havingconsulted the staff representatives. Thecriteria must however take account of thenumber of family dependants, seniority, thepersonal difficulties of the employee (anyphysical handicap, for instance) and theprofessional abilities of each category,subject to any specific provisions in theapplicable collective agreement.

Furthermore, a dismissal for redundancywill only constitute a valid cause fortermination if the employer can produceevidence that there are no other positionsavailable within the group worldwide thatare suitable for the employee and that, inaddition, it has made very substantialefforts to redeploy the employee beforefinally deciding to terminate the contract.

13.4 Special ProtectionSeveral categories of employees, such asemployees incapacitated by reason ofsickness, employees having suffered awork-related disease or a work accident,women on maternity leave, uniondelegates, employee representatives on



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various bodies and Works Councilmembers, enjoy special protectionagainst dismissal.

Dismissals of staff representatives willonly be allowed after following a specialprocedure which includes obtaining anofficial authorisation from theLabour Inspection.

Severance pay is payable to anyemployee with at least one year’s serviceunless he is being dismissed for seriousor gross misconduct. In addition theminimum severance pay provided for bylaw has increased to one fifth of the grossmonthly salary for each year of service,plus two fifths of the same salary for eachyear of service beyond 10 years (theseamounts are the same whether theemployee is terminated for dismissal orredundancy). Collective-bargainingagreements or individual contracts oftenprovide for higher levels of severance pay.


Business closures and collectivedismissals are included in the scope ofdismissals for economic reasons. If morethan one employee is to be dismissed for“economic reasons”, the rules relating tocollective dismissals will apply. Theserules include consultation with the WorksCouncil or, in the absence of such aCouncil, the staff representatives.

When collective dismissals affect ten ormore employees, over a 30-day period, inan undertaking with more than50 employees, the employer has anobligation to prepare a social plan (Plande Sauvegarde de l’Emploi) (formerlycalled a “Plan Social”) in consultation withthe Works Council which may coverissues such as voluntary part-time work,professional appraisal, guidance inseeking employment and early retirement.The social plan must also includeprovisions regarding the “CSP” orRedeployment Program. If the labourauthorities consider the planunsatisfactory, they may require the

employer to start the procedure again,including consultation and the drafting ofa new plan. In addition, if labour courtjudges consider the plan unsatisfactory,they may declare all the dismissals nulland void (which is the toughest sanctionavailable in French labour law, except forcriminal charges, which may be laid forexample for failure to respect staffrepresentatives’ prerogatives or healthand safety requirements).

A social plan mass-redundancy programwill last a minimum of three months but inpractice may take between 6 and12 months before notification of thedismissals may be sent out. It is atime-consuming and costly procedure butif managed correctly in a constructivemanner by the local management withoutundue haste, the employer will reach itsgoal within a reasonable time-period.

14. Data Protection14.1 Employment RecordsThe French law of 6 January 1978known as “Informatique et Libertés”(technology and freedom), modified by alaw of 6 August 2004, governs thecollecting, storing, processing and use ofpersonal data in France as well as theinternational transfer of personal datacollected in France.

Data controllers such as employers, mustcomply with a number of formalities anddeclarations to the “Commission Nationalede l’Informatique et des Libertés” (CNIL),an independent governmental agency,prior to collecting data for an automatedpersonal data processing operation. TheCNIL then delivers a writtenacknowledgement of receipt.

The law develops the means of control ofthe CNIL and particularly the access of itsagents to the premises of companies(refusing the access of the company’spremises to the CNIL agents is a criminaloffence sanctioned by an imprisonment ofup to one year or a fine of up to €15,000).

14.2 Employee Access to DataEmployees, as data subjects, have theright to make an access request. Thedata subject has to prove his identitybefore the requested information can becommunicated. No charge may be leviedand the data must be communicated inclear and intelligible language and thedata subject is entitled to a copy of therequested information.

The data subject may require theemployer to modify, complete, clarify,update or erase the information asappropriate. If the access request isrefused, the data subject has a right tochallenge the employer’s decision beforethe Courts.

14.3 MonitoringIn general, French law does not prohibitor limit the monitoring of the employees’level of activity at work, but merelyrequires prior notice to be given toemployees and a prior consultation withthe Works Council. Although an employermay, as a general principle, monitor theemployees’ use of Internet and emails, itmust at all times, comply with the generalprinciple of proportionality (ArticleL. 1121-2 of the French Labour Code).

Every monitoring measure must bejustified by the nature of the businessactivity of the employer’s entity and berespectful of the employees’ rights andliberties, including the right to a private lifeand privacy of correspondence.

French case law considers that, for theprotection of the right to privacy ofcorrespondence, an employer cannotsystematically access the content of allemails and attached documents of eitheremployees generally or specificallytargeted employees.

Email correspondence is deemed to beprofessional but the employer may nottotally forbid the use of the technology(whether phone, fax, email, internet etc)for personal reasons. Furthermore, theemployer may not access emails which



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are expressed to be private, filed in a fileof any sort marked private or whichmerely appear to be private by reason oftheir subject or recipient.


The notice filed at the CNIL must specifyall destinations for international transfers,and all international transfers require theprior authorisation of the CNIL. The CNILmay oppose any international transfer toa country that does not afford adequatedata protection to its subjects.

The European Commission Decisionsregarding “adequacy” have full effect inFrance, and are recognised by the CNIL.

Infringements of the Law may constitutecriminal offences and be sanctioned by afine of to up to €300,000 and, in theory,up to five years’ imprisonment forthe company’s legal representative.

Under Article 226-24 of the FrenchCriminal Code, organisations may beliable for such breaches. Fines are fivetimes higher for organisations, andspecific sanctions may apply, such as a

prohibition from carrying outprofessional activities.

In addition, email correspondence isprotected under certain conditions byadditional provisions of the FrenchCriminal Code. Infringements of theseprovisions may lead to punishment byimprisonment of up to one year or a fineof up to €45,000. Individual data subjectscan also claim damages in respect of anyinfringement of his/her privacy.

Contributed by Clifford Chance, Paris


93A Guide to Employment in the European UnionGermany

Germany1. IntroductionAlthough there is no single statutegoverning the individual and collectiveaspects of employment, labour law inGermany is highly regulated and codified.In practice, terms and conditions ofemployment as well as the nature oflabour/management relations aremoulded primarily by collective bargainingagreements between trade unions andemployers or collective agreementsbetween works councils and employersand to some extent by custom andtradition. However, employment contractsmust be negotiated within the strictconfines of labour legislation, regulationsand case law. Side by side with statutoryregulation, a number of ancillaryprinciples have been developed, such asthe employee’s duty of loyalty and theemployer’s duty of care.

Employee participation in the workplaceis well developed. There are“co-determination” rights conferred onworks councils, the latter being asignificant factor in areas such as hiringand dismissing employees, health andsafety and HR planning. Collectiveagreements are legally binding and a highpercentage of the workforce have someterms and conditions of employmentprovided by collective agreements.Disputes, both collective and individual,are handled by special labour courts.

The Federal Government was and is stilldetermined to work on legal projects withinthe field of labour law. Currently, theintroduction of minimum wages for specificindustries or even for employmentrelationships in general is under discussion.To date there has been one statutoryminimum wage. It has applied for thenursing services sector since August 2010.In general, minimum wages have beenestablished by collective bargainingagreements which were declared bindingon the entire industry sector(allgemeinverbindlich) or implemented byway of an ordinance (Rechtsverordnung),irrespective of whether the affected

employers are members of the relevantemployers’ associations or unions. Suchagreements or ordinances currently applyin the construction and construction relatedservices industry sectors, the buildingcleaning sector, the painting and varnishingsector, industrial laundry services, wastemanagement, special mining services,security services and training andqualification services. A minimum wage inthe temporary employment sector wasintroduced in 2011.

Industrial relations themselves continue tobe generally good. In some businessareas the practical co-operation betweenthe social partners is quite close.

2. Categories of Employees2.1 GeneralThe German system of labour lawrecognises various categories ofemployees and has traditionally drawn adistinction between white collar workers(Angestellte) and blue collar workers(Arbeiter). After this general distinctionwas declared unconstitutional severalyears ago, only a few provisionsdifferentiating between the two categoriescontinue to exist, most of which arefound in collective bargainingagreements, for example with regard tonotice periods.

2.2 DirectorsCertain protective laws do not apply toboard members or managing directors(Vorstandsmitglied in an AG andGeschäftsführer in a GmbH) and onlypartly to senior executives (LeitendeAngestellte). The distinction betweensenior executives and salariedemployees is in practice often not aneasy one to draw. Senior executives arenot represented by a works council(Betriebsrat) and they have a statutoryright to form their own committee(Sprecherausschuss). Thesecommittees have broadly similarpowers to works councils in relation todismissals and redundancies.

2.3 OtherGerman statutory law includes theprinciple that part-time employees shouldreceive the same protection as full-timeemployees. There must be justifiablereasons for an employer to treat part-timeand full-time employees differently. Onengaging a part-time employee, thenumber of working hours per weekshould be agreed between employer andemployee. If this is not expressly agreed,10 hours a week will be implied. In thecase of part-time contracts withoutgeneral agreement on the working daysand work hours, the employer must givefour days’ notice of the work he requiresto be done. Furthermore, if the contractdoes not contain any provisions withregard to the number of working hoursper day then the employer is obliged toprovide at least three consecutive hoursof work a day.

After six months of employment,employees generally have a right todemand a reduction in their working time.The employer is obliged to comply withthis request unless he can prove theexistence of business or operationalreasons justifying an objection to such areduction. Employees are, however, onlyentitled to part-time employment, if thetotal number of employees in thecompany exceeds 15. If part-timeemployees wish to increase their workingtime, employers are obliged to offervacant full time posts to these part-timeemployees first.

Similar provisions apply to employees onparental leave. A parent is entitled topart-time employment (15 to a max. of30 hours per week) during the parentalleave, provided that the employmentrelationship has been in existence formore than six months and the totalnumber of employees exceeds 15. Theemployer may only refuse such arequest, if urgent operational reasonsjustify the refusal.

Marginal employment is deemed to existwhenever the employee earns no more

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than €450 per month (regardless of thenumber of hours worked) or whenever theduration of the work is characteristicallylimited to two months or 50 days percalendar year, unless the nature of thework is professional and the total paymentexceeds €450 per month (i.e. €5,400 peryear). For the purpose of assessingwhether an individual is engaged inmarginal employment, the payment andduration of several periods of employmentmust generally be aggregated during oneyear. Whenever an employmentrelationship is classified as marginalemployment, the employer is only requiredto make a lump sum contribution of atotal of 30% of salary to the socialsecurity system (15% for pension, 13%for health insurance and a further 2% forincome tax). Following a change in thelaw, marginally employed employeesmust, in the future, be fully insured in thestatutory pension insurance scheme, butwill have to pay the 3.9% top up to the15% pension contributions themselves.Marginal employment relationships mustbe notified to the social securityauthorities in the same manner as full-timeemployment relationships.

3. Hiring3.1 RecruitmentEmployers must consult with the workscouncil (where there is one) about generalpersonnel planning. In companies withmore than 20 employees, the employermust, inter alia, consult with and obtainthe consent of the works council beforehiring. An employer with 20 or moreemployees must reserve 5% of jobs fordisabled employees or pay the authoritiesa compensation tax (Ausgleichsabgabe)of between €105 and €260 a month foreach disabled person he is obliged to,but does not in fact, employ. In additionto paying the compensation tax, theemployer may be fined up to €10,000 fornot fulfilling the quota.

3.2 Work PermitsAs a general rule, all non-EEA nationalswho wish to work in Germany must apply

for a visa before entering Germany for thefirst time. However there are exceptions,for example the rule is not applicable toUS nationals and nationals of some othercountries. The visa will be issued byGerman embassies based overseas.Once in Germany, all non-EEA nationalshave to apply for a residency and workpermit (Aufenthaltstitel) with the locallycompetent public offices for aliens(Ausländerbehörden). After obtaining theapproval of the competent FederalEmployment Office (Bundesagentur fürArbeit), the public office for aliens willconvert the visa and issue the residencypermit. The residency permit amounts inessence to a work permit, as theauthority to work is explicitly stated in theresidency permit.

The residency permit may only be issued ifa concrete job offer exists, the employmentdoes not result in any adverseconsequences for the labour market, noGerman workers are available for the typeof employment and filling the vacancieswith foreign applicants is justifiable in termsof labour market policy and integrationissues. The employer is required to furnishthe locally competent employment office(which will in turn pass this information tothe public office for aliens) with informationon pay, working hours and other terms andconditions of employment.

Since August 2012, non-EEA nationalscan apply for a so called “EU Blue Card”permitting them to stay in the EU for thepurpose of taking up gainful employment.The EU Blue Card is issued if thenon-EEA national has obtained auniversity degree or a comparable degreein Germany or a recognised foreignuniversity and earns a gross annual salaryof at least €44,800. In certain professionslacking sufficient job applicants(mathematicians, engineers, doctors,IT-specialists) a gross annual salary of atleast €34,944 is sufficient.

EEA nationals, as a rule, benefit from therules granting freedom of movement andlabour mobility. They no longer need to

apply for a residency and work permitwith the public office for aliens but needonly obtain a confirmation of registrationfrom the local public and administrationoffice (Meldebehörde).Employees fromRomania and Bulgaria, however, will needa residency and work permit in order towork in Germany until 31 December2013 under the provisions of theso-called 2+3+2-regulation of the EU.

4. DiscriminationThe General Equal Treatment Act(Allgemeines Gleichbehandlungsgesetz)transposed into German national lawseveral EU directives dealing withanti-discrimination regulations on18 August 2006. It considerablyexpands employees’ protectionagainst discrimination.

The General Equal Treatment Actprotects employees, job applicants andformer employees, including pensioners,against discrimination by the employer,other employees and third parties, suchas customers or service providers of theemployer. It expressly prohibitsdiscrimination on the grounds of race,ethnic origin, gender, religion or belief,disability, age or sexual identity. TheGeneral Equal Treatment Act containsprovisions specifying which activitiesconstitute a violation of the law, whatcriteria might be applied in determining aviolation and the obligations pertaining tothe employer in this context. Theemployer is obliged to take appropriatemeasures to protect his employeesagainst discrimination and harassment,for example by informing his staff of theanti-discrimination legislation, byappointing competent persons within hisorganisation where complaints can befiled, by undertaking precautionarymeasures where necessary and carefullydocumenting potential discriminationcases, but also by admonishing or evendismissing employees who discriminateagainst others. The most significantchange from the previous legal situationis the introduction of significant and


95A Guide to Employment in the European UnionGermany

uncapped sanctions, together with areversal of the burden of proof, whichputs the onus on the employer todemonstrate that the act complained ofwas not motivated by discriminatoryreasons. As the General Equal TreatmentAct does not clarify what intensity certainacts must have in order to constitutediscrimination or harassment under thelaw, the interpretation of the law is theobject of disputes and, in their wake,court decisions which provide moreconcrete criteria to help interpret the law.

The extent to which the General EqualTreatment Act applies to dismissals is notentirely clear. The Act actually excludesthe entire Dismissal Protection Act(Kündigungsschutzgesetz) from the scopeof its application. However, the EuropeanCommission has argued that thisexception violates European law and hasrequested that the General EqualTreatment Act is amended. In addition,the Federal Labour Court (BAG) has ruledthat the protection against discriminationguaranteed by the General EqualTreatment Act also applies to dismissalsunder the Dismissal Protection Act.

The General Equal Treatment Act alsocontains exceptions justifyingdifferentiations made on the basis of criteriawhich normally constitute discrimination.For example, discrimination on the groundsof gender can be justified if the gender isan indispensable prerequisite for the activityto be performed, or, discrimination on thebasis of age might be permitted if there areobjective reasons for it and a legitimatepurpose such as an underlying aim ofintegration of young persons, olderpersons and persons with obligationstowards dependants into the job market.

In the event of alleged discriminatoryactivities, the employee or job applicant willonly have to substantiate circumstanceswhich raise a presumption ofdiscrimination. Thereafter, the employerbears the burden of proof of demonstratingthat either there existed no discriminatorytreatment or that it was justified in

accordance with the General EqualTreatment Act. Discriminatory measures willbe void and might additionally lead to aclaim for damages. The General EqualTreatment Act distinguishes betweencompensation for financial loss and fornon-material damages; liability fornon-material damages being independentof the existence of fault or even negligenceon the part of the employer.

According to the General EqualTreatment Act, not only discrimination bythe employer and representatives of theemployer may trigger the employer’sliability, but also the activities of thirdparties, namely customers or serviceproviders of the employer.

Any claim for compensation for damagemust be asserted in writing within twomonths of the claim coming intoexistence and, unless acknowledged bythe employer, court proceedings mustbe instituted within three months ofmaking the written assertion. TheFederal Labour Court as well as theEuropean Court of Justice have ruledthat this two-month claim period isconsistent with European legislation.

It is advisable for employers to ensurethat internal procedures, modelemployment agreements and applicablecollective agreements comply with theGeneral Equal Treatment Act. It is alsovery important to ensure that managerswith personnel responsibilities receivecomprehensive training in relation to legalrequirements as well as being madeaware of the consequences of violatingthem. Where the employer candemonstrate that it provided managerswith appropriate training this will help theemployer defend any claim brought underthe General Equal Treatment Act.


5.1 Freedom of ContractAlthough employer and employee are, inprinciple, free to set the terms of their

relationship, this freedom is, in practice,limited by mandatory minimum statutorystandards. In addition, industry-widecollective bargaining agreementsbetween unions and employers,associations or directly with theemploying companies are common. Suchagreements are sometimes declaredgenerally binding in relation to certainindustries or trades (allgemeinverbindlich)and can therefore be legally binding onemployers who are not party to theagreements and thus risk being unawareof the agreement’s provisions.

In practice, employers often use standardemployment terms for all employees. Ifstandard terms are used, the general lawsregarding the review of standard terms andconditions apply. In the past few years,many standard provisions formerly deemedacceptable and valid have been deemedinvalid by the Federal Labour Court.Caution must therefore be exercised whendrafting employment terms and standardemployment contracts should be regularlyreviewed to ensure compliance withcurrent law and jurisprudence, asapplicable from time to time.

5.2 FormEmployment contracts should be inwriting and an employer is obliged tonotify an employee in writing of theessential conditions of his or heremployment within one month of the startof the employment in order to guaranteelegal clarity and make it possible for theemployee to know his or her rights.Non-fulfilment of this obligation does notrender the employment contract invalid.However, if conditions of the employmentrelationship are subject to litigation andthe employer has not properlydocumented the contractual rights andduties, the burden of proof for disputedfacts favourable to the employer may lieon the employer.

Fixed-term contracts are subject to thePart-Time and Fixed-Term Employment Act(Teilzeit- und Befristungsgesetz). This Actsubstantially restricts the ability of the

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employer to enter into fixed-term contracts.Generally, fixed-term contracts can beconcluded without justification only for aterm of up to two years and provided thatno employment relationship had existedwith the same employer (whether under afixed-term or indefinite contract) at any timein the past. Within this two year period,employers are allowed to extend fixed-termemployment contracts up to three times.As an exception to this rule, during the firstfour years after the establishment of a newcompany (but not in the case of a mergeror transformation of pre-existingcompanies), it is possible to concludefixed-term employment contracts for aperiod of up to four years. In all othercases, there must be a valid reason tojustify the agreement being for a fixed term.Justification for a fixed-term contractincludes, for example, the replacement ofan employee on maternity leave.Fixed-term contracts must be in writingand be signed by both parties before thebeginning of the employment. Fixed-termcontracts that do not fulfil the legalrequirements outlined above will not berendered invalid but will instead beclassified as contracts for anindefinite period.

5.3 Trial PeriodsProbationary periods are common andmaximum periods are often regulated bycollective bargaining agreements; they areusually up to four weeks for blue collarworkers and three to six months for whitecollar workers. Probationary periodscannot, in principle, exceed six monthsand must, in any event, be reasonable.

The minimum notice period during suchprobationary period is shorter than usual,i.e. two weeks (or even less underapplicable collective bargainingagreements). This notice period can,under very limited circumstances, beprolonged by agreement and thereforelead to a de facto extension of theprobationary period.


In principle, employees are subject to astatutory duty not to compete during thecourse of employment. Employees whoare not covered by this statutoryprovision are subject to a general dutyof loyalty.

Post-termination restrictions on anemployee’s competing activities must beagreed in writing, must provide for certainminimum payments to be made (essentially50% of the remuneration formerly received)throughout the period of the restriction andmust be for a reasonable period (notexceeding two years). The non-competitionrules in respect of a managing director or amember of a board of directors(Geschäftsführer or Vorstandsmitglied) aredifferent and to some extent less restrictive.

An employee’s general duty of loyaltyextends to the prevention of disclosure oftrade and business secrets during theemployment. Disclosure of suchinformation after termination can also beprevented provided this is expresslyagreed with the employee. It is possiblethat disclosure or use of certain trade orbusiness secrets may constitute a criminaloffence under unfair competition laws.

5.5 Intellectual PropertyInventions made by an employee duringthe course of employment and in fulfilmentof the employee’s contractual duties aregoverned by the Act on EmployeeInventions (Arbeitnehmererfindungsgesetz)and can be acquired by the employer byway of a declaration. If the employer doesnot want to acquire the invention, it has togive the employee written notification ofthis within four months. If the employeracquires the invention, the employee has aclaim to reasonable compensation fromthe employer. There is no specificlegislation addressing the issue ofcopyright and design patents in theemployment context.

The German Copyright Act(Urheberrechtsgesetz) is based on the

general principle that the employeeautomatically grants all user rights to theemployer whenever the work has beencreated in fulfilment of contractual duties.With regard to the creation of software aspart of the contractual obligation, theemployer is entitled to use the copyrightexclusively, unless otherwise agreed. Theuse of the copyright is in these casescovered by the employee’s wages. Whereemployers expect employees to makeinventions or to create intellectualproperty it is nevertheless advisable toconclude appropriate agreementscovering these matters.

6. Pay and Benefits6.1 Basic PayCurrently, a statutory minimum wageapplies only in the nursing services and inthe temporary employment sectors (seeabove), but the introduction of a minimumwage for specific industry sectors or evenin general is under discussion. In anyevent, collective bargaining agreementscurrently include minimum wageprovisions for various categories ofemployees. These are legally enforceableif the collective bargaining agreement isapplicable, either because:

(a) employer and employee aremembers of the parties to thecollective bargaining agreement (i.e.the employer’s association and thetrade union respectively); or

(b) the collective bargaining agreementin question has been declaredgenerally binding(allgemeinverbindlich) or anordinance (Verordnung) has beenpassed by the Federal Minister forLabour and Social Affairs; or

(c) the employer and the employeeagree individually that the collectivebargaining agreement or partsthereof are applicable.

Therefore, even where a company is notcovered by a collective bargainingagreement, its wage rates are ofteninfluenced by collectively agreed rates.



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Annual salary is usually divided into12 monthly instalments. In addition, a13th (and sometimes 14th) month’s salaryor Christmas or holiday bonuses areoften paid.

There is no obligation to index link pay.However, a similar effect is often achievedby the annual re-negotiation of wageswithin the framework of collectivebargaining agreements.

6.2 PensionsMany employers provide companypension arrangements. Pensionslegislation provides that employees areentitled to demand a company pensionfrom their employer by way of conversionof their remuneration (currently up to anamount of €2,784 per year in the oldFRG states and €2,352 per year in thestates of the former GDR) into pensioncontributions. The amount equals 4% ofthe income threshold for social securitycontributions and changes annually. Theemployee has a right to demand acompany pension in the form of a directinsurance policy that will mature and payout upon retirement, unless the employerwants to execute the company pensionby way of a pension fund. In addition,employers are, in practice, often obligedto provide company pension plansbecause of the terms of a collectiveagreement or simply to attract sufficientlabour. Most schemes are non-contributory for employees and theirqualifying periods of service to get vestedrights can be fairly long (up to five years).

Pension promises made on or after1 January 2005 by way of a directinsurance or pension fund must betransferred to a new employer at the(former) employee’s request (the so-calledprinciple of portability, Portabilität). Thisrequires the former employer to pay tothe new employer a sum equal to theactuarial value of the pension at the dateof termination of employment (up to amaximum amount of €69,600 in the oldFRG states (Western Germany) and€58,800 in the states of the former GDR

(East Germany) in 2013) thus resulting ina drain of liquidity at the formeremployer’s pension or insurance fund.

6.3 Incentive SchemesProfit-related pay is often paid tomanagerial and increasingly also tonon-managerial staff. Employers are incertain circumstances legally obliged toset up a savings plan for employees andcollective agreements often also requirethe employer to make a contribution.Equity Award Plans are often applied,usually in international group companies.It is worth noting that their introduction aswell as operation might be subject toGerman laws notwithstanding that theplan rules state that they are governed bythe law of another jurisdiction and shouldthus be aligned with them.

6.4 Fringe BenefitsFringe benefits vary according to the sizeof the business and may includebonuses, company cars (for more senioror frequently travelling employees), lifeand/or accident insurance, subsidisedcanteen or luncheon vouchers. If benefitssuch as Christmas bonuses, vacation payor company cars are provided under acollective bargaining agreement orindividual contracts, employees are likelyto have a right to them as part of theirremuneration package unless expresslystated otherwise.

6.5 DeductionsEmployee’s income tax (Lohnsteuer) isdeducted by the employer at source andthen accounted for to the tax authorities.The top income tax rate has in recentyears been reduced to 42% and appliesto an annual income of €52,882 or morefor single employees and €105,764 ormore for married couples. The basic taxrate is 15% and applies to incomeexceeding €7,664 for singleemployees/€15,328 for married couples.In 2007 a top income tax rate of 45%was introduced for an annual income of€250,731 or more for single employeesand €501,462 for married couples (the socalled “rich people deduction”). Another

deduction, introduced in 1992 to pay forthe re-unification programme, is the“solidarity surcharge”. Since 1998 it hasbeen set at 5.5% of the income tax rate.Church tax will also be deducted by theemployer if the employee is a member ofa tax raising church.

7. Social Security7.1 CoverageThe State social security system providesbenefits in the case of old age, disability,death, sickness, maternity, industrialinjury, unemployment and, where there isa need, for nursing care.

7.2 ContributionsThe social security system is financed byemployee and employer contributionswhich are based on the employee’s salaryup to various ceilings. With someexceptions, employers and employeesshare the contributions equally.

Employees without children pay anincreased percentage for the nursing careinsurance (of 1.275% rather than1.025%) and all employees pay in to thehealth insurance fund an additionalamount of 1.025% of their salary up tothe ceiling amount.

With effect from 1 January 2009, anyperson coming within the scope of thepublic health insurance system (i.e. everycitizen of Germany) is obliged to contractfor health insurance cover. In the past,only employees earning above a specificthreshold amount were able to opt out ofthe public health insurance system andtake out private health insurance. From1 January 2009, private health insurancehas been available to all citizens(i.e. including all employees irrespective oftheir income). Private health insurancecompanies are legally obliged to offerinsurance for a basic premium notexceeding the premiums of the publichealth insurance system. Private healthinsurance companies are required toprovide cover for any citizen who wantsit; without the ability to exclude high risk


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individuals or to charge higher premiumsin relation to higher risk individuals.

Self-employed persons are as a rule notmembers of the social security system(comprising unemployment insurance,public health insurance, retirementinsurance and nursing care insurance),but the qualifying requirements forself-employed status are very strict.Furthermore, certain groups ofself-employed persons are subject tomandatory membership of the socialsecurity system for old agepension insurance.

For the year 2013, the rates are:

Employers (alone) must also contribute tothe insurance for accidents at work. Thecontribution varies according to thespecific risk of the business concerned;the average contribution amounts to1.26% of the total gross remuneration,but may be significantly higher in accidentprone industries (e.g. constructionindustry etc.).

8. Hours of WorkThe number of working hours per week isusually regulated in a collective bargainingagreement or, if there is no collectivebargaining agreement, will be regulated inthe individual contract of employment.

Working time is restricted by statute to amaximum of eight hours per day on

average, including Saturdays, which can,in certain circumstances, be increased to10 hours per day. There is a general banon Sunday and bank holiday working,except in certain trades like hotels orrestaurants or for certain publicbusinesses, like hospitals. Extensions ofnormal working hours exceeding theselimits may be provided for in collectiveagreements, that is the 10 hour per daylimit can be increased, provided theworking time comprises significantperiods of standby-time. Otherwise,extensions may only be carried out inexceptional circumstances with theapproval of the appropriate labourauthority. Shop opening hours used to be

strictly regulated, but have beensignificantly extended and in someregions completely abolished.

Under most collective bargainingagreements the average working week isabout 37.7 hours over a five day week.The trend towards a 35 hour week in the1990s has started to reverse particularlyin the past year. In many industries andcompanies employees now work 40 hourweeks again.

Where a company is experiencingeconomic problems, it is possible toplace employees on short-time hours inorder to avoid redundancies. During thistime, employees receive a short-timeallowance from the Federal EmploymentOffice (Bundesagentur für Arbeit).Generally, the maximum period of this

allowance is six months. During thefinancial crisis in 2009, however, themaximum period was increased to24 months. In 2010, the maximum periodwas reduced to 18 months and again in2012 to 12 months.

Hours worked in excess of thecontractually agreed hours of work are asa rule considered overtime. Overtime willfrequently be covered by collectiveagreements and often has to be paid at apremium rate. Where this is not the case,and even though this is not legallyrequired, the payment of premium rates isalso often stipulated in individualemployment contracts. In line with thetrend towards longer working hours,many collective agreements provide forflexible working time with the possibility ofperiods of time off as compensation foraccumulated overtime in order to reducethe necessity to pay premium rates forovertime hours worked.

9. Holidays and Time Off9.1 HolidaysThere are between nine and 13 publicholidays per year depending on the State(Bundesland) in question. Statute providesfor a minimum of four weeks’ paid holidayper year (24 days counting Saturdays asworking days), but frequently collectivebargaining agreements as well as individualcontracts of employment will increase thisto five or even six weeks. For seniorworkers and salaried employees,25-30 days’ (not counting Saturdays asworking days) holiday per year is regardedas standard. The Federal Labour Court hasrecently decided that the increase of theemployees’ entitlement to annual paidholiday based on age provided for in thecollective bargaining agreement for thepublic service sector (Tarifvertragöffentlicher Dienst) is no longer permittedbecause it violates the anti-discriminationrules of the General Equal Treatment Act(age discrimination). The arguments onwhich the Court based its ruling are equallyapplicable to the private sector and, wherenecessary, collective bargaining

Percentage ofthe AggregateAmount

Limit for Basis ofAssessment per month

West-Germany

East-Germany

Retirement Benefit Charge 18.9% €5,800 €4,900

Unemployment Insurance(Employment Promotion) Charge

3.0% €5,600 €4,800

Public Health Insurance Charge 15.5% €4.350

Nursing Care 2.05% €3,927



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agreements and individual employmentcontracts will have to be amended.

9.2 Family LeavePregnant women are entitled to takematernity leave from six weeks prior toconfinement. They are entitled to a furthereight weeks after the birth (in some cases12 weeks). Throughout the maternityleave they will receive payment of up to amaximum €13/day from the healthinsurance fund while the employer has topay the difference between the woman’sregular net pay and the daily healthinsurance fund benefit. The amountreceived from the health insurance fundwill be dictated by the employee’s formerincome. Under the Act for Compensationof Employer’s Expenses (Gesetz über denAusgleich von Arbeitgeberaufwendungen)introduced in 2006, all employers cannow apply for reimbursement of thematernity pay the employer has paid tothe pregnant employee and of theemployer’s share of the contributions paidto the social security system.

After the end of the maternity leaveperiod, either parent has a right to claimparental leave for a period up to threeyears after the child’s birth for thepurpose of rearing the child. During thisabsence no payments have to be madeby the employer (unless otherwise agreedin any applicable individual or collectiveagreements), however, he has to makethe employee’s position available for theemployee upon her or his return to workor to allow them to return to a suitablenew position.

In order to encourage parents to takeadvantage of this provision, the Act onPayment during Parental Leave(Bundeselterngeld- und Elternzeitgesetz),which applies to all children born on orafter 1 January 2007, entitles eitherparent to a monthly payment of 67% ofthe former regular net pay, up to amaximum of €1,800 per month, if thechild is reared by the parent and theparent does not work more than 30 hoursa week. This amount will be paid monthly

for a maximum period of 14 months. Theparents are free to choose how to splitthis time between themselves, subject toa maximum of 12 months being taken byone parent. The other two months arereserved for the other parent. In 2011,the monthly payment has been reducedto 65% of the former regular net pay (if itexceeds €1,200).

There are in addition various statutoryprovisions protecting pregnant womenand new mothers/fathers in their dailywork and from dismissal.

9.3 IllnessEmployers must pay 100% of theemployee’s normal salary for six weeksduring any period of ill-health absence. Ifthe employee returns to work and has asubsequent period of ill-health absence,and provided the subsequent ill-health isnot the same as that that gave rise to theprevious absences, the employee is againentitled to receive up to six weeks’ full pay.Separate periods of (different) ill-health arenot aggregated. In businesses with notmore than 30-employees the healthinsurance fund will reimburse the employer,in general, 80% of the employee’s insuredearnings for this period. After this period, areduced benefit is provided by the localsocial security fund.

9.4 Other time offThe Part-Time and Limited TermEmployment Act (Teilzeit- undBefristungsgesetz) permits employees tomake flexible working requests aftersix months of employment. The employermust consent to flexible and part-timeworking unless there are operationalreasons for not doing so. Such operationalreasons may exist if the reduction of theworking time would fundamentally affectthe business’ organisation, safety orworking processes or if the reductionwould create unreasonable costs. Theemployer has to prove the existence ofsuch operational reasons.

In recent years it has become morecommon for employer and employee to

agree to a sabbatical leave which theemployee may use for example forstudying or travelling. Sabbatical leavemay be unpaid or, where collectivebargaining agreements do not providelimitations in this regard (for examplebecause deviations from theremuneration amounts payable as aminimum cannot be validly agreed inindividual employment relationships), theemployee may receive a reduced salary inthe period prior to the sabbatical leave inorder to receive payment during thesabbatical leave.

10. Health and Safety10.1 AccidentsEmployers must provide insurance foraccidents at work (see 7.2 above). Theamount that can be claimed in the caseof accident will depend on the level ofcover actually provided. There aredetailed requirements as to health andsafety at work and the State BusinessSupervisory Authority(Gewerbeaufsichtsamt) may imposeadditional requirements if the undertakingis changed or expanded significantly.

10.2 Health and Safety ConsultationWorks councils have rights of inspection,co-determination and to receiveinformation concerning health and safetyin the workplace. In addition, certainworkplaces are obliged by statute to setup Health and Safety Committees, whichmust meet every three months toconsider health and safety matters.Employers may also be obliged toemploy (either full time or part-time) a“safety specialist”, depending on thenature and size of the business.

11. Industrial Relations11.1 Trade UnionsThe right to freedom of association andthe right to engage in union activity on anemployer’s premises are constitutionallyguaranteed. An employer must permitunion officials to disseminate informationand recruit new members on company


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premises during non-working hours if theunion already represents members ofthe workforce.

Under the Constitution, employeescannot be compelled to join a trade unionand closed shop agreements areprohibited. Trade unions must meetcertain criteria of independence and besufficiently representative in order to beable to conclude collective agreements.

Most trade unions belong to one of thenational federations:

(a) DGB (DeutscherGewerkschaftsbund) – the largestwith the most affiliates

(b) DBB (Deutscher Beamtenbund) –for public sector unions

There is a growing trend of so-calledsector unions (Spartengewerkschaften)which, unlike the classic trade unions,only represent specific groups ofemployees either in an industry or incertain companies. As such unions tendto organise groups of employees who arekey to operations of businesses and areable to apply a high level of pressure oncompanies even when calling for a strikewith relatively few members. Some of themost well-known are, for example, thetrain conductors union (GDL), the air pilotunion (Cockpit) and the medical doctorsunion (Marburger Bund) but others havealready been, or are in the process ofbeing, established.

Employers are generally affiliated to thenational employers’ associations, theFederal Organisation of Employers’Associations (BDA or Bundesvereinigungder deutschen Arbeitgeberverbände).

11.2 Collective AgreementsCollective bargaining agreements may beconcluded between unions on one sideand individual employers or employers’associations on the other side. They areusually entered into for particularindustries or sectors of industries (forexample the chemical industry). They may

be at local, regional, State or Federallevel. They must be in writing and areusually negotiated annually or bienniallywith regard to salary but are applicablefor a much longer period if they deal withmatters such as, for example, health andsafety, working hours and holidays.

Collective bargaining agreements aregenerally legally enforceable between theparties, provided they are in writing andsigned by the authorised representatives.There is a central register of collectivebargaining agreements and the parties toa collective agreement are obliged to notifythe Federal Minister of Labour and SocialAffairs (Bundesministerium für Arbeit undSoziales) of the entry into force of such anagreement and any amendment made toit. However, the general public, includinginterested companies, cannot accessthe central register to obtain copies ofsuch agreements.

11.3 Trade DisputesThe freedom to strike is a basic rightgranted to trade unions and such actionwill be lawful provided it is supported bya union, has work-related objectives (asopposed to only political ones) and is theresult of a serious breakdown in thenegotiation process. During a strike,striking employees are not entitled toreceive pay. Provided the strike is notillegal, the employer cannot dismissstriking employees but may in limitedcircumstances lock-out and suspendstriking as well as non-striking employeesfrom working. In practice, German courtspermit very extensive strike activity, e.g.sympathy strikes and even flashmobactions are considered to be legal.


One of the most important principles inGerman industrial relations law is that of“co-determination”. This concept cangive employees the right to be involved indecision-making at various levels and tovarious degrees. Thus co-determinationcan occur at board level or at shopfloor level.

Depending on the circumstances,employees and their representatives maybe entitled, in connection with particularmatters, to:

(a) receive information fromthe employer;

(b) put forward ideas of their own andbe consulted; and

(c) approve or review decisions.

Where a company is required to form asupervisory board – Aufsichtsrat (broadlyspeaking, if the company is either anAG or a GmbH and employs more than500 people) – to oversee managementdecisions, employees have the right toelect a third of the members to this board(or half, if the company or in certaincases group of companies, has morethan 2,000 employees).

In establishments with more than fiveregular employees, a works council(Betriebsrat) can be elected at the freediscretion of the work force. Workscouncils have extensive rights toinformation, consultation and/ormandatory co-determination in respect ofmost organisational matters. Forexample, in companies with more than20 employees in Germany, workscouncils have a mandatoryco-determination right with regard to anymeasures which might causeredundancies or other significant changesto the company’s structure or itsoperations and might trigger significant(potential) disadvantages for theworkforce in Germany. In companies withmore than 20 employees in Germany,works councils also have the right to beconsulted on decisions regardingindividual personnel matters (such as therecruitment or transfer of an employee,dismissals and redundancies) and someindividual personnel matters. In addition,and irrespective of the size of theestablishment, the works council has toconsent on some general personnelmatters (such as selection criteria orevaluation principles) and must be



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consulted prior to any dismissal. Theworks council should meet at least oncea month with the employer.

Actions taken by the employer violatingthe works council’s rights may be legallyinvalid and can be punished by imposingfines on the employer for each incidentof violation.

Where the works council and theemployer are in dispute on a matter onwhich the works council has a right ofco-determination and fail to reachagreement, both parties can require aconciliation committee (Einigungsstelle) tobe established in order to resolve theissue. The conciliation committee isempowered by law to render a final andbinding decision.

An economic committee(Wirtschaftsausschuss) is created on acompany wide level in companiesregularly employing more than 100employees and is elected by the workscouncil(s). Its function is to regularlydiscuss the economic affairs of thebusiness with the employer.


12.1 GeneralThe rights of employees and employeerepresentative bodies in the context ofacquisition and merger situations differdepending on whether the transaction isdone by way of a share purchase or anasset purchase (share deal – assetdeal) respectively.

A share deal raises only limited legalissues since the legal identity of the targetcompany as employer does not changeupon the acquisition of shares and thepurchaser acquires the entity as is. Inparticular, a share deal is not subject tothe provisions regulating the transfer ofan undertaking.

In general, a share deal does not, as such,directly affect existing employee

representative bodies such as workscouncils or economic committees nor theconstitution of the supervisory board, ifany. Nevertheless, co-determination lawsare dictated by the number of regularemployees with the consequence thatfollowing an acquisition or merger, differentrules may apply and changes to the co-determination arrangements maybecome necessary. This consequencemust be borne in mind where thetransaction could lead to the overallnumber of employees being increasedbeyond the threshold number triggeringthe obligation to form a supervisory boardfor the first time or to create additionalrepresentation rights. Consequentlytransaction structures are often influencedby employment law related considerations.

In the event that a business (Betrieb) orpart of a business (Betriebsteil) is sold bytransfer of all or the essential tangibleand/or intangible economic assets, thisconstitutes a so-called transfer ofundertaking pursuant to section 613a ofthe German Civil Code (BürgerlichesGesetzbuch), which transposes theAcquired Rights Directive, irrespective ofthe number of employees affected.

Upon the sale of the business, or partof the business, all existing employmentrelationships, including those withexecutives but excluding servicecontracts with organs of the company(e.g. board members), are automaticallytransferred to the new owner and all therights and liabilities of the employmentrelationship continue to exist vis-à-visthe new employer. The purchaser is alsoliable for pension commitments made tothe employee. Where the employmentrelationships are subject to applicablecollective agreements these may beamended or replaced automatically byexisting collective agreementsapplicable at the new employer. Atransfer can have complicated legalconsequences amongst other things onthe application of collective bargainingagreements and works councilsagreements and can result in works

councils being displaced, depending onthe precise factual scenario.


In the context of an asset deal, pursuantto section 613a para 5 German CivilCode, the former employer and the newemployer are (jointly) obliged to informeach affected employee in writing about:(i) the date or proposed date of thetransfer; (ii) the reason for the transfer;(iii) the legal, economic and socialimplications of the transfer for theemployees; and (iv) any measuresenvisaged in relation to the employees(including, for example, dismissalsplanned by the new employer). Withinone month of receipt of the information,each employee may object in writing tothe transfer of his employmentrelationship to the new employer. If anemployee objects to the transfer, theemployment relationship will continueunchanged with the former employer. Theobjection may be declared vis-à-vis theformer employer or the new employer.

The German Federal Labour Court(Bundesarbeitsgericht) jurisprudence hasheld that the information can be providedby way of a standard letter, but theemployees must also be informed of theparticular consequences of the transferon their employment relationships. Theinformation must not only be sufficientlydetailed and legally correct, but, at thesame time, comprehensible for a personwithout any legal education. If anemployee is not duly informed, the one-month objection period does notstart to run and the employee may objectat a later point in time, possibly evenyears after the transfer. Complying withthis requirement is therefore a keyconsideration, in particular for a seller ofa business who will otherwise face therisk of claims by (former) employees longafter the sale. In practice, the risk ariseswhere the new employer terminatesemployees or otherwise causes them toregret that they have transferred to it, inparticular in the context of insolvency


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scenarios. Where an employee doesobject he can claim that his employmentwith the former employer continued andwhere appropriate can also claimoutstanding remuneration or benefits,pension claims etc.

Pursuant to section 106 of the GermanWorks Constitution Act(Betriebsverfassungsgesetz), theeconomic committee must be informedand consulted about a planned assetdeal. The company must provide theeconomic committee with the necessarydocuments concerning the asset deal assuch and describe the planned impact ofthe transaction on the company and, inparticular, potential personnel relatedconsequences provided no trade orbusiness secrets would be jeopardisedby doing so. The information must bemade in a comprehensive manner andenable the economic committee toprepare for its deliberations with thecompany. In practice, it is often unclear atwhat point in time the information mustbe provided. The information is in anyevent deemed to have been given late ifdecisions by the management bodieshave already been finalised, e.g. after theassets have been transferred.

The economic committee has no right toblock the asset deal, even if noinformation was disclosed. However,providing insufficient, false, or belatedinformation constitutes an administrativeoffence, which may result in a fine of upto €10,000 per case.

In general, there are no legal obligationsto inform the works council or tradeunions about an asset deal; however, it isnevertheless advisable to inform theworks council about the planned assetdeal. Pursuant to section 111 GermanWorks Constitution Act, in companiesregularly employing more than20 employees, the works council must,however, be promptly andcomprehensively informed about aplanned separation of a business, whichoccurs for example if only a part of a

business is transferred to the purchaser(Spaltung eines Betriebs). In addition, thecompany must attempt to conclude withthe works council a reconciliation ofinterests agreement (Interessenausgleich)before implementing a separation of thebusiness operation. This reconciliation ofinterests agreement describes theorganisational implementation of theseparation. If an agreement cannot bereached, both the employer and theworks council can bring this issue beforea conciliation board (Einigungsstelle) to beestablished for these purposes. Finally,the company is obliged to set up a socialplan (Sozialplan) with the works councilconcerning the mitigation and settlementof financial disadvantages which theaffected employees may suffer due to theplanned separation of the business. If noagreement on a social plan is reached,the conciliation board decides on theestablishment of the social plan.

In the context of a share deal, there is nolegal obligation to inform employees ofthe transfer of shares of their employerbefore or after the transfer, although thisis usually advisable for practical reasons.In principle, and subject to the extendedinformation/consultation duties describedbelow, the same information andconsultation duties towards its economiccommittee exist in a share deal as in anasset deal. There exists no obligation tonegotiate a reconciliation of interestsagreement and a social plan.

The Limitation of Risks Act(Risikobegrenzungsgesetz), which cameinto effect on 19 August 2008, extendedinformation/consultation duties towardsemployee representatives in the case of ashare deal. In the event of a takeoverwhich results in the acquisition of thecontrol over a company (deemed to occurwhen at least 30% of the company’s votingshares are acquired), the company’seconomic committee must be informed inthe same manner as described above inrelation to an asset deal. However, inaddition the management of the targetcompany must also provide the economic

committee with information about thename of the potential purchaser, itsintentions regarding the future businessactivities of the company and theirconsequences on the employees. In theevent of an auction process, the economiccommittee must be informed by thecompany’s management about all potentialpurchasers (deemed to be only companieswhich have tendered a binding offer for thetarget company) prior to the takeover. If noeconomic committee exists, the targetcompany is obliged to inform its workscouncil in the same manner as it wouldhave to inform its economic committee.

12.3 Notification of AuthoritiesThere is generally no obligation to notifythe authorities of a business transfer.

12.4 Liabilities Although the works council has no vetoright regarding the acquisition or thedisposal of a business itself, itsprocedural right of consultation in relationto redundancies and other significantchanges can lead to injunctionproceedings in court instituted by theworks council and can thus delay atransfer of undertaking in Germany untilthe legal obligations have been compliedwith if an agreement is not reached.

Violations of the co-determination rights ofthe works council represent anadministrative offence. In the event of aserious offence, legal proceedings may beinstituted against the employer for breachof statutory duties. In these proceedingsthe employer can be ordered to refrainfrom committing illegal acts or be orderedto perform specific acts, and the courtmay order that in the event of repeatedviolations administrative fines of up to€10,000 may be imposed per case.

13. Termination13.1 Individual TerminationThe rules in relation to termination ofemployment contracts are complex andan employer must ensure it complieswith applicable contractual, legislative



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and/or collective agreement or workscouncil agreement provisions in relationto such termination.

13.2 NoticeExcept for cases of gross misconduct, inwhich case the employer can dismiss theemployee without notice (fristloseKündigung aus wichtigem Grund), theemployer must comply with theapplicable notice periods. These may befound in a collective bargainingagreement, contract of employment andin applicable legislation. Minimum noticeperiods provided by law (which may bevaried by collective bargainingagreements or in individual contracts ofemployment) are as follows:

(a) in the first two years ofemployment, four weeks (to the15th of the month or end of thecalendar month);

(b) for employment between two and20 years, the notice period is on asliding scale from one to sevenmonths (to the end of thecalendar month).

Termination is not hindered by theemployee being ill or absent from work.

Notice of termination has to be given inwritten form to be effective. The writtenform prescribed is only satisfied if thetermination letter is personally signed bythe appropriate representative(s) of theemployer and if the original terminationletter is issued to the employee. Thismeans that termination letters transmittedby fax or email do not satisfy therequirement that the letter be in writing.

The termination letter must be signed bythe legal representative (e.g. theGeschäftsführer of a GmbH or a memberof the board of directors of an AG) of theemploying entity (either alone or if he is notauthorised to represent the companyalone, together with another legalrepresentative) or by the formally appointedhead of personnel. If any other person is tosign the termination letter, this person must

submit at the same time and together withthe termination letter a written power ofattorney in the original, signed by the legalrepresentative of the employing entity dulyauthorising him to sign the terminationletter. The termination letter does not haveto, and should as a rule not, refer to thereason(s) for the termination.

An employee is obliged to register as awork seeker with the competent localemployment agency as early as possibleafter termination, failing which he riskslosing some entitlement to unemploymentbenefits. Accordingly the terminationletter should refer to the employee’sobligation to present himself personally tothe employment agencies immediatelyafter receiving the notice.

Each potential dismissal, whether with orwithout notice, must be notified to theworks council (if any exists) before it canbe implemented. The notification mustidentify the employee concerned anddescribe the reason(s) for the planneddismissal. The works council then hasone week (in the event of a dismissal forcause without notice: three days) withinwhich it can notify the employer if itwishes to challenge the dismissal. Even ifthe works council does not agree with orobjects to the dismissal, the employercan proceed to give the employee notice.

The employee may file a claim with thelabour court within three weeks of receiptof the termination letter if he believes thedismissal was unjustified. Where the Courtfinds that the dismissal was not valid, theemployee will as a rule be reinstated in hisformer position. For the period betweenthe invalid termination of the employmentand reinstatement of the employee, theemployer will be obliged to pay salary inarrears (default salary) if the employee hasnot secured an alternative employmentincome during this period. Only inexceptional cases may the Court terminatethe contract of employment on the groundthat the terminated employee or theemployer does not find it acceptable tocontinue the employment relationship. In

these circumstances the Court will awardcompensation of up to 18 months’ pay(depending on the length of service, theage and social circumstances of theemployee) to the employee.

One notable feature of the Germansystem for dealing with disputes overdismissal is the employee’s ability incertain cases, in particular in cases wherethe works council has objected to thedismissal, to insist on remaining activelyemployed throughout the period duringwhich the claim is being heard,notwithstanding the eventual outcome ofthe claim.

13.3 Reasons for DismissalIf the Dismissal Protection Act(Kündigungsschutzgesetz) is notapplicable, there need not be a reasonfor termination. The dismissal mustnevertheless comply with the provisionsof the General Equal Treatment Act(Allgemeines Gleichbehandlungsgesetz).

If the Dismissal Protection Act isapplicable, which is broadly the casewhen the business has more than10 employees (or if the employmentrelationship in question started before1 January 2004, if the business had morethan five employees) and the employee inquestion has been with the business formore than six months at the date thetermination letter is issued to theemployee, a contract of employment canonly be terminated if there is either:

(a) gross misconduct, e.g. theft fromthe employer or colleagues, or amaterial breach of a non-competition covenant, in whichcase the employer can dismiss theemployee without notice (fristloseKündigung aus wichtigem Grund),provided the dismissal notice isissued to the employee within twoweeks of the employer knowing ofthe facts justifying the dismissal ; or

(b) one of the following justifyingreasons (“social justification”):misconduct, character/personality


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reasons (such as prolonged illness,drug addiction, loss of a driver’slicence where such is required forthe performance of the job) orgenuine economic business reasonsleading to a redundancy (so-called“dismissal for operational reasons”).

In the case of a dismissal for misconduct,the employer must have previously givena final warning (Abmahnung) to theemployee. In cases of termination forgenuine economic business reasons, ifthere were several comparable individualswho could have been dismissed for thisparticular reason, the employer mustshow that it selected the employee inaccordance with the mandatory legalrequirements, taking into account thesocial criteria i.e. length of service, age,obligations towards dependants anddisability (so-called “social choice”).

The burden of proof for establishing thatthe dismissal was socially justified is, ifchallenged by the employee, on theemployer. In practical terms, this is oftendifficult to establish and the labourcourts are known for generally favouringthe employee.

13.4 Special ProtectionCertain employees benefit from specialprotection from dismissal. For example,the consent of the competent labourauthority must be obtained before aseverely disabled individual, a pregnantwoman or a parent on parental leave canbe dismissed. Works council members orcandidates in the course of an election tothe works council are protected fromdismissal throughout their period ofmembership or candidacy, and for oneyear thereafter (except in the case of grossmisconduct). Special protection alsoapplies to the company’s data protectionofficer as well as to employees fulfillingsimilar functions required under the law.


Under the Works Constitution Act, incompanies employing more than

20 employees in Germany, the employeris obliged to inform the works council ofany planned closures, collectivedismissals or any other business oroperational changes (including splits andmergers of businesses) which may resultin material adverse effects for theworkforce in Germany. Case law providesthat a collective dismissal is defined byreference to a clause in the DismissalProtection Act and based on the totalnumber of employees in the business andthe number of employees affected. Forexample, the dismissal of six or moreemployees in a business with more than20 and less than 60 employees, or adismissal of 10% or 25 employees in abusiness with more than 60 and less than500 employees would be deemed acollective dismissal in this context. Theemployer also has to negotiate with theworks council and attempt to agree onmeasures for a reconciliation of interestsplan (Interessenausgleich) and conclude asocial plan (Sozialplan) specifyingcompensation measures (for example inthe case of collective dismissals bydetermining severance payments to bemade to dismissed employees, usuallybased on a formula taking into accountlength of service and salary). If the partiesfail to agree upon such a social plan it willbe determined by the conciliationcommittee (Einigungsstelle) at the requestof either party.

Operative changes undertaken by theemployer without prior attempt to agreeon a reconciliation of interests plan areillegal and may entitle employees toseek damages from the employer forfinancial prejudices sustained for aperiod of up to 12 months andseverance payments. Dismissalseffected in breach of these rules are,however, still valid in relation to theindividual employee. Also, the workscouncil may apply to the Labour Courtfor a preliminary injunction forbiddingthe employer to proceed with theimplementation of its plans in Germanyuntil the co-determination obligations

vis-à-vis the works council have beencomplied with.

In cases of collective dismissals, theemployer must also comply with specialprovisions of the Dismissal Protection Act.The planned collective dismissals must benotified to the Labour Authority before atermination letter is served on theemployee and at least 30 days before theend of the employment relationship. Atleast two weeks prior to this notification,the works council must be informed inwriting of the planned collective dismissals.Compliance with the legal requirements issubject to a review by a competentLabour Court and failure to fully complywith these obligations (including inparticular formal requirements) renders allthe dismissals invalid.

14. Data Protection14.1 Employment RecordsThe Federal Data Protection Act(Bundesdatenschutzgesetz) regulates thecollection, processing and use ofpersonal data. Generally, the Federal DataProtection Act allows private persons toprocess and use personal data when thisis permitted or required by statute orwhen the affected person consents. TheFederal Data Protection Act specificallygoverns data protection in theemployment context. However, theGerman Government has announced itsintention to enact an Employment DataProtection Act. For this purpose, theGovernment has proposed a draft billwhich provides for numerous additionallimitations and obligations on theemployer (e.g. as regards the monitoringof the use of telecommunication media,such as Internet and email byemployees); this bill is, however, stillpending and unlikely to be passed in thenear future.

The Federal Data Protection Act permitsthe recording, processing and use of anemployee’s personal data without requiringthe employee’s individual consent, if this isnecessary in order to decide whether to



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offer employment or for the execution orthe termination of the employmentrelationship. Whether or not thisprerequisite is fulfilled must be determinedin each case taking into account theconcrete facts and circumstances.

During recruitment the candidate entersinto a quasi-contractual relationship withthe potential employer entitling it tocollect information provided by thecandidate or by third parties, for instanceby former employers, but only if there is aconnection with the targetedemployment. Once it has beenestablished that the application of acandidate has not been successful theemployer is obliged to delete anypersonal data collected, unless thecandidate has agreed to the futurestorage and use of such data. Since theGeneral Equal Treatment Act shifts theburden of proof onto the employer in theevent discrimination claims are broughtagainst it (see above), keeping personaldata on file is deemed justified at leastuntil the two month period for raisingdiscrimination claims in writing and thethree month period for lodging claims atcourt have expired.

During employment the employer isallowed to record, process and usepersonal data which are covered by thepurpose of the specific employmentagreement, such as gender, maritalstatus, education and periods ofabsence etc, without requiring theexpress consent of the employee. Undercertain circumstances, the employer hasthe right to collect, process and usepersonal data in order to uncovercriminal activity. Upon termination of theemployment the employer is generallyobliged to delete the personal dataexcept to the extent that it is legallyrequired to store specific personal datafor specified purposes or has obtainedconsent from the employee concerned.

The employer has to ensure that hekeeps personal data accurate andconfidential. Furthermore, data may only

be used for the purposes for which theywere collected.

The works council has a right of co-determination, which includes practicallyall matters related to the employer’sstorage, use and processing of personaldata as well as monitoring of email andInternet usage. For instance, theprocessing of work reports is notpermitted without the consent of theworks council. The Federal DataProtection Act does not constraininformation rights of the works councilcovered by the Works Constitution Act.

In businesses employing more than nineemployees in automated dataprocessing, the employer is obliged toappoint a data protection officer who is incharge of ensuring compliance with theFederal Data Protection Act. Theemployer must support the dataprotection officer in his functions. Thedata protection officer enjoys specialprotection from dismissal.

14.2 Employee Access to DataThe German Works Constitution Act(Betriebsverfassungsgesetz) gives eachemployee the unfettered right to accesshis employment records during workinghours. After termination of employment,the former employee has to demonstratea specific interest before being allowed toaccess his employment records.

14.3 MonitoringThe monitoring of telephone usage is, ifpersonal use of the company telephonesystems by the employees is not banned,permissible only in very limitedcircumstances; breach of these monitoringrestrictions can give rise to severesanctions, including criminal sanctions.Even if personal use of a companytelephone system is banned, the employeris generally not allowed to listen in andrecord employees’ telephoneconversations, unless expresslysanctioned by individual consents,regardless of whether they are private orbusiness-related. If such measures are

necessary for the prevention of criminaloffences committed by the employee orsignificant damage to the employer, suchmonitoring may as an exception to the rulebe permissible even if no prior consentwas obtained and even illegally obtainedinformation may be admitted in court asproof if this is deemed appropriate basedon a balancing of the interests of employerand employee (e.g. where relevant criminaloffences were committed).

The legal position as regards themonitoring of employees’ email and theInternet is unclear as only limitedprecedent case law exists. In all caseswhere employees are allowed (expresslyor tacitly) to use the existing email andInternet infrastructure at work for personalpurposes in addition to business-relatedpurposes, whether this is during oroutside the employees’ working time, it isargued by many legal commentators thatvirtually no monitoring of email andInternet may be carried out by theemployer unless express written consentis obtained from each employee. Ifpersonal use of telecommunication media,email and Internet use, is not banned,telecommunications law may apply toemployer-employee relationships, to theeffect that any violation of the respectivelegislative provisions risks being classifiedas a criminal act. It is therefore advisableto address the subject of how the emailand Internet infrastructure may be usedand to what extent the use will bemonitored in appropriate companypolicies, or works agreements concludedwith the works council (if any exists) andto obtain individual consent from theemployees as well.

14.4 Transfer of Data to Third PartiesTransfer of employee data to thirdparties is generally prohibited unless theaffected person consents. Thisprohibition also extends to oralsubmission of personal data and willalso prevail after the termination of theemployment contract. The transfer ofpersonal data in the context ofoutsourcing of certain functions, such as


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payroll, for example, may however, bepermissible without individual consent inthe following circumstances:

(a) The third party is based withinthe EEA.

(b) The employer and the third partycontractually agree in writing termsof the processing of data (dataprocessing agreement(Vereinbarung über dieAuftragsdatenverarbeitung)).

(c) The data processing agreementcontains, amongst others,provisions addressing: themodalities of processing, the use ofdata and data protection measures.

The employer remains responsible forcompliance with the Federal DataProtection Act.

In any case, if the outsourcing does notmeet the requirements of a dataprocessing agreement, the expresswritten consent of each affectedemployee is required before outsourcingthe data processing function. Transfer tothird parties based outside the EEA or ofdata not falling within the ambit of ECLaw is only permitted by the Federal DataProtection Act if the recipient countryprovides an adequate level of protectionfor personal data or one of a series oflimited exceptions applies (e.g. a data

transfer agreement is concludedaccording to the standard form approvedby the European Commission).

Contributed by Clifford Chance, Frankfurt



107A Guide to Employment in the European UnionGreece

Greece1. IntroductionThe standards which apply toemployment relationships and the termsand conditions under which an employeeworks are laid down within a frameworkof rules created by the Constitution, laws,collective agreements, internal regulationsand custom.

In broad terms, labour law regulatesmatters such as pay, benefits, allowancesand other working conditions. Collectiveagreements and other internal regulationsprovide regulation on other issues suchas annual wage increases, cost of livingadjustments, allowances and benefitsincreases, equal access to promotionopportunities and promotion at work etc.

There is a hierarchy of legal sources oflaw so that, in general, provisions from alower source (e.g. a contract), shouldnot conflict with those from a highersource (e.g. a legislative rule), exceptwhere the provisions of the lower sourceare more favourable to the employee.Legislation is a higher source of law thancollective agreements, but the provisionsof an employment contract cannotcontravene an applicable collectiveagreement, unless that contract is morefavourable to the employee.

The Greek Code of Civil Procedureprovides a special procedure in relation toemployment disputes, whereby theCourts are obliged to attempt to reconcileboth parties during the first hearing. Inaddition, the Code also gives tradeunions and professional organisations theright to participate in pending litigationinvolving one of their members and theright to be party to litigation whichconcerns the interpretation andapplication of a collective agreement, withthe aim of protecting the commoninterests of those whom they represent.

2. Categories of Employee2.1 GeneralA distinction used to be drawn betweenblue-collar employees (carrying out manual

work) and white-collar employees (carryingout office work) in relation to noticeperiods, redundancy pay, annual holidays,payment of salary etc. This distinction hasnow been eliminated with regard to mostlabour issues, except in relation totermination of employment (see below).

Generally, legal provisions protectingemployees are equally applicable to theemployment of senior executives anddirectors. However, certain provisionssuch as those relating to overtime, nightwork and holiday bonuses are notapplicable to senior executives.

Employees may be engaged on a part-time basis. Full-time vacancies mustfirst be offered to part-time employees.Salary and benefits are calculated prorata to those for full-time employees, anda specific social security regime isapplicable to part-time employees.

3. Hiring3.1 RecruitmentAll recruitment by private sectoremployers must be done through theState Employment Agency (OAED),except if they announce the relevantemployment to OAED.

There are quotas for the employment ofspecial categories of protected individuals(e.g. veterans of the Greek Resistance).Greek or foreign undertakings whichoperate in Greece with more than50 employees must employ at least 8%of protected personnel, whether or notthere is a vacancy.

3.2 Work PermitsThe General District Secretary must issuean approval of employment where non-EEA nationals are employed.Application for approval of the employmentof a non-EEA national, which is submittedto the local Municipality of the place of theemployer’s place of business, must beaccompanied by certain documents andcertificates. If the approval is granted, it isthen forwarded to the Consulate of theforeign national’s place of residence which

then issues the visa for entry into Greece.A residence permit must also be obtainedfrom the local Municipality.

Less stringent provisions apply in relationto certain categories of senior employees,including management level employees,Board Members of multinationals, high-ranking executives of subsidiarycompanies and branch offices of foreigncompanies. Such employees arepermitted to enter Greece after obtaininga special entry permit from the GreekConsulate in the applicant’s country ofresidence. The application for such anentry permit must be accompanied by anumber of specified documents. Uponarrival in Greece, the Prefecture, will issuea work permit upon production of theentry visa, and the employment contract.A residence permit will also have to beobtained from the local Municipality.

4. DiscriminationThe Greek Constitution, EU legislation,ratified international agreements andvarious other laws and decrees prohibitdiscrimination on grounds of sex,nationality, union membership, familystatus, political belief, religion, disabilityetc and provide for equal treatment ofmen and women.


5.1 Freedom of ContractContracts of employment may neitherderogate from the rules of public policynor from the provisions of any relevantcollective agreement, labour regulation orarbitration decision, except if theprovisions of the contract are morefavourable to the employee. In practice,the contract of employment creates aframework for the employmentrelationship, while its content isdetermined by overriding legislation andcollective agreements.

5.2 FormThere are no particular legal requirementsin relation to the form and the content of

A Guide to Employment in the European UnionGreece

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an employment contract. Contracts maybe oral or written, except in respect ofpart-time employment where the contractmust be evidenced in writing. Legislationdoes however impose restrictions on thesuccessive use of fixed term contracts.

By virtue of Presidential Decree156/1994, which has implemented EUDirective 91/533/EEC, the employer isobliged to inform the employee of thesubstantial terms of the employmentcontract. The information in questionmust include at least the following:

(a) the identities of thecontracting parties;

(b) the place of performance of workand the residence address ofthe employer;

(c) the post or specialisation of theemployee, his rank, the category ofhis employment and the object ofhis work;

(d) the date of commencement of theemployment contract or the workrelationship and its duration, ifconcluded for a fixed-term;

(e) the duration of paid leave to whichthe employee is entitled, as well asthe manner and time of its payment;

(f) the amount of compensation dueand the time limits the employer andemployee must comply with in caseof termination of the contract or ofthe work relationship with notice;

(g) the wages of any kind to which theemployee is entitled and thefrequency of payment thereof;

(h) the duration of the normal daily andweekly employment of theemployee; and

(i) reference to any applicablecollective agreement which definesthe minimum terms of remunerationand work of the employee.

An employer will satisfy his obligations ifthe written employment contract includesthe information outlined above.

5.3 Trial PeriodsTrial periods must not exceed the timeneeded by the employer to assess thecapabilities of the employee concerned.Such trial periods are taken into accountfor the calculation of severancepayments, retirement indemnities, holidayentitlement etc.


There is a general duty on employees tokeep the employer’s secrets confidential.Provisions that prevent employees fromworking for a competitor for a period aftertermination must be agreed ad hoc,either as clauses of the employmentagreements or separately, as long as theyare reasonable (in terms of term,geographical application and the scopeof restrictions) and they do not harm theemployment prospects of the individualconcerned. Depending on the nature ofthe restriction imposed the employermust provide the employee with anindemnity in exchange for the restrictiveundertaking. There is no standard rate ofindemnity, it is estimated according to thenature of the restriction in question.

5.5 Intellectual PropertyIf an employee creates intellectualproperty in the course of his employment,the creator remains the initial beneficiaryof the real and moral rights to suchproperty. In the absence of an agreementto the contrary, those rights, deriving fromthe real rights, which are necessary forthe fulfilment of the purpose of thecontract are automatically transferred tothe employer.

Inventions made by an employee belongto that employee except in twocircumstances. Firstly, when an inventionis the result of an employment contract,the object of which is research anddevelopment, it will belong exclusively tothe employer. Secondly, when theinvention is made during the term of acontract using equipment and informationwhich belong to the employer, 40% of theinvention will belong to the employer and

60% to the employee. The employer haspriority in the use and exploitation of theinvention, but is obliged to compensatethe employee according to the value ofthe invention and the benefits accruedfrom its exploitation.

6. Pay and Benefits6.1 Basic PayOn 1 April 2014 a new system forformulating the legal minimum salary andminimum daily wage thresholds will enterinto force. The new system’s formulationwill be determined in the first quarter of2013 by an act of the Council of Ministers.

From 12 November 2012 until the newsystem enters into effect, the legalminimum salary is equal to €586.08 permonth for employees over 25 years ofage and €510.95 for employees under25 years of age, whereas the legalminimum daily wage is equal to €26.18for workers over 25 years of age and€22.83 for workers under 25 years of age.

Prior to these changes, the minimumsalary and minimum daily wage were setfor most employees by collectiveagreements negotiated annually by theFederation of Greek Industries (SEB) andthe General Confederation of GreekLabour (GSEE). However, pursuant tothe Medium-Term Fiscal StrategyFramework 2013-2016, and startingfrom 12 November 2012, the terms ofthe National Collective Agreementestablishing the minimum salary andminimum daily wage are only in force foremployees working for employerswho belong to the contractingemployer unions.

Employees are entitled to thefollowing bonuses:

(a) Christmas bonus – one month’ssalary or 25 days’ wages foremployees paid on a daily basis;

(b) Easter bonus – half of a month’ssalary or 15 days’ wages foremployees paid on a daily basis; and



(c) Holiday bonus – half of a month’ssalary or 13 days’ wages foremployees paid on a daily basis.

The automatic salary increase system isno longer applicable. Minimum salarygenerally increases twice a year. As aconsequence of the recession, minimumsalaries and wages have not increasedsince 2010.

6.2 PensionsPrivate pension schemes are uncommon,and those that do exist are provided bysubsidiaries of multinational companies orby large employers such as banks. Thebasic rules governing private pensionschemes have not yet beensystematically dealt with and there iscurrently no specific legislative provision.

6.3 Incentive SchemesShare participation schemes wereintroduced by law in 1987. Under theseschemes, undertakings can distributeprofits to their employees each year in theform of shares.

6.4 Fringe BenefitsCars, enhanced health coverage, mobilephones, laptops, cars and housingfacilities are benefits most commonlyprovided to senior executives.

6.5 DeductionsEmployers are obliged to deduct incometax at source according to a scaleprovided by the tax authorities.

7. Social Security7.1 CoverageThe majority of Greek employees arecovered for basic social security benefitsby the Social Insurance Institute (IKA),which covers industrial and commercialworkers, and OGA which coversagricultural workers. Fairly generouscover is given in respect of retirement,survivors and disability benefits as well ashealth care and sickness benefits. TheManpower Employment Organisation(OAED) provides family allowances and

unemployment benefits. In addition, thereare a large number of compulsoryschemes which provide additionalbenefits, normally for particular categoriesof employees within certain industries.

7.2 ContributionsSocial security contributions arecompulsory and payments are collectedby IKA from both employers andemployees. Contributions are calculatedby reference to actual earnings.

8. Hours of WorkThe law lays down the maximum numberof working hours: eight working hours perday and 40 working hours per week(although there are further limits on theworking hours of employees afterchildbirth or during breastfeeding etc).These limits may be varied in certainindustries by collective agreement.

In addition, working hours within abusiness may be re-arranged for aspecific period of time into a “period ofincreased demand” and a “period ofdecreased demand” by an agreementbetween the employer and the employeeunion or representatives in the company,and on condition that certainrequirements, procedures and thresholdsprovided by the law are met.

Legislation provides for special authorisedadditional work of up to five hours a week

paid at a premium of 20% (over thehourly rate, i.e. the additional work rateswill apply to the 41st, 42nd, 43rd, 44th, 45th

working hours).

Greek employment law also provides forovertime work. With effect from12 November 2012, working hours maybe increased by up to two hours per dayand 120 hours per year, provided theemployer has notified the EmploymentOffice. Overtime is paid at a premium

(over the hourly rate) of 40% for overtimeworked up to 120 hours annually, and60% for overtime worked in excess of120 hours annually. Employees who workon a Sunday or a public holiday areentitled to an additional premium of 75%of their daily wage.

Despite the fact that unauthorisedovertime is subject to severe penalties(a premium of 80% of the hourly rate),non observance of the law is widespread.

By Ministerial Decision, an employer maybe granted with special overtime approvalwhere such a request is made on thegrounds of exceptional circumstances. Inthat case, overtime is paid at a premiumof 60%.

Depending on their age and the nature ofemployment, young people are notallowed to work at night.

Benefits Employers’contributions %

Employees’contributions %

Total %

IKA benefits

(a) Pension 13.33 6.67

(b) Health Benefits 5.10 2.55

IKA Team 3.00 3.00

OAED benefits 6.03 2.93

Other benefits – 1.35

Total 27.46 16.50 43.96


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9. Holidays and Time Off9.1 HolidaysEach employee from the commencementof his employment until the completion of12 months’ service, is entitled to pro-rated annual paid holiday on thebasis of 24 working days (in the case of asix day working week) or 20 workingdays (in the case of a five day workingweek). During the first calendar year theemployee is entitled to a pro-ratedholiday entitlement.

During the second calendar year theemployee is entitled to annual paid holidayproportionate to the duration of hisemployment. For each subsequentcalendar year, as from the 1 January, theemployee is entitled to annual paid holidaywhich is calculated as set out above.

Annual holiday is increased by oneworking day for each year of service afterthe first year (up to 26 working days for asix day working week or 22 working daysfor a five day working week).

After 10 years’ service with the sameemployer or 12 years’ service withvarious employers, there is an entitlementto 25 days’ paid holiday (in the case of afive day working week) and 30 days’ paidholiday (in the case of a six day workingweek). After 25 years’ service, there is anentitlement to 26 days’ paid holiday (inthe case of a five day working week) and31 days’ paid holiday (in the case of asix day working week).

Some collective agreements give paidholiday entitlement above thestatutory minimum.

There are also five public holidaysrecognised each year (25 March, EasterMonday, 1 May, 15 August andChristmas). An optional public holiday forthe private sector is 28 October while it isa compulsory one for the public sector.Many collective agreements increase thenumber of public holidays.

9.2 Family LeaveThe 2000-2001 National GeneralCollective Labour Agreement providesthat female employees are entitled to17 weeks’ maternity leave, eight ofwhich must be taken before the birth.The maternity allowance paid by IKAduring the leave is 50% of a notionalsalary (which depends on theclassification of the employee and isincreased by the number of dependants,however it cannot be lower than twothirds of the actual net wages of theemployee). The employer is obliged topay the difference between socialsecurity benefits and the employee’snormal salary for half of one month orthe whole of one month depending onthe seniority of the employee, and forthe remaining period the employee ispaid the difference by OAED.

Fathers are entitled to two days’ paidfamily leave upon the birth of a child.

Parents are entitled for 30 months afterthe end of maternity leave, either tocommence or leave work one hourearlier, every day. In agreement with theemployer, the parent is entitled to takepaid leave in lieu of this right to reduceddaily working hours.

Unpaid parental leave of at least fourmonths may be claimed in certaincircumstances by both parents after theend of the mother’s maternity leave untilthe child reaches the age of six. Up to fourdays each year may also be taken on aday-by-day basis as paid parental leave toenable either parent to make arrangementsfor the child’s education. The parents ofdisabled children are entitled to extra days’special leave each year.

Pursuant to art. 142 of Law 3655/2008,working mothers (who are insured in thenational Insurance Body (I.K.A) are entitledto an additional maternity leave of sixmonths. This leave begins before or afterthe expiry of Lochia leave (nine weeksafter the childbirth) and the completion ofthe Breastfeeding and Childcare Leave

(in the form of reduced working hours oras a continuous paid leave).

During this additional six month leave, theEmployment Organization (O.A.E.D.) paysthe maternity leaver the legally definedminimum salary.

This six month additional maternity leaveis admeasured to the pensionable yearsfor the employees who are insured atI.K.A. During this period both employerand employee insurance contributions arepaid by O.A.E.D.

9.3 IllnessAn illness allowance/sick pay is paidfollowing the IKA doctor’s order/diagnosisof the insured employee’s incapacity forwork, due to illness.

Directly insured members of IKA areentitled to an illness allowance subject tothe following conditions:

(a) Ill-health incapacity renders themunable to work;

(b) They have worked for at least120 working days, within the lastyear or within the last 15 monthsprior to the notification to IKA of theemployee’s incapacity (due toillness). The illness allowanceprovided by IKA is paid in the eventof the insured employee’sincapacity for work and is paid fromthe fourth day of absence.

Subject to having 10 days’ service, allemployees absent from work on ill-healthgrounds are entitled to sick pay from theiremployer of half a month or one month’ssalary per annum, depending on seniority.

10. Health and Safety10.1 AccidentsIn most cases employees are covered byIKA in the event of accidents at work.Employers are personally liable withregard to employees who are not coveredby IKA insurance or for compensation formoral harm. Whether the employee is



covered by IKA or not, the employer isliable to compensate the aggrievedemployee, in the event of an accident atwork due to employer’s fault.

10.2 Health and Safety ConsultationIn undertakings with 50 or moreemployees, employees have the right toelect safety committees and/orrepresentatives who are entitled to receivecertain information and to be consulted.

In undertakings with 20 or moreemployees, employees have the right toelect representatives, for consultation onhealth and safety issues.

In undertakings with less than20 employees, the employees are entitledto consult with each other and to electtheir health and safety representative. Thelatter is elected for a two year-term.

11. Industrial Relations11.1 Trade Unions The 1975 Constitution guarantees tradeunion freedom. The constituentdocuments of a trade union must besigned by at least 20 people.

Labour Centres, which group togetherlabour unions of a particular local district,supervise the enforcement of labour lawsin that district and resolve organisationalproblems encountered by local unions.Federations represent industry on asector by sector basis and sign collectiveagreements. Labour Centres andFederations are organised into nationalconfederations. The most importantconfederation is the GeneralConfederation of Greek Labour (GSEE).The GSEE negotiates the annual nationalcollective wage agreement with theFederation of Greek Industries (SEB)which is the main employers’ association.

11.2 Collective AgreementsThe most representative trade union in acertain field/sector/profession/undertakinghas the right to conclude collectiveagreements with the respective

employers’ representatives. The lawdefines five categories of collectiveagreements: national collectiveagreements, sectorial agreements,national and local vocational agreementsand special agreements. The first four areconcluded by the appropriate tradeunions and employers’ associations andare applicable at different levels, while thelatter is concluded by the employer andthe employees represented by the TradeUnion representing the employees of theemployer and, in the absence of suchrepresentative union, by the Body/Unionof employees established in accordancewith the relevant legislation.

The General National EmploymentAgreement (GNEA), sets the minimumstandards, as far as terms and conditionsof employment are concerned, for allemployees within the Greek territory.However, minimum standards regardingpay set by the GNEA apply only for theworkforce of employers who belong tothe contracting employer unions. SectoralCollective Agreements are binding inrespect of the employees of certaincategories of company (companiesoperating in the same sector orcompanies established in a city, a specificregion or the whole country).

Company Collective Agreements arebinding in respect of the employees of acertain company.

National Vocational CollectiveAgreements are applicable in respect ofemployees who practice the sameprofession across the country.

Local Vocational Collective Agreementsare applicable in respect of employeeswho practice the same profession in aspecific region.

Collective agreements are binding on theparties which have concluded them.There are provisions of the law pursuantto which the Ministry of Labour can alsodecide to extend their application to allemployees or employers in an industry

sector or a particular trade. Theapplication of these provisions, however,has been suspended during theimplementation of the Medium TermFiscal Strategy. Collective agreementshave precedence over private contracts,but may not contain provisions lessfavourable than those provided by law.

11.3 Trade DisputesThere is a right to strike under the GreekConstitution. In order to be lawful,industrial action must only be used as ameans of protecting the interests ofworkers in relation to pay, insurance,union rights and working conditions. Adecision to strike must be notified to theemployer at least 24 hours before thestrike by a recognised trade union, and anauthorisation to strike must be providedby the relevant body within the union. Ifthese rules are not observed, the strike isillegal and the employment contracts ofthe striking employees can be terminated.

In the event of disputes in relation toemployment matters, including thoserelating to collective agreements,employers and trade unions can requestthe intervention of a “conciliator” from theMinistry of Labour or the Labour Office ofthe Prefecture. In the case of a collectivedispute not being resolved through thisMinistry official, parties can use theservice of an official mediator who willhear the case and make the necessaryinquiries. Having regard to thedetermination of the minimum basicsalary and minimum daily wage, theparties can, by agreement, in specificcircumstances submit the dispute toarbitration at any stage of thenegotiations. Both mediators andarbitrators must be independent in theexercise of their duty; some of them areappointed by the “Organisation ofMediation and Arbitration” for a period ofthree years.


Undertakings with 20 or more employeesare entitled to set up a works council in


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cases where there is no trade unionrepresented in the undertaking.Undertakings with 50 or more staff areentitled by law to set up a works councilmade up of employees only.

The law stipulates that the works councilrepresents all the employees in anundertaking whether they are trade unionmembers or not. However, the existenceof a works council does not prejudice therole of trade unions, which have the rightto press for better conditions than thoseagreed between the works council andthe employer.

Works council members are elected fortwo-year terms and their number variesaccording to the size of the undertaking.The employer and the works councilmust meet in the first 10 days of everysecond month, or whenever one of theparties so requests. The works council isentitled to take decisions together withthe employer on such matters as healthand safety, annual leave, training,disciplinary procedures, and cultural andsocial activities at the work place. Theemployer is obliged to provide the workscouncil with information on a wide rangeof issues.

Employee participation in the managerialdecision-making process is currentlybeing pioneered in both the private andpublic sectors.


12.1 GeneralGreek Presidential Degree (PD) 178/2002,implements the Acquired Rights Directive(Dir. 98/50/EC). There is a transfer of anundertaking for the purposes of the PDwhere there is a transfer of an economicentity which retains its identity, meaningan organised grouping of resourceswhich has the objective of pursuing aneconomic activity, whether or not thatactivity is central or ancillary. A transfer ofan undertaking leading to a change in theemploying entity can occur in the case of

a business transfer, consolidation, buy-out or take-over.


The PD requires the transferor and thetransferee to provide information to therepresentatives of the employees inrelation to the following issues:

(a) the actual or proposed transfer date;

(b) the reasons for the transfer;

(c) the legal, financial and socialconsequences that the employeeswill suffer, due to the transfer;

(d) the proposed measures for theemployees (if any).

The PD also requires the transferor andthe transferee to consult with theemployees’ representatives in the eventthey propose to change the employees’terms and conditions of employment.

The PD requires the transferor tocommunicate on the above issues withthe employees’ representatives before thebusiness transfer takes place. Howeverthe transferee is only obliged tocommunicate the above information in atimely fashion and in any event beforetransferred employees’ terms andconditions are affected by the transfer.

If measures are envisaged by transferoror transferee that will affect the status ofthe employees they must consult with therepresentatives of the employees in goodtime, in order to achieve an agreement,however agreement does not have to bereached. The results of the consultationare embodied in minutes.

The employee representatives will be theworks council, or in the case of aworkforce of less than 50, the tripartitecommittee provided for by the relevantregulations. In the absence of either ofthese the individual employees must beprovided with the informationoutlined above.

12.3 Notification of AuthoritiesThere is no specific obligation on eithertransferee or transferor to notify theauthorities of any business transfer.

12.4 LiabilitiesFailure to comply with the information andconsultation obligation in respect ofemployee representatives or employeescan give rise to a fine. This can beimposed on both transferor and transferee.

In addition, the Court can grant aninjunction until theinformation/consultation obligations arecomplied with, suspending thetransaction provisionally.

There are no ad hoc criminal sanctionsfor failing to comply with the informationand consultation obligations.

13. Termination13.1 Individual TerminationThe right to work is protected under theGreek Constitution and any provision thatlimits that right is narrowly interpreted bythe Courts. This is relevant, for instance,to fixed-term contracts which providelower protection than contracts for anindefinite term. If an employer terminatesa fixed-term contract prematurely, in theabsence of a serious reason fortermination, he or she is obliged to paythe employee’s full salary until the agreedterm of the contract has elapsed.

13.2 NoticeThe law provides different rules forterminating the contracts of blue-collarand white-collar employees. Dismissals ofboth types of employees with contractsfor an indefinite term must be notified inwriting and handed to the employee inperson, whether the contract isterminated with or without notice.

Following recent legislative amendment,the minimum notice periods for whitecollar employees are:



If an employer terminates a whiteemployee without prior notice, it is obligedto pay the following severance pay.

Salary is based on the regular earnings ofthe last month of employment increasedby 1/6 (pro rata Christmas, Easter bonusand holiday allowance).

Pursuant to the recent changes,employees whose length of serviceexceeded 17 years on 12 November2012 are entitled to an additionalseverance amount. This additionalseverance pay is calculated accordingto the number of years of service as at12 November 2012 (see below)However, this amount will remain thesame regardless of when thetermination of contract takes place after12 November 2012.

Termination with notice:

Termination without notice:

Length of Service Notice Period

1 to 2 years 1 month

2 to 5 years 2 months

5 to 10 years 3 months

10 years + 4 months

Length Severance Paywithout prior notice

1 to 4 years 2 months salary




10 years 6 months salary







Length of service with thesame employer on 12/11/2012

Additional severance pay withoutprior notice

(salary is not calculated for the amountexceeding €2,000 euro)

17 years + 1/2 month salary

18 years + 1 months salary

19 years + 1 ½ months salary


21 years + 2 1/2 months salary








Length of service with thesame employer on 12/11/2012

Additional severance pay withoutprior notice

(salary is not calculated for the amountexceeding €2,000)

17 years + 1 month salary













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For blue-collar workers, the situation ismore straightforward. Whether adequatewritten notice is given or not, the blue-collar worker is always entitled to aseverance payment as set out below:

In theory, an employee is obliged to giveadvance notice to the employer in thecase of resignation. The notice period orpayment in lieu to be given by white-collar employees is equal to one half ofthat imposed on employers in cases ofdismissal with a maximum of threemonths. The notice period to be servedby blue-collar workers is equal to thenumber of days for which they wouldhave been compensated for had theemployer terminated the contract.Payment in lieu of notice on the part ofthe employee amounts to half the wagethat would have been paid during thenotice period. In practice, this law is notusually enforced and the employee isallowed to leave freely without givingnotice or paying in lieu.

13.3 Reasons for DismissalsA dismissal may be challenged in Courtbecause of a lack of legal grounds,discrimination or failure to observe theproper procedures (for example the non-payment of severance pay). If thedismissal is declared void, the Court may

also order the employer to compensatethe employee for the entire period sincethe dismissal.

Provided the termination is notified inwriting and subject to the principle of goodfaith, employers are, in general, notobliged to give the reasons for dismissal(a principle applying to employmentagreements of indefinite term). Thedismissal will be considered as “abusive”and, consequently, void if the employerhas acted in bad faith or with maliciousintent. Lawful reasons include thoserelated to the employee himself (inability,inefficiency, breach of contract, lack oftrust etc) or reasons related to the interestsof the company (economic, financial ortechnical). In cases of dismissals onfinancial or technical grounds, Courts mayexamine whether the changes are neededin the real interests of the company orwhether the employee could be kept onpart-time or given alternative employmentwith the company.

Employers are also required to payan indemnity:

(a) to employees who voluntarily withthe consent of the employerterminate their contracts after atleast 15 years’ service; or if theyhave reached the retirement age setby the relevant insurance fund or ifno retirement age is set, the age of65. The amount of compensation isequivalent to 50% of severance pay;

(b) to white-collar employees whoterminate the employment havingsatisfied the pre-requisites forreceiving a complete pension;

(c) to blue-collar employees whovoluntarily terminate their contracts,having met the prerequisites forreceiving a complete pension. Theamount of compensation isequivalent to 50% of severance payor 40% of severance pay foremployees who are insured by anauxiliary pension scheme.

For the employees who leaveemployment or are dismissed, havingsatisfied the pre-requisites for receiving afull pension, the Ministry of Labour hasclarified: For the calculation of theindemnity the salary of the last month ofemployment is taken into account andthe length of service that is taken intoaccount for the calculation of theindemnity is the service with the relevantemployer on the 12 November 2012.

13.4 Special ProtectionSeveral categories of employees aregiven special protection against dismissal.Trade union representatives, for instance,cannot be dismissed during their time inoffice and for a certain period afterwards,unless there are specific reasons whichare not linked with their union duties.Pregnant women/women inlochia/breastfeeding, employees whoserve their military service or those whohave distinguished themselves in time ofwar, employees who are on leave, underage employees/workers and unionmembers all enjoy various levels ofprotection against termination on thegrounds of their status.


In the event of the closure of aworkplace, the employer mustterminate the contracts lawfully andcomply with the rules regarding thetermination of employment.

Collective dismissals are defined by law asdismissals which affect more than acertain percentage of employees in anyundertaking with more than 20 employees.Before dismissing, employers must informemployee representatives in writing of theintention to dismiss part of the workforceand consult with these representatives.Relevant information must be sent tovarious authorities, such as the Head ofthe Employment Office and the Head ofthe Prefecture or Minister of Labour andthe Employment Office depending on thecase. If no agreement is reached betweenthe parties, the Head of the Prefecture or


Length ofservice

Severance pay

Less than twomonths

0

2 months to 1 year 5 days’ wages

1 to 2 years 7 days’ wages







30 years + 165 days’ wages



the Minister of Labour can extend theconsultation period for another 20 days oreven refuse to approve the application toallow the proposed dismissals.

Recent legislation establishes a monthlydismissal limit, dismissals in excess ofwhich give rise to a collective dismissalsituation, as follows:

(a) for businesses with 20 up to150 employees, the limit is6 dismissals per month; and

(b) for businesses with more than150 employees, the limit is 5% ofthe employed personnel and up to30 dismissals per month.

14. Data Protection14.1 Employment RecordsCollection, storage, use and any kind ofprocessing of personal data held byemployers about their employees andworkers (prospective, current and past)are regulated by Law No 2472/1997 asamended (the HDPA Law), whichimplements the EU Data ProtectionDirective 95/46/EC. Infringement of dataprotection law can lead to fines,administrative and penal, civilcompensation claims from affectedemployees or regulatory action.

Collection and processing of employees’personal data is allowed exclusively forpurposes directly related to theemployment relationship and on conditionthat such acts are necessary for fulfillingthe legal and contractual obligations ofboth parties.

Essentially employers, as data controllers,are under an obligation to ensure thatthey process personal data about theiremployees (whether held on manual orcomputer files) in accordance withspecified principles including the following:a requirement to ensure that data isaccurate, up to date, not excessive inrelation to the purposes for which it isprocessed, not kept longer than isnecessary and a requirement that it is

stored securely to avoid unlawful access,accidental destruction or damage to it.

Employers are generally advised to ensurethey have some sort of document retentionand security policy in place and to ensurethat the personnel are aware of their dataprotection obligations and consents to theirpersonal data processing.

14.2 Employee Access to dataEmployees, as data subjects, have thefollowing rights in relation to theprocessing of their personal data:

the right to be informed of the controller’sidentity, the purpose of the processing,the data recipients and of the employee’sright to access.

The right to access, i.e. the right of theemployee to know the exact content ofhis/her personal file and which of his/herpersonal data are subject to processing.

The right to object in case theprocessing is unlawful or contravenes thecontractual agreement.

The right to seek provisional judicialprotection in the case of an automatedprocessing of his personal data with thepurpose of evaluating his personality, hiseffectiveness at work and hisgeneral conduct.

14.3 MonitoringThe monitoring of an employee’s e-mail,Internet and telephone or the installationof a CCTV system is regulated by115/2001 Directive issued by the HellenicData Protection Authority (HDPA) underthe framework of the HDPA Law2472/1997. Monitoring is permissibleprovided that it is carried out inaccordance with the principles andprocessing conditions provided by theHDPA Law (and where appropriate inaccordance with any other applicablelegislation). Any adverse impact ofmonitoring on employees must bejustified by its benefit to the employerand/or others. Express employee consent

to monitoring is not usually required,however, employees should be notifiedthat they are being monitored, thepurpose of the monitoring and who hasaccess to the monitored data, unlesscovert monitoring is justified. Wheredisciplinary action is a possibleconsequence of anything discovered, thistoo should be made clear to employees.

Whistleblowing schemes may be set uponly when absolutely necessary for thepurposes of a legitimate interest pursuedby the employer. Such an interest mustevidently prevail over the rights andinterests of the person whom the datarefer to. Whistleblowing schemes may onlybe established after the HDPA has beennotified in writing. The scope of reportingpermitted is limited to the fields ofaccounting, internal accounting controls,auditing matters, the fight against bribery,banking and financial crime. For the faircollecting of personal data, only identifiedreports must be communicated.


An employer who wishes to transferemployee data to third parties must doso in accordance with the principles andprocessing conditions provided by theHDPA Law. Where the third party isbased outside the EEA it should be notedthat the HDPA Law prohibits the transferof data to a country outside the EEAunless that country ensures an adequatelevel of protection for personal data orone of a series of limited exceptionsapply (Safe Harbor Certificate, EUStandard Contractual Clauses etc). In anyevent, the employee’s express consent isrequired before his personal data isprovided to third parties.

The transfer of personal data within the EUis permissible. In certain circumstances,personal data can be transferred to thirdcountries (non EU-member states) uponthe �DPA’s permission.

Contributed by Bahas, Gramatidis& Partners


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Hungary1. IntroductionThe basic rules of employment areregulated by Hungary’s Labour Code(Act I of 2012 on the Labour Code, the“Labour Code”) which came into force on1 July 2012 and which replaces theformer Labour Code in its entirety on1 January 2013. The new Coderepresents a significant shift from theformer regulation, which has been in placesince 1992, and changes most aspects ofemployment relations. It gives greatercontractual freedom with less regulation.The lawmakers’ stated aim is tostrengthen the employment market, makeemployment more flexible and incorporatethe relevant EU acquis into the locallegislation. Accordingly, the judicialpractice is also expected to change.

The new Labour Code is applicable to allexisting employment relationships andgenerally all agreements concluded underthe previous Labour Code shall remain inforce. The entry into force of the newLabour Code does not affect the validityof the provisions agreed under theprevious Labour Code as long as theintention of the employer and theemployee was not to stipulate theapplication of a particular provision of theprevious Labour Code, but to generallyapply the relevant provisions of theLabour Code as applicable from time totime, in which latter case the formerregulations of the previous Labour Codeand the references to its formerprovisions are automatically replaced bythe provisions of the new Labour Code. Ifthe parties’ intention was to stipulate theapplication of a particular provision, itneeds to be examined whether suchprovision is in compliance with the newLabour Code. Any provision of anemployment contract or a collectiveagreement contrary to the mandatoryprovisions of the new Labour Code shallbe invalid and shall terminate if notreplaced by the parties with provisionsconsistent with the applicable provisionsof the new Labour Code

In addition to the Labour Code, furtherlaws and regulations may need to betaken into consideration whendetermining the legal provisionsapplicable to the particular employmentrelationship, such as the generalprovisions of the Hungarian Civil Code,provisions concerning work safety,supervisory proceedings of the labourauthorities, act on temporary workagencies, act on pensions and socialsecurity contributions, etc.

The Labour Code implements themajority of EU employment lawdirectives. Collective agreements andemployment contracts may only regulateemployee’s rights and obligations whichare not dealt with in the Labour Code orif they are more favourable to theemployer. In certain cases, deviationfrom the general provisions of the LabourCode to the detriment of the employeesmay be agreed in collective agreementsif such deviation is explicitly permissiblein the Labour Code. In addition,employment contracts cannot coverrights and obligations dealt with inapplicable collective agreements, exceptto the extent that they are morefavourable to the employee.

Given the Hungarian labour courts’generally pro-employee approach,Hungarian employment law should becarefully complied with and if there is anydoubt regarding the interpretation ofemployment law provisions, it should beassumed that the employee’s interestswill be respected by a court.


2.1 GeneralThe Labour Code applies to allemployees. However, Hungarian labourlaw categorises employees on the basisof their role within the employer’soperations and distinguishes between“executive employees” and other“normal”/”average” employees. This

distinction is reflected in the regulation ofemployees’ rights and obligations.

2.2 DirectorsExecutive employees are the employer’sdirector and any other person under hisdirect supervision who are authorized –partly or entirely – to act as thedirector’s deputy.

Employment contracts may also invokethe provisions on executive employees ifthe employee is in a position ofconsiderable importance to theemployer’s operations, or has a positionof trust, and his salary exceeds seventimes the mandatory minimum wage.

Due to the specific nature of their role,executives are exempt from certainprotective provisions of the Labour Coderelating to working time or termination,for example, and have greater liability fordamages caused in connection withtheir employment.

2.3 OtherExcept as otherwise provided in theemployment contract, employees are full-time. Part-time employees are entitled tothe same protection as full-timeemployees. Any differences in treatmentof part-time employees must be onjustified grounds connected to thecharacteristics of part-time employment(e.g. pro rata salary).

3. Hiring3.1 RecruitmentThe employer’s recruitment process is notregulated under Hungarian labour law.However, the activity of temporary workagencies and employment agencies issubject to additional requirements (e.g.registration and reporting obligations) setout in a separate government decree.

All persons entering into an employmentrelationship, as employees, must be atleast 16 years of age, however: (i) aperson of at least 15 years of agepursuing full-time studies may be



employed during the school vacationperiod, (ii) a person under 16 years of agemay enter into an employmentrelationship with the prior consent of theguardian authority for the purposes ofperformance in certain artistic, sports,modelling or advertising activitiespermitted by law.

Persons of diminished capacity may enterinto an employment relationship subjectto the permission of their legalrepresentatives (parent or a guardian).

Legally incompetent persons (e.g. owingto their mental state or unsound mind)may conclude employment relationshipsonly for jobs which they are capable ofperforming on a stable and continuousbasis in light of their medical condition.The employees’ medical examinationshall cover the employees’ ability tohandle all functions of the job.

In certain circumstances (e.g. in the caseof decisions affecting a large number ofemployees including restructurings, newinvestments or collective dismissals) theemployer must consult therepresentatives of the Works Council onmajor personnel planning.

Employers with 25 or more employeesmust pay a yearly “rehabilitation tax”unless at least 5% of their staff consistsof disabled persons. In practice it meansthat the employer is to pay an amount ofcc. €3,450 multiplied by a multiplier(the multiplier is the number of 5% of theemployees less the number of theemployed disabled employees).

3.2 Work PermitsThe citizens of all EEA member states donot need to obtain a work permit foremployment in Hungary. Non-EEAnationals and citizens must obtain a workpermit prior to the commencement ofemployment in Hungary. An individual workpermit, which must be applied for by theemployer, may be granted for a maximumof two years and may be renewed.

EEA nationals may freely enter and stay inHungary for a period not exceeding90 days. If the term of their stay exceeds90 days, they must obtain an EEAresidence permit. An EEA residence permitis valid for a maximum of five years and isrenewable. This general rule is applicableto the stay of non-EEA nationals but mayvary depending on the citizenship.

4. DiscriminationDiscrimination on the grounds of gender,race, colour, nationality, age, state ofhealth and other characteristics notrelated and relevant to the position isprohibited. This principle is alsoapplicable to the recruitment process.

In the event of a dispute on the groundsof discrimination, it is the employer whomust prove that its conduct wasnot discriminatory.


5.1 Freedom of ContractAlthough employer and employee are freeto agree on the terms of employment, theterms of the employment contract, if theyare different from the rights andobligations provided for by employmentlaw provisions, must be more favourablefor the employee than the statutoryminimum standards subject to certainexemptions applicable in the case ofexecutive employees. Industry-widecollective agreements may also apply incertain sectors and collective agreementsmay apply to employers. Theemployment contract may only containterms different from those set out in thecollective agreement if they are morefavourable for the employee. Theprovisions of collective agreements arenot applicable to executive employees.

5.2 FormIn general terms, employment contractsmust be in writing. However, oralemployment contracts may be valid if theemployee fails to challenge the validity of

the oral employment contract within30 days of the start of employment.

In order to be valid an employmentcontract must at least contain details ofthe parties, the employee’s position andthe salary. The employer must, within15 days of the conclusion of theemployment contract, notify theemployee in writing of certain essentialconditions of his employment, however,non-fulfilment of this obligation does notrender the employment contract invalid.

Fixed term contracts may be entered intofor a maximum term of five years. Thisrule is also applicable to the aggregate ofconsecutive renewals. If a fixed-termemployment contract is renewed orextended for reasons that are consideredunjustified (i.e. not based on objectivereasons independent of the workorganization or it jeopardises theemployee’s legitimate interests) thecontract is deemed to be a contract ofindefinite duration. According to judicialpractice, in such cases the contract mayalso be terminated and the employee isentitled to receive an absence fee for theduration of his notice period andseverance pay is also payable.

5.3 Trial PeriodsThe probation period may not exceedthree months starting from the first day ofthe employment. The employer and theemployee are free to prolong theprobation period in cases where it wasoriginally shorter than three months, butthe total term of the probation periodcannot exceed three months.

During the probation period either of theparties may terminate the employmentrelationship with immediate effect withoutproviding any reason.


Employees are subject to statutory non-competition provisions during the term oftheir employment. Executives must complywith strict non-competition requirements.


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Non-compete agreements restrictingcompetitive activities following thetermination of employment must providefor a minimum level of compensation tobe paid to the employee, not less thanone third of the employee’s previousremuneration. The compensation mustreflect the nature and content of thespecific prohibition. When determiningthe amount of such compensation, theemployee’s ability to find otheremployment elsewhere shall be taken intoconsideration. The period of restrictioncannot exceed two years.

Employees have a general duty during theiremployment to refrain from any conductthat interferes with the employer’s lawfuleconomic interests. If expressly agreedbetween the parties, this obligation on thepart of the employee may be maintainedfollowing the termination of employment inline with the rules on non-competeagreements. Employees are prohibitedfrom disclosing business secrets bothduring employment and followingtermination. Disclosure of business secretsmay, in certain circumstances, constitute acriminal offence.

The employees’ behaviour in certain casesmay be monitored by the employer evenoutside their working hours in accordancewith their job or position in the employer’shierarchy as they are required to refrainfrom any conduct that directly and actuallyhas the potential to damage theemployer’s reputation, lawful economicinterest or the intended purpose of theemployment relationship. However, theaffected employees must be informed ofsuch monitoring in writing in advance.

Under the new Labour Code the right ofthe employees to express their opinionmay be restricted if it could lead toserious harm or damage to theemployer’s reputation or lawful economicand organizational interests.

5.5 Intellectual PropertyThe Intellectual Property Lawdistinguishes between service inventions

(“szolgálati találmány”) and employee’sinventions (“alkalmazotti találmány”)depending on whethe) depending onwhether or not the preparation of thework (invention) came within the scope ofthe employee’s employment duties.

A service invention is made by a personwho is employed for the expresspurpose of research and development ina specific field (e.g. researchdepartments of companies, where theinventors are researchers employed todevelop new solutions).

In the case of a service invention theemployer is an “ex lege” successor in titleto the inventor of the service invention.The inventor is entitled to remunerationby way of compensation (i.e. aninventor’s fee).

An employee’s invention is owned by theemployee, but the employer has an exlege non-exclusive licence. If theemployee’s invention is used by theemployer, the employee is entitled toreceive remuneration.

In both cases the employee has a duty tonotify the employer of any such invention.

6. Pay and Benefits6.1 Basic payEach year the Hungarian Governmentestablishes the level of minimum pay. Themonthly minimum wage in 2012 wasHUF 93,000.00 (approx. €330). The so-called guaranteed wage minimum for2012 was HUF 108,000.00 (approx.€385) established for employees whohave at least secondary education orsecondary professional education andperform work which requires at leastsecondary professional education.

Collective agreements may also establisha minimum pay rate for employees ofcertain categories.

Wages are paid either on a time orperformance basis or a combination ofthe two. Time wages are paid on an

hourly (common among blue-collarworkers) or monthly basis.

Wages in Hungary are not index linked.However, where employers come withinthe scope of a collective agreement, thewages are usually re-negotiated annuallywith the Trade Union.

6.2 PensionsThe provision of private pension plans isnot mandatory. However, large employersoften provide private pensionarrangements as a benefit by contributingto a pension fund for the employee.

6.3 Incentive SchemesEmployee share schemes are notmandatory in Hungary. Large foreignparent companies of Hungarianemployers often offer share schemes tothe employees of Hungarian subsidiaries,but this form of benefit is not yetwidespread in Hungary.

6.4 Fringe BenefitsFringe benefits vary according to the sizeof the business and the influence of TradeUnions. These may include bonuses,company car, insurance, subsidisedholidays and meals. These may beprovided either unilaterally by theemployer or on the basis of anemployment contract or collectiveagreement. In the latter case theemployer may not withdraw thesebenefits without the Trade Union’s oremployee’s consent.

6.5 DeductionsEmployers deduct the employee’sincome tax and social securitycontributions at source and account for itto the tax authorities.

7. Social Security7.1 Coverage The basic level of social security benefitscovering old age, disability, industrialinjury, sickness, death andunemployment, is provided by the statesocial security system.



7.2 ContributionsSocial security contributions are paid byboth the employer and the employee. Anemployee’s social security contributionsmust be deducted at source by theemployer from the employee’s grosssalary. Employer contributions are 24%,employee contributions are 17% of thegross salary.

8. Hours of WorkThe statutory number of working hoursper week is 40 hours. In general, dailyworking time is limited to eight hours. Theemployer and the employee may agreeon 12 working hours per day in certainexceptional circumstances (extendeddaily working time). Hungarian labour lawprohibits working on Sundays and publicholidays except where the nature of workrequires continuous operation (e.g.hotels, shopping malls, public utilities andother public services).

Working in excess of normal hours ofwork qualifies as overtime. Executives arenot usually entitled to overtime pay.

Employees are entitled to wagesupplements payable for working onSundays or on public holidays or for shiftwork, etc. The employer and theemployee in lieu of settling supplementalpayments for overtime worked eachmonth, may: (i) agree that the base wageincludes the wage supplements or(ii) agree on a fix monthly averagepayment which includes the base wageand the wage supplements.

Specific rules apply where the employermakes use of specified shift patternswhere work is defined in specific cyclesinstead of on a daily basis.

9. Holidays and Time Off9.1 HolidaysThere are 10 public holidays in Hungary.The number of statutory paid holidaysdepends on the employee’s age andvaries from a minimum of 20 days to

30 days. Collective agreements andemployment contracts may provide formore paid holidays or extra holidays incertain circumstances (e.g. executives areoften granted extra holidays).

9.2 Family LeaveEmployees are entitled to extra holidays ifthey have children (two working days forone child; four working days for twochildren; seven working days for morethan two children under 16 years). Theextra holidays are increased for parents ofchildren with disabilities by two workingdays per child.

Pregnant women are entitled to24 weeks’ maternity leave, which theymay take, if possible, from four weeksbefore confinement. After the 24-weekmaternity leave, in certain circumstanceseither parent is entitled to additional leaveof up to three years from the child’s birth.During this leave no payments have to bemade by the employer. Fathers areentitled to a five day paid holidayfollowing the birth of their child or sevenworking days in the case of twins.

Pregnant women, mothers and singlefathers have greater protection in termsof dismissal and performancemanagement at work.

The employee who intends to return towork at the end or before the expiry ofthe maternity leave must notify theemployer of such intention at least30 days prior to the requested start date.

The maternity returner mother/single fatheris entitled to return to the same job or asimilar job to that in which he/she wasemployed before he/she went on leave, onterms and conditions that are no lessfavourable than those that would haveapplied had she not been absent. He/sheis also entitled to the benefit of anyincreases in salary made by the employerduring the maternity leave. If the employeris unable to provide the returningemployee with a position satisfying the

above requirements due to circumstancesfalling within the scope of the employer’soperation, or if the employee refuses theoffered job, the employer is entitled toterminate the employment.

9.3 IllnessEmployees are entitled to 15 days’ sickleave per year during which, broadlyspeaking, they are entitled to 70% of theabsence fee to be paid by the employer.The amount of the absence fee iscalculated on the basis of the employee’sbase salary and other performance-based wages and wage supplementspaid for the last six months on average.In practice the absence fee is lower invalue than the amount of the base salary.

Following the expiry of this 15 day sickleave period, the employee is entitled tosick pay for a maximum period of oneyear. The sick pay is provided by thestate and is 60% of the base salarywhere the employee had at least twoyears’ service and is 50% of base salaryin the case of employees with shorterservice. Two-thirds of this amount ispaid by the social security system andone-third by the employer.

9.4 Other time offEmployees are exempt from work incertain circumstances e.g. during anymandatory medical examination; fordonating blood - at least four hours; twoworking days upon the death of arelative; to attend court proceedings; dueto personal or family reasons, etc.Exemption is granted by law for theduration of employee’s studies in limitedcircumstances (e.g. only for finishingprimary school studies). In general,agreement must be reached with theemployer to undertake training or toattend seminars.

Employer and employee may agree inwriting on a flexible working schedulewhere the employee is entitled toschedule a minimum of 50% of hisworking time.


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10. Health and Safety10.1 AccidentsDetailed regulations exist regarding safetymeasures at work. Non-compliance withthese regulations triggers fines imposedby the labour authority.

The employer is fully liable for damagescaused to an employee in connectionwith his employment, regardless ofculpability. An employer is only relieved ofliability if it is able to prove that thedamage was caused (i) by anunavoidable event resulting fromcircumstances beyond the employer’sfield of operations and there had been noreasonable grounds for taking action toprevent or mitigate the damage; or(ii) solely by the unavoidable conduct ofthe injured employee. No liability arises inrelation to damage attributable to theemployee’s negligence or in cases wherethe employee has failed to fulfil hisobligation to mitigate the damage. Theemployee is required to prove that thereis a causal link between the damage andhis employment relationship. If the liabilityof the employer is proven, the employeris required to reimburse the employee forloss of income, material damage andjustified expenses incurred in connectionwith the damage.

If the accident is attributable only to theemployee then he/she is liable for thedamage caused to the employer by anyviolation of employment-relatedobligations arising or as a consequenceof the failure to act. The amount ofcompensation payable by the employeemay not exceed four months’ of theemployee’s absence fee. However,where the damage was caused wilfullyor by gross negligence the employee isliable for the full extent of damages. Theemployer has to prove the liability of theemployee, the occurrence and theamount of damage, as well as thecausal connection.

If the accident is attributable to both theemployer and the employee, the liability

and the financial consequences areapportioned according to theirrespective contribution.

10.2 Health and Safety ConsultationTrade Unions and Works Councils mustbe kept informed in relation to healthand safety measures. Where thenumber of employees is at least 50,employees are entitled to elect Healthand Safety Representatives. A Healthand Safety Committee may be formedwhere there are three or more Healthand Safety Representatives elected.These bodies have consultation rightsand rights to information regardinghealth and safety measures.

11. Industrial Relations11.1 Trade UnionsAll associations under Hungarian lawwhose purpose is the representation ofemployees’ interests in connection withtheir employment qualify as TradeUnions. If the Trade Union has membersemployed by the employer, Trade Unionrepresentatives are free to enter theemployer’s premises in order to performtheir tasks relating to the employees’representation. Employees cannot beforced to join a Trade Union anddiscrimination against employees on thebasis of their Trade Union membershipis prohibited.

Trade Unions are entitled to conclude acollective agreement on behalf ofemployees if they are independent from theemployer and sufficiently representative.

Trade Unions are entitled to requestinformation on all matters affecting theemployees’ economic and social interestsin connection with their employment andto express their opinion to the employerconcerning its actions and decisionsand/or initiate negotiations in connectionwith such actions/decisions.

11.2 Collective AgreementsCollective bargaining agreements may beconcluded by Trade Union(s) on one side

and an employer or employers’association on the other. An employermay fall under the scope of no more thanone collective bargaining agreement. If aTrade Union (that qualifies as anemployees’ representative) initiatesnegotiations with a view to concluding acollective bargaining agreement the otherparty (i.e. the employer) cannot refuse tonegotiate. A collective bargainingagreement must be registered with theMinistry for National Economy. Theparties are jointly obliged to notify theMinistry for National Economy of anyamendments to and termination of thecollective bargaining agreement.

Unless otherwise agreed between theparties, the notice period for terminatingthe collective bargaining agreement is threemonths. The parties are prohibited fromexercising their right to termination during asix month period following the conclusionof the collective bargaining agreement.

The minister in charge of employmentand labour may extend the scope of acollective bargaining agreement to theentire sector (or subsector), at therequest of the parties provided theyqualify as representatives of the sector (orsubsector) in question. The opinion of thenational employee and employerrepresentative organizations affected bysuch a proposed extension must also beobtained before the extension is granted.

11.3 Trade DisputesEmployees and Trade Unions have theright to initiate strikes, provided that thestrike has work-related objectives (otherthan the amendment of the CollectiveAgreement and matters falling within thecourt’s competence) and that previousnegotiation between the parties havefailed. Works Councils do not have thisright. Although striking employees arenot entitled to remuneration during astrike, participation in a strike, providedthat it is lawful, may not serve as abasis for discriminating against astriking employee.



Where an employer provides afundamental public service e.g. publictransportation, telecommunications,suppliers of electricity, water, gas andother energy, then a strike in such aworkplace may be regarded as illegal ifinsufficient levels of service aremaintained during the strike. Whatamounts to a sufficient level of service iseither defined by law or must be agreedduring the pre-strike negotiations.


Employees and their representative bodies(such as Works Councils and TradeUnions), have the right to information,consultation and joint decision-making inrelation to certain matters.

Where an employer has more than200 employees, employees have the rightto elect one third of the members of theemployer’s Supervisory Board in order toensure employees’ participation insupervising the employer’s management.

Works Councils monitor compliance withthe legal provisions relating toemployment at the employer.

To the extent required to meet theirresponsibilities, Works Councils areentitled to request information and toinitiate negotiations on relevant topics theemployer cannot refuse such requests.

Where the number of employees exceeds50 the election of a Works Council iscompulsory but, unless the election ishindered by the employer, there are nolegal consequences in the event that noWorks Council is elected.

In general terms, the employer mustrequest the Works Council’s opinion oneach matter affecting a significant numberof employees (e.g. restructuring of theemployer, introducing new technologies,investment programs) and the WorksCouncil is entitled to receive informationon all matters affecting the employees’economic and social interests connected

to their employment (e.g. in the case ofchanging wages and/or work conditions).

The Works Council’s opinion does notbind the employer to any extent. However,employers must pass decisions jointlywith the Works Council in matters relatingto the utilisation of welfare funds listed inthe collective bargaining agreement and ofcertain assets of a similar nature. Violationof these rights may result in theemployer’s action being ruled invalid bythe Labour Authority and the imposition offines of varying amounts.


12.1 GeneralThe acquisition of a company through ashare purchase in itself does not triggerany specific employment law obligationson the part of the employer, as theemploying entity does not change as aresult of the transaction.

Where an acquisition is in the form of abusiness sale (asset sale) variousemployment law obligations will betriggered. The transfer of an economicunit (i.e. an organised group of materialand/or immaterial resources) or part of aneconomic unit, irrespective of the numberof employees affected by the transfer,results in the automatic transfer ofemployment contracts related to theeconomic unit (or part of the economicunit) to the buyer proposing to operatethe business.

The EU Acquired Rights Directive hasbeen implemented in Hungary.

Transferred employees have no right toobject to the transfer.

Termination of employment on the basisof the transfer of undertaking by theemployer is invalid. However, the newemployer (the transferee) can terminateemployment on the grounds of re-structuring or staff rationalisationfollowing the transfer.

In principle, unless the terms of thetransferee’s collective bargainingagreement are more favourable for thetransferred employees, the transferee isbound by the collective bargainingagreement applicable to the previousemployer (transferor) in respect of theemployees affected by the transfer. Thisrule is applicable until the collectivebargaining agreement is terminated bythe transferor or the expiration of thecollective bargaining agreement, or untilanother collective bargaining agreementis concluded between the relevantemployees and the transferee. If none ofthese events occur the transferee mustmaintain the working conditions ensuredby the collective bargaining agreement ofthe transferor for at least one yearfollowing the date of transfer.


In the case of a transfer of an undertakingthe Works Council has no right to vetothe transaction, however, the transferorshall inform the Works Council or in theabsence of that the concernedemployees directly in writing not laterthan 15 days prior to the date of thetransfer of the (i) date or the proposeddate; (ii) the reason; (iii) the legal,economic and social implications of thetransfer; and (iv) any planned measuresaffecting the employees.

The transferee must inform the affectedemployees in writing within 15 days of thedate of the transfer and the changes incertain working conditions and must alsoprovide the employer’s identification data.

The affected employees are entitled toterminate the employment relationship incases where the transfer involves asubstantial change in their workingconditions and maintaining theemployment relationship would result inan unreasonable disadvantage or wouldbe impossible. The employees mustexercise the right of termination within30 days of the date of transfer.


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12.3 Notification of authoritiesThere are no obligations to notify theauthorities about the transferof employment.

12.4 LiabilitiesThe transferor and the transferee arejointly and severally liable for liabilitiesincurred prior to legal succession if suchclaims of the employee are enforcedwithin one year of the transfer.

In general terms, if the transferor and thetransferee are not undertakingsindependent from each other, the transferoris liable, as surety, for the payments due toan employee if his employment relationshipis terminated by ordinary notice inconnection with the employer’s operationsor his fixed term employment is terminatedby the employer.

If an employer fails to comply with itsinformation and consultation obligations,Works Councils may apply to court for adeclaration that the employer hasbreached its obligations. However, thisdoes not affect the validity of thetransfer agreement.

13. Termination13.1 Individual Termination An employer must comply with strictrules in relation to the termination ofemployment. Non-compliance with theserules may result in the invalidity of thenotice of termination, re-instatement andcompensation obligations. However, therules on termination vary depending onwhether the employment is for anindefinite duration, for a fixed term orwhether the employment is still in the trialperiod phase. In every case, thetermination notice must be in writing.

Employment may be terminated:

(a) by mutual consent of the employeeand the employer;

(b) by notice;

(c) by dismissal with immediate effect.

13.2 Notice An employment relationship may beterminated by notice both by theemployee and the employer. If the contractspecifically so provides, the employmentrelationship cannot be terminated bynotice for a period of up to one yearfollowing the date of commencement ofthe employment relationship.

In the case of indefinite employmentrelationships, employers are required tojustify clearly and reasonably theirtermination notice, and are only entitledto exercise their termination right on thebasis of reasons in connection with thebehaviour or ability of the employee, or inconnection with the employer’s operation.

Fixed-term employment relationships mayalso be terminated by notice by theemployer subject to the following limitedcircumstances: (i) in case of ongoingliquidation or bankruptcy proceedings, or(ii) for reasons related to the worker’sability, or (iii) when maintaining theemployment relationship is no longerpossible for the employer due tounavoidable external reasons.

Employees are not required to givereasons for terminating their indefiniteemployment relationship by notice,however they are required to give reasonsfor terminating their fixed-termemployment relationship by a notice. Inthe latter case the reason for terminationmust be such that it would rendercontinuation of the employmentrelationship impossible or would causeunreasonable inconvenience to theemployee in light of his/her circumstances(e.g. changing the place of work).

The statutory minimum notice period is30 days for both the employer and theemployee. Depending on the length ofservice with the employer, the noticeperiod in a termination notice of theemployer can increase to 90 days.Employer and employee may agree on alonger notice period with the provisionthat the notice period cannot be longer

than six months. Statutory noticeentitlements are not applicable toexecutive employees. Collectivebargaining agreements often provide forlonger notice periods.

The employer must exempt theemployee from the duty to work for atleast half the notice period and theemployee is entitled to his salary while heperforms work and his absence fee whilehe is exempt from work.

The amount of severance pay is 1-6 months absence fee depending onthe length of the employment served.

13.3 Reasons for Dismissal Both the employer and the employeeare entitled to terminate theemployment relationship with immediateeffect in the event of any grave violationof any substantive obligations arisingfrom the employment relationship or if,as a consequence of the other party’sconduct, the employment relationshipcannot be maintained. For instance,summery dismissal will be justified whenthe employment relationship is nolonger sustainable and immediate actionis required.

The right to dismiss summarily can beexercised within a 15 day period ofinitially becoming aware of the reasonsfor the dismissal, and at the latest withinone year from the occurrence of therespective breach of the substantiveobligation. In circumstances where thedismissal is as a consequence of acriminal offence, the termination withoutnotice may be served up to the expiry ofthe limitation period for prosecuting thecriminal offence.

The right of summary dismissal can alsobe exercised without giving reasons bothby the employer or by the employeeduring the probation period and by theemployer in the case of a fixed-termemployment relationship. In the lattercase the employee is entitled to anabsence fee for 12 months, or if the



balance of the fixed period is shorter thanone year, for the remaining time period.

13.4 Special ProtectionNo notice of termination may be served incertain circumstances (prohibition ofdismissal), for example the employer maynot terminate the employmentrelationship by notice during pregnancy,maternity leave, unpaid leave of absenceto care for a child, during any period ofvoluntary military service, and in the caseof women receiving IVF treatment.

There are certain employees in relation towhom the dismissal the employer isrequired to comply with additionalrequirements, such as investigatingwhether there are any other position at theemployer that could be filled by theaffected employee before the terminationnotice can be lawfully served (protectionagainst dismissal). Employees close toretirement age, mothers and single fatherswith children under the age of three maybe dismissed by notice only on specificallyjustified grounds. The employment ofemployees’ close to reaching the age limitfor old age pension may be terminated forreasons connected with the employer’soperations, or in connection with theemployee’s ability, in the event that thereare no vacant positions suitable for theaffected employee in terms of his/her skills,education and/or experience, or if theemployee refuses a position that is offeredto him/her without good reason. Mothersor single fathers who are eligible for, but donot take, unpaid leave to care for a child upto the age of three can be dismissed ifthere are no vacant positions suitable forthe affected employee in terms of theirskills, education and/or experience or if theemployee refuses a position offered tohim/her without good reason, providedalways that the general requirements inrelation to dismissals are adhered to.

The Trade Union’s consent must beobtained in order to dismiss any of theirmembers and the Works Council’sconsent must be obtained in order todismiss its chairman by notice.

Non-compliance with these rules rendersthe termination invalid.


The Labour Code defines collectivedismissal by reference to the number ofemployees employed and the number ofemployees to be dismissed. In principle,the rules on collective dismissals apply ifthe employer has at least 20 employeesand the redundancy affects at least 10%of the employees. When calculating thenumber of employees affected, it is notonly dismissals by ordinary notice thatmust be taken into consideration, butalso termination of fixed termemployment relationships andterminations by mutual agreement.

Collective dismissal triggers a broadobligation on an employer to inform andconsult with the representative of theWorks Council, the local labour authorityand the individual employees.

If there is a Works Council, due to thestatutory consultation process prior to theimplementation of the collective dismissal,the employer may make its decision onthe collective bargaining agreementapproximately four weeks after theinitiation of the consultation process. Thefirst termination notices may only beserved approximately two months afterthe start of the consultation process.

If no Works Council operates at theemployer, the employer is not required toconsult with the employees directly andthe length of a collective dismissalprocedure can be significantly shortened.In any case the employer shall notify theemployees of the intention of redundancy– at least 30 days prior to serving thetermination notices on the employees.The notices can be delivered 30 daysthereafter. The labour authority must beinformed and updated during the courseof the redundancy programme.

The Works Council or the employees areentitled to bring court proceedings in the

event the employer fails to fulfil any of itsobligations in connection with thecollective dismissal. Notices ofterminations that do not comply with theproposed collective dismissal schedule orthe agreement reached with the WorksCouncil are invalid.

14. Data Protection14.1 Employment RecordsThe collection, use and storage ofemployee data in Hungary is regulated bythe Data Protection Act (DPA) and theLabour Code. The DPA is supported bythe guidelines issued by the HungarianNational Authority for Data Protection andFreedom of Information (NADP). Althoughthese guidelines are not legally bindingregulations, the NADP has the right torequest that the employer and otherpersons handling the employee’s datacomply with the data protection rules.

NADP is responsible for supervising anddefending the right to the protection ofpersonal data and to freedom ofinformation in Hungary.

As a matter of practice suggested by theNADP, employers need to notify theNADP of their data controlling/processingactivity if they handle data of employeesin excess of the minimum datanecessary to comply with theirobligations under the employmentcontract (i.e. payment of wages/salaries),which is usually the case.

An employer may require data from theemployee to the extent that this does notinfringe his personal rights (e.g. privacy)and that the data provides the employerwith substantial information concerningthe employment relationship. In thesecases the employee’s implied consent(in practical terms by signing theemployment contract) is sufficient. Inaccordance with the general rules of theDPA, the employee’s express consent ora mandatory provision of law is necessaryfor the collection, use, storage andprocessing of personal data for purposes


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other than the proper exercise of rightsand obligations under the employmentcontract. Consent in writing must beobtained for certain sensitive data suchas state of health, criminal records orTrade Union membership. Employers maybe permitted to disclose facts, data andopinions concerning an employee to thirdpersons only if the law permits suchdisclosure or the employee gave his orher consent.

Although there is no requirement toobtain an employee’s consent to datahandling in writing, since the burden ofproof in data protection matters isgenerally on the employer, it is advisableto record the employee’s consent.

Personal data may only be collected,used, stored and processed for a definedpurpose and in order to exercise rightsand perform obligations. Only personaldata which is indispensable for thepurpose of the data collection, use,storage and processing may be used,and only to the extent and for the periodof time required for the accomplishmentof such purpose.

Non-compliance with the data protectionrules may result in a claim by theemployee for damages and an obligationto delete the employee’s data that hasbeen collected, used, stored orprocessed unlawfully. In certaincircumstances when data handling iscontrary to the DPA, the NADP is entitledto (i) order the correction of false data;(ii) order the seizure, deletion ordestruction of the unlawfully processedpersonal data; (iii) prohibit the unlawfulmanagement or processing of personaldata; (iv) prohibit the transfer of personaldata to any third country (i.e. countryoutside the EEA); (v) order the datacontroller to inform the person concernedif the data controller has refusedpreviously to give the required informationto such person; and (vi) impose fines ofup to HUF 10 million (approx. €37,000).Data handling contrary to the DPA mayalso constitute a criminal offence.

Financial institutions, telecommunicationservice providers and public utilities mustappoint an internal data protection“commissioner”, who is responsible forcompliance with the data protectionrules, and establishing internal dataprotection rules within the organisation.

14.2 Employee Access to DataEmployees have the general right toreceive information in advance on thecollection, use, storage or processing oftheir data. They are also entitled torequest the correction or, in certaincircumstances, the deletion of their data.

14.3 Monitoring Employers are allowed to monitor thebehaviour of their employees only to theextent the monitoring relates to theemployment relationship. The private lifeof the employees may not be violated.

The employer has the right to monitor thecontent of the hardware of theemployee’s computer if the computer isexplicitly for work-related use. As far asemails are concerned, the employer mustdistinguish between email addresses forprivate purposes containing theemployee’s name and work-related emailaddresses not referring to the employee.Emails from email addresses accessibleby the employee (and the systemadministrator) exclusively may only bemonitored in compliance with the generalrules of data protection.

The distinction between email addressesfor work-related and private purposesapplies to the use of the internet. If theemployer explicitly limits internet use forpurposes connected to the employee’swork, it may monitor the use of internetprovided that this was notified to theemployees before the monitoring occurs.

The use of cameras for controllingemployees’ activities at work is subject tothe employees’ consent. The employermay use cameras in the absence of theemployees’ consent provided that theindividual employees are not recognisable

in the picture transmitted by the cameras.In any event, employees must be notifiedof the existence of cameras and advisedon whether the pictures are recorded orstored and for what purposes.

Further, according to the relevant laws,an electronic surveillance system may notbe used in a place where surveillance islikely to violate human dignity, such as indressing rooms, fitting rooms and toilets.

Monitoring private telephone usage, i.e.listing the numbers called by theemployee, irrespective of the employee’sconsent, is usually contrary to the DPA asthe telephone number of the other partyto the telephone conversation qualifies asa personal data and it is impossible toobtain the other party’s consent to listhis/her telephone number.


Data transmission to third parties by theemployer is subject to the generalrequirements on handling the employee’spersonal data.

For international data transfers the DPArequires either the explicit consent of theemployee, or – in addition to the relianceon the legitimacy of data processing –adequate protection of personal data inthe county outside the territory of EEA towhich the data is transferred.

Notably, Binding Corporate Rulesdemonstrating that the organization hasadopted EU data protection standards andthat these are enforceable across theorganization seated in different jurisdictions- and ‘ad hoc’ contractual clauses forinternational data transfers, are omittedfrom the list of recognized “adequacy”instruments under Hungarian Law. Under amandatory legal act of the European Unionthe provisions of the DPA only permit theuse of Model Clauses and reliance on thirdcountry adequacy decisions.

Contributed by Lakatos, Köves és Társai


125A Guide to Employment in the European UnionIreland

IrelandThis states the law in Ireland as atDecember 2012.

1. IntroductionEmployment law in Ireland is governed bycommon law, statutory provisions and arange of fundamental rights enshrined inthe Irish constitution. In addition, EuropeanCommunity Directives and Court of Justiceof the European Union decisions apply tothe employment relationship.

There are a number of separate systemsof labour-related Tribunals: the LabourCourt whose principal function is toprovide conciliation facilities in connectionwith trade union disputes but also hasjurisdiction under a number of statutoryprovisions; the Employment AppealsTribunal appointed by the Minister forJobs, Enterprise and Innovation, whichhears grievances under specificlegislation such as that relating to unfairdismissal, minimum notice, redundancyetc; the Rights Commissioner Servicewhich may also hear claims of unfairdismissal, redundancy etc as well ashaving exclusive jurisdiction for claimsunder the European Communities(Protection of Employees on Transfer ofUndertakings) Regulations 2003 and forclaims of penalisation under the Safety,Health and Welfare at Work Act 2005;and the Equality Tribunal which deals withdiscrimination issues in employment.

There is currently a reform projectunderway to merge the above bodiesand create a two-tier WorkplaceRelations structure to adjudicate claims.

In addition, employees have accessdirectly to the Courts. The Courts have, ina series of employment-related cases,granted injunctions restraining purportedtermination of contracts of employmentand also restraining internal disciplinaryprocedures on the basis that principles ofconstitutional and natural justice were notbeing observed. Such principles arefurther expanded by the European

Convention on Human Rights Act 2003.The Courts may also award damages forwrongful dismissal, a distinct remedyfrom unfair dismissal.


2.1 GeneralIrish employment law does not, ingeneral, distinguish between differentcategories of employees within theprivate sector. Part-time employees areentitled to be treated no less favourablythan full-time employees. Similarly, fixed-term employees are entitled to be treatedno less favourably than permanentemployees. The Protection of Employees(Temporary Agency Work) Act 2012 wasenacted to give agency workers muchthe same rights and entitlements aspermanent employees.

2.2 DirectorsDirectors may be officeholders andemployees and, therefore, may haveexactly the same entitlements as ordinaryemployees. Their rights and obligationsas officeholders are governed by theprovisions of the Companies Acts.

3. Hiring3.1 RecruitmentThe Employment Equality Acts 1998 to2011 (the “Equality Acts”) specificallyprohibit discrimination in the areas ofaccess to and conditions of employment,training, promotion and advertising.Employers are advised to reviewrecruitment procedures, includingadvertising and interviewing techniques, toensure that discrimination does not occur.

Employers are not required to use Stateunemployment offices and there are norecruitment quotas requiring employersto recruit from any particular groups.State employment offices and trainingcentres are run by An Foras AiseannaSaothair (FÁS). They provide formalsources of recruitment for manual or

semi-skilled workers. Private recruitmentconsultants are commonly used for moresenior positions.

3.2 Work PermitsIn general, an employment permit isrequired for non-EEA nationals (exceptingnationals of Switzerland) who are workingin Ireland. An employment permit isissued by the Minister for Jobs,Enterprise and Innovation following anapplication by the employing company, orthe non-EEA national (excepting nationalsof Switzerland) in prescribedcircumstances. A non-EEA national(excepting nationals of Switzerland) maynot make an application in respect oftheir employment in Ireland unless anoffer of employment has been made inwriting to them.

Work permits are available foroccupations with an annual salary of€30,000 or more where green cards arenot available and, in exceptionalcircumstances, for occupations withsalaries below €30,000. Certain jobs arestrictly ineligible for work permits,regardless of the salary paid.

Green cards are available for occupationswith an annual salary of €60,000 or moreand for certain occupations with anannual salary of between €30,000 and€59,999. Employment permits are initiallygranted for a two-year period.

An employer must demonstrate that theyhave taken all steps as were reasonablyopen to them to offer the employment inquestion to an EEA citizen or national ofSwitzerland and, in the case of a workpermit, must advertise the role in aprescribed manner. In addition, theemployer must prove that, at the time ofthe application, more than 50% of theiremployees were EEA citizens, ornationals of Switzerland. Refugees whocome within the criteria laid down in theRefugee Act 1996 (as amended) areentitled to all employment rights availableto Irish citizens.

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Employers may also apply for intra-company transfers incertain circumstances.

4. DiscriminationThe Equality Acts prohibit discriminationon nine grounds, namely gender, civilstatus, family status, sexual orientation,religious belief, age, disability, race andmembership of the Traveller community.Discrimination on grounds of gender andmarital status has been prohibited bystatute since 1977 but the additionalgrounds were introduced more recently.

The principle of equal treatment of menand women requires that they receiveequal pay for “like work” unless thedifference in pay is based on groundsunrelated to the employees’ gender. TheEquality Acts extend this principle to thenine discriminatory grounds so thatdifferent rates of pay for like work mustbe justified on grounds other thanthese grounds.

The Equality Acts also provide a remedyagainst acts of indirect discriminationwhich are those acts which place aparticular category of employees (withinthe meaning of the nine grounds ofdiscrimination) at a particulardisadvantage by reference to acomparator and which cannot beobjectively justified by the employer.

The Equality Acts outlaw sexualharassment in the workplace. It is definedas any form of unwanted verbal, non-verbal or physical conduct of a sexualnature carried out by fellow employees,customers or business contacts, beingconduct which has the purpose or effectof violating a person’s dignity andcreating an intimidating, hostile,degrading, humiliating or offensiveenvironment for the person. Unwantedconduct may consist of acts, requests,spoken words, gestures or theproduction, display or circulation ofwritten words, pictures or other material.

The Equality Acts also outlaw non-sexualharassment in the workplace. It is definedas any form of unwanted conduct relatedto any of the discriminatory groundscarried out by fellow employees,customers or business contacts, beingconduct which has the purpose or effectof violating a person’s dignity andcreating an intimidating, hostile,degrading, humiliating or offensiveenvironment for the person. As withsexual harassment, unwanted conductmay consist of acts, requests, spokenwords, gestures or the production,display or circulation of written words,pictures or other material.

Employers are liable for acts of sexualand non-sexual harassment by theiremployees unless they can establish thatthey took reasonable steps to ensure thatharassment did not occur. Complaintsconcerning discrimination will be handledby the Director of the Equality Tribunalwhose decisions may be appealed to theLabour Court. Complainants may alsorefer claims directly to the Circuit Court incertain circumstances.


5.1 Freedom of ContractIn Ireland there is extensive freedom ofcontract between employer andemployee, with statute intervening only inlimited circumstances. However,employment legislation must be borne inmind. For example, although a contractof employment may allow an employer toterminate the contract on notice, theUnfair Dismissals Acts 1977 to 2007 (the“Unfair Dismissals Acts”) provide thatdismissals are deemed unfair unless theemployer can show otherwise.

5.2 FormThere is no requirement for a contract ofemployment to be in writing, althoughunder the Terms of Employment(Information) Acts 1994 to 2012 (whichimplement Directive 91/533/EEC)employers are obliged to furnish

employees with a statement of the mainterms and conditions of their employmentwithin two months of commencement.The required information includes theplace of work, the duration of anytemporary or fixed-term contract, the rateor method of calculation of remuneration,the frequency of remuneration, any termsor conditions regarding hours of workincluding overtime, paid leave (other thansick leave), incapacity to work due tosickness or injury and paid sick leave.The statement should also specify theperiod of notice which the employeemust give and is entitled to receive inorder to terminate their employment.

Contracts may be for a fixed or indefiniteterm, or for a specific purpose, e.g. thecompletion of a project where it is notpossible to predict the length of timerequired. Fixed-term or specified purposecontracts may be drafted to exclude anemployee’s right to bring an unfairdismissal claim on the expiry of the fixed-term or on the completion of thespecified purpose. For an exclusion to bevalid, the contract should be in writing,signed by both parties, and should statethat the Unfair Dismissals Acts shall notapply to a dismissal which is due only tothe expiry of the fixed-term or the cessorof the specific purpose. Employers maynot, however, use a series of fixed-termor specified purpose contracts to depriveemployees of the protections availableunder the Unfair Dismissals Acts. Furtherlimitations on the use of fixed-termcontracts and further protections forfixed-term workers were introduced bythe Protection of Employees (Fixed-Term)Work Act 2003 (which implementsDirective 1999/70/EC).

5.3 Trial PeriodsProbationary periods of up to 12 monthsfrom the commencement of theemployment may be agreed between theparties, although in practice trial periodsmay be very much shorter. Although it isnot a legal requirement that they areagreed in writing, in practice they are.




All employees are under an implied dutynot to enter into any business activities incompetition with their employer, eitherduring or outside working hours. Inaddition, restrictive covenants prohibitingemployees from competing with thebusiness of their employer aftertermination of their employment areincluded in the contracts of many senioremployees. These will only be enforcedby a Court where they are to protect thelegitimate business interests of theemployer and are limited in time andgeographical area A duty of confidentialityin relation to the employer’s businessapplies during the employmentrelationship and after it has terminated.

5.5 Intellectual PropertyContractual provisions concerningproperty rights in inventions made byemployees are common, but in theabsence of an express provision theCourts will usually decide that aninvention made by an employee duringthe course of employment or where theemployee was employed for the purposeof inventing, belongs to the employer.

6. Pay and Benefits6.1 Basic PayThe National Minimum Wage Act 2000introduced a statutory minimum wage,which is currently €8.65 per hour. Certainindustries have established minimum paylevels (which may be higher than theNational Minimum Wage) and employers insuch industries must give details of the paylevel to employees. An employer who paysless than the established minimum may beordered to pay up to three years’ arrears ofwages due to the employee. An employeemay sue his or her employer if thatemployer fails to pay his or her basic salaryand, if the payment is governed by anEmployment Regulation Order, theemployer may be guilty of an offence underthe Industrial Relations Acts 1946 to 2012.

Legally binding agreements relating topay may be reached by one or more

trade unions and one or more employersthrough voluntary bodies known as JointIndustrial Councils (“JICs”). Suchagreements apply to all individualemployees covered by JICs regardless ofwhether or not those employees areunion members.

There is no obligation on employers toindex-link the salary they pay toemployees. However, it is commonpractice for employers to link salary toinflation. National wage agreementsbased on a “partnership” approachbetween Government, unions, employersand other interested groups had been inplace for many years in certain sectors,though the collapse of social partnershiphas seen these agreements fall away.

6.2 PensionsPrivate pension schemes are becomingmore common with contributions madeto an independent employer-sponsoredfund by both employers and employees.However, these schemes tend to bedefined contribution only with newdefined benefit schemes being very rare.If an employer-sponsored pensionscheme is approved under the TaxesConsolidation Act 1997, it may benefitfrom various tax concessions, subject tocertain limits. Employers must offeraccess to at least a standard PersonalRetirement Savings Account (PRSA) to“excluded employees” such as thosewhose employer does not operate anoccupational pension scheme or wherethere is a waiting period of over sixmonths or more to join the scheme.

6.3 Incentive SchemesIn the last 10 years, the Irish Governmenthas introduced tax legislation toencourage employees to participate inthe ownership of their employercompany. There are no tax incentives to

encourage employers to operatecommission or bonus schemes.

6.4 Fringe BenefitsIn many employment contracts, fringebenefits include payment of theemployee’s contributions to a voluntaryhealth insurance (operated by VHI or otherhealth insurance providers) scheme forthe employee and his or her dependants.For more senior positions the use of a caris frequently provided. Both the paymentof health insurance premia and theprovision of a company car are subject toincome tax as a benefit in kind. (See alsosickness benefits below).

6.5 DeductionsDeductions must be made from allemployee salaries and wages forincome tax under the Pay As You Earn(PAYE) scheme, in respect of socialinsurance contributions and to covercertain amounts payable under CourtOrders. Other deductions can only bemade after obtaining the writtenconsent of the employee.

7. Social Security7.1 CoverageWith very few exceptions, the Irish socialsecurity system covers all employees inthe private sector who are over age 16and who earn €38 or more per week (aworker who earns less than €38 perweek is only covered for occupationalinjuries). The social security systemprovides for benefits to cover retirement,disability and survivors’ pensions,sickness, maternity, industrial injury,unemployment, disability, socialassistance and family allowances.

7.2 ContributionsContributions are generally made by bothemployers and employees, and are madeas follows:

Employers' Pay Related Social Insurance

Salary less than €356 per week/€18,512 per annum 4.25%

Salary greater than €356.01 per week/€18,512 per annum 10.75%


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Employees

The employees’ contributions are madeup of Pay Related Social Insurance(“PRSI”) and a “Universal Social Charge”as follows:

(a) PRSI 4% payable on salary(employees earning €352 or lessper week are exempt from PRSI).

(b) Universal Social Charge:

Subject to certain conditions, there is anEmployer’s PRSI Exemption Schemeintroduced for 2012 that exemptsemployers from the obligation of payingemployers PRSI for 18 months whentaking on certain additional full-timeemployees. To avail of the scheme, theadditional full-time employees must havebeen employed during 2012.

8. Hours of WorkUnder the Organisation of Working TimeAct 1997 the maximum average workingweek is 48 hours. Hours may be averagedover a period of four, six or 12 months,depending on the circumstances. The Actalso requires employers to provide restbreaks to employees. Employees have anentitlement to a 15 minute rest breakwhere up to four and a half hours havebeen worked and 30 minutes where up tosix hours have been worked. Thesebreaks may be varied either by collectiveagreement (which must be approved bythe Labour Court) between the employees’representatives and the employer or byRegulations made applicable to aparticular sector. In such cases,compensatory rest must be provided.

Special provisions apply to nightworkers, i.e. those who work for at leastthree hours between midnight and 7amand at least half of whose annualworking time is night work. Employers

must not permit night workers to workfor more than an average of eight hoursin any 24-hour period. The averagingperiod for night workers is two months(although longer periods are permitted incertain circumstances).

9. Holidays and Time Off9.1 HolidaysThere are nine public holidays, in respectof which employees are permitted at theoption of the employer to (i) a paid day offon that day; (ii) a paid day off within amonth of that day; (iii) an additional day ofannual leave; or (iv) an additional day’spay. In addition, employees are entitled toa minimum of 20 days’ holidays per year,although an employee must have workedfor a particular employer for the fullholiday year in question to be entitled tothe full 20 days. Otherwise, holidays aregranted on a pro rata basis.

9.2 Family LeaveThe most important rights under theMaternity Protection Acts 1994 and 2004are the right to return to work aftermaternity leave and the right to additionalmaternity leave. Female employees areentitled to attend ante-natalappointments during their working hoursand to take maternity leave of up to42 weeks, provided the employer is givenat least four weeks’ notice of thecommencement of such leave. Thematernity leave must include at least twoweeks’ absence before the date of thebirth and at least four weeks after. TheState provides a maternity allowance of80% of the employee’s gross earningsduring the first 26 weeks of leave, subjectto a maximum level determined from timeto time by the Government. Theemployee is also entitled to take up to16 weeks’ additional maternity leaveentirely at her own expense.

Female employees, and in certain limitedcircumstances male employees, areentitled to take up to 40 weeks ofadoptive leave. Adoptive benefit ispayable by the State for the first

24 weeks. An employee may take anadditional 16 weeks of leave during whichno benefit is payable.

The Parental Leave Acts 1998 and 2006give parents of children the right to14 weeks of unpaid leave in respect ofeach such child. The leave must be takenbefore the child is eight years old (subjectto modifications in the case of anadopted or disabled child) and may betaken as a continuous period, in portionsor by working reduced hours. While theleave is unpaid, it is reckonable for thepurposes of employment rights. This is tobe extended in 2013 to four months (atleast one of which may not be transferredto the other parent).

Employees may in limitedcircumstances take up to 104 weeks ofunpaid leave of absence to care for anincapacitated dependant.

9.3 IllnessIn the absence of any express term in acontract of employment concerning acompany sick pay scheme or any termimplied as a result of custom andpractice, an employee has no entitlementto receive money from the employerduring any period of absence due tosickness or injury. Thus, during suchperiods of absence, the employee mustrely wholly upon social welfare benefits.

Large undertakings usually provide forpayment of full wages for a limited periodof absence due to illness or injury, subjectto a refund to employers in respect of theState benefits received.

10. Health and Safety10.1 AccidentsAll employers are required to take stepsto ensure that their employees areworking in as safe an environment as isreasonably practicable. That standard “sofar as is reasonably practicable” is a highthreshold pursuant to the Safety, Health &Welfare at Work Act 2005 (the “2005Act”). Employees can bring civil claims

First €10,036 2%

€10,036.01 to €16,016 4%

Remainder 7%



against their employers for any losssuffered as a result of accidents at workor industrial illnesses and also claimcompensation from the StateOccupational Injuries Benefit Scheme.

More recently, emphasis has been placedon protecting employees from incurringnon-physical illness at work. Liabilityarising from stress-induced illness hasbeen established in a number of casesand employers are expected to takeappropriate steps to prevent any forms ofharassment and bullying in the workplaceor any other forms of practice which maygive rise to injury and damage to anemployee. There is no statutory obligationon employers to be insured against civilliability, although most large undertakingsare covered by such insurance.

A criminal offence is committed wherethe duties imposed by the varioussections of the 2005 Act are breached.Those offences can be divided into twoseparate sets, less serious offences forwhich the guilty person is liable onsummary conviction to a fine notexceeding €3,000, and the more seriousoffences for which, on summaryconviction, one can be liable to a fine notexceeding €3,000 and/or imprisonmentfor a term of up to six months. For themore serious offences, upon convictionon indictment a person can be liable to afine of up to €3,000,000 and/orimprisonment for a term of up to twoyears. The “more serious offences” whichattract the more severe penalty includesuch straightforward duties as providinginformation to employees regardinghealth and safety pursuant to Section 9of the 2005 Act or providing instructiontraining and supervision to employeespursuant to Section 10 of the 2005 Act(i.e. it is not just contravention of themore obviously important duties whichcan attract the higher penalty).

Where an offence under health and safetylegislation has been authorised orconsented to by a manager, or a personwho purports to act in such a capacity,

then that person, as well as theundertaking, shall be guilty of an offenceand shall be liable to be prosecuted.

The Safety, Health and Welfare at Work(General Application) Regulations 2007(the “Regulations”) came into force inNovember 2007. The Regulationscomplement the 2005 Act and include, inone text, most of the specific health andsafety laws, which apply generally to allemployment. The Regulations revoke awide range of stand-alone health andsafety legislation and present a vast arrayof health and safety provisions in one selfcontained and easily accessible text.

10.2 Health and Safety ConsultationAn employer must provide information inrelation to health and safety to employeesand the Safety Representative (if any) in aform, manner and language that isunderstood by employees.

An employer must consult withemployees, and take account of anyrepresentations made by the employees,for the purpose of giving effect to theemployer’s statutory duties in respect ofsafety, health and welfare. As this ismandatory, some form of consultationmechanism must be provided (althoughsafety committees are not mandatory).The Health and Safety Authority hasissued guidelines on the effectiveness ofconsultation arrangements includingadvice on the selection of safetycommittees (where one is put in place).

The employees may, if they so wish,select a Safety Representative (or, byagreement with the employer, more thanone) from “amongst their number”. TheSafety Representative may consult with,and make representations to, theemployer on safety, health and welfarematters relating to the employees in theplace of work. The Safety Representativehas a number of statutory rights andpowers including:

(a) the right to information from theemployer in connection with the

safety, health and welfareof employees;

(b) the right to make representations tothe employer as to safety, healthand welfare. The employer isrequired to consider these and,where necessary, act on them. Therequirement to act onrepresentations from the SafetyRepresentative is more demandingthan would apply to representationsfrom other employees;

(c) the power to carry out generalinspections or investigate potentialhazards on notice to the employer.The employer cannot unreasonablywithhold permission for these;

(d) the Safety Representative must beinformed by the employer that aHSA Inspector has arrived at theplace of work and also has a rightto accompany the Inspector, unlessthe Inspector is investigating aspecific incident. The SafetyRepresentative may make oral orwritten representations to anInspector and is also entitled toreceive advice and information froman Inspector;

(e) the Safety Representative is entitledto time off “as may be reasonable”,without loss of remuneration:

(i) to acquire knowledge to carryout his/her functions; and

(ii) to carry out his/herfunctions, e.g.conducting investigationsand inspections;

(f) the Safety Representative is tosuffer no penalisation for being asafety representative; and

(g) the right to investigate accidentsand dangerous occurrences(provided that it will not interferewith the performance of another’sstatutory obligation).

The Health and Safety Guidelines statethat in most organisations a single Safety


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Representative will be adequate to meethealth and safety requirements but that, ifan employer has different locations, aSafety Representative can be appointedat each place of work.

Every employer must have a SafetyStatement in relation to every place ofwork. This is a statement based upon arisk assessment specifying how healthand safety should be managed. Anexemption exists for employers who haveless than three employees if an approvedcode of practice exists, and in thosesituations compliance with that approvedcode of practice is sufficient.

Smoking is banned in enclosedworkplaces by virtue of the Public Health(Tobacco) Act 2002 as amended (the“2002 Act”). Any employer who allows acontravention of the prohibitions orrestrictions contained in the 2002 Act willbe guilty of an offence unless they canshow that they made all reasonableefforts to ensure compliance with theprovisions of the 2002 Act.

11. Industrial Relations11.1 Trade Unions All Irish workers have a right to jointogether and form trade unions. However,only those trade unions with 1,000 ormore members and on behalf of whommoney has been deposited in Court arelicensed to take part in collectivebargaining. It is an offence for a union toenter into any sort of negotiations withoutsuch a licence, although groups ofworkers are legally entitled to negotiatewith their own employer. There is no legalobligation on an employer to recognise atrade union, and the post-entry closedshop has been declared unconstitutional.The Labour Court has under the IndustrialRelations (Amendment) Act 2001 (asamended) been given power toadjudicate in industrial disputes and inlimited circumstances to issue bindingdeterminations where the normalvoluntary procedures have not resolved

the issue in dispute. Trade unions may beaffiliated to the Irish Congress of TradeUnions (“ICTU”).

The largest employers’ association is theIrish Business and Employers’Confederation (“IBEC”), which acts as acentral adviser to its members on mattersconcerned with employer/union relations.In general, IBEC will only take part incollective negotiations when requested todo so by one of its members.

For 22 years, the Government, employerassociations, trade unions and otherinterested bodies entered into “socialpartnership agreements” with regard toissues such as wages, industrial relationsand other reforms. However in 2009,social partnership effectively collapsedfollowing the failure to agree on a newdeal in light of the economic crisis.

11.2 Collective AgreementsCollective agreements are generally notlegally enforceable by the parties to them.However, the terms of such anagreement may become incorporated ina contract of employment or beregistered with the Labour Court as a“Registered Employment Agreement” andhence, be enforceable by the employeragainst the employee or vice versa.Collective agreements in the moretraditional industries tend to benegotiated on an industry-wide basis butmore recently the trend with establishedindustries is towards collective bargainingat plant level.

11.3 Trade DisputesIrish workers have no statutory right tostrike or to take industrial action.However, the Supreme Court has heldthat there is an implied term to be readinto every contract of employment to theeffect that serving a strike notice notshorter than the contractual notice periodand taking action pursuant to such anotice is not a breach of contract. Prior tothe introduction of the Industrial Relations

Act 1990 there was some debate as towhether a right to strike should beincluded in it, but ultimately that Actpreserved the position whereby strikingemployees are granted certain immunitiesfrom liability which they might otherwiseincur for action in contemplation of or infurtherance of a trade dispute. However,no immunity is given to employees actingin defiance of a strike ballot or to anindividual employee who has failed tofollow the proper procedures. In ameasure designed to improve industrialrelations and to facilitate the resolution ofdisputes between unions and employers,a code of practice was introduced. Thisrecognises that the primary responsibilityfor the resolution of disputes lies with theparties involved, and it lays down anappropriate dispute resolution procedure.

There are also certain limitations to thecircumstances in which a Court willgrant an injunction to an employer toprevent a strike.


The Transnational Information andConsultation of Employees Act 1996requires businesses with over 1,000employees in the European EconomicArea (which includes all EU states,together with Norway, Iceland andLiechtenstein) and at least 150employees in each of two EEA states, toestablish procedures to inform andconsult employees in relation totransnational matters affecting thebusiness at EEA level. Employers arerequired, either on their own initiative or atthe request of at least 100 employees inat least two EEA states, to establish aSpecial Negotiating Body for thepurposes of negotiating agreedinformation and consultationarrangements. Whilst the role of the“Works Council” is limited, it does involvea new consultative process with workerrepresentation and is a new concept foremployers in non-unionised workplaces.



EU Directive 2002/14/EC (the“Information and Consultation Directive”),which imposes further consultationobligations on businesses in Ireland withover 50 employees has beenimplemented in Irish law by theEmployees (Provision of Information andConsultation) Act 2006.

Where collective redundancies areproposed, under the Protection ofEmployment Act 1977 (as amended) theemployer is obliged to consult with theemployee representatives and notify theMinister for Jobs, Enterprise andInnovation; failure to do so may result inthe employer being fined afterprosecution by the Minister. The employermust notify the Minister at least 30 daysbefore the first dismissal takes place andmust consult with the employeerepresentatives at least 30 days beforethe first notice of dismissal is served.There is a maximum fine of €5,000 peroffence on conviction for failure to provideinformation to and/or consult with theemployee representatives and failure tonotify the Minister. However, fines can beup to €250,000 for implementing theredundancies before notifying theMinister. Employees or theirrepresentatives may also refer the issueof non-consultation to a RightsCommissioner who may award up to fourweeks’ remuneration as compensation.

Additional provisions apply in relation to“exceptional collective redundancies”. Anexceptional collective redundancy is adismissal which is collective andcompulsory and where the dismissedemployees are replaced by others whowill perform essentially the samefunctions but on inferior terms andconditions of employment. Penalties canbe up to five years’ salary and/or fines ofup to €250,000.

Consultation obligations may also ariseunder existing collective agreements orthe Transfer Regulations referred to insection 12 below.


12.1 General The European Communities (Protection ofEmployees on Transfer of Undertakings)Regulations 2003 (the “TransferRegulations”) implemented the 2001 EUAcquired Rights Directive (2001/23/EC).

Upon a transfer of a business orundertaking falling within the TransferRegulations, all rights and obligationsarising from contracts of employment aswell as any rights under collectiveagreements are automatically transferredto the transferee. The dismissal ofemployees by reason of the transfer isprohibited unless this is done for“economic, technical or organisationalreasons entailing changes in theworkforce”. The status and functions ofexisting employee representatives arealso preserved in certain circumstances.


The transferor and transferee mustinform, and in certain circumstancesconsult with, the representatives of theiremployees that are affected by thetransfer. They should be informed ofwhen the transfer will take place, thereasons for the transfer, the implicationsthe transfer will have for the workforceand of any ‘measures’ envisaged inrelation to the employees. Thisinformation must be given to theemployees or their representatives, wherereasonably practicable, not later than30 days before the transfer occurs and inany event in ‘good time’ before thetransfer (which could be a period greaterthan 30 days).

Where there are no employeerepresentatives the relevant employer(s)must put in place a procedure wherebyrepresentatives can be appointed. Time toappoint representatives needs to befactored into the timing of any transaction.

These information and consultationobligations apply to all transfers to whichthe Transfer Regulations apply regardlessof the number of employees involved.Where the transferor or the transfereeenvisage any ‘measures’ in relation to theemployees (e.g. a change to theemployees’ work practices, work locationredundancies) the employees’representatives must be “consulted” witha view to reaching an agreement.Provided that there has been meaningfulconsultation there is no obligation toactually reach an agreement.

12.3 Notification of AuthoritiesThere is no general obligation to notify theauthorities about a transfer or itsconsequences, however certain regulatedindustries (e.g. financial services) may berequired to notify the relevant regulatoryauthorities (i.e. the Financial Regulator) orindeed certain transactions may requireapproval by the Competition Authority.

12.4 LiabilitiesA complaint of a contravention of theTransfer Regulations may be referred to aRights Commissioner at first instance. Ifhe upholds any complaint, the RightsCommissioner may require the employerto pay to each employee compensationnot exceeding four weeks’ remunerationfor a breach of the notification andconsultation obligations and notexceeding two years’ remuneration for abreach of any other provisions of theTransfer Regulations.

A Rights Commissioner is also able togrant relief analogous to injunctive reliefand in addition, it is possible to obtain aninjunction from the courts, particularly incases where time is of the essence(though such has been extremely rare intransfers under the Transfer Regulations).Any decision of a Rights Commissionermay be appealed to the EmploymentAppeals Tribunal and then to the CircuitCourt. If the employer fails to carry out adecision, an application can be made tothe Circuit Court to seek an orderdirecting the employer to comply.


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13. Termination13.1 Individual TerminationUnder the Unfair Dismissals Acts anemployee who has worked for more thanone year is entitled to rely on thelegislation to challenge a dismissal asbeing unfair. Under the Unfair DismissalsActs, a dismissal is deemed to be unfairand the onus is on the employer toestablish otherwise.

It is also possible, although notconcurrently with a claim under the UnfairDismissals Acts, for an employee tochallenge a dismissal which isdiscriminatory within the meaning of theEquality Acts.

13.2 NoticeIn cases other than gross misconduct(when the employer is entitled toterminate without notice), anindefinite/permanent contract may beterminated by notice. However the UnfairDismissals Acts must also be compliedwith. The following minimum statutorynotice periods apply to all employeeswho have completed 13 weeks ofcontinuous service with the employer:

Individual contracts may provide for longernotice periods and often do so in the caseof senior executives. Notice may be oral,although collective agreements maystipulate that it be in writing. Any dismissedemployee is entitled to require theemployer to supply a written statement ofthe reasons for dismissal within 14 days.After the initial 13 weeks of employment,an employee must give one week’s noticeof his or her intention to resign.

A former employee who has beendismissed without proper notice beinggiven can claim salary (and loss of otherbenefits) in lieu of notice.

Claims of unfair dismissal are normallyheard by the Employment AppealsTribunal and must be made within sixmonths of the date of dismissal; thisdeadline may be extended by the Tribunalto a maximum of 12 months in certaincircumstances. If both parties agree, theclaim can be heard more informally by aRights Commissioner whoserecommendation may be appealed to theEmployment Appeals Tribunal.

The remedy which may be sought orawarded in the case of unfair dismissalis reinstatement, re-engagement orcompensation of up to a maximum oftwo years’ remuneration. Determinationsof the Employment Appeals Tribunal aresubject to appeal to the Circuit Courtwhose decision may be further appealedto the High Court; appeals in bothCircuit and High Courts are by way offull re-hearings. Failure by the employerto implement a determination of theEmployment Appeals Tribunal withinsix weeks may result in proceedings bythe Minister for Jobs, Enterprise andInnovation in the Circuit Court to enforcethe remedy awarded by the Court.

Employees may also apply to the Courtsdirectly claiming wrongful termination oftheir contract of employment and applyto the Courts for injunctions restrainingthe purported termination.

13.3 Reasons for DismissalDismissals may be justified on one of anumber of grounds, including theemployee’s competence, capability,conduct or redundancy. In addition todemonstrating that there were substantialgrounds justifying the dismissal, theemployer must show that it actedreasonably in effecting the dismissal.Therefore, an employer consideringdismissal for poor performance shouldapply fair procedures such as notifying

the employee of the dissatisfaction andaffording an opportunity to improvebefore effecting the dismissal.

In a redundancy situation, the employermust show not only that a genuineredundancy situation existed, but also thatthe employee was fairly selected forredundancy. Employees must be informedabout the disciplinary and dismissalprocedures in force at their workplace andshould be notified of any changes.

The employer must properly investigateany alleged breaches of working practicesand may suspend an employee on full payduring such an investigation. Theprocedures followed by an employer arevitally important when deciding whether aparticular dismissal was fair or not.

13.4 Special ProtectionDismissals which are connected withpregnancy, religion, politics, race, colour,sexual orientation, age, membership ofthe travelling community or trade unionmembership are automatically unfair.Selective dismissals of employees onstrike are also unfair.


As mentioned above, redundancy is apermissible reason for individualtermination. However, it is frequentlyassociated with plant closure andcollective dismissals.

Where an employer closes a workplaceor work of a particular kind is no longerneeded, the affected employees whohave worked for that employer for aminimum of two years are entitled tostatutory redundancy paymentscalculated according to their age, lengthof service and rate of pay. Entitlement tosuch a payment may be lost if theemployee refuses an offer of suitablealternative employment. The suitability orotherwise of such proposed alternativeemployment is considered by a subjectivetest, to be judged by the employee’spersonal circumstances.

Period ofEmployment

Notice

13 weeks – 2 years 1 week

2 years – 5 years 2 weeks



15 years or more 8 weeks



There is no rebate available from the IrishGovernment for statutory redundancypayments where the date of dismissal dueto redundancy is on or after 1 January2013. Where the date of dismissal due toredundancy occurred in 2012, theemployer will be entitled to receive arebate of 15% of the statutory redundancypayment. Disputes arising as toentitlement to a redundancy payment arereferred to the Employment AppealsTribunal. An employee who is to be maderedundant is entitled to reasonable paidtime off during the last two weeks of thenotice period in order to look for alternativework or attend training sessions.

Depending on the numbers ofredundancies involved (in relation to thetotal workforce of the undertaking),employers may be under a duty to informthe Minister for Jobs, Enterprise andInnovation before making collectiveredundancies and to notify and consultany employee representatives. (Seesection 11.4 above).

As mentioned earlier, the Protection ofEmployment (Exceptional CollectiveRedundancies and Related Matters) Act2007 (the “Exceptional CollectiveRedundancies Act”) prohibits collectiveredundancies in certain circumstances.The Exceptional Collective RedundanciesAct provides that an “exceptionalcollective redundancy” is a dismissalwhich shall not be deemed a redundancywhere, although the dismissals arecollective and effected on a compulsorybasis, the employees have been replacedby other employees to perform essentiallythe same functions as those previouslydismissed on materially inferior terms andconditions of the employment.

The Exceptional Collective RedundanciesAct establishes a Redundancy Panelwhose purpose it is to determine whetherwhat is proposed is in fact an exceptionalcollective redundancy. The RedundancyPanel may request the Minister, or theMinister may at his own behest in the

public interest, seek the opinion of theLabour Court as to whether the proposalis an exceptional collective redundancy.The timescale for a referral to the LabourCourt is the 30 day consultation periodunder the Protection of Employment Acts1977 to 2007 (which may be extendedby seven days if there has been a referralto the Redundancy Panel).

The first dismissal of an employee undera proposal for collective redundancy shallnot take effect while the process ofreferral pursuant to the ExceptionalCollective Redundancies Act iscontinuing. If an employer acts in breachof this he may be guilty of an offence andliable to a fine up to €250,000.

The Labour Court must make a decisionwithin 16 days of the referral of theproposal to it. Where the Labour Courtdecides that the redundancies are of anexceptional nature and the employerdismisses the employees as per theproposal, the Minister shall take intoaccount the Labour Court’s opinion whenconsidering the employer’s application fora rebate. Notably, should the Ministerrefuse/reduce the rebate to the employeron the basis of the Labour Court’sopinion, the exemption from income taxfor statutory redundancy payments doesnot apply to the payment.

The Exceptional Collective RedundanciesAct modifies the compensation payableunder the Unfair Dismissals Acts if theexceptional collective redundancies areheld to be unfair dismissals. An employeewho has less than 20 years’ continuousservice may be compensated with up to208 weeks’ remuneration. For employeeswho have more than 20 years’continuous service, compensation maybe up to 260 weeks’ remuneration.

14. Data Protection14.1 Employment RecordsEmployers’ data protection obligations areset out in the Data Protection Acts 1988and 2003 (the “Data Protection Acts”). The

Data Protection (Amendment) Act 2003implements the European Data ProtectionDirective 95/46/EC. The Data ProtectionActs regulate how employers collect, storeand use personal data held by them abouttheir employees (past, prospective andcurrent). More onerous obligations areimposed in respect of sensitive personaldata. Infringement of the Data ProtectionActs can lead to investigation by the DataProtection Commissioner, fines of up to€100,000 or compensation claims fromaffected employees.

Employers, as data controllers, mustensure that personal data about theiremployees is collected and processedfairly, is kept accurate and up-to-date andis not kept for longer than necessary.Appropriate security measures must betaken by employers against unauthorisedaccess to, or alteration, disclosure ordestruction of, personal data.

Employers should have a data protectionpolicy in place including a dataprotection notice, a defined policy onretention periods for all items of personaldata and provide appropriate stafftraining in data protection.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be informed whatpersonal data is held about them and towhom it is disclosed, to obtain a copy oftheir personal data and have personaldata amended or deleted where it isincorrect. Employers should respond tosubject access requests as soon aspossible or within 40 days from receipt ofthe written request. Subject accessrequests cover personal data held inelectronic form and in manual form(provided it is held in a “relevant filingsystem” as defined by the DataProtection Acts). Employers may chargeup to €6.35 for supplying employees witha copy of their personal data.


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14.3 MonitoringAs a result of the electronic workplace,organisations commonly have a generalcommunications policy which in certaininstances confers a right on the employerto monitor employee communications.Such policies apply to all employeesincluding those who travel on businesswith PCs, laptops and e-workers whowork from home.

All monitoring of employee email, internetand telephone use and close circuit TVmonitoring is subject to compliance withthe Data Protection Acts. Certain types ofmonitoring may also be caught by thePostal and Telecommunications ServicesAct 1983 (as amended by theInterception of Postal Packets andTelecommunications Messages(Regulation) Act 1993) (the “1983 Act”)and the EC (Electronic Communicationsnetworks and Services) (Data Protectionand Privacy) Regulations 2003 (the “DataProtection Regulations”). Section 98 ofthe 1983 Act makes it an offence tointercept (i.e. listen to or record) anytelecoms message in the course oftransmission unless either the sender or

recipient has consented to such listeningor recording.

On the other hand, if an employer wishesto monitor stored information such asvoicemails and emails, the Data ProtectionActs and the Data Protection Regulationswill apply. Express employee consent isnot required provided the employee isnotified that this form of monitoring maybe carried out as well as the purpose forwhich it may be carried out and the partiesto whom the stored information may bedisclosed. The Data ProtectionCommissioner has issued guidelines inrelation to employee monitoring, theguiding principle being that any limitationof the employee’s right to privacy shouldbe proportionate to the likely damage tothe employer’s legitimate interests.


Employers should not provide employeedata to third parties otherwise than inaccordance with the principles andprocessing conditions set out in the DataProtection Acts.

It may be necessary to obtain expressconsent from the employee to suchdisclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation and the location of the thirdparty. Where the data is being transferredto a third party within the EEA a writtencontract should be entered into wherebythe recipient agrees to process the datain accordance with the instructions of thetransferor and comply with the securityobligations set out in the Data ProtectionActs. Where the third party is basedoutside the EEA, the Data Protection Actsprohibit the transfer of data unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply. Whereemployee data is requested in thecontext of a commercial transaction,anonymised data should be provided.

Contributed by McCann FitzGerald


135A Guide to Employment in the European UnionItaly

Italy1. IntroductionEmployment relationships are regulatedby the Constitution, the Civil Code, theWorkers’ Bill of Rights (Law No.300/1970, namely Statuto dei Lavoratori)and other Acts of Parliament andDecrees. The Constitution provides forthe general rights of employees whereasthe Civil Code and other laws set out adetailed body of rules governingemployment relationships.

In addition to statutory provisions, termsand conditions of employment are set outby the national collective labouragreements (contratti collettivi nazionali dilavoro) applicable to employees inparticular industries. In principle, suchagreements are private contracts and, assuch, bind only employers that aremembers of employers’ associations andemployees who are union members. Inpractice, however, case law indicatesthey will apply to almost all employersand employees (whether union membersor not), since Italian Courts have inseveral instances ruled that suchagreements provide a minimum level ofwages and other benefits. However, inrecent years some unions have refused tosign some collective agreements,therefore the application to employeeswho are members of non-signatoryunions has become controversial. Somecollective labour agreements have in thepast been codified into legislation andtherefore made applicable to allemployees concerned.

Contratti integrativi aziendali areagreements which supplement atcompany level national collective labouragreements and which are concludedbetween employer and employeerepresentatives. Local agreements mayapply in addition, or as an alternative, incertain territorial areas.

Individual labour disputes are heard atfirst instance by the local Tribunale (andthe trial is before a one-man labourCourt). Hearings are usually held shortly

after the filing of the claim. Compliancewith an order of the Tribunale cannot bedelayed by the employer lodging anappeal. Appeals are brought to the Corted’Appello and, in the last instance, to theSupreme Court (Corte di Cassazione)which rules on points of law only. Apreliminary fast-track procedure applies inrespect of certain dismissal claims (seebelow; Reasons for Dismissal) and iscarried out prior to the steps above.

Alternatively, disputes can be broughtbefore Arbitration Tribunals as provided inthe national collective labour agreements.In principle, it is permissible to apply for aconciliation procedure with thecompetent authorities/unions conciliationcommittees before issuing labour Courtproceedings however it is not compulsoryto do so. However, in the case ofindividual dismissal for economic or otherobjective reasons in large undertakings(i.e. employers with more than15 employees in the same productionunit/municipality or with more than60 employees overall), the employer isobliged to attempt conciliation prior togiving the worker notice of dismissal, bysending a notice to the TerritorialEmployment Office (see below; Reasonsfor Dismissal).

Italian Labour law has been extensivelyreformed by Law No. 92/2012. The mostsignificant amendments relate toindividual dismissals (with the intention ofachieving “greater flexibility in relation todismissals”) and changes to rulesgoverning some categories of contracts(with the intention of curbing improperuse of these contracts, while encouragingapprenticeships as a preferred route foraccess to the labour market). Thereforms changed some of the categoriesof employment relationships e.g.contracts for project work (i.e. contractson a self-employed basis for specialprojects), contracts for the professionalservices of holders of VAT registrationnumbers, job-on-call, casual labour, andapprenticeship. Having regard tocontracts for project work, the only

permissible object of the collaborationcontract is now the realization of aspecific project aimed at fulfilling aspecific result; the specific result must beseparate and distinct from the businesspurpose of the employer and it cannotconsist of merely executive or repetitivetasks; the project has to be preciselyspecified in the contract, otherwise therelationship is considered to be anemployment contract of indefiniteduration. The new legislation alsointroduced circumstances in which anemployment contract is presumed toexist. The reforms also introduced a newprotection regime for those professionalswho work as VAT registration numberholders, by providing that in somecircumstances there will be apresumption that they are engaged on acontract for project work, such that a“project” is required (and in the event thatno project can be identified the contractwill be deemed an employment contractof indefinite duration).

Job-on-call is a work contract, whichallows an employer to have a workeravailable for non-continuous orintermittent work, within certain limitsand terms; under the new legislativeregime competent authorities must benotified under simplified procedureswhen the worker is called to work; job-on-call is now permissible for workersaged under 25 or over 55. Casual labouris defined as purely occasional workwhere the aggregate remuneration fromall the “employers” does not exceed€5,000 per year, and from any employerwho is a commercial businessman orprofessional, does not exceed €2,000per year; the remuneration is paid withvouchers, that also include socialsecurity and insurance contributions.

Under the reforms, the apprenticeshipcontract has become the principalgateway to the world of employment. Thetraining that an apprenticeship is intendedto provide is achieved by a number ofdevices, including the following: providingthat the minimum duration of an

A Guide to Employment in the European UnionItaly

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apprenticeship is six months (save forcertain exceptions); increasing the ratiobetween apprentices and qualifiedworkers from 1:1 to 3:2 (excludingemployers who employ less than 10employees, for whom the ratio cannotexceed 100%). An employer who doesnot have any qualified or specialisedemployees or who has less than threesuch employees, may hire no more thanthree apprentices. For those who employmore than 10 employees, the ability tohire a new apprentice is conditional uponthe percentage of apprentices whoseemployment relationship has beencontinued at the end of theapprenticeship period, within the previousthree years (30% for the 36 monthsfollowing the effective date of the reform;50% subsequently).


2.1 GeneralBoth Italian law and collectiveagreements classify employees intovarious categories. The three basiccategories are:

(a) blue collar employees (operai);

(b) white collar employees (two grades:impiegati and quadri); and

(c) executive employees (dirigenti).

The categorisations are important notonly as legal concepts but in a practicalsense too; promotion from one categoryto another is seen as a major event in anemployee’s career.

2.2 DirectorsDirectors of companies with delegatedpowers are traditionally considered self-employed. However, there is a socialsecurity contribution charge on directors’fees, expressed as a percentage ofincome, and the fiscal treatment ofdirectors’ fees is subject to the same taxregime applicable to employees’ salaries.

2.3 OtherPart-time employees have fullemployment protection, priorityapplication for full-time posts andcollective bargaining rights over hours ofwork. Other specific provisions apply toseasonal employees in certain industriesand in relation to fixed-term contracts.Legislation aims to encourage part-timeworking and to this end a degree offlexibility in part-time working hours andovertime is allowed. Part-time work, LawNo. 92/2012 permits collective bargainingto cover not only the introduction offlexibility clauses in individual contractsbut also conditions and procedureswhereby the worker may request achange to, or the elimination of, theseclauses. Student workers or cancerpatients will in any event be entitled torevoke consent to these clauses.

3. Hiring3.1 RecruitmentRecruitment through authorised privatecompanies is allowed for all types ofemployees. The recruitment system hasbeen reformed in 2003 by giving privatebodies a more extended role and byproviding for an IT database, which willbe continuously updated with data on thesupply and demand of manpower.Companies are allowed to engageemployees provided by another entity (anauthorised private agency) for fixed orindefinite periods. However, undertakingswith more than 15 employees arerequired to recruit fixed quotas of theirlabour force from special lists of“protected categories” like refugees anddisabled persons and, in some cases,widows and orphans.

Some social security contributionadvantages (including lower rates ofsocial security contributions) are availableto employers that hire workers fromspecial lists of unemployed people (suchas people who have been dismissedfollowing collective dismissal procedures).

Employers are prohibited frominvestigating or asking any questionsabout an applicant’s political beliefs orlabour union membership or activities orother matters not necessary to assessjob skills. These rules are in addition tothose relating to discrimination (seefurther below).

Companies are permitted to take ontemporary employees through authorisedprivate agencies. National collectivelabour agreements impose limits on whatproportion of the firm’s workforce may betemporary. The Ministry of Employmentauthorises the agencies, which must alsobe registered. Companies that apply forauthorisation will be examined underseveral criteria: they must, for example,have a minimum paid-up capital and holdadequate deposits with a creditinstitution. The employment relationship iswith the authorised private agency whichpays the employee’s salary and socialsecurity contributions and retainsdisciplinary power. The company usingthe agency employee remainsnonetheless liable for any unpaid salaryand social security contributions and forworkplace safety and health.

3.2 Work PermitsWork permits are required for non-EEAnationals and must be obtained before theemployee enters Italy by applying to theappropriate Provincial Labour Office. Workpermits are issued subject to a numericalcap established each year by GovernmentDecree. All foreign nationals must obtain aresidence permit from the policeauthorities within eight days of arrival.

Employers are liable if they employworkers who have not complied withresidence permit regulations.

4. DiscriminationDirect and indirect discrimination on thegrounds of gender, race, disability, age,language, religious belief, political or tradeunion affiliation or activity, strike



participation, sexual orientation andpersonal beliefs is prohibited. Adiscriminatory dismissal is void and theemployee is entitled to reinstatement plusdamages irrespective of the size of theundertaking and of the employee’scategory (see Reasons for Dismissals).

There is a right to freely express anyopinion in the workplace.

The Italian legislative definitions of directand indirect discrimination correspondwith those set out in Directives No.2000/43/EC and 2000/78/EC, as follows:

(a) “direct discrimination” shall betaken to occur when one person istreated less favourably than anotheror has been or would be treated ina comparable situation on thegrounds of his/her religion, belief,disability, age, sexual orientation,race or ethnic origin;

(b) “indirect discrimination” shall betaken to occur when an apparentlyneutral provision, criterion orpractice would put persons havinga particular religion, belief, disability,age, sexual orientation, race orethnic origin at a disadvantage.

The discrimination laws are, in principle,monitored and enforced by the NationalCommission for Equal Treatment andEqual Opportunities. Regional EqualityCounsellors may bring discriminationcases against employers.

Law No. 120/2011 introduced “genderquota” requirements for corporate boardsof listed companies and of non-listedpublicly controlled companies: theseundertakings have to reserve at least 1/3of their corporate board seats in order toensure gender equality and promote theparticipation of the underrepresented sex.Only a one fifth quota is required for thefirst renewal of the boards after12 August 2012 for listed companies(and after a later date, not yet fixed, fornon-listed publicly controlled companies).


5.1 Freedom of ContractIndividual contracts of employment(contratti individuali) cannot derogatefrom the provisions of the law andnational collective agreements (contratticollettivi nazionali di lavoro) andsupplemental agreements at companylevel (contratti integrativi aziendali) to thedetriment of the employee. Because ofdetailed labour laws and collectiveagreements, often very little is left forindividual contracts to cover other thanimprovements in basic economic terms.

The employer is also required to maintaina “unified employment record” (“LibroUnico del Lavoro”), recording its hiringand payroll records.

5.2 FormThere is no general requirement that acontract of employment be in writing tobe valid. However, most collectiveagreements require the contracts ofemployment to which they apply to be inwriting. However, part-time, fixed-termcontracts and probationary periodcovenants (including job description)must all be in writing.

All employers must display a copy of thedisciplinary rules and sanctions applyingto all employees at the workplace.

Legislation requires the employer to givenotice of any new employment relationshipto the competent authority, by transmittingon-line the required information no laterthan the day before the employmentrelationship commences. This informationmust include: the personal details of theemployee, the type of contract, the startingdate and the duration of the contract, thedate of termination (if any), the employee’sgrade, the applicable terms and conditions(e.g. salary, working hours, duties, tasks,etc). If employers fail to comply with thisprovision, administrative fines from €100 upto €500 may be imposed.

In addition the employer has a duty toprovide new employees before they startwork with a copy of the information noticesent to the competent authority, or with acopy of the individual employmentcontract, which has to include informationon the appointment, the place of work,the start date, the duration of the contractand any trial period, the employee’sgrade, the salary, holiday entitlement,hours of work, and notice periods. If anemployer fails to comply with thisprovision, administrative fines from €250up to €1,500 may be imposed.

Subsequent changes must be notified tothe employee within a month of theirbecoming applicable to the employee,unless they arise out of legislation orchanges to the applicable collectiveagreement. Otherwise, the employee maysubmit an application to the local labouroffice requesting that the employerprovide details of the changes withinfifteen days; if the employer fails to do so,it may be fined up to €1,290. In mostcases if the employer has failed tocomply with the above notificationprovisions the competent authority willissue the employer with a notice toperform and if the employer complies areduced fine only will be imposed.

Fixed-term contracts can only beconcluded if there is an objective reason fordoing so derived from technical, productiveor organisational reasons justifying thefixed-term, which must be specifically setout in writing in the employment contract.Law No. 92/2012 introduced an exceptionto this requirement; such justifications arenot needed for either (i) the first fixed-termemployment contract or fixed-term privateagency supply of work contract with aduration of up to 12 months (non-extendable) or; (ii) where provided for bycollective agreement subject to an overalllimit of 6% of workers employed in theproduction unit, in circumstances wherethe fixed term contract recruitment is linkedto an organisational process resulting fromspecific scenarios identified in the


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legislation (for example, product launchesor launch of an innovative service).

Fixed-term contracts are prohibited insome cases (e.g. to substitute workers onstrike). In some circumstances, thecontract may be renewed once, or newfixed-term contracts may be entered intowith the same employee, for a maximumcumulative term (including the original term)not in excess of three years (the cumulativeterm also takes into account any periodworked under a fixed-term authorisedagency supply of work contract).

5.3 Trial PeriodsAny agreement for a probationary periodmust be in writing and specify the jobdescription. During this period, eitherparty may terminate the agreementwithout giving notice (on the basis thatthe trial was not satisfactory); atermination payment (TFR) and otherminor indemnities will, however, still bedue. Collective agreements lay downmaximum probationary periods, inprinciple up to six months.


An employee may not carry on businessin competition with his or her employer orwork for a competitor, divulge confidentialor secret information concerning thecompany or the production methods ofthe employer, or utilise such informationso as to cause prejudice to the employer.

The non-competition obligation is limitedto the carrying out of activities in thesame field of business in which theemployer operates. It applies only duringthe employment contract and does notsurvive thereafter unless a specific non-competition agreement is entered intobetween the parties. A non-competitionagreement is only enforceable if:

(a) it is agreed in writing;

(b) compensation for the employee isprovided for; and

(c) the limitation on the formeremployee’s activities is reasonableas to activity, duration (in any case,the duration cannot be more thanfive years for dirigenti and threeyears for all other employees) andgeographical limit.

5.5 Intellectual Property Inventions made by an employee in thecourse of employment belong to theemployer where their creation isanticipated by the employment contractand special provision has been made. Ifnot, and the invention is made whileperforming the contract, the employee isentitled to a bonus in proportion to theimportance of the invention. In the eventthat the invention is made outside thescope of the employment and relates tothe activities of the employer, theemployer has a preferential right over theinvention. In all cases the employeeretains a moral right to be regarded asthe inventor.

6. Pay and Benefits6.1 Basic PayThere is no minimum wage as such, butthe Italian Constitution guarantees theright to fair pay. Collective agreementsprovide minimum levels of wages andbenefits. A Court can order an increasewhere pay is insufficient and generally thestandard reference is the nationalcollective labour agreement.

Wages are normally paid in 12 monthlyinstalments with a 13th instalment paidin December. Some collectiveagreements provide for a 14th instalmentat other times, usually to coincide withsummer holidays.

The multi-industry agreement of 2009provides that the parties shall negotiatesalary increases every three years, takingthe rate of inflation into account.

6.2 PensionsBecause of extensive and compulsorystate benefits, private pensions have

been rare. They are sometimes providedby the financial services sector and Italiansubsidiaries of international companies(usually only for executives).

With effect from 1 January 2007,employees have been able to choose tocontribute their accruing “TFR”termination indemnity (namely“trattamento di fine rapporto”) in asupplementary pension fund. The TFR isa deferred compensation which anemployee is entitled to receive upontermination of employment, whether inthe case of resignation or dismissal, andregardless of the reasons (seefurther below).

In companies with more than50 employees, employees must decidewithin six months of starting workwhether to transfer future TFR accrualsinto a private pension fund or anindividual pension plan. Alternatively, theymay choose to transfer the TFR to aspecific TFR fund (Fondo Tesoreria)managed by the National Social SecurityInstitute (Istituto Nazionale di PrevidenzaSociale – INPS). If they make no electionwithin the six-month period, future TFRaccruals will be transferred to a pensionfund selected by the employers andunions (or, if one is not available, to theINPS fund).

Different rules apply for companies withfewer than 50 employees. The maindifference is that, if employees choose toleave their TFR with the employer, theTFR can continue to be an accountingaccrual within the company (i.e. it doesnot have to be transferred to the INPSfund). The purpose of this is to helpsmaller companies with cash flow issues.

6.3 Incentive SchemesNo official measures have been taken toencourage share participation apart fromtax and social security relief in relation tocertain grants of shares and social securityrelief for share options. The specific taxrelief that was applicable in relation to shareoptions was abolished by Law Decree No.



112/2008 (as converted into law), inrelation to the exercise of any options (thatis, the granting of the shares) on or after 25June 2008. Any capital gains made inrelation to such options is included asemployment income, and taxed as such, inaccordance with the usual tax bands(however, in certain circumstances, a 10%tax supplement will apply to managers anddirectors of banking and financial sectors).Social security contributions relief hasbeen maintained.

6.4 Fringe BenefitsItalian managers enjoy relatively highremuneration as well as, in certain cases,fringe benefits such as company cars, lowinterest loans, mobile telephones, etc.

Other employees enjoy fringe benefitssuch as cafeteria or restaurant tickets,private supplementary insurance, etc.

6.5 DeductionsThe employer is required to withholdincome tax on behalf of the employeeand to pay such tax to the authorities ona monthly basis.

7. Social Security7.1 CoverageThe Italian social security system iscompulsory and provides acomprehensive set of benefits for allemployees. The general programmes areadministered by the National SocialSecurity Institute, INPS, as set out in therelevant collective agreements.

7.2 ContributionsThe system is financed by employee andemployer contributions which varyaccording to the category of employeeand are calculated on gross earnings.Employee contributions are deductedfrom earnings at source by the employer,who then passes them to the relevantauthorities. The amount of thecontributions vary but are around 9% foremployees and from 30% to 36% foremployers, to be calculated on the overallsalary, in most cases.

8. Hours of Work Normal working hours are generally 40 perweek. Collective labour agreements mayestablish a shorter working week. There isno maximum limit on daily working hours,however, average working hours cannotexceed 48 hours, including overtime, inany seven-day period, and daily rest mustbe, in most cases, at least 11 hours in any24-hour period. The average working timemust be calculated using a maximumreference period of four months (NCLAsmay increase the reference period to six or12 months where there are objective,technical or organisational reasons fordoing so).

In the absence of overtime limits beingestablished by collective labouragreements, it is necessary for individualagreement between the employer andeach employee. In any event overtimecannot exceed 250 hours per year.

The rate of pay for overtime, night work,holiday work and work undertaken duringthe weekly rest break must be - inprinciple - higher than for work duringnormal hours. Overtime rates range inprinciple from an additional 15-50% fornight work to an additional 30-70% forwork performed on a public holiday. Therates are set by collective agreement.Managerial employees are not entitled toextra pay for overtime.

9. Holidays and Time Off9.1 HolidaysEach town has a holiday on the day of itspatron Saint and, in addition, there areten religious and national holidays.

The Constitution establishes a right toone day of rest a week (usually taken onSunday) and a right to annual holiday.

The law provides for a minimum annualholiday entitlement of four weeks with fullpay. Having regard to this four weekentitlement the employer may not makepayments in lieu of accrued but untaken

holidays, except on termination of theemployment relationship.

More generous arrangements can beagreed by collective labour agreements;in such cases it is possible to agree thatthe employer may make payments in lieuof accrued but untaken holiday.

9.2 Family LeaveAn employee is entitled to 15 days’ leaveat normal pay on marriage as well asoccasional days off for familyresponsibilities (such as the death of arelative or child’s sickness).

Legislation provides that a woman mustgo on maternity leave two months beforechildbirth and three months thereafter (or,if she prefers and her health situation isgood, one month before childbirth andfour months thereafter). During this periodshe is entitled to maternity pay equal to80% of normal pay which is paid by thesocial security system. In someexceptional circumstances, the father isentitled to take up to three months’ leavefrom the child’s date of birth, in place ofthe mother. Collective agreements mayprovide for additional pay by theemployer, up to 100% of normal pay.

A woman or her husband may elect totake a further 10 (or 11 in specificcircumstances) months’ leave, partlypaid. During the parental leave period,the rate of pay is 30% of normal pay for aperiod of six months in aggregate up tothe child’s third birthday. Thereafter, untilthe child’s eighth birthday, pay duringparental leave is 30% of normal pay if theindividual’s revenue is below a specificthreshold. Exercising this leaveentitlement does not affect the worker’sright to resume her/his employment. Inthe first year following the birth of thechild, the mother (or, in some cases, thefather) is entitled to break from work fortwo hours each day in order to nurse thechild (if more than one child was born,four hours’ break may be taken).


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As an experimental measure in order tosustain parental relationships and topromote the sharing of duties towardschildren, Law No. 92/2012 provides thatin 2013-2015:

The father is obliged to take one day offwithin five months of the child’s birth.Within the same period, the father mayreplace the mother for a maximum of twodays during the mandatory period ofmaternity leave. During this leave he isentitled to a daily indemnity - paid byINPS - equal to 100% of the salary.

It is anticipated that the mother will beentitled to receive - within 11 months ofthe end of the maternity leave and as analternative to the parental leave -vouchers for the purchase of baby-sittingservices, when implementing legislation ispassed. Originally the date ofimplementation was summer 2012, thenew date for implementation is unknownand is subject to budget availability.

9.3 IllnessAn employee who is sick has a right toretain his or her position, seniority and,generally, regular pay for a period up tosix months or more, depending on theprovisions of the applicable collectiveagreement. The social security systemcovers part of the salary.

If employers require employees toundergo medical examinations to testtheir aptitude for the job or their fitnessfollowing sickness or accident, suchmedical check-ups must be carried outby the national health service.

9.4 Other time offAn employee is entitled to paid or unpaidleave in several circumstances prescribedby law or by the applicable collectiveagreement. For example, paid leave isgranted for trade union activity, forassisting disabled relatives, for blooddonations, or to undertake study in orderto complete compulsory education. Theright to unpaid leave may be granted in a

number of cases, which can varydepending on the applicable collectiveagreement (it may be granted for examplein the event of sickness of the employee’schildren, to perform public offices, forvolunteering activity, and so on).

10. Health and Safety10.1 AccidentsEmployers have a duty to ensure safetyat work, and may incur penal sanctions inthe event of negligence. Insuranceagainst accidents at work is compulsoryand is managed by a state agency. Strictregulations about health and safety alsoapply to supply or service contracts, andthe principal is jointly liable with thecontractor and any subcontractors foraccidents sustained at work by theiremployees performing the supply orservice contract (as well as for insurancecontributions, social securitycontributions, salary allowances, taxdeductions and VAT).

10.2 Health and Safety ConsultationThe law gives employees and theirrepresentatives the right to control theimplementation of health and safetystandards. In practice, this often meansthat union organisations at company level(RSUs – see below) will exercise theirright to consultation on the promotion ofhealth and safety at work. Formalinspection rights are only granted to theNational Health Service and to the othercompetent public authorities.

11. Industrial Relations11.1 Trade Unions Employees have the right to join and beactive in trade unions. Around 30-50% ofthe Italian workforce is unionised. Thegeneral right to associate is contained inthe Constitution with legislation givingspecific rights, such as paid and unpaidtime off work for officials to carry outunion duties. Union officials have the rightto post notices, collect funds and, inlarge undertakings, to use theundertaking’s premises for union

activities. There are strict regulationspreventing employers from dismissing ortransferring union officials. Employerscannot, financially or otherwise, supportany trade union.

Employers not complying with an order tocease anti-union activity may be liable topenal sanction.

Unions are often organised on politicallines but form alliances for the purpose ofcollective bargaining at various levels. Thenational confederations reflect politicalorientation as well. The largestorganisations are:

(a) CGIL (Confederazione GeneraleItaliana Lavoratori);

(b) CISL (Confederazione ItalianaSindacati Lavoratori);

(c) UIL (Unione Italiana del Lavoro);

(d) Dirigenti are represented byFederManager in the industrialsector and by ManagerItalia in thecommercial sector.

The main industrial employer’sconfederation is Confindustria. Thecommercial equivalent is Confcommercio.

11.2 Collective AgreementsThe most important level of collectivebargaining is that which sets nationalindustry-wide agreements. Suchagreements are negotiated by the tradeunions representing the employeesconcerned on one side, and theassociation of the employers in theparticular industry on the other.

11.3 Trade DisputesThe right to strike is enshrined in theConstitution, although restricted in somepublic services and essential supplyindustries. Industrial action short of a strikeis prohibited. There is no law whichgoverns the right to strike in general, withthe exception of a statute regulating strikesin public and other “essential“ services.




Italian unions generally believe incollective bargaining as the preferredmethod for regulating industrial relationsand, for that reason, tend to disapproveof other methods for consultation andparticipation. Employees are alsorepresented by committees organised atcompany level. The most important formof employee representation is therappresentanze sindacali unitarie (RSU).The number of works council memberswill depend on the number of employeesat the establishment. Where they exist,they have the power to concludecollective labour agreements at companylevel as well as having various informationand consultation rights. Members of suchcommittees have the right to time off forthe performance of their duties. There arealso procedures for creating jointcommittees where the employer operatesfrom more than one establishment.Employees are entitled to consult therepresentatives of recognised unionswhenever they disagree with theiremployer’s decisions.


12.1 GeneralIn the event of a transfer of anundertaking, or of a part of anundertaking, the employment contractsare automatically transferred to thetransferee and the employees maintaintheir respective seniority and the positionthat they have acquired during theiremployment with the transferor.

Employees whose employmentconditions undergo significant changesduring the three month period following atransfer of an undertaking may resign andclaim notice compensation. Under theterms of their national collectiveagreement Dirigenti in various commercialsectors have the right to resign within180 days of a change in ownership andto claim an indemnity. The level ofindemnity is set out in the relevant

national collective agreement and willtypically amount to a sum equal to part orall of their notice entitlement.

Following the transfer, the transferee mustcontinue to observe the terms andconditions under any collectiveagreement applied by the transferor atthe date of the transfer and on the sameterms, until the date of expiry of suchcollective agreement or the entry intoforce or application of another collectiveagreement of the same level.


If the transferor employs, in total (i.e.irrespective of the number of employeeswho are actually transferred) more than15 employees, both the transferor andtransferee of the undertaking must carryout an information procedure at a locallevel prior to the execution of any bindingagreement. This must take place at least25 days before the deed effecting thetransfer is executed or, if earlier, before abinding agreement between the parties isreached. Both the transferor and thetransferee must inform therepresentatives of workers in theundertaking, and the relevant tradeunions of (i) the reasons for the transfer;(ii) the legal, economic and socialimplications of the transfer as they affectthe employees; (iii) the measuresenvisaged in relation to the employees(if redundancies are contemplated, thisinformation must be disclosed, and acollective dismissal procedure could berequired); and (iv) the date of theenvisaged transfer.

If there is a European Works Council,information must be provided inaccordance with established procedures.

Within seven days of receiving theinformation outlined above, the workers’representatives and trade unions areentitled to request a consultationmeeting. Consultation must commencewithin seven days of receipt of such arequest. The procedure is deemed

complete 10 days after thecommencement of the consultations,regardless of whether the parties reachedagreement on the transfer.

12.3 Notification of Authorities There is no obligation to supplyinformation and/or consult or negotiatewith any public authorities in relation tothe transfer of an undertaking.

12.4 LiabilitiesFailure by the transferor and thetransferee to comply with the informationand consultation obligations constitutesan unfair union practice, in breach of theWorkers’ Bill of Rights. In the case ofsuch a breach the trade union can seek acourt injunction ordering the employer tocease such breaches.

An employer that fails to comply with aninjunction (or subsequent appeal decision)will be liable to criminal sanctions (i.e.imprisonment for up to three months or afine of up to €206). It is generally very rarefor imprisonment to arise.

Relatively recent case law indicates thatthe validity of a transfer agreement will notbe affected by a failure to comply withinformation and consultation obligations.This contrasts with earlier court decisionsto the effect that a failure to inform andconsult renders a transfer agreementeither null and void or without legal effectin relation to the employees until theinformation/consultation procedure iscompleted. There is no obligation toobtain consent to a transfer from tradeunions and/or workers’ representatives,and they have no right of veto.

The seller and the buyer are jointly liablefor all the employees’ rights at the date ofthe transfer. The Italian Civil Code statesthat if a transfer of an undertaking isfollowed by a supply contract betweenthe seller (as principal) and the buyer (ascontractor) to be performed using theundertakings (or part of an undertaking)transferred, the ordinary regime of jointliability in supply or service contract


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applies. It provides that, for a period oftwo years following the supply or servicecontract, a claim may be brought againstthe principal as well as the contractor andany subcontractor, by the employees ofthe contractor or any subcontractor forpayment of salary allowances andinsurance and social security contributionsand tax withholdings and VAT.

Law No. 92/2012 has introduced somechanges in relation to the regime of jointliability for salary allowances, insuranceand social security contributions and taxdeductions, provided that joint liability canbe disapplied as a result of collectivebargaining. In addition, it provides thatthe principal may be sued for paymenttogether with the contractor and anyother subcontractors. If, however, therehas been prior enforcement against thecontractor and any subcontractors, theenforcement action can only be broughtagainst the principal if that enforcementaction failed. In such circumstances, theprincipal may have a right of recoveryagainst those parties.

In addition to the minimum legalobligations set out above, morefavourable provisions may be containedin any applicable collective agreement.

13. Termination13.1 Individual TerminationTermination by the employer is generallypossible only if it is for just cause orjustified reasons (see below).

13.2 NoticeBoth parties can terminate a contract(other than a fixed-term contract) bygiving due notice. Notice periods areregulated by collective agreements (andto a lesser extent by individual contracts)by reference to service and grade. Theytend to range from approximately twoweeks for blue-collar workers to threemonths for senior managers or up to12 months for executives.

Failure of either employer or employee togive proper notice will make thedefaulting party liable to paycompensation to the other party of a sumequal to the pay due to the employee forthe notice period.

13.3 Reasons for DismissalDismissal by the employer generally hasto be for just cause (giusta causa), orthere must be justified reasons(giustificato motivo).

In the case of justified reasons (whetherobjective ones relating to the undertakingor subjective ones relating to theemployee), full notice and a terminationpayment must be given.

For there to be just cause, there must begrave misconduct, so that theemployment relationship is deemed to beunable to continue, even provisionally. Inthis case, no notice needs to be given,although the employee is still entitled tothe termination payment.

Disciplinary sanctions against anemployee are regulated by statute,collective agreements and disciplinarycodes laid down by the employer. Failureby the employer to post a copy of thedisciplinary procedures in eachproduction unit renders the disciplinarysanction void. An employee maychallenge any disciplinary procedure inCourt or by requesting that anindependent conciliation and arbitrationboard investigate the matter. If disciplinaryprocedures are not complied with, theemployer’s failure to comply can bechallenged in Court as well.

Dismissal must be promptly notified tothe employee in writing. The notice muststate in detail the reasons for thedismissal (just cause or justified reason).

A termination payment (TFR) is defined bylaw as a deferred compensation which anemployee is entitled to receive upontermination of employment, whether inthe case of resignation or dismissal, and

regardless of the reasons. (See alsoSection 5.2 above).

TFR is calculated according to a complexformula, which approximately representsthe annual salary (including payments inkind) paid each year divided by 13.5.Employers set aside such terminationpayments annually as reserves in thebalance sheet for any part notcontributed to supplementary pensionfunds (see section 5.2 above) throughoutthe employment. The law provides thatemployees with at least eight years’service are entitled to ask the employerfor an advance payment equal to 70% ofthe accrued termination paymentdepending on the specific circumstances;requests must be satisfied annually inrespect of up to 10% of the employeesentitled to such advance payments or, inany case, in respect of up to 4% of thetotal number of employees.

Other minor indemnities due in all casesof termination of employment are:accrued but untaken holidays and time-off, and portions of the accrued 13th

month salary instalments (and 14th month,if any).

Law No. 92/2012 introduced significantamendments to article 18 of the Workers’Bill of Rights in relation to theconsequences of unlawful dismissal incertain scenarios, with the intention ofretaining the right to reinstatement only inthe most insidious cases and providingfor compensation alone in all other cases.This has resulted in the following regimes:

(a) “full reinstatement”: in the case ofverbal dismissals or null and voiddismissals, irrespective of the sizeof the undertaking and in the caseof executive dismissals, the Courtwill order the employer to reinstatethe worker and to pay damagesincurred as a result of the dismissalpending reinstatement (with aminimum of 5 months’ pay, subjectto the deduction of earningsreceived from another employer



(aliunde pereptum)) and socialsecurity and welfarecontributions.The employee has theright choose an indemnity in lieu ofreinstatement, equal to 15 months’pay. Note the following dismissalswill be null and void:

(i) dismissal of a woman withinone year of marriage becauseof the marriage;

(ii) dismissal of a woman during herpregnancy and up to one yearafter the birth, or of the father ifhe takes leave in her place;dismissal because of a requestto take parental leave/leave for achild’s sickness.

(b) “reduced reinstatement”: in certainserious cases (i.e. (i) unlawfulnessof dismissal due to objectivereasons consisting of the physicalor mental unsuitability of the workeror notification in violation ofregulations governing the protectedsick leave entitlement; (ii) where theCourt finds that there is manifestlyno objective, justified reason fordismissal and decides to apply theregime applicable to serious cases;(iii) where the underlying facts beingused as justification for thedisciplinary dismissal complaint donot exist or represents conductpunishable with a lesser sanctionaccording to applicable collectiveagreements or disciplinary codes),reinstatement is provided, howevercompensation is capped at 12months’ pay (and it is permissibleto deduct both the aliundeperceptum and the aliundepercipiendum, i.e. earnings that theemployee would have received ifhe/she had diligently looked foranother job or actual earningssecured from a job). The employerwill also be ordered to pay welfareand social security contributions,minus any amounts covered byother employment contributionsmade in the interim. The worker is

entitled to choose indemnity inlieu of reinstatement, equal to15 months’ pay;

(c) “full compensation”: in other caseswhere there is insufficient groundsfor dismissal, the employee will beawarded an indemnity ranging from12 to 24 months’ pay;

(d) “reduced compensation”: in caseswhere the dismissal is declaredineffective due to proceduralbreaches only (e.g. violation of therequired written specification ofreasons of termination, or of priorprocedural requirements, i.e.disciplinary procedure orconciliation procedure, dependingon the reason for termination, theworker will be awarded anindemnity ranging between six and12 months’ pay).

It should be noted that the pre-existingregime of unlawful dismissal for smallcompanies has not changed (i.e. re-hiringor, at the employer’s election,compensation from two and half to sixmonths’ pay, extended to 14 months inspecific cases).

Law No. 92/2012 introduced the followingchanges with effect from 18 July 2012:

(a) it imposes an obligation to attemptconciliation prior to giving the workernotice of dismissal in cases ofdismissal for an objective economicreason by large undertakings. Thedismissal must be preceded by anotice to the Territorial EmploymentOffice with a copy to the worker. Thenotice to the Territorial EmploymentOffice will call the parties to ameeting that will start a conciliationprocedure which should, in principle,conclude within 20 days of the noticeconvening the meeting. In the caseof a legitimate and documentedimpediment preventing the workerfrom attending the meeting, theprocedure may only be suspendedfor a maximum of 15 days;

(b) it provides that notice of dismissalgiven after the conciliation or thedisciplinary procedure (i.e. for justcause or subjective justified reason)(as appropriate) will take effect fromthe date on which the procedurewas commenced (save for certainexceptions which do not howeverinclude illness, in order to curbpossible delaying tactics);

(c) it provides that in the case ofretraction of the dismissal, providedthat this occurs within 15 days ofthe date of receipt of theemployee’s challenge, theemployment relationship isregarded as restored withoutinterruption and the worker will onlybe entitled to pay accrued in theperiod prior to the retraction;

(d) for judicial disputes concerningdismissals and events governed byarticle 18 of the Workers’ Bill ofRights a dedicated fast-trackprocedure has been implemented.The writ of summons can onlyconcern claims relating to dismissalsgoverned by article 18 of theWorkers’ Bill of Rights, additionalclaims may not be made under thisprocedure unless they are groundedon identical facts. The defendantcan file its defence up to five daysprior to the hearing (fixed by way ofan order no later than 40 days afterthe claim is filed); upon terminationof the hearing the court will eitheraccept or dismiss the action by wayof an immediately enforceable ruling;the enforceable nature of the rulingcannot be suspended or withdrawnpending a decision in any appealproceedings, which must be broughtwithin 30 days of notification of theruling; the appeal proceedings areordinary labour proceedings,following which a decision is issued,which may be appealed withinreduced terms (30 days). It ispossible to petition the SupremeCourt against the appeal decision.


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13.4 Special ProtectionCertain employees, such as pregnantwomen, recently married women,employee’s representatives, and disabledemployees enjoy special protectionagainst dismissal.

In addition, a resignation or mutualconsent termination during pregnancy orthe period up to the child’s third birthdayrequires validation with the ServizioIspettivoServizio Ispettivo del Ministerodel Lavoro (Employment MinistryInspectorate), at the TerritorialEmployment Office.

For other employees, Law No. 92/2012has established a resignation/mutualconsent termination procedure to preventpre-arranged termination practices (i.e.where the worker is required to sign anundated termination letter when hired).The effectiveness of resignations ormutual consent termination of theemployment relationship will besuspended pending the completion ofcertain procedures, including: validationwith the Territorial Employment Office orCentro per l’Impiego (Job Centre) orother bodies identified in collectiveagreements; or the worker signing adeclaration at the foot of the transmissionreceipt of the communication of thetermination of the relationship to thecompetent offices; additional proceduresmay be established by way of ministerialdecree. In this respect, employers mustfollow a specific invitation procedurewithin 30 days of the date ofresignation/consensual termination andworkers are entitled to withdraw theirresignation or consent to terminationwithin seven days of the date of receipt ofthe employer’s invitation.


The law regulates collective dismissalsand provides that employers inundertakings with more than15 employees who intend to dismissmore than five employees (within a periodof 120 days) in the same province for the

same purpose of restructuring operations,are required to carry out a complexconsultation and negotiation procedurewith trade unions, which may have aduration of 75 days. The consequencesdescribed above for unlawful dismissalapply depending on the nature of breach.Scenarios can be summarised as follows:(i) full reinstatement in the case ofdismissal notified in the absence of awritten communication; (ii) reducedreinstatement in the case of violation ofselection criteria; (iii) full compensation inthe case of violation of the collectivedismissal procedure.

14. Data Protection14.1 Employment RecordsLegislative Decree No. 196/2003regulates the processing of personaldata, including the collection, storage anduse of information regarding employees(the “Consolidated Act”). TheConsolidated Act sets out very preciserequirements to be followed for the lawfulprocessing of personal data. TheWorkers’ Bill of Rights also regulates theprocessing of data.

As a general rule, employers, as do allother data controllers, have to complywith the specific principles of theConsolidated Act when processingsensitive personal data, i.e. any datawhich identifies the employee’s religious,sexual, or political orientation, ormembership of or affiliation to any othergroup or union. An employee’s priorwritten consent and authorisation fromthe Italian data protection authority aregenerally necessary to process sensitivedata, subject to a limited number ofexceptions. The Italian data protectionauthority grants an authorisation toemployers to process sensitive data foremployment purposes annually. Thisauthorisation describes the permittedpurposes of the processing, the datasubjects covered, the processingarrangements, data categories and themethods for data maintenance,communication and dissemination.

An employee’s prior consent is requiredfor the processing of personal data. Suchconsent is valid only if freely given,documented in writing, and the employeehas been informed of the following:

(a) the purposes and methods ofthe processing of the databeing requested;

(b) whether compliance with therequest for the data is mandatoryor voluntary;

(c) the consequences of a refusal orfailure to reply;

(d) the categories of person to whomthe data may be communicatedand the geographic area withinwhich the data may bedisseminated;

(e) the right to access his/her personaldata, and the right to have his/herpersonal data updated, erased,blocked or rendered anonymous ifit is incorrect or has been obtainedunlawfully. For these purposes,personal data which is notnecessary for the purposes forwhich it was collected or processedis considered unlawfully obtainedand may not be retained;

(f) who the person responsible for theprocessing will be.

In principle, consent is not required if theprocessing of personal data meets atleast one of a series of justifyingconditions, specified in the ConsolidatedAct. Consent is not necessary if: (i) theprocessing is necessary for compliancewith a legal obligation; (ii) the processingis necessary for the performance of acontract to which the data subject is aparty; (iii) the processing concerns datataken from public registers, lists,documents or records that are publiclyavailable; (iv) the processing concernsdata relating to economic activities thatare processed in compliance with thelegislation in force as applying tobusiness and industrial secrecy; (v) theprocessing is necessary to protect life or



bodily integrity of a person; (vi) theprocessing is necessary for carrying outinvestigations or to defend a legal claim;(vii) the processing is necessary for thepurposes of legitimate interests of eitherthe data controller or a third partyrecipient in the cases specified by theItalian data protection authority, incircumstances where those interests arenot overridden by the interests orfundamental rights and freedoms of thedata subjects; (viii) the processing iscarried out by no-profit associations; and(ix) the processing is necessaryexclusively for scientific or statisticalpurposes. The condition relating to theperformance of a contract to which thedata subject is a party has a relativelybroad application. This condition may beapplicable in the context of anemployment relationship to the extentthat the processing of the employees’personal data is necessary for theemployer in order to perform itsobligations in the relationship.

Employers are prohibited frominvestigating and collecting data regardingreligious and political opinions, includingopinions relating to trade unions. Any actor decision taken by an employer on thebasis of the political opinion, ethnic origin,language or gender of any employee mayalso be discriminatory and therefore void,and the presence of such data on apersonnel file could be used in court asevidence of discrimination.

As a general rule, the employer cannotcontrol, for instance, the contents of itsemployees’ email, unless a series ofconditions are met. Any breach by theemployer of the relevant data protectionrules can lead to an administrative fineranging from €3,000 to €90,000.Moreover, an additional administrativesanction in the form of an injunctive ordermay also be applied. Finally, if theemployer causes damage to hisemployees as a consequence of theprocessing of their personal data it maybe liable to pay civil damages pursuant toArticle 2050 of the Italian Civil Code.

Criminal sanctions only apply if:(i) personal data are unlawfully processedwith a view to making a profit or tocausing harm to another; (ii) the relevantminimum security measures required bythe law are not adopted; or (iii) theprovisions issued by the Italian dataprotection authority are not complied with.

14.2 Employee Access to DataEmployees are entitled to obtain, uponsimple oral request, confirmation thatpersonal data about their job exists, evenif the data is not yet recorded, and to beclearly informed about the nature of thedata, the origin of their personal data, theaim and terms of the data processing,the identity of the person responsible forthe data processing and the people towhom the data can be disclosed. Theprocessing of employees’ data by meansof automated calling systems, email, fax,MMS or SMS or other electroniccommunications means for advertisingpurposes is only permitted with prioremployee consent (on an “opt-in” basis).In any event, direct marketing must notdisguise the identity of the data controllerand must provide a means by which theemployee can exercise his right to objectwithout being penalised as aconsequence of doing so.

14.3 MonitoringThe Consolidated Act does not containspecific provisions governing themonitoring of employee communications,whether email, Internet use, telephone,fax or voicemail, therefore this activitymust be considered subject to thegeneral principles and conditionsgoverning the processing of personaldata. The Consolidated Act does,however, prohibit any kind of remoteaudio-visual systems such as CCTV inthe work place aimed at monitoring theactivity of workers, unless therequirements of the Workers’ Bill ofRights are met (i.e. previous agreementhas been secured from the unions orprior authorisation obtained from theLabour Office to set up the audio-visualsystem, and the use of that system for

objective reasons such as the protectionof business property, rather than remotelycontrolling the employees’ workingactivity).There is a risk that monitoringemails sent or stored by employees,internet access or telephone calls duringworking hours could be classified as anindirect means of remotely controllingemployees’ working activities. Anemployer may set up audio-visualsystems or similar systems monitoring theactivities of employees, if:

(a) they are necessary because ofspecific and defined organisationaland technical needs (e.g. in orderto ensure safety in the work placeor due to the particular businesscarried out by the employer); and

(b) the works council has given itsprior consent. In the absence of aworks council or in the event thatan agreement with the workscouncil cannot be reached, theemployer is entitled to file arequest with the Labour Office inorder to obtain the relevantauthorisation from the LabourAuthority. In the absence of suchagreement or authorisation, theaudio visual system or similartechnical device should not be setup and the employees’ awarenessof the introduction of remotecontrol devices into the workplaceor the individual employee’sacceptance is not deemed validconsent for this purpose.


Employers may transfer personal andsensitive data to third parties providedthat: (i) employees have been previouslyinformed of the entities to which theirdata may be transferred and haveconsented to the transfer; and (ii) thetransfer is for a legitimate purpose.

The Consolidated Act generally prohibitsthe transfer of personal data outside theEuropean Union if the laws of thedestination countries do not guarantee a


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level of protection equal to the protectionoffered by Italian and European law. Non-EU transfers will nevertheless bepermitted if the employee consents to thetransfer in writing, or for example if the

transfer is necessary (i) to performobligations arising from a contract towhich the employee is a party; (ii) togather information at the employee’srequest prior to the conclusion of a

contract; or (iii) for the conclusion orperformance of a contract in the interestsof the employee.

Contributed by Clifford Chance, Milan


147A Guide to Employment in the European UnionLatvia

Latvia1. IntroductionThe basic legislative act that regulatesemployment relationships in Latvia is theLabour Law, Darba likums (LL), whichcame into force on 1 June 2002. Itregulates the major aspects ofemployment ranging from jobadvertisements to claims againstunjustified dismissals. The LL establishesa minimum benchmark for employmentrights and obligations and, accordingly,any provisions in employment contracts,collective agreements, work procedureregulations etc which reduce theseminimum employment rights are void.


2.1 GeneralAny person who performs work under anemployment contract is deemed to be anemployee (darbinieks) and the other partyto an employment contract is always theemployer (darba dev�js). The LL applies tothe legal relations between any employeeand his or her employer. Issues related tothe remuneration of employees workingfor state or municipal institutions areregulated by the Law On Remunerationof Officials and Employees of State andLocal Government Authorities.

The law specifically provides that part-time employees and employees witha fixed-term contract are entitled to thesame conditions as full-time and indefiniteterm employees. Moreover, the lawprovides that employment contracts mustgenerally be for an indefinite duration,and only in certain specified cases is afixed-term contract justified.

2.2 DirectorsUnder the provisions of the LL membersof the management boards (valdesloceklis) and supervisory boards(padomes loceklis) of companies shouldnormally be employed under employmentcontracts, unless they are employed onthe basis of contracts other thanemployment contracts, for example

where the director is engaged under aservice provider contract. In cases wherethe board members are employed underemployment contracts the mandatoryprovisions of the LL to some extent (e.g.,with respect to termination of theemployment) do not apply giving acompany greater flexibility.

3. Hiring3.1 RecruitmentThe State Employment Agency,Nodarbin�t�bas Valsts a�ent�ra (SEA)offers personnel services to employers,which can be useful, in particular forfinding lower level employees. Privaterecruitment agencies must have alicence from the SEA. Internet-basedplacement firms are also popular amongpersons looking for work.

The LL regulates several other issues inrelation to the recruitment of employees,including the right of the employer torequest that a candidate undergo amedical examination prior to recruitment.There are also restrictions on what maybe included in a job advertisement andon the type of questions that may beasked during a job interview, e.g.regarding a candidate’s marital status,pregnancy, religious beliefs, national orethnic origin.

3.2 Work PermitsA non-EEA national will, in most cases,have to obtain a work permit from theOffice of Citizenship and Migration Affairs,Pilson�bas un migr�cijas lietu p�rvalde(OCMA). First, the employer must notifythe State Employment Agency,Nodarbin�t�bas valsts a�ent�ra (SEA) of thevacancy. After the vacant job has beenregistered at the SEA and has remainedvacant for at least one month, theresident employer in Latvia has to ask theOCMA, to affirm the work summons.

After the work summons is approved, theemployee must submit it, together withother required documents, to anembassy or other representative office of

Latvia abroad in order to obtain aresidence permit from the OCMA.

4. DiscriminationAll employees have a right to equal work,just remuneration and just, safe and non-hazardous working conditions. Director indirect discrimination at any stage ofemployment (including recruitment) on thegrounds of a person’s race, colour,gender, age, disability, religious, political orother conviction, national or social origin,wealth, family status, sexual orientation orother circumstances is unlawful.

It is unlawful to discriminate against anemployee on the grounds of his/hermembership of an organisation for theprotection of employees’ social, economicand professional interests (mainly tradeunions). In addition, it is unlawful to subjectan employee to detrimental treatmentbecause he or she has exercised hisemployment rights legitimately and, in theevent of a dispute, the employer bears theburden of proving that the detrimentaltreatment did not result from theemployee’s exercise of his or her rights.

The LL also imposes a general obligationon employers to take reasonablyadequate measures in order to adapt theworking environment for disabled personsto facilitate their recruitment, promotionand training.


5.1 Freedom of ContractThe LL provides that those provisions ofemployment contracts, collectiveagreements, work procedure regulationsand the employer’s instructions, whichfall below the mandatory minimumrights and obligations stipulated by theLL, are void and are unenforceableagainst an employee.

5.2 FormEmployment contracts have to beconcluded prior to commencement of

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work in writing in duplicate; one copymust be given to the employee and thereis a certain level of information which isrequired by the LL to be set out in thecontract. If an employment contract isnot set out in writing, an employee canrequest that the employment contract isconcluded in writing. In the meantime, anoral employment contract has the sameconsequences as a written one if at leastone party has begun to perform it. Incircumstances where there is no writtenemployment contract and neither theemployer nor the employee can prove theduration of the employment relations,working hours and remuneration, it isassumed that the employee has alreadybeen employed for three months and thatnormal working hours and the minimummonthly salary have been provided for.

Employment contracts have to beconcluded for an indefinite period of time.Fixed-term employment contract can beconcluded only in a limited number ofcases (e.g., for performance of seasonalwork, providing cover for an employeetemporarily absent, incidental work notcharacteristic to the undertaking, etc).The maximum aggregate term for a singlefixed-term employment contract orconsecutive fixed-term contractsbetween the same parties is three years.However, although a seasonal workcontract cannot exceed 10 months, anemployment contract with an employeewho is providing cover for a temporarilyabsent employee can exceed three years.If, upon the expiry of the fixed term,neither party requests the termination ofemployment and it continues de facto,the employment contract is deemed tobe for an indefinite term.

5.3 Trial PeriodsIt is common for employers to require atrial period and this must be expresslyagreed in the employment contract. Themaximum probation term isthree months, excluding temporaryemployee incapacity and other justifiedabsence. During this term, either partymay give the other party three days’ prior

notice of termination without having tostate the reason for termination. If anemployee considers that he or she hasbeen dismissed during a probationaryperiod in breach of the principle of equaltreatment, that employee may bring aclaim before the court within one monthof receiving the termination notice.


An employee has a statutory obligation notto disclose information that is regarded tobe the employer’s commercial secret andto take care so that commercial secrets donot become directly or indirectly availableto a third party. The employer musttherefore indicate to the employee inwriting which information qualifies as acommercial secret. The Commercial Law(Komerclikums) sets out additionalconditions, which must be fulfilled beforean employer can classify information as acommercial secret, e.g. the informationmust not be generally available to thirdparties and the employer must have takenreasonable measures for the preservationof the confidentiality of the information. It isadvisable for employers to prescribe, indetail, in the employment contract or theinternal working procedure rules thecategories of information regarded ascommercial secrets and to specify that theconfidentiality clause will continue to applyfollowing the termination of employment.

During the employment relationship, theemployer may restrict the employee’s rightto take up work with other employers (by-work), insofar as the restriction isjustified to protect legitimate interests ofthe employer, in particular if the by-workmay adversely affect the employee’sperformance of his/her obligations.

The employee and the employer may alsoconclude post-termination restrictivecovenants in relation to the employee’sprofessional activity. The maximum termof a non-compete provision is two years,and an adequate monthly compensationmust be paid to the employee for theduration of the restriction.

5.5 Intellectual PropertyGenerally, if an employee creates work thatis the subject of copyright, the economicrights to the work can be transferred to theemployer only if the employment contractor other agreement provides so. In relationto software created under the employer’sinstructions, the law presumes that alleconomic rights belong to the employer,unless the contract provides otherwise. Anemployer is entitled to an employee’sinvention, if it is produced while performingwork under an employment contract thatinvolves inventive activity or as a result ofcarrying out duties at the employer’srequest that involve research, construction,or specific projects, etc. However, inpractice, it is advisable that the rights andobligations of the employer and theemployee are defined in greater detail inthe employment contract.

6. Pay and Benefits6.1 Basic PayWith effect from 1 January 2013 thestatutory minimum wage equals LVL 200(approx. €285) per month or LVL 1.203(approx. €1.72) per hour (this is slightlyhigher for some categories of employee,whose weekly working time is 35 hoursinstead of 40, and minors).

The employer is obliged to ensure equalpay for equal work or work of equivalentvalue to employees withoutdiscrimination. If the amount ofremuneration that an employee receivesis contrary to the principle of equaltreatment, the employee may, within acertain term, bring a claim before thecourt for adequate remuneration.

Subject to the minimum wage, there areno other statutory conditions regulatingthe amount of remuneration in privatesector, and employment contracts donot generally provide for a regularincrease of salary.

6.2 PensionsPension funds have now existed in Latviafor more than 10 years. Closed pension



funds are those established by employers,and only employers may be shareholdersof closed funds; these funds are only opento the employees of the founders andshareholders of the respective fund. Openpension funds are, by contrast, thosewhose founders and shareholders arebanks with a license to accept depositsfrom natural persons in Latvia or Latvian-registered life assurance companies. Thelatter are gradually becoming popular.Participation is purely voluntary and canoccur either via individual or collectiveparticipation. In the latter case, anemployer must conclude a collectiveparticipation agreement. There are strictlegal requirements as to the content ofparticipation agreements for the protectionof the interests of the participants.

6.3 Incentive SchemesThere is no statutory obligation tointroduce such schemes, although theyare quite common in contracts withsenior management of companies; thesecan include annual bonuses and shareoptions in the company.

6.4 Fringe BenefitsIt is common for employers in both thepublic and private sector to procuremedical insurance for their staff. Othercommon fringe benefits includereimbursement of mobile phoneexpenses and the provision of companycars for senior employees.

6.5 DeductionsAn employer is obliged to withhold theemployee’s obligatory social insurancepayments and income tax before payingthe salary to the employee. Additionaldeductions from the employee’s netsalary deriving from the employer’s claims(e.g. for damage to or loss of theemployer’s property) against theemployee can be made within the limitsprescribed by the law (generally up to20%). If the deductions are intended tocover damages caused by the employeeto the employer, the employee’s writtenconsent must first be obtained.

7. Social Security7.1 CoverageThe state social security system coversstate pensions (old age, disability,survivor’s pension), allowances andbenefits (maternity, paternity, sickness,unemployment, temporary disability,death grant, parents’ benefit, childadoption, family benefit, etc). Since thereform of the state pension scheme, apart of the social insurance payments foremployees who were below the age of30 on 1 July 2001 are included in thefunded pension scheme, which isexecuted by the licensed investmentmanagement companies. Olderemployees can join the funded pensionscheme voluntarily.

7.2 ContributionsThe total amount of contribution equals35.09% of the taxable base (broadlyspeaking, all income gained inemployment), and the employer covers a24.09% share of it whereas the employeepays a 11% share.

8. Hours of WorkThe LL includes detailed regulations onworking and rest time and sets the normalworking time at 40 hours per week andeight hours per day. A normal five-dayworking week can be changed to six daysof work every week, if necessitated by thenature of the work and employees’representatives have been consulted.Overtime is allowed only if the employerand the employee have agreed it in writingand may not exceed 144 hours in fourmonths. Aggregated work can beprovided, if normal working time isimpossible to maintain, and may notexceed 56 hours per week. Shift work canbe introduced if it is necessary to ensurecontinuous work at an undertaking.

The LL sets the normal daily rest time ata minimum of 12 hours and the minimumweekly rest amounts to a period of42 hours without interruption, except inthe event of aggregated work. Sunday is

a general holiday, however, working ispermitted on that day if continuous workmust be ensured and a different rest dayis granted.

9. Holidays and Time Off9.1 HolidaysThere are 15 statutory holidays in Latvia(some of them on Sundays, e.g. EasterSunday). Employees are entitled to aminimum of four weeks of annual paidleave. It is allocated on a pro rata basisdepending on the time the employee hasspent working and can be claimed afterthe employee has worked at least sixmonths for the employer. Annual paidleave may, in exceptional circumstances,be postponed to the following year, butmay not be compensated by money,except on termination of employment.

9.2 Family LeavePregnancy leave and birth leave arecalculated together and amount to112 days, which are granted as a singleleave period. In some cases, additionalpregnancy leave will be granted. Payduring this leave is provided by the statesocial security system at a rate of 80% ofthe average monthly salary calculatedaccording to a set formula. Where thecalculated amount of paid leave exceeds23.02 LVL a day, then 50% of the amountin excess of 23.02 LVL per day is paid.Paid paternity leave and leave for one ofthe adoptive parents of a child of nomore than three years of age is ten days.Any employee has the right to paidchildcare leave in relation to the birth oradoption of a child until the child is oneand a half years old. Until a child reachesthe age of one, one of its parents isentitled to a ‘parent benefit’ which is paidfrom the social security system. Uponreturning from any of these periods ofleave, the employee is entitled to returnto the same position, or, if that is notpossible, to a similar or equivalentposition with equally beneficial conditionsof employment.


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9.3 IllnessIf an employee is temporarilyincapacitated due to illness and obtains aphysician’s note (darba nesp�jas lapa)certifying that he or she is unable towork, the employer will have to pay anillness allowance to the employee (at least75% of the average remuneration for thesecond and third day of illness and atleast 80% with effect from the fourth day)up to the 10th day of illness. From the11th day of illness, the allowance is paidby the State Social Insurance Agency(Valsts soci�l�s apdrošin�šanas a�ent�ra)from the social insurance budget.

9.4 Other time offRegular study leave can be prescribed inthe employment contract or collectiveagreements, however, an employee canclaim 20 business days leave per year inorder to sit state exams or to write adiploma thesis at the end of his studies.The employer may decide on his owndiscretion whether to grant paid or un-paid leave in this case.

10. Health and Safety 10.1 AccidentsThe Labour Safety Law (Darbaaizsardz�bas likums) sets out anemployer’s general obligations in this areae.g. an obligation to assess labour safetyrisk factors in the undertaking ofmandatory health inspections for certaincategories of employees, etc. In addition,numerous governmental regulations setout detailed labour safety requirementsfor particular kinds of work. Compliancewith all these requirements is supervisedby the State Labour Inspection (Valstsdarba inspekcija). There is no particularobligation for an employer to providehealth insurance for employees, sincesocial assistance in the event of anaccident at work is provided under thecompulsory social security (socialinsurance) system.

10.2 Health and Safety ConsultationAn employer is required to consultemployees or labour safety

representatives, who can be elected byemployees if the undertaking or unitthereof has five or more employees. Inaddition, the employer must appoint oneor several labour safety experts in theundertaking depending on the number ofemployees. Alternatively, the employer canconclude an agreement with a licensedfirm providing labour safety services.

11. Industrial Relations11.1 Trade UnionsThe right to unite in trade unions is afundamental right of employees and isprotected under the Constitution(Satversme). According to the Employers’Confederation of Latvia survey:“Conditions and Risks of Employment inLatvia 2009- 2010” in January 2011,around 5.8% of the national workforcehad union membership in 2010. Unionsare usually related to a particular sectorof the industry and most of them areunited under one federation (LatvijasBr�vo arodbiedr�bu savien�ba).

Trade unions are one kind of employees’representatives and therefore have thebasic rights attached to representation,including access to the undertaking andthe right to hold meetings there. Tradeunions have a priority right to concludecollective agreements and their consentmust be obtained in almost all casesbefore a trade union member employeecan be dismissed.

11.2 Collective AgreementsCollective agreements (darba kopl�gums)must be in writing and are usuallyconcluded at the undertaking level, i.e.between a particular employer and atrade union; general agreements atindustry level (�ener�lvienošan�s) are lesscommon. Trade unions have priority overauthorised employees’ representatives(elected individuals from amongst theemployees) in concluding a collectiveagreement. A collective agreement willcover all the employees in an undertakingunless the collective agreement itselfprovides otherwise.

The LL establishes a basic procedure forthe conclusion of a collective agreementand the employer (or association ofemployers) cannot refuse to negotiate. Acollective agreement must be for aparticular assignment or for a fixed term.However, after the term has expired, theprovisions of the collective agreementremain applicable until the conclusion of anew one.

11.3 Trade DisputesStrikes are permitted in the case ofcollective disputes of interests, althoughthe preliminary procedure for theresolution of such disputes established bythe Labour Dispute Law (Darba str�dulikums) has to be observed. The decisionto strike must be taken by a trade unionat a general meeting attended by morethan 50% of the members (or theirrepresentatives). The decision to strikemust be taken by employees at a generalmeeting attended by at least 50% of theemployees of the undertaking. A strikemust be notified to the employer at leastseven days in advance. Employees takingpart in the strike may not be dismissedand are entitled to return to their previousposition afterwards.

The right to strike is restricted in a numberof cases, including the prohibition to strikein support of political demands or duringthe term of a concluded collectiveagreement with the aim of amending it.Solidarity strikes are uncommon and areonly permitted in connection with thefailure to conclude or observe a generalagreement (on tariffs or social/labourguarantees at industry level). Employersare entitled to lockouts in the event of astrike, although the number of employeessubject to a lockout may not exceed thenumber of employees on strike.

11.4 Information, Consultation and Participation

Employers are obligated to provideinformation to employees’ representativesand to consult them before takingdecisions that may affect the interests ofthe employees. Consulting is defined as a



dialogue and exchange of opinions with aview to achieving a consensus.Employees’ representatives are entitled torequire information on the social andeconomic status of the undertaking andinformation necessary for the conclusionof a collective agreement.

Employees’ representatives are entitledto be consulted prior to decisions beingtaken in relation to the following issues:determination of work norms, internalwork regulations, the establishment of asix-day working week, shift work,aggregated work, breaks and vacationschedule. There are also more detailedconsultation obligations in relation tocollective redundancies and transfersof undertakings.

The European Works Councils’ Directivehas been transposed into national law.


12.1 GeneralThe Acquired Rights Directive has beenimplemented in Latvia. The transfer of anundertaking or an independent part of it,as well as mergers and acquisitions ofcompanies, is subject to the regulation inthe LL relating to the transfer of anundertaking. In general, the obligationsarising from the employment relationshipsexisting at the time of the transfer willpass from the transferor employer to thetransferee employer; this also includesany collective agreement in force at thetime of the transfer, the provisions ofwhich cannot be amended to thedetriment of the employees for a one-year period following the transfer. Anexception to this rule is the transfer of anundertaking within the context ofbankruptcy proceedings. The transferitself is not a valid reason for termination;it is, however, possible to terminate forgeneral reasons, e.g. dismissals justifiedby the implementation of economic,organisational, technological measures ormeasures of a similar nature inthe undertaking.


The transferor and transferee must informthe representatives of their employees or,if such representatives are not elected,the employees about: (i) the date orproposed date of the transfer; (ii) thereasons for the transfer; (iii) the legal,social and economic implications of thetransfer of employees; and (iv) anymeasures or activities envisaged inrelation to the employees.

The transferor must provide thisinformation to his employees not laterthan one month before the transfer. Thetransferee must provide this informationto the employees not later than onemonth before the transfer starts directlyaffecting the working conditions andemployment terms of its employees.

Where the transferor or transferee hasplanned to take certain organisational,technological or social measures inrelation to his employees in connectionwith the envisaged transfer, it is under anobligation to start consultation with therepresentatives of the employees not laterthan three weeks before the transfer withan aim to reaching an agreement on suchmeasures and their implementation. Theobligation to start consultation, however,does not create any obligation on theemployer to actually reach agreement.

There are no thresholds in terms ofnumber of employees triggering theinformation obligation. The obligation ofinformation and consultation must beperformed before the transfer. In principle,the documentation giving effect to thetransaction (e.g. sale and purchaseagreement) can be signed before theinformation and consultation takes place,provided the transfer takes place after theinformation and consultation is performedas described above.

The LL does not prescribe any time frameas to the length of the information andconsultation process. The informationprocess in practice should not be a time

consuming process as it merely involvesthe provision of information. Theconsultation might take more time.However, given the fact that theconsultation does not create anyobligation on the employer with regard tothe outcome, the employer may be in aposition to control the time frame.

12.3 Notification of AuthoritiesFrom the employment law perspectivethere is no obligation to supplyinformation to or consult with state orregulatory bodies in relation to thetransfer of an undertaking.

12.4 LiabilitiesFailure to comply with information andconsultation obligations in relation to thetransfer of undertakings may give rise toan administrative fine of up to LVL 750(approx. €1,071). The fine would beimposed on the transferor or transfereerespectively. In addition, the employee(s)adversely affected by the transfer couldclaim appropriate compensation. Forexample, if an employee is unjustifiablydismissed as a result of the transfer ofundertaking, the employee could claimthe annulment of the dismissal andpayment of average earnings for thewhole duration of the dismissal. However,the possibility that a violation of theprocedural requirements associated withthe transfer of an undertaking could leadto the annulment of the actual transfer ishighly unlikely.

13. Termination13.1 Individual Termination An employer wishing to bring anemployment contract to an end must becareful to ensure that the provisions of theLL in relation to the reasons for andprocedure leading to dismissal are satisfied.

Exceptionally, the employer may apply tothe court for permission to dismiss anemployee when he has a relevantreason, but none of the explicit clausesof the LL are applicable to theparticular circumstances.


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13.2 NoticeDismissal during a probationary periodrequires a three-day notice period. Inother cases, the minimum notice periodestablished by the LL is either none,10 days or one month, depending on theparticular clause of the LL that is used asgrounds for the dismissal. Theemployment contract or collectiveagreement may provide for longer periodsof notice.

The employer must give the dismissalnotice in writing. In the event of dismissaldue to the employee’s behaviour, he mustfirst require the employee’s writtenexplanation and when deciding whetherto dismiss or not, the gravity of thebreach, the employee’s previous work,etc. must be considered. The dismissalmay only take place within one month ofthe discovery of the violation and, in anyevent, no later than 12 months after theviolation was committed.

13.3 Reasons for DismissalDuring the probationary period, anemployee may be dismissed without theneed to give reasons. Aside from that,the LL sets out an exhaustive list ofgrounds on which an employee may bedismissed. These must be related eitherto: the employee’s behaviour (e.g.appearing intoxicated at work, graveviolation of the employment contract;breach of work safety rules leading toendangerment of the safety and health ofother persons); his capabilities (theemployee lacks professional skills forperforming the work, the employee ismedically certified as incapable ofperforming the work due to his healthstatus; he or she is ill for a long period oftime); economic, organisational,technological measures or measures of asimilar nature in the undertaking(liquidation of the employer, reinstatementof the previous employee to the samework or reduction in the number ofemployees). In any event, the employermust notify the employee in writing of thereasons underlying the dismissal (this canbe included in the dismissal notice). The

employee is entitled to full pay during thenotice period.

A dismissal on grounds related to theemployee’s capabilities or economic,organisational, technological measures ormeasures of a similar nature in theundertaking (except the liquidation of theemployer) can only be implemented if it isimpossible to transfer the employee toanother position in the undertaking,where the employee can work, with theemployee’s consent.

The employer and the employees’representatives can agree on theestablishment of a labour disputecommission (darba str�du komisija) inthe undertaking. However, theseinstitutions are not common in privatesector undertakings.

Once the employer gives notice to theemployee, the latter can challenge it byfiling a claim in court within one month(unless a labour dispute commissionprocedure is applicable). Generally, if thecourt finds the dismissal unjustified, theemployee will be reinstated (unless he orshe requests otherwise) and his averageremuneration for the period of forcedabsence from work (i.e. period ofunjustified dismissal) will have to be paid.

It is the employer’s obligation to provethat the dismissal occurred in accordancewith the law and was justified.

13.4 Special ProtectionAn employer may not give notice ofdismissal to an employee during absencedue to sickness (except in case of a longterm sickness) or other justified reasons. Inaddition, the law restricts the right todismiss a pregnant employee or for oneyear following childbirth (or throughout thebreastfeeding period) or a disabledemployee (although dismissal on the basisof the employee’s behaviour is still allowed).

A member of a trade union can, in mostcases, only be dismissed with theconsent of the trade union; therefore,

before giving notice of dismissal, theemployer must find out whether theemployee belongs to a union.


If the number of employees dismissed froman undertaking due to a “reduction in thenumber of employees” (darbinieku skaitasamazin�šana) within 30 days exceeds acertain threshold (from 5 to 30 employees,depending on the total number ofemployees in the undertaking) thedismissals are classified as a collectivedismissal. This imposes an obligation onthe employer to carry out a collectivedismissal, to provide employees’representatives with detailed information onthe dismissal and commence consultationswith them in good time in order to agreeon the number of employees subject todismissal and their social guarantees (i.e.dismissal benefits and pensions schemes,in addition to the State Social insuranceschemes and other issues arising from thecollective agreement or employmentcontract), as well as the dismissalprocedure itself. In addition, the employermust notify the State Employment Agency(Nodarbin�t�bas valsts a�ent�ra) and the localmunicipality of the undertaking at least45 days in advance.

14. Data Protection14.1 Employment RecordsUnder the LL, an employer may transferthe information acquired from and thedocuments submitted by a job applicantin applying for work only to the personswho take the decision about therecruitment of that applicant. Theinformation and documents may bedisclosed to third parties only with theconsent of the job applicant. Moreover,information about the employee’s healthstatus and professional qualifications,which the employer has obtained uponthe employee’s application for work, maybe used by the employer only in order tocarry out organisational, technical orsocial measures in the undertaking andthe employer is liable to ensure that such



information is only available to personswho use them for carrying out therespective measures.

The Natural Persons’ Data ProtectionLaw (Fizisko personu datu aizsardz�baslikums; hereinafter - NPDPL), whichimplements the EU Data ProtectionDirective, is applicable to employers asdata controllers. There is no requirementto register data processing with the DataState Inspection (Datu valsts inspekcija),which is only undertaken for normal HRand accounting purposes.

14.2 Employee Access to DataUnder the NPDPL, an employee has therights of any personal data subject,namely to obtain all information abouthimself that is held in a personal datafiling system as well as to receive otherinformation regarding the processing ofhis or her personal data.

14.3 MonitoringAlthough the fundamental right to privacyis constitutionally recognised, most of thelegislation in force deals with the rightsand obligations of the state in this context(e.g. the right of investigatory authoritiesto monitor telephone communications)and, at present, there is little regulationthat applies to other private individuals.Therefore it is recommended that, at thevery least, the employer should inform theemployees in writing about any form ofsurveillance or monitoring that theemployer carries out and include areference to that in the employmentcontracts and internal work regulations.Of course, as any form of employeesurveillance will be regarded as personaldata processing under the NPDPL, theemployer must have the appropriate legalgrounds for processing the employees’data, i.e. consent of the employee.


As indicated earlier, the employer mayonly transfer information acquired fromthe documents submitted by a jobapplicant in applying for work to thepersons who make the decision aboutthe hiring of that applicant and thatinformation may not be disclosed to thirdparties without the consent of the datasubject (i.e. job applicant or currentemployee) or on some other legal basis.

Contributed by Sorainen Law Offices

A Guide to Employment in the European UnionLithuania

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Lithuania1. IntroductionEmployment relations in Lithuania aregenerally controlled by the Labour Code(2002). This regulates the formation,amendments to and termination ofemployment contracts, salaries,vacations, liabilities, dispute settlementsetc. In practice, it applies to almost allemployment relations.

Employment relations with civil servants,persons working in certain services suchas the police, the prosecutor’s office andcertain other employees are regulated bythe Law on Public Service as well asspecific legislation and governmentresolutions. Relations with trade unionsare regulated by the Law on TradeUnions and the Labour Code.

Employment contracts must be drawn upin accordance with legislative requirementsand it is unlawful to seek to contract out ofthe minimum employment rightsestablished by legislation. In certain cases,however, collective agreements mayestablish conditions deviating from thelegislative provisions provided it is expresslysanctioned by the relevant legislation.

Trade unions and work councils can beestablished in enterprises, althoughcollective representation of employees isnot very well developed. As a result, theinfluence of collective agreements onemployment relations is generally notsignificant. Labour disputes are usuallyhandled by the courts.


2.1 GeneralPursuant to Lithuanian law, a companyhas two managing bodies: the generalmanager (one natural person) and themanagement board (the latter is optionaland consists of a minimum of threenatural persons). The general managerperforms day-to-day activities of thecompany and the management boarddecides on more important issues related

to the company. The management boardalso appoints/dismisses the generalmanager. An employment contract has tobe concluded with the general manager(in order to provide him with socialsecurity benefits); however, employmentcontracts may not be concluded with themembers of the management board.

Lithuanian legislation does not distinguishbetween blue-collar and white-collaremployees. There are no specificregulations in relation to the employmentof directors, other than in relation toworking time and termination.

2.2 DirectorsThe Labour Code provides that the workof the administrative (management) officialsof a company, which exceeds thecontractual working time, is not deemed tobe overtime. In addition, general managersof companies are not, as a matter of law,entitled to notice of termination, exceptwhere the employment contract soprovides and their entitlement toseverance pay does not depend on theirlength of service. Employment contractsare not concluded with the members ofthe management board.

2.3 OtherPart-time work is permissible by mutualagreement. The part-time contract mustbe granted at the request of theemployee due to his/her medicallycertified state of health, at the request ofa pregnant woman, a woman who hasrecently given birth or who isbreastfeeding, an employee raising achild under three years of age, anemployee who is a single parent of achild under 14 or a disabled child under18 years of age, an employee under18 years of age, an employee medicallycertified as disabled or employeesnursing a sick family member. Theemployment contract must expresslyaddress the part-time working conditionsand, if a full-time contract is varied, itmust be amended to reflect the new part-time arrangements.

The salary for part-time employees mustbe proportionally equivalent to the salarypaid to equivalent full-time employees.

Fixed-term employment contracts maynot exceed five years. Under theprovisions of the Labour Code,employment contracts are normally of anindefinite duration; fixed-termemployment contracts are generally notallowed for the permanent positions andcan be concluded only on the basis of atemporary need. There are a fewexceptions to this rule. Fixed-termemployment contracts are allowed forpermanent positions if expresslypermitted by law or collective bargainingagreement. Moreover, fixed-termemployment contracts are allowed forpermanent positions, if the employee isrecruited to a newly establishedposition/vacancy (there should be nomore than 50% of such positions in thecompany), and the fixed-term contractdoes not extend beyond 31 July 2015.

If another fixed-term employmentcontract for the same role is concludedwith the same employee within onemonth upon the expiry of a previous fixedterm contract, such a contract can beclassified as a contract of indefiniteduration at the request of the employee.

Employees working under a fixed-termcontract are subject to the same socialguarantees as employees workingunder an employment contract of anindefinite duration.

Short-term employment contracts areconcluded, where necessary, for urgent orshort-term work or to provide cover fortemporarily absent employees (due toillness, vacation etc.). Short-termcontracts can be concluded for amaximum period of two months. Short-term contracts may also be concludedwith students during their school vacation.

Employees working under short-termemployment contracts are subject to thesame rules in relation to working time;


155A Guide to Employment in the European UnionLithuania

they are not subject to a trial period orgranted annual leave (they are, however,entitled to compensation in lieu of annualleave). They do receive severance pay ifterminated prior to the expiry of its term,one month’s average salary or thebalance of the unexpired term if thecontract is terminated with less than amonth to run. If the fixed term of a short-term employment contract has expiredbut the employment relationship actuallycontinues and neither party has servednotice of termination prior to theexpiration of the term, the contract will bedeemed extended for an indefinite term.

In certain circumstances, an employeehas the option of agreeing to performadditional work (not specified in thecontract) at the same workplace or toundertake secondary duties. Anemployee wishing to undertakesecondary duties must, prior to theconclusion of an employment contract,provide the employer proposing to hirehim for the performance of the secondaryduties with a certificate from the principalemployer specifying the time when thedaily work starts and ends in the principalworking place. The secondary employermust ensure that the regulations onmaximum work time are not breached.

‘Remote’ workers perform their work at alocation other than the employer’sworkplace by agreement with theemployer. The working time of a ‘remote’worker may not exceed 40 hours perweek. A ‘remote’ worker is not subject tothe internal rules of the employer andmanages his working time at his discretion.

3. Hiring3.1 RecruitmentEmployers are free to select personnel asthey wish, subject to compliance with therules that outlaw discrimination.

3.2 Work PermitsThe Law on Legal Status of Foreignersprovides that non-EEA nationals mustobtain a temporary residence permit to

stay in Lithuania for more than threemonths per six-month period or if he orshe plans to work or to be engaged inany other legal activities in Lithuania.

Work permits are required for theemployment of non-EEA nationals inLithuania (there are certain exemptions,e.g. government workers, diplomats, etc).The work permit is issued by the LabourExchange under the Ministry of SocialSecurity and Labour, which, by doing so,takes into consideration internal labourmarket demand. It should be noted thatgeneral managers of enterprises are notalways required to obtain a work permit.

The Law on Legal Status of Foreignersstipulates that nationals of EuropeanUnion member states who are employedor self-employed in Lithuania and whointend to stay in Lithuania for more thanthree months in any six-month period,have to declare their place of residenceaccording to the procedures establishedby the Law on Declaration of Place ofResidence. They do not need to obtainany residence or work permits.

4. DiscriminationDiscrimination on the grounds of gender,sexual orientation, social status, race,colour, national or social origins, personalstatus, age, disability, private life, religiousactivities and union activities is prohibitedby the Law on Equal Opportunities(2003). The scope of the law is broad andit is applied to all aspects of theemployment relationship, includingrecruitment, remuneration, promotion anddismissal. The equal opportunitiescontroller investigates complaints ofdiscrimination and can adopt a bindingdecision (e.g. transfer the investigation tothe prosecutor in the event a crime mayhave been committed, warn theemployer, etc). A victim of discriminationhas a right to claim damages under therules of civil liability. There are no limits onthe level of damages that can beawarded. In addition, the Labour Codeincludes similar discrimination prohibition

provisions and in addition prohibitsdiscrimination on the grounds of family,marital status and intention to havechildren, religious or political views orother circumstances not related to theemployee’s work.


5.1 Freedom of ContractAlthough an employer and an employeeare, in principle, free to settle the terms oftheir relationship, this freedom is, inpractice, limited. The contractual terms ofthe employment agreement may not beless favourable to the employee thanmandatory provisions of laws. In certaincases, conditions that are more beneficialfor the employer may be established bycollective agreements provided it isexpressly permitted as a matter of law.

5.2 FormAny employment contract must beconcluded in writing and in accordancewith the sample form approved by theGovernment. The employment contracthas to be concluded in at least twooriginals: one for the employee, the otherfor the employer. On the day ofconclusion of an employment contract itshould be registered with the RegistrationJournal of Employment Contracts (i.e. theformal register maintained by theemployer). Such registration is notmandatory where an employer is anatural person employing three or feweremployees. An employee maycommence his/her work only after havingreceived from the employer anidentification card, one original of theemployment contract and after beingfamiliarised with the working conditions,collective agreement (if any), internal workregulations and other regulationsapplicable to the work place. Theemployer must also notify the StateSocial Insurance Fund Board about thenew employee at least one business daybefore the start of work.


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The following terms must be specified inthe employment contract:

(a) the place of work;

(b) the employee’s duties; and

(c) the terms applicableto remuneration.

The parties may also agree on otherterms and conditions of employment,such as a probation period, unlimitedliability of the employee to the employerfor damage caused to the employer’sproperty or business, work regime, fringebenefits, etc.

5.3 Trial PeriodsAn employment contract may include atrial period. As a general rule, the trialperiod may not exceed three months. Atrial period may be established toassess whether:

(a) the employee is suitable for the workfor which he/she is employed; or

(b) the work is suitable forthe employee.

If an employment contract incorporates atrial period for the purpose of testingwhether the employee is suitable for thework, the employer may terminate theemployment contract before the end ofthe trial period on three business days’written notice without paying the employeeany severance payment. If the trial periodis established for the purpose of assessingwhether the work is suitable for theemployee, the employee may terminatethe contract during the trial period on threebusiness days’ written notice. If anemployee continues working after theexpiry of the trial period, the employmentcontract may only be terminated inaccordance with the general rules ontermination (see section 13 below).


The parties to an employment contract canagree on terms and conditions that are notdirectly prohibited by relevant legislation;

however, the employment contract mustcomply with the general principles ofjustice, reasonableness and fairness.

When recruiting an employee, a companymay include non-compete provisions inthe employment contract or conclude aseparate non-compete agreementprohibiting the employee from competingwith the former employer after terminationof employment. The non-competeprohibition must be reasonable, limited interm (usually, up to two years) andremunerative. However, in practice,enforcement of such non-competeclauses may be complicated.

Employees must keep the businesssecrets of the employer. If an employeeviolates this obligation, the employer isentitled to compensation for any lossincurred. The Competition Law providesthat an individual may use commercialsecrets learned as a result of employmentor other contractual relations with anenterprise no earlier than one year afterthe date of the termination of theemployment or other contractualrelations, subject to any provisions to thecontrary in the relevant contract. Inpractice, it is recommended thatemployers incorporate this statutoryprovision into the employment contractand the internal rules of the company. Inaddition, it is advisable to requireemployees to sign a document settingout the categories of informationclassified as commercial secrets by themanagement body of the employer andgive a written undertaking not to disclosesuch information, failing which theemployee will be liable for damages.

5.5 Intellectual PropertyEmployee inventions are defined andregulated by the Law on Patents. Ifsomething is deemed to be an invention,the employee is obliged to inform hisemployer promptly in writing to thateffect. Until a patent application isprepared, both the employer and theemployee must keep the details of theinvention secret. An employee will not be

entitled to royalties for his inventions if hiscontract of employment explicitlyspecifies that his duties involve creatinginventions and the level of remunerationtakes this into account.

Similar to those of patent invention arethe rights to design, which can also beregistered in order to entitle the designerto royalties. The design rights of designscreated by an employee during hisemployment and in accordance with hisemployment contract will be owned bythe employer, unless the employmentcontract specifies otherwise.

The Law on Copyright and RelatedRights provides that the property rights tocopyrighted material created by anemployee during his employment and inaccordance with his employmentcontract will be owned by the employerfor a period of five years, unless theemployment contract specifies otherwise.One exception exists in relation to the titleto software, which will be owned by theemployer indefinitely, unless the contractstipulates otherwise.

6. Pay and Benefits6.1 Basic PayThe minimum pay tariffs (hourly andmonthly) to be paid to each employee areestablished by the Government. Thehourly minimum pay is currently LTL 5.15(€1.49). The monthly minimum pay iscurrently LTL 850 (€246.17). Discussionsare currently underway in relation toproposed increases to minimum pay. Oneof the current proposals is that theminimum monthly wage could beincreased to LTL 1000 (€290) with thehourly wage increasing accordingly.

Minimum pay rates are revised from timeto time; however, there are no fixed datesfor the minimum pay rates to beincreased. Employees must be paid atleast twice per month. At the writtenrequest of the employee, pay may bepaid monthly only. Parties have to agreeon the dates when the salary is paid. The



Labour Code obliges the employer topresent each employee with payrolldetails setting out the net and grosssalary, details of deductions made andactual overtime worked.

Indexation is left to be negotiated by thecontracting parties or by the relevantcollective agreement.

If an employee’s salary equals theminimum monthly salary, it has to beincreased in line with any increase to theminimum monthly salary. In addition, if thesalary of an employee is tied to theminimum monthly salary (e.g. theemployment contract stipulates that thesalary payable amounts to three times theminimum monthly salary) then such salarymust also increase in line with anychanges to the minimum monthly salary.

6.2 PensionsSocial guarantees are ensured by thestate social security system. There is noobligation on employers generally toprovide private pension arrangements.Private schemes are either insured withpension insurers or through a pensionfund enterprise.

6.3 Incentive SchemesProfit-related pay may be paid to somemanagerial staff. There are no legal orfiscal measures encouraging employeeshare participation.

6.4 Fringe BenefitsFringe benefits vary according to theinternal policy rules and may includebonuses, company cars (for more senioror frequently travelling employees), mobilephone, etc. If the fringe benefits areprovided for personal use as well, theymay be subject to taxation.

6.5 DeductionsEmployee’s income tax is deducted bythe employer at source and thenaccounted for to the tax authorities.Employee’s income tax consists ofincome tax and separate healthinsurance tax. The income tax rate is

15% and the health insurance tax rateis 6%.

The tax exempt minimum salary variesand is dictated by an employee’s salary.

7. Social Security7.1 CoverageThe state social security systemprovides benefits in the case of old age,disability, death, sickness, maternity andindustrial injury.

7.2 ContributionsThe social security system is financed byemployee and employer contributions,which are based on the employee’s salary.A 3% social insurance payment iswithheld from the income of the employeeand is deducted from the gross salary ofthe employee; a 31% social insurancepayment is paid by the employer on topof the gross pay to the employee.

Currently, there are no upper limits fortaxation or social insurance paymentsand the fixed tax rate is applied.

8. Hours of WorkOrdinary weekly working time may notexceed 40 hours per week and eighthours per day. Exceptions may beestablished by legislation, governmentalresolutions and collective agreements.The maximum length of a workday orshift, including overtime, as well as thework under two or more employmentcontracts may not exceed 12 hours perday and the working week cannotexceed 48 hours.

The working hours of the employees ofcertain categories prescribed bygovernment, such as medical personnel,child carers, children educationinstitutions, energy sector, specialcommunication agencies, etc, as well assecurity services watchmen may notexceed 24 hours per shift. However, theaverage weekly working time (in anyseven-day period) of such employees

may not exceed 48 hours, and the resttime in between the working days mustnot be less than 24 hours.

9. Holidays and Time Off9.1 HolidaysThere are 15 public holidays per year. Thebasic right is to four weeks’ (28 calendardays’) paid annual leave each year thatmay be granted for the first time after sixmonths of continuous employment. Thisis increased to five weeks (35 calendardays) for minors under 18, disabledemployees, single parents who are raisinga child under 14 years or disabled childunder 18 years and other employeesspecified by law. Specific groups ofemployees (e.g. employees of theteaching, medical, aviation, or maritimeprofessions or those working inhazardous conditions) have an extendedannual leave entitlement. The total annualleave entitlement conferred by law maynever exceed 58 calendar days. Publicholidays falling within a period of leave donot count as part of the annual leave, nordoes a period of sickness.

9.2 Family LeaveWomen are granted pregnancy andchildbirth leave for the period of70 calendar days before childbirth and56 calendar days after it (in the event of acomplicated childbirth or the birth of twoor more children – 70 calendar days’maternity leave is granted after the birth).The leave is paid provided she wascovered by social sickness and maternityinsurance for at least 12 months duringthe preceding 24 months. Pregnancy andchildbirth leave is granted to the womanas a single period (126 days in total);however, its duration may depend on theprecise circumstances.

A man is granted one month’s paternityleave from the child’s birth until the childis one month old. The leave is paidprovided he was covered by the socialsickness and maternity insurance for atleast twelve months during thepreceding 24 months. Paternity leave is


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paid by the social insurance authorityand paternity pay is equal to the averagesalary of the employee.

On request, a mother (or adoptive mother)or a father (or adoptive father) or agrandmother or a grandfather or otherrelatives who are bringing up the child maybe granted child care leave until the childreaches three years of age. Alternatively,the family may decide to share the leavebetween the father, grandmother,grandfather or relatives of the child whoare actually bringing up the child. Leavemay be taken either in full or in part andpersons entitled to this leave may alternateturns. A maternity (paternity) allowance isgranted to one of the parents, adoptiveparents or foster parents until a child istwo years old and is paid by the socialinsurance authority. If the maternity(paternity) leave does not last beyond thechild’s first birthday, the allowance mayamount to 100% of the insured income(subject to statutory thresholds). If thematernity (paternity) leave continues up tothe child’s second birthday the allowanceis 70% of the insured income during thefirst year and 40% of the insured incomeduring the second year (subject tostatutory thresholds). The length of childcare leave (including the type ofcompensation) depends on the choice ofparents. At the request of a parentbringing up children less than 14 years ofage, unpaid leave of up to 14 calendardays per year must be granted. Parentsbringing up disabled children less than18 years of age are entitled to annualunpaid leave for up to 30 calendar days.

9.3 IllnessAn employee is entitled to sicknessbenefit if sickness occurs during the termof employment, including any probationperiod, provided he was covered by thesocial sickness or maternity insurance forat least three months during the last12 months or six months during the last24 months before the sickness.

Employees must obtain an authorisedmedical certificate of incapacity to work in

order to receive this benefit. Sicknessbenefit is paid from the third day ofincapacity until a person is able to workor sickness is replaced by disability. Thesickness benefit during the first two daysof employee’s incapacity is paid bythe employer.

9.4 Other Time OffEmployees who are studying, takingentrance examinations to colleges andhigher educational institutions understudy contracts with their employer areentitled to paid educational leave, withthe pay at the rate of at least the averagesalary. If an employee is takingexaminations or is studying on his owninitiative, then his rate of pay (if any) forany study leave will be determined in anyapplicable collective bargainingagreements or by express agreementwith the employer.

Employees who study in educationalinstitutions are granted study leave toprepare and take regular examinations -three days for each examination; toprepare and take tests (two days for eachtest); to perform laboratory work andconsultations (as many days as stipulatedin educational projects and schedules); tofinish and defend graduation theses(30 calendar days) and to prepare andtake state examinations, including theexamination for general educationsecondary school leaving certificates(six days for each examination).

10. Health and Safety10.1 AccidentsEmployers are liable for their employees’work-related accidents, including thoseoccurring on the way to or from work orduring and as a result of theemployment. The employers must haveappropriate insurance.

10.2 Health and Safety ConsultationThe employer has a general duty toensure that employees are provided witha safe system of work and a safe workingenvironment. This duty is subject to

control by the State Labour Inspectorate.Labour inspectors have the right to enteran enterprise at any time of the day toinspect whether the regulations areobserved and, amongst other things, todemand that the employer stops theworks in case the working environmentbecomes hazardous to the health or lifeof the employees.

When starting a new business, thepremises in general, as well as theparticular work places, need to becertified as safe and compliant withapplicable hygiene and safe workenvironment standards.

A health and safety committee must beset up in any business, which employsmore than 50 people. Where there are50 or fewer employees, such acommittee may also be set up byagreement. The committee consists ofequal numbers of employerrepresentatives and the trade union orother employees’ representatives. Theemployer cannot terminate theemployment of a member of a laboursafety committee without consent fromthe trade union or the employees.

11. Industrial Relations11.1 Trade UnionsA trade union may be established when ithas no less than 20 founders or when thefounders would account for no less thanone tenth of all employees in an enterprise,an institution or an organisation.

A trade union is considered to be a legalentity when it has the requisite number offounders, the statutes of the trade unionare approved in general meeting, themanaging body is elected and thegeneral meeting passes a resolutionregarding the legal address of the tradeunion. A trade union must lodgedocuments, testifying its compliance withthe above requirements, with the Registerof Legal Entities.



11.2 Collective AgreementsCollective agreements are not common inprivate enterprises and in thosebusinesses established after marketliberalisation there are few collectiveagreements. Although legislationpromotes the conclusion of collectiveagreements, the number of collectiveagreements has not increased.

Agreements are legally binding on theparties. The employer has a duty toinform new employees of the contents ofrelevant collective agreements.

A collective agreement can include theterms of payment for work, salary rates,benefits and compensatory allowances,conditions of employment, management,labour protection, organisation of work,safety in the workplace, work and resttime and other social and economicfactors or guarantees that are notregulated by legislation.

The collective agreement comes intoforce upon signing unless the agreementprovides otherwise and remains valid untilthe deadline set in the agreement or untilthe signing of a new collectiveagreement. If a fixed-term collectivebargaining agreement has beenconcluded, the parties should beginnegotiations for its renewal two monthsbefore the expiry date.

11.3 Trade DisputesA strike is permitted by law in the eventof a collective dispute not being settled ora decision adopted by the ReconciliationCommission, Labour Arbitration or ThirdParty Court that is acceptable to theemployees not being executed. The rightto adopt the decision to announce thestrike is vested in the trade union.Sectorial strikes have been permittedsince 22 June 2010.

During a strike, labour contracts of thoseemployees taking part in the strike aresuspended. They maintain continuity ofemployment, length of service, theirentitlement to the state social insurance

and the assurance of safety at work.Employees taking part in strikes do notreceive pay and are exempt fromobligations to carry out theirwork functions.

Lithuanian law bans lockouts. Theemployer is forbidden to hire newemployees to replace those on strike.


Representatives of the employees havethe right to receive information from theemployer and they have a right to beconsulted. The information about currentand future activities of the company(structural unit), its economic situationand status of employment relationsshould be provided to the representativesof the employees regularly and, in anyevent, not less than once per year.

Before adopting any decisions oncollective redundancy or reorganisationor other decisions that may have amaterial effect on the organisation ofwork within the company or the legalstatus of the employees of the company,the employer has to inform and consultwith the representatives of theemployees. In the event that there are noemployee representatives in a company,the employer has to inform theemployees directly or in a generalmeeting of the employees.

Employees are not entitled to haverepresentatives in the management orsupervisory bodies of the employer.

If there is no trade union in an enterpriseand the employees’ meeting has nottransferred the function of employeerepresentation to the trade union of theappropriate sector of economic activity,the employees may be represented bythe Labour Council. The Labour Councilhas the same competence as the tradeunions, except in relation to those powersexclusively conferred upon trade unionsby law.


12.1 GeneralThe requirements of Council Directive2001/23/EC of 12 March 2001 on theapproximation of the laws of the MemberStates relating to the safeguarding ofemployees’ rights in the event of transferof undertaking, businesses or parts ofundertakings or businesses areimplemented in the Labour Code. In theevent of a business transfer, theemployment relations continue with thenew employer under the same conditions.It is prohibited to change the employmentconditions or terminate employment onthe grounds of business transfer.

12.2 Information and Consultationrequirements

There is no statutory timeframe for theinformation and consultation ofemployees other than that this shouldtake place with employee representatives(or in the absence of such representatives– informing the employees directly) priorto taking a decision on the reorganisationof the company and other decisions thatare likely to have substantial effects onthe organisation of work in the companyand the legal status of the employees.The information and consultation shouldbe about the reasons for such a decision,the legal, economic and socialimplications for the employees, as well asabout any measures envisaged with aview to avoiding or mitigating theexpected consequences.

In order to transfer the employees, eachemployee must be individually informedabout the business transfer 10 businessdays in advance. Furthermore, eachindividual employee has to consent tothe transfer.

12.3 Notification of authoritiesIn the event of a transfer of business bymeans of company reorganisation thereis a general requirement to notify theRegister of Legal Entities about thetransfer of the business, but there is no


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specific notification obligation in relationto the transfer of employees. The newemployer has to notify the SocialInsurance institution on the change ofthe employer.

12.4 LiabilitiesThe employer is under an obligation toinform and consult with the employeerepresentatives or directly inform theemployees (as set out above). In the eventof a failure to fulfil this obligation a fineranging from LTL 500 to LTL 5,000 (from€145 to €1,550) may be imposed by theState Labour Inspection on the employer.

13. Termination13.1 Individual TerminationAn employer wishing to terminate mustensure he has a valid reason fordismissal and complies with the relevantnotice requirements.

13.2 NoticeAs a rule, the employer is required toprovide the employee with written noticeof dismissal two months prior to thedismissal, except in the following caseswhen notice of four months should begiven to:

(a) a person who is within five yearsof being entitled to a fullretirement pension;

(b) a person under 18 years of age;

(c) a disabled person;

(d) an employee bringing up childrenunder the age of 14 years.

The Labour Code prescribes certaincases when an employment contractmust be terminated immediately:

(a) when a court judgement sentencingthe employee to a criminal penalty,as a result of which he cannotcontinue working, becomes effective;

(b) when the employee is deprived ofa special right to carry out certaintypes of work;

(c) at the request of a state body orofficial authorised by law;

(d) when a medical or Disability andWorking Capacity Defining Officeconcludes that the employee is notallowed to perform his employmentfunctions or work;

(e) at the request of one of theparents, a statutory representative,doctor, or school to terminate anemployment contract of a minoraged between 14 and 16 years; or

(f) upon liquidation of the employer ifits employment obligations are nottransferred to another entity.

The employer also has a right toterminate an employment contractwithout notice if:

(a) the employee carries out workduties carelessly or has otherwiseviolated work discipline or if he hashad a disciplinary sanction imposedat least once within the previous12 months; or

(b) the employee has committed onemajor violation of work discipline.

Notice of termination has to be given inwritten form to be effective. The LabourCode provides that, after serving notice oftermination, the employer must providethe employee with time off work duringthe notice period, the duration of whichshould be at least 10% of the employee’sworking time to look for a new job. Duringthis time off, the employee is entitled tohis or her average monthly salary.

During the entire notice period theemployer has to offer the employee anyavailable positions.

13.3 Reasons for DismissalThe main grounds for terminating anemployment contract are:

(a) agreement between the parties;

(b) expiry of a fixed-termemployment contract;

(c) request by the employee;

(d) reasons outside the employee’scontrol e.g. the employee may givenotice if the employee is notprovided with any work during hiscontractual working hours for over30 successive days or over 60 daysin aggregate in the last twelvemonths, as well as if the employeeis not paid his full work pay(monthly wage) for over twosuccessive months through no faulton the part of the employee;

(e) at the initiative of the employer(in the absence of employee fault), ifthere are serious grounds forterminating the contract, providedthe employee receives a terminationnotice within the established terms(two or four months’ notice).According to the Labour Code,serious grounds may be related tothe qualification of the employee,his professional capabilities, hisconduct at work, economical ortechnological reasons or structuralchanges in the work place, etc.;

(f) at the initiative of the employer whenthe employee is at fault, e.g. theftfrom the employer or material breachof work regulations such asmisbehaviour with the customers etc.

13.4 Special ProtectionThe Labour Code limits an employer’sright to terminate the employmentcontracts of pregnant women andemployees bringing up children. Anemployee may not be dismissed from thedate of submitting to the employer amedical certificate of pregnancy, up tothe month after the end of the pregnancyand childbirth leave (subject to certainexceptions). The employer may notterminate an employment contract of anemployee who is bringing up a child of upto three years old, if there is no fault onthe part of the employee.

In the case of an employee to bedismissed who is a member of an elective



body of the trade union or the LabourCouncil, the employer has to obtain thepermission of the trade union or thelabour council to dismiss the employee.

Employees are entitled to suspend theiremployment contracts (for no longer thanthree months) in case the employer doesnot fulfil its obligations. If the employeesuspended the employment contract onlegitimate grounds, the employer isobliged to pay the monthly compensationfor the employee under suspension in theamount of one minimum monthly wage.


In the event of dismissal of employees oneconomic or technological grounds ordue to the restructuring of the workplace,the employer must, prior to giving noticeof termination, consult with employeerepresentatives with a view to avoiding ormitigating the negative effects of theproposed restructuring.

When an employer proposes to makeredundant within 30 calendar days:

(a) 10 or more employees where anenterprise employs from 20 to99 employees;

(b) over 10% of employees where anenterprise employs from 100 to299 employees; or

(c) 30 or more employees where anenterprise employs 300 andmore employees;

the Territorial Labour Exchange must benotified about a collective redundancy

exercise upon completion of theconsultation procedure and beforetermination notices are issued tothe employees.

14. Data Protection14.1 Employment RecordsThe principal piece of legislationregulating data protection issues inLithuania is the Law on Legal Protectionof Personal Data (“LLPPD”).The LLPPDregulates the collection, storage and useof personal data and allows privatepersons to process and use personaldata when this is permitted or required bystatute or when the affected personconsents. The LLPPD permits therecording, processing and use ofpersonal data within a contractualrelationship if this is covered by thelegitimate purpose of the contract. Thereis no specific legislation governing dataprotection in the employment context.

The employer, as the data controller, isallowed to process the collected data forspecified and legitimate purposes in a waycompatible with those purposes. Whenprocessing personal data, the employershould ensure that data is processedaccurately, fairly and lawfully, is accurate,and, where necessary for the processingof personal data, kept up to date,consistent, adequate and not excessive inrelation to the purposes for which they arecollected and processed and kept in aform which permits identification of datasubjects for no longer than is necessaryfor the purposes for which the data werecollected and processed.

14.2 Employee Access to DataThe employee as data subject is entitledto obtain information on the source andtype of his personal data that has beencollected, the purposes of processing andthe recipient to whom the data have beendisclosed. Upon receiving an enquiry, theemployer, as the data controller, mustprovide the employee with the requesteddata. On request, such information mustbe provided in writing.

14.3 MonitoringThe Law on Electronic Communications(2004) prohibits the disclosure of thecontent of information transmitted overelectronic communications networksand/or related traffic data without theconsent of the users of the electroniccommunications services. The legislationdoes not explicitly establish to whatextent, and in which cases, thecommunications of the employees maybe monitored by the employer.


Transfer of employee data to third partiesis generally prohibited, unless the affectedperson consents. An employer whowishes to provide personal data to thirdparties must follow mandatory provisionsconcerning data processing.Transmission within the EU is allowed.The transfer of data to a third party basedin a country outside the EU is permissibleonly if the country ensures an adequatelevel of data protection.

Contributed by Sorainen Law Offices

A Guide to Employment in the European UnionLuxembourg

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Luxembourg1. Introduction Under Luxembourg law, employmentrelationships must be evidenced in writing.

Freedom of contract is limited by variousmandatory legal provisions andparticularly by the provisions of theLabour Code (Code du Travail) (the “LC”).The LC is the most important source ofemployment law in Luxembourg.Agreements concluded between socialpartners on specific subjects such astelework and moral harassment as wellas collective bargaining agreements areanother important source of law.

Disputes are usually resolved in LabourCourts (Tribunaux du Travail) from whichappeals lie to the Court of Appeal (Courd’Appel). A special Court deals withissues relating to social security.

Employment contracts are usuallywritten in French, German or English.There is no legal requirement inconnection with the language to beused, as long as the employee canunderstand the content of theemployment contract. In certaincircumstances, in order to admitemployment contracts in evidencebefore a Luxembourg Court or publicauthority, a complete or partialtranslation into French or German maybe required.


2.1 GeneralThe Luxembourg labour market ischaracterized by a significant number ofcommuters and expatriates (many ofthem being employed in thebanking/financial sector).

The provisions of the LC apply to allemployees (see however, section 5.3below), however its provisions in relationto working time (e.g. overtime) are notapplicable to senior executives(“cadres supérieurs”).

Senior executives are defined by the LCas employees who have the authority totake a decision, who have significantautonomy in relation to the organisationof their work and working hours and whoare granted an adequate remuneration(meaning a higher remuneration than anordinary employee).

2.2 DirectorsUnder Luxembourg law, members of theboard of directors are not considered to beemployees as directorship is considered tobe a corporate mandate function.

However, it is possible to hold adirectorship at the same time as havingan employment relationship with thesame company if the director, in additionto his legally defined director’s mandate,holds a specific and technical functionwhich is distinct from the office of directorand if for the purposes of carrying out theemployment function the individual is in asubordinate relationship (lien desubordination) with the company.

2.3 OtherPart-time employees and employeesemployed under fixed-term contracts(in the latter case except if otherwiseprovided by law) enjoy the same legalprotection as full-time employees.

3. Hiring3.1 RecruitmentThe Constitution guarantees the right towork and the freedom of all citizens toexercise that right. Employers must reportany job vacancy to the National LabourOffice (Agence pour le development del’emploi) and must not recruit on adiscriminatory basis. Reference to the sexof potential employees in jobadvertisements is forbidden.

The employment of disabled people iscompulsory both in the public and theprivate sectors. In the private sector,undertakings with at least 25 employeesmust employ at least one disabledemployee. Undertakings with at least

50 employees must employ at least 2%of the workforce from those peopleregistered as disabled. For undertakingswith at least 300 employees, thepercentage rises to 4%. In any case, thisrequirement is subject to the NationalLabour Office being presented with a jobdemand from a disabled person. If theundertaking fails to employ the requirednumber of disabled employees, a specialcompensation tax of an amount equal tohalf the minimum monthly wage ispayable in respect of each disabledemployee who has not been employed inbreach of these minimum requirements.

The law forbids the employment of peopleunder 15 years of age but exceptions tothis rule exist in the area of publicentertainment. Young people between15 and 18 years cannot be employed todo certain types of work, for example,assembly line work and piecework.

3.2 Work PermitsWork and residence authorisations aregoverned, in Luxembourg, by the lawdated 29 August 2008 on the freemovement of European Union citizensand on immigration policies (the“Immigration Law”).

As a general rule, any “third-countrynational”, i.e. any foreigner who is not: (i) acitizen of an EU Member State, of one ofthe member states of the Agreement onthe European Economic Area (“EEA”) or ofSwitzerland; or (ii) a family member ofsuch citizens (regardless of his/hernationality), has to apply for and to obtaina prior authorisation from the Luxembourgminister of foreign affairs and immigration,to be employed in the Grand-Duchyof Luxembourg.

The third-country national must apply forthe residence authorisation prior toentering Luxembourg.

The Immigration Law distinguishesbetween third-country nationals’ stays forup to three months and third-nationals’stays for more than three months. Subject


163A Guide to Employment in the European UnionLuxembourg

to certain conditions, third-countrynationals have the right to enter andreside in Luxembourg for up to threemonths, within a period of six months,without being required to apply for aresidence authorisation unless they intendto work as employees or to commenceself-employment activities. However, theydo not need an authorisation if they cometo Luxembourg for less than three monthswithin one calendar year, for business trippurposes or to perform services within thesame group of companies (excluding anysubcontracting work), or as an artist,sportsman, lecturer, etc.

Third-country nationals who intend toenter and reside in Luxembourg for morethan three months have to get aresidence authorisation prior to theirentry. There are a number of differentcategories of residence authorisations forthird-country nationals working asemployees, i.e.:

(a) Residence authorisation for salariedworkers (“wage-earners”)(travailleurs salariés): this residenceauthorisation is subject to severalconditions and requires amongstother things, the conclusion of anemployment contract between thethird-country worker and theLuxembourg employer. It is valid fora period of one year, in respect ofone profession and one businessactivity but for any employer. Thisresidence authorisation for salariedworkers may be renewed. The firstrenewal is valid for a period of twoyears. The subsequent renewals areeach valid for a period of threeyears in any profession andbusiness activity.

(b) Residence authorisation for highlyqualified workers (travailleurshautement qualifiés) (EU BlueCard): this residence authorisation,which also requires the conclusionof an employment contract withthe Luxembourg employer, isdelivered to third-country nationalswho have a higher education

qualification (or at least five yearsof professional experience) andwho will earn remunerationequivalent to at least one and ahalf times the Luxembourg averagegross annual salary. This amount isdetermined by a Ministerial decree.For the year 2012, the minimumgross annual salary that needed tobe earned by a foreign worker whowanted an EU blue card was€66,564. It is valid for a period oftwo years (or for the duration ofthe employment contract plusthree months) and is renewableupon request.

(c) Residence authorisation for salariedworkers temporarily seconded tothe grand-Duchy of Luxembourg(travailleurs salariés détachés) (thisresidence authorisation is deliveredto third-country nationalstemporarily assigned toLuxembourg by companiesestablished outside EU MemberStates, EEA States or Switzerlandfor the provision of cross-borderservices (prestations de servicestransnationales). It is valid for theduration of the contemplatedcross-border services and may berenewed in exceptionalcircumstances if the provision ofthe cross-border services has notbeen completed.

(d) Residence authorisation fortransferred salaried workers(travailleurs salariés transférés). Anauthorisation of stay can be issued,at the request of the host company(i.e. the Luxembourg entity withinwhich the third country national willwork during his stay inLuxembourg), to the salaried workerof a third country temporarily“transferred” (transféré) to the GrandDuchy of Luxembourg, as part of atransfer (transfert) betweencompanies belonging to the sameeconomic and social entity, asdefined by the LC.

4. DiscriminationAll direct or indirect discrimination basedon religion or belief, disability, age, sexualorientation, race or ethnicity is prohibited.This prohibition applies, among otherthings, to access to employment,promotion, professional orientation andtraining, work conditions, includingconditions of remuneration andtermination, affiliation to a workers’organisation, social security entitlements,social benefits, etc.

Luxembourg law also specifically forbidsall forms of sexual discrimination, whetherdirect or indirect and affirms the principleof equal treatment for men and womenas regards access to employmentincluding promotion, access to anindependent occupation or profession,professional guidance, vocational training,advanced training and retraining, termsand conditions of employment includingremuneration, and affiliation to a workers’or employers’ organisation.

All collective bargaining agreements mustprovide for the application of this principleof equal treatment.

Employers are required to take preventivemeasures against sexual harassment atthe work place.

An agreement in relation to harassmentand violence at work has also beenconcluded between the OGBL and LCGBtrade unions on the one hand and theUnion of Luxembourg undertakings on theother (the “Agreement”). The Agreementhas been declared as generally applicable(d’obligation générale) by a Grand-Ducalregulation. It has however to be notedthat the Agreement is only applicable tosome sectors (such as the banking andthe insurance sectors).


5.1 Freedom of ContractAs a general rule under Luxembourg law,


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employment contracts are concluded foran indefinite duration.

Fixed-term employment contracts arepermitted in certain circumstances only.They may only be entered into for theperformance of a specific and temporarytask such as, for instance, thereplacement of a sick employee, forseasonal jobs, for specific tasks whichdo not form part of the normal activitiesof the undertaking or when there is atemporary increase in activity in theundertaking. Fixed-term contracts canalso be concluded in a sector of theeconomy where it is customary toconclude contracts of a limited duration(e.g. actors, sports coaches). Fixed-termemployment contracts can be renewedtwice (if the option of renewal is providedfor in the contract or in a subsequentdocument), but the duration of thecontract, including any renewals, cannotexceed 24 months in aggregate. Fixed-term contracts must specify atermination date and, if this is notpossible (for example, in the case ofreplacement of an absent employee dueto illness), they must be concluded for aminimal duration (indicated in thecontract). Fixed-term contracts thatviolate these rules are deemed to becontracts for an indefinite duration.

Freedom of contract is limited bylegislation. The terms of the employmentcontract cannot be less favourable to theemployee than the provisions of the LCor the provisions of the collectivebargaining agreement.

The modification of an essential clause tothe disadvantage of the employeerequires the employee’s express consentor has to be notified in accordance withthe notice and other obligations thatwould apply to the employer in the eventof the termination of the employmentcontract by the employer. Luxembourglaw does not define “essential clause”and this is a matter to be determined bythe courts, on a case-by-case basis.

After having been notified of theproposed modification of a fundamentalclause of the existing employmentcontract, the employee is entitled torequest the reasons for the proposedchanges. The employer will then have tocommunicate these reasons.

In the event the employee does notaccept the changes, he will have toresign and his resignation will be treatedas a termination by the employer of theemployment contract. In the event thatthe court considers that the amendmentwas not justified, the employee will beentitled to damages.

It is also possible to notify the employeeof an amendment to the existingemployment conditions with immediateeffect (i.e. without notice period), but onlyif serious reasons exist.

Mandatory provisions of Luxembourglabour law (such as working time,holidays, weekly rest period) must beapplied to all employees performing theiremployment duties in Luxembourg. Ithas however to be noted that theprovisions of the LC concerning part-time work and fixed-time work, aswell as the provisions of the LCconcerning the requirement of a writtencontract and the provisions concerningcollective labour agreements are notapplicable to seconded employees.

The automatic indexation ofremuneration, which is also a rule ofpublic order in Luxembourg is onlyapplicable to seconded employees inrelation to the minimum wage or inrelation to the minimum salary applicablein a specific sector as defined by acollective bargaining agreement that hasbeen declared of general application.

5.2 Form A contract of employment must be inwriting and signed in two originals, one ofwhich is given to the employee at thelatest at the time he or she starts working.

The contract must, as a minimum, statethe identity of the parties, thecommencement date, the place of work,the nature of the employment, the normaldaily or weekly working schedule, thenormal working hours, the basic salaryand benefits, the length of paid holiday,the length of the notice period to beobserved by the employer and theemployee in case of termination of theagreement, the length of the trial period ifany, a reference to any applicablecollective bargaining agreement, anyderogation from the law (where permitted),the existence and nature of acomplementary pension scheme, ifapplicable, as well as any additional termsupon which the parties have agreed.

5.3 Trial PeriodsTrial periods function as a mechanism forboth parties to terminate the contract onshort notice and without providing areason. Trial periods must be provided forin writing in the employment contract. Asa general rule, a trial period cannotexceed a period of six months. The LChowever provides for exceptions to thisgeneral rule. Indeed, for an employeewho has not obtained the so-called“certificat d’aptitude technique etprofessionnel de l’enseignementtechnique”, the maximum legal durationof the trial period is three months. Inaddition, the employer is entitled toprovide for a trial period of a maximumduration of 12 months for employeesearning, from the commencement of theemployment a gross monthly salary of atleast €536, Index 100 of the mobilesalary scale (a government publishedindex, which determines the indexapplicable to salaries - see furtherparagraph 6.1 below) (i.e. with effect from1 October 2012 a 12 month trial period isonly permissible in relation to employeesearning at least €4,053.60 a month).


Employees have a general duty ofconfidentiality with regard to the businessof the employer. In the banking sector



this duty is more specific. In addition tocriminal penalties applicable toemployees in breach of rules on bankingsecrecy, most employment contracts inthe banking sector provide that anybreach of the confidentiality obligation is aground for immediate dismissal withoutnotice. However, Luxembourg Courts stillretain the power to determine whetherthe breach was sufficient to justify animmediate dismissal.

Restrictive covenants are regulated bythe LC. A non-compete clause may onlyprohibit a former employee fromundertaking a competitive activity as anindependent worker within the Grand-Duchy of Luxembourg in the sameindustrial sector in which the individualhad been previously employed and for amaximum period of 12 months only. Anon-compete clause may not prohibit theemployee from taking up newemployment. In addition, a non-competeclause will only be valid if on the day theemployee leaves the company theemployee’s annual gross salary is equalto or exceeds €6,817, index 100(i.e. €51,554.92 as of 1 October 2012,the index standing at 756.27).

5.5 Intellectual PropertyIntellectual Property is comprised ofseveral aspects, such as design patterns,copyrights, patents, trademarks andindustrial property.

The applicable legislation mainlyconsists of:

(a) the law of 16 May 2006implementing the BeneluxConvention relating to intellectualproperty (trademarks, designpatterns and models), signed inthe Hague on 25 February 2005,as amended;

(b) the law of 20 July 1992 modifyingthe rules on patent rights, (the “Lawof 1992”), as amended;

(c) the law of 18 April 2001 oncopyrights, ancillary rights and databases as amended.

If a design pattern has been created byan employee in the discharge of hisduties relating to the employmentcontract, the employer is considered asits creator, unless otherwise agreed.

If a computer programme is created byan employee in the discharge of hisduties or under the instructions of hisemployer, the employer is authorised toexercise property rights exclusivelyrelating to the programme, unlesscontractually agreed otherwise.

The property rights of databases belongto the “producer”. The producer islegally considered to be the physicalperson or legal entity, which takes theinitiative and principally takes the risk toundertake the necessary investments forthe creation of a database. Thus, inpractice the employer will nearly alwaysbe considered the producer of adatabase and will be entitled to theproperty in it.

Generally speaking inventions made by aperson bound by an employmentcontract will belong to the employer if theinvention is made:

(a) during the performance of acontract of employment whichencompasses a requirement tomake inventions;

(b) during a period of study orresearch with which the employeeis explicitly entrusted;

(c) during the performance of his orher duties;

(d) in the undertaking’s field ofactivities, or

(e) as a consequence of theknowledge or use of techniques ormeans specific to the undertakingor as a result of data provided bythe undertaking.

The employer and employee have todisclose to each other any usefulinformation relating to the invention andhave to abstain from making any

disclosures that could compromise theexercise of the rights granted by the law.

Any agreement between the employerand the employee relating to an inventionof the employee must be in writing, failingwhich it may be deemed null and void.

Pursuant to article 13 of the Law of 1992,if an employer realises “notable profits” asa consequence of an employee’sinvention he has to grant the employee areasonable portion of the profits. Failureto do so will allow the employee to bringan action against the employer for ashare of the profits.

6. Pay and Benefits6.1 Basic Pay Wages and salaries are determined bythe individual employment contract. Theyare subject to a minimum salary (salairesocial minimum). The minimum dependson the age and qualifications of theemployee. With effect from 1 October2012, the statutory minimum wagepayable to non-qualified employees over18 years old age is €1,846.51 per month.The statutory minimum wage for qualifiedemployees as at 1 October 2012 is€2,215.81 per month.

The minimum wage is regularly adjusted bythe Government to take account ofeconomic developments and the cost ofliving. Also, all salaries have to beautomatically increased by the employer inline with any rise in the mobile salary scaleindex (often referred to as the “price index”,or simply, “the index”) where this indexincreases by more than 2.5%. Given theeconomic circumstances, the indexationhas been limited by law until 2014 to amaximum of one indexation per year.

Employees are normally paid monthly.

In some sectors, collective bargainingagreements provide for remunerationscales, and/or require employers to payan additional bonus equivalent tobetween half a month and two month’ssalary on top of the monthly basic salary.


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Employers may also provide for aperformance bonus, which is normallylinked to the business results.

6.2 Pensions The state social security system isgenerally considered to be adequate.Nevertheless, it is becoming increasinglycommon to have occupational pensionschemes in place.

If a complementary pension scheme isprovided, generally by multinational orlarge local undertakings, it is usuallyfinanced through book reserves, pensionfunds or group insurance. Complementarypension schemes are governed inLuxembourg by a law dated 8 June 1999on complementary pension schemes.

6.3 Incentive Schemes The promotion of employee shareparticipation has never been encouragedthrough legal or fiscal measures.However, resident companies havesought to encourage employeeinvolvement, primarily through annualbonuses related to profits and byoffering shares to employees atpreferential prices.

Credit institution and investment firmsare legally required, as part of theirgovernance arrangements, to haveremuneration policies and practices inplace that are consistent with andpromote sound and effectiverisk management.

The Luxembourg Supervisory authorityof the financial sector (CSSF) has thelegal power to require a credit institutionand investment firms, to limit the variableremuneration as a percentage of thetotal net revenues where such aremuneration is not compatible with asound financial basis.

6.4 Fringe BenefitsFringe benefits vary according to thesector concerned and the function ofthe employee.

6.5 DeductionsEmployers are required to withholdincome tax and social security charges atsource from the salary of the employee.

7. Social Security7.1 Coverage The social security system provides ahigh level of benefits, most of which areautomatically linked to the price index.Some of the benefits are earnings-related. The following benefits areprovided: retirement pensions, survivors’benefits, medical care, sickness,disability, unemployment and maternitybenefits, industrial injuries andoccupational disease insurance andfamily allowances.

Luxembourg’s state pension scheme willbe reformed in 2013 (in particular byextending the period over whichemployees must contribute). It currentlyprovides generous pensions (in 2012 thestate pension, after a full career, variedbetween 50% and 92% of final earningswith a rate of around 75% for finalearnings equivalent to the contributionceiling defined as five times the minimumwage (i.e. €9,232 as at 1 October 2012)).

The LC sets out rules governing thepayment of unemployment benefits.Workers domiciled in Luxembourg, whohave been employed for at least 26 weeksover the last 12 months are entitled, ifcertain other conditions are met, to receiveunemployment benefits of roughly 80% oftheir former gross salary (with an initial capat two and a half times the minimumwage. The cap then gets progressivelylower over time for a maximum periodequal to the period worked over areference period of 24 months.)

7.2 ContributionsBoth employer and employee have tobear the cost of social securitycontributions that are calculated as apercentage of salary up to thecontribution ceiling. The employerdeducts the employee’s share from his

salary on behalf of the tax authorities. Thekey contributions can be summarised asfollows (as at 1 October 2012):

* plus an extra-premium to be borne bythe former blue-collar workers during atransitional period (until 2013).

Unemployment benefits are financedmainly through a solidarity tax payable byboth employer and employee.

8. Hours of WorkThe LC defines hours of work as theperiod of time during which theemployee is at the disposal of theemployer. The normal working hours ofan employee cannot exceed eight hoursper day and 40 hours per week.Collective bargaining agreements canestablish different limits as long as theyare lower than the LC thresholds.

If the weekly working hours are spreadover five business days or less, the

Employer%

Employee%

Pensions 8 8

SicknessInsurance*

0.25(benefit incash ) +02.80(benefit inkind)

0.25(benefit incash ) +02.80(benefit inkind)

DependencyInsurance

1.40

AccidentInsurance

1.15

Health atwork

Variesaccordingto sector

Mutuality Contributiondepends onriskclassification(from 0.42%to 2.64%)



employee can be asked to work ninehours per day, provided that weeklyworking hours do not exceed 40 hours.

For reasons of flexibility the LC providesthat employees may work in excess ofeight hours per day or 40 hours per weekor other contractually defined limitsprovided that the average weekly hoursover a reference period of fourconsecutive weeks do not exceed40 hours or the maximum specified in thecontract. The reference period can beextended to 12 months by a collectivebargaining agreement.

In that case, a work organisation plan(plan d’organisation du travail) (“POT”)covering the entire reference period willbe drawn up by the employer. For anyparticular week during the agreedreference period average hours may notexceed 48 hours per week and 10 hoursper day. Work performed beyond thelimits set out in the POT is remuneratedas overtime work.

Undertakings can also opt for a mobiletimetable (horaire mobile) instead of aPOT. It allows the option of carrying overto the next reference period a specifiednumber of “hours worked in excess” ofapplicable limits. Again, working hoursmay not exceed 10 hours per day and48 hours per week.

The LC working time provisions do notapply to managers (personnes occupantun poste de direction effective) or seniorexecutives (cadres supérieurs) of acompany if their presence is necessary toensure the running and the supervision ofthe company.

Overtime is defined as work performedbeyond the normal daily and weeklyworking hours, i.e. beyond the legal orcontractual limits.

However, if a POT or a mobile timetableis in place in the company, overtime isdefined as any work done beyond thethresholds provided in an applicable POTor mobile timetable.

Before any overtime work is carried outprior notification to or authorisation by theMinister of Labour is required. Overtimework will only be sanctioned in thefollowing exceptional circumstances:

(a) to prevent loss of perishable goodsor to avoid compromising thetechnical result of the work;

(b) to complete special tasks such asinventories and accounts;

(c) in exceptional circumstancesaffecting the public interest, or incircumstances of national danger;

In circumstances which are duly justifiedand which have no direct impact on thelabour market, overtime may beperformed provided that the employercomplies with the notification procedureor, as the case may be, with theauthorisation procedure.

The procedure is as follows: the employernotifies the Labour Inspectorate(Inspection du Travail et des Mines),outlining the exceptional circumstancesfor the overtime request. The requestmust also contain the opinion of the staffdelegation or, in the absence thereof, ofthe staff. Where the opinion is favourable,authorisation of the overtime is automatic.In the event of a negative opinion, theMinister of Labour takes a decision basedon the reports of the Labour Inspectorateand the National Labour Office.

The daily overtime limit is normally twohours but may be more if the work iscarried out in order to deal with anaccident or an imminent accident or ifurgent tasks need to be performed onmachines or work needs to be carriedout as a result of unforeseeable events(“force majeure”). The LC establishes theprinciple of compensation for overtime byremunerated rest time at a rate of oneand a half hours of paid time off per hourof overtime worked. It is also legallypossible to record overtime to a time-savings account (compte-épargnetemps). If the compensation or recordingto a time-savings account is not possible

for reasons which are inherent to theorganisation of the undertaking orbecause the employee leaves theundertaking before taking theremunerated rest time to which he isentitled, overtime is remunerated at a rateof 140% of the hourly salary.

Night work is generally permitted, exceptin the case of adolescents (i.e. workersbetween 15 and 18 years of age). Theremuneration for every hour workedbetween 1am and 6am is augmented by25%, either in pay or in time off.

Article L.333-1 LC exempts pregnant orbreast-feeding women from workingbetween 10pm and 6am at theirrequest and after consultation with thelabour doctor.

In principle, work on Sundays isprohibited, but there are a number ofexceptions linked either to the status ofthe employee or the nature of the work.Employees working on Sundays areentitled to their base wage augmented by70%. Hours worked on Sundays mayalso be compensated by time off in lieu.Where this option is taken, the employeewill only be paid the 70% augmentationbut not the base wage.

Employees working on public holidaysare entitled to their normal salary plus theremuneration for the hours effectivelyworked, augmented by 100% (i.e. thepublic holiday is paid whether it is workedor not. If it is worked, the worker receivesin addition twice his base wage for thework performed).

9. Holidays and Time Off9.1 HolidaysThere are currently 10 public holidays peryear (New Year’s day, Easter Monday,1 May, Ascension day, Whit Monday, theNational Holiday, Assumption, All Saints’Day, Christmas Day, St Stephen’s Day). Ifa public holiday falls on a Sunday, aSaturday or on a day the employeewould not have to work, a further day offmust be granted in lieu.


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In addition to the public holidays,employees in the private sector areentitled to a minimum of 25 days paidholiday per year. The right to days offcomes into existence after three monthsof uninterrupted work although holidaywill actually accrue during the three-month period.

Collective bargaining agreements usuallyprovide for more than 25 days holiday.

Many collective agreements also providefor customary holidays (jours fériésd’usage).

9.2 Family leaveEmployees are entitled to special paidleave days for a variety of reasons, suchas the death of a relative, birth of a child,to move, for a wedding etc. Employeeswho live in a domestic partnership havethe same leave entitlement as employeeswho are married.

An employee who has a dependent childunder 15 years of age can also begranted family leave in case of seriousillness, accident or the critical illness ofthe child that necessitates the presenceof one of the child’s parents. Family leavecannot in principle exceed two days perchild per year.

Special leave may also granted toemployees to take care of a relativenear death.

Subject to certain conditions each parentis also entitled to parental leave. Parentalleave can take two forms:

(a) six months’ full leave (i.e. noprofessional activity is allowed);

(b) 12 months’ part-time employmentwithin the company (in agreementwith the company).

Such leave is indemnified by the NationalFamily Allowances Fund (CaisseNationale des Prestations Familiales). Theparental leave indemnity amounts to€1,778.31 per month (as at 1 October

2012) for full-time parental leave. Thisindemnity is financed jointly by theEmployment Funds (Fonds pour l’Emploi)and through the state budget.

Female employees are entitled to16 weeks’ maternity leave, eight weeks ofwhich must be taken before the expecteddate of birth.

If the child is born earlier than anticipated,the maternity leave is extended to ensurethat the total maternity leave period is notless than 16 weeks.

If the birth occurs after the expected dateof birth, employees are still entitled toeight weeks’ maternity leave after thedate of birth.

Maternity leave may be extended by anadditional four weeks in case ofbreastfeeding, multiple births orpremature births.

During maternity leave, employees whohave been affiliated with the SocialSecurity for at least 6 months continueto be paid benefits by the CaisseNationale de Santé regardless of theemployee’s qualification. This benefit isequal to the sickness benefits (see below).

9.3 IllnessEmployees are entitled to sicknessbenefits (indemnité pécuniaire de maladie)from the first day of absence up to amaximum of 52 weeks over a referenceperiod of 104 weeks.

The employer has to pay the employee100% of his salary until the last day of themonth during which the 77th day ofsickness occurs (calculated over areference period of 12 successivecalendar months). Social Security onlystarts to pay sickness benefits after theemployer’s obligation ends, subject to acap of five times the minimum wage.

The Mutuality of Employers (Mutualitédes Employeurs) reimburses employers

80% of the gross remuneration paid tothe employees who were unable to workdue to illness. The Mutuality ofEmployers is financed by employers’contributions. The amount of thesecontributions is determined according tothe category of contribution to which theemployer belongs, this category beingdetermined by the rate of absenteeism ofemployees in the undertaking. Inaddition, the Mutuality of Employers isfinanced by an extra premium leviedon workers formerly classified as ‘blue-collar’, during a transitional perioduntil 31 December 2013.

9.4 Other Time OffMany types of special leave are available:for example for sport, education andcultural activities, for volunteer firebrigade, rescue and lifesaving activities.

In certain circumstances, employees mayalso benefit from training leave, up to amaximum 80 days over the whole of aperson’s working life (with a maximum of20 days in any two year period).

Employees may also ask for flexibleworking arrangements but theemployer may refuse such requestswithout justification.

10. Health and Safety10.1 AccidentsEmployers are required to insureemployees in respect of accidents at work.

10.2 Health and Safety Consultation The LC provides measures to ensure thehealth and safety of employees onindustrial premises and deal with thehealth services in the work place.

Any undertaking employing over5,000 employees (or over 3,000employees in cases where at least100 of them are exposed to the risk ofoccupational illnesses or safety risks) isrequired to set up a company medicalservice of its own (service de santéau travail).




All other employers have three options:

(a) to organise their own companymedical service;

(b) to join an inter-company medicalservice catering jointly for a numberof undertakings; or

(c) to use the National OccupationHealth Service (Service national desanté au travail).

All potential employees must undergo amedical examination with a medicallabour service, to ensure that they are fitfor the position under consideration.

The examination must take place eitherprior to the commencement of theemployment in the case of an “at risk”position (poste à risque) or in the twomonths following the recruitment for otherpositions. In the latter case, should theemployee be declared medically unfit, theemployment contract ends automaticallyby operation of law.

The Labour Inspectorate, the Ministry ofHealth, the Industrial Injuries InsuranceAssociation and the Customs and ExciseAdministration are responsible forensuring compliance with health andsafety obligations.

Employers are required to appoint a“travailleur désigné” who will beresponsible for the prevention and theprotection of the professional risks in thecompany (if the undertaking occupies notmore than 49 employees, the employercan himself perform the activities of“travailleur désigné”, assuming that hehas the required qualification).

If the undertaking has a staff delegationin place, the staff delegation mustappoint, among its members or amongthe other employees of the undertaking,a safety delegate.

11. Industrial Relations11.1 Trade Unions Luxembourg enjoys a very goodlabour/management working environment

based on a cooperative arrangementscheme involving the government, labourunions and companies. As aconsequence, labour unrest and strikesare very rare.

The main trade unions are organisedalong ideological lines. The socialist tradeunion (OGBL –OnofhängegeGewerkschaftsbond Lëtzebuerg) and theChristian trade union (LCGB–Lëtzebuerger ChrëschtlecheGewerkschaftsbond) are the largestunions in Luxembourg and enjoy nationalrepresentation. Among the unaffiliatedunions, the ALEBA is particularly strong inthe banking sector.

The notion of ‘trade union’ as well as thecircumstances in which a trade union isconsidered to be representative at anational level or in a major sector of theeconomy are defined under articles 161-1LC and following.

Most employers in the industrial sector aremembers of the Luxembourg Federationof Industries (Fédération des IndustrielsLuxembourgeois, FEDIL), whereas forexample, the interests of the banking andfinancial sector are represented by theBankers’ Association (Association desBanques et Banquiers, ABBL).

11.2 Collective AgreementsIf an employer is requested to enter intonegotiations with a view to concluding acollective bargaining agreement, he islegally obliged to do so. Uponexecution, collective bargainingagreements must be lodged with theLabour Inspectorate. Collectivebargaining agreements come into forcefrom the date on which they areregistered and remain in force for aperiod of between six months and threeyears but are deemed to be renewed bytacit agreement. Notice of terminationmust be given at the latest threemonths before expiry. If no terminationhas been notified parties may decide torenegotiate. In that case the parties arerequired to start negotiations for a new

agreement six weeks before the oldagreement is due to expire.

Collective bargaining agreements can bedeclared generally binding, by means ofa Grand Ducal regulation, in respect ofall employees and employers of thetrade or profession in relation to whichthey are concluded.

Each collective agreement must containcertain mandatory provisions (forexample, a bonus for night work,additional compensation for dangerouswork and guarantees of equal pay forboth sexes).

Where an employer refuses to enternegotiations to renew or conclude acollective agreement, the matter isreferred to the National Conciliation Office(Office National de Conciliation). TheNational Conciliation Office is presided bythe Minister of Labour. It is composed ofa joint commission (Commission paritaire)and an administrative service.

If the conciliation before the NationalConciliation Office fails, the conflict maybe referred to an Arbitration Committee.In that case, the arbitral decision isassimilated to a collective agreement.

11.3 Trade DisputesThe right to strike is enshrined in theConstitution, although the right is notlegally defined. Before a strike can beimplemented lawfully, the conflict must bereferred to the National ConciliationOffice. If no agreement is reached thecase may be heard by arbitrators. Anystrike which is started without compliancewith the preliminary procedure is deemedto be illegal. No strike of any significancehas taken place in recent years.


A staff delegation (délégation dupersonnel) must be set up in all privatesector undertakings which employ atleast 15 people. The size of thedelegation depends upon the number of


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employees: from one delegate forworkplaces with 15 to 25 employees upto 25 delegates in large workplaces.Each staff delegation includes onesubstitute member for each full member.The members of the delegation areelected by secret ballot on a proportionalrepresentation basis. The staff delegationitself will have to appoint from amongstits members or from the employees ofthe company a security delegate(“délégué à la sécurité du personnel”). Inaddition, the staff delegation will alsohave to appoint among its members anequality delegate (“délégué(e) à l’égalité”).

The role of the staff delegation is toprotect and to safeguard the interests ofthe employees in matters relating toworking conditions, job security,employment and social status.Depending on the matter concerned, theemployer is only obliged to communicaterelevant information to the staff delegationor has to inform and consult the staffdelegation. The employer is, amongstother things, obliged to inform andconsult the staff delegation on anydecision which may involve importantmodifications to the organisation of thework and the employment contracts,including decisions in relation to thelegislation concerning collectivedismissals and the preservation ofemployees’ rights in the event of atransfer of an undertaking.

In those undertakings run by incorporatedcompanies, the employer must informstaff delegates at least once a year of theeconomic and financial changes affectingthe undertaking and must communicateperiodically any other useful information inrelation to the activities of the undertaking.

When the number of employeesrepresented by the delegation exceeds500, the law grants a certain number ofdelegates time off to perform their dutieson full salary.

During their mandate, the full members aswell as the substitute members of the staff

delegation cannot be dismissed. Thedismissals will be declared null and void atthe request of the staff delegate. However,in the event there is a serious reason fordismissal, a special application may bemade to the court to have the labourcontract terminated. The protectionagainst dismissal also applies to formermembers of the staff delegation during thefirst six months following the termination oftheir mandate as well as to the candidatesfor membership of the staff delegation, fora period of three months from thepresentation of their candidacy.

A Works Council (Comité mixted’entreprise) must be set up in anyundertaking established in Luxembourgand habitually employing at least150 employees over a reference periodconsisting of the last three years.

The Works Council is composed of anequal number of employer andemployees’ representatives. Its exact sizedepends on the size of the undertaking.

Members of the Works Council must bedesignated before the end of the monthfollowing the end of the elections of thestaff delegations. The employees’representatives are elected among theemployees of the undertaking byproportional representation in a secretballot by the staff representatives. Themanagement of the company appointsthe employer’s representatives on anybasis it sees fit.

The dismissal of a member of the WorksCouncil is mandatorily subject to theapproval of the council to which hebelongs. If no agreement can bereached, the member of the WorksCouncil can only be dismissed if thecompetent labour court has given itsauthorisation. In the case of summarydismissal for grave misconduct, a specialprocedure is applicable.

The Works Council has a power of co-decision in relation to: (i) theintroduction or the application of

technical equipment intended to controlbehavior and the performance of theemployees in their workplace; (ii) theintroduction or the modification ofmeasures concerning the health andsafety of the employees as well as theprevention of occupational diseases;and (iii) the establishment or themodification of general criteriaconcerning the personal selection incase of hiring, promotion, transfer,redundancy, and, if applicable, theeligibility criteria for early retirement.

The Works Council must also beinformed and consulted prior to anysignificant decision relating to: (i) theworking environment (such as theconstruction, transformation or extensionof the production or administrationfacilities; (ii) the economic and financialdecisions (i.e. each and every decision ineconomical or financial matters, whichmight have a determining effect on thestructure of the undertaking or on thelevel of the workforce); and (iii) theevolution of the company: the companymust inform and consult the WorksCouncil at least twice a year on theeconomic and financial changes affectingthe undertaking.

The Works Council must meet at leastquarterly, or when requested to do so inwriting by 25% of the members.

Draft legislation has been produced underwhich it is envisaged that Works Councilswill be abolished and the number of staffdelegates increased. It is also anticipatedthat the staff delegation will be grantedpower of co-decision in relation to thosematters that the Works Council areinformed and consulted on.

The Labour Minister currently prepares adraft bill by which the matter of staffrepresentatives shall be reformed. Inparticular, it is envisaged to abolish theWorks Council and to increase, asconsequence, the number of staffdelegates. It is also contemplated togrant to the staff delegation a power of



co-decision on the subjects for which theWorks Council has currently such power.

European Works CouncilThe European Works Council Directive94/45/EC on the establishment ofEuropean Works Councils (Comitéd’entreprise européen) has beenimplemented in Luxembourg.

The purpose of the European WorksCouncil is to keep employees informedabout and consult with them onstrategic economic and social matters ofa trans-national nature regarding thecompany. European Works Councils arerestricted to large companies employingat least 1,000 people within the EU andEEA and at least 150 people in two ormore EU countries.

European Company (SE)The European Company Statute(comprising the Workers ParticipationDirective and the Company LawRegulation) has been implemented inLuxembourg to provide a framework fornegotiations of the rights of information,consultation and participation of theemployees in the European Company (SE).

Employee participation in publiclimited company managementIn public limited liability companies(sociétés anonymes) in which the statehas a financial participation of at least25% or which have had more than1,000 employees over the last threeyears, Employee Board Representativesmust be elected from amongst theemployees of the company. Theseemployee representatives are elected bythe staff delegation and have full votingrights. The Employee BoardRepresentatives’ contracts ofemployment cannot be terminated whileholding Board office or for six monthsafterwards, without the approval of therelevant Tribunal. Once elected, they areliable for any management errors theycommit in the same way as otherBoard Members.


12.1 General The LC provides that in the event of atransfer of undertaking, existingemployment agreements and all rights andobligations arising from the employmentagreement or employment relationship aretransferred from the transferor to thetransferee by operation of law. A change inthe shareholding is not considered to be atransfer of undertaking.

Neither the transferor, nor the transferee,nor the affected employees can contractout of this principle, which is a mandatoryrule (disposition d’ordre public) ofLuxembourg law. In order to qualify as atransfer coming within the scope of thelegislation the transfer must involve aneconomic entity that retains its identityand comprises an organised grouping ofpeople and assets that facilitate theexercise of an economic activity.

After the transfer, the transferee has tomaintain the same or at least equivalentterms and conditions of employment. Ifthe transferee fails to do so theemployees are entitled to resign and theirresignation would be treated as aconstructive dismissal that would entitlethem to claim damages in court againstthe transferee.

The transfer of undertaking does not ofitself constitute a valid reason for thetermination of the employee’semployment agreement either by thetransferor or by the transferee.


Transferor and transferee have to informin due time (en temps utile) theirrespective staff delegations on: (i) thedate the transfer will take place; (ii) thereasons for the transfer; (iii) the legal,economic and social consequences ofthe transfer for the employees; (iv) themeasures that will be taken in relation tothe employees.

If no staff delegation exists within eitherthe transferor or transferee company,the information has to be provided tothe individual employees of thecompany in question.

This information has to be providedbefore the transfer of undertakingbecomes effective and in writing.

The employer has a general obligation toinform and consult the staff delegationon the decisions that are likely to have asignificant impact on the organisation ofwork or on the employment contracts,including those decisions concerningany transfer of an undertaking (seefurther section 11.4 above). Theinformation and consultation of the staffdelegation must occur prior to thedecision being taken. No timeframe ishowever determined by the LC for suchinformation and consultation.

The transferor is also obliged to inform inwriting the transferee of all rights andobligations that will be transferred as aresult of the transfer of undertaking.

12.3 Notification of AuthoritiesA copy of the letter sent by the transferorto the transferee (see section 12.2 above)has to be sent to the Labour Inspectorate.

12.4 Liabilities The transferor and the transferee are,after the transfer, jointly and severallyliable (obligation solidaire) for the paymentof all amounts that are payable to theaffected employees which became duebefore the date of transfer. The transferormust therefore reimburse the amountspaid by the transferee pursuant to thisobligation, unless a commercialagreement has been reached in relationto the apportionment of such liabilities.

13. Termination13.1 Individual TerminationEmployment contracts of an indefiniteduration may be terminated by eitherparty with notice, or with immediate effectfor serious reasons.


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Fixed-term employment contracts cannotbe terminated before the expiry of theirterm, except for serious reasons.

Fixed-term employment contracts andcontracts of an indefinite duration maybe terminated by either party bymutual consent.

13.2 NoticeIn undertakings with at least150 employees, an employer wishing todismiss an employee must have apreliminary discussion with the employeebefore terminating the employmentcontract. At the meeting, the employermust explain the reasons for theproposed dismissal. Formal notice, if it isto be served, must be given between oneand eight days after this preliminarymeeting. Collective bargainingagreements may provide for morefavourable provisions.

The termination of the employmentcontract with notice period must benotified in writing to the employee (or theresignation to the employer) by registeredletter (or by way of a countersignature bythe employee/the employer of a copy ofthe termination letter/resignation letter).

Notice periods are as follows:

It must be stressed that collectivebargaining agreements, internalregulations or individual contracts maycontain notice provisions that are morefavourable to the employees than thestatutory minimum.

The notice period starts to run on the15th of the month if the notice of

termination has been served before thatdate, or on the first day of the followingmonth, if the notice of termination hasbeen served on the 15th of the previousmonth or later.

An employer who dismisses withoutcomplying with its notice obligations mustpay compensation equal to theremuneration for the duration of the noticeperiod, or the remaining part of the period.

Senior executives often negotiate morefavourable notice provisions with theindividual outcome varying according to anumber of factors such as age, security,function, the situation of the job marketand contractual provisions.

During the notice period, all the rightsand obligations arising from theemployment contract subsist. Theemployee will consequently have to workand will be entitled to his remuneration.The employer may nevertheless free theemployee from the obligation to work.During this time, the employee musthowever continue to be remunerated andmust benefit from all his contractualbenefits (including entitlement toholidays). The employee is also entitled, ifreleased from work, to start working for anew employer. In this case, the formeremployer shall bear, until the end of thenotice period, in addition to the difference(if any) between the previous salary andthe new salary (and the employer’s socialcontributions related to this differentialsupplement), the employer’s socialcontributions relating to the salary paid bythe new employer (up to a maximumamount corresponding to the employer’ssocial contributions calculated on theformer salary).

In addition to the notice period, dismissedemployees may also be entitled to astatutory severance indemnity (indemnitéde départ) depending on their length ofservice within the company. To qualify fora statutory severance indemnity anemployee must have at least five years’continuous employment. If an employee

has at least five years’ service, he will beentitled to a statutory severance indemnityequal to one month’s salary increasing toa sum equal to 12 months’ salary if theemployee has had at least 30 years’continuous service.

13.3 Reasons for dismissalUnder Luxembourg law, an employmentcontract may only be terminated by anemployer if valid reasons for doing soexist. The termination of the employmentcontract is hence not an absolute right ofthe employer.

The reasons that may justify thetermination of an employment contractfalls into two categories:

(a) the reasons that are related to thebehaviour of the employee, suchas underperformance, unjustifiedabsences from work,misconducts, etc.

(b) the reasons that are related to therunning of the business and of thecompany (such as internalreorganization, restructuring,economic reasons, etc.)

Where an employment contract isterminated with notice, an employer doesnot have to state the reasons for thedismissal in the termination letter.

After having received the terminationletter, the employee has a period of onemonth to request the reasons for thetermination of his employment contract.

Where requested the employer will, againwithin one month, have to notify theemployee by registered letter of thereasons for the dismissal. The reasonshave to be indicated with precision andmust be substantial.

Failure to supply written reasons for thedismissal renders the termination unfairresulting in an obligation to pay damages.

Should the employee not accept thereasons that have been notified, he may

Length ofService

Dismissal Resignation

Under 5years

2 months 1 month

5 years orover

4 months 2 months

10 years orover

6 months 3 months



file a court action. The employer mustthen prove the existence and seriousnessof the notified reasons.

In the event of court proceedings it willnot be possible to rely on any reasons fortermination other than those notified inwriting to the employee.

A claim for unfair dismissal may be madewhere the dismissal is contrary to the law orwhere the dismissal is not based onreasons connected with the aptitude orconduct of the individual or with theoperating needs of the undertaking. Anyclaim for unfair dismissal must be lodgedwithin three months of notification oftermination or at the moment when reasonsare given, whichever is later. However, if theemployee submits a written protest to theemployer, he then has a period of one yearwithin which to lodge the claim startingfrom the date of the protest.

Any termination of the employmentcontract which cannot be justified by validreasons will be considered as being unfair,and hence entitle the employee todamages for his moral and materialprejudice. As a general rule, underLuxembourg law the employee willhowever not be entitled to claimreinstatement (subject to certain specificexceptions e.g. employees on maternityleave, staff delegates, etc).

The employment contract can beterminated with immediate effect by eitherparty for “a serious reason” (motif grave).The LC defines “serious reason” as anyfact or fault that immediately anddefinitively renders the continuation of theemployment relationship impossible. Thisusually involves gross misconduct on thepart of the employee.

The rules on notice period and statutoryseverance indemnity do not apply in theevent of the employment ending becauseof gross misconduct.

The termination must be notified in writingby registered mail (or by way of a

countersignature on the terminationletter). The preliminary meeting, ifrequired, must take place prior to thetermination of the employment contractfor serious misconduct.

The termination letter must indicate theprecise reasons for the dismissal.

If the employer summarily terminates thecontract on the grounds of “motif grave”,which is not subsequently demonstratedor which is not considered seriousenough to amount to “motif grave” by thelabour court, the termination isconsidered to be unfair (see above).

13.4 Special Protection Certain employees have specialprotection against dismissal. Forinstance, members of the staff delegationmay not be dismissed unless there is aserious fault recognised as such by thelabour court (see section 11 above).

Employees on sick leave during the first26 weeks and employees on maternityand parental leave also benefit from aspecific protection against dismissal.They are however not all entitled to claimfor reinstatement.


The dismissal of employees for reasonsnot related to the employee concerned(e.g. dismissals for reasons linked to thefunctioning of the undertaking (includingrestructuring)) are regarded as “collective”by the LC if:

(a) there are at least seven dismissalswithin a 30-day period;

(b) there are at least 15 dismissalswithin a 90-day period.

For the purpose of calculating the abovethresholds, the LC includes anydismissals made at the employer’sinitiative for one or several reasons thatdo not relate to the employee, if thenumber of such dismissals equals at leastfour. This rule applies, for example, in the

case of termination of employment bymutual consent or, in the case of earlyretirement, if the termination or earlyretirement is motivated by the economicsituation of the employer or, by the factthat the employer has announced hisintention to reduce its headcount.

If an employer is contemplating acollective dismissal it is obliged tonegotiate a social plan before beingentitled to proceed with the dismissals.Dismissals that are notified: (i) prior to theconclusion of a social plan or (ii) prior tothe official statement released by theConciliation Board declaring that noagreement was reached on a social planor (iii) prior to the election of a staffdelegation (if required) are null and void.

The LC provides that, prior to notifyingthe termination of the employmentcontracts, the employer must, in goodtime (en temps utiles), start negotiationswith the representatives of theemployees. Prior to the commencementof the negotiations, the employer isobliged to give the representatives, inwriting, information containing at aminimum: the reasons for thecontemplated collective dismissal, thenumber and the categories of employeesaffected by the dismissals, the numberand categories of employees regularlyemployed by the company, the periodover which the dismissals arecontemplated, the criteria envisaged forthe selection of the employees to bedismissed and the method of calculationof any indemnities in excess of thestatutory amounts due, or, the reasonsjustifying the refusal of the employer topay any enhanced indemnities.

The LC also provides that the employerhas a general obligation to inform andconsult the staff delegation on thedecisions that are likely to have asignificant impact on the organisation ofthe work or on the employmentcontracts, including those decisionsconcerning collective dismissals (seesection 11.4 above). The information and


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consultation of the staff delegation mustbe carried out prior to the decision beingtaken. The LC does not, however,establish a time frame for suchinformation and consultation.

The LC provides for a detailed procedureand imposes various deadlines for thenegotiation of a social plan. The LCprovides that 15 days after the beginningof the negotiations, the employertogether with the representatives of theemployees have to execute a social plan,evidencing the parties’ agreement ordisagreement. In the event ofdisagreement on the social plan at theend of the 15 day period, the partieshave to execute, without delay, detailedminutes of the negotiations evidencingtheir position during the negotiations.

If a social plan cannot be agreed aconciliation procedure applies. Withinthree days of the execution of theminutes of the negotiations, the partiesmust call upon the Conciliation board,which will set up and convene a jointcommission that will have to deliberateaccording to a strict timetable.

Luxembourg law only requirescompliance with the procedure andtimetable outlined above and that thenegotiations are in good faith. It does notrequire an agreement to be reached or asocial plan to be executed.

The LC also contains provisions on theconclusion of an agreement on thepreservation of employment (plan demaintien dans l’emploi) in the event of acertain number of dismissals. Anyemployer employing at least15 employees is obliged to notify thesecretariat of the “Comité deConjoncture” of any dismissal for reasonsnot related to the employee. The “Comitéde Conjoncture”, can at any time invitethe social partners to start discussions toestablish an agreement on thepreservation of employment. The Comitéde Conjoncture will, in any event, invitesuch discussion when five employees are

dismissed for reasons not related to theindividual employee during a referenceperiod of three months or in the event ofeight such dismissals during a referenceperiod of six months. The employerand/or the staff representatives can alsotake the initiative to request thenegotiation of such an agreement if thesethresholds are not reached. In that case,the party that wants to start negotiationshas to inform the ‘Comité deConjoncture’. The agreement on thepreservation of employment has toaddress different topics, such asapplication of the legislation concerningpartial unemployment benefits (législationsur le chômage partiel), the possibility ofadapting working time by applyingamongst other things a shorter or longerreference period, voluntary part-timework, the possibility of using time-savingaccounts (comptes épargne-temps), theapplication of the legislation on thetemporary secondment of the workforce(prêt temporaire de main d’oeuvre) etc.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about theiremployees (prospective, current andpast) are regulated by the law dated2 August 2002 on the Protection ofPersons with regard to the Processing ofPersonal Data as modified by a law dated27 July 2007 (the “Data Protection Law”),which implements the Data ProtectionDirective 95/46/EC (the “EU Directive”).

The Data Protection Law applies to allforms of capturing, processing anddissemination of sound and image.Employers, as data controllers, have toensure that personal data are:

(a) processed fairly and lawfully;

(b) collected for specified, expresslyindicated and legitimate purposesand not further processed in a wayincompatible with those purposes;

(c) adequate, relevant and notexcessive in relation to the

purposes for which they arecollected and/or further processed;

(d) accurate and, where necessary, keptup-to-date; every reasonable stepmust be taken to ensure that datawhich are inaccurate or incomplete,having regard to the purposes forwhich they were collected or forwhich are further processed, aredeleted or rectified; and

(e) kept in a form which permitsidentification of data subjects for nolonger than is necessary for thepurposes for which the data werecollected or for which they arefurther processed.

The Data Protection Law requires thedata controller, prior to thecommencement of personal dataprocessing to notify such processing tothe National Data Protection Commission(the “CNPD”), unless the processing hasbeen expressly exempted by the DataProtection Law.

The Data Protection Law gives anexhaustive list of the exemptedprocessing. Included amongst theexemptions from notification, is dataprocessing exclusively linked to theadministration of staff of the datacontroller provided that the processingdoes not cover data on health of the datasubject, or sensitive or legal data, or dataused to assess the data subjects. Inaddition such data may not becommunicated to third parties except asrequired by law or regulation, or if suchcommunication is necessary to achievethe objectives of the processing.

Breach of the requirement to processfairly and lawfully is punishable by a termof imprisonment of eight days to one yearand/or a fine of €251 to €125,000.

In addition, the CNPD can, amongstother sanctions, order the destructionand deletion of any data, and prohibitthe processing of personal data for alimited duration.



Breach of the Data Protection Lawrequirements may also give rise to civilsanctions ordered by the judge of thedistrict where the processing was carriedout (e.g. discontinuance of theprocessing, temporary closure of thebusiness of the data controller)

14.2 Employee access to DataUnder the Data Protection Law, datasubjects have a right of information, aright of access and a right to correctinaccurate data.

Except in certain specific cases,employees, as data subjects, have theright to access personal data relating tothem and to obtain a copy of suchinformation and the right to correct itwhere inaccurate.

In addition the LC provides that everyemployee has the right to access twice ayear, during working hours, the filescontaining data relating to him/her.

Data subjects will in certain circumstanceshave a right to object to the processing ofpersonal data for amongst other thingsdirect marketing purposes. Data subjectsmay also object to the disclosure ofpersonal data to third parties and must beinformed of this right.

14.3 MonitoringThere are specific provisions in both theLC and the Data Protection Lawaddressing the processing of personaldata for the purpose of monitoringemployment activities. The provisionscover all means of monitoring and areequally applicable to public and privatesector employers.

Data processing for the purposes ofmonitoring activities is only allowed:

(a) if it is required for the health andsafety of the employees;

(b) if it is necessary for the purpose ofprotecting the company’s assets(e.g. CCTV monitoring for safetyreasons, monitoring of emails,Internet or telephone in thefinancial sector);

(c) if it is required to control themechanical production process;

(d) on a temporary basis, in order tocontrol or measure the productivityor performances of an employeewith a view to establishing his orher salary, if such processing is theonly means of determining theexact salary of the employee; or

(e) if it is carried out in the context of aflexible working hours organisationin accordance with the law.

In case (a), (d) and (e), no monitoring maytake place without the approval of theWorks Council. The consent of theemployee is ineffective.

Furthermore, the employer must informthe affected employees as well as theWorks Council, or failing that the staffdelegation, or failing that again theLabour Inspectorate of the following:

(a) the purposes of the processing;

(b) the period(s) of time during whichthe monitoring is to be carriedout; and

(c) the duration and the conditions inwhich the data will be stored.

The processing and monitoring ofemployees’ activities requires the priorauthorisation of the CNPD.

Beyond the scope of data protection oremployment law, there are further generalrules relating to the secrecy ofcommunication and the right to privacy.


Under the Data Protection Law transfersof data within the EU are not restricted.

The transfer to a country other than anEU Member State (“Third Country”) ofpersonal data that are subject toprocessing, or that will be subject toprocessing after their transfer, may onlytake place if the recipient country ensuresan adequate level of protection andcomplies with the provisions of the DataProtection Law and its implementingregulations. The transfer of data to aThird Country, which is not assessed bythe data controller as offering anadequate level of protection may howevertake place in certain conditions, e.g. withthe consent of the data subject.

Contributed by Clifford Chance,Luxembourg

A Guide to Employment in the European UnionMalta

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Malta1. IntroductionMaltese Employment Law is essentiallybased on the contractual relationshipbetween the employer and employee,with certain controls being imposed bystatutory intervention. Whereas certainconditions of employment are governedby statute, other conditions such asrestraint of trade are unregulated andparties can therefore agree on whateverterms and conditions are acceptable tothem and are reasonable in the eyes ofthe judicature.

The legal system is a mixed one whereelements of French and Italian law areamalgamated to form the basis of Maltesecontract law. The legal theories applied byMaltese courts when examining casesconcerning the variation of theemployment contract, for example, areheavily influenced by Continental doctrine.For historical reasons however, the legalsystem applied in modern employmentmatters such as disciplinary action orconstructive dismissal is stronglyinfluenced by common law practices.

The Employment and Industrial RelationsAct of 2002 (EIRA) (Chapter 452 of theLaws of Malta), which regulates someconditions of employment and contractsof service, currently governs Malteselabour law. The Employment andIndustrial Relations Act has in factamended the pre-2002 legislative positionand introduced the necessary legalframework for Malta to come in line withother European jurisdictions.

Traditionally, collective agreements areconsidered to be binding privateagreements and are enforceable betweenthe parties. Many disputes betweenemployers and employees are settled inthe Industrial Tribunal which has exclusivejurisdiction to hear cases relating todismissal, trade disputes and otheremployment law disputes such as thoserelated to harassment, discrimination andthe observation of the working timerequirements, most of which have

originated from Malta’s membership ofthe European Union.


2.1 GeneralGenerally speaking, employmentlegislation in Malta is equally applicable toemployees at every level of theworkplace. As with English legislation,some recent legislation refers to the term‘workers’ which broadly speaking is aterm encompassing employees, agencyworkers, contract staff and self-employedpersons who are ‘dependant’ on oneparticular employer.

A Maltese employee is usuallycategorised as a full-timer, a whole-timeror a part timer. A full-timer is a personwho works an average of 40 hours perweek; whereas a whole-timer is a personwho works a number of hours specifiedin an applicable Wage Regulation Order.A Wage Regulation Order (also known asa Sectoral Order) specifies a number ofemployment parameters and rightswhich are applicable only to a particularsector of the employment market (e.g.the Food Manufacturing WageRegulation Order of 1991). One of thespecified parameters is the whole-timerweekly hours rate (usually rangingbetween 20 and 35 hours per week). Anemployee working in that sector whoreaches that number of hours is entitledto be given the maximum leave andbenefits entitlement as a full-timer.

A part-timer under Maltese employmentlaw is an employee who works less thanthe full-time or the whole time weeklyhours of work. Broadly speaking, part-timers are not to be treated lessfavourably than full or whole-timers in sofar as remuneration and benefits areconcerned. Pro-rata calculations andpayments as compared to whole-timersor full-timers are usually applicable topart-timers. Also, under the Part TimeEmployees Regulations of 2002 (asamended) part-timers are entitled to pro

rata benefits, leave etc. notwithstandingthe number of hours worked.

A similar right not to be treated lessfavourably also applies to fixed-termcontract employees as compared tothose comparable employees employedon an indefinite-term contract.

2.2 DirectorsThe Companies Act of 1995 regulatesthe position of directors of private andpublic limited liability companies, whomay or may not also be employees ofthe company.

3. Hiring3.1 RecruitmentMaltese employers recruit through avariety of sources, the most popular beingadvertising in newspapers and fee-charging employment agencies. TheEmployment and Training Corporation(ETC) is a government run agency whichprovides a free recruitment service,normally used by employers to recruit lesssenior employees. Private employmentagencies require a licence to operate. Thelatter is issued by the Department ofEmployment and Industrial Relations afterthe prospective applicants go through anad hoc application process.

3.2 Work PermitsAs Malta is an island of 390 sq km insize, it is necessary to impose certainimmigration regulations to control theinflux of labour within acceptable limits.Accordingly, those who intend to set upshop in Malta, or private individuals whowish to work in Malta, should makereference to the local laws, principally theImmigration Act of 1970 (Chapter 217 ofthe Laws of Malta) and the ImmigrationRegulations of 2004 (LN 205 of 2004).Since the freedom of movementprinciples in relation to citizens of theEuropean Union are respected, the latterhave not required a work permit to workin Malta since June 2011. Non-EUcitizens always require a work permit inorder to work in Malta. A work permit can


177A Guide to Employment in the European UnionMalta

be obtained within three months andcosts from €230 for a permit for one yearand can be renewed for further periods ofone year at a price of €230 per year. If aNon-EU citizen wishes to be employed inMalta, he/she must have a genuineprospect of securing employment beforeentering Malta to work and the employerneeds to prove that the employee’s skillsare not easily found within the MalteseIslands. Once a prospective employer hasbeen identified, the applicant may beissued with an entry visa if required, thatis valid for a fixed period (from three to sixmonths as determined by the ImmigrationPolice) until the work permit is issued.

Once a work permit has been obtainedby a non-EU citizen, his dependants(namely his/her spouse and childrenbelow the age of 21) are also given theright of residence and the right to work inMalta upon application for and issue of avalid work permit as described above. Asfar as non-EU citizens are concerned, anentry visa may be required from somecountries that do not have a freemovement agreement with Malta (a list ofcountries which have a free movementagreement with Malta can be found atwww.foreign.gov.mt).

4. DiscriminationThe Constitution of Malta and otherMaltese employment statutes protectemployees from discrimination on thegrounds of sex, religion, race, disability,age and sexual orientation.Discrimination against part-timers andpersons employed on fixed-termcontracts is also regulated.

Discrimination in the work place isunlawful as far as recruitment, treatmentduring the course of employment andtermination is concerned. Chapter Four ofthe Maltese Constitution protects personsfrom being discriminated against on anumber of grounds in every aspect of life,including work. With the advent ofEuropean Union membership, a numberof anti-discrimination provisions withdirect relevance to the workplace were

included in the new Employment andIndustrial Relations Act of 2002 and anumber of statutory instruments wereintroduced in order expand upon thegeneral principles found in EIRA.

Such instruments include the Equality forMen and Women Act 2003 (as amended)which focuses on sexual discrimination;the Employment and Industrial RelationsInterpretation Order of 2003 whichinstructs the Industrial Tribunal to refer tothe European Directives on discriminationand the Equal Treatment in EmploymentRegulations 2004 (as amended) whichfocuses on the principle of equaltreatment in relation to religion andreligious belief; racial or ethnic origin;disability; age and sexual orientation.


5.1 Freedom of ContractIt is a basic principle of Maltese Civil lawthat parties are free to contract onwhatever terms they choose. Freedom tocontract is however limited by statutoryintervention in that no parties may agreeto terms that are below the minimumrights granted by statute. TheEmployment and Industrial Relations Act2002 in fact specifies that if a contract ofemployment specifies conditions that areless favourable to the employee thanthose specified in the Act or in regulationsissued under it the statutory conditionsshall prevail.

Contracts of employment can be enteredinto for a fixed term or for an indefiniteterm. Fixed-term contracts or thoseentered into for a specified task can beentered into as long as the employee isnot continuously employed with thesame employer on a fixed-term contractfor more than four years. As soon as thefour years are up, the employee’scontract of employment becomes anindefinite one unless the employer hasobjective reasons to justify the renewal ofthe fixed-term contract. Casualemployment is also possible.

5.2 FormUnder Maltese law, every employee musthave a written contract of employment ora Minimum Statement of Conditions.Such a contract of employment may bewritten or verbal. However, if the contractentered into is verbal, the employer thenhas eight working days to give theemployee either a contract of employmentor a written statement of minimumconditions according to the Information toEmployees Regulations of 2002. Suchinformation includes normal rates of pay,overtime rates, hours of work, place ofwork, and a reference to all the leave towhich an employee is entitled.

5.3 Trial PeriodsThe probationary period within which theemployer may terminate the employmentof the employee without assigning anyreason is set at a maximum of six monthsfor lower grade employees. However ifthe employee’s employment is of atechnical, executive, administrative ormanagerial nature and the employee’swages are at least double the minimumwage during that year, the probationaryperiod is usually set at one year.

5.4 Confidentiality and Non Competition

Although there are no statutory rulesgoverning confidential information, theMaltese courts have adopted the Englishdoctrine that an employee is bound by ageneral duty of good faith and a dutynot to disclose the employer’sconfidential information.

Recent jurisprudence has heldenforceable a clause which prohibits theemployee from soliciting clients of theemployer with whom he had contact. Ageneral clause which prohibits directcompetition with the employer after theemployment has been terminated hasbeen declared by the Maltese courts tobe unenforceable. Similarly, provisionswhich purport to restrict employeesworking for competitors after terminationof the employment will rarely beenforceable, even if they are reasonable


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and the employer has a legitimateinterest to protect (i.e. confidentialinformation or trade secrets). TheMaltese courts have emphasised that thelimitations of time and market have to bereasonable within a small area such asthe Maltese islands. An ex-employeecannot be forced to leave his country inorder to pursue his vocation.

A decision of the Maltese Court ofAppeal held that giving an employeeadequate compensation for therestriction is not sufficient to render itenforceable. In addition, if any financialpenalty is specified in the contract ofemployment with the intention of creatinga deterrent or a prohibition on thefreedom of the individual, the penalty inquestion will be considered null on publicpolicy grounds, unless it arises from aspecific provision of the law. The courtalso held that anything that goes beyondthe specific provisions of theEmployment and Industrial Relations Actof 2002 cannot be enforced.

5.5 Intellectual PropertyBroadly speaking, according to theCopyright Act, if intellectual property iscreated or discovered by an employeeduring the course of his employment, itwill belong to the employer.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage of€158.11 per week (€151.33 per week inthe case of young people and traineesaged 17 and €148.49 per week in thecase of young people and trainees aged16 and younger).

Lower-grade workers in Malta aregenerally paid monthly on the basis of aweekly wage, although in some industriesit is customary for workers to be paid“piece-rates” according to the amount ofwork done. Overtime at one and a halftimes the normal rate is generally paid inrespect of additional hours worked inexcess of 40 hours per week.

More senior employees are normally paidmonthly in arrears and are not generallypaid for overtime since their remunerationpackage is deemed to compensate themfor any overtime worked.

Although it is not common for pay to beindex-linked, subject to the nationalminimum wage, there is a legal obligationon employers to increase wagesaccording to a cost of living index that ispublished annually by the Maltesegovernment. This year’s cost of livingincrease was €4.66 a week.

6.2 PensionsAlthough state pensions are providedunder the social security system, privatepension schemes are increasing inpopularity. Private pension provision maybe by way of an employer-sponsoredoccupational pension scheme, or by anindividual employee’s own personalpension scheme.

The Maltese state pension scheme iscurrently under review and there are plansto incentivise workers (especially thosebelow the age of 35) to participate inprivate pension schemes in order to lessenthe burden on the state. Tax incentives foremployers wishing to set up occupationalpension schemes are also in the pipeline.

6.3 Incentive SchemesShare schemes are not mandatory inMalta but are increasing in popularitywithin the financial services sectorbecause of the popularity that suchschemes enjoy within similar sectors inother European countries.

6.4 Fringe BenefitsCommon fringe benefits may typicallyinclude private health insurance and cars(for more senior employees particularly).Such fringe benefits are usuallycontractual and employers may notunilaterally withdraw them.

6.5 DeductionsAlthough generally, according to EIRAemployers are prohibited from making

deductions from pay, they are obliged todeduct income tax at source through the“Final Settlement System” (FSS) scheme.They are also obliged to deductemployees’ National Insurancecontributions (social securitycontributions). Further deductions suchas trade union membership fees oroccupational pension schemecontributions may only be deducted withthe written consent of the employee.

7. Social Security System7.1 CoverageThe single state administered socialsecurity system provides benefits by wayof pensions, unemployment benefits,family-based benefits, medical benefitsand sickness and injury benefits.Employers should be aware both of thecosts involved and of the administrativeburden of some state guaranteedbenefits (for example, sick leave pay andstatutory maternity pay) responsibility forwhich has been devolved to employers.

Health care has, traditionally, beenprovided by the state. However, there hasbeen an increased use of private medicalinsurance and private medical insurancehas become an increasingly commonemployee benefit.

7.2 ContributionsAccording to the Social Security Act(Chapter 213 of the Laws of Malta)employers must deduct from employees’pay National Insurance contributionspayable by employees and make anemployer’s contributions in respect ofeach employee. National Insurancecontributions are payable by employeesat a rate of 10% of earnings between thelower and upper earnings limit which arefixed each year, (and for the year 2012/13are €158.11 and €378.50 per weekrespectively). Employer’s contributions arethe equivalent of the employee’s.

8. Hours of WorkThe usual working week is 40 hours inmost sectors of employment. Specific



limitations on the hours of work areimposed by the Working TimeRegulations of 2003 on the hoursworked each day and each week by“workers” (this includes employees andagency workers). Generally working timemust not average more than 48 hoursper week over a reference period of17 weeks. Manufacturing and tourismindustries have a reference period of52 weeks and Collective Agreementsmay also extend the reference periodfrom 17 weeks up to a maximum of52 weeks. Under the Working TimeRegulations however, a Maltese workermay opt out of the regulations in orderto work more than the 48-hour averagestipulated by law.

Workers are also entitled to a daily rest ofat least 11 consecutive hours in each 24-hour period and a weekly rest periodof not less than 24 hours in any seven-day period. Night workers (i.e. where atleast three hours of daily working time isworked at night as a matter of course)must not work in excess of eight hours ineach period of 24 hours if the type ofwork carried out is particularly strenuous.

9. Holidays and Time Off9.1 HolidaysThe Working Time Regulations of 2003give the employee a right to fourworking weeks and four working daysof paid vacation leave. Any leave takenbeyond that period is taken at theoption of the employer and is usuallyunpaid. Annual leave accrues on a prorata basis from the first day ofemployment. Money may not be paid inlieu of untaken statutory holidayentitlement except on termination ofemployment. According to the NationalHolidays and other Public Holidays Act(Chapter 252 of the Laws of Malta)there are 14 national and public paidholidays per annum. These are to begiven over and above the statutoryannual vacation leave, to the extent theyfall on a working day for the employee.

9.2 Family LeaveSubject to satisfying the necessarystatutory criteria, a woman is entitled to18 weeks’ ordinary maternity leave onfull pay, with effect 1 January 2013. Ifsickness or other complications relatedto the pregnancy and/or birth arise, theemployee may ask for up to eightweeks’ special leave during which anentitlement equal to the minimum wageis payable. Any further special leaveis unpaid.

Men and women with one year’scontinuous service are entitled to fourmonths’ unpaid parental leave in respectof children under eight years of age.Employees are also allowed 15 hours ofpaid time off to deal with emergenciesarising in relation to persons related tothem up to the first degree.

9.3 IllnessEmployees absent from work by reasonof sickness have a right to receive sickpay from their employer. The number ofdays that may be taken as sick leavevaries according to sector, however, interms of the Minimum Special LeaveEntitlement Regulations of 2007, indefault of an applicable WageRegulation Order, an employee isentitled to the equivalent in hours oftwo working weeks per year. Part of thecost may be recouped from the SocialSecurity Department in that employersmay deduct the benefits that arereceived by the employee from thewages due.

9.4 Other time offEmployees are entitled to injury leave ofup to one year on full pay. Such benefit ispayable by the employer and may bereduced by the injury benefit which theemployee receives from the state.

Employees are also entitled to one dayof bereavement leave, two days ofmarriage leave, one day of birth leave,and jury service leave for as long as itis necessary.

10. Health and Safety10.1 AccidentsEmployers are obliged by theOccupational Health and Safety AuthorityAct of 2000 to safeguard the physicaland psychological well being of theiremployees at any place of work. Breachof the Occupational Health and Safetystatutes is a criminal offence which maybe coupled with a civil suit for damages.The statutes are coherent with theEuropean directives in place and aretherefore both general and work specific.

There are no compulsory employer’sliability insurance rules in Malta,although most employers are insuredunder such policies.

10.2 Health and Safety ConsultationEmployers in Malta are under anobligation to consult and inform theiremployees on all health and safetymatters. There is no obligation to have ahealth and safety company policy but riskassessments must be carried out on alltypes of work. Consultation must becarried out through an elected Workers’Health and Safety Representative or witha Health and Safety Committee.

11. Industrial Relations11.1 Trade UnionsAlthough union membership is stronger insome industries than in others, it caneasily be said that the Maltese workingpopulation is still highly unionised. Majorunions include the General Workers Union(GWU) and the UHM (Union HaddiemaMaqghudin) (these are general unionscovering various sectors) and the sectorspecific unions such as the MUBE (MaltaUnion of Bank Employees) and the MUT(Malta Union of Teachers). Employer’sunions such as the MEA (MaltaEmployer’s Association) are also popular.

Although statute regulates the functionsand proceedings of a trade union incertain instances, there is no statute toregulate recognition. In cases of


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recognition, a majority of memberworkers within a given bargaining unit isusually recognised due to a long-standing custom. Although method ofbargaining is left up to the parties,industrial action and its consequencesare regulated by statute.

11.2 Collective AgreementsCollective agreements are popular in thetraditional sectors of employment such asmanufacturing and tourism and theseagreements usually regulate matters suchas pay, working hours, holidays, disputeprocedures and procedures to deal withredundancy. Collective agreements areconsidered to be private agreements thatare binding on the parties.

11.3 Trade DisputesMaltese law does not have acomprehensive “strike law” or anyenshrined right to strike. Rather, unionsare granted statutory protection fromliability, which they would otherwise incurunder the tort law, when taking industrialaction pursuant to a trade dispute. It isdebatable whether an employee whotakes industrial action loses the right topay during that period. It is howeverunfair to dismiss an employee who istaking part in “official” industrial action.

11.4 Information, Consultation and Participation

There are at present no formalisedrequirements for employee participation inMalta, although some employers operateshare schemes as an additionalremuneration incentive. However,obligations do arise with respect toconsultation and the provision ofinformation to appropriate representatives(these are usually either elected employeerepresentatives or representatives of arecognised trade union).

The obligations are:

Where a collective redundancy (as definedin the Collective Redundancies (Protectionof Employment) Regulations 2002) isproposed to take place within a period of

30 days, consultation with appropriaterepresentatives must take place at theearliest possible opportunity. Minimumtime limits for consultation are laid downand failure to consult or comply with thetime limits gives the Director ofEmployment and Industrial relations theright to issue a fine which is equal to€1,165 per employee declared redundant.

Employers are required to provide certaininformation to appropriaterepresentatives upon the transfer of anundertaking as defined in the Transfer ofBusiness (Protection of Employment)Regulations 2002.

Employers must consult with employeeson health and safety matters.Consultation has to be with the Worker’sHealth and Safety Representatives aselected by the workforce or withemployees directly.

Under the European Works CouncilDirective, any undertaking or group ofundertakings with at least 1,000employees in the EU and 150 employeesin more than one EU state may have toset up a Works Council or a procedurefor informing and consulting employees atEuropean level. The Directive has nowbeen implemented in Malta, and while theinitial establishment of the employeenegotiating body is quite clearlyregulated, subsequent negotiations aregenerally up to the parties to regulate.

Following the European Parliament’sapproval of the Workers ParticipationDirective, Malta has implementedlegislation in 2004 in respect of workerinvolvement in the affairs of EuropeanCompanies. This will lead to the regularconsultation of, and provision ofinformation to, a body representing theemployees of the companies that haveformed the European company, inrespect of current and future businessplans, production levels, managementchanges, collective redundancies,closures, transfers, mergers and so on.

The Maltese government has alsoimplemented the Employee Informationand Consultation Regulations of 2006which oblige employers who employ50 employees and above to have asystem of information and consultationwith the employee’s representatives onmatters which are likely to lead tosubstantial changes in the workorganisation or contractual relations.


12.1 GeneralUpon the transfer of an undertaking, thecontracts of employment of thetransferor’s employees automaticallytransfer from the transferor to thetransferee, unless those employees cangenuinely be made redundant. Anydismissal connected with the transferwill, in principle, be unfair and give riseto an entitlement to claim compensation.Changes to terms and conditions ofemployment by reason of the transferare voidable, even if agreed to bythe employees.


When the undertaking carrying out thetransfer (transferor) employs 20 or moreemployees, Section 38 (2) of EIRArequires both the transferor and thetransferee to give the employees’representatives the following information:

(a) the date or proposed date ofthe transfer;

(b) the reasons for the transfer;

(c) the legal, economic and socialimplications of the transfer for theemployees; and

(d) the measures envisaged in relationto the employees.

The employees’ representatives are theofficials of a recognised trade union or anumber of employees elected specificallyfor the purpose of negotiation in relationto the business transfer.



The requisite information must beprovided by means of a written statementgiven to the employee representatives atleast 15 working days before the transferis carried out or before the changes inconditions of employment of theemployees come into effect, whichever isthe earlier.

If the employment conditions of theaffected employees will change as aconsequence of the transfer, consultationon the impact of the changes has tobegin with the employees’representatives seven working days afterthe information statement is received bythe representatives. Although statutedoes not stipulate whether a sale andpurchase agreement can be signedbefore the information/consultationobligations are fulfilled, employers arediscouraged from doing so.

12.3 Notification of authoritiesOn the same day that the statement issent to the employees’ representatives, acopy of the statement must be sent tothe Director of Employment andIndustrial Relations.

12.4 LiabilitiesContravention of any of the regulatoryprovisions is a criminal offence punishablewith a fine of €1165 per employee treatedillegally in connection with the transfer.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with both the statutory andcontractual requirements with regard toreasons for and procedures leadingto dismissal.

13.2 NoticeStatute lays down a minimum period ofnotice that will apply where the contractof employment does not make anyprovision for notice. Where the contractof employment stipulates a notice periodsuch a notice period will only stand if the

notice is more favourable to theemployee. Notice periods only apply incases of redundancy or resignation.There are no notice periods fortermination for good and sufficient cause(e.g. gross misconduct).

The statutory minimum period of noticedepends on the length of time theemployee has been in employment with aparticular employer. The notice cannothowever exceed a maximum of 12 weeks.These notice periods apply to all categoriesof employees irrespective of seniority.

If an employer prefers that an employeedoes not work his or her notice period,the general practice is for employers topay salary in lieu of the notice period.There are no special formalities formaking such payments (except as to thededuction of tax where required).

13.3 Reasons for DismissalAlthough the employer is always free toterminate the employment, it may onlydo so for a good and sufficient cause orin cases of redundancy. Even so, theemployee may always contest theredundancy or the actual termination inthe Industrial Tribunal. In cases where theemployee is engaged on a fixed-termcontract, the law stipulates that if eitherparty wishes to terminate theemployment before the time stipulated atlaw, the defaulting party has to pay tothe other an amount which is equal tohalf the wages that the employee wouldhave earned in the period remaining.Also, according to statute, fixed-termcontracts may not be terminated on thebasis of redundancy.

Generally, it is accepted that theft,misconduct and a genuine redundancyare a good and sufficient cause fortermination. As with most common lawjurisdictions, the employer must showthat he has a good reason for thedismissal and that a fair and reasonableprocedure has been followed whenimplementing the dismissal.

There is no minimum qualifying periodfor an employee to refer the case to theindustrial tribunal and there is nominimum or maximum cap on the awardthat the tribunals may give. The mostcommon type of tribunal award isfinancial compensation although if theemployee was not in a position of trust,he may ask for, and begranted, reinstatement.

13.4 Special ProtectionThe same rules apply to dismissalsconnected with pregnancy or maternity,parental leave, health and safety, tradeunion membership or activities, transfers ofundertakings, breach of the Organisationof Working Time Regulations and makinga disclosure to the proper public authority (“whistle-blowing”) although if thetermination is found to be made forreasons connected with the employeewanting to exercise his statutory rights inrelation to the above mentioned topics, thedismissal is statutorily one which is unfair.

The only instance in which the lawexpressly prohibits termination ofemployment is when the employee is oninjury leave.


As stated above, redundancy constitutesa good and sufficient cause for dismissal.Although it may be applicable toindividual termination, it is commonlyassociated with the partial or total closureof a business.

Redundancy is not a statutorily definedterm and Tribunals tend to rely on thedefinition as found in the ILORecommendation no. 119 on theTermination of Employment and Englishjudgments. The redundancy musttherefore be based on a re-organisationof the company or on financialdifficulties. Statute also defines whichemployees must be made redundant asthe EIRA dictates that in cases ofredundancy, an employer shall terminatethe employment of the last person to be


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engaged in the pool of employeesaffected by the redundancy.

There is no eligibility criterion forredundancy and the law establishes thatthe notice period that is applicable toresignations also applies in cases ofredundancy. In some industries there maybe enhanced contractual redundancypackages available but these usuallydepend upon the collective agreements inplace. Employers should take care tocomply with applicable consultation andinformation requirements that are found inthe Collective Redundancies Regulationsas described under 11.4 above.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers abouttheir employees and workers(prospective, current and past) areregulated by the Data Protection Act2001 (DPA), which implements the EUData Protection Directive.

There is currently no Data ProtectionGuidance Note or Code of Practice thatfocuses on employment issues althoughsuch a code is in the pipeline. Infringementof data protection law can lead to finesand compensation claims from affectedemployees or regulatory action.

Essentially employers, as data controllers,are under an obligation to ensure thatthey process personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principles including theprinciples of proportionality andtransparency. It is also recommendedthat the workforce is informed of anyprocedure being implemented due to theprovisions of the DPA.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what data isheld about them, to whom it is disclosedand to be provided with a copy of suchpersonal data. Subject access requestscover personal data held in manual andelectronic records such as email. There isno regulation on charges levied onemployees although the authorities tendto look down upon such initiatives.

14.3 MonitoringAlthough there is no direct legislation onthis topic, the monitoring of employeeemail, internet and telephone usage andclosed circuit TV monitoring is regulatedby the general principles founding theDPA. Although there have been nodecisions on the subject as yet,

monitoring is so far permissible providedthat it is carried out in accordance withthe DPA principles in that it should beadequate, relevant and not excessive andit should be carried out in the leastintrusive way possible. Any adverseimpact of monitoring on employees mustbe justified by its benefit to the employerand/or others. Express employee consentto monitoring is not usually required,however, employees should be madeaware that monitoring is being carriedout, the purpose for which it is beingconducted and to whom the data will besupplied. Where disciplinary action is apossible consequence of anythingdiscovered this too should be made clearto employees.


An employer who wishes to provideemployee data to third parties must do soin accordance with the DPA principles andprocessing conditions. It should be notedthat the DPA prohibits the transfer of datato a country outside the EEA unless thatcountry ensures an adequate level ofprotection for personal data or one of aseries of limited exceptions apply.

Contributed by Ganado & Associates


183A Guide to Employment in the European UnionThe Netherlands

The Netherlands1. IntroductionIn the Netherlands employment relationsare regulated by the Dutch Civil Codeand by a large number of specific rulesand regulations. These employmentrules and regulations apply to privateemployment contracts. Employmentconditions for civil servants are regulatedby a different system, that is notaddressed here. In addition, collectivelabour agreements may apply for certainbranches of industry or at companylevel. The employment provisions of theCivil Code and the associated rules andregulations lay down various mandatoryrules, which are mainly designed toprotect employees. The Dutch CivilCode is largely influenced by EU lawsand regulations.


2.1 GeneralMost employees work on the basis of apermanent or temporary contract withtheir employer. There are limits on theability to extend temporary contracts.

Many companies use temporary workerssupplied through special employmentagencies. Such agency workers areemployed by the agencies and aretherefore not considered to beemployees of the company using them.Agency workers do not necessarily havethe same employment conditions asregular employees. As a general rule,agencies are liable to pay temporaryworkers salaries equal to the salariespaid by the hiring company to its ownemployees. Depending on the applicablecollective labour agreement, exceptionsto this rule may apply.

Regulations regarding the position of on-call workers include a minimum levelof pay per call and presumptionspursuant to which the on-call worker canbe deemed to have an employmentagreement and/ or an employmentagreement of a certain number of hourswith the company using his services.

Provisions of the Civil Code and otheremployment legislation shall in principleapply equally to part-time employees. Asa general rule, employees that workpart-time must be treated equally to full-time employees, unless objectivereasons justify different treatment.

2.2 DirectorsThe general meeting of shareholders orthe supervisory board of the companyappoints a managing director (statutairbestuurder). Managing directors areusually also employed by the company ora group company and as such, they aregenerally protected by the same rules thatare applicable to regular employees,except in connection with the terminationof their employment (see further below).With effect from the implementation of theAct on Management and Supervision (WetBestuur en Toezicht) (see further below),managing directors of listed Dutchcompanies can no longer be employed onthe basis of an employment agreement.They must provide their services on thebasis of an assignment agreement(overeenkomst van opdracht) instead.

The duties and obligations of managingdirectors are regulated by law, by thecompany’s articles of association and, forlisted Dutch companies, also by theDutch Corporate Governance Code. TheCorporate Governance Code, amongstother things, deals with issues such asfixed and variable remuneration,termination fees and the term ofappointment. Listed Dutch companiesthat do not comply with the Code willneed to explain in their annual accountswhy they deviate from the Code (inaccordance with the so-called ‘comply orexplain’- principle).

With effect from 1 January 2013, the Acton Management and Supervision enteredinto force. This introduced the statutorybasis for the so-called one-tier board andimposes a limit on the number ofsupervising roles that managing andsupervising directors of qualifying entitiesmay hold. Prior to this the management

of Dutch companies was often organisedbetween the management board and a(separate) board of supervisory directors.

The annual reports of all Dutchcompanies should include individualdetails regarding salary, compensation,bonuses, termination fees, share optionsand shareholdings of the managingdirectors, past and present.

3. Hiring3.1 RecruitmentState recruitment agencies are notextensively used and employers are notobliged to inform these agencies of anyvacancies (except for certain workpermit procedures).

Certain collective labour agreementsrequire employers to ensure that a certainpercentage of the employer’s workforceconsists of disabled persons.

3.2 Work Permits The principle rule is that for a non-EEAnational the employer is obliged to obtaina work permit before the individual isallowed to work in The Netherlands. Workpermits will in principle only be granted ifthe employer proves that he is not able tofill the vacancy with an equallysuitable/qualified national from one of theEEA-countries. There are certainexemptions to this procedure, for examplein the case of intra-group transfers.

In addition to a work permit, a residencepermit must be obtained by a non-EEAnational for a stay in The Netherlands ofthree months or more. Nationals from anumber of countries also need atemporary residence permit in order to beallowed to enter The Netherlands.Residence permits are in principlegranted for the duration of one year, butcan be extended. During the first fiveyears of the foreign national’s stay in TheNetherlands, the residence permit needsto be extended each year.

Employees from EU member states whointend to stay more than three months in

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The Netherlands need to register with theImmigration Authorities as citizens of theEuropean Union.

The Knowledge Workers Procedure(kennismigrantenprocedure) is anaccelerated procedure for obtaining aresidence permit for non-EEA nationalswho come to The Netherlands for thepurpose of paid employment with aDutch employer and who earn more than€51,239 (and €37,575 if the individual isyounger than 30). The knowledgeworkers procedure is also open to Dutchemployers to whom foreign nationals areseconded within a group of companies(i.e. the employment agreement remainswith the non-Dutch employer). Thebenefit of this procedure is that theknowledge worker does not need toapply for a separate work permit. TheKnowledge Workers Procedure can onlybe used if the Dutch employer hasconcluded a so-called covenant with theImmigration Authorities. As part of a pilotwhich runs until 31 December 2013, theKnowledge Workers Procedure is alsoapplicable for non-EEA nationals whocome to the Netherlands for a short stayof up to three months.

4. DiscriminationEmployers should, based on theirstatutory obligation to act as a goodemployer, treat employees equally. Inaddition, employment law as well asspecific legislation prohibits discriminationand provide for equal treatment.

An employer may not discriminate on thegrounds of sex, religion, life principles,political persuasion, nationality, sexualdisposition, race, marital status, physicalfitness, age or employment status, eitherdirectly or indirectly and in general not atany stage of the employment (fromrecruitment, negotiation of theemployment agreement, promotion ortraining, to the termination ofemployment). In some casesdiscrimination is permitted, provided itcan be justified (on objective grounds).

An employee may claim damages in theevent of discrimination by the employer.Persons who are discriminated againstand/or parties concerned may bring aclaim before the Equal TreatmentCommittee (the “Committee”). TheCommittee can also act on its owninitiative. The decisions of the Committeeare not legally binding but may support apetition to the relevant court for adeclaration that the discriminatory act iswrongful or for an injunction to be issued.In general, courts tend to follow thedecisions of the Committee. It is commonfor individuals to approach the relevantcourt if the Committee has concludedthat there has been a breach of equaltreatment legislation.


5.1 Freedom of ContractParties are free to negotiate individualemployment agreements within the limitsof mandatory employment legislation andapplicable collective labour agreements,if any.

5.2 FormAccording to the Dutch Civil Code, anemployment agreement exists where anemployee personally undertakes workduring a given period in the service andunder the supervision of an employer inreturn for remuneration. The agreementneed not be in writing to be legallybinding. However, certain provisions,such as those relating to non-competitionand a trial period, must be in writing.Furthermore, an employer must inform anemployee in writing of the essentialaspects of the employment within onemonth of the start of the employment.

Employment agreements can be enteredinto for a fixed or indefinite period oftime. Fixed-term agreements, inprinciple, automatically terminate at theend of the agreed term. Parties mayenter into a maximum of threeconsecutive fixed-term agreements,which together should not last longer

than three years. If the parties enter intomore than one agreement and threeyears have passed, or more than threefixed-term agreements have beenentered into consecutively, the lastemployment agreement will be deemedto be for an indefinite period of time.Consequently, the employmentagreement will not end automaticallyupon the expiry of the extended period,and the applicable regulations in relationto termination (see further below) willhave to be complied with. If the fixed-term agreement provides for interimtermination, this right can only beexercised if the termination regulationsare complied with.

Employment agreements are deemed tobe consecutive if entered into within athree-month period after termination ofthe previous agreement and concludedby the same parties or parties thatappear to be their successors.

5.3 Trial PeriodsParties may agree a trial period, providedthat it is agreed in writing. The maximumtrial period is two months, except in thecase of a fixed-term employmentagreement for a period shorter than twoyears (in which case the maximum trialperiod is one month). During the trialperiod, either party can terminate theemployment agreement at any timewithout notice or the need for financialcompensation. Upon the employee’srequest, the employer must announce thereasons for the dismissal to theemployee. Reasons of a discriminatorynature are prohibited.


Employees are subject to an implied dutyof confidentiality in relation to theiremployer’s business and an employermay claim damages if an employeebreaches this duty. In practice, manyemployers include a provision in theemployment agreement in order toprotect their interests.



In order for a non-competition clause tobe valid, it should be agreed in writingbetween the employer and an employeeof age (meerderjarig). Restrictions onpost-employment competition must bereasonable in time, area and scope andcan be set aside or amended by arelevant court. Non-competition provisionsare subject to the principles ofreasonableness and fairness and they willhave to be reviewed (and, wherenecessary, renewed) when the employee’sposition within the company changes andas a consequence the impact of the non-competition undertaking on theemployee changes (unless this change ofposition could be anticipated at the timethe original non-compete undertakingwas concluded).

It is common to impose a penalty forbreach of the confidentiality and/or non-competition provisions. Postemployment non-competition provisionswill not, however, bind an employee if theemployer is liable for damages arisingfrom the manner of terminating theemployment agreement.

5.5 Intellectual PropertyIntellectual property created by anemployee in the course of hisemployment generally belongs to theemployer. Patentable inventions andcopyright normally belong to theemployee, unless agreed otherwise. Inlimited circumstances an employer canbe held liable to pay compensation forpatentable inventions and copyrights.Provisions in the employment agreementrelating to the protection of intellectualproperty rights are common in certainindustrial sectors, such as the informationtechnology industry.

6. Pay and Benefits6.1 Basic PayThe law provides for a minimum wage,which varies according to the employee’sage. The government determines thestatutory minimum wage biannually. Witheffect from 1 January 2013, the minimum

monthly gross wage for a full-timeemployee aged 23 or over amounts to€1,469.40 (excluding holiday allowance).

If an industry or trade-wide collectivelabour agreement applies, it will usuallycontain a remuneration scheme,determining the minimum remuneration.In addition, an employer is obliged toprovide a minimum holiday allowanceamounting to 8% of the employee’s grossannual salary. Employment agreementscan provide that the holiday allowance isconsidered to be included in the agreedsalary provided that the agreed salary isat least three times higher than thestatutory minimum wage increased by8%. It is common practice for wages tobe index-linked.

Pursuant to new legislation on thestandardization of the remuneration ofsenior officials in the public and semi-public sector (Wet normeringtopinkomens), specific remunerationrequirements apply to a targeted group ofindividuals within the relevant sector. Themaximum salary amount to which suchsenior officials are entitled is €187,340(130% of a Dutch Minister’s salary). Whenthe expense allowances and pensioncontributions are included, the relevantmaximum amount is €228,599. Themaximum level of severance payment forrelevant individuals is €75,000.

The new legislation also provides forspecific publication requirements.

In recent years, various initiatives havebeen taken to regulate the remunerationwithin financial institutions. A prohibitionon bonuses applies to board membersand policy makers of financial institutionsreceiving state aid.

6.2 PensionsEmployees are entitled to the benefits ofthe obligatory state pension scheme(Algemene Ouderdomswet) as of the daythey reach the age of 65. As of 1 January2013, the pensionable age will be

gradually increased up to the age of 67 inthe year of 2023.

In addition to the obligatory state pensionscheme (“old age pension”), manyemployers grant pension benefits to theiremployees. There is no legal obligationfor employers to make pensionsarrangements unless one of theapproximately 80 mandatory industry ortrade-wide pensions schemes apply.According to the Pensions Act(“Pensioenwet”) pension obligationsshould be funded through a separatelegal entity. This can be a pensioninsurance company, an industry-widepension fund, a company pension fund ora pension institution seated in anotherMember State. In addition, the PensionsAct confers rights on employees inspecified circumstances (e.g. terminationof employment, divorce).

6.3 Incentive SchemesShare option schemes and sharepurchase schemes are a popularincentive instrument, particularly for keyemployees. Employees can derive taxbenefits from such schemes, providedthat certain conditions are met. Clausesthat provide that option rights shallautomatically lapse upon termination ofemployment may not always appear fullyenforceable or may result incompensation being payable toemployees upon terminationof employment.

Many employers operate voluntary profit-sharing plans, which entitleemployees to a bonus related to profits.Such a bonus is often calculated as apercentage of the employee’s earningsand is taxed as regular salary.

6.4 Fringe BenefitsCompany cars, telephones and laptopcomputers, cost allowances, gifts onspecial occasions (such as anniversariesand jubilees) and childcarearrangements are frequently provided forvarious categories of employees and


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specific tax favourable regulations mayapply in this regard.

6.5 DeductionsWage tax is deducted from pay atsource in accordance with publishedrates. The tax year runs from 1 Januaryto 31 December. The employmentincome tax rates applicable in 2012 wereas follows:

Depending on the personal circumstancesof the employee (for example maritalstatus), a levy rebate may be available.Subject to certain conditions, foreignemployees who are assigned to theNetherlands may benefit from a taxexemption of 30% of their gross salary asa tax-free cost allowance, on theassumption that 30% of their income willbe expressly classified as extraterritorialexpenses. This exemption does not applyto employees who live within a radius of150 kilometers from the Dutch border andare assigned to the Netherlands.

7. Social Security7.1 CoverageThe social security system is split into anational insurance scheme covering allresidents of The Netherlands(“volksverzekeringen”) and an employees’insurance scheme for employees only(“werknemersverzekeringen”). Old agepension (AOW), dependant’s pension(ANW), exceptional medical expenses(AWBZ) and child benefits(Kinderbijslag) are provided by the statewithin the national insurance scheme.The employees’ insurance schemeprovides for benefits in the event ofillness (ZW), disability (WIA) orunemployment (WW).

7.2 ContributionsThe premiums for the national insurancescheme (“volksverzekeringen”) areincluded in the wage tax.

The premiums for the employees’insurance scheme(“werknemersverzekeringen”) are due upto a maximum income amount of€50,064. The percentages of thepremiums depend, amongst otherthings, on the business sector of theemployer. The premiums are due by theemployer, and the employer may onlywithhold part of the premium from theemployee’s income.

In addition, under the health insurancescheme (ZVW), each Dutch citizen pays anominal premium, which depends on thehealth insurer of his or her choice. Inaddition, an income dependentcontribution of 7.1% of the employee’syearly income is due (up to a maximumincome amount of €50,064). Employers areobliged to reimburse this incomedependent contribution to their employees.

8. Hours of WorkAccording to the Dutch Working HoursAct (“Arbeidstijdenwet”) employers havethe flexibility to adjust working hours tothe circumstances within the company orsector. In any event, an employee is onlyallowed to work a maximum of 12 hoursper shift and a total of 60 hours per week.

The employer may, within reasonablelimits, require employees to workovertime. In general, overtime is eitherpaid for or compensated in another way(for example time off in lieu). In order tobe able to oblige employees to work onSundays, an express agreement must bereached in advance. Various collectivelabour agreements include provisions onthe reduction of working hours.

Employees can request an adjustment totheir working hours after one year ofemployment, whereby certain formalitiesshould be complied with. Such a request

may only be refused by an employer onthe grounds of significant businessinterests, and it is generally difficult foremployers to demonstrate this.

9. Holidays and Time Off9.1 HolidaysFull-time employees are entitled to aminimum of 20 days’ paid holiday peryear (the “Statutory Minimum”). Collectivelabour agreements or individualemployment agreements usually providefor a more generous annual holidayentitlement per year. In addition, there arenine public holidays in the Netherlands.Relatively new legislation that came intoforce on 1 January 2012 provides thataccrued, but untaken, holiday that fallswithin the Statutory Minimum in principlelapses six months after the last day of theyear in which they accrued, unless theemployer elects to carry over period.Holidays exceeding the StatutoryMinimum expire five years after the lastday of the year in which they accrued.The new legislation also containstransitional provisions applicable toholiday entitlement that accrued prior to1 January 2012.

9.2 Family LeaveAccording to the Employment and CareAct (Wet Arbeid en Zorg), employees areentitled to a number of different forms oftemporary leave, either paid or unpaid.

Pregnant women are entitled to16 weeks’ maternity leave, which muststart no later than four weeks before theexpected date of childbirth. Maternitybenefits paid by social security are equalto 100% of the employee’s salary,provided that the salary does not exceedthe maximum daily wage, which is€193.09 per day with effect from 1 July2012. In practice, the employee’s fullsalary is often continued during maternityleave (except for travelling expenses anda fixed expenses allowance).

The mother’s partner is entitled to twodays’ paid paternity leave, to be taken

Income Tax rate

€0 – €18,945 33.10%

€18,945 – €33,863 41.95%

€33,863 – €56,491 42%

€56,491 or more 52%



within four weeks of the child’s birth.Paternity benefits are equal to 100% ofthe employee’s salary. However, theserules may be deviated from by collectivelabour agreement or an agreement withthe employee representation body.

For each child up to the age of eight, eachparent is entitled to unpaid parental leave.Since 1 January 2009, parental leave isextended from 13 weeks to 26 weeks fornew claims. The basic statutoryarrangement is that parental leave may betaken up to a maximum of half of theemployee’s weekly working hours averagedover a period of 12 months. The employeecan apply to deviate from thesearrangements so that:

(a) leave may be taken over a longerperiod than 12 months;

(b) more hours of leave may be takenper week, for instance on a full-timebasis; and

(c) leave may be divided into parts(subject to a maximum of six)with each part lasting at leastone month;

but the employer can reject such anapplication on the grounds of substantialbusiness interests. Employers andemployees may (and often do) deviatefrom these rule by means of a collectivelabour agreement.

After having taken the full parental leaveentitlement, the employee may requestan adjustment to his or her workingpattern for a period of one year after theend of the parental leave or for suchperiod as agreed between the parties.

In the case of adoption or foster care of achild, the future/foster parents are entitledto four weeks’ parental leave, whichshould be taken in the period commencingtwo weeks prior to the adoption andending 16 weeks after the adoption.During this leave, the salary payments arecontinued by the social security authorities,up to the maximum daily wage.

In the event of an emergency, employeesare entitled to temporary paid leave for afew days or hours, depending on to thenature of the emergency.

Employees are entitled to a short periodof leave of no more than 10 days peryear to take care of a seriously ill closerelative, during which period theemployee is entitled to 70% of his normalwage. However, the employer is notobliged to grant such leave if it hassignificant reasons for refusing it. Theserules may be deviated from by collectivelabour agreement or an agreement withthe employee representation body.

The Employment and Care Act sets outthe entitlement to long-term care leave.This type of leave entitles the employeeto take care of a partner, child or parent,who suffers from a life-threateningillness. The leave is comprised of amaximum of six times the employee’sweekly agreed working hours during aperiod of 12 months. In principle suchleave should be taken in one continuousperiod and should not amount to morethan half the employee’s agreed workinghours per week.

9.3 IllnessThe employer is in principle obliged to payemployees absent due to illness for up to104 consecutive weeks of illness. Duringthe first 52-weeks of an employee’s illness,the employer will have to pay the employeeat least 70% of his salary up to a maximumof 70% of the maximum daily wage.

If this 70% payment is less than theminimum wage, the employer will have tosupplement the payment in order to bringit up to the minimum wage. During thesecond 52-week period of illness, theemployer will also have to continue to payat least 70% of the employee’s salary.The employee is however no longerentitled to receive at least the minimumwage from his employer.

Collective labour agreements andindividual employment agreements may

provide that employers will supplementthe employee’s salary up to a percentageof 100% of his usual salary and thepercentage of salary payable may alsovary during the 104 week period.

Both employer and employee are legallyobliged to actively seek to reintegrate theemployee into the workplace. Failure todo so by the employer may lead to anextension of the period during which theemployer is obliged to pay theemployee’s salary. Failure to do so by theemployee may cause the employee tolose his entitlement to continued salarypayments. Generally, the employmentagreement cannot be terminated duringthe first two consecutive years of illness,except in the case of redundancy.

The risks of payment during illness canbe privately insured.

After two consecutive years of illness, theemployee may be entitled to socialsecurity benefits, the amount and durationof which mainly depends on the degree ofincapacity for work of the relevantemployee and his or her labour history. Noentitlement to social security benefitsexists if the employee, after the first twoyears of illness, is capable of earning atleast 65% of the salary he last earned. If,however, the employee’s earning capacityis between 20% and 65% of the salarylast earned, it will be beneficial for theemployee to try to generate income withhis own or another employer, as thisgenerally increases the social securitybenefit payable to the employee.

For employees with little or no remainingearning capacity and little or no prospectof recovery, permanent social securitybenefit is available.

10. Health and Safety10.1 AccidentsEmployers have a duty of care in relationto the health and safety of theiremployees while they are at work. Healthand safety rules and regulations need to


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be observed by an employer whenorganising work and by employees whilstperforming work. The LabourInspectorate is responsible for enforcingthe law in relation to working conditions(Working Conditions Act;Arbeidsomstandighedenwet), and isentitled to make binding orders and/orimpose fines on an employer in the eventof violation of the regulations. TheWorking Conditions Act provides targetregulations, i.e. regulations that requirethe employer to reach a level ofprotection for its employees, whichenables them to work in a safe andhealthy manner. Employees have the rightto cease all work-related activities andcall in the Labour Inspectorate in theevent of a serious risk to health andsafety. In light of the employer’s healthand safety obligations employers are inprinciple obliged to engage a companydoctor or other expert support.

Employers and employees (and theirrepresentative bodies) are responsible fordrawing up so-called working conditionscatalogues, wherein they describe howthey intend to implement the WorkingConditions Act’s target regulations. TheMinistry of Social Affairs and Employmentwill perform a check on these workingconditions catalogues, which will determinethe reference framework for control by theLabour Inspectorate. The WorkingConditions Act and regulations also containadditional standards with respect toworking conditions that cause serious riskto the health and safety of employees.

An employee has a statutory right towork in an environment that is free ofcarcinogenic substances (such astobacco smoke). Non-compliance by theemployer with the health and safetyregulations may constitute an economicoffence and theoretically, the employermay even be liable for damages sufferedby the employee due to non-compliance.

10.2 Health and Safety ConsultationThe company’s works council (see below)has a right to receive information and to

be consulted on matters relating to healthand safety in the workplace.

11. Industrial Relations11.1 Trade UnionsSome 20% of the Dutch workforce is amember of a trade union. Most of themare members of a trade union affiliated tothe Federation of Dutch Trade Unions(“Federatie Nederlandse Vakbeweging –FNV”) and to the Christian Trade UnionFederation (“Christelijk NationaalVakverbond – CNV”). A small number ofemployees belong to unions that aremembers of smaller federations.

Unions are well organised in themanufacturing industry sector and thesemi-public or privatised sectors, but lessorganised in the service sector and newtechnology industries.

The main employers’ association is calledthe VNO-NCW.

11.2 Collective AgreementsTrade unions and employers’organisations may negotiate minimumwages and basic employment rights at anational level for certain branches ofindustry or trade. The agreements thatare reached are used as standards forsimilar bargaining at sector level. Inprinciple, employers may choose thetrade unions with whom they wish tonegotiate a collective labouragreementHowever, for the purposes ofmaintaining good industrial relations,employers tend to recognise those tradeunions that are strongly represented inthe relevant sector of industry or trade.

A collective agreement can also beagreed for one single company.

The Minister of Social Affairs andEmployment can declare a particularcollective labour agreement to begenerally binding on an entire sector ofindustry or trade. Consequently, thecollective labour agreement is applicableto all employers and employees in that

sector, even to those employers that arenot members of an employer’sassociation and employees who are notmembers of a trade union.

11.3 Trade DisputesThe Dutch Civil Code does not recognisethe right to strike. However, inaccordance with international treaties,the right is recognised in certaincircumstances. In general, courts allowstrikes organised by trade unions if theaim of the strike is considered reasonableand if other means to achieve that aimhave been exhausted. Strike action is notcommon in the Netherlands.

Picketing is usually unlawful because it isgenerally considered an unreasonableform of industrial action.


The extent of employee influence in themanagement of a company depends onthe size of the company. In companieswith 50 or more employees, a workscouncil must be established. The workscouncil consists of and is elected by thecompany’s employees.

The company’s management will have tomeet with its works council at least twicea year to discuss the general affairs of thecompany. The works council has a rightto receive information on various topics(e.g. on financial information regarding thecompany, the various categories ofemployees within the company,remuneration arrangements etc.)

In addition, the works council must beinformed of and consulted on certaindecisions such as change of control,take-over, closure or reorganisation. Theworks council will also have to beconsulted by the company’s managementon various intended financial decisions, forexample significant financial investments,capital investments and substantial loans tothe company. The company’s managementis furthermore obliged to consult the workscouncil on decisions regarding technology



facilities and important decisions onenvironmental issues. The management ofthe company will require the approval ofthe works council for certain mattersrelating to working conditions, health andsafety and job evaluation. The length ofthe entire consultation procedure isdependent on the circumstances(i.e. complexity of the case, time pressureand what is reasonable).

A management decision may not beimplemented for a period of one month if itwas subject to works council consultationand the decision was opposed by theworks council, or if the requirements toconsult the works council have beenneglected. During this one-month period,the works council may appeal to thespecial Enterprise Chamber of theAmsterdam Court of Appeal (the“Chamber”). If the Chamber finds thedecision unreasonable, it can require theemployer to withdraw the decision, inwhole or in part, or to refrain from takingany further action pursuant to it. Inpractice, the Chamber is reluctant toconclude that a management decision wasunreasonable. Intervention by the Chamberis most likely when there have beenprocedural irregularities. If a managementdecision is subject to approval by theworks council and such approval is notgranted, the management may petition therelevant cantonal court for approval.

In addition, a works council is entitled togive its opinion on the proposedappointment or dismissal of the highestauthority (usually a director) who hasresponsibility, alone or with others, forthe organisation of employment withina company.

Works councils of companies that aresubject to the large company regime, i.e.companies with an issued capital of atleast €16 million, at least 100 employeesand for which a works council has beenestablished, have the right to nominateone third of the candidates for thesupervisory board of the company.

The management of a company with aworkforce of between 10 and50 employees is required to meet with theemployees at least twice a year as well asupon the request of at least 25% of theworkforce. The general course of businessmust be discussed at least once a yearand the company’s management mustconsult the employees on certain proposeddecisions that may affect at least a quarterof the company’s workforce.


12.1 General Dutch law has implemented the EUAcquired Rights Directive. Upon atransfer of a business, the employeesdedicated to this business are in principleautomatically transferred to theemployment of the transferee on thesame terms and conditions as providedfor in their employment agreements withthe transferor. However, specificprovisions apply with respect to pensionentitlements. In the case of a businesstransfer, employees, or the works councilif established, will need to be consultedon the intended transfer of a business.


Companies are generally required toconsult with the works council onacquisitions. Collective labour agreementsmay also impose a duty on a company’smanagement to consult with the tradeunions and the works council in cases ofan intended merger or acquisition. A workscouncil will have to be involved at a point intime where they can still influence theintended decision (i.e. before the signing of,for example, a sale and purchaseagreement or even a letter of intent).

The Dutch Merger Code (“SER-besluitFusiegedragsregels 2000”) also requiresnotification of and consultation with thetrade unions at an early stage ofnegotiations between the parties to atransaction, involving the acquisition ofdirect or indirect control over the activities

of a company (or part thereof) that has abusiness in The Netherlands and whereone of the parties is a company (or partof a group of companies) employing morethan 50 employees in the Netherlands.The relevant trade unions must benotified and consulted before agreementwill be reached.

12.3 Notification of AuthoritiesThe Merger Committee has to beinformed that the trade unions have beennotified of a contemplated acquisition.

12.4 LiabilitiesThe trade unions and/or parties to amerger can submit complaints in relationto non-observance of the Merger Code tothe Merger Commission who may thenissue a public statement addressingnon-observance of the Merger Code bythe parties. In addition, an infringement ofthe Merger Code may give rise to claimsby trade unions in tort for injunctive reliefand/or compensatory damages for lostmembership income, costs incurred orreputational risk in respect of a breach ofthe collective labour agreement thatprovides that the provisions of the MergerCode should be adhered to.

13. Termination13.1 Individual TerminationDutch law provides extensive employeeprotection. Failure on the part of theemployer to observe the rules relating totermination may result in a liability to paysubstantial damages to the employee. Anemployment agreement for an indefiniteperiod cannot be terminated unilaterallywithout the prior approval of asemi-governmental body called UWVWERKbedrijf or through a court decision,except: (i) during the trial period or (ii) incircumstances allowing the employer todismiss the employee summarily forsignificant reasons, such as theft.Settlement negotiations often result in atermination by mutual consent (which iscommon and in principle does notdisqualify the employee from stateemployment payment benefits).


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13.2 NoticeOnce the permission of the UWVWERKbedrijf has been obtained, theemployment agreement may beterminated by serving the statutorynotice, or if a different notice period isagreed, the contractual notice. If theemployment is terminated after havingobtained a dismissal permit from theUWV WERKbedrijf the notice period canbe reduced by one month, subject to aminimum notice period of one month.The statutory notice period for anemployer depends on the length ofservice of the employee. The employershall observe a statutory notice period ofone month for employees with less thanfive years of service and an additionalmonth for every period of five years’service. The maximum statutory noticeperiod of four months applies if theemployee has been employed for15 years or more. The statutory noticeperiod for the employee is one month.

In order to be valid, a notice period differingfrom the statutory notice period has to beagreed in writing and the employer’s noticeperiod must be at least twice as long asthe notice period that the employee isrequired to observe. The maximumcontractual notice period that can beagreed is 12 months for the employer andsix months for the employee. Notice oftermination should be given in such amanner that the employment agreementterminates at the end of a calendar month(but these rules may be deviated from bywritten agreement).

No notice has to be given if the courtterminates the employment agreement. Insuch cases the employment automaticallyterminates on the date stipulated by therelevant court.

13.3 Reasons for DismissalAs outlined above, an employer whowishes to terminate an individualemployment agreement needs to obtainthe permission of the UWV WERKbedrijfbefore notice of termination can be validlygiven. The request for permission must

state the reasons for the intendedtermination. Various guidelines issued bythe UWV WERKbedrijf determine thecircumstances in which permission canbe expected to be given. In practice, thereasonableness of the grounds fortermination is the main criterion. Specificrequirements apply to each ground oftermination, e.g. business organisationalreason or a non-performing employee.The procedure for obtaining permissiongenerally takes two to four months. TheUWV WERKbedrijf has no authority toorder the employer to pay compensation,however, it may take into accountwhether appropriate compensation hasbeen offered.

After any dismissal, whether legally valid ornot, an employee may initiate courtproceedings in order to obtaincompensation, or higher compensation,from the employer on the basis that thetermination was “apparently unreasonable”.

Alternatively, each party to an employmentagreement is at all times entitled to petitionthe relevant court to terminate theagreement. The relevant court will examinethe reasons given for termination, thefairness of the proposed termination andthe consequences of continuation ortermination of the employment agreementfor the employee. The relevant court mayaward compensation to the employee.Such a court decision is not subject toappeal unless the relevant court misjudgedthe applicability of the procedure orviolated fundamental rules of law in itsjudgement. In the case of termination of anemployment agreement by the relevantcourt, an employee will be subject to a cutin his state unemployment benefits overthe applicable notice period which startsrunning from the date of the court ruling.

Managing directors (statutair directeuren)have less protection in the event oftermination of their employment. Oncetheir corporate relationship has beenvalidly terminated by a resolution of thegeneral meeting of shareholders or thesupervisory board of the company, their

employment with the company is inprinciple deemed to have terminated aswell (after the relevant notice period hasexpired). No dismissal permit from theUWV WERKbedrijf or court interference isrequired. Directors may be granted thesame level of compensation as thatpayable to regular employees.

In order to determine the amount ofcompensation upon termination of theemployment (other than for fundamentalbreach or as a result of expiry of theterm), the Cantonal Court formula isgenerally applied. According to thisformula, the amount of compensation isdetermined by the employee’s age andyears of service. Each year of service untilthe age of 35 counts as half a month’ssalary. Each year of service between theage of 35 and 45 counts as one month’ssalary. Each year of service between theage of 45 and 55 counts as one and ahalf month’s salary and each year ofservice from the age of 55 counts as twomonth’s salary. In principle, thiscalculation method may apply when thereasons for the dismissal are neutral,meaning that none of the parties inparticular can be blamed for thedismissal. The neutral formula if oftenused, amongst other situations, in caseof dismissal for economic reasons. Insome circumstances payment inaccordance with the neutral formula maybe deemed insufficient. In such cases thesum payable under the neutral formulacould be multiplied. Occasionally,circumstances lead to no payment ofcompensation or payment equal to lessthan the neutral formula. This is possibleif the employee is largely to blame for thedismissal or when the employer canprove that it has insufficient funds to paycompensation. When calculating theamount of compensation the employee’smarket position may be taken intoaccount by the relevant court as well asthe financial position of the employer. Forthose employees who will soon retire, theamount of compensation may not exceedthe employee’s salary until the applicableretirement date.



The Civil Code provides examples ofcircumstances justifying a summarydismissal without compensation. If anemployee disputes the summarydismissal, it is a matter for the relevantcourt to decide whether there is sufficientreason for the employer to summarilydismiss the employee withoutcompensation. The employer cannotvalidly pre-determine in the employmentagreement what conduct it considersgross misconduct. The reasons for thedismissal must be communicated to theemployee immediately after they havebecome known to the employer and asummary dismissal should be effected assoon as reasonably practical after therelevant event, although the employer isentitled to take time to investigate thespecific circumstances.

13.4 Special ProtectionCertain categories of employees arespecially protected against dismissal, forexample, pregnant women, membersand former members of the workscouncil and employees absent by reasonof illness.


An employer contemplating a dismissal of20 or more employees within the sameregion in any three-month period mustnotify the UWV WERKbedrijf and therelevant trade unions of its intentions. Theemployer is, furthermore, obliged toconsult the relevant trade unions. In thecase of a failure to comply with therequirements of the Collective RedundancyAct, the dismissals will be voidable.

In practice parties often try to agree to asocial plan, although the law does notrequire an employer to draw up a socialplan, nor does the law require that thecontents of a social plan are to be agreedwith the relevant trade unions or theworks council. Agreeing to a social plan,however, is very common inreorganisation processes and usuallyspeeds up and smoothes the procedure.

14. Data Protection 14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about theiremployees and workers (prospective,current and past) is regulated by theDutch Data Protection Act of 6 July 2000(“DDPA”), which implements the EU DataProtection Directive.

The term “personal data” means any datarelating to an identifiable natural person.The term “processing” covers virtually allactions performed on personal data, fromcollection until deletion of the data.

Relevant matters for employers that arecovered by the DDPA vary from, forexample, the processing of personal datafor salary administration to the monitoringof the employees’ use of telephone,internet and email facilities.

Employers are generally advised toensure they have some sort of documentretention policy in place and to ensurethat the employees are aware of theirdata protection obligations.

Under the DDPA, the processing ofpersonal data is permitted only if theprocessing is based on one or more ofthe limited grounds listed in the DDPA.For commercial organisations the relevantgrounds are likely to be that:

(a) the employee has unambiguouslygiven his consent to the processingof his personal data;

(b) the processing is necessary forthe performance of an agreementto which the employee is party, orin order to take steps at therequest of the employee which arenecessary for entering intoan agreement;

(c) the processing is necessary forcompliance with a legalobligation; or

(d) the processing is necessary for thepurposes of legitimate interests

pursued by the employer or by thethird party to whom the data isdisclosed, except where suchinterests are overridden by theinterests or fundamental rights andfreedoms of the employee. In otherwords, the employer is allowed toprocess personal data of theemployee, unless the employeewould be unduly prejudiced.

The processing of sensitive personal data(i.e. data relating to a person’s religious orphilosophical beliefs, race, politicalopinions, health and sexual life, tradeunion membership or criminal behaviour)is subject to stricter rules. The generalrule is that such data may not beprocessed. There are, however, severalspecific and some general exemptions tothis rule.

In principle, all processing of personaldata must be notified to the Dutch DataProtection Committee (which is the Dutchdata protection supervisory authority),prior to the collection of the personaldata. Depending on what personal datawill be processed and for what purposes,the data processing may be exempt fromnotification under the Dutch Decree onStandardised Exemptions.

The employer is required to implementappropriate technical and organisationalmeasures to guarantee that itsemployees’ personal data is keptsecurely. Specific protection should beput in place to prevent the unauthoriseddisclosure of and access to personaldata. For example, employers mustensure that access to personal datawithin the organisation is restricted toemployees whose job descriptionobjectively requires them to have access.

14.2 Employee Access to DataPrior to the collection of personal data, theemployer must inform its employees of(i) the contact details for queries andrequests and (ii) the purposes of theintended data processing. Depending onfactors such as the sensitivity of the data


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in question and whether personal data willbe internationally transferred, the employeris required to provide more detailedinformation in order to ensure that theprocessing is carried out in an appropriateand careful manner. Under the provisionsof the DDPA, employees have the right toask the employer periodically to beinformed whether his or her personal dataare being processed and to receive anoverview of the data processed.

The employer could, for example, providethe necessary information by attaching adata protection policy to the employmentagreement (ideally, the employmentagreement would contain a dataprotection clause referring to this policy).For the sake of clarity, it can sometimesbe advisable to use different privacypolicies, for example a general privacypolicy explaining the organisation’sgeneral approach towards privacy and aseparate privacy policy specifically aimedat the monitoring of employees.

14.3 MonitoringMonitoring employee’s telephone calls,electronic communications and internetaccess is only allowed if certainconditions are met (including theobligation to inform the employee that hisactivities are monitored). Electroniccommunications of the works councilregarding their activities may not bemonitored. Guidelines have been issuedby the Dutch Data Protection Committeeregarding the monitoring of employeeemail and internet use, which, althoughnot legally binding, are intended toprovide “assistance for employers andemployees in formulating a companypolicy with respect to the monitoring ofthe use by employees of email and theinternet in accordance with privacy law”.

The employer should request the priorconsent of the works council, if any,before any policy regarding themonitoring of telephone calls, email andinternet use can be introduced.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DDPA. Thereare additional requirements that need tobe observed if personal data is to betransferred from EU countries to countriesoutside the EU. In principle, suchtransfers may only take place if thecountry of destination offers an adequatelevel of protection for the transferreddata. (e.g. the US is not deemed toprovide an adequate level of protectionand transfers of personal data to the USare, consequently, not allowed). Thereare, however, ways to legitimiseinternational transfers, even if anadequate level of protection is not inplace in the country of destination.Transfers within the EU are not restricted.

Contributed by Clifford Chance,Amsterdam


193A Guide to Employment in the European UnionPoland

Poland1. IntroductionThe principal source of law regulatingemployment relationships in Poland is thePolish Labour Code of 26 June 1974 (the“Code”). The Code has been subsequentlyamended in order to implement numerousEC directives.

Poland is also a member of the InternationalLabour Organisation and it has ratifiedvarious international agreements relating tolabour law, e.g. regarding unemployment,the employment of women and juveniles,freedom of trade unions and accidentsat work.

Collective agreements are legallyenforceable and are of some importance.Collective agreements or internal rules ofemployment may provide for different,more favourable working conditions foremployees than the provisions of theCode. They cannot, in any case, providefor less beneficial terms in comparison tothose provided by the Code and otherbinding regulations of labour law.

Disputes between an employer and anemployee are settled in special divisionsof the regular courts. Special provisions ofthe Polish Code of Civil Procedure governdisputes under employment contracts.They are designed to provide protectionfor the employee and enable employeesto receive help quicker and in a morecost-efficient and effective mannerinvolving less amount of bureaucracy.

In general, under Polish law it is notpossible to contract out of statutoryemployee protection. In addition, the Codestates expressly that if the contractualprovisions of the employment contract areless beneficial to the employee than theprovisions of labour law, the contractualprovisions will be considered void and themore beneficial provisions of labour law willreplace them.

2. Categories of Employees2.1 GeneralPolish law generally does not differentiatebetween various categories ofemployees, in particular blue-collar andwhite-collar employees.

2.2 DirectorsThere are some regulations that applyonly to the top management employees(e.g. less restrictive regulations regardingworking overtime by such employees).

2.3 OtherMost provisions of the Code and otheremployment legislation apply equally topart time employees. As a general rule,employees that work part time areentitled to be treated on an equal basiswith full time employees, unless objectivereasons justify different treatment.

3. Hiring3.1 RecruitmentEmployers recruit employees through avariety of sources, including through theinternet and by advertising in newspapersor journals.

Private recruitment agencies andagencies providing temporary staff arebecoming more popular, and there aremany agencies that specialise in therecruitment of staff from specificprofessional groups. Such agencies donot require any licences before they canoperate, but they have to be recorded inthe register maintained by the marshal ofthe voivodeship (marszałek województwa– local governmental authority).

3.2 Work PermitsPolish law is highly complex with regardto the issuance of work permits, thereforeonly a high level overview of the legalposition is set out below.

Citizens of all European Economic Areacountries and of countries with which theEU has signed Free Movement ofPersons Agreements have free access tothe Polish labour market.

The employment of foreigners, with theexception of those from EEA countries, isregulated by the Act on Promotion ofEmployment and Labour MarketInstitutions of 20 April 2004.

Under the provisions of this Act, a foreigneris allowed to carry out work in Poland if theemployer obtains a work permit conditionalupon the foreigner obtaining an appropriatevisa or a residence permit for a specifiedperiod of time. The work permit is issuedby the voivode (wojewoda – governmentalauthority) appropriate to the place of theemployer’s registered place of business,upon the application of the employer.

The work permit allows the foreigner toapply to either: a Polish consulate for avisa for the right to reside in Poland withthe right to work, or to the appropriatevoivode for a residence permit for aspecified period of time. A number ofdocuments must be attached to the workpermit applications (the relevant list canbe obtained in the Voivodeship Office).

A specific, less formalized procedureapplies to highly qualified foreignersseeking to acquire the right to work andstay in Poland. Such employees onlyhave to apply for only one type of permit,which allows them to both work and stayin Poland.

In most cases, a work permit is issued fora three year period however in somesituations it is issued for no longer thanone year.

An employment agreement or otheragreement on performing paid work(e.g. mandate agreement, specific taskagreement) may only be entered into forthe period specified in the work permit.The Voivode may revoke the work permitif, for example, the conditions of thepermit are breached or if the employeeloses the qualifications necessary to carryout the specific type of employment(e.g. driver’s licence). In such cases, therelevant agreement must be terminatedas soon as possible.

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Foreigners who have permanent residenceor refugee status in Poland (or who havetemporary protection) or in certaincircumstances, who are relatives of aPolish citizen, do not have to obtain awork permit. There are a number ofadditional exceptions including a keyexception for foreigners who permanentlyreside abroad and are members of themanagement board of a legal entity, if theyplan to reside in Poland for no more thansix months in any 12-month period.Individuals who are non-EU nationalsseconded by their foreign employer towork in a Polish branch of the employerfor no longer than 30 days in a calendaryear or for no longer than three months ina six-month period do not need a workpermit. Note however that an exceptionapplies to employees temporally secondedto Poland in relation to the performance ofexport services by a foreign employer,(when the work permit is required from thefirst day of secondment). Pursuant to theprovisions of the Code which implementDirective 96/71/EC, the working conditionsof seconded employees cannot be worsethan the minimum prescribed in the Code.

An employer is obliged to pay a workpermit fee in the amount of:

(a) PLN 50 if the employer intends toemploy the employee for a periodnot exceeding three months;

(b) PLN 100 if the employer intends toemploy the employee for a periodexceeding three months; or

When a work permit is extended, this feeis halved. Illegal employment (i.e. withouta work permit or in breach of itsconditions) is penalised by fines of atleast PLN 3,000 for the employer and atleast PLN 1,000 for the employee.Moreover, the employee may bedeported from Poland (the deportationcosts are borne by the employer).

4. DiscriminationDirect or indirect discrimination on thegrounds of sex, gender, age, disability,

race, religion, nationality, sexualorientation, ethnic origin, political views,membership of any kind, is forbiddenwhen hiring employees, whether foremployment for a fixed or indefinite term,full time or part time.

The employer is expressly obliged toactively prevent such discrimination aswell as any harassment or bullying.

Under Polish law bullying means action orbehaviour towards an employee ordirected against an employee, thatinvolves persistent and long-lastingbadgering or threats causing him/her tohave a lower sense of professional worth,ridiculing an employee or humiliatinghim/her, ostracizing or eliminating him/herfrom the team of his colleagues.


5.1 Freedom of ContractGenerally, parties are free to contract onwhatever terms they choose and agreeupon provided that such terms are notless favourable to the employee than theprovisions of the binding regulations oflabour law and the employer’s internalemployment regulations. In addition, thereare some provisions that have to beincluded in every employment contract asa matter of law (e.g. type of work, placeof work, working hours andremuneration). These requirements cannotbe contracted out of by the parties.

5.2 Form Employment contracts may be executedfor an indefinite period of time, for a fixedterm, and for a certain period to performspecified work. All of the above can bepreceded by an employment contract fora probationary period, which cannotexceed three months.

Employment contracts have to beconcluded in writing. If they are not, theemployer is obliged to inform anemployee in writing of the basic termsand conditions of employment within

seven days of the date the employmentcontract is concluded. However, a failureto comply with this requirement does notrender the contract invalid or void.

The employer may be fined up toPLN 30,000 if the employment contract isnot confirmed in writing.

5.3 Trial PeriodsAny employment contract can bepreceded by an employment contract fora probationary period. Such anagreement is a separate independentemployment contract that applies only tothe probationary period. Usually theparties decide on the length of theprobationary period; however, it cannotexceed three months. After the lapse ofthe term indicated in the contract, thecontract terminates. If an employerintends to extend the employmentrelationship, a new employment contracthas to be concluded.


An employee is obliged to perform hiswork conscientiously and carefully, and toabide by the instructions given by theemployer. He is also obliged to look afterthe interests of the employer, protect hisproperty and to keep confidential anyinformation the disclosure of which couldresult in damage to the employer. However,there is no statutory non-competeobligation for employees.

Therefore, the employer may, and oftendoes, conclude a separate non-competecontract for the duration of theemployment contract. In such a contract,the employee may be obliged neither todirectly undertake competitive activitieshimself nor to provide, indirectly by anymeans whatsoever, services for thebenefit of any institution or entity thatcompetes with his employer.

When an employee has access to vitallyimportant information the disclosure ofwhich could result in damage to theemployer, the parties to the employment



contract can conclude a non-competitioncontract that will also be binding after thetermination or expiry of the employmentcontract. The non-competition contractshould set out the duration of theobligation and provide for compensation tobe payable to the employee. Regardless ofits duration, a non-competition obligation ofthe employee ceases to be binding oncethe reasons justifying this obligation ceaseto exist or if the employer fails to paycompensation to the former employee.

The amount of compensation cannot beless than 25% of the remunerationreceived by the employee under theemployment contract during thenon-competition period.

The general confidentiality obligation of anemployee is also regulated by the UnfairCompetition Act; however, very oftenmore stringent provisions are included inemployment contracts.

5.5 Intellectual PropertyUnder Polish law, unless the employmentcontract provides otherwise, the employeris entitled to any intellectual propertyrights that the employee creates as aresult of performing his duties under hisemployment within the mutually envisagedscope of the employment contract.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage, whichis set out for each calendar year in anordinance from the Ministry of Labour. In2013 the minimum wage is PLN 1,600 permonth gross (this is approximately €400).

There are no legal obligations on employersto increase wages. However, collectiveagreements or internal remuneration rulesmay provide otherwise.

6.2 PensionsPrivate pensions schemes are of someimportance, but for the time being theyare not very common and mostemployers apply only state provisions.

Submitting contributions to the StateSocial Security Fund is compulsory forevery employer, regardless of its legalstatus. An employee is entitled to receivea state pension from the pension fund.The amount of the pension depends onvarious factors (e.g. the duration ofcontribution and non-contributionperiods, the amount of contributions paidby the employer).

The contribution that is paid by theemployer is split into two parts – generallyone of them is transferred to the SocialSecurity Fund and the other to a privateopen pension fund chosen by theemployee. As the institution of privatepensions was implemented in 1998, thereare some groups of people that are notobliged to choose a “private openpension”. People born before 1 January1949 cannot contribute towards theprivate open pension; people born after31 December 1948 and before 1 January1969 may voluntarily contribute towards aprivate open pension apart from the statepension, however they may contributeonly towards the state pension; peopleborn after 31 December 1968 mustcontribute towards a private open pensionapart from the state pension.

Apart from the pensions from the SocialSecurity Fund, the employee may receivea pension from private pension funds ifhe has paid premiums into the relevantprivate pension fund himself.

6.3 Incentive SchemesIncentive schemes are voluntary in Polandand they come in various forms. Theymay operate on a monthly, quarterly orannual basis and may be linked to suchfactors as market share performance,revenue increase, or PTI (pre-tax income)results. Each employer devises the termsof its incentive schemes, if any, accordingto its requirements.

6.4 Fringe BenefitsCommon fringe benefits include privatemedical insurance for treatment outsidethe national health service and company

cars. Generally, additional charges relatedto such fringe benefits (e.g. costs of fuel)are covered by the employer; howeverthe value of certain fringe benefits (e.g.private medical insurance) constitutestaxable income for the employee.

6.5 DeductionsEmployers are obliged to deductincome tax at source. They are alsoobliged to deduct health and socialsecurity contributions.

7. Social Security7.1 CoverageThe state-administered social securitysystem provides benefits by way ofpensions, family benefits andcompensation benefits.

There are the following socialsecurity benefits:

(a) pensions; and

(b) sick pay, accident at work,rehabilitation, maternity andcompensation benefits.

Employers and employees are obliged topay certain contributions with respect tosocial security benefits. Thesecontributions are paid to the SocialSecurity Fund (or an accident fund that isa part of the Social Security Fund).

7.2 ContributionsThe level of an employer’s tax and socialsecurity contributions depends on theamount of an employee’s remuneration.

Personal income tax is calculatedas follows:

(a) 18% of annual remuneration up toPLN 85,528, the amount of taxreceived from the above calculationis decreased by PLN 556.02;

(b) Then, if annual remunerationexceeds PLN 85,528, personalincome tax amounts to PLN14,839.02 plus 32% from theamount in excess of PLN 85,528.


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The social security contributions areas follows:

(a) 19.52% of the remuneration is paidin relation to pensions benefits (this premium is paid in equal partsby the employer and the employee);

(b) 8% of the remuneration is paid inrelation to disability pensionsbenefits (6.5% is paid by theemployer and 1.5% is paid bythe employee);

(c) 2.45% of the remuneration is paidin relation to sickness benefits(the premium is paid entirely bythe employee);

(d) 2.45% of the remuneration is paidin relation to the Labour Fund (the premium is paid entirely bythe employer);

(e) 0.10% of the remuneration is paidin relation to the GuaranteedEmployees Benefits Fund (the premium is paid entirely bythe employer);

(f) from 0.67% up to 3.60% of theremuneration is paid in relation toaccident at work benefits (the premium is paid entirely bythe employer).

Retirement and pension insurancecontributions do not have to be paid onthat part of any employee’s salaryexceeding 30 times the forecastednational average salary (i.e. in 2012 it wasPLN 105,780). Therefore, for employeesearning in excess of this cap, theemployee keeps most of the grossed-upamount and the employer enjoys areduction in the overall contributions ithas to make.

8. Hours of WorkThe Labour Code provides that generallyworking hours in Poland may not exceedeight hours in a 24-hour period and anaverage of 40 hours per average five-dayweek in a given calculation period not

exceeding four months. It is anticipatedthat in 2013 the maximum length of thecalculation period will be extended to12 months, but the new regulations havenot yet been adopted by Parliament.Applicable working time regimes are setout either in the employer’s generalinternal works regulations or in individualemployment contracts.

The working time schedule may vary indifferent working time regimes applicableto a given employer.

Generally, in each 24-hour period, anemployee is entitled to at least11 hours of uninterrupted rest and to aminimum 35-hour period of weeklyuninterrupted rest.

The number of overtime hours must notexceed 150 hours per calendar year forany individual employee (a differentovertime hours limit may be established byinternal works regulations or employmentcontracts - up to about approx. 416 hoursannually). In any event, weekly workinghours together with overtime hours maynot exceed an average of 48 hours in agiven settlement period.

Under the Labour Code, in addition tobasic remuneration, additionalremuneration for overtime work will bepaid in the amount of:

(a) 100% of the employee’s hourlyremuneration - for each hour ofovertime worked at night, on dayswhich are not working days for theemployee pursuant to the workschedule an employee is obliged tocomply with, on a day off grantedto an employee in exchange forwork on Sunday, or on a holidaypursuant to the employee’swork schedule;

(b) 50% of the employee’s hourlyremuneration - for each hour ofovertime worked during theemployee’s normal working days.

9. Holidays and Time Off9.1 HolidaysIn Poland, there are 13 public holidays.These include e.g. New Year’s Day,Easter Monday and Christmas. Allworkers are entitled to a minimum of20 days’ paid annual leave, whichaccrues on a pro rata basis from the firstday of employment up to 10 years’employment. Employees with more than10 years’ service are entitled to 26 days’paid annual leave.

9.2 Family LeaveA woman is entitled to: (i) 20 weeks’ leavefor the birth of one child, (ii) 31 weeks’leave for the birth of twins; (iii) 33 weeks’leave the birth of triplets; (iv) 35 weeks’leave for the birth of quadruplets; and(v) 37 weeks’ leave for the birth ofquintuplets (or more).

A man is entitled to paternity leave if hiswife returns to work after taking maternityleave and having used at least 14 weeks.In such an event, the unused part of thematernity leave may be granted to theman as paternity leave.

After the basic period of maternity leaveis used, an employee is entitled to anadditional voluntary paid leave of up tosix weeks (in the case of one birth) or upto eight weeks (in the case of a multiplebirth) from 2014. However, there is atransition period and in 2013 theadditional paid leave will last up to fourweeks (up to six weeks in the case of amultiple birth).

The father of the child is entitled tospecial paternity leave of two weeks,which should be used during the child’sfirst 12 months.

It is anticipated that in 2013 themaximum length of maternity leave will beextended to 12 months and paternityleave – to eight weeks, but the newregulations have not yet been adoptedby Parliament.



An employee is entitled tomaternity/paternity leave if she/he assumesresponsibility for bringing up somebodyelse’s child and wants to adopt it.

During maternity/paternity leave theemployee is entitled to maternity/paternitypay of up to 100% of her/his remuneration.

9.3 IllnessEmployees absent from work by reason ofill-health or injury are entitled to sick pay,in principle for 182 days per calendaryear. Generally sick pay amounts to 80%of the employee’s remuneration. (100% ispayable for sickness during pregnancy orsickness resulting from an accident atwork.) The employer pays sick pay for anaggregate of 33 days’ illness during theyear. After this period, sick pay is coveredby social security.

9.4 Other Time OffBoth parents are entitled to three years’unpaid childcare leave until the child’sfourth birthday and an additional threeyears’ unpaid leave until the child reachesthe age of 18 if the child is disabled.Employees entitled to take childcare leavemay, instead of taking childcare leave,request part-time working, however therequested part-time hours cannot,however, be less than half the employee’sfull-time hours.

Employees are entitled to additional leavein a number of other circumstances, forinstance, employees raising a child underthe age of 14 are entitled to two days ofpaid leave in a calendar year, andemployees gaining professionalqualifications, with the employer’sconsent, are entitled to paid study leave(in particular up to 21 days’ paid leaveduring the last year of study).

10. Health and Safety10.1 AccidentsEmployers are under a duty to haveregard for the health and safety of theiremployees while at work (and travelling toor from work), and are obliged by statute

to take out insurance against liability foroccupational injuries and diseases.

Generally, employers are obliged toprevent accidents at work. In the case ofan accident at work, an employer isobliged to provide first aid and eliminatethe source of danger. Employers mustmaintain an accident register.

In the case of serious, lethal or groupaccidents, the employer should informthe Labour Inspectorate and the LabourInspectorate’s prosecutor.

10.2 Health and Safety Consultation The employer should provide theemployees with healthy and safe workconditions and should inform theemployees about the health and safetywork place rules.

Before an employee commences work,the employer must give him training inrelation to health and safety rules, andthe employee has to undergo preliminarymedical examinations.

An employer is obliged to provideemployees with free personal equipmentto protect them against factors in thework place that are hazardous andharmful to health and to instruct theemployees in the use of such equipment.In certain situations, it is also obligatory toprovide employees with free workingclothes and shoes and the employershould not permit the employees to workwithout personal protective equipment,work clothes and shoes.

An employer with more than100 employees is obliged to set up anadvisory and supervisory board body onwork and safety issues. If the employeremploys fewer than 100 employees, itmay assign the performance of work andsafety service tasks to an employeecarrying out other work.

An employer with more than250 employees is obliged to set up a

work and safety committee as anadvisory and opinion-giving body.

11. Industrial Relations11.1 Trade UnionsUnder Polish law, workers are free to setup a trade union which can beestablished by a minimum of 10 founders.Trade unions have various rights as far asemployment relationships are concerned.Employers are obliged to consult withthem, for example on redundancies,transfer of business, or termination of theemployment contract of an employeerepresented by trade unions. Employerscannot dismiss employees who aremembers of the managing body of atrade union.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually executed in the industrial sectorand often regulate matters such as pay,working hours, holidays, disputeprocedures and redundancy procedures.

Collective agreements are one of thesources of labour law, which means thatthey bind employers. They regulate workconditions, rights and obligations of theemployer and the employees. Typically,work conditions provided for in collectiveagreements are more beneficial to theemployees than those stipulated inemployment legislation.

One type of collective agreement is theso-called Social Package, which may beconcluded between a trade union and anemployer, or an investor planning to buythe employer. Most often they areconcluded in the companies privatised bythe State where the position of the tradeunions is stronger (in particular in theenergy and mining sectors). The SocialPackage provides for additional employeerights, and guarantees that the employerwill fulfil these rights.

Most commonly, the Social Packagestipulates additional benefits, a guarantee


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of employment, and additional severancepayments for the employees in the caseof redundancies. The Social Package isconcluded for a fixed period of time,mostly for a few years.

11.3 Trade DisputesTrade disputes may relate to work andremuneration conditions. The first step toresolving a trade dispute is a negotiationexercise between the trade unions andthe employer. If the parties do not cometo an agreement, the next step ismediation conducted by therepresentatives chosen by trade unionsand the employer. If the parties do notreach an agreement as a result ofmediation, trade unions have the right togo on strike. The right to strike isguaranteed by the Polish Constitution.


The Workers Information and ConsultationDirective has been implemented by meansof the Act on Informing and ConsultingEmployees of 7 April 2006. This Actintroduces a new employee representativebody called the “Works Council”. The Actapplies to employers with at least 50employees. The employer is obliged toinform the employees about their right toestablish the Works Council but is onlyobliged to create a Works Council when arequest is made by the employees.

A Works Council only has a consultativeremit. In particular, Councils are notentitled to enter into collective disputeswith the employer or call any strikes.

Employers must keep the Works Councilinformed about the following:

(a) the activities and economicsituation of the employer and anyplanned changes in this field;

(b) the situation, structure and probabledevelopment of employment withinthe undertaking; and any activitieswhich are aimed at maintainingemployment levels; and

(c) those activities which may cause anymaterial change in the organisation ofwork or basis of employment.

The employer is also obliged to consultwith the Works Council on the mattersoutlined at (b) and (c) above.

The Works Council is entitled to issue anopinion about the matters on which it hasbeen informed. However, the employer isnot required to take any action inresponse to this opinion. The consultationshould be carried out in good faith andwith due regard to the other party’sinterests. However, this is very generalwording, which does not oblige theemployer to share the Works Council’sview or to reach any agreement.

An employer may have additionalinformation and consultation obligationsin the context of mergers andacquisitions and redundancy exercises(see sections 12.2 and 13.1 below).


12.1 GeneralThe acquisition of a company through ashare purchase does not in itself triggerany specific employment law obligationson the part of the employer (except forthe general obligation to inform the WorksCouncil, if one has been established), asthe employing entity does not change asa result of the transaction.

On the other hand, where an acquisition isin the form of the sale of a business(assets), various information andconsultation obligations will be triggered.The transfer of a business (i.e. employmentestablishment) or part thereof, irrespectiveof the number of employees affected bythe transfer, results in the automatictransfer (i.e. by operation of law) ofemployment contracts related to thebusiness (or part of the business) to thebuyer proposing to operate the business.The same generally applies to mergers,where the employees of the entity which is

taken over are transferred, by operation oflaw, to the surviving entity.

The general legal framework for thetransfer of an employment establishmentis based on the EU Acquired RightsDirective, which has been implementedin Poland.

Transferred employees have no right toobject to the transfer, but they mayterminate their employment contracts onseven days’ notice at any time in the twomonths following the transfer.

Termination of employment on the basisof the transfer of an employmentestablishment is prohibited. However, thenew employer (the transferee) mayterminate employment on the grounds ofrestructuring or staff rationalizationfollowing the transfer.

In principle, unless the terms of thetransferee’s internal remunerationregulations are more favourable for thetransferred employees, the transferee isobliged to apply the collective bargainingagreement applicable to the previousemployer (transferor) in respect of theemployees affected by the transfer for atleast one year following the date oftransfer. After a one year period, theformer working conditions of transferredemployees apply to them until they arechanged by the transferee.


If the trade unions are recognised, theseller and the buyer must inform them ofthe transfer 30 days in advance. If thereare no recognised trade unions, the sellerand the buyer have to inform theindividual employees of the transfer30 days in advance. Additionally, anemployer is obliged to conduct aninformation and consultation process withthe works council, if any. Theseobligations exist regardless of the numberof employees involved in the transfer ofan employment establishment.



If, as result of a transfer of an employmentestablishment, employment conditions areto be changed, the employers shouldconduct negotiations with the tradeunions in order to conclude an agreementregarding the transfer.

Failure to complete the information andconsultation process prior to the transferdoes not prevent a transfer from beingcompleted before the end of theconsultation process.

12.3 Notification of authoritiesThere is no obligation to notify theauthorities of a transfer, unless thetransfer triggers the collective dismissalprocedure (e.g. in relation to change ofworking conditions with respect to theplace of work) (see section 13.5 below).

12.4 LiabilitiesThe transferor and the transferee arejointly and severally liable for liabilitiestowards employees related to the periodprior to the transfer.

If the information and consultationprocess with trade unions or workcouncil is not completed before thetransfer of an employmentestablishment due to the employer’sfault, there may be penalties (e.g. a fineor restriction of freedom) imposed onthe employer for failing to comply withthese obligations.

13. Termination13.1 Individual TerminationThe employer must comply with therules of termination provided in theCode. Non-compliance with theprovisions of law may causere-instatement or compensationobligations. The employment contractmay be terminated with or withoutnotice or by mutual agreement.

13.2 NoticeAn employer may only terminate anemployment contract without notice if

one or more particular events, preciselydescribed in the Code, occur. These are:

(a) an employee seriously violates hisbasic duties (i.e. through grossnegligence of wilful misconduct);

(b) an employee commits a criminaloffence during the employmentperiod that renders his furtheremployment in his positionimpossible, if the offence isobvious or has been confirmed bya court judgement;

(c) an employee ceases through hisown fault to have the necessaryqualifications for the performance ofwork at his post;

(d) an employee is incapacitated forwork on account of sickness andsuch incapacity lasts (i) longer thanthree months, in cases where anemployee has been employed bythe same employer for less thansix months; (ii) longer than thesickness-allowance period, in caseswhere an employee has beenemployed at the same employer forat least six months, or where theincapacity was caused by anaccident at work or an occupationaldisease; and

(e) an employee is absent from workfor more than one month for ajustified reason other than thosecovered by the previous points.

Each party to an employment contractmay terminate the employment contractby a termination notice. The notice periodvaries according to the type ofemployment contract (fixed term period,indefinite period or for a probationaryperiod) and the length of employmentwith a given employer. The terminationnotice must be in writing and must bedelivered to the other party of theemployment contract.

If the employer terminates an employmentcontract concluded for an indefinite period

of time and the employee is a member oftrade union or is represented by the tradeunion, the employer should inform therelevant trade union in writing of anyintention to terminate the employmentcontract, and it should state the reasonsfor the dismissal.

If a trade union decides that such a noticeis unjustified, it may present the employerwith written substantiated objections withinfive days of receiving the information. Theemployer, however, is not bound by theobjections of the trade union and mayproceed with termination.

The minimum guaranteed notice periodfor an employment contract for aprobationary period is as follows:

(a) three working days if theprobationary period does notexceed two weeks;

(b) one week if the probationary periodis longer than two weeks; or

(c) two weeks if the probationaryperiod is three months.

A fixed-term contract can be terminatedby the parties with two weeks’ notice ifthe term of the contract is longer than sixmonths and the parties agreed in thecontract on the possibility of terminationby notice.

The minimum guaranteed notice periodfor an employment contract of indefiniteperiod is:

(a) two weeks if the employee hasbeen employed for no more thansix months;

(b) one month if the employee hasbeen employed for at least sixmonths; or

(c) three months if the employee hasbeen employed for at leastthree years.

The employee receives remunerationduring the entire notice period.


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13.3 Reasons for DismissalThe employer may generally terminate anemployment contract at any time.However, if the contract is for an indefiniteperiod, the employer has to state thereasons for the dismissal. Under Polishlaw, the reasons have to be justified andspecific. This means that they have to berelated to the employee’s work (e.g. lowstandard of work) or to the employer(e.g. restructuring). If an employee provesthat the reasons for dismissal are notjustified, he has the right to claimcompensation, or, if the employmentcontract has been terminated in themeantime, the employee can also claimreinstatement to his previous position. Themaximum amount of compensation thatcan be awarded is generally threemonths’ remuneration.

13.4 Special ProtectionThere are special rules regarding dismissalas far as e.g. pregnant women, tradeunion representatives or employeesnearing retirement age are concerned.Generally, employers cannot terminate theemployment contracts of such protectedemployees. There are, however,exceptions to these protection rules. If anemployer is declared bankrupt or is in theprocess of liquidation, such employeeswill not be protected from dismissal.


There are special rules in relation tocollective redundancies. The rules willapply if the employer employs at least20 employees and within the period of30 days he makes redundant:

(a) 10 employees where thetotal workforce is less than100 employees;

(b) 10% of employees if the totalworkforce is between 100 and300 employees; or

(c) 30 employees if the total workforceexceeds 300 employees.

An employer is obliged to consultrecognised trade unions about anyproposed redundancies. The employerand trade union should execute anagreement regarding the terms of theredundancy exercise. An employer is alsoobliged to notify the poviat (i.e. the relevantadministrative region) employment office(powiatowy urz�d pracy) of the redundancyterms (in particular of the number ofemployees who will be made redundantand the reasons for the redundancy).

Generally, in the case of redundancyemployment protection rules do not apply.

An employee who is made redundant isentitled to a redundancy payment of:

(a) one month’s remuneration if he hasbeen employed for less thantwo years;

(b) two months’ remuneration if he hasbeen employed for more than twoyears and less than eight years; or

(c) three months’ remuneration if hehas been employed for more thaneight years.

The total amount of a redundancypayment may not exceed 15 times theminimum wage, i.e. PLN 24,000 grossin 2013.

A redundancy payment is paid toemployees whose employment contractswere terminated even if the number ofemployees made redundant is less thanthat indicated above. The only requirementfor the payment of the redundancypayment is that the employment contractbe terminated due to reasons notattributable to the employee.

If the employer subsequently recruits staffinto the same positions that werepreviously made redundant, it is obligedto re-hire employees made redundantfrom any such position if they apply forthose positions within a year of the dateof their respective redundancies.

14. Data Protection14.1 Employment RecordsThe employer’s data protection obligationsare specified in the Code and in thePersonal Data Protection Act. Under thePersonal Data Protection Act, personaldata means any information relating to anatural person on the basis of which it ispossible to identify that person.

Under the Code the employer maydemand from an employee only thefollowing data:

(a) name and surname;

(b) date of birth;

(c) residential address and address forcorrespondence;

(d) education level;

(e) certificates of previousemployment; and

(f) other personal data and datapertaining to the employee’schildren if required for the purposesof exercising employee’s rights.

An employer, as a data controller, ispermitted to process employee data forthe purposes of the employee’semployment. This covers processing forthe purposes of the fulfilment ofstatutory and contractual obligationstowards employees, as well as to acertain extent, for the purposes ofjustified business objectives.

The Personal Data Protection Actprovides other detailed rules with respectto personal data processing, such as therules on transferring personal dataoutside the European Economic Area(EEA). The Personal Data Protection Actalso specifies what security measures anemployer, as a data controller, is obligedto take to prevent unauthorised access tothe personal data of its employees.

14.2 Employee Access to DataUnder the Personal Data Protection Actan employee, as a data subject, has a



number of rights allowing him/her tocontrol the processing of his/her personaldata by the employer. In particular anemployee has the right:

(a) to be informed about the scopeand manner of the processing ofhis/her personal data;

(b) to be informed about the manner inwhich data are made available tothird parties, and in particular aboutthe recipients or categories ofrecipients of personal data; and

(c) to demand that his/her personaldata be supplemented, updated,amended as well as temporarily orpermanently withheld from beingprocessed or deleted, if data isincomplete, out of date,inaccurate or was collected inbreach of the Personal DataProtection Act, or is no longernecessary for the purpose, forwhich it was originally collected.

The Personal Data Protection Act does notspecify the method by which an employeemust be provided with information

concerning his personal data. This is left tothe employer to decide provided that theemployee has an effective means ofacquainting himself with the informationand the information is given in writing if theemployee so requests.

14.3 MonitoringThe monitoring of employee emails is notexpressly regulated by law. Generally, theemployer has the right to supervise howan employee is fulfilling his duties at work.Monitoring employee email, Internet andtelephone usage is permitted as long assuch usage is related to the employee’swork. The employee’s consent is notrequired, however, employees should benotified about monitoring.

14.4 Transmission of Data tothird parties

An employer who wishes to provideemployee data to third parties must doso in accordance with the Personal DataProtection Act principles and processingconditions. In many cases it may benecessary to obtain express consent tosuch disclosure in the absence of a

legitimate business purpose for thedisclosure or express legal grounds forsuch disclosure. Personal data can betransferred within the EU subject togeneral compliance with the PersonalData Protection Act.

Where the third party is based outsidethe EEA, personal data may betransferred if the country ensures anadequate level of protection of personaldata. If the country does not ensure anadequate level of protection, the transferof personal data may occur only if: (i) oneof the specific conditions of transfer setout in the Personal Data Protection Act isfulfilled; or (ii) if the Polish data protectionauthority (the General Inspector forProtection of Personal Data) consents tosuch transfer.

Contributed by Clifford Chance, Warsaw

A Guide to Employment in the European UnionPortugal

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Portugal1. IntroductionThe primary source of employee rights isthe Constitution which enshrines rightssuch as the employee’s right to strike.

Employment relationships in Portugal arehighly regulated and in the past there hasbeen criticism that the extent ofregulation has led to a certain amount ofinflexibility in the labour market.

An amendment to the Labour Codecame into force on 1 August 2012. Thisthird amendment to the Labour Codeimplemented significant changes in thefollowing areas:

(a) overtime work payments;

(b) compensation for termination ofemployment contracts;

(c) flexible working hours;

(d) reduction of administrativecommunications to theLabour Authority.

These alterations to the Labour Codeare in line with the Memorandum ofUnderstanding – Agreement betweenPortugal, the International Monetaryfund and the European Central Bank of3 May 2011.

Collective bargaining is well establishedwith some 80% of Portugueseemployees being covered by some formof collective agreement. Collectiveagreements are legally binding and itshould be noted that there is a highdegree of government intervention in theconduct of collective negotiations.

Disputes are resolved by a highlydeveloped system of Labour Courts(Tribunais de Trabalho) but the system isextremely cumbersome and it can takeone to two years between an aggrievedindividual making an application and afinal decision being given at firstinstance and four to five years if thecase goes on appeal.

2. Categories of Employees2.1 GeneralThere are three categories of employees:general, rural and domestic. In thispublication, attention is focusedexclusively on “general” employeescovering non-domestic andnon-agricultural employees includingsenior staff and directors.

2.2 DirectorsThere are specific provisions relating to“special confidence” employmentrelationships, namely those with directors,managers and their personal secretaries.

2.3 OtherThere are specific provisions relating topart-time employment. The salary ofpart-time employees must be calculatedpro-rata to the salary of full-timeemployees carrying out similar work.

3. Hiring3.1 RecruitmentEmployers are encouraged to recruityoung employees up to the age of 30who have never had regular employment.Employers who employ such employeesare exempt from making 50 to 100% ofthe social security contributions theymight otherwise have to make for aperiod of three years.

Women must be allowed access to alljobs, professions and posts. As a basicrule, job offers and advertisements mustnot specify any restrictions orqualifications based on sex.

Although there is a recommendation inthe law on contracts of employment thatemployment shall be made available toindividuals notwithstanding age, illnessor disability, undertakings are not legallyobliged to hire any minimum percentageof disabled workers. However,employers benefit from reduced socialsecurity contributions in respect ofdisabled employees.

3.2 Work PermitsA “temporary stay visa” is required inrespect of non-EEA nationals of countrieswhich do not apply a principle of equaltreatment to foreign nationals intending towork for a short period. However, suchnationals intending to work for more thansix months must obtain a residencepermit. All contracts of employment ofthis type must be registered by theemployer with the Ministry of Labour. Thecontract will be considered for registrationif the employer provides evidence of thereasons for wishing to employ a foreignnational, evidence that the employee hasa clean police record and a copy of thesigned employment contract.

Foreign employees may not be offeredpay and other benefits differing fromthose offered to Portuguese nationalsdoing equivalent work.

There are no restrictions regarding thenumber of foreign employees that aPortuguese employer is allowed to hire.However, an annual government reportestablishes the total maximum number offoreign employees that may be admittedfor each sector of activity.

4. DiscriminationThe Portuguese Constitution enshrinesthe basic right to be treated equallyregardless of sex, race or nationality. TheLabour Code guarantees equal pay,equal opportunities, equal conditions atwork and equal treatment for both menand women and outlaws discriminationon the grounds of parentage, age, sex,sexual orientation, marital status, geneticheritage, disability, chronic illness,nationality, ethnic origin, religion, politicalor ideological convictions and tradeunions membership.


5.1 Freedom of ContractAlthough the principle of freedom ofcontract is recognised, in practice such


203A Guide to Employment in the European UnionPortugal

freedom is limited in the employment fieldby the requirements of legislativeprovisions and collective agreements. Acollective agreement will take precedenceover an individual contract where theprovisions of the former are morefavourable to the employee.

5.2 FormThere is no requirement for contracts ofemployment to be evidenced in writing.However, home-based work contracts,term contracts (where permissible),part-time contracts, intermittent workcontracts, contracts with non-EEA nationalsof countries who do not apply a principle ofequal treatment to foreign nationals (seeabove) and non-competition provisionsmust be in writing. In addition, as Portugalhas implemented the EU Directive dealingwith the information to be given about thecontract of employment, it is necessary tohave the “essential aspects” of the contract,as defined in the EU Directive,communicated to the employee in writing.

Contracts may be for fixed or indefiniteperiods and, if not specified to be for afixed period, will be deemed to be for anindefinite one. Term contracts may beentered into for periods up to three years,and can be renewed three times providedthat it does not in aggregate exceedthree years, except in specificcircumstances provided for by law. If aterm contract “overruns”, then it will bedeemed to have become a contract foran indefinite period. Term contracts mayalso be entered into for non definedperiods of time in certain legally definedsituations (e.g. for the duration of aspecific project, as a temporaryreplacement of an absent employee). Inthese situations the contract’s duration islimited to the duration of the “event”giving rise to the contract and may not, inany event, exceed six years.�

Under special legislation in force, fixedterm contracts whose duration does notextend beyond 13 June 2013 can besubject to two special renewals thatcannot exceed 18 months. The duration

of each special renewal cannot be lessthan one sixth of the legally establishedmaximum duration of the contract or ofits effective duration, whichever is theshorter. In any case, no contract subjectto a special renewal may be extendedbeyond 31 December 2014.

In specific situations defined by law, thefollowing special types of employmentcontract may be executed:

(a) Term contracts of a very shortduration: these may be for periodsnot exceeding 70 days for specificseasonal activities such as tourism.This type of term contract need notbe in writing.

(b) Intermittent work: for employerswith a variable and discontinuousactivity. These contracts will allowpre-defined periods of employeeactivity and inactivity. This type ofemployment contract must beentered into in writing.

5.3 Trial PeriodsThe maximum trial period for an indefinitecontract is 90 days. Longer periodsapply for senior management contracts(240 days) and contracts which requirespecial skills or experience (180 days).During the trial period the contract maybe terminated by either party withoutnotice or compensation.

In the case of fixed-term contracts, themaximum trial period is 30 days forcontracts of six months or more and15 days for contracts of less thansix months.

These periods can be reduced bycollective agreement or by writtenagreement between the parties.

The duration of any previous professionalrelations between employer andemployee (term employment contract,temporary work or independent work) willbe considered for the purposes ofdetermining the duration or excluding theexistence of a trial period.


Employees are under a general duty toprotect confidential information and notto reveal information concerningproduction methods or other businesssecrets to third parties. Unlawfulcompetition by an employee is a reasonwhich may justify dismissal.

To be effective, non-competitionprovisions must be contained in a writtencontract of employment and cover onlyactivities which may reasonably be saidto damage the employer’s business. Theycan be for a maximum period of twoyears and the employee is entitled tocompensation for the period during whichalternative employment is restricted.However, in situations where theemployee’s role involves a significantdegree of confidentiality or access tosensitive information, the non-competeperiod may be extended to three years.

5.5 Intellectual PropertyIf an invention is made by an employeeduring the course of his or heremployment, it belongs to the employer,provided the activity giving rise to theinvention is required by the contract andthe employee is remunerated for theinvention. If such remuneration is notprovided for, the employee is,nevertheless, entitled to be remuneratedaccording to the value of the invention. Ifthe invention, however, is connected withthe employer’s activity but is not relatedto a task defined in the contract, theemployer has a preferential right over theacquisition and exploitation of theinvention; appropriate compensationmust however be paid to the employee.

6. Pay and Benefits6.1 Basic PayA statutory minimum national wage isnormally fixed each year (€485 per monthfor 2012).

The employer cannot reduce thecontractual wage, unless expressly


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permitted to do so by law, or where sucha reduction has been accepted in acollective agreement.

An extra one month’s basic wage mustbe paid to all employees as holidayallowance and at Christmas by law.

There is no obligation to index-link pay.

6.2 PensionsIn some areas there are supplementalprivate pension plans. These tend to bemore common in the case of larger andmulti-national companies. All privatepension schemes established on or after1 January 1987 must be funded andmanaged on a segregated basis, eitherthrough an insurance company or amanagement society approved underthe law.

Most private pension schemes have beencollectively bargained and offered benefitsrelated to final pay, targeting a finalpension (inclusive of the state pension) ofbetween 80 and 100% of final pay.Recently there has been a tendency toalter pension schemes into definedcontribution plans rather than definedbenefits/schemes.

6.3 Incentive SchemesThere is no legislative requirement foremployers to operate share options orprofit-related pay schemes, and in practicesuch schemes are not widely used.

6.4 Fringe BenefitsCommon fringe benefits includesubsidised meals for employees, carsfor directors, mobile telephones andhealth insurance.

6.5 DeductionsEmployers are obliged to deduct tax andsocial security contributions at source.

7. Social Security7.1 CoverageBenefits provided under the SocialSecurity regime include retirement

pensions, unemployment payments,family allowances, sickness and maternitypay. Extensive medical care is providedunder a national health system funded bythe social security system.

Old age retirement and disabilitypensions are covered and supported bySocial Security.

7.2 ContributionsUnder the legislation currently in forcecontribution rates are of 34.75%:comprised of the employer’s contributionsat 23.75% of salary and the employee’scontribution at 11% of salary. In addition,all employees must be provided with aminimum level of industrial injury benefits;employers may provide these benefits byway of insurance.

8. Hours of WorkThe legal limit on the maximum hours ofwork is eight hours a day (up to amaximum of 40 hours per week).However, collective agreements mayestablish different maximum hours ofwork provided that they do not exceedthe legal maximum hours of workprovided for by general law. Specialflexible working hours regimes may alsobe established in certain circumstances.

The Labour Authority must be informedonce a year of the number of hoursworked in excess of the legal maximum.

The alterations to the Labour Code in2012 reduced overtime work paymentsby 50%. According to the new rules,overtime must be paid at a premium of25% for the first hour and at 37.5% ofnormal rates for subsequent hours orfractions. The premium is 50% if overtimeis performed on a day off. Any provisionin employment contracts or collectiveagreements providing for overtime workpayments superior to those establishedby law are currently suspended for aperiod of two years until August 2014.

9. Holidays and Time Off9.1 HolidaysWith effect from 1 January 2013, publicholidays are reduced to nine nationalpublic holidays and an additional municipalholiday. Permanent employees are entitledby law to 22 working days holiday perannum and, unless the contrary is agreedwith an employee, the employer is obligedto permit an annual vacation in the periodbetween May and October.

9.2 Family LeaveThe initial parental leave is 120 days andmay be increased by 30 days if theparents so desire and by an additional30 day period if the leave is shared by theparents. In the event of multiple births the120 days of maternity leave will beincreased by an additional 30 days leavefor each additional child.

The mother is entitled to an exclusiveparental leave of a minimum of six weeks(that must be taken after birth) and thefather is entitled to an exclusive parentalleave of a minimum of 10 to 20 businessdays. The balance of the initial parentalleave may be taken either by the motheror by the father.

The initial parental leave allowance is 100%of the employee’s average wage for120 days or 80% for 150 days (if thematernity leave is increased by 25%) andthe cost is met by the social securitysystem. Where both parents share theparental leave giving rise to leave of180 days the employee will be entitled toreceive a monthly allowance correspondingto 83% of her/his average salary. All rightsregarding job security and seniority areprotected during the parental leave.

Either the mother or the father may takeunpaid leave of up to three months,extendible to up to two years, after thebirth of a child to look after that child untilthe child is six years old. Employees havethe right to return to their previous job onexpiry of parental leave.



In the case of the birth of a third child ormore, leave may be extended for up tothree years.

Either the mother or the father will also beentitled to take unpaid leave of up tofour years to take care of their children incases where they are handicapped orhave a chronic disease until the child is12 years old.

9.3 IllnessDuring the first three days of absencedue to illness or injury, the employeedoes not receive his or her full wage.After this period, the employee is entitledto receive pay for up to 1095 days.These costs are met by the socialsecurity system as follows:

(a) 55% of full wage for periods ofillness of 30 days or less;

(b) 60% of full wage for periods ofillness of more than 30 days and upto 90 days;

(c) 70% of full wage for periods ofillness of more than 90 days and upto 365 days; or

(d) 75% of full wage for periods ofillness of more than 365 days.

The employment contract will beconsidered suspended if an employee isunable to work for longer than 30 days.

Sickness and disability payments aremade under the social security system,although in some industries, collectiveagreements may provide for asupplemental payment. Employers areliable for the payment of salary if theemployee is not covered by the socialsecurity system.

9.4 Other time offSeveral situations such as marriage anddeath of relatives are qualified asjustified absences by the labour Codeand entitle the employee to be absentfrom work without loss of remunerationin most situations.

Employees attending any level ofschooling, including postgraduatecourses may be covered by the specialStudent employees’ regime thatprovides for special rules in whatconcerns working hours and studyrelated leaves.

Flexible working hours and part timeregimes as well as unpaid leaves arealso available to employees but will inmost situations require the agreement ofthe employer.

10. Health and Safety10.1 AccidentsAll employees must be covered for aminimum level of industrial injury benefitin addition to benefits payable underthe social security system, thiscover is provided by way ofmandatory insurance.

10.2 Health and Safety ConsultationThe law gives employees the right tohave health and safety representativesand health and safety committees mayhave to be set up under the terms ofcollective agreements. Special rulesgovern the running of employers’ healthand safety departments. Employees andWorks Councils have rights toinformation and consultation in respectof health and safety matters.

11. Industrial Relations11.1 Trade UnionsTrade unions are given extensive rightsunder the law to organise themselveswhich, together with the relatively fewlegal restrictions on the formation oftrade unions in Portugal, has led to alarge number of trade unions. However, itis difficult to accurately assess thepercentage of the Portuguese workforceinvolved in unions, but estimates suggestthat it is about 18%.

Although unions are protected frompolitical interference by law, they are

themselves highly political. The majority ofPortuguese unions belong to one of twonational organisations:

(a) the CGTP – Intersindical(Confederação Geral dosTrabalhadores Portugueses); or

(b) the UGT (União Geral dosTrabalhadores).

There are regional or sectoralemployers’ associations, for example,the Confederation of PortugueseIndustries (CIP), which negotiatecollective agreements.

11.2 Collective AgreementsThere are three different types ofcollective agreements recognised underPortuguese law:

(a) contrato colectivo, which is thecollective contract negotiatedbetween employers’ associationsand unions;

(b) acordo colectivo, an agreementnegotiated between unions andmore than one employer (althoughnot an employers’ association); and

(c) acordo de empresa, an agreementbetween unions and anindividual employer.

The first two are more commonly found insmall and medium businesses, whilstlarge employers tend to negotiate anacordo de empresa.

Collective agreements are governed by aspecial section of the Labour Code andmost private sector employees arecovered by one of these agreements.

Provided that a collective agreementdoes not attempt to impose uponemployees worse economic and socialconditions than those provided by law orattempt to regulate the economicactivities of the undertaking, the partiesare free to include any matters which theyfeel are appropriate. In practice, collective


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agreements tend to cover matters suchas working hours, career development,health and safety and minimum wages.

The procedure by which collectiveagreements are negotiated is governed insome detail by law, and the final form ofany agreement must be lodged with theMinistry of Labour.

The Labour Code contains provisions onthe duration and renewal of collectiveagreements. Generally speaking, underthis regime a collective agreement maynot remain in force for longer thantwo years without being renegotiated. Theunderlying purpose of these provisions isto promote the periodical renegotiation ofthe collective agreements (which, in thepast, had remained unaltered for longperiods of time). The Labour Codeintroduced specific rules on the durationof the currently typical (termination)clauses in collective agreements thatstipulate that the agreement will only beterminated in the event it is replaced by anew collective agreement. The new rulesprovide that these termination clauses willfall away after a five or six and a half yearperiod if not renegotiated by the partiesduring that period.

The government has powers tointervene in the collective bargainingprocess, and may by order (regulamentode extensão) extend a collectiveagreement to bind parties other than theoriginal signatories.

The Labour Code makes it possible foran individual employee to adhere to acollective agreement in force at thecompany even though he is not amember of the relevant unions.

11.3 Trade DisputesThe right to strike is enshrined in thePortuguese Constitution. The procedureslaid down in the Labour Code mustbe followed.

It is also worth noting that lock-outaction by an employer is a criminal

offence punishable by up totwo years’ imprisonment.


There is a constitutionally guaranteed rightto form a Works Council (the size of whichwill depend on the number of employees)in any undertaking whatever its size. Itsmembers are elected on an annual ortwice yearly basis by the workforcefrequently, although not always, from listsput forward by the dominant union. Therole of a Works Council is advisory, aimingto safeguard employees’ interests bybecoming involved in consultation onmatters such as changes in location, plantclosure and production changes.

In addition to Works Council delegates,time off must be given to elected uniondelegates, whose role is to ensure thatcollective agreements are adhered to andto defend employees’ rights.


12.1 GeneralThe Labour Code implements the revisedAcquired Rights Directive that regulatesemployees’ acquired rights in the event ofa transfer of a business. As a generalrule, a transferee will take over thecontracts of employment on the transferof a business and assume the position ofthe transferor, unless the employee wastransferred elsewhere (e.g. to a differentlocation or department) before thetransfer of the business occurred.


Before the transfer takes place, thetransferor and transferee must providewritten information to the employees, ortheir representatives, stating the date andreasons of the transfer, its legal, economicand social consequences as well as anyspecific employment measures to beimplemented as a result of the transfer.This obligation arises regardless of thenumber of employees involved.

Ten days after compliance with theinformation obligation, the transferor andtransferee must consult the employees,or their representatives, in order toobtain their agreement on specificmeasures to be implemented as a resultof the transfer. The information andconsultation obligations must becomplied with before completion.

12.3 Notification of AuthoritiesThere are no specific obligations to notifyauthorities in the event of a transfer ofbusiness. However, general rules inrelation to the notification of the labourauthorities or social security servicesconcerning the admission of newemployees or the termination of thecompany’s activity will apply.

12.4 LiabilitiesFailure to comply with the information andconsultation obligations is classified as alight labour law infraction punishable withfines of up to €1,440, though such failurewill not invalidate a transaction.

For a period of one year after the transfer,the transferee is jointly liable with thetransferor for any obligations vis-à-vis theemployees that arose prior to the date ofthe transfer.

Any dismissals or redundancies prior toor after the transfer that are made inconnection with the transfer itself areunlawful. Failure to comply with theobligation in relation to the automatictransfer of employees is classified as avery serious labour law infraction. This ispunishable with fines and will entitle theemployees to bring proceedings to bereinstated or to receive compensation forunlawful dismissal.

13. Termination13.1 Individual TerminationFixed-term contracts may terminate withthe expiry of the term if notice is given inwriting by the employer or by theemployee, respectively, 15 or eight daysbefore the end of the term. Any contract



may terminate by mutual agreement(which must be recorded in writing) or bythe employee’s unilateral decision.Otherwise (except during a trial period orwhen there are collective dismissals), anindividual’s contract of employment mayonly be terminated if there is grossmisconduct (justa causa). In particular, itshould be noted that although theretirement age is legally fixed at 65, theemployee may not be forced to retire andany enforced retirement will be construedas an unjust dismissal. However, once anemployee reaches 70, the employmentcontract will be deemed to become afixed-term contract for six months,terminable at the end of this period.

Where an employer terminates anemployment contract in breach of theapplicable rules a labour court can classifyit as an unlawful dismissal. This will entitlethe employee to choose between beingreinstated or receiving compensation ofbetween 15 and 45 days’ base salary andseniority award (“diuturnidades”) per yearof service (in any event the compensationcannot be less than three months salary).The employee will also be entitled to allunpaid salary from the date of dismissaluntil the date of the court decision.

13.2 NoticeAn employee may terminate anemployment contract on 30 or 60 days’notice depending on the duration of theemployment contract.

An employer cannot terminate anindefinite employment contract by givingnotice except in cases of redundancy, butin such cases, there are other complexprocedural requirements.

13.3 Reasons for DismissalThere are three reasons for which anindividual’s contract may be terminated:

(a) misconduct;

(b) redundancy; or

(c) the employee’s lack of adaptabilityto new working conditions.

In connection with dismissals formisconduct, the law lays down anon-exhaustive list of reasons, each ofwhich would be sufficient justification.

Termination due to elimination of anindividual’s post (which is equivalent toindividual redundancy) must bedistinguished from collective redundancy(see below).

Finally, an employer may terminate thecontract of employment if an employee isunable to adapt to changingcircumstances. There are certain specificcircumstances which must exist beforedismissal on such grounds can occur(including the introduction of newtechnology in the preceding six months).

The procedure applicable to dismissalsarising for each of the reasons set outabove is laid down in considerable detailby law. In connection with dismissals formisconduct, the Works Council must beinformed and the employer must awaitthe opinion of the Works Council beforeimplementing the dismissal (failure to doso will lead to the dismissal beingconsidered void). Where a dismissal isdue to the disappearance of the job orthe employee’s lack of adaptability, theemployer must notify the Works Councilwhich may call upon the LabourAuthority to examine the grounds of thedismissal. There are detailedconsultation requirements.

13.4 Special ProtectionPrior to dismissing an employee who isbenefiting from specific parental protectionrights (pregnant, breast-feeding onmaternity or paternity leave), a priorfavourable opinion must be issued by theEmployment Department. Dismissal of

employees who benefit from suchprotection is always rebuttably presumedto have been without just cause.


There will be a collective dismissal if twoor more employees are dismissed from amicro company (i.e. a company with aless than ten employees) or a smallcompany (i.e. a company with between10 and 50 employees), or if five or moreemployees are dismissed from a mediumor larger undertaking. The employer mustdemonstrate that the reasons for makingcollective dismissals are sufficiently graveto justify priority being given to theundertaking’s interests over theconstitutionally protected rights of theemployees. The employer must notify theWorks Council and the Labour Authority,giving details of each employee involvedand the reasons for the proposeddismissals. The employer and employees’representatives are obliged to negotiateways of minimising the numbers ofemployees affected. The services of theMinistry of Labour will intervene innegotiations to ensure that theappropriate formalities are complied withand to act as mediator. Once thenegotiations are completed, the employermust give all affected employees at least15 to 75 days’ notice (depending on theemployee’s seniority) before the dismissalscan take effect and inform them, inwriting, of the reason for the dismissal, thedate on which it takes effect and theamount of compensation payable. Theapplicable notice periods are:

(a) 15 days if the employee has lessthan one year’s service;

(b) 30 days if the employee hasbetween one and five years’ service;

(c) 60 days if the employee hasbetween five and 10 years’service; or


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(d) 75 days if the employee has 10 ormore years’ service.

Under the new rules, employees have theright to receive compensation fortermination as follows:

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofpersonal data held by employers abouttheir employees is regulated by thePersonal Data Protection Law, approvedby Decree-Law 67/98, dated 26 October(PDPL), which implements the EU DataProtection Directive. Violation of thePDPL can lead to criminal convictions,fines, compensation claims from affectedemployees or regulatory action. TheLabour Code also establishes specific

data protection rules based on theprinciple of preservation of the right toprivacy/private life.

Employers, as data controllers, are underan obligation to ensure that they process

personal data about their employees(whether held on manual files orcomputer) in accordance with specifiedprincipals including the following:ensuring that data is accurate, up todate, and is not kept longer than isnecessary and that it is stored securely toavoid unlawful access or accidentaldestruction or damage.

Employers, and all persons that haveaccess to personal data in the scope oftheir job function are obliged to keepsuch data confidential.

In the absence of the application of any ofthe exemptions specified by the DataProtection National Commission (CNPD)employers must notify the CNPD of theirprocessing of their employees’ personaldata. This notification is made on astandard form setting out details of theprocessing, the data controller’s identity,the purposes of the processing, thecategories of data to be processed,security measures adopted to protect thedata, details relating to the transfers of datato third parties and international data flows.

In some specific cases identified by thePDPL (including cases where sensitivedata and criminal records are processedand images are recorded by an internaltelevision circuit), an employer mustobtain the prior authorisation of theCNPD in order to initiate the processingof their employees’ personal data.

In addition, in the absence of a relevantexception, personal data may only beprocessed if employees haveunambiguously given their consent. Insome cases express consent is required,for example in order to process sensitivedata where no relevant exceptions apply.

14.2 Employee Access to DataEmployees, as data subjects, have theright to access their personal data. Theright of access entitles them, subject tocertain limited exceptions, to be told,among others, what data are held aboutthem, the purposes of the processing, towhom it is disclosed and to be providedwith a copy of their personal data. Datasubjects may also request the rectification,deletion or blocking of their personal data,where the processing of their data doesnot comply with the provisions of thePDPL, and that any such rectification,deletion or blocking should be notified toany third party to whom their personaldata had been communicated exceptwhere the employer demonstrates that it isimpossible to do so. The exercise of theserights of access is subject to certainconditions in particular case of dataprocessing, as provided by the PDPL.

Employment commenced before 1 November 2011

Service up to 31 October 2012 Service after 31 October 2012

n One month basic salary (MBS +Seniority allowance (SA)) X no. ofyears of service

n Compensation cannot be less thanthree MBS and SA

n Prorated payments will be made inrespect of fractions of a year

n Will only be considered if theemployee has less than 12 years’service and/or the compensation forthe previous period of service doesnot exceed 240 times the minimumnational wage (i.e. €116,400 for 2012)

n 20 days of MBS and SA per yearof service

n A prorated payment is made inrespect of fractions of a year

n 1 day of MBS = (1 MBS + SA) /30

n The MBS ceiling is 20 times theminimum national wages (i.e. €9,700for 2012)

Employment commenced on or after 1 November 2011

20 days of MBS and SA per year of service

Prorated payments for fractions of a year

1 day = (1 MBS + SA) /30

MBS ceiling of 20 times minimum national wage (i.e. €9,700 for 2012)



Employees also have the right to objectto the processing of their data in thecircumstances specified by the PDPL,namely in the case of processing fordirect marketing purposes or for anyother form of advertising.

14.3 MonitoringThe monitoring of employee email, internetand telephone usage and closed circuit TVmonitoring is regulated by the LabourCode. Monitoring is permissible providedthat it is carried out in accordance with theprinciples and processing conditionsprescribed by the Labour Code. All filesand systems used by the employer toprocess employees’ data must satisfy thePDPL’s provisions. Express employeeconsent to monitoring is not usuallyrequired, however, employees shall bemade aware that monitoring is beingcarried out, the purpose for which it isbeing conducted and to whom the datawill be supplied.

The recording of communications isexpressly prohibited, except if made forthe exclusive purpose of proving a

commercial transaction or if made in thecontext of a contractual relationship, asestablished by the Law related to PersonalData Processing and Privacy Protection inElectronic Communications. In the case oflegally authorised recordings, employeesinvolved in such communications must bemade aware of the recording and theymust give their express consent to therecording in addition to any other datasubject involved in the communication.The CNPD must grant prior authorisationfor the recordings.

The employer is entitled to establishrules for the use of the company’scommunication systems (e.g. email).These rules must be made clear tothe employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the PDPLprinciples and processing conditions. Inmany cases it may be necessary toobtain express consent to such

disclosure in the absence of a legitimatebusiness purpose for the disclosure anddepending on the nature of theinformation in question and the locationof the third party. Personal data can betransferred within the EU subject togeneral compliance with the PDPL.

Where the third party is based outsidethe EEA it should be noted that the PDPLprohibits the transfer of data to a countryoutside the EEA, unless that countryensures an adequate level of protectionfor personal data or one of a series oflimited exceptions apply.

Contributed by CuatrecasasGonçalves Pereira

A Guide to Employment in the European UnionRomania

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Romania1. IntroductionRomanian employment relationships aregoverned principally by the Labour Code(Codul Muncii), collective bargainingagreements, the employer’s internalregulations and employment contracts.

The Labour Code is the main enactmentgoverning individual employment relationsand sets out the minimum rights to beafforded to employees. It came into forcein 2003 and has been significantlyamended several times. The latestamendments came into force on 30 April2011. The Labour Code largely complieswith the European Union legislation.

In addition, the Law of Social Dialogue, inforce since May 2011, constitutes aunitary legal framework for, inter alia,trade unions, employers’ organisations,collective negotiations and the settlementof labour conflicts.

Collective bargaining agreements may beconcluded at sector, group company orcompany level. Collective bargainingagreements, irrespective of the level atwhich they were concluded, must notbreach the requirements of the LabourCode nor establish rights for employeesthat are inferior to those established bythe collective bargaining agreementsconcluded at higher levels.

As a general remark, there is a certaindegree of uncertainty and lack ofconsistency in the practice and theapproach of different Romanianauthorities and courts of justice dealingwith labour law issues. This is especiallyso regarding the most recent labourlegislation changes.

2. Categories of Employees2.1 General Romanian legislation distinguishesbetween employees with indefinitecontracts and fixed-term contracts,full-time employees and part-timeemployees, temporary agency employees

and employees working at home. Each ofthese categories of employees has theright to be treated no less favourably thana comparable full-time employee with anindefinite contract.

2.2 DirectorsUnder Romanian corporate legislation,directors are appointed under mandatecontracts and not employment contracts.As an exception, a director in a limitedliability company can conclude anemployment contract for the position ofdirector if he is also the sole shareholderof that company.

In addition, directors and managers injoint stock companies cannot beengaged under an employment contractin the company for the duration of theirmandate. If a director is engaged as anemployee of a company, his employmentcontract with the company isautomatically suspended during hismandate as director.

2.3 OtherPublic officers are subject to a special lawestablishing their status, rights andobligations, in accordance with therelevant EU legislation.

3. Hiring3.1 RecruitmentThere are a number of sources ofrecruitment, such as the state agenciesfor employment and private recruitmentagencies. Also, in order to recruit,employers usually advertise in local ornational newspapers or journals. Theservices of private recruitment agenciesare often used by employers for allcategories of employees.

Romanian legislation provides forincentives to be granted by the state toemployers which hire unemployed andnewly graduated persons.

3.2 Work PermitsWork permits are required for mostforeign citizens to work in Romania.

There are various types of work permit.The most important is the type A workpermit which allows a foreign person toenter into a Romanian employmentcontract and grants the foreign personthe same rights as a Romanian employeewould have. The type B work permitallows a foreign employee to beseconded in Romania for a maximumduration of one year.

Certain categories of foreigners are,however, exempt from obtaining a workpermit, such as: (i) EU/EEA nationals;(ii) non-EU/EEA citizens appointed asheads of representative offices,subsidiaries or branches in Romania; and(iii) non-EU/EEA foreigners employed bycompanies having the registered offices inEU/EEA countries and who are secondedto Romania, provided they present theresidence permit issued by the respectiveEU/EEA country.

The family of a work permit holder mayenter Romania provided that they do notneed a visa or have obtained a visa for afamily reunion.

4. DiscriminationThe Labour Code recognises the principleof equality in work relationships betweenall employees and all employers. In thisrespect, the Labour Code prohibits anyform of direct or indirect discriminationagainst employees on grounds such asgender, sexual orientation, geneticparameters, age, nationality, race, colour,ethnic origin, religion, political views, socialorigin, disability, marital status, familyresponsibility, union membership or unionactivities. The Labour Code requiresemployers to address discrimination issuesin their internal regulations and breach ofan employer’s discrimination rules willtrigger the liability of the employer.

Specific rules on discrimination are alsocontained in special enactments, such asthe Governmental Ordinance no.137/2000 on preventing and sanctioningall forms of discrimination which


211A Guide to Employment in the European UnionRomania

transposes Council Directive 2000/43/CEimplementing the principle of equaltreatment between persons irrespectiveof racial or ethnic origin and CouncilDirective 2000/78/CE which establishes ageneral framework for equal treatment inemployment and occupation. Also, LawNo. 202/2002 regulates the principle ofequal opportunities between women andmen and imposes specific obligations onemployers in order to ensure this isachieved. This legislation provides thatemployees claiming discrimination atwork on grounds of gender maycommence civil claims against employersin special employment courts. Bothpieces of legislation provide for theprinciple of equal pay for equal work.

Sexual harassment is a criminal offenceunder Romanian law and may bepunished by a term of imprisonment ofbetween three months and two years orby a fine.


5.1 Freedom of ContractAs a general principle, employers andemployees are free to negotiate and enterinto an employment contract, thoughcertain mandatory provisions need to betaken into consideration. For instance,although contracts may be for a fixed orindefinite term, fixed-term contracts mayonly be used in very limited situations asprovided by law. No more than threesuccessive fixed-term contracts may beconcluded for the same job, and,generally, their total duration cannotexceed 60 months.

Before entering into any kind ofemployment contract, the employer islegally required to inform the employeeabout the most important clauses.

Irrespective of the term of the contract,the employees receive the benefit of thesame mandatory rights as provided bylaw and the applicable collectivebargaining agreements.

5.2 FormThe employment contract must beconcluded in the written,Romanian-language standard formprovided by law. In addition to themandatory clauses, the employmentcontract may include additional clauses,as negotiated by the parties, providedthat such additional clauses are not inbreach of the law or the collectivebargaining agreements. The employmentcontract may also be concluded in aforeign language, for the parties’ use;nevertheless, the Romanian version willprevail and will be the enforceable one.

One day before commencement ofactivity, the main elements of theemployment contract must be recordedin the employees’ register kept by theemployer in electronic form; also, anelectronic copy of the employees’ registermust be filed with the appropriate labourinspectorate by the employer on thesame day.

As a rule, any amendment to theemployment contract must be agreed toby the employer and the employee andmust be recorded in the employees’register and notified as above to theappropriate labour inspectorate within19 days of the amendment.

5.3 Trial PeriodsTrial periods may be included inemployment contracts. During such aperiod, either of the parties mayterminate the employment contract withimmediate effect.

The following maximum terms areprescribed for the trial period inemployment contracts concluded for anindefinite term:

(a) 120 calendar days formanagement positions;

(b) 90 calendar days for non-management positions; and

(c) 30 calendar days for personswith disabilities.

The first six months after theprofessional debut of graduates fromuniversities are deemed a period oftraineeship, except for those professionswhere the period of traineeship isregulated by specific legislation.

For employment contracts concluded fora fixed term, the trial periods varybetween five business days foremployment contracts concluded forless than three months and 45 businessdays for employment contractsconcluded for more than six months fora management position.


The employment contract may contain aconfidentiality clause whereby the partiesagree that throughout the duration of theemployment contract and after itstermination they will not disclose data orinformation they have acquired during thecontract. Failure by either of the parties tocomply with such a clause obliges theparty at fault to pay damages.

A non-competition clause may also beincluded in the employment contract.This clause may be effective only aftertermination of the employment contractand for a period not exceeding two years.Under the non-competition clause, theemployee undertakes not to perform, fortheir own interests or that of a third party,any activity which competes with theactivity performed for their formeremployer, in exchange for a monthlynon-competition indemnity which theformer employer undertakes to payduring the entire non-competition period.

The non-competition clause is valid only ifit clearly stipulates:

(a) the activities the employee isprohibited from performing;

(b) the amount of the monthlynon-competition indemnity;

(c) the time period for which thenon-competition clause is effective;


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(d) the third parties on behalf of whomthe performance of activity is beingprohibited; and

(e) the geographical area in whichtheemployee might be in actualcompetition with theirformer employer.

The monthly non-competition indemnity isnot part of the employee’s salary andmust be paid after termination of theemployment contract. The amount of themonthly non-compete indemnity is atleast 50% of the employee’s averagegross salary paid for the six months priorto the date of termination.

The non-competition clause may nothave the effect of absolutely prohibitingthe employee from exercising theirprofession or specialisation.

If the employee wilfully breaches thenon-competition clause, they may beobliged to return the non-competitionindemnity and, if applicable, to paydamages to the employer.

5.5 Intellectual PropertyAs regards inventions, under Romanianlaw there are two main rules oninventions created by an employee duringemployment: (i) if the employee wasassigned a creative mission, the inventionbelongs to the Company however, thecontract must provide for additionalconsideration to be paid to the employeein respect of any such invention, unlessotherwise agreed; or (ii) if the employeewas not assigned a creative mission andthe invention was created duringemployment through knowledge or use oftechnology or by means specific to theemployer or information available on thepremises of the employer or with thematerial assistance of the employer, theinvention belongs to the employee unlessotherwise agreed. As regards industrialdrawings and designs: (i) if the employeewas assigned a creative mission or actedin accordance with his job description,the right to the industrial drawing/design

belongs to the company; or (ii) if theemployee created the industrial drawingsor designs independently, i.e. other thanin pursuit of a specific creative mission orin accordance with the job description,the related right belongs to the employee.

As regards copyright: (i) works created inaccordance with the job description belongto the employee unless otherwise agreed;the copyright related to such works mayonly be transferred to third parties with theemployer’s consent and with duecompensation of the employer for itscontribution to the cost of creation of suchwork; or (ii) computer programs belong tothe employer if created in accordance withthe job description or upon the employer’sinstructions, unless otherwise agreed.

6. Pay and Benefits6.1 Basic PayAccording to the Labour Code, the salaryincludes the base salary, bonuses,compensation, and other benefits asprovided by law and the relevantemployment related documents.

The minimum base salary is establishedat national level by government decisionand in 2012 it amounts to RON 700 permonth (approximately €155) for170 working hours per month.

Salaries in Romania may be linked to acertain currency exchange ratio, mostfrequently € or US dollars.

According to the Labour Code, the salarymust be paid at least once a month. Noretentions may be performed out of thesalary, except for the cases and in theconditions provided by law.

The Labour Code provides for minimumbonuses to be granted to all employeesin addition to the base salary, such asovertime bonus or night-work bonus. Therelevant collective bargaining agreement,the internal regulation or the employmentcontract may provide for other bonuses,compensation and additions to the salary.

6.2 PensionsThe Private Pensions System in Romaniahas been operational since May 2007and is mandatory for employees underthe age of 35 and optional for employeesbetween 35 and 45 years old.

6.3 Incentive SchemesThere is no legal requirement for employersto grant share options or profit-related payschemes, and these are also notcommonly used by Romanian employers.The granting of these incentives may benegotiated by the parties in the relevantcollective bargaining agreements oremployment contracts or may be givenex gratia by the employer.

6.4 Fringe BenefitsA very common fringe benefit in Romaniais meal tickets. These are tickets that canonly be exchanged for food products.The value of the meal tickets is partiallydeductible from the employers’ taxableincomes and is subject to income on thepart of the employee.

Private medical insurance, the use of theemployers’ vehicles or telephones forpersonal purposes are also commonfringe benefits. They may be contractualor given ex gratia by the employers.

6.5 DeductionsDeductions from pay by the employer areprohibited unless they are expresslyregulated by law. Deductions by way ofdamages may be withheld provided theemployee’s debt is due, liquid andpayable and has been established byway of a definitive and irrevocable courtdecision. By way of exception, theemployer and the employee can agree asa matter of contract that the employeewill be liable in damages to the employerup to an amount of approximately €780.

In addition, deductions cannot, in anycircumstances, exceed 50% of thenet salary.



7. Social Security7.1 CoverageRomanian law establishes a mandatorysocial security system provided by thestate. The public system covers, interalia, retirement as a result of age, earlyretirement, disability and survivors’pensions, temporary incapacity to workdue to sickness, maternity and child careallowances. This system is funded bycontributions from both employees andemployers. In addition, a mandatoryprivate pension scheme and a voluntarypension scheme have also beenimplemented in Romania.

7.2 ContributionsThe rates, dependent on work conditions,of social security contributions areestablished by law annually, and aredistributed between the employee andthe employer. Employers must calculateand pay monthly into the relevant publicfund both the employer’s contributionsand individual employee’s contributions.

The employer must deduct a total of16.5% of the gross monthly salary ofeach employee, representing anindividual employee’s contributions forunemployment, pensions andhealth funds.

Employers’ contributions may varybetween 27.75% and 38.45% of thegross monthly salaries depending mainlyon the working conditions (i.e. normal,particular or special conditions) and thebusiness object of the employer.

In addition to withholding and paying theemployee’s income tax and the varioussocial contributions, the employer has anumber of related reporting obligationswith the state authorities.

8. Hours of WorkThe legal working time for full-timeemployees is eight hours per day,40 hours per week and cannot exceed48 hours per week (including overtime).

As an exception, working time mayexceed 48 hours per week provided thatthe average working hours calculatedover a reference period of four months donot exceed 48 hours per week. Inaddition, longer reference periods, up to12 months, can be negotiated incollective bargaining agreements if certainconditions are met.

Every 12 hours worked must be followedby 24 consecutive hours of rest.

The working time for part-time employees,calculated weekly or as a monthly average,is shorter than the working program ofcomparable full-time employees.

Overtime may not be performed withoutthe employee’s consent, except in caseof force majeure or absolute necessity.

In general, overtime entitles the employeeto be afforded time off in lieu, within thefollowing 60 days. If time off in lieu cannotbe afforded, the employee must be paidan overtime bonus of 75% of the basesalary or a higher amount as provided forin the applicable collective bargainingagreement, internal regulation oremployment contract.

9. Holidays and Time Off9.1 HolidaysFull-time employees are entitled to aminimum of 20 business days of holidayper year. In addition, there are 11 days ofpublic holiday in Romania. It is notpermitted for money to be paid in lieu ofuntaken holiday, except upon terminationof employment. In addition, untakenholiday entitlement may not be taken inthe following year except if provided bylaw or the relevant collective bargainingagreement. Collective bargainingagreements or employment contractsmay grant additional holiday rights.

9.2 Family LeaveWomen are entitled to maternity leaveof 126 calendar days. Normally, leaveof 63 days before the child’s birth and

63 days after the child’s birth isgranted. In any case, the new mothermay not return to work earlier than42 days after the child’s birth. Duringmaternity leave, the employee isentitled to 85% of the average incomeover the six months preceding the birthwhich is paid out of the social securityfund, without exceeding 12 monthlygross minimum salaries i.e. RON 8,400(approximately €1,860).

Collective bargaining agreements oftenprovide that male and female employeesare entitled to additional paid holidays forspecial family events, such as for the birthof a child, for the marriage of theemployee and for the marriage of a child.

Employees are entitled to childcare leaveuntil the child is one or two years old, asthey so choose (or three years old in thecase of a disabled child). During thisleave, employees are entitled to socialbenefits amounting to 75% of theaverage income over the 12 monthspreceding the birth but no less than amonthly statutory pay of RON 600(approximately €133) and no more thanRON 3,400 (approximately €755) forchildcare leaves until the child turns one,and not more than RON 1,200(approximately €270) for childcare leaveuntil the child turns two. During childcareleave, the employer may not terminatethe employment.

9.3 IllnessIllness has the effect of suspending theemployment contract. Employeesabsent from work by reason of illnessare entitled to between 75% and 100%of their average income in thepreceding six months depending on thetype of illness without exceeding12 monthly gross minimum salaries,i.e. RON 8,400 (approximately €1,860).This is paid by the employer during thefirst five days and by Social Security forthe rest of the period, up to a total of183 days per year.


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10. Health and Safety10.1 AccidentsUnder Romanian law, employers mustensure the health and safety of theiremployees and to maintain insuranceagainst liability for accidents of employeesat work. They are also required to maintaininsurance for occupational disease. Thecost of the insurance varies according togeneric classes of risk which areestablished by law based on specificformulae for each area of activity.Romanian legislation also contains specificregulations and norms governing certaintypes of workplace and activities in termsof health and safety.

10.2 Health and Safety Consultation Employers have the legal obligation toconsult with their employees on healthand safety matters and the employees,through their representatives, have theright to make suggestions on suchmatters. For this purpose, a health andsafety committee must be established forcompanies with more than 50 employees.Also, for employees working underdifficult, harmful or dangerous conditions,the labour inspector may require suchcommittees to be established even forcompanies with fewer than 50 employees.For companies not required by law toestablish a health and safety committee,consultation with employers on health andsafety matters is carried out by anemployee representative designated bythe employer.

11. Industrial Relations11.1 Trade UnionsEmployees have the freedom ofassociation according to law. A tradeunion may be set up by at least15 members working at the sameemployer. An employee may only be amember of one trade union in respect ofa single employer.

The union members must paysubscriptions. They have the right to electthe union’s representatives and toorganise their activity. Unions function in

accordance with statutes that have beenadopted by their members.

A trade union is representative if it meetscertain criteria, such as its membersrepresenting at least 50% plus one of thetotal number of employees in the relevantcompany (e.g. if there are 30 employeesthere must be at least 16 members).Being representative gives a trade unionadditional powers (e.g. to negotiatecollective bargaining agreements).

In companies with more than20 employees and where no representativeunion has been established, the employeesmay elect and empower representatives topromote and defend their interests. Suchrepresentatives must be elected at ageneral meeting of employees, by at leasthalf of the total number of existingemployees. The employer and theemployees must agree on the number ofemployees’ representatives to be elected,which varies according to the total numberof employees. The term of office of suchrepresentatives may not exceed two years.

According to the Labour Code,employees’ representatives may not acton matters that are reserved by law forunions. However, they have certain rightswhich can be exercised by them as wellas by unions. Such rights include theright to consult on all matters that mayaffect the employment relationship, andthe right of collective negotiation.

Employees’ representatives mayparticipate in collective negotiations andas the case may be, enter into acollective bargaining agreement at thelevel of the company for which they work.

However, unions may participate incollective negotiations and enter into acollective bargaining agreement at thelevel of the company where they arepresent only if they are representativewithin that company. According to theLaw of Social Dialogue, a legallyestablished union qualifies asrepresentative at a company level if at

least half plus one of the total number ofemployees of the relevant companyare members.

Union leaders benefit from special rightsincluding the right: (i) not to be dismissedfor the duration of their term, except ondisciplinary grounds; (ii) to negotiate withthe company a number of days off permonth in order to perform union relatedactivities (employers are not required topay their salaries for the time spentduring the performance of union relatedactivities); and (iii) to receive copies of thedecisions of the board of directors orequivalent management body dealingwith matters of a professional, economicand social nature within two working daysof the relevant meeting date. In addition,the employer may invite the leaders of therepresentative trade union to attend theboard of directors meetings wherediscussions relate to matters ofprofessional, economic and social nature.

11.2 Collective AgreementsCollective bargaining agreements may beconcluded at sector, group company orcompany level.

Under the law, these agreements apply toall of the employees from:

(a) the company if the collectivebargaining agreement is atcompany level;

(b) the group of companies if thecollective bargaining agreement isconcluded at group companylevel; and

(c) all the companies in the employers’organizations that concluded thecollective agreement at sector level.

An employer with at least 21 employeesmust initiate collective negotiations.Collective negotiations may notnecessarily culminate in the conclusion ofa collective bargaining agreement. If theemployer fails to observe this obligation,the employees can request that theemployer initiates collective negotiations.



11.3 Trade DisputesAccording to Romanian law labourconflicts may arise with respect to rightsprovided by employment contracts,collective bargaining agreements or thelaw or in relation to the negotiation ofcollective bargaining agreements .

Strikes may be organised only in the caseof conflicts of interests and only afterprior settlement procedures have beenexhausted. During strikes, employmentcontracts may not be terminated by theemployer; however employmentcontracts are suspended and employeesdo not receive their salaries for the periodof the strike.


The Information and Consultation Lawno. 467/2006 (which transposed Directive2002/14/EC) requires employers of atleast 20 employees to inform and consultwith the employees’ or unionrepresentatives in respect of:

(a) the recent and probabledevelopment of the employer’sactivities and economic situation;

(b) the situation, structure andprobable development ofemployment within the employerand on any anticipatory measuresenvisaged, in particular where thereis a threat to employment; and

(c) decisions likely to lead tosubstantial changes in workorganisation or in contractualrelations, including collectiveredundancies and the transfer ofundertakings, businesses or partsof undertakings or businesses.

Information must be given at such time,in such manner and with such content asare appropriate to enable, in particular,employees’ or union representatives toconduct an adequate study and, wherenecessary, prepare for consultation.

Consultation shall take place:

(a) while ensuring that the timing,method and content thereofare appropriate;

(b) with the relevant level ofmanagement and representation,depending on the subjectunder discussion;

(c) on the basis of information suppliedby the employer and of the opinionwhich the employees’ or unionrepresentatives are entitledto formulate;

(d) in such a way as to enableemployees’ or union representativesto meet the employer and obtain aresponse to any opinion they mightformulate, and the reasons for thatresponse; and

(e) with a view to reaching anagreement on decisions likely tolead to substantial changes inwork organisation or incontractual relations.

More details on the information andconsultation procedure could be providedin the applicable industry and/or companycollective bargaining agreements.

Failure to inform and/or consult theemployees or the provision of false orinaccurate information is considered aminor offence and may be sanctionedwith fines between RON 1,000 and50,000 (approximately €220 to €11,110).

In addition, according to the LabourCode employers have information andconsultation obligations with the union orthe employees’ representative in certaincircumstances, such as:

(a) on the introduction of internalregulations of the employer;

(b) on the introduction of health andsafety rules and procedures withinthe employer;

(c) on the introduction of a professionaltraining plan within the company;

(d) on scheduling the annual leave ofemployees; and

(e) on any matters that mightsubstantially affect the workingconditions, the contractualrelations, labour relations andgenerally the employees’ rightsand interests.

The European Works Council Law(implementing the European WorksCouncil Directive 94/45/EC) came intoforce on 1 January 2007 and applies tothe following:

(a) a Community-scale undertakingwhose central management islocated in Romania or in anotherMember State of the EuropeanUnion or of the European EconomicArea (“Member State”);

(b) a Community-scale undertakingwhose central management is notlocated in a Member State, butwhere the central management hasappointed a representative inRomania for the purpose ofinitiating the establishment of aEuropean Works Council or aprocedure for informing andconsulting with employees; and

(c) a Community-scale undertakingwhose central management is notlocated in a Member State, and itdid not appoint a representative in aMember State, and the subsidiary,branch or any other secondary officeof such undertaking or, as the casemay be, the undertaking member ofa group, which employs the largestnumber of employees in a MemberState is located in Romania.

A Community–scale undertaking musthave at least 1,000 employees withinthe Member States and at least150 employees in each of at least twoMember States in order to be subjectto the legal obligation to establish aEuropean Works Council or aprocedure for informing and consultingwith employees.


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12.1 GeneralThere is no general obligation ofinformation or consultation of theemployees in case of change of control inRomanian companies. However,employees are protected in the case oftransfers of undertakings, businesses orparts of undertakings or businesses,pursuant to Law no. 67/2006 whichimplemented the Acquired Rights Directive2001/23/EC, as amended. In suchcircumstances, employees retain all theirrights as provided in their employmentcontracts and collective bargainingagreements at the date of transfer.Employment contracts may not beterminated by the employer.


Thirty days before the transfer isscheduled to take place both transferorand transferee must inform their respectiveemployees in writing of the following:

(a) the date of the transfer;

(b) the grounds for the transfer;

(c) the legal, economical and socialconsequences of the transfer;

(d) the measures to be taken in relationto the employees; and

(e) the working conditions.

Also, both the transferor and thetransferee must consult with theirrespective employees 30 days before thetransfer is scheduled to take place ifcertain measures are planned, in order toreach an agreement with the employees.

In addition, employers have a generalobligation to inform and consult withemployees on every occasion on whichdecisions are made which have asignificant impact on working conditions,contractual relations with employees orlabour relations.

12.3 Notification of AuthoritiesThere is no obligation to notify authoritiesin the case of a transfer of undertaking.This obligation exists only when collectiveredundancies are involved.

12.4 LiabilitiesFailure to observe the information andconsultation obligations by the transferoror the transferee in the case of a transferof an undertaking is deemed a minoroffence and is sanctioned with a fine ofbetween RON 1,500 and 3,000(approximately €332 and €665). Moreover,employees affected by the transfer maymake a complaint to a court.

If it is not within a transfer of undertakingsituation, the failure to inform and consultwith employees about major decisionsaffecting their interests and rights isdeemed a minor offence and is sanctionedwith a fine of between RON 1,000 and20,000 (approximately €220 and €4,442).

13. Termination13.1 Individual TerminationThe employment contract may ceasepursuant to the parties’ mutual consentor at one party’s initiative, under theterms and conditions expressly providedfor by the law.

The employment contract may also ceaseautomatically in cases expressly providedfor by the law.

13.2 NoticeAs a principle, employees are entitled toa termination notice of 20 business daysif termination occurs in one of thefollowing circumstances:

(a) physical and/or mental incapacitypreventing the employee fromcarrying out their duties;

(b) the employee is not professionallyfit for their current position; or

(c) individual or collective redundancies.

If, during the notice period, theemployment contract is suspended, thenotice term is also suspended.

The Labour Code provides for specificprocedures to be observed byemployers in the case of dismissal inspecific circumstances.

Employees may terminate the employmentcontract by resignation, in which case theymust provide notice of a maximum of20 business days for employees in juniorpositions, or 45 business days foremployees in management positions.Throughout the notice period, theemployment contract continues to havefull effect. If, during the notice period, theemployment contract is suspended, thenotice term is also suspended accordingly.

Employees may resign without notice ifthe employer has not met its obligationsunder the employment contract, such aspaying their salary.

13.3 Reasons for DismissalThe permitted reasons for dismissing anemployee are as follows:

(a) serious misconduct or repeatedacts of misconduct;

(b) if the employee has been placed inpolice custody for a periodexceeding 30 days, under the termsof the Criminal Procedure Code;

(c) physical and/or mental incapacitypreventing the employee fromcarrying out their duties; or

(d) if the employee is not professionallyfit for their current position.

Dismissal for reasons not related to theemployee is a redundancy termination.The redundancy of a position must begenuine and must have a genuine cause.

Redundancies may be individualor collective.



13.4 Special ProtectionThere are certain situations regulated bylaw when employees benefit from specialprotection and their employment contractmay not be terminated:

(a) during sick leave;

(b) during quarantine;

(c) during pregnancy, provided thatthe employer has been informedabout the pregnancy before thedismissal decision;

(d) during maternity leave;

(e) during child care leave (which maylast until the child turns two, or, inthe case of a disabled child, turnsthree years old);

(f) during the leave for looking after asick child aged up to seven years,or, in the case of a disabled childuntil they turn 18 years of age;

(g) during the exercise of an electiveposition in a trade union body,except when the dismissal is forserious disciplinary misconduct orfor repeated acts of disciplinarymisconduct; and

(h) during annual leave.


Collective dismissal involves dismissing,for reasons not related to employees,within a 30-day period, at least tenemployees (for companies with 21 to99 employees), 10% of employees (forcompanies with 100 to 299 employees),or 30 employees (for companies with atleast 300 employees).

Collective dismissal requires 30 days’prior notice to the tradeunions/employees’ representatives, theterritorial labour inspectorate and theterritorial agency for professionaloccupation and training. The notice muststate the intent to engage in collectivedismissal and detail the social protectionmeasures taken. If the problems relatingto the collective dismissal cannot be

solved within 30 days, the territoriallabour inspectorate may, at the request ofa party, extend the period by a maximumof 10 days. The dismissal decision isindividual and the serving of terminationnotices is mandatory.

If the employer resumes the activity, theemployees made redundant by way ofcollective redundancies must be givenpriority in relation to vacancies for thesame jobs in the 45 day period followingtheir dismissal. The employer may onlyrecruit other candidates if the redundantemployees refuse the jobs.

Employees hired for indefinite periods whoare laid off through collective dismissalsduring company restructuring orreorganisation processes, during partial ortotal cessation of the activity or duringprivatisation or liquidation may benefitfrom social protection measures such ascompensatory payments, collective pre-dismissal services (e.g. outplacementcounselling) and active measures intendedto limit unemployment.

14. Data Protection14.1 Employment RecordsUnder the Labour Code, an employerhas a general obligation to ensure theconfidentiality of its employees’personal data.

The Data Protection Law implementedthe Data Protection Directive 95/46/EC.

As a general principle, the processing ofpersonal data must be notified to theRomanian Personal Data ProcessingSupervisory Authority (the “Authority”).However, the processing by the employerof the personal data of its employees inorder to fulfil its legal obligations relatedto employment is not required to benotified to the Authority.

An employer need not obtain the expressconsent of the employee with respect tothe processing of personal data whenentering into the employment contract.

Any further registration, organisation,storage, amendment, use, disclosure tothird parties or transfer overseas of anemployee’s personal data must bemade with the employee’s expressconsent, except where the employeracts in order to fulfil its legal obligationsrelated to employment.

In accordance with the principles set outin the Directive, the employer mustensure that the data is:

(a) processed fairly and lawfully;

(b) collected for specified, explicit andlegitimate purposes and not furtherprocessed in a way incompatiblewith those purposes;

(c) adequate, relevant and notexcessive in relation to thepurposes for which they arecollected and/or further processed;

(d) accurate and, where necessary,kept up to date; and

(e) kept in a form which permitsidentification of data subjects for nolonger than is necessary for thepurposes for which the data werecollected or for which they arefurther processed.

14.2 Employee Access to DataThe employee has the following rights:

(a) the right to access the data: theright to obtain from the controllerupon request and at no expense forone application a year, confirmationas to whether their personal dataare or have been processed bythe employer;

(b) the right of intervention: the right toamend, update, block, delete andanonymise data whose processingdoes not comply with the law,especially incomplete orinaccurate data;

(c) the right to object: the right toobject, for serious and legitimatereasons related to their personalsituation, to the processing of their


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personal data, except as otherwiseprovided for by the law;

(d) the right not to be subject toautomated decision-making: theright not to be subject to a decisionwhich produces legal effectsconcerning them or significantlyaffects them and which is basedsolely on automated processing ofdata intended to evaluate certainpersonal aspects relating to them,such as his performance at work,creditworthiness, reliability, conduct,etc; and

(e) the right of access to justice: theright to make a complaint to acourt of law for any breach of therights provided for by the DataProtection Law.

14.3 MonitoringThe monitoring of employee email,internet and telephone usage is notexpressly contemplated by the labourlegislation. Nevertheless, employers mayhave internal rules or policies thatregulate these aspects.

As a general principle, employers havethe right to supervise the way theemployees fulfil their duties at work.


Unless it is performed in relation to thelegal obligations of the employer, thetransfer of data to third parties may beperformed only with the employee’sexpress consent. Furthermore, theemployer must authorise such transfer

with the Authority. However, if the transferis to an EEA state or a non-EEA state butwhere there is an adequate level ofprotection of personal data, the employerneed not obtain authorisation from theAuthority, but only notify such transfer tothe Authority.

Contributed by Badea Clifford Chance


219A Guide to Employment in the European UnionSlovakia

Slovakia1. IntroductionThe principles of Slovak labour andemployment law are based upon labourregulations applicable prior to 1989. In2002 the new Labour Code, Act No.311/2001 Coll. as amended (the “LabourCode”) replaced the previous LabourCode, Act. No. 65/1965 Coll. that hadbeen in force since 1965. The newLabour Code still follows some of thetraditional principles implemented in thepast such as equal protection ofblue-collar workers, white-collar workersand managers, limited rights of theemployer to terminate employment andlimited contractual freedom of the partiesin certain labour law areas. The courtpractice concerning employment relationsis also affected by the previous regimeand it tends to protect employees’ rightsover those of employers in court disputes.


2.1 GeneralThe Labour Code does not distinguishbetween blue-collar workers, white-collarworkers, managers and directors. Allemployees, regardless of their position,benefit from the same level of protectionand they are all subject to conditionsnegotiated with trade unions and agreed incollective agreements. The Labour Codeonly recognises managers as a specificcategory of employees in respect of someworking conditions, such as additionalworking duties. In other respects, includingtermination of employment, the position ofmanagers is the same as the position ofregular employees.

3. Hiring3.1 RecruitmentThe recruitment process known as“pre-contractual relations” is specificallygoverned by the Labour Code. Theemployer is obliged to inform the recruitof the rights and obligations under theirlabour contract, the salary and otherworking conditions. If there are any

specific requirements for the employeesuch as a health requirement or speciallegal requirements the employer may onlyenter into a labour relationship with aperson who meets such requirements.The employer may require references anda previous job description with theexception of school graduates seekingfirst time employment. It is unlawful torequest information about pregnancy,family status, trade union allegiance,political party membership, religion ortrustworthiness (existence of a criminalrecord) from potential employees. Areview of criminal records is only allowedwhen this is essential in respect of theparticular employment position.Anti-discrimination laws and theobligation to treat employees equally alsoapply to the recruitment process. Theprospective employee may claim financialcompensation from the employer ifobligations relating to the recruitmentprocess are breached. The prospectiveemployee is obliged to inform theprospective employer about allcircumstances that could prevent himfrom performing the role or that couldcause any harm to the employer.

3.2 Work PermitsEU citizens are in an equal position toSlovak citizens in respect of employmentin the Slovak Republic. Non-EU citizensneed a work permit to be employed inthe Slovak Republic, except in casesdetermined by Act No. 5/2004 Coll., onEmployment Services (as amended)(foreign Slovaks, refugees or personsunder asylum laws, humanitarianorganisation members, accreditedjournalists, etc.)

Slovak employers can be fined if theyemploy foreigners without valid workpermits. A work permit is issued by theregional labour office upon the applicationof the future employee following a reviewof the labour market in the relevantregion. In some cases the work permit isissued automatically. Work permits maybe issued for a maximum period of twoyears and may be renewed. In addition to

a work permit, a non-EU citizen whointends to be employed in the SlovakRepublic needs to obtain permission fromthe regional police office for temporaryresidence in the Slovak Republic.

4. DiscriminationThe prohibition of discrimination and theobligation to treat employees equally isone of the basic principles of the LabourCode. Section 13 of the Labour Codeexpressly prohibits discrimination againstemployees and imposes an obligation onthe employer to treat all employeesequally. Act No. 365/2004 Coll., onAnti-discrimination (as amended) cameinto effect on 1 July 2004 and expresslyprohibits discrimination in employmentrelations, based on gender, religion, race,nationality, health, disability, age or sexualorientation, marital or family status, colourof skin, language, political affiliation orother conviction, national or social origin,property, descent or any other status.The obligation to treat employees equallyapplies to access to employment,working conditions, remuneration etc.Different treatment is only permitted ifthere are reasonable grounds due to thenature of the work and only if the extentof this different treatment is necessary forsuch activities or the circumstances inwhich they are performed.

Any person who claims discriminationmay apply to court and seek financialcompensation, amongst other remedies.


5.1 Freedom of ContractAlthough the new Labour Code increasedthe level of contractual freedom in labourrelationships, some provisions of theLabour Code are still mandatory and it isnot possible to contract out of theirapplication. The state governed LabourInspection Office may impose a penalty ofup to €100,000 on the employer for eachbreach of the Labour Code. Workingconditions may only differ from the

A Guide to Employment in the European UnionSlovakia

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provisions of the Labour Code if they aremore beneficial for the employee thanthose provided for by the Labour Code.

5.2 FormLabour relations in the Slovak Republicare very formal. Labour contracts mustbe agreed and amended in writing.Termination of employment is only valid ifit is performed in a prescribed manner.The Labour Code recognises four typesof labour contract (regular labourcontracts, part time labour contracts(for working time not exceeding 10 hoursper week), agreements on theperformance of work for limited workingtasks (not exceeding 350 hours per year)and agreements on the working activity ofstudents), and sets out the essentialrequirements in respect of each of them.There are four unavoidable essentials thathave to be included in labour contracts:(i) a job description; (ii) place of work;(iii) start date; and (iv) salary details. Theformal requirements are particularlyimportant in respect of terminationdocuments, particularly with regard tonotice from the employer. Summarytermination and non-compliance with theformal notice requirements often causethe termination of employment to bedeclared void by the courts.

5.3 Trial PeriodsA trial period may only be agreed beforethe start date, in writing, for a maximumperiod of three months. A trial period maynot be repeated. During the trial periodeither party may terminate employment inwriting, without providing an explanation.The termination notice during the trialperiod should generally be delivered tothe other party at least three days beforethe end of the employment.


The employee has a duty ofconfidentiality under the Labour Code.This applies during employment but maybe extended under the contract for anunlimited period after the termination ofemployment. The remedy for a breach of

confidentiality after termination ofemployment is, however, only theoreticalas the Labour Code does not specify anyfines or sanctions applicable aftertermination of employment, therefore theremedy must be sought under otherlegislation (such as the Commercial Codein respect of the protection of businesssecrecy and fair competition).

The Labour Code contains an explicitnon-competition clause applicable duringemployment according to which theemployee may only perform other gainfulactivities of a competitive nature to thebusiness of the employer with the priorwritten consent of the employer that maybe revoked at any time for seriousreasons, except for scientific,pedagogical, publishing, lecturing orartistic activities. A non-competitionclause may be applied for a period of upto one year after the termination ofemployment for a consideration of at least50% of the employee’s average monthlypay, if agreed in the labour contract.

5.5 Intellectual PropertyAccording to Act No. 618/2003 Coll., theCopyright Act (as amended), the right toexercise the proprietary rights (copyright) ofan author of literature, sound recordings,movies, pictures, computer software andsimilar works belongs to the employer if theparticular work was created by theemployee as part of the author’s workduties. The personal rights attached to thework remain with the author.

6. Pay and Benefits6.1 Basic PayThe minimum salary in the SlovakRepublic is set by a new GovernmentalDecree No. 326/2012 Coll., whichapproved new minimum rates with effectfrom 1 January 2013: €337.70 per monthfor employees compensated monthly or€1.941 per hour for employeescompensated by the hour. The LabourCode sets out six levels of work (fromuntrained workers to work in scientificprofessions) stipulating for each level a

coefficient by which the minimum salarymust be multiplied. For professions on thesixth level the minimum salary is doublethe minimum wage determined by law.

Higher rates of pay are commonlyagreed in collective agreements. Extrapay for overtime, work during holidays,work during days of rest (usuallySaturday and Sunday), night shifts andwork on call is obligatory.

The law does not provide for the linking ofsalaries to an index. Such provisions areusually contained in collective agreements.

6.2 PensionsThe pension system in Slovakia has beenbased on three pillars since January 2005.The first one represents pension insuranceprovided by the Social InsuranceCompany. The second one representsold-age pension savings provided bypension fund management companies(the “PFMC”). The third one issupplementary pension insurance providedby supplementary pension companies.

The first and second pillars are the basicsystem of pension insurance to whichcitizens pay insurance premiums orcontributions stipulated by law. Thosewho are only connected to the first pillarpay an insurance premium to the SocialInsurance Company for old age insurance(which is part of the pension insurance)amounting to 18% of the assessmentbasis (if they are employees, theemployer deducts 4% from their wageand the employer pays 14% from his orher own resources). Those who are alsoconnected to the second pillar pay 14%to the Social Insurance Company forold-age insurance and 4% to the PFMCchosen for employees (if employed, theemployer pays 10% to the SocialInsurance Company and 4% to thePFMC). The third pillar is optional.

6.3 Incentive SchemesIt is not common for Slovak employers tooperate share option schemes. Bonusesand profit-sharing arrangements are



usually agreed either in the labourcontract or in collective agreements.

6.4 Fringe BenefitsSlovak tax laws consider the private useby an employee of a company car to bea taxable benefit. Therefore it is morecommon to provide a company car toan employee exclusively for workpurposes. Use of a company car, mobilephone or personal computer aregenerally regarded as the provision ofequipment necessary for theperformance of the work by theemployee rather than as a benefit andare therefore provided on this basis.

6.5 DeductionsThe employer is obliged by law to deductincome tax (19% in general; 25% fromearnings over €3,311 per month) andsocial contributions from the salary of theemployee. Employers are also obliged todeduct part of the salaries fromemployees where an order of an executoror court applies.

7. Social Security7.1 CoverageThe public social security systemincludes: (i) retirement pension insurance;(ii) sickness insurance; (iii) work injuryinsurance; (iv) unemployment insurance;and (v) guarantee insurance.

7.2 ContributionsBoth employees and employer contributeto the social security system. The ratesare broadly as follows:

8. Hours of WorkThe maximum number of working hoursaccording to the Labour Code is40 hours per week excluding breaks. Foremployees working in shift operations it is38.75 hours per week and for employeesin three shift operations it is 37.5 hoursper week. For employees up to 16 yearsof age the maximum working hours are30 hours per week, for employeesbetween 16 and 18 years of age themaximum working hours are 37.5 hoursper week including overtime.

Collective agreements may provide forshorter but not longer working hours. Inaddition, the employer may introduce aworking hours account in the collectiveagreement or in an agreement with theemployees’ representative. A workinghours account allows the employer toallocate different working hours eachweek while paying the same salary to theemployee. The salary has to be matchedto the hours worked within a specifiedtime period not exceeding 30 months.

A break of at least half an hour has to beprovided to employees working shifts ofsix hours or more. The break between twoshifts, except for certain professions andsituations, cannot be less than 12 hours or14 hours for young employees, within any24-hour period. Each week, the employeeshall have two subsequent resting daysthat should be a Saturday and a Sundayor a Sunday and a Monday.

Work performed in excess of the usualworking hours, upon the instruction of the

employer or with the employer’s consent,constitutes overtime. The number ofovertime hours is limited. Generally,overtime work prescribed by theemployer must not exceed eight hoursper week and 150 hours per calendaryear. In addition, the average number ofovertime hours must not be more thaneight hours per week during a referenceperiod of four consecutive months,without prior agreement with theemployees representative. In any eventthe average number of overtime hoursmust not exceed eight hours per week ina 12 month period.

The employee is entitled to receive extrapayment for overtime amounting to atleast a 25% increase over the averagesalary, unless it has been agreed in acollective agreement that overtime isincluded in the employee’s basic salary(such agreement is only permitted for amaximum of 150 hours of overtime peryear). The employee and the employermay agree that instead of extra paymentfor overtime, the employee will be entitledto additional time off.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled to salarycompensation for public holidays whenthey are absent from work if the holidayfalls on a day that would otherwise be aregular working day for the employee.Such compensation is calculated basedon average earnings during the previouscalendar quarter.

SicknessInsurance

Pension Insurance GuaranteeInsurance

UnemploymentInsurance

HealthInsurance

WorkInjuryInsurance

SolidarityFund

RetirementInsurance

DisabilityInsurance

Employee 1.4% 4% 3% – 1% 4% - -

Employer 1.4% 14% 3% 0.25% 1% 10% 0.8% 4.75%

Total 2.8% 18% 6% 0.25% 2% 14% 0.8% 4.75%


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All employees are entitled to four weeks ofregular holiday a year. An employee whoreaches the age of 33 years is entitled tofive weeks per year. A week for thispurpose means seven consecutive days.

9.2 Family LeavePregnant women are entitled to paidmaternity leave for a period of 34 weeks.If a woman is a single parent, thematernity leave is extended to 37 weeksand if she gives birth to two or morechildren, to 43 weeks. If the father takespaternity leave to care for the child he isalso entitled to the same leave, but onlyone parent can take such leave.Maternity payments are provided by theSocial Insurance Company from thefunds for sickness insurance. Maternityleave usually starts six weeks before theexpected date of birth.

The employer is also obliged to provideto the employee, upon her/his request,parental leave until their child is threeyears old. If the health of the childrequires additional care, parental leaveshould be provided until the child is sixyears old. If agreed between theemployer and the employee, the parentalleave may be extended until the child isfive years old or, if the child requiresadditional care for health reasons, untilthe child is eight years old. Duringparental leave the employee is onlyentitled to the parental contribution paidby the state.

9.3 IllnessEmployers pay a sickness contributionto employees for the first ten calendardays of absence (including Sundays andSaturdays) the amount of which is setout by social insurance regulations.After the initial ten days a sicknessallowance is paid by the state SocialInsurance Company.

10. Health and Safety10.1 AccidentsThe Labour Code and specific lawsimpose obligations on the employer to

provide safe working conditions and healthprotection, and to protect employees fromaccidents at work. State governed LabourInspection Offices regularly checkcompliance with these conditions.

10.2 Health and Safety Consultation Employers appoint a “safety commission”made up of employees, which takes partin internal reviews of working safety. Thisreaches joint decisions with the employerin relation to safe working conditions.

11. Industrial Relations11.1 Trade UnionsTrade unions in the Slovak Republic areclassified as civic associations registeredwith the Ministry of Interior Affairs. Thereis no nationwide trade union and theemployees in each workplace may createtheir own association. There are tradeunion associations for specific industriesand trades (e.g. a trade union associationof foodstuff workers, trade unions for themetal processing industry) thatcommunicate with employersassociations with the intention ofnegotiating higher level collectiveagreements. Such trade unions usuallysucceed in establishing their presence inthe workplaces of major employers.

In addition to trade unions, or if there is notrade union unit in the workplace,employees may elect a works council(if there are more than 50 employees) or aworks representative (if there are more thanthree but fewer than 50 employees). Theemployer is obliged to allow the election ofa works council upon the written request ofat least 10% of the employees.

11.2 Collective AgreementsAccording to Act No. 2/1991 Coll., onCollective Bargaining (the “Act onCollective Bargaining”), each tradeunion unit has the authority tonegotiate, with the employer, anindividual collective agreementapplicable to all employees includingemployees not belonging to the tradeunion. Individual collective agreements

may only provide for more beneficialworking conditions for employees thanthose provided by the Labour Code.The provisions of the collectiveagreement are binding on the employerand they take precedence over theprovisions of individual labourcontracts. To the extent that the labourcontract provides a lower level ofbenefits than the collective agreement,the provision of the labour contract isnull and void. A higher level collectiveagreement is agreed between tradeunion associations and employersassociations and takes precedenceover any applicable individual collectiveagreements to the extent that suchhigher level collective agreementprovide for a higher level of employeebenefits. Higher level collectiveagreements are stored by the Ministryof Labour and Social Affairs and arepublicly accessible.

11.3 Trade DisputesThe Act on Collective Bargaining governsthe resolution of trade disputes. Tradedisputes arising in connection with thefulfilment of obligations under collectiveagreements can be resolved by amediator and an arbitrator, whoseresolution can be contested by appealingto a court. Trade disputes arising inconnection with entering into collectiveagreements can be resolved by amediator and, if not submitted to anarbitrator, by declaring a strike.


The role of trade unions and otheremployee representatives is governed bythe Labour Code, which imposes anobligation on the employer to inform tradeunions and other employee representatives,consult with them and jointly decideparticular issues. Joint decision-making withemployee representatives is required inrespect of the approval of internal workingrules. Consultations are required in respectof the termination of employment by noticeor immediate cancellation of employmentby the employer or in respect of collective



dismissals. In addition, the employer isobliged to inform trade unions and otheremployee representatives about itseconomic and financial situation and aboutthe employer’s development. The employeris obliged to consult trade unions and otheremployee representatives about, amongother things, social policy and organisationalchanges of the employer. Trade unions areentitled to examine measures implementedfor safety and health protection at work.Furthermore, employee representatives areentitled to inspect the employer’scompliance with labour laws, includingcompensation regulations and obligationsarising under collective agreements.


12.1 GeneralSlovak law provides that a merger mayoccur by way of the merger of twocompanies to form a new entity or whenone company absorbs another.

The term “acquisition” can mean eitherthe acquisition of the shares of acompany or the acquisition of acompany’s assets. A share acquisition willhave no impact on employmentrelationships as there is no change in theidentity of the employer. In the event ofan asset acquisition the acquirer of theassets acquires all the rights and liabilitiesattached to the assets including thoserelated to employment relationships.


In general, the employer is obliged toconsult employee representatives aboutmaterial issues relating to theemployer’s existence and profit(regardless of the number of employeesinvolved). In particular, the employermust inform employee representativesor employees directly (if there is norepresentative) in writing of the:

(a) date or intended date of transfer;

(b) reasons for transfer;

(c) working, economic and social impactfor employees; and

(d) measures related to the transferaffecting employees.

This information must be provided onemonth, at the latest, prior to the transfer,whether that occurs due to merger,takeover or sale and purchase.

In addition, no later than one monthbefore the transfer the employer has toconsult with employee representatives.

Should the transfer of the employeesinclude redundancy terminations, theprovisions on collective dismissal wouldapply (see section 13.5 below).

12.3 Notification of AuthoritiesThere are no specific obligations tonotify and/or to seek the approval of theauthorities in relation to employmentrelations and/or the transfer ofemployees in the context of mergersand acquisitions.

12.4 LiabilitiesThe Labour Inspection Office may imposea penalty of up to €100,000 on anemployer that has breached itsinformation or consultation duties.However, the validity of a particularmerger or acquisition and related transferof employees will not be affected by sucha breach or by the sanction.

In addition, if the working conditions ofan employee are to be substantiallychanged by the transfer and theemployee does not consent to suchchange, his employment is deemedterminated as of the date of the transferand the employee is entitled to aseverance payment as if his employmentwas terminated by agreement (seesection 13.1 below).

13. Termination13.1 Individual TerminationAn employer wishing to terminate anemployment relationship may only do so

in accordance with the provisions of theLabour Code.

In the event of the termination ofemployment by notice or agreement dueto organisational reasons or due to theemployee’s incapacity to perform thework on health grounds, the employer isobliged to provide a severance paymentto the employee ranging from at least theemployee’s average monthly earnings toat least (i) four times the average monthlyearnings of the employee in the case oftermination by notice; or (ii) five times theaverage monthly earnings of theemployee in the case of termination byagreement, in each case depending onthe length of the employment.

If the reason for terminating theemployment is due to a work accident oroccupational disease, or the threatthereof, or because the employeeexceeded the maximum permitted level ofexposure to a dangerous environment,the proposed severance payment shouldbe at least ten times the average monthlyearnings of the employee.

13.2 NoticeThe Labour Code provides for a one-month general notice period.However, there are several exceptions.

Should the employment be terminateddue to organisational reasons or due tothe employee’s incapacity to perform thework on health grounds, the employerhas an obligation to provide: (i) twomonths’ notice if the employee has beenworking for the employer for at least oneyear and less than five years; and (ii) threemonths’ notice if the employee has beenworking for the employer for at least fiveyears. In the case of termination for otherreasons where the employee has beenworking for the employer for one year ormore, the employer has an obligation toprovide two months’ notice.

The employee has an obligation to givetwo months’ notice if he has been workingfor the employer for one year or more.

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The notice period starts on the first dayof the calendar month following themonth in which the notice is delivered tothe counter party.

13.3 Reasons for DismissalAn employee may terminate hisemployment by notice at anytime withoutproviding a reason. An employer may onlyterminate employment for one of thereasons set out in the Labour Code.There are few such reasons, whichinclude redundancy of the employee as aresult of organisational changes, lack ofcapability due to the employee’s health,failure by the employee to fulfil specificrequirements of the law or employer forthe performance of the work, breach ofwork discipline and also unsatisfactoryperformance by the employee providedthat several conditions are met (e.g. priorwritten warnings are given). Thetermination of employment by theemployer requires many preconditions tobe met. The employer is considerablyrestricted in its ability to terminate theemployment of its employees. In the pastthe “organisational changes” ground wasoften used by employers to justify thetermination of employment. However, thelaw now restricts an employer who hasmade a position redundant from recruitinganother employee for that position withinthe subsequent two months.

Notice of dismissal is only valid ifemployee representatives have beenconsulted in advance. Notice must begiven in writing, state the cause of thenotice by reference to the provisions ofthe Labour Code and also describe thecircumstances or facts that are thegrounds for such notice. Notice must bedelivered to the employee personally atthe workplace, at his home, or at anyother place, or by registered mail. Anotice that does not fulfil the formalrequirements is likely to be found void bythe courts. If notice is given on thegrounds of a breach of discipline, theemployer has to allow the employee tostate his/her case regarding the allegedbreach prior to giving notice to the

employee in question.

Immediate termination of employment isonly possible where the employee or theemployer has serious cause. Theemployer may summarily dismiss anemployee who has been found guilty of amalicious crime or who is guilty of anextraordinary beach of work discipline.Although the Labour Code does notdefine such a breach, it is sufficientlydefined by court practice. Determinationof whether a particular breach wasgrounds for immediate termination is oneof the most frequent subjects of labourlaw disputes in the Slovak Republic.Theemployee may immediately terminateemployment if the employer is in defaultin paying all or part of his salary or if hishealth and safety is threatened.

An employee may bring courtproceedings on the grounds that the actby which his employment was terminatedwas invalid. Such a claim must bebrought within two months of the allegedtermination of employment. If the claimsucceeds the employee is entitled tosalary compensation for the entireduration of the court proceedings up to36 months. Such salary compensationmay be reduced by the court at the solediscretion of the judge, upon the requestof the employer, if the period for whichthe compensation is to be providedwould exceed 12 months.

13.4 Special ProtectionThe Labour Code specifies certainprotection periods during whichemployment may not be terminated bynotice, such as pregnancy, illness ormilitary service.


Termination of employment by notice dueto organisational reasons or terminationdue to other reasons not caused by theemployee is classified as a collectivedismissal if, within a period of 30 days, itaffects at least:

(a) 10 employees, if the employeremploys from 20 to 100 employees;

(b) 10% of all employees, if the employeremploys 100 or more but less than300 employees; or

(c) 30 employees, if the employeremploys 300 employees or more.

The Labour Code requires the employerto consult with employee representativesor affected employees directly (if there areno representatives) and regional labouroffices in the event of collectivedismissals. At least one month before thestart of the collective dismissals theemployer has to inform employeerepresentatives of the collective dismissaland discuss with them potential optionsto minimise the negative effect of thecollective dismissal. Information aboutsuch discussion must be delivered to theregional labour office, which alsoparticipates in the consultations.

The state governed Labour InspectionOffice may impose a penalty of up to€100,000 for breaching this consultationobligation. In addition, the employee maybe entitled to double the average salaryas a compensation.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofpersonal data held by employers abouttheir employees and workers(prospective, current and past) isregulated by Act No. 428/2002 Coll., onPersonal Data Protection, as amended(the “Personal Data Protection Act”),which implemented the EU DataProtection Directive. As it does notcontain any special provisions in respectof employment records, the generalprinciples set down therein for dataprocessing apply. The general ruleapplying to the processing of personaldata is that unless the Personal DataProtection Act or a specific law provideotherwise, the prior consent of the datasubject is required for the processing.



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The data controller must be able to provethat the consent is valid. The consentmay be revoked and such revocation issubject to conditions agreed upon whengranting the consent.

Employers, as data controllers, areobliged to ensure that only personal datathat corresponds to the purpose ofprocessing in extent and content isprocessed. In addition, employers mustprocess only accurate, complete andup-to-date personal data in relation to thepurpose of processing; inaccurate andincomplete personal data must beblocked and corrected or updatedwithout undue delay, otherwise the datacontroller must erase such data.

Employers are responsible for thesecurity of personal data and mustprotect the data from accidental or illegaldamage, destruction and loss,unauthorised access or modification aswell as any other inadmissible form ofprocessing by adopting appropriatetechnical, organisational, and personnelmeasures corresponding to the mannerof processing.

Any person who has access toprocessed personal data is obliged tokeep the data confidential.

The Labour Code restricts the processingof personal data by employers to suchpersonal employee data that is necessaryfor the employment relationship, or thatrelates to the qualifications and workingexperience of the employee.

14.2 Employee Access to DataEmployees, as data subjects, have theright to request from the data controller inwriting: information about the status of

the processing of their personal data,detailed information about the source ofthe personal data, a copy of theirpersonal data being processed,correction of inaccurate or out of datepersonal data, erasure of personal data ifthe purpose of processing has beencompleted or if the processing hasinvolved a breach of the law.

Requests of the data subject must becomplied with by the data controller andthe applicant notified of the outcome inwritten form within 30 days of the receiptof the request. The data controller mustprovide the information without charge,apart from information about the sourceof the personal data and copies of thepersonal data being processed, in whichcase it is entitled to levy a fee notexceeding the costs of the copies,materials and posting of the informationto the data subject, unless a specific lawstipulates otherwise.

14.3 MonitoringThe monitoring of employees’ email,internet and telephone usage, and TVmonitoring is governed by the CivilCode, according to which documents ofa personal nature, video and audiorecords concerning an individual canonly be made and used with theemployees’ consent.

The Data Protection Act only permits theaudio or video monitoring of publiclyaccessible premises for the purposes ofpublic order and security, and provided thatclear warning is given that the monitoring istaking place (except if a specific lawstipulates otherwise). If the record is notused for the purposes of prosecuting anoffence or criminal act, it must be deletedwithin seven days of its creation.

The Labour Code allows the employer tomonitor employees at the workplace andin common areas, record phone callsmade from work devices and monitoremails received and sent from a workemail address without notifying theemployee in advance, provided that thereare serious reasons based on the specialnature of the employer’s activities. Inaddition, the employer has to consult theemployee representatives on the scope,methods and the duration of monitoringand on informing the employees prior toimplementing any such measures.

An employee who claims that his privacyat the workplace or in common areas hasbeen violated may refer to the court andseek legal protection.


An employer who wishes to provideemployees’ data to third parties must doso in accordance with the principles andprocessing conditions set out in the DataProtection Act. Personal data may only betransmitted from an information system toa third person, including abroad, regardlessof whether the third person is based withinor outside the European Union, with theconsent of the data subject, unless thePersonal Data Protection Act or a specificlaw provides otherwise.

Contributed by Clifford Chance, Prague


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Slovenia1. IntroductionThe Employment Relationships Act(Zakon o delovnih razmerjih) is theprincipal law regulating labour issues inSlovenia. It took effect on 1 January 2003and was amended in November 2007(Official Gazette No. 103/07), andbasically regulates all employmentrelationships in both the private and publicsector. Collective agreements, individualemployment contracts, the employer’sgeneral actions, works agreements andindividual employment contracts alsoregulate the employment relationship.

Numerous trade unions are active inSlovenia. Due to obligatory bargainingconditions, most business sectors usecollective agreements. Nevertheless,since membership of the Chamber ofCommerce is no longer mandatory, acollective bargaining agreement isbinding on an employer, only if it is amember of either the Chamber ofCommerce or the Employers’Association. The only exception to thisare collective bargaining agreements,which were declared by the Ministry ofLabour to be generally applicable, e.g.for trade. Individual employmentcontracts may contain provisions thatare more beneficial to the employeethan those contained in theEmployment Relationships Act or othercollective agreements.

Employees’ participation rights aregoverned by the Law on WorkerParticipation in Management, whichprovides for various forms of employeeparticipation, and by the Law on WorkerParticipation in Profit (Zakon o udeležbidelavcev pri dobi�ku), which was adoptedin 2008 and provides for a voluntaryagreement between the employer andemployees on the distribution of profits toemployees and consequential tax relieffor the employer.

Labour disputes, whether individual orcollective, are settled by special labourcourts. An appeal from the labour court is

heard by the Higher Labour and SocialCourt (Višje delovno in socialno sodiš�e).


2.1 GeneralSlovenian law does not differentiatebetween blue-collar employees andwhite-collar employees. However, the lawdifferentiates between “normal”employees and managerial staff, as wellas between full-time employees andpart-time employees.

3. Hiring3.1 RecruitmentGenerally, an employer has to advertisevacancies either in the public areas of theemployment service office in newspapersor on its own webpage (if any). Inaddition, the advertisement has to set outthe requirements of the job and may notspecify a particular gender unless genderis an essential condition for carrying outthe work. A deadline for the submissionof applications must be established,although there are some exceptions tothis obligation.

An employer who employs part-timeemployees or employees with afixed-term employment contract has toinform such employees of any availablefull-time positions of a fixed term orindefinite nature.

Employers with more than 20 employeesare obliged to employ a certainpercentage of disabled peopledepending on the type of business. Ifthe employer does not meet thisobligation, it has to pay 70% of theminimum salary to the competent socialsecurity authorities for each disabledperson it has not employed.

3.2 Work PermitsThe Slovenian Act on Employment andWork of Aliens (Zakon o zaposlovanju indelu tujcev) refers to three types of workpermits: (i) personal work permits;

(ii) permits for employment; and (iii) permitsfor work. Every work permit is subject todifferent requirements. Permits foremployment and permits for work areissued by observing a quota determined bythe Slovenian government. Whereas apersonal work permit allows generalaccess to the Slovenian labour market, apermit for employment and a permit forwork are linked to a specific workplace andhave to be applied for by the employer.

A foreigner or a person without Sloveniancitizenship may only enter into anemployment contract if he or she fulfilsthe conditions set out in the SlovenianAct on Employment and Work of Aliens.

In 2011 the EU Blue Card was introducedas a document comprising the work andresidence permit. The EU Blue Cardallows a foreigner who will perform highlyqualified work to enter and reside inSlovenia. In such cases the individualneed not obtain a work permit and aresidence permit, instead he or hisemployer simply files an application forthe EU Blue Card.

Citizens of the EU and the EuropeanEconomic Area countries and the SwissConfederation are exempt from theobligation to obtain a permit beforecommencing work; however, there is stilla notification obligation forstatistical purposes.

4. DiscriminationDiscrimination by an employer on variousgrounds (e.g. sex, race, disability, sexualorientation, religion, age), direct orindirect, as well as sexual harassmentand other harassment in the workplace(mobbing) is prohibited. The shifting ofthe burden of proof assists the employeein proving any discriminatory actcomplained of. Recently, it has becomecommon for employees to bring claims of‘mobbing’ as part of the claim before thecourts in relation to their dismissal. Atpresent damages that are awarded inrelation to ‘mobbing’ are not very high.


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5.1 Freedom of contractIn general, an employment contract issubject to the general rules of civil law.However, the Employment RelationshipsAct imposes restrictions on the freedomto contract. Provisions in an employmentcontract may only depart fromapplicable legal requirements andcollective agreements if doing so isbeneficial to the employee. Theemployment agreement may be lessbeneficial for management positions(i.e. directors and procurators enteredinto the Business/Court Register as thelegal representatives of a company).

The conclusion of a fixed-termemployment contract is only permissiblein the circumstances prescribed in theEmployment Relationships Act. Afixed-term employment contract orsubsequent, successive fixed-termemployment contracts concluded with thesame employee in relation to the same jobmay not exceed a period of two years (in aggregate). Exemptions apply to“smaller” employers, employing ten orfewer employees, if such exemptions areprovided for in the relevant branchcollective agreements, and if theemployment agreement is concluded witha person in a managerial position or dueto a substitution of an absent employee.

5.2 FormEmployment contracts have to beexecuted in writing. The employer has toforward to the employee a written draft ofthe employment contract three daysbefore the anticipated execution. After theexecution of the employment contract,the employer has to hand over to theemployee a written executed copy of theemployment contract. Violation of thisformal requirement may result in a finefrom €750 up to €2,000 for the employerand from €100 up to €800 for theresponsible person at the employer, butdoes not lead to the nullification of theemployment contract.

In addition, the Employment RelationshipsAct stipulates the minimum content for theemployment contract. If the employmentcontract does not contain all requiredelements, the law provides for theautomatic application of the relevant legalprovisions and collective agreements,provided that the employer is a member ofthe association that is a party to thecollective agreement or if the collectiveagreement is generally applicable.

5.3 Trial PeriodsGenerally, a trial period is permissible. Aprobationary period must be agreed uponin the employment contract. A trial perioddoes not, however, provide the employerwith the right to rescind the contract. Onlythe employee may terminate theemployment contract for any reason byadhering to a notice period of seven days.

The employer may exceptionallyterminate the employment relationshipafter the expiry of the trial period, if theemployee performed his or her dutiesunsatisfactorily during the trial period.


The employee may not disclose businesssecrets to a third person or exploit suchsecrets for his or her private use. Generally,the employee is liable in damages for anyviolation of this obligation.

During the employment relationship, theemployee may not render services orconclude a transaction on his own behalfin competition with the employer. Incertain cases, the parties to theemployment contract may agree to apost-termination non-compete provisionfor a specified period after thetermination of the employmentrelationship. However, a non-competitionclause may not exceed a term of twoyears after the termination of theemployment relationship. It is onlyenforceable if the employmentrelationship has been terminated by theemployee or as a result of his actionsand if the amount of the monetary

compensation for complying with thenon-competition clause is explicitlystipulated in the employment contract.The compensation may not be less thanone-third of the average monthly salaryof the employee in the three monthsimmediately prior to the termination andhas to be paid in certain circumstances,for example where the non-competitionclause prevents the employee fromearning a salary, comparable to theprevious salary of the employee.

5.5 Intellectual PropertyThe mandatory provisions of the Law onIntellectual Property Rights in Connectionwith Employment differentiate betweenemployment-related inventions andso-called free inventions. Employmentinventions are further divided into directand indirect inventions. Direct inventionsare those generated within thecontractually required employment tasksor as expressly required by the employer,while indirect inventions are thosegenerated beyond the scope of one’semployment, but the employmentexperience and employer’s facilitiescontributed considerably to the invention.The employer is entitled to assume rightsto inventions related to employment andmay register the invention as a patentwith the IP authority on the employer’sbehalf. Employment-related inventionsmay be taken over by the employer forcertain consideration, either exclusivelyor non-exclusively.

6. Pay and benefits6.1 Basic PayIn Slovenia, the minimum basic wageamounts to a monthly salary of €763.06(with effect from January 2012). TheSlovenian wage has three principalcomponents: (i) basic wage; (ii) wage forjob performance; and (iii) extra payments.

Employees are entitled to extra paymentsrelated to extraordinary working times,e.g. night shifts, overtime work, and workon Sundays, holidays and work-freedays. The amount of such extra


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payments is regularly stipulated incollective agreements. The law alsoprovides for an extra payment based onthe employee’s length of service, whichamounts to an automatic pay increasebased on length of service.

In addition, there are certain voluntarywage components that may be fixed inthe employment contract: remunerationfor business performance, profit-sharingand payments in kind.

There is no obligation to index-link pay.

6.2 PensionsIn Slovenia, employers are notobligated to include or pay foremployees’ private pensions.

In practice, a considerable number ofwell-established employers provide fortheir employee’s participation in additionalcollective pension schemes. In addition,some employees enter into additionalpension insurance plans on an individualbasis. Altogether, about 60% of Slovenianemployees have additional privatepension insurance.

6.3 Incentive SchemesShare schemes are not mandatory inSlovenia, however share schemes andprofit sharing have been increasinglyfocused upon by trade unions andemployers’ representatives.

6.4 Fringe benefitsIn practice, it is uncommon for employersto grant fringe benefits such as acompany car or additional personal injuryinsurance to normal employees unlesscertain benefits are crucial to a specifictype of job performance. Sales agentsare often granted a company car andphone. Tax legislation does notencourage the granting of such benefits.

Apart from work-related needs, it iscommon for employers to grant certainbenefits such as the use of a companycar, phone, additional personal injuryinsurance and the like to managerial staff.

6.5 DeductionsEmployers are obligated to deductincome tax advances and social securitycontributions from the salary oftheir employees.

7. Social security7.1 CoverageAn employer has to register the employeefor obligatory pension, disability, health,parental and unemployment insurance onthe day the employee’s workcommences. The social security systemprovides benefits in the case ofretirement, disability, death, sickness,injuries (regardless of whetheremployment-related or not), occupationaldisease, pregnancy, maternity leaveand unemployment.

7.2 ContributionsEmployees’ social security contributionsamount to 22.1% of an employee’ssalary, while employers’ social securitycontributions amount to 16.1% of anemployee’s salary.

8. Hours of workIn Slovenia, the normal working week is40 hours. The employer’s general actionsor a collective agreement may decreasethe “normal” working time, although itmay never amount to less than 36 hours,except in relation to employees who areexposed to a greater risk of injury ordamage to health.

Working hours comprise an employee’seffective working time plus breaks.Hence, a daily break of half an hour iscounted as part of the working hours.

There are certain limits to the amount ofovertime that may be worked: overtimemay not exceed eight hours per week,20 hours per month, and 170 hours peryear. With the employee’s consent thisannual limit may be extended, but maynot exceed 230 hours per year. A blanketconsent cannot be included in theemployment agreement, instead consent

must be obtained each time an employeeis asked to work overtime. TheEmployment Relationships Act and somecollective agreements stipulate certaincases in which employees may not beordered to work overtime.

Overtime can be avoided or minimizedwhere prior agreement is reached withthe employee that the hours worked in agiven period of six months, or longer ifprovided for by collective agreement, willbe aggregated for the purpose ofcalculating full-time work (this is referredto as an ‘uneven distribution of work’). Inthe case of an uneven distribution ofworking hours, an employee may workup to 13 hours per day and 56 hours perweek. At the end of the calculationperiod, full-time work is calculated andthe difference is regarded as overtime.

9. Holidays and Time Off9.1 HolidaysAn employee has the right to paidabsence from work on public holidaysrecognised in the Republic of Sloveniaand on other work-free days as specifiedby law.

An employee is entitled to at least fourweeks of paid holiday per calendar year.Under the Employment Relationships Act,certain employees are entitled to a longerannual leave period.

9.2 Family LeaveA female employee is obligated to go onmaternity leave for a period of 28 daysbefore the expected due date. Femaleemployees are entitled to paid maternityleave for a period of 105 days altogetheri.e. including the leave before the child’sbirth. Payments during maternity leaveare borne by social security.

In addition, the father is entitled to15 days’ paid additional leave to betaken during the first six months afterchildbirth and an additional 75 daysleave to be taken before the child’s thirdbirthday. During this 75-day period the



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state pays only social contributionsbased on the minimum salary inSlovenia for such father.

After the maternity leave has expired,either the mother or the father of the childis entitled to 260 days of paid parentalleave, which may be used as full-timeabsence from work, or alternatively, aspart-time absence from work, in whichcase the period of absence is longer.Payments during paternal leave are borneby social security.

Parental leave may be extended undercertain circumstances.

9.3 IllnessIn the case of temporary incapacity dueto injury or disease, an employee isentitled to be absent from work. Theemployer has to pay wage compensationout of its own funds in the case of suchabsence from work due to health reasonsfor a period of up to 30 days for eachindividual absence. In relation to injury ordisease not connected to work, there is alimit of 120 working days per calendaryear. In the event of a longer absencefrom work, the employer will be refundedby health insurance. If the absence fromwork does not result from anoccupational disease or an injury relatedto work, the wage compensationamounts to 70% of the employee’s wagein respect of a non-work related injuryand 80% of the employee’s wage for theabsence due to sickness. he currenttrend is towards reducing thesecompensation amounts.

10. Health and Safety10.1 AccidentsThe employer has to ensure that workingconditions meet the regulationsapplicable to health and safety in theworkplace. This is verified occasionallythrough a labour inspection.

The employer is also obliged to instruct ajob candidate to have a medical check-upbefore concluding an employmentagreement and commencing employment.

10.2 Health and Safety ConsultationAccording to the Act on OccupationalHealth and Safety, the employer mayensure health and safety by appointing anexpert employee who fulfils certain tasksrelated to safety at work, as well as anauthorised physician for the purpose ofensuring health at work.

The expert employee in charge of safetyat work has to pass a special exam.However, the employer may also hire anexternal expert employee or externalexpert bodies to conduct such tasks.Certain restrictions apply.

11. Industrial Relations11.1 Trade UnionsA trade union that has members workingfor a particular employer may appoint orelect a trade union representative torepresent the trade union at theemployer’s place of business. Theemployer has to be informed of theappointment or election of such tradeunion representative. Furthermore, thetrade union representative has the right toprotect the rights and interests of theemployees at the employer’s placeof business.

11.2 Collective AgreementsSlovenian law recognises generalcollective agreements, branch collectiveagreements and company collectiveagreements. Currently, there are severalbranch collective agreements that applygenerally to the whole of Slovenia, e.g.the Collective Agreement for Trade. Thismeans that this collective agreementapplies to all employers that pursue anactivity which falls within the scope of thecollective agreement regardless ofwhether they are members of theSlovenian Chamber of Commerce or theAssociation of Employers of Slovenia.

The parties to collective bargainingagreements comprise: (i) the associationsof employers using general and branchcollective agreements, or the employeritself in the case of company collectiveagreements, and (ii) the associations of

trade unions or trade unions at theemployer’s place of business in the caseof company collective agreements.

11.3 Trade DisputesEmployees have the right to strike, whichis exercised collectively. The right to strikeis enshrined both in the Constitution andin the Strike Act.

Generally, disputes between employersand trade unions should be resolved incompliance with applicablecollective agreements.


Employees have the right to participatein the management of the employer.Such participation may either beperformed by a workers’ representativeor a works council, depending on thesize of the employer’s company. Thereare three forms of participation: (i) theright to information; (ii) the right toconsultation; and (iii) the right toparticipation in decision-making. Ifcertain participation rights are neglectedby the employer, the works council maystay a decision by the employer.

Moreover, employees may have certainparticipation rights in managementbodies. Workers’ participation inmanagement bodies is implementedthrough representatives acting on acompany supervisory board, thesupervisory committee of a cooperative,or through an employee representativewithin the company’s management.

Participation rights may also be extendedor their exercise regulated in more detailby a works agreement.


12.1 GeneralIf the employer changes due to the legaltransfer of a business, in whole or in part,the contractual and other rights andobligations arising from the employment



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relationship that the employees had onthe day of the transfer are automaticallytransferred to the transferee. Any rightsand obligations under the collectiveagreement that bound the transferormust be guaranteed by the transferee forat least one year, unless the collectiveagreement expires earlier or unless a newcollective agreement is concluded duringthis period. In addition, certaininformation and consultation obligationsof the transferor and the transferee applyin the event of the transfer of a business.

If the employee refuses to transfer, thisgives the employer (i.e. the transferor) areason to terminate the employmentrelationship without any severance pay ornotice period.


The transferor and the transferee mustinform trade unions of the reasons for atransfer, the legal, social and economicimplications of the transfer for theemployees and the measurescontemplated in respect of theemployees at least 30 days prior to thetransfer of the business. All obligationsrelated to the transfer of an employerapply to all companies, regardless of thenumber of employees. In addition, thetransferor and the transferee need toconsult with these trade unions on thelegal, social and economic implicationsof the transfer for the employees and themeasures considered in relation to theemployees at least 15 days before thetransfer. The relevant date of the transferof the employees is the date of transferof the employer, e.g. the date of thetransfer as stipulated by the saleagreement. The information with respectto the transfer must be provided at least30 days prior to the expected date oftransfer. The purpose of the consultationis to reach an agreement on thesetopics. Should it not be possible to reachan agreement, this does not affect thetransfer. If a trade union has not beenestablished at the employer, thetransferor and the transferee have to

inform the employees directly. Additionalconsultation obligations may arise in theevent of any organisational changes inthe business operation.

12.3 Notification of authoritiesThere is no obligation to notify the authoritiesin the event of a business transfer.

12.4 LiabilitiesIf the information and consultationprovisions of the EmploymentRelationship Act are not complied with,fines of between €3,000 and €20,000can be imposed on the transferor andfines of between €450 and €2,000 canbe imposed on the individual employeesat the transferor who are responsible forthe infringement.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with the statutory requirementsas regards reasons and procedure.

Employees with service of more than oneyear and whose employment contractwas terminated by the employer throughordinary termination due to businessreasons or for reasons of incapacity areentitled to a severance payment. Theamount of such severance payment isdependent on the employee’s length ofservice (ranging from one-fifth of monthlysalary to ten months’ salary). There arecurrently initiatives that the law can bechanged to reduce the amount ofseverance payable.

If an employee retires and theemployment relationship is terminated, heor she is entitled to severance pay.

13.2 NoticeThe minimum notice entitlement isdetermined by the reason for terminationand the duration of service.

If termination is based on businessreasons, the minimum notice period

amounts to 30 days and increases withthe length of service up to 150 days. Ifthe reason for termination is related to theincapacity of the employee, the minimumnotice period is also 30 days andincreases with the length of service up to120 days. If the employer terminates theemployment relationship due to theemployee’s capability or conduct, theminimum notice period is always 30 days.Specific notice periods apply in somecircumstances (e.g. bankruptcy orliquidation proceedings). The noticeperiods in the event of termination due tobusiness reasons (reorganisation,technical, economic, or structuralreasons) and incapacity have beenchanged by the amendments to theEmployment Relationship Act in 2007,however they will not come into forceuntil a new Unemployment Act isadopted and it is currently unclear whenthis will happen.

The parties to the employment contractmay reach a written agreement providingfor the payment of compensation in lieuof the observance of the notice period.

Prior to an ordinary termination ofemployment, the employer has to meetinformation obligations and is subject tothe duty to warn the employee. Exceptin the case of termination due tobusiness reasons, the employer has toprovide the employee with anopportunity to defend himself.

Upon the request of the employee, theemployer has to inform the trade union, ifany, in writing about the intendedtermination. If the trade union opposesthe termination, the employee mayrequest that the termination not becomeeffective until the commencement ofarbitration and/or judicial protection hasbegun. The employee may also seek atemporary injunction within the course ofthe judicial proceedings, which has theeffect of further postponing thetermination date.


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Any notice of termination has to be inwriting. The employer has to cite thereasons for termination and has to informthe employee of the available legalremedies and the employee’s rights tounemployment insurance.

Dismissal without notice is onlypermissible if the employer’s reason fordoing so is acceptable for the purposesof the Employment Relationship Act. Thelaw sets a high standard. In addition tohaving a legitimate reason for thepurposes of the EmploymentRelationships Act, the continuation of theemployment relationship until the expiryof the notice period or a fixed term mustalso be unreasonable for the employer.

The employer has to inform the employeeof the dismissal without notice within15 days of becoming aware of its reasonand no later than six months from theoccurrence of the action that gave rise tosuch reason.

Also, the employee may terminate theemployment relationship without notice,again for a reason stipulated by law(e.g. material breach of contract). Eightdays before the employee mayextraordinarily terminate his employment,the employee has to call on the employerto fulfil its obligations. Simultaneously, theemployee has to inform the labourinspectorate of the employer’s violationsin writing. If the employee has adhered tothis procedure, he may terminate theemployment for the reasons stipulatedby law.

Mutual termination of the employmentcontract requires a written contractbetween the employer and theemployee. If the parties do not adhere tothis formal requirement, the mutualtermination is invalid.

13.3 Reasons for DismissalIn Slovenia, the employer may neverterminate the employment relationshipwithout reason. Consequently, theemployer may base the ordinary

termination on four different grounds:(i) business reasons; (ii) the incapacity ofthe employee; (iii) reasons of fault; and(iv) disability. In any event, the reason(s)for termination has to be substantiatedand has to render continuation of theemployment relationship impossible.

In the case of termination on the groundsof the incapacity of the employee or forbusiness reasons, the employer isobligated to examine whether it ispossible to employ the employee underdifferent conditions or to transfer him toanother post, and/or whether it ispossible to retrain the worker.

Additionally, the Employment RelationshipsAct sets out certain reasons wheretermination is considered to be unfounded.

The employee does not need to cite areason for his resignation uponproviding notice.

The employee may assert the illegality ofthe termination within 30 days of aviolation of his rights (i.e. from the noticeof termination) before the competentlabour court.

If the labour court finds that theemployer’s termination was illegal andthat the employee does not intend tocontinue the employment relationship itshall, at the employee’s request, rule thatthe employment relationship continuedup to the date the judgment of the firstinstance court is issued. The court willalso determine the employee’s length ofservice and other rights arising from theemployment relationship, as well as theemployee’s compensation arising fromthe illegal dismissal in light of theapplicable civil law. The level ofcompensation will depend on thecircumstances of the case.

13.4 Special ProtectionCertain categories of employee enjoyspecial protection against termination:members of the works council, workers’representatives, females duringpregnancy, breastfeeding mothers (there

is no upper limit on the duration of suchprotection), parents, disabled persons,and persons absent from work becauseof disease. Such employees may only bedismissed in certain circumstances.

13.5 Closures and Collectivedismissals

A specific procedure has to be adheredto if the employer intends to dismiss alarge number of employees due tobusiness reasons. For example, thedismissal of at least 10 employees by anemployer employing more than 20 butfewer than 100 employees qualifies as acollective dismissal.

In these circumstances, the employer isobliged to draft a dismissal program. TheEmployment Relationships Law stipulatesthe material content of the dismissalprogram. In addition, the employer has toinform the trade union and theemployment service of its intention. Theemployer may not terminate anyemployment relationship for a period of30 days from notification of theemployment service (“blocking period”).The employment service may evenextend this blocking period to 60 days.Should the employer dismiss during theblocking period, the dismissal isineffective and the labour inspectoratecan impose a fine of €3,000 to €20,000on the employer and a fine of €450 to€2,000 on the individual responsible.

14. Data Protection14.1 Employment RecordsThe employer is obliged to protect thepersonal data of employees. Hence, dataon employees may only be collected,processed, used and provided to thirdparties if the Employment RelationshipsAct or another law so stipulates, or if thisis required in order to exercise the rightsand obligations arising as a result of theemployment relationship.

14.2 Employee Access to DataEmployees’ access to data is usuallyregulated in the employer’s internal


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documents, e.g. the employer’s generalact (pravilnik).

14.3 MonitoringThe Employment Relationships Act andthe Act on Data Protection do not includeprovisions regarding the monitoring ofemployee communications. However,provisions regarding monitoring areusually included in the employer’s internaldocuments, e.g. the employer’s generalact (pravilnik).

According to the Act on DataProtection, the employer may use videomonitoring on the business premises inextraordinary cases. Video monitoringcan be carried out if necessary to

preserve the safety of people or assetsor for the protection of secretinformation and business secrets,provided that there are no less intrusivemeans by which these aims can beachieved. Employees have to benotified in advance of the videomonitoring. In any event, videomonitoring is prohibited in lockerrooms, elevators and sanitation areas.


Data may only be transmitted to datamanagers, contractual employees orusers of data who have a registered seator are registered in non-EU countries ornon-EEA countries, if the supervisory

body of the Republic of Slovenia issues adecision that the receiving stateguarantees a sufficient level of dataprotection. Such decision is not requiredfor transmission to a state contained onthe list of countries recognised as havingsufficient levels of data protection. If asufficient level of protection in relation tothe data transmitted and the purpose ofthe transmission is established, data maybe transmitted to countries that onlypartially assure a sufficient level ofprotection without first obtaining adecision by the supervisory body of theRepublic of Slovenia.

Contributed by Wolf Thiess, RechtanwälteAttorneys-at-law


233A Guide to Employment in the European UnionSpain

Spain1. IntroductionThe Spanish Constitution recognisescertain basic labour-related rights, such asthe right to work, the right to strike and theright to join a trade union. More detailedregulation is contained in the WorkersStatute, which establishes a number ofmandatory and minimum terms andconditions of employment. Theemployment relationship may be furtherregulated at a number of levels, forexample, Collective Bargaining Agreements(“CBAs”) or individual contracts agreed witha particular employee.


2.1 GeneralSpanish law draws a distinction between“Senior Executive” staff and ordinary orstandard staff.

2.2 DirectorsThe employment relationship of SeniorExecutive employees is governed by thespecific rules of Royal Decree1382/1985. Their contracts ofemployment are subject to fewerconstraints than standard employeeswhose employment relationship is largelygoverned by the Workers’ Statute.

The concept of “Senior Executive” isnarrowly defined and includes only “thoseemployees who genuinely exercise broadpowers inherent to the company’s legalownership and related to the company’sgeneral objectives, limited only by thedirect instructions issued by thecompany’s managing body”.

When determining whether anemployment relationship should beclassified as “standard” or that of a“Senior Executive” in the context of amultinational group of companies, if theindividual does not receive directinstructions from the Board of theSpanish company but from a person whois responsible at an international level for

the group or board of directors within thegroup (without the employee havingsignificant autonomy in the performanceof his services), the employee may beclassified as a standard employee ratherthan a Senior Executive.

In some cases, case law has stated thatindividuals who render their services asSenior Executives and are simultaneouslyactive members of the company’s boardhave a mercantile and not an employmentrelationship with the company.

3. Hiring3.1 RecruitmentIn principle, the employer may recruitemployees freely. For this purpose, theemployer may resort to publicemployment services, recruitmentagencies, placement agencies andtemporary employment agencies. Whenan employer recruits via a temporaryagency, the relationship is governed byspecific rules contained in Law 14/1994and Royal Decree 4/1995.

Generally speaking, employers are legallyrequired to register the content of anyemployment contracts, and anyamendments thereto or extensions, withthe relevant Employment Office (“ServicioPúblico de Empleo”) within 10 workingdays of the execution date. In addition,employers must register employees withthe social security system before theiremployment contracts can commence.

Companies with more than 50employees must recruit 2% of theirworkforce from those persons registeredas disabled. Employers may receivesocial security or tax benefits forrecruiting disabled employees.

3.2 Work PermitsAs a general rule, non-EEA nationalsmust obtain a work permit beforecommencing employment. Various typesof work permits may be granteddepending on the nature and duration of

the work involved. Whether or not a workpermit will be issued may depend, amongother things, on the current nationalemployment situation.

Pursuant to Royal Decree 240/2007citizens of the European Union or of EEAMember States, either employees or self-employed, may reside and work inSpain without a residence or work permit,as may the members of their family as ageneral rule. In order to carry outactivities as employees or in a self-employed capacity, the interestedparties are subject to the sameregulations as Spanish citizens.

4. DiscriminationThe Workers’ Statute prohibitsdiscrimination on the grounds of sex,marital status, age, race, social status,religious/political ideology, sexualorientation, trade union membership,kinship with other employees orlanguage, in relation to recruitment andemployment conditions. It also prohibitsdiscrimination on the grounds of physicalor mental handicap and provides specialprotection in maternity cases.

In addition, Organic Law 3/2007 ofEquality between Men and Womenrequires every company to adoptmeasures in order to avoid discriminationbetween men and women. Furthermore,an “Equality Plan” including: (i) specificequality objectives; (ii) specific strategiesand policies to achieve these objectives;and (iii) evaluation and monitoringsystems must be developed in certaincircumstances (i.e. in companies withmore than 250 employees, whenstipulated by the applicable collectivebargaining agreement, etc.).


5.1 Freedom of Contract The parties are free to agree on anyterms to the extent permitted by law.

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5.2 FormCertain types of employment contractsmust be executed in writing in aprescribed format (e.g. internshipcontracts, fixed-term contracts with aterm of over four weeks, part-timecontracts etc). The main classifications ofcontracts are set out below:

Indefinite employment contracts, whichmay generally be agreed either verbally orin writing.

Fixed-term employment contracts, whichcan be:

(a) Contingent contracts - based onproduction needs or marketdemands, these contracts must setout in detail the circumstances inwhich they operate. They must beagreed in writing if the term exceedsfour weeks.

(b) Interim contracts - to providetemporary cover for anotheremployee. These contracts must beagreed in writing.

(c) Contracts for a specific work orservice - these must be agreedin writing.

(d) Internship contracts - these must beagreed in writing.

There are other specific categories ofemployment contracts such as part-timecontracts (either of fixed or indefiniteduration), relief contracts (an employeesubstitutes another employee who haspartially retired), or temporary contractsfor disabled persons (from one to threeyears’ duration). These must all beagreed in writing.

The employment of Senior Executive staffis governed by Royal Decree 1382/1985;this contains more flexible provisions thangeneral labour law, particularly in relation totermination and severance arrangements.Senior Executives are not generallygoverned by CBAs unless expressagreement is reached with the employer.

Accordingly, as regards SeniorExecutives, the parties are free to agreespecific severance terms. If no prioragreement on severance terms has beenreached, dismissal packages of 20 days’salary per year of service (up to amaximum of twelve months’ salary) arepayable. An employer can also terminatethe contract “at will” and waive thecontract on the grounds of “loss of trust”upon giving notice of three to six months(or making a payment in lieu), andcompensation of seven days’ salary peryear of service (up to a maximum of sixmonths’ salary) is payable, unless adifferent amount is agreed by the parties.In practice, contracts for SeniorExecutives often include “goldenparachute clauses” which providedetailed and substantial severancepackages, as well as other related terms.

5.3 Trial PeriodsIf a trial period is agreed, it must berecorded in writing before theemployment starts. During the trialperiod, either party may unilaterallyterminate the contract without having tojustify the grounds. In thesecircumstances, the employee is notentitled to receive a notice or a severancepayment upon the termination of theemployment relationship.

Trial periods may not exceed the termestablished in the applicable CBA. In theevent that the trial period is not regulatedby a CBA, the Workers’ Statute providesfor a general term of six months forqualified technicians or two months forother employees. In any event, trialperiods may not exceed three months(except qualified technicians) incompanies with fewer than 25 workers.

One exception is in relation to theindefinite employment contract to support“entrepreneurs”, established forcompanies with less than 50 employeesthat meet some requirements where thetrial period is one year.

Employment contracts for SeniorExecutives may incorporate a trial periodnot exceeding nine months.


Any information related to the employer’sbusiness must be kept confidential, bothduring and after employment. This duty ofconfidentiality is inherent to the legalnature of the employment relationship forboth standard employees and SeniorExecutives, and there is no need for theemployer to provide any compensationfor it.

An employee may not provide services toseveral employers during the term of thecontract if this would give rise to unfaircompetition, or if an exclusivity covenanthas been given by the employee. Theexclusivity covenant must be in writingand the employee is entitled to bespecifically remunerated for the covenant,except in the case of Senior Executives.The exclusivity covenant may beterminated at any time at the employee’sdiscretion, by serving the employer with30 days’ written notice, therebydisentitling the employee to any furthercompensation for exclusivity.

Post-termination non-competitioncovenants may also be agreed at anygiven time, provided that:

(a) the employer has an effectiveindustrial or commercial interest inrelation to its enforcement; and

(b) the employee is paid adequateeconomic compensation.

In any event, such post-termination non-competition covenants may not exceedtwo years for technicians and six monthsfor other employees.

When the employee has attendedprofessional specialisation courses orreceived training at the employer’sexpense, a “retention” covenant may beagreed in writing, by virtue of which the



employee shall remain with the companyfor a specific term not exceeding twoyears. If the employee leaves thecompany before the end of the term, theemployer will be entitled to claimdamages. The damages are normally at alevel equal to the value of the coursestaken in order to acquire thespecialisation in question.

5.5 Intellectual PropertyThe transfer to the employer ofintellectual property rights in workscreated by virtue of an employmentrelationship is governed by the contract.In the absence of any express provision,it is assumed that the intellectual propertyrights have been exclusively assigned tothe extent required by the employer tocarry out its usual activities.

6. Pay and Benefits6.1 Basic PayThe structure of the salary is usuallyestablished by the CBA or detailed inthe employment contract, with adistinction being drawn between thebase salary and any additionalallowances. Additional supplements arepayable in certain circumstancesspecified by the relevant CBA or in theemployment contract (for examplehazardous work, night shifts etc).

Employees are also entitled to at leasttwo extraordinary payments per year; onepayment to be made at Christmas andthe other generally paid before thesummer holidays. The CBA may,however, provide that the extraordinarypayments be paid on a pro rata basisover 12 months.

The government annually adjusts theminimum wage, taking into account,amongst other criteria, the ConsumerPrice Index. The amounts establishedare a minimum wage and may beincreased by CBAs or in individualemployment contracts between theworker and the employer.

The CBAs establish the minimum salaryreviews to be made on an annual basisand which are usually linked to theincrease in the Official Consumer PriceIndex, although the employer may applyhigher increases.

6.2 PensionsThe promoter of an “employment system”pension plan will be any entity, companyor business whose employees areparticipants in the pension plan. Theseplans are financed by contributions fromthe promoters and, where applicable, bycontributions from the participants. Thesepension schemes are funded through avehicle which is separate fromthe promoter.

6.3 Incentive SchemesMany companies have incentivesschemes. Usually these incentivesschemes comprise variable remunerationlinked to performance or sales.

Stock option plans may be used as anincentive for productivity and theretention of employees or SeniorExecutives within the company. As ageneral rule, the benefits provided toemployees under a stock option plan willbe classified as remuneration in kind fortax and Social Security purposes (theremay, however, be tax exemptions incertain circumstances and subject tospecific limits).

Case law has established that thebenefits provided to employees under astock option plan will be classified assalary for the purposes of calculatingseverance payments.

6.4 Fringe BenefitsFringe benefits can be voluntarily grantedby companies or stipulated in theapplicable CBA.

Each company has a different policy asregards fringe benefits (i.e. somecompanies have no fringe benefits orhave them only for managers and other

companies have a series of differentfringe benefits offered to all of theiremployees). Generally fringe benefits areprovided to managers. However, undersome CBAs fringe benefits (i.e. insurancepolicies, meal/transportation allowances,etc.) are provided to all the employees.

6.5 DeductionsEmployers are obliged to deductemployees’ social security contributionsfrom their pay.

7. Social Security7.1 CoverageProvided that specific requirements aremet, the Spanish Social SecuritySystem offers a wide range of benefits,including medical care, benefits fordependent children, death andsurvivors, unemployment allowances,retirement pensions, temporary orpermanent disability grants andmaternity/paternity benefits.

The Spanish Social Security System ismade up of a General Regime, a Regimefor employees “assimilated to the GeneralRegime” (applicable to directors that alsoperform management tasks while paid bythe Company) and several specialregimes applicable to, for example,self-employed workers.

7.2 ContributionsUnder the General Regime, both theemployer and employee are required tomake contributions.

The standard contribution rates are28.3% for employees with an indefinitecontract, plus the contribution foroccupational accidents and illnesses(which ranges from 1% to 8.5%depending on the type of activity carriedout) of which 23.6% is the employer’scontribution rate and 4.7% is theemployee’s contribution rate. Theunemployment contribution rate is 7.05%for employees with an indefinite contractof which 5.5% is the employer’scontribution rate and 1.55% the


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employee’s contribution. The WageGuarantee Fund contribution rate is 0.2%for the employer. The Career Trainingcontribution rate is 0.7% of which 0.6% isthe employer’s contribution and 0.1% isthe employee’s contribution. Thecontribution rates are applied over thecorresponding contribution base. Thecontribution base for 2012 has been setat a maximum monthly amount of€3,262.50 that serves as a cap. Theemployee’s Social Security must bededucted directly by the employer fromthe employee’s salary. In addition, theemployer must make monthly paymentsto the Social Security Treasury for thecorresponding employees’ andemployer’s contributions.

8. Hours of WorkThe duration of the annual working time isagreed in the CBA or employmentcontracts. The maximum duration of theordinary annual working time will be anaverage of 40 hours per week over thecourse of a year. In addition, companiesmay adjust 10% of their annual workingschedule to meet production needs(i.e. some weeks the hours may beextended and during other weeks thehours reduced but in aggregate the annualhours are the same). Through a CBA or anagreement between the company and theemployee’s legal representatives, thepercentage of the working schedule thatcan be adjusted can be increased,provided that the legal minimum restperiods are still complied with.

In this respect, there must be a minimumof 12 hours between the end of aworking day and the following one. Inaddition, employees are entitled to enjoya minimum weekly uninterrupted restperiod of one and a half days, which canbe accumulated over 14 days, so it ispossible for an employee to work for11 days and then rest for three days.

Hours worked in excess of the ordinaryannual working time are classified asovertime, which may not exceed

80 hours per year. Overtime shall beremunerated according to the ratesagreed in the applicable CBA or theemployment contract (and this may notbe lower than the established hourly rate)or offset with equivalent rest periodswithin the four months following theperformance of overtime.

9. Holidays and Time Off9.1 HolidaysThe annual holiday period is agreed in theapplicable CBA or employmentagreement and may not be less than30 calendar days. It is not permissible topay employees in lieu of their holidayentitlement, except on the termination ofthe contract. Unused holiday may not becarried forward to the next year. Inaddition, employees are entitled to14 public holidays annually.

9.2 Family LeavePaid leave must be allowed in certainfamily-related circumstances (e.g.15 days for marriage or two days forthe death of a close relative). Theparents or legal guardians of childrenunder eight or handicapped/dependantrelatives have the right to a reduction ofup to half of the working day, with apro-rata salary reduction. Workers areentitled to a one hour absence in theirdaily working time (without loss ofsalary) for nursing a child of under ninemonths (or this may be accumulatedand taken as rest days after the end ofthe maternity leave).

During maternity leave, the contract issuspended for 16 weeks (plus two extraweeks per each child if more than onechild is born). This right to maternity leavemay be enjoyed by the child’s mother orfather, although during the six weeksfollowing the birth leave may only be takenby the child’s mother and, thereafter, bothparents may take maternity leave eithersimultaneously or successively, providedthat no more than 16 weeks’ leave is takenin total between the parents.

During paternity leave, the contract issuspended for 13 days (plus two extradays per each child if more than onechild is born).

Social Security benefits are not indexedto an employee’s actual salary but tospecified contribution bases (subject tominimum and maximum amounts). TheSocial Security System pays 100% of theemployee’s Social Security referencecontribution base while the employee isenjoying parental leave.

9.3 IllnessGeneral legislation states that in the caseof temporary incapacity caused bycommon illness or non-occupationalaccidents, employees are not entitled toreceive their salary for the first three daysfollowing the temporary incapacity.Between days four and 20, employeesare entitled to receive 60% of thereference contribution base (from the 4thto the 15th day sick pay is paid by theemployer and from the 16th to the20th day by the Social Security System).Finally, from day 21 onwards, they areentitled to receive 75% of their referencecontribution base (paid by the SocialSecurity System).

In the event of occupational illness andaccidents, employees are entitled toreceive 75% of the reference contributionbase from the date on which thetemporary incapacity begins (paid by theSocial Security System).

CBAs often improve these percentages,for example by requiring the employer topay the difference between the SocialSecurity allowance and the real salary orimposing an obligation on the employerto assume payment during the first threedays of incapacity.

Social Security benefits resulting fromtemporary incapacity are paid for amaximum of 18 months.



10. Health and Safety10.1 AccidentsRegulations on the prevention ofoccupational hazards are extremelydetailed in Spain, requiring multiplemeasures to be taken and obligations tobe implemented by the companies.

In the event of a breach of health andsafety duties, employers are subject todifferent administrative sanctionsdepending on the seriousness of thebreach. In addition, infringing employersbear a surcharge of between 30%-50%of the corresponding Social Securityallowance granted to the employee thathas suffered an occupational illness oraccident at work, depending on thenature and the extent of the breach.This surcharge cannot be insuredagainst, and any agreement or contractwhich is executed in order to cover,compensate or transfer this surcharge islegally null and void.

10.2 Health and Safety ConsultationThe monitoring of health and safetyregulations is carried out both externallyand internally. Externally, the LabourInspection and other public bodies are incharge of these matters. Internally,employers, Prevention Services, the Healthand Safety service provider or the Healthand Safety Committees are involved withthe prevention of occupational risks(notwithstanding the employing company’sultimate responsibility).

The Health and Safety Committees arejoint membership bodies in charge ofregularly and periodically advising thecompany on matters related to riskprevention. They are set up in companiesor workplaces which have at least50 employees and consist of an equalnumber of employee andemployer representatives.

11. Industrial Relations11.1 Trade UnionsLaw 11/1985 on Trade Union Freedomgoverns the right of all workers to freely

join a trade union and gives broadpowers to trade unions to exercise theirrights. Indeed, large trade unions in Spainsuch as the Workers’ Commission(“Comisiones Obreras” or “CCOO”) andthe General Workers’ Union (“UniónGeneral de Trabajadores” or “UGT”) haveconsiderable political power. There arealso employer associations, which seekto develop labour relations in conjunctionwith the trade unions and the labourauthorities by means of collectiveagreements, lobbying and so on.

11.2 Collective AgreementsCBAs mandatorily regulate specificemployment terms and conditions ofthose employees that come within thescope of each specific CBA. CBAs maybe drawn up at different levels by meansof collective negotiation (by sector; suchas metal, offices, chemicals etc, or bycompany) and with different territorialscopes of application (national,Autonomous Community, provincial).CBAs are temporary agreements, theduration of which is agreed between theparties. In addition, individual contractsmay contain specific terms and conditionsagreed with a particular employee.

11.3 Trade DisputesThe right to strike is protected by theSpanish Constitution. Any strike actionmust be expressly adopted by a majorityof employees in each company and mustbe notified to the employer and to theLabour Authorities by the employees’legal representatives. This notice must begiven at least five working days prior tothe commencement of the strike, or10 working days if the strike affectspublic service companies.

While an employee is exercising the rightto strike, the employment contract issuspended. This relieves both employerand employee of their obligation toprovide remuneration and servicesrespectively. The dismissal of an individualwhose employment contract issuspended as a result of exercising theright to strike will be void, unless the

strike is declared illegal or the employeedoes not comply with the minimumservice requirements provided in the lawor relevant CBA.


As well as participation through unionrecognition, information, consultation andparticipation of employees at a companylevel is provided through the employees’legal representatives (staff delegates inworkplaces with fewer than 50 employeesor Works Councils in workplaces with atleast 50 employees). The number ofemployees on a Works Council willdepend on the size of the workplace.Work Councils and staff representativesare entitled to receive information(e.g. details of serious disciplinary actionsagainst employees etc) to publish leafletsin relation to employment or socialmatters and may collectively negotiate incertain circumstances.

Employers must consult the Work Councilbefore adopting certain importantdecisions, such as those relating to thereorganisation of the workforce, theclosure of a plant or training programmes.

A Spanish company must establish aEuropean Works Council, or a similarvehicle which provides information andconsultation to/with employees, if:

(a) it employs a total of more than 1,000people in all European MemberStates, of whom 150 work in oneparticular Member State and another150 in a different Member State; and

(b) this is requested by at least100 workers or their representatives,belonging to two workplaces orcompanies located in differentMember States.

Prior to the establishment of a EuropeanCompany in Spain, specific proceduresmust be followed and rights toinformation, consultation and/orparticipation agreed between the


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company representatives and theemployees’ legal representatives.

12. Acquisition and Mergers12.1 GeneralArticle 44 of the Workers’ Statuteimplements the “Acquired Rights Directive”in Spain. In the event of a transfer of anundertaking, the affected employees areentitled and obliged to transfer, under theirexisting employment terms and conditions,to the transferee who automaticallybecomes their new employer.

The transferor and transferee are jointlyand severally liable for a three-year periodfor any employment obligationsoutstanding at the time of the transferand for a four-year period in relation tosocial security obligations arising prior tothe transfer.

If there are no labour or social securityobligations outstanding at the time of thetransfer, any future obligations areassumed exclusively by the newemployer (unless the transfer is classifiedas a fraud, in which case the formeremployer would also be liable).


The transferor and transferee should servenotice of the transfer to the legalrepresentatives of the affected employees.In the absence of any legalrepresentatives, each affected employeeshould be individually informed. Theinformation to be provided is: (i) theproposed date of the transfer; (ii) thereasons for the transfer; (iii) the legal,economic and employment consequencesof the transfer for the employees; and(iv) details of the proposed measures inrelation to the employees.

The information must be provided inadvance of the transfer and before theemployees’ employment conditions areaffected by the transfer.

In the event of company mergers anddemergers, the information must beprovided no later than the date that thenotice convening the general meeting ofthe company to adopt the relevantresolutions is served.

Where specific employment measures arecontemplated as a consequence of atransfer, the employer(s) of the affectedemployees must commence aconsultation process with the employees’legal representatives in relation to theproposed measures and theirconsequences for the employees. Thisconsultation must take place sufficientlyin advance of the implementation of themeasures for a genuine consultation totake place.

Where any measures relate to asubstantial modification of terms andconditions of employment, relocation orcollective dismissals, detailed informationand consultation rights and procedureswill apply.

In the event of a merger or change in theemployer’s legal status that may affectthe level of employment, the legalrepresentatives of the employees areentitled to issue a report, prior to themerger provided they do so within15 days of being informed of themerger/change in status.

12.3 Notification of AuthoritiesThere is no obligation from anemployment law perspective to notify theauthorities in the event of the transfer ofan undertaking. However the socialsecurity authorities must be notified of thetransfer and the affected employees.

12.4 LiabilitiesIn strict legal terms, in relation to thetransfer of an undertaking, if the employerdoes not comply with its information andconsultation obligations, it will not affectthe validity of the transfer, however, itcould give rise to a fine of up to €6,250from the Labour Authorities.

13. Termination13.1 Individual TerminationEmployment contracts may only belawfully terminated on a number ofgrounds expressly stipulated by law andin accordance with the appropriateprocedures for each case.

Contracts may be terminated at therequest of the employee or employer bymutual consent, upon the expiry of anagreed term or the conclusion of the job orservice covered by a temporary contract,or due to the retirement of the employee.

Upon the termination of a temporarycontract, employees are entitled tocompensation equivalent to eight days’salary per year of service (except forinterim and internship contracts). Thiscompensation will be progressivelyincreased over the next few years.Accordingly, temporary employmentcontracts entered into after 1 January2012 will have a compensation equivalentto nine days’ salary per year of service;10 days’ salary per year of service if thetemporary employment contract isconcluded on/after 1 January 2013;11 days’ salary per year of service if thetemporary employment contract isconcluded on/after 1 January 2014 and12 days’ salary per year of service if thetemporary employment contract isconcluded on/after 1 January 2015.

13.2 NoticeThe employee must be served withwritten notice of the dismissal, indicatingthe events on which it is based and thedate it is to take effect.

13.3 Reasons for DismissalThe employment contract may beterminated by the employer by means ofa disciplinary dismissal based on aserious and wrongful breach of thecontract by the employee, without thelatter having any right to compensation.Legislation and CBAs list the contractualbreaches which may be considered for



such purposes (lack of discipline ordisobedience, offences, breach ofcontractual good faith etc).

The employee is entitled to oppose thedismissal by means of filing a claim within20 working days of the dismissal datebefore a special administrative bodywhere a preliminary conciliation meetingis required. A conciliation meeting will beheld in an attempt to reach an agreementregarding the dismissal (e.g. the companymay offer compensation in order to reachan agreement with the employee andavoid judicial proceedings).

If such an agreement is reached, then thecompany will have to pay the employeethe agreed amount as severance pay forhis/her termination.

If the parties fail to reach an agreement atthe conciliation meeting, then it is highlylikely that the employee will file a claimbefore the Labour Courts, which he/shemust do within the remaining term of the20 business day period granted for filingthe conciliation claim. The Labour Courtswould resolve the dispute by classifyingthe dismissal as fair, unfair or void. Therelevant legal procedures can takearound three to four months and anappeal to a higher court is possible.

If the dismissal is considered unfair theemployer may, in most cases, chooseeither to reinstate the employee or toterminate the contract with a severancepayment of 45 days of salary per year ofservice subject to a maximum of42 monthly payments for the period ofservice between the commencementdate and 11 February 2012 and 33 daysof salary per year of service capped at24 monthly payments for the period ofservice from 12 February 2012 onwards.

In addition, an employment contract maybe terminated on “objective grounds”such as the employee’s ineptitude,employee absenteeism (when it reachescertain levels as established by law), orwhen there are economic, technological,

organisational or production-relatedgrounds affecting a number of jobs belowthe “collective dismissal” thresholdnumber. The objective dismissal issubject to a number of legalrequirements; first, written notice must beserved to the employee explaining indetail the grounds for the decision;secondly, the employer must make asimultaneous offer to pay the minimumseverance compensation equal to20 days’ pay per year of service (up to amaximum of 12 months’ pay); and thirdly,the employee is entitled to 15 days’notice or a payment in lieu of notice.

The employee may appeal the decision todismiss as if it were a disciplinarydismissal and, likewise, the decision maybe classified by the Judge as fair, unfairor void with similar consequences.

13.4 Special ProtectionThe dismissal will be considered void if itwas discriminatory or if it violated theemployee’s fundamental rights or publicfreedom. In such circumstances, theemployer must reinstate the employeeand pay all salary accrued during thedismissal period.


The Collective Dismissal procedure is aprocedure that should be followed whena company expects to terminate aminimum number of contracts in a90-day period in accordance with thefollowing thresholds:

(a) 10 employees in a company whichhas fewer than 100 employees;

(b) 10% of the total workforce in acompany with between 100 and300 employees; and

(c) 30 employees in a company with300 or more employees.

Dismissals which affect the entire staff areclassified as collective dismissals if theheadcount is more than five employees.

A Collective Dismissal procedure impliesthat the company must carry out aconsultation period with the employees’legal representatives for a maximum termof 30 days, or 15 days in companies withless than 50 employees, in order todiscuss the possibilities of avoiding orreducing the number of dismissals andmitigating their consequences withancillary social measures.

After the consultation period, thecompany should notify the dismissal toeach affected employee, and is obliged topay the legal severance (i.e. 20 days ofsalary per year of service capped at12 monthly payments).

In addition, if the Collective Dismissalprocedure affects more than50 employees, the company should offeran outplacement plan to the employeesfor a minimum term of six months. In thecase of companies with over100 employees (even in group terms)which have made profits over the lasttwo years, and where the CollectiveDismissal affects employees over theage of 50, the companies must make acontribution to the Public Treasury. Thiscontribution consists of applying apercentage (between 60% and 100%) ofthe amounts representingunemployment benefits or subsidies andsocial contributions in relation to anysuch employees.

Both collective and individual claims maybe filed in relation to dismissals carriedout under a Collective Dismissal:

(a) Collective claim

The employees’ legal representativesor the trade union representativeswho are “sufficiently established” inthe collective dismissal situation mayfile a claim against a company’sdecision to adopt a CollectiveDismissal, based on thenon-existence of legal cause, thenon-observance of the consultationperiod or the failure to provide the


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necessary documentation, fraud,willful intent, duress, abuse of the law,or the infringement of fundamentalrights and public liberties.

The claim must be filed within a20-day statute of limitations followingnotification of the decision at the endof the consultation period.

The judgment (which can beappealed, will declare that thedecision to terminate: (i) “conforms tolaw”, if the legal causes alleged forthe collective dismissal are provenand the formal requirements are met;(ii) “does not conform to law”, if thecauses alleged are not proven, inwhich case the company must payunfair dismissal severance; or (iii) isnull and void, if no consultation periodwas provided, if the necessarydocumentation was not provided or ifthe decision infringes fundamentalhuman rights or was adopted in afraudulent manner, with wilful intent,duress or abuse of the law. In thisscenario, the judgment will declarethat the employees are entitled to bereinstated to their former posts.

(b) Individual claims

The dismissal will be declared null andvoid and, therefore, reinstatement willbe mandatory if no consultationperiod was completed, if thenecessary documentation was notprovided or if the permanencepriorities were not upheld, asprovided by law, collective bargainingagreement or an agreement reachedduring the consultation period.

If the existence of an “objectivecause” for dismissal is not proven, thedismissal will be declared unfair andthe company will be obliged to payunfair dismissal severance.

14. Data Protection14.1 Employment RecordsThe processing of personal data in Spain,including the collection, storage and use

of information held by employers abouttheir employees and workers(prospective, current and past) isgoverned mainly by the Organic Law15/1999 dated 13 December 1999 (the“LPDCP”), which implements the EU DataProtection Directive and the Royal Decree1720, of 21 December, which approvesthe regulation implementing organic law15/1999, of 13 December, on theprotection of personal data.

Employers, as data controllers, are underan obligation to ensure that they processpersonal data about their employees(whether held on manual files or oncomputer) in accordance with specifiedprincipals including the following: arequirement to ensure that data isaccurate, up to date, and is not keptlonger than is necessary; and arequirement that it is stored securely toavoid unlawful access or accidentaldestruction or damage to it.

Under the LPDCP, prior to the creation of apersonal data file, employers (as datacontrollers) must notify the Data ProtectionAgency of the creation of every file, by filinga standard form. The notification mustcontain details of the data controller’s(corporate) identity, the purpose of the file,its location, security measures taken, thedata intended for inclusion in the file, anddetails of foreseeable disclosures andinternational data flows.

In addition, personal data may only beprocessed if the employee hasunambiguously given his or her consent,unless there is an applicable legalexception. Finally, employers must complywith certain duties to provide theemployees with specific information aboutthe data processing. This informationmust be provided before the personaldata are collected and before the consentof the employee has been granted.

Infringement of the data protection lawcan lead to fines of between €900 and €600,000.

14.2 Employee Access to DataData subjects have the right to accesstheir personal data, to rectify such datawhen it is incorrect, to delete thepersonal data contained in a data filewhen it is excessive, and to object to thedata processing of their personal data incertain cases.

Employees, as data subjects, are entitledto request and obtain information from adata controller about their personal dataincluded in the Employer’s files. Withinone month of such a request, the datacontroller must decide whether the datasubject has a right of access, and if noresponse is provided within one month,the request is deemed to have beenrefused. If the request is granted, thedata subject should exercise the rightwithin 10 days. This may involve merelyconsulting the files by visual examination,or the provision of relevant data in writing,by fax or photocopy in a legible andunderstandable form. The data subjectmay select the means by which the rightof access is exercised, subject only to thelimitation that the means chosen must bein accordance with the data controller’smethod of storage.

The information provided must includenot only the data, but also the source ofthe data, third parties to whom the datahave been disclosed, and a statement ofthe uses and purposes for which the dataare being stored.

The only statutory grounds on whichaccess may be refused are that therequest for access was made bysomeone other than the data subject, orthat the data subject has exercised theright of access within the previous12 months and there are no reasonablegrounds for exercising it again. In suchcases, the data subject has the burden ofproving the reasonableness of his request.

Data subjects are also entitled to requestfrom the Data Protection Registryinformation relating to the existence of



personal data processing, its purposes,and the identity of the data controller. TheRegistry is available for publicconsultation, without charge.

14.3 MonitoringNo specific legislation has been enactedto regulate the monitoring of employeecommunications such as email, internetand telephone usage. However, theLabour Courts have considered theconflict between the employer’s rights toeffective management control and theright of employees to personal privacyand secrecy of communications.

From case law, it can be inferred thatemployers may monitor employeecommunications in the circumstances setout below. Note that these guidelines area matter of interpretation of the relevantcase law and have not been promulgatedby any regulatory authority:

(a) The monitoring must be justified,suitable to achieve the company’s aim,necessary (i.e. a more moderatealternative of achieving the sameobjective does not exist) and balanced.

(b) The company should communicate toits employees that access to email orthe internet has been granted

exclusively for professional purposes,and that the company has in place aprocedure for monitoring emails sentand records of internet access.Employees can be advised of suchpractices via internal codes settingout professional standards or internalguides to the company, to be signedby each employee, or by inclusion ofa statement in the terms of theemployment contract, or by drafting aspecific document to be signed byevery employee of the company inwhich they express their agreementwith the policy and consent to themonitoring activity.

(c) Employees should be required toadvise third parties of the monitoringactivity carried out by the employer inconnection with emails received. Areference to such monitoring activityshould also be automatically includedin emails sent by employees.


An employer who wishes to provideemployee data to third parties must do soin accordance with the LPDCP principlesand processing conditions. In principle, itmay be necessary to obtain expressconsent to such disclosure. Please note

that in the following circumstances theconsent is not required:

(a) Under the LPDCP, disclosures ofemployees’ personal data for thepurpose of requiring them to fulfil theirlegal obligations (tax, social security),or to allow employers to fulfil theirs.

(b) Where the third party is based outsidethe EEA it should be noted that theLPDCP prohibits the transfer of datato a country outside the EEA unlessthat country is considered by theSpanish Data Agency as one thatensures an adequate level ofprotection for personal data.

(c) When a service provider has accessto employee data and such access isnecessary for the provision of theservices to the employer and theservices agreement provides that:(i) once the contractual service hasbeen completed, the personal datamust be destroyed or returned to theemployer; (ii) the service provider willnot transfer the data to any thirdparty; and (iii) the service provider willstore the data securely in accordancewith the employer’s instructions.

Contributed by Clifford Chance, Madrid

A Guide to Employment in the European UnionSweden

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Sweden1. IntroductionWhilst statutory regulation of the Swedishlabour market has increased, labour lawin Sweden has for some time been highlyregulated under a system of collectivebargaining. In practice, terms andconditions of employment as well as thenature of labour/management relationsare to a large extent moulded bycollective bargaining.

A high percentage of employees belongto trade unions. There are three centraltrade union confederations: the firstrepresents blue-collar workers; thesecond represents white-collar workers;and the third represents professional(graduate) employees. In addition,membership in employers organisationsis common. The Swedish Employers’Federation exercises considerableinfluence over its members. Collectivebargaining is focused nationally withagreements being negotiated centrally bytrade unions. Labour law in Swedenprotects this bargaining process byproviding certain “positive rights”including the right to strike, the right to bea member of a trade union and the rightof a trade union to consultations.

Collective agreements are legallyenforceable. An employee’s relationshipwith his employer is regulated by acombination of statutory provisions,collective agreement (if any) andindividual contract. Indeed, employerswho are not represented by anemployers’ body still tend to follow theindustry-standard agreements.

Disputes are handled by the DistrictCourts and the Labour Court. Decisionsof the District Courts can be appealed tothe Labour Court. The Labour Courtcomprises representatives of the judiciary,employers’ organisations and tradeunions. Decisions of the Labour Court arefinal and binding. In some cases disputesare handled directly by the Labour Court,from which there is no right of appeal.


2.1 GeneralThe Swedish system of collectivebargaining recognises variouscategories of employees. Generally, theemployees can be divided into two maincategories; white-collar employees andblue-collar employees. As stated above,such categories are traditionallyrepresented by different trade unionsand are, thus, covered by differentcollective agreements.

2.2 DirectorsExecutives and employees withcomparable positions comprise aseparate specific category, as they areexempted from the application of theprincipal piece of employmentlegislation, the Employment ProtectionAct (lagen om anställningsskydd). As ageneral rule, the managing director of alimited liability company is covered bythis exemption, as well as seniormanagement in larger companies.However, the actual duties and terms ofemployment have to be considered ineach specific case in order to determinethe scope of this exception. Themanaging director and the seniormanagement are normally also excludedfrom the scope of collectiveagreements. Instead, the employmentof senior executives is normallyregulated by contract and disputesbetween employer and seniorexecutives are often resolved througharbitration. However, senior executivesand directors can be represented bytrade unions.

2.3 OtherGenerally, there are no special rulesapplying to the employment of part-timeemployees. However, a part-timeemployee may, under certaincircumstances, have a right to increasehis or her working hours. Discriminationagainst part-time workers is alsoprohibited (see section 4 below).

3. Hiring3.1 RecruitmentAs a general principle, an employer is freeto choose whomever to employ. Thereare, however, some limitations to thisprinciple such as the prohibition ondiscriminating on the grounds of gender,transgender identity or expression (i.e.discrimination against transsexuals,transvestites, intersexuals and otherpersons who do not identify themselvesas male or female), ethnic origin, religiousfaith, disability, sexual preference or age.

Employees previously made redundantenjoy a preferential right to re-employmentin the business where they wereemployed if their length of service totalsmore than twelve months over thepreceding three years. This preferentialright applies from the time notice is givento the end of the ninth month after theemployment has been terminated. Thismeans that an employer may not engagenew employees within this period withoutobserving the redundant employees’preferential right. The preferential right tore-employment will only apply if theredundant employee requests re-employment and if he possesses thenecessary skills for the vacancy.

It should also be noted that theauthorities, as a labour market measure,can indirectly influence who is employed(normally elderly and disabled employeesor an under-represented gender group) bymaking specific quotas a condition of thegrant of regional aid or other subsidies.

An employer is also normally obliged toinitiate consultations with the tradeunion(s) to which he is bound bycollective agreement before employing anemployee in a managing position.

3.2 Work PermitsNordic and other EEA nationals areentitled to stay and work in Swedenwithout restriction. Should the stay exceedthree months, however, such personsmust register with the Migration Board.


243A Guide to Employment in the European UnionSweden

Non-EEA nationals, before coming toSweden to work, obtain a residencepermit and a work permit. Permits areissued for specified periods andextensions can be applied for. Theapplications for such permits are made tothe Migration Board. In addition, nationalsin the majority of countries outside the EUneed a visa to enter Sweden.

Swedish citizens, foreigners already livingin Sweden and citizens of EU and EEAmember states have a priority over othersin obtaining work in Sweden. However,an employer may, after having advertiseda vacant position within Sweden, the EUand Switzerland, offer the employment toa non-EU or EEA national.

Work permits are normally granted for amaximum of two years at a time, or, if theemployment lasts for less than two years,for the period for which the employmentis offered. The employee can apply for apermanent residence permit after fouryears. A work permit is, as a main rule,restricted to the trade or professionenvisaged in the offer and to theemployer who made the offer.

An employer employing someone withouta permit or keeping in his servicesomeone who has had his permitwithdrawn or not extended can be fined.

4. DiscriminationDiscrimination on grounds of gender,transgender identity or expression,(i.e. discrimination against transsexuals,transvestites, intersexuals and otherpersons who do not identify themselvesas male or female), ethnic origin, religiousfaith, disability, sexual preferences, age,part-time and fixed-term employment,parental leave as well as trade unionactivities is generally prohibited. Thisprotection (with the exception of tradeunion activities as well as part-time andfixed-term employment) also applies toapplicants for work (see above).

If an employee is discriminated againstby an employer, the employer may beheld liable to pay compensation to theemployee and acts of discrimination canbe declared invalid at the request of theemployee. The time limits for bringingclaims vary depending upon the causeof action.

It should also be noted that it is a criminaloffence under the Swedish Criminal Codeto discriminate on grounds of race,colour, nationality, ethnic origin, religiousfaith or sexual orientation.

There is a special so calleddiscrimination ombudsman whosefunction is to ensure compliance withthe discrimination legislation.


5.1 Freedom of ContractThe negotiation of contractual terms at alocal level is relatively uncommon inSwedish labour practice, although it isincreasing. Typically, the terms ofemployment are governed by collectiveagreements signed at industry level. Theemployment of senior executives andemployees with specific functions is,however, normally governed byindividually negotiated contracts. It shouldbe noted that statutory interventionprovides a set of mandatory requirementsrelating to, for example, employmentprotection, parental leave, educationalleave, health and safety issues, workingtime and holidays.

5.2 FormThere is no legal requirement thatemployment contracts must be in writing.It is customary, however, for collectiveagreements to require the employmentcontract to be in writing and to containparticular terms. Furthermore, incompliance with Council Directive91/533, an employer must inform a newemployee in writing of the conditionsapplicable to the contract.

There are several collective agreementscontaining employment conditions whichcannot be reduced or exceeded. Thepurpose, amongst others, is to ensure thatthe parties retain control of pay rates. Forexample, if an employer pays wageswhich are too high he may be liable to paydamages to the trade union for breach ofthe applicable collective agreement.

Contracts of employment in Sweden areregarded as being for an indefinite periodunless otherwise agreed. In certainspecifically defined circumstances,employment contracts may be limited intime. Currently, Swedish law recognisesfour different types of fixed-termemployment contract.These include ageneral fixed-term agreement, a temporarysubstitute agreement and employment fora specific season. A general fixed-termagreement or a substitute agreement willautomatically transform into anemployment contract of indefinite duration,if the aggregate duration of the employee’sservice during a five-year-period exceeds24 months. The Ministry of Employment isproposing the following changes to thisrule with effect from of 1 July 2013: Ageneral fixed-term employment or asubstitute employment will automaticallytransform into an employment contract ofindefinite duration if the employee - duringa period of successive probationary orfixed-term employments - has either had ageneral fixed-term contract or a substitutecontract for more than two years.

5.3 Trial PeriodsA new employee may be employed onprobation, provided that this does not lastmore than six months. The employermust give notice to terminate therelationship before the end of theprobationary/trial period. In default, thecontract will become an indefinite-termemployment. During the probationaryemployment, the relationship can beterminated at any time on two weeks’notification. Many collective agreementsinclude adjustments and supplements tothese rules.


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Under Swedish law, employees are boundby a general duty of loyalty during the termof the employment (including the noticeperiod). This duty of loyalty precludes anemployee from taking any actions thatmay be detrimental to the employer. Inparticular, the duty of loyalty imposes aduty not to compete with the employer, aswell as a duty of confidentiality in relationto information that could harm theemployer, should it become knownpublicly or by a third party. Theseobligations apply even though no non-compete or confidentiality undertakingshave been included in the individualemployment contract. A clarification of theduty of loyalty during the term of theemployment is often included in collectiveagreements. A breach of the duty ofloyalty could, in serious cases, constitutegrounds for dismissal and could give riseto an obligation for the employee to paydamages to the employer.

Upon termination of employment, the dutyof loyalty ceases. Thus, the formeremployee may engage in a business thatis competitive with the employer and makeuse of knowledge acquired during theemployment, with the exception ofcompany secrets which are protectedunder the Swedish Protection of TradeSecrets Act (lagen omföretagshemligheter). In order to preventan employee from competing or disclosingconfidential information, express post-termination contractual restrictions arerequired. Such restrictions must, however,be carefully considered in the context ofeach individual case, as their validity issubject to significant restrictions.

Pursuant to Section 38 of the SwedishContracts Act (avtalslagen), anon-compete clause is not enforceable tothe extent it is more far-reaching than isreasonable in the circumstances.Accordingly, a court of law could modifythe scope of the non-compete provisionor declare such a clause completelyunenforceable. In addition, if the

non-compete clause is sanctioned bypenalty, such a sanction could beadjusted or declared invalid pursuant toSection 36 of the Swedish Contracts Act.It should be noted that any penaltyimposed on the former employee forbreach of the non-compete obligationmust be proportionate to his formersalary from the employer. Liquidateddamages, in relation to a breach of anon-compete clause, may normally not tobe in excess of a sum equivalent to sixmonths’ salary. However, this naturallypre-supposes that the non-competeclause in itself is valid.

In order to determine whether anon-compete clause is reasonable, abalance must be struck between theemployer’s need for protection and theemployee’s freedom to work. The validityof a non-compete clause is subject tofurther regulation by a collectiveagreement entered into in December1969 between the principal players in thelabour market. The principles of thiscollective agreement (the “CollectiveAgreement of 1969”) still guide thegeneral legal considerations relating tonon-compete clauses even in relation toemployment relationships which are notformally covered by the CollectiveAgreement of 1969.

Specific provisions concerning loyalty,unfair competition and confidentiality areoften found in the contracts of seniorexecutives or employees with specificfunctions. However, it should be notedthat the Swedish courts apply a restrictiveapproach towards post-contractualnon-competition clauses.

5.5 Intellectual PropertyThe starting point is that intellectualproperty created by an employee duringthe course of his or her employmentbelongs to the employee. However, asregards patentable inventions, theemployer has under certaincircumstances a statutory right to takeover such inventions and the employee isentitled to “reasonable compensation”.

Disputes are tried in the ordinary courts,with issues concerning compensationbeing tried by a special board.

With regard to intellectual property otherthan patentable inventions, the employeralso often, by way of agreement (expressor implied), has a right to intellectualproperty created by the employee. Inaddition, in compliance with CouncilDirective 91/250, where a computerprogram is created by an employee in theexecution of his duties, the employer isexclusively entitled to exercise all rights inthe program so created, unless otherwiseprovided for by contract.

6. Pay and Benefits6.1 Basic PayThere is no statutory minimum pay, butcollective agreements usually lay downrates of pay for the groups of employeesto which they apply. As already noted,collective agreements are legallyenforceable against an employer.Typically, companies not bound bycollective agreements nevertheless followwage rates set by an appropriatecollective agreement.

The prohibition against discrimination canin some circumstances lead togovernmental control in respect of wages.

Further, under the Contracts Act, anyterm of an agreement, including a wageclause, may in certain circumstances beset aside or modified by the courts ifdeemed unreasonable.

The method by which wages andsalaries are paid is not regulated bystatute, but again, collective agreementsusually provide for the timing andmethod of payment.

Pay is not usually index-linked.

6.2 PensionsMost contracts of employment makeprovision for a pension complementary tothe state pension scheme either througha collective agreement or by individual



provision in the contract itself. Pensionsare usually index-linked.

6.3 Incentive SchemesProfit related pay schemes, profit sharingarrangements or bonus schemes exist,but usually only for senior executiveswithin the private sector.

6.4 Fringe BenefitsBenefits such as a company car, bonus,life/accident insurance and subsidisedcanteen/luncheon vouchers may beprovided to employees.

6.5 DeductionsEmployers are obliged under Swedishtax law to make income tax deductionsbefore wages or salaries are paid. Inaddition, they must provide certaindetails in an itemised pay statementsetting out what deductions have beenmade. Other deductions can only bemade in specified circumstances or withthe consent of the employee.

During 2012 municipality taxes variedbetween 28% and 34% on incomesunder SEK 401,100 (for 2013 thethreshold is expected to beSEK 413,000) depending on themunicipality the employee resides in. Onincomes ranging from SEK 401,100 toSEK 574,300 (for 2013 the income rangeis expected to be between SEK 413,000and SEK 591,600) a 20% state tax isadded to the above rates. On incomesover SEK 574,300 (for 2013 the thresholdis expected to be over SEK 591,600)state tax at a rate of 25% is added.

7. Social Security7.1 CoverageSocial security provision is made for, interalia, sickness benefit, childcare,unemployment insurance, pensions,disability and industrial injury.

7.2 ContributionsEmployers are obliged by law to makecontributions in respect of theiremployees to the social security fund.

Contributions at the rate of 31.42%(during 2012; and it is anticipated thatthis will also be the applicable rate in2013) of an employee’s gross wage orsalary and taxable benefits are payableby the employer but are tax deductible.Employees are also required to make aminor contribution, which is taxdeductible for the employee.

8. Hours of WorkThe Working Time Act (arbetstidslagen)regulates the working hours of allemployees. The working week is set at amaximum of 40 hours, but is flexible inrespect of when those hours are worked.Therefore, the number of hours workedover a period of four weeks can beconsidered together and averaged. TheAct does not lay down any right for theemployee to overtime compensation.However, collective agreements and/orindividual employment contracts oftencontain provisions in this respect.Moreover, the total compensation to theemployee may not be unreasonably low.

The Act recognises two differentcategories of working hours regulated bylaw: “normal hours” and “on-call hours”(where the employee is required to stay atwork to be able to work if the needarises). Working weeks of less than40 hours are not unusual.

In addition, there are two categories ofovertime work – general and special.Employees are permitted to work amaximum of 48 hours general overtimeper four-week period or 50 hours percalendar month, with an annual limit of200 hours general overtime per year.Overtime in excess of this (referred to asspecial overtime) can be worked up to amaximum of 150 hours per calendar year,provided that it arises in the context of anextraordinary situation and the situationcould not be resolved in a different way.General and special overtime togethermay not exceed 48 hours per four-weekperiod or 50 hours per calendar month.The Act further contains certain

exceptions in case of natural disastersand major accidents.

The Act also regulates overtime workedby part-time employees, the workinghours of young people as well as rest andinterval periods.

Finally, as a general limitation, the averageworking time for each seven day periodmay not exceed 48 hours during a periodof four months.

9. Holidays and Time Off9.1 HolidaysEmployees are entitled by law to 25working days holiday per year. Saturdayis not counted as a working day. Thestatutory holiday year runs from 1 April to31 March the following year. Employeesare entitled to save holiday entitlementover and above 20 days per vacationyear (i.e. if the annual entitlement is 30days, 10 days can be saved). It is,however, possible to agree with theemployee that a maximum of five daysmay be saved per vacation year. Thesaved holidays must then be used withina five year period.

9.2 Family LeaveBoth parents are entitled to parentalbenefits paid by the social securitysystem. A female employee can startdrawing such benefits 60 days beforethe expected birth of her child. After thebirth of the child, the parents can drawparental benefits for 480 days (theparental benefits period is reduced bythe number of days benefits alreadydrawn by the mother prior to the birth ofthe child). This right also applies toadoptive parents. The days for whichparental benefits are payable are dividedequally between the parents, and, withthe exception of 60 days, may betransferred from one parent to the other.Sole custodians are entitled to all480 days themselves. The benefits maybe drawn at any time until the childreaches the age of eight or completesthe first class of school. The parents can


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choose to draw full, three-quarters,one-half, one-quarter or one-eighth of aday in parental benefit. Parental benefitsare paid by the Social Insurance Officeand amount to 80% of the salary, in2012 capped at an annual salary of SEK440,000 (in 2013 SEK 445,000).

Irrespective of whether parental benefitsare paid or not, a parent always has theright to full leave of absence for custodyof his/her child until the child is18 months old. Thereafter, parental leavecan only be taken together with parentalbenefits (see above).

In addition, parents are also generallyentitled to take leave in order to care for asick child under the age of 12, as well aschildren between 12 and 16 who are inspecial need of care and supervision. Insuch cases the parent is entitled totemporary parental benefits, paid by theSocial Insurance Office, amounting to80% of the salary, in 2012 capped at anannual salary of SEK 330,000 (in 2013SEK 333,750).

The employer is not required to make anyadditional maternity or parentalpayments, and parents are, unlessotherwise agreed, solely compensatedthrough the social security system. Tosome extent, however, employees earnvacation pay during their parental leave.For each child, the employee is entitled tocount up to 120 days of parental leave,or 180 days for single parents, as leaveof absence that qualifies for paid vacationdays. For each day of such absence thebasis for calculating the vacation pay isincreased by a sum corresponding to theemployee’s average daily salary in theemployment over the remaining qualifyingyear of service. Pregnant employees whohave a physically demanding job areentitled to be transferred to other duties.If, in such a case, the employer cannotoffer the employee some other form ofwork, the employee is entitled topregnancy benefits.

9.3 IllnessThe employer must pay sick pay to itsemployees in respect of the first 14 daysof sickness, with the exception of the veryfirst day of sickness (qualifying day). Suchcompensation amounts to 80% of thesalary, unless a higher amount isstipulated in a relevant collectiveagreement or agreed with the employee.Thereafter, sick employees must beregistered with their local Social InsuranceOffice. The Social Insurance Officeprovides for sickness benefits consistingof daily compensation. Normally sick payis paid by the Social Insurance Office for364 days during a period of 450 days(approximately 15 months). It is possibleto receive extended sick pay for amaximum period of 550 days(approximately one and a half years), incertain cases even longer or withoutlimitation in time (e.g. after workaccidents). Sickness benefits amount to80% of the salary, in 2012 capped at anannual salary of SEK 330,000 (in 2013SEK 333,750). Sick pay and sicknessbenefit are taxable.

9.4 Other Time OffEmployees are entitled to paid or unpaidleave for, amongst other things, tradeunion activities, public work, education,non-competing business activity,language classes (in the case ofimmigrants) and compulsory or voluntarymilitary or civil defence service.

10. Health and Safety10.1 AccidentsThe Health and Safety at WorkRegulations cover almost every type ofemployment, and there are also specificrules relating to particular forms of hazard.Generally, an employer is obliged to ensurethat the work place is safe and that suchsafety arrangements that are necessary toensure that proper care is taken ofemployees are implemented in the workplace. Liability is also imposed uponmanufacturers of equipment or dangerousmaterials, which are used by employees inthe course of their employment.

If an employer does not take sufficientcare or otherwise fails to comply withhealth and safety requirements, criminalliability may arise, as well as civil liability(i.e. damages) and a liability to pay acompany fine (företagsbot) (a companyfine (särskild rättsverkan) can be imposedby a court on a company or other legalentity for infringements committed in theconduct of business activities. Theamount is subject to an upper limit ofSEK 10,000,000). Furthermore, theemployer has a general legal duty torehabilitate injured or sick employees.Compensation for injuries at work is paidout of the work injury insurance scheme.

10.2 Health and Safety ConsultationThere is no legal obligation to specificallyconsult with employee representatives onhealth and safety matters. An employer isin general obliged to consult with thetrade union to which it is bound by acollective agreement before making anysignificant changes to the business or tothe employment conditions of theemployees belonging to such tradeunion. Consequently, only if a health andsafety matter at work involves asignificant change to the business, willthe employer have an obligation toconsult with the relevant trade union(s).The employer is also obliged to consultwith the trade union, if the trade union sorequests or if the matter is of specificinterest for the trade union with which theemployer has a collective agreement. Anemployer who is not bound by acollective agreement is under anobligation to consult with a trade union towhich an employee belongs only if ahealth and safety matter specificallyconcerns the employment terms andconditions of the employee.

Under the Swedish Work EnvironmentAct, at every worksite where five ormore persons are regularly employed,one or more employees must beappointed as safety delegates. Safetydelegates are appointed by the localtrade union currently or customarilyhaving a collective agreement with the



employer. In the absence of such anorganisation, safety delegates must beappointed by the employees. The safetydelegate represents the employees onwork environment matters and hisfunction is to promote a satisfactoryworking environment.

Where 50 or more persons are regularlyemployed, a safety committee consistingof representatives of the employer and ofthe employees must be established atevery worksite. The committee’semployee representatives are appointedin the same way as the safety delegates.The safety committee must, inter alia,participate in the planning of workenvironment measures at the worksiteand observe their implementation.

11. Industrial Relations11.1 Trade UnionsUnder Swedish labour law, employers andemployees have the right to belong to anorganisation and to be active in it. Inaddition, employees’ organisations havethe right to ask for consultations in relationto all matters relating to the relationshipbetween employer and employees.

Sweden does not have a formal systemfor recognising trade unions. However,trade unions which have entered intocollective agreements have moreextensive legal rights than other tradeunions concerning, for example,information and consultation. There arecollective provisions providing for the rightto distribute information during workhours, but not to recruit new membersduring work hours. Apart fromorganisations such as the SwedishFederation of Trade Unions (LO), theSwedish Federation of White-CollarWorkers (TCO) and the SwedishFederation of Professional Associations(SACO) and the Private Sector White-Collar Workers’ Cartel (PTK, which is abargaining cartel that unites a number ofsectoral trade unions belonging to SACOor TCO), there are a large number ofnational trade unions for different

categories of employees. Privateemployers are affiliated to nationalorganisations and national employers’federations. State and local governmentemployers have their own organisations.

11.2 Collective AgreementsCollective agreements are an importantfeature of the Swedish labour system.They are usually entered into by thenational federations of trade unions andemployers’ organisations. Significant partsof labour legislation can be changed oradjusted through collective agreements.

Collective agreements can be negotiatedat a local or national level, although atpresent, the trend is towards local levelagreements. All categories of employeescan be covered.

Collective agreements must be in writingand are legally enforceable both inrespect of the employer and themembers of the relevant organisationsafter signing. They are typically for a fixedduration (e.g. two or three years) but canbe terminated by either party by way ofwritten notice.

There are no registration requirements forcollective agreements.

11.3 Trade DisputesSubject to what is stated below, tradeunions are entitled to take industrialaction, such as a strike. Employeescannot be dismissed for taking suchaction, unless the employee hasparticipated in an extended illegal strike.However, an employee can be dismissedon account of the effects of a strike, forexample, the liquidation of a companyfollowing a strike.

As a general rule, where a collectiveagreement governs the issues in questionboth employers and employees arerequired to refrain from industrial actionduring the term of the agreement. Only if amatter within applicable co-determinationprovisions is at issue and negotiationshave failed, industrial action may follow.

Damages to the trade union(s) can beawarded for failure to comply with the co-determination rules.


The most important collective labour lawprinciple in Sweden is co-determinationat work. More detailed provisions inrelation to co-determination at work arecontained in collective agreements. Inshort, trade unions always have the rightto consult an employer on matters whichconcern the relations between theemployer and the members of the tradeunion. In certain circumstances, theemployer must initiate consultations withtrade union(s) prior to issuing or reachinga decision. Trade union rights toconsultations are complemented bycertain information rights.


12.1 GeneralSweden implemented the AcquiredRights Directive. As a consequence,employees who work in a businesswhich is transferred will themselvestransfer with the business on unchangedterms and conditions of employment.However, accrued rights to old-age,invalidity and survivors benefits are nottaken over by the new employer. Theemployee may object to the transfer, inwhich case he/she remains employed bythe transferor.

The transfer will not, as such, constitute“an objective ground” for dismissal.Thus, the transferor may not dismissemployees due to a prospectivepurchaser’s wish to acquire a businesswith a reduced workforce.

If the transferor of a business is boundby a collective agreement, thepurchaser will automatically be boundby such agreement, provided that thepurchaser is not already party toanother collective agreement that maybe applied to the transferred


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employees. The transferor may,however, terminate the collectiveagreement prior to the transfer. If noticeof termination is given less than60 days before the transfer, thepurchaser will, however, be bound bythe collective agreement until 60 days’notice has expired.

Where the purchaser is bound to anothercollective agreement, it must still applythe terms of employment stipulated in thetransferor’s collective agreement inrelation to the transferred personnel forone year or until the term of thetransferor’s collective agreement hasexpired (if shorter). As a result, apurchaser already bound by a collectiveagreement may have to apply differentterms (e.g. salaries, working hours andthe like) to incoming employees than itapplies to its own employees falling withinthe same categories.

A share transaction does not normallyraise any specific employment law relatedissues except for information andconsultation requirements (see below).


Under the Swedish Co-determination Act(lagen om medbestämmande iarbetslivet), an employer, bound bycollective agreement(s), is obliged toinitiate consultations with the local tradeunion(s) before a decision is made whichinvolves a significant change in itsbusiness. A transfer of business alwaysqualifies as a significant change. There isno threshold number of employeestriggering this obligation. Further, the saleof a major subsidiary is also likely totrigger the obligation to consult.

If the employer is bound by one orseveral collective agreements, theconsultations must take place with thetrade union(s) party to the agreement(s).A trade union with a collective agreementis deemed to represent all theemployees, not just the members of thattrade union. As a consequence, it is

sufficient to perform the consultationswith such trade union(s). If the employeris not bound by any collectiveagreement, it is nevertheless obliged toconsult with all trade unions that have atleast one member affected by thetransfer of business.

There is no fixed minimum or maximumtime period during which the consultationsmust take place. The consultations mustbe carried out and finalised before theemployer makes a final decision. Theyshould be initiated at a sufficiently earlystage of the employer’s decision-makingprocess so that the consultations form anatural and effective part of the process.The rationale being that the trade unionshould have a realistic opportunity ofinfluencing the decision.

If no agreement can be reached with thelocal trade union, the employer must – ifso requested by the trade union – alsoconsult that trade union at a nationallevel. However, once the consultationprocess is completed, the employer isentitled to make its own decisionregardless of whether the trade unionapproves or not.

The length of a consultation process withthe trade union(s) will be dictated by thetrade union’s attitude towards the issuesin question and whether or not they referthe consultation to a national level.Typically, the consultation process will belonger if redundancies are involved.

There is no other obligation to inform andconsult any employee representatives,employees or works councils inconnection with a transfer of business,unless there are supplementaryprovisions in any applicable collectiveagreement or applicable European WorksCouncils agreement.

12.3 Notification of AuthoritiesApart from notice to the Swedish PublicEmployment Service (Arbetsförmedlingen)in the event of termination due toredundancy of more than five employees

(see section 13.5 below), the employerhas no obligation, from a labour lawperspective, to inform any governmentalbody of a merger or transaction.

12.4 LiabilitiesSanctions and remedies for breach of theCo-determination Act and/or collectiveagreements are mainly damages, bothfinancial and punitive, to the affectedtrade union(s). A court injunction cannotbe obtained to prevent or reverse atransaction, nor can any criminalsanctions be enforced due to a failureto consult.

13. Termination13.1 Individual TerminationA dismissal must be served in writing onthe employee. The employee must alsobe informed of the procedures by whichhe/she can appeal against a dismissal.The formal procedure is to notify theemployee as well as his/her trade unionof the proposed dismissal in order to givethe opportunity to either the employee orthe trade union to ask for consultation inrelation to the matter. After theconsultation procedure is finalised (anagreement does not have to be reached),the employee can be given notice. If theemployer fails to follow the formalprocedure, the dismissal will not beinvalid but the employer may as aconsequence be liable to pay damagesof between SEK 10,000 – SEK 20,000 tothe trade union.

13.2 NoticeDifferent notice periods apply toemployees employed prior to 1 January1997 and those employed thereafter. Foremployees employed before 1997, theperiod of notice of termination to be givendepends on the employee’s period ofservice and age. The shortest possiblenotice period is one month. An employeewho at the time when notice is given hasbeen employed by the employer for thelast six months or for a total of12 months during the last two years isentitled to a notice period of:



(a) two months if he/she has reached theage of 25;

(b) three months if he/she has reachedthe age of 30;

(c) four months if he/she has reached theage of 35;

(d) five months if he/she has reached theage of 40; and

(e) six months if he/she has reached theage of 45.

For employees employed since 1 January1997 the period of notice of terminationdepends only on the employee’s periodof service with the employer. However,the shortest possible notice period is onemonth. Employees are then entitled to aperiod of notice of:

(a) two months if the employee hasbetween 2 to 4 years of service;

(b) three months if the employee hasbetween 4 to 6 years of service;

(c) four months if the employee hasbetween 6 to 8 years of service;

(d) five months if the employee hasbetween 8 to 10 years of service; and

(e) six months if the employee has atleast 10 years of service.

Collective agreements and individualemployment contracts may containlonger notice periods which must then beapplied instead. If agreed between theparties, an employee can be paid in lieuof notice.

13.3 Reasons for DismissalThe employer has the burden of proof toshow that the dismissal is justified onobjective grounds. The grounds whichcan be relied upon are redundancy(e.g. lack of work) and personal grounds(e.g. severe incompetence, failure toco-operate and neglect of duty). Thepractice of the labour Court is to requirestrict proof from the employer. Swedishlaw distinguishes between dismissal withor without notice. In cases of gross

misconduct, dismissal without notice canbe permissible. In the examples referredto above, notice will usually be required.Before notice of dismissal is given, theemployer must ascertain whether it ispossible to assign the employee toanother vacant position at the company.Only if the employer is unable to findother duties for which the employee hasthe necessary skills, objective grounds fortermination exist. In the event oftermination due to redundancy, theemployer has to apply the “last in-firstout” principle.

A dismissal can be held to be invalid andan employee may be able to remain atwork until any litigation concerning his/heremployment is resolved. Any employercontravening the Employment ProtectionAct may be liable to pay damages for(i) salary and other benefits to which theemployee is entitled; and (ii) for anyloss/damage incurred by the employee.The damages may consist ofcompensation for the resulting loss aswell as for suffering caused by theunlawful act. The level of compensationfor loss occurring after termination is setby section 39 of the EmploymentProtection Act (a maximum of 32 months’salary may be awarded where theemployee had at least 10 years’ service).

13.4 Special ProtectionGenerally, there is no special protectionagainst dismissal, but any dismissalmust be objectively justified. Needless tosay, disability is not an objective groundfor termination.

Employees on parental leave can bedismissed like other employees, howeverthe notice period will only commenceonce the employee has returned fromhis/her parental leave.

It should be noted that trade unionrepresentatives enjoy extensive protectionunder the Swedish Trade UnionRepresentatives Act (lagen om fackligförtroendemans ställning påarbetsplatsen). Such representatives are

protected against dismissal on thegrounds of their trade union activities.Further, in the event of redundancies,trade union representatives are entitled tobe given priority to continue inemployment, provided continuedemployment is of particular importancefor the purposes of the general tradeunion activity at the work placeconcerned (and not only in relation to theredundancy situation). The onus is on thetrade union (and not the employer or theindividual representative) to determinewhether continued employment is of“particular importance”. Such issues can,however, be settled by court. If theemployer contravenes the trade unionrepresentative’s right to priority ofemployment, the dismissal can bedeclared void by the court uponapplication by the representative.


In the event of termination due toredundancy of more than five employees,the employer has to notify the SwedishPublic Employment Service. In addition,the employer must also initiateco-determination consultations with theaffected trade unions.

The employer may not decide at its owndiscretion which employees are to bemade redundant. Instead, as a generalrule, the principle “last in - first out”applies. This mandatory rule means thatthe employer must prepare a priority listfor each production unit and for eachcollective agreement sector (if there aremore than one). The employee’s positionon the priority list depends on his lengthof service with the employer or othergroup companies and, to some extent,age. Where two employees have equallength of service, the older will be givenpriority. An employee will, however, nothave priority over other employees unlesshe has the necessary skills for the job.There are, however, certain exceptions tothese rules with regard to smallercompanies (ten employees or fewer).Finally, it should be noted that it is


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possible to depart from the priority rulesby collective agreement.

14. Data Protection14.1 Employment RecordsProcessing of personal data is governedby the Swedish Personal Data Act (the“PDA”). The PDA implemented CouncilDirective 95/46. A new EU privacyregulation, which is expected to increasecompliance obligations and raisepenalties substantially, is, however,anticipated to come into force by 2015.

The PDA regulates the conditionsregarding processing of personal data,whether this is done by automated dataprocessing or manually. Collection,recording and storage are, among others,examples of operations that constituteprocessing of personal data.

The PDA applies to data controllerswhich are established in Sweden. A “DataController” is defined as a natural or legalperson which alone or jointly with othersdetermines the purpose and means ofthe processing of personal data. Inaddition, the PDA also applies to DataControllers who are established in acountry outside the EU/EEA but useequipment located in Sweden for theprocessing of personal data. In suchcases the Data Controller must appoint arepresentative established in Sweden.

Processing of personal data that is whollyor partially automated is, as a general rule,subject to a notification requirement.Notification should be given to thesupervisory authority, the Swedish DataInspection Board. However, there aremany exceptions to the notificationrequirement. Examples of such exceptionsare: (i) if a personal data representative isappointed and reported to the SwedishData Inspection Board; (ii) the personaldata is processed with explicit consent; or(iii) it is necessary for the Data Controller tofulfil its obligations or exercise rights underemployment law in order to protect vitalinterests of the data subject.

The Data Controller is obliged to takeappropriate technical and organizationalmeasures to protect the personal datathat is processed.

Violation of the PDA may under normal circumstances lead to fines and compensation claims from affected employees.

Employers as Data Controllers mustensure that the processing of personaldata is in accordance with the PDA’sfundamental requirements. For example,the personal data must: (i) be processedonly if it is lawful, in a correct manner andin accordance with good practice; (ii) becollected only for specific, explicitly statedand legitimate purposes; and (iii) not beprocessed for any purpose that isincompatible with that for which the datawas collected.

Personal data may, as a general rule, onlybe processed if the person concerned (the“Data Subject”) consents thereto. Ifconsent is not obtained, personal datamay nevertheless be processed if, and tothe extent, the processing is necessary inorder to, for example: (i) fulfil a contractbetween the Data Subject and the DataController; or (ii) protect a legitimateinterest, except for where such interest isoverridden by the interest of the DataSubject. Employee related personal datacan generally be processed on grounds(i) and (ii) above. Ground (i) includes allpersonal data that is necessary for theperformance of the employment contract,for example information necessary toadminister salary payment such asinformation regarding the employees’names, bank account numbers, positionsat the company, etc. Ground (ii) most likelyallows the processing of “neutral” factssuch as information on education, work lifeexperience and assignments performed.

The PDA contains stricter requirements inrelation to the processing of sensitiveinformation, including but not limited tohealth and membership in trade unions.

When collecting data from the DataSubject, the Data Controller must providethe Data Subject with information aboutthe processing, for example informationconcerning the purpose of the processingand the Data Controller’s obligation, uponrequest by the Data Subject, to provideinformation about, for example, the datathat is processed about the Data Subject(see section �14.2 below).

Employers are generally advised toensure they have some sort of personaldata policy in place and to ensure thatthe staff are aware of their dataprotection obligations.

14.2 Employee Access to Data The Data Controller is obliged to provideinformation at the request of a DataSubject on whether personal dataconcerning the Data Subject is beingprocessed or not. If personal data isprocessed, written information must beprovided about what information is beingprocessed, the source from which it wascollected, why the processing is takingplace (i.e. the purpose of theprocessing) and to which recipients orgroups of recipients the data isdisclosed. A signed, written requestmust be sent to the Data Controller bythe Data Subject. The Data Controllermust submit the information to the DataSubject free of charge and, as a generalrule, within one month of the request.The duty to respond to a datainformation request is limited to oneoccasion per calendar year.

14.3 MonitoringChecking an employee’s use of theemployer’s computer equipment isgenerally permissible in order for theemployer to protect a legitimate interest,except where such interest is overriddenby the interest of the Data Subject.However, please note that there may becertain requirements on information thatmust be provided to the employee beforesuch checks may be performed.



An employer is not entitled to read privateemails and files of the employees, unlessthere is serious suspicion of disloyalty orcriminal activity.

Camera surveillance, images and moviesfrom digital cameras are generallyconsidered to qualify as the processingof unstructured data. The processing ofsuch data is permissible if it does notviolate the Data Subject’s integrity. Inorder to decide if the camera surveillanceviolates the Data Subject’s integrity aproportionality assessment must becarried out.

Further, camera surveillance is regulatedboth by the law on public camerasurveillance (the “PCSA”) and the PDA.The PCSA governs camera surveillanceover areas where the public enjoysaccess and the PDA governs camerasurveillance in places where the publicdoes not enjoy access. Camerasurveillance over areas where the publicenjoys access may be subject topermission or notification to thesupervising authority, the countyadministrative board. However, it isanticipated that a new law regulatingcamera surveillance, the CameraSurveillance Act, will come into forceduring the next few years. The intentionis that all matters regarding camerasurveillance, except for private camerasurveillance, will be addressed by thenew Camera Surveillance Act. Under

this Act, it is proposed that a partyconducting camera surveillance shallcompensate a person undersurveillance for any damages andviolation of the person’s integrity causedby unlawful processing of visual andaudio materials.

It is anticipated that Swedish DataInspection Board will be responsible forthe supervision of the CameraSurveillance Act, including evaluating thelaw enforcement, giving advice andsupport to the county administrativeboards and providing general advice.


It is permitted to freely transfer personaldata between countries that aremembers of the EU/EEA.

As a general rule, the transfer of personaldata to a country outside the EU/EEAthat does not have an adequate level ofprotection for personal data is prohibited,unless the Data Subject has expresslyconsented to the transfer.

As an exception to this general rule, atransfer of personal data to a countryoutside the EU/EEA is permitted if thetransfer is necessary for: (i) theperformance of a contract between theData Controller and the Data Subject, ormeasures that the Data Subject hasasked to be taken before a contract isentered into; (ii) the conclusion or

performance of a contract between theData Controller and a third party which isin the interest of the Data Subject; (iii) theestablishment, exercise or defence oflegal claims; or (iv) the protection of vitalinterests of the Data Subject.

It should also be noted that the EuropeanCommission has issued decisions statingthat the use of certain standardcontractual clauses when transferringpersonal data from within the EU/EEA tocountries outside the EU/EEA offersadequate protection of personal data aswell as using so-called Binding CorporateRules (which need to be approved by theData Inspection Board) or the USDepartment of Commerce’s Safe HarborPrivacy Principles.

If the employer, as Data Controller,engages a third party to conduct theprocessing of personal data on behalf ofthe Data Controller (“Processor”), theremust be a written contract between theData Controller and the Processor whichstipulates that the Processor may onlyprocess personal data in accordance withinstructions from the Data Controller andspecifically addresses security aspects ofthe processing of personal data.

It is always the Data Controller who isresponsible to the Data Subject even ifthe Data Controller has engageda Processor.

Contributed by Mannheimer Swartling

A Guide to Employment in the European UnionUnited Kingdom

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United Kingdom1. IntroductionThis section describes the provisionswhich are generally applicable throughoutthe United Kingdom, but with particularemphasis on England and Wales. BothScotland and Northern Ireland have legalsystems separate from that of Englandand Wales (although in the field ofemployment law, the law in all threejurisdictions is similar).

The most important source of lawregulating the employment relationship isthe common law but statute neverthelessintervenes to protect employees (mostnotably in the fields of discrimination anddismissal and to govern certain areas ofcollective labour law) and to imposeduties on employers (for example, inrelation to pensions and share schemes).In general, it is not possible tocontract-out of statutory employeeprotection. Traditionally, collectiveagreements have not been accorded asmuch importance in the UK as in otherparts of the EU and are not normallylegally enforceable, however legislationdoes provide for compulsory trade unionrecognition by an employer where themajority of the workforce wishes it.

Many disputes between an employer andemployee are settled in special labourcourts (Employment Tribunals and theEmployment Appeal Tribunal) with a view,in theory at least, to providing aspecialised, quicker and more costefficient approach to resolving disputesthan is normally possible using theordinary courts.


2.1 GeneralThe common law and relevantemployment legislation apply equally toemployees at every level. Some of themore recent employment legislationcovers “workers”, a term which coversemployees, agency workers andcontract staff.

2.2 DirectorsThe position of directors of private andpublic limited companies, who may ormay not also be employees of thecompany, is further regulated bycompany law.

2.3 OtherPart-time employees have a statutoryright which, broadly speaking, entitles theemployee to be treated no less favourablyin respect of their terms and conditions ofemployment than a comparable full-timeemployee. A similar protection exists foremployees on fixed-term contracts whoalso have the right to be treated no lessfavourably in respect of terms andconditions of employment than acomparable permanent employeeperforming similar work. Generallyspeaking executive directors are engagedunder service agreements and areregarded as employees as well as officersof the employing company.

After a 12-week qualifying periodtemporary agency workers have a rightto equal treatment in relation to termsand conditions of employment incomparison to those that would haveapplied if they had been recruited directlyby the company.

It is anticipated that with effect fromApril 2013 there will be a new category ofemployee, the employee-shareholder.Such employees will be given shares ofnot less than £2,000 in value in theemployer and/or the parent company,they will be exempt from any capital gainstax on any gains on shares issued up tothe value of £50,000 (although shares ofa greater value may be issued). Suchemployee shareholders will, however, notbe able to claim unfair dismissal (exceptwhere dismissal is for a reason that isautomatically unfair (e.g. fordiscriminatory reasons or for ‘blowing thewhistle’)) or statutory redundancypayments, their ability to make flexibleworking requests will also be limited.

3. Hiring3.1 RecruitmentEmployers recruit through a variety ofsources, including via the internet andby advertising in newspapers orjournals. Private, fee-chargingrecruitment agencies are commonlyused for some types of employees, forexample, secretarial staff and senior andprofessional staff. State-run “JobCentres” provide a free recruitmentservice which is used by employers torecruit less senior employees. There is,however, no obligation on employers touse the state Job Centres. Privaterecruitment agencies no longer require alicence before they can operate but arenevertheless subject to regulation.

3.2 Permission to work in the UKThe general rule is that anyone who isnot a British citizen, a national ofanother member state of the EuropeanEconomic Area (EEA, i.e. EuropeanUnion member states, Iceland,Liechtenstein and Norway) or a Swissnational, is subject to immigrationcontrol and may not work in the UKunless they have a visa issued by theUK Border Agency (UKBA) entitlingthem to work in the UK. Some controlsapply in respect of particular EUmember states, however.

Employer liability Since 29 February 2008 it has been alegal requirement for employers tocheck the immigration status of theiremployees. Checks should be made ofall employees, not only those whoappear likely to require immigrationclearance (as above), to avoid anypotential discrimination issues. Checksshould be carried out before aprospective employee starts work andthen at least annually until anemployee provides evidence (in a formspecified by law) of an indefiniteentitlement to remain and work in theUK. Existing employees should also bechecked for good measure.


253A Guide to Employment in the European UnionUnited Kingdom

Employers may be liable for a criminaland/or civil penalty (respectively) if theyknowingly or negligently employ a personwho is in the UK illegally or in breach ofhis/her immigration controls. An officer (orpartner) of the employer may bepersonally liable if he or she consents orconnives in the employment or it resultsfrom his or her negligence. Foremployees employed from 29 February2008, the sanctions may be a fine of upto £10,000 per illegal worker (civil) or anunlimited fine and/or up to two years’imprisonment (criminal). Employers maybe excused from the civil penalty if theycan show that they checked at leastannually that the employee had thenecessary documents entitling them towork in the UK (there is a statutory list ofacceptable documents) and retainedcopies of the original documents seen.

Points-based system (PBS)The UK PBS has five tiers or categories(which cover, respectively, highly skilledworkers; skilled workers with job offers;low skilled workers to fill temporary labourshortages (this tier is not open); students;and temporary workers). Migrants mustscore points, based on attributes whichpredict their likely success in the labourmarket and compliance with theirconditions of leave in the UK, in order toqualify to enter or remain in the UK underthe appropriate tier. Tier 2 is the mostrelevant tier for UK employers.

Tier 2 (skilled workers with job offers)Tier 2 is aimed at enabling UK employersto recruit employees from outside the UKand EEA to fill a particular job for whichno British or EEA worker is available.There are two main categories: (i) Tier 2(General) whereby either a ‘resident labourmarket test’ must be satisfied to showthat no British or EEA worker is available(for roles that attract a salary of less than£150,000 per annum) or the role must bein a category identified by the UK as a‘shortage occupation’; and (ii) Tier 2 (Inter-Company Transfer (ICT)) under whichworkers who have been employed by anoverseas group entity for specified periods

(depending on the type of position theywill fill, but usually 12 months) may moveto a UK group entity.

In order to employ a worker under Tier 2,the employer must first obtain a licenceto sponsor migrants. To become asponsor, the employer will need to makean electronic application to the UKBAand provide certain supportingdocuments. The supporting documentswill vary depending on the type oforganisation. If a licence is granted theemployer’s name and rating will bepublished on the UKBA’s register ofsponsors. The sponsor will be rated ‘A’ or‘B’, depending on whether they pose arisk to immigration control and/or haveappropriate systems in place to complywith the UKBA requirements forsponsoring Tier 2 migrants.

Licensed sponsors are required to fulfilcertain duties. The relevant duties forTier 2 sponsors include: record keeping,reporting, complying with the law,co-operating with the UKBA and issuing acertificate of sponsorship only if satisfiedthat a migrant intends to and is able to dothe specific skilled job proposed. In orderto apply for a sponsorship licence, theemployer must allocate members of itsstaff based permanently in the UK as ‘keypersonnel’, to have responsibilities inrelation to sponsorship and to be a pointof contact for the UKBA.

Once licensed, a sponsor is entitled toissue ‘certificates of sponsorship’. Acertificate of sponsorship is a referencenumber generated following an onlineapplication in which the sponsor providesdetails of the role, the salary and thecandidate they intend to employ.

Once a certificate of sponsorship hasbeen issued, the prospective migrantworker will need to make an applicationfor leave to enter or remain in the UK. Intheir application, the prospectiveemployee will need to give the certificateof sponsorship reference number andprovide details and supporting evidence

regarding their academic qualifications,prospective salary, English languageability (for Tier 2 (General) but not usuallyICT) and having specified funds availableto maintain themselves in the UK (anA-rated sponsor can guarantee this‘maintenance’ requirement). The fact thata certificate of sponsorship has beenissued does not guarantee that themigrant will be successful in obtainingentry clearance or leave to remain.

Following the change in government inMay 2010, a temporary limit on thenumber of migrants entering andremaining in the UK under Tier 2(General) was introduced in July 2010 forthe period up to 31 March 2011. Annuallimits were introduced in April 2011.

An annual limit of 20,700 applies tomigrants entering the UK under Tier 2(General). The limit does not apply toin-country applications (from thosealready in the UK), to dependents of Tier2 migrants or to those seeking admissionto fill a vacancy attracting a salary of£150,000 or more. Applications forrestricted certificates of sponsorship areconsidered on a monthly basis. It isnecessary for a sponsor to request a‘restricted’ certificate of sponsorship fromthe UKBA by submitting an onlineapplication using the SponsorManagement System. In months whenthe limit for Tier 2 (General) isoversubscribed, shortage occupationsare prioritised and other applicationsranked according to the salary payablefor the role. To date, the allocation hasbeen undersubscribed each month. Thegovernment has confirmed that theannual limit of 20,700 certificates willremain in place until April 2014.

The Tier 2 (ICT) route is not included inthe Tier 2 limit however ICT migrants arerestricted to a certain length of time in theUK. The minimum salary requirement fora Long-Term Staff migrant to come to theUK for more than 12 months is £40,000(and up to five years). A minimum salarythreshold of £24,000 applies to the


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Short-Term Staff and Graduate Traineesub-categories with a maximum stay ofup to 12 months. The ICT Skills Transfervisa also requires the employee be paid aminimum salary of £24,000 and wouldallow them to remain in the UK for up tosix months. (Sponsors should be awarethat an ICT migrant’s salary must alsomeet the minimum level for the relevantOccupation/Code of Practice as specifiedby the UKBA, which may be higher thanthis amount).

The new ‘Senior Staff’ sub-category ofICT visa will allow senior members of staff(earning £150,000 or more) to transfer tothe UK for up to nine years.

Following the introduction of the12 month ‘cooling-off’ policy in April2012, Tier 2 migrants are now restrictedto a period of five or six years in the UK(for ICT Long-Term Staff and Generalmigrants respectively) after which timethey will be required to remain outside ofthe UK for 12 months before applying foranother Tier 2 visa. This policy does notaffect Tier 2 migrants who have held anICT (Short Term, Graduate Trainee orSkills Transfer) visa and will be returningto the UK on an ICT Long Term visa withthe same employer. It also does not applyto Tier 2 ICT migrants who were granteda visa prior to 6 April 2011.

It is envisaged that the ‘cooling-off’period will also apply to the ‘Senior Staff’ICT migrants after working in the UK forthe maximum period of nine years.

Tier 1 (highly skilled workers)Tier 1 allows certain individuals to cometo the UK and to work or undertake selfemployment opportunities. There is norequirement for sponsorship.

Tier 1 is not relevant to most UKbusinesses, as the previous Tier 1(General) route for highly skilled workershas been closed to new applicants sinceApril 2011. It is possible for Tier 1General Migrants to extend their stay inthe UK as long as they continue to meet

the points requirement under theimmigration rules.

There are four other categories within Tier1. Two of the categories, ExceptionalTalent (intended for academics, scientistsand artists in particular and requiresapplicants to be internationallyrecognised in their field) and GraduateEntrepreneur (to allow graduates whobeen identified by UK Higher EducationInstitutions as having developed worldclass innovative ideas or entrepreneurialskills to establish one or more businessesin the UK) are limited to 1000 migrantsannually. There is also the Entrepreneurand Investor routes under Tier 1 for highnet worth individuals running businessesand/or investing in the UK. These are notsubject to a limit on numbers.

SettlementGenerally, migrants are initially grantedleave to enter or remain in the UK forthree years under the above categories,which can then be extended if therelevant criteria for attributes for extensionare satisfied. Employees may apply forindefinite leave to remain in the UK afterbeing in the UK for 5 years under Tier 1or Tier 2 (this qualifying period can beshorter for Tier 1 Entrepreneur andInvestor routes). Tier 2 ICT migrants willonly be eligible to apply for IndefiniteLeave to Remain if they were grantedleave under the ICT scheme before 6April 2010. For those granted a visa afterthis date but up to and including 5 April2011, they will be able to extend theirvisas indefinitely in the UK but will notqualify for settlement.

Should a Tier 2 General migrant notobtain settlement before the end of theirsix year stay they will be required to leavethe UK at the end of that period and willbe subject to the 12 month‘cooling-off’ policy.

Settlement for Tier 1 or Tier 2 (General)migrants is subject to satisfying criteria inrelation to English language andknowledge of life in the UK. Additional

criteria, including a minimum paythreshold of £35,000 will apply to Tier 2migrants applying for settlement fromApril 2016.

Tier 5 Temporary WorkersThere are a number of schemes underTier 5 which allow non-EEA nationals toundertake temporary work placements inthe UK.

The Tier 5 Youth Mobility Scheme is opento nationals (aged between 18 and 30years of age) from Australia, Canada,Monaco, New Zealand, Republic of Koreaand Taiwan. Nationals from thesecountries and territories can live and workin the UK for up to 24 months. (Japan willalso be joining the Youth Mobility Schemein January 2013). There are restrictionson the type of employment/selfemployment the holder can undertakeand as it is a temporary visa, employersshould not hire individuals on apermanent contract whilst holding thisvisa. The number of places available onthis scheme are allocated by thegovernment each year. In 2012, 51,000places were available and this figure willincrease to 54,500 in 2013.

The other categories within Tier 5 areCreative and Sporting, Charity Workers,Religious Workers, GovernmentAuthorised Exchange Scheme andInternational Agreement. As it isnecessary for a Sponsor to assign aCertificate of Sponsorship for these roles,there will be a restriction on the type ofrole individuals holding these visascan undertake.

EU nationalsBulgarian and Romanian nationals requireUKBA permission to work in the UK. Ingeneral terms: (i) an accession workercard and a work permit (under the oldpre-PBS work permit system) arerequired for skilled work, for the first12 months; (ii) particularly highly skilledBulgarian and Romanian workers may beadmitted under the highly skilled migrantprogramme (which remains from the old



pre-PBS system, for Bulgarian andRomanian nationals only); and (iii) limitednumbers of Bulgarian and Romanianworkers may be employed for up to sixmonths’ low-skilled agricultural work orup to 12 months in certain low-skilledfood manufacturing positions. Therestrictions applied to Bulgarian andRomanian nationals will continue until theend of 2013. It is expected that similarrestrictions will apply to Croatian nationalsonce Croatia joins the EU in July 2013.

4. DiscriminationDiscrimination in the work place, whetherit be in connection with recruitment,treatment during the course ofemployment, in respect of terminationand in certain circumstances following theend of the employment relationship, isrendered unlawful under the Equality Act2010. The Equality Act prohibitsdiscrimination on the grounds of sex,gender reassignment, marital status andcivil partner, colour, race, nationality andethnic or national origins, disability, sexualorientation, religion or belief, pregnancyand maternity and age. In NorthernIreland, it is additionally unlawful todiscriminate on political grounds.

It is also illegal to discriminate against anemployee on grounds of his or hermembership or otherwise of atrade union.


5.1 Freedom of ContractIt is a basic principle that parties are free tocontract on whatever terms they choose.However, certain provisions, for examplethose concerned with preventingcompetition by a former employee, are notenforced by the Courts if they areconsidered a restraint of trade. In addition,subject to certain exceptions, attempts tocontract out of statutory employmentprotection are void. Contracts may be for afixed or an indefinite period (i.e. terminableon notice), as the parties think most

appropriate. However, the use ofsuccessive fixed-term contracts is restricted.

An employee engaged under a fixed-termcontract will be classified as a permanentemployee if all of the following conditionsare satisfied:

(a) the employee is currently employedunder a fixed-term contract; and

(b) that fixed-term contract haspreviously been renewed or theemployee was previously employedunder another fixed-term contractbefore the start of the currentcontract; and

(c) the employee has been continuouslyemployed under fixed-term contractsfor a period of four years or more; and

(d) at the time the contract was renewed(or entered into) the employer couldnot objectively justify the use of a fixed-term contract (e.g. where funding isonly available for a limited period).

For the purposes of statutory protection,there is little distinction between theposition of employees on fixed-term andindefinite contracts, since the accrual ofcertain of the more significant rightsdepends on the period the employee hasworked irrespective of whether this isunder a fixed-term or indefinite contract.Broadly speaking, an employee will enjoysignificant statutory rights after two years’continuous employment, although somerights, especially those associated withanti-discrimination legislation, areexercisable irrespective of length ofservice. In addition, employers are notable to treat employees on fixed-termcontracts less favourably than similarpermanent employees.

5.2 FormThere are no particular requirements as tothe form of contracts of employment,which may be oral or written (except inScotland where a contract for a term ofmore than 12 months should be inwriting). In the case of senior employees

(for example, managing directors), thecontract is more likely to be contained ina formal written service agreement.

However, there is a statutory requirementthat all employees be provided with asingle document containing writtenparticulars of certain details of theircontract of employment within two monthsof commencement of employment.

5.3 Trial PeriodsIt is not uncommon for parties to agree atrial period but there are no specific legalrequirements governing such periodsand, since (with certain exceptions) anemployee does not qualify for statutoryprotection against unfair dismissal untilemployed for two years, this allows theemployer a reasonable period to assessthe employee’s suitability.


Although there are no statutory rulesgoverning confidential information, anemployee is bound by a general duty ofgood faith and a duty not to disclose theemployer’s confidential information. Theextent of these general duties is not in allcases well defined and a prudentemployer may, depending on the natureof the business, consider including anexpress confidentiality provision in thecontract of employment.

Although express provisions in a contractmay be used to stop an employee fromcompeting with his employer both duringand after the employment, it should benoted that since provisions which purportto restrict competition after termination ofthe employment are generally regardedas contrary to public policy, they will onlybe enforceable if they are reasonable andthe employer has a legitimate interest toprotect (i.e. confidential information ortrade connections).

5.5 Intellectual PropertyBroadly speaking, if intellectual property iscreated by an employee during thecourse of employment, it will belong to


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the employer and compensation is onlypayable to the employee inlimited circumstances.

6. Pay and Benefits6.1 Basic PayThere is a national minimum wage of£6.19 per hour for employees age 21 andabove. It is £4.98 per hour in the case ofyoung people aged 18 to 20. For 16 to17 year olds the rate is £3.68 an hour.These rates are generally increasedannually in October of each year.

Lower-grade workers in the UK aregenerally paid a weekly wage, oftendetermined by reference to an hourlytime rate, although in some industries itis customary for workers to be paid“piece-rates” according to the amountof work done. Overtime at a premiumrate is generally paid in respect ofadditional hours worked. More senioremployees are normally paid monthly inarrears and are not generally paid forovertime worked.

It is not common for pay to be index-linkedand, subject to the national minimumwage, there are no legal obligations onemployers to increase wages.

6.2 PensionsAlthough state pensions are providedunder the social security system(comprising a basic state pension andan additional proportion currently relatedto an individual’s earnings), privatepension schemes are of importance.Private pension provision may be byway of an employer-sponsoredoccupational pension scheme, or by anindividual employee’s own personalpension scheme.

The cost of such provision, to both theindividual employee and the employer, mayvary enormously depending on the type ofbenefits provided and the individualsinvolved. There is no longer any statutorylimit on the level of contributions, whichcan be made to a “registered pension

scheme”. Instead of limits on contributionsthere is now an “annual allowance”available to the individual. If the individual’stotal “pension input amounts” (essentiallythe value of the contributions from both theindividual and the employer to a pensionscheme) in any particular tax year exceedsthe annual allowance for that year then atax charge will be levied on the excess.This charge is payable by the individual.

Although state pensions are providedunder the social security system(comprising a basic state pension andan additional proportion currently relatedto an individual’s earnings), privatepension schemes are of importance.Private pension provision may be byway of an employer-sponsoredoccupational pension scheme, or by anindividual employee’s own personalpension scheme.

The cost of such provision, to both theindividual employee and the employer,may vary enormously depending on thetype of benefits provided and theindividuals involved. There is no longerany statutory limit on the level ofcontributions, which can be made to a“registered pension scheme”. Instead oflimits on contributions there is now an“annual allowance” available to theindividual. If the individual’s total “pensioninput amounts” (essentially the value ofthe contributions from both the individualand the employer to a pension scheme)in any particular tax year exceeds theannual allowance for that year then a taxcharge will be levied on the excess. Thischarge is payable by the individual.

Prior to 1 October 2012, there was noobligation on an employer to make anypension provision other than arequirement for employers employing fiveor more employees to designate andfacilitate access to a stakeholder pension.

However, on 1 October 2012, thegovernment’s automatic enrolmentregime came into force, imposing astatutory duty on employers to

automatically enrol all eligible employees(aged 22 and above) into the NationalEmployment Savings Trust (known as“NEST”) or their own qualifying pensionscheme (although employees will be ableto opt out) and make minimumcontributions. Employers and employeeswill have to pay contributions of 3% and4% (to be phased in over time) ofrelevant earnings respectively, with anextra 1% from the Government in theform of tax relief. Depending on theirsize, employers will be required todischarge these duties on a staggeredbasis. Employers who fail to comply withtheir duties in respect of NEST may facean initial fine from the Pensions Regulatorof up to £50,000, and they may also besubject to criminal proceedings.

The staging timetable for auto-enrolmentruns from 1 October 2012 until 1February 2018, and an important obviouspoint to note is that for many employers,there will not be a statutory duty toprovide access to a pension scheme fortheir employees for some years.

As far as stakeholder pensions areconcerned, the requirement todesignate and facilitate access to onewas effectively abolished on 1 October2012, however transitional provisionscontinue to protect employees who arealready members of their employer’snominated stakeholder pension schemeon that date. New employees and otheremployees not covered by thetransitional measures will no longerneed to be given access to astakeholder pension.

Supplementary provisions also apply from1 October 2012, requiring an employer tonotify an employee of the consequenceof having made a request to ceasemaking deductions.

6.3 Incentive SchemesShare schemes are not mandatory inthe UK but are popular because of thefavourable tax treatment they receiveand there is a well-developed legislative



framework in place to governsuch schemes.

6.4 Fringe BenefitsCommon fringe benefits may typicallyinclude private medical insurance fortreatment taken outside the NationalHealth Service and cars (for more senioremployees particularly). Such fringebenefits may be either contractual or ex-gratia. If benefits are contractual, caremust be taken if the employer proposesto withdraw them.

6.5 DeductionsAlthough generally employers areprohibited from making deductions frompay, they are obliged to deduct incometax at source through the “Pay As YouEarn” (PAYE) scheme. They are alsoobliged to deduct employees’ NationalInsurance contributions (socialsecurity contributions).

7. Social Security7.1 CoverageThe single state-administered socialsecurity system provides benefits by wayof pensions, unemployment benefits,family-based benefits and support forindividuals on low income. Employersshould be aware both of the costsinvolved, and of the administrative burdenof some state guaranteed benefits (forexample, statutory sick pay and statutorymaternity pay) responsibility for which hasbeen devolved to employers.

Health care has traditionally beenprovided by the state-run National HealthService. However, recent reforms havebeen aimed at encouraging increaseduse of private medical insurance andprivate medical insurance has become anincreasingly common employee benefit.

7.2 ContributionsEmployers must deduct from employees’pay National Insurance contributionspayable by employees and make anemployer’s contributions in respect ofeach employee. National Insurance

contributions are payable by employeesat a rate of 12% of earnings between thelower and upper earnings limit which arefixed each year, (for the year 2013/14these are £149.00 and £797 per week)and a further 2% on earnings over £797a week. Employer’s contributions are13.8% above £149 per week for the year2013/2014 and uncapped. Lower ratesare payable if the employees are in“contracted-out” employment (that is if, inreturn for paying the lower rate ofcontributions, the employer and/or theemployee make separate arrangementsto cover part of what would, otherwise,have been the additional state pension).

8. Hours of WorkThe usual working week is 40 hours inindustry and 35 hours in offices. Specificlimitations are imposed by the WorkingTime Regulations on the hours workedeach day and each week by “workers”(this includes employees and agencyworkers). Generally, working time mustnot average more than 48 hours perweek over a reference period of 17weeks. Workers are also entitled to adaily rest of at least 11 consecutive hoursin each 24-hour period and a weekly restperiod of not less than 24 hours in anyseven-day period.

Night workers (i.e. where at least threehours of daily working time is worked atnight as a matter of course) must notwork in excess of eight hours in eachperiod of 24 hours.

9. Holidays and Time Off9.1 HolidaysIn England and Wales, there are normallyeight public holidays per annum. Allworkers are entitled to a minimum of 5.6weeks’ (28 days for someone working afive day week) paid annual leave, whichaccrues on a pro rata basis from the firstday of employment and can include theBank Holidays. Money may not generallybe paid in lieu of untaken statutoryholiday entitlement except on termination

of employment. Employees are notnecessarily entitled to take holiday whena Bank Holiday actually falls and can berequired to take it at some other time ifthat suits the employer’s business better.

9.2 Family LeaveFemale employees are entitled to26 weeks’ ordinary maternity leave and26 weeks’ additional maternity leave(there is no length of service requirement).Statutory Maternity Pay (SMP) is payablefor 39 weeks. Subject to the employeemeeting the earnings eligibilityrequirements. SMP is payable for sixweeks at 90% of average weeklyearnings and 33 weeks at a flat rate(£135.45 April 2012 to March 2013;£136.78 from 7 April 2013) or 90% ofnormal weekly earnings if this is lower.The flat rate of SMP is revised in Aprileach year.

Men and women with one year’scontinuous service are entitled to 13weeks’ unpaid parental leave in respectof children under five. Employees ofdisabled children under 18 are entitled tounpaid parental leave of 18 weeks. FromMarch 2013 the period of unpaid parentalleave will increase from 13 to 18 weeks.Employees are also allowed unpaid timeoff to deal with emergencies arising inrelation to dependants.

Fathers (and one adoptive parent) areentitled to elect to take one or twoweeks’ paid ordinary paternity leave,payable at the same rate as SMP.Additional paternity leave of up to 6months is also available. Some of theadditional paternity leave may be paid atthe same rate as SMP, depending onwhen the mother returns to work.Additional paternity leave can commencefrom the 20th week after the child’s birthprovided the child’s mother has endedher maternity leave. The maximum periodof additional paternity leave is six monthsand cannot be taken beyond the child’sfirst birthday. Accordingly the length ofthe additional paternity leave will bedictated by when the child’s mother ends


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her maternity leave. Entitlement toadditional paternity leave is subject tocertain qualifying conditions andnotification obligations.

Additional paternity leave is only aninterim measure until the new flexibleparental leave regime is introduced in2015. Under the proposed flexibleparental leave regime the mother andfather or mother and her partner (theparents) will (subject to meeting qualifyingservice and notification criteria) be entitledto share the untaken balance of themother’s 52 weeks maternity leave andtake it as flexible parental leave. Flexibleparental leave (FPL) may be taken at anytime after the two week compulsorymaternity leave period. It must, however,be taken in minimum blocks of one week.It may be taken in a pattern of theparent’s choice subject to the employer’sagreement. The intention is that theparents can intersperse periods of workwith periods of FPL and may also takethe FPL simultaneously if they so choose.

Parents who meet the qualifying conditionswill be entitled to receive statutory flexibleparental pay (FPP). The aggregate ofStatutory Maternity Pay (SMP) and FPPmust not exceed 39 weeks in total; that is,the balance of the unpaid SMP will bepayable as FPP. FPP will be payable at thebase rate of SMP.

9.3 IllnessEmployees absent from work by reasonof sickness or injury have a right toreceive statutory sick pay (SSP) from theiremployer. Part of the cost may berecouped from the employer’s NationalInsurance contributions once paymentsof SSP exceed a certain level. The rate ofSSP in April 2012 is £85.85 and willincrease to £86.70 on 6 April 2013. SSPis revised in April each year.

In addition, it is not unusual foremployers to agree to pay employeesan amount greater than statutory sickpay for a limited period, the length ofwhich will vary, depending upon the

custom of the industry and the status ofthe employee.

9.4 Other time offCertain employees have the right torequest flexible working arrangements,namely those employees who are parentsof disabled children under 18 or childrenunder seventeen. This right also appliesto carers of certain adults. In order to beeligible to make such a request, theemployee must have worked for theiremployer continuously for 26 weeks. Theright to request flexible working is to beextended to all employees in 2014 (Aprilat the earliest).

10. Health and Safety10.1 AccidentsEmployers are under a duty to haveregard for the health and safety of theiremployees while at work (but nottravelling to or from work), and are obligedby statute to maintain insurance againstliability for injury and disease arising out ofemployment. These duties arise underboth statute and the common law. TheHealth and Safety at Work etc Act 1974lays down the general principles to befollowed by an employer in relation tohealth and safety, and criminal as well ascivil liability may result from a failure tocomply with the provisions of that Act. Inaddition to the general principles laiddown by that Act, there are numerousspecific Acts and regulations governingcertain types of work place and certaintypes of work activity.

10.2 Health and Safety Consultation Employers in the United Kingdom areunder an obligation to consult with theiremployees on health and safety mattersand are obliged to have a writtenstatement on their general health andsafety policy, which must be available toemployees. Consultation must be carriedout through a safety representativenominated by a recognised trade union(or a Health and Safety Committee, ifrequired by the union), elected employeerepresentatives or directly with

employees. Certain information must bemade available by the employer.

11. Industrial Relations11.1 Trade UnionsThe importance of trade unions hasdeclined over the last twenty years,although this position may now bechanging. However, in some industriesunionisation is still relatively strong. Majorunions include the GMB, Unison andUnite. Trade Unions may be generalunions covering many industry sectors orsector specific.

Legislation provides for compulsoryrecognition of a trade union by anemployer where a majority of the relevantworkforce support the union inbusinesses which employ at least21 employees. If a union becomesrecognised the employer and union musttry and conclude a procedure agreementto regulate their relationship and todetermine the matters to be the subjectof negotiation. In the absence ofagreement, a procedure based on astandard model will be imposed. Closedshops are illegal.

11.2 Collective AgreementsCollective agreements betweenemployers and trade unions are mostusually found in the industrial sector andoften regulate matters such as pay,working hours, holidays, disputeprocedures and procedures to deal withredundancy. However, whilst normallynot legally enforceable between theemployer and the union at present, suchcollective agreements may have legalconsequences for the employer, sincecertain terms in such agreements maybecome incorporated (either expressly orby implication) into individual employees’contracts of employment and where thishappens become enforceable(collectively agreed wage rates, forexample). Furthermore, in someindustries unionisation remainssufficiently strong for industrial pressureto prove an effective means of securing



observance of otherwise legallyunenforceable collective agreements.Employers who have had to recognise aunion as a consequence of compulsoryrecognition imposed on them (or haveagreed to) will have to negotiate with theunion concerning pay, hours, holidaysand training.

11.3 Trade DisputesThe United Kingdom does not have acomprehensive “strike law” or anyenshrined right to strike. Rather, individualsand unions are granted certain limitedstatutory protection from liability, which theywould otherwise incur under the commonlaw, when taking industrial action pursuantto a trade dispute. To enjoy such immunity,trade unions are required to hold ballots,which conform to statutory requirements.An employee who takes industrial actionloses the right to pay during that periodand is not entitled to receiveunemployment benefit (although theemployee’s family may in certaincircumstances receive other social securitybenefits). It is unfair to dismiss an employeewho is taking “protected” industrial actionunless it lasts more than twelve weeks andthe employer has complied with certainprocedural requirements.


There are at present no formalisedrequirements for employee participationin the UK, although some employersoperate share schemes as an additionalremuneration incentive. However,obligations do arise with respect toconsultation and the provision ofinformation to appropriaterepresentatives (these are usually eitherelected employee representatives orrepresentatives of a recognised tradeunion). The obligations are:

(a) where a union is recognised for thepurposes of collective bargaining,certain information must be disclosedto that union to assist in that process;

(b) to consult with appropriaterepresentatives in the context of a

collective redundancy (see further below);

(c) employers are required to providecertain information to appropriaterepresentatives upon a businesstransfer regardless of the number ofemployees affected (see further below);

(d) employers must consult withemployees on health and safetymatters. Consultation has to be withrepresentatives nominated by arecognised trade union, electedemployee representative oremployees directly; and

(e) employers with 50 or more employeesare required to consult withprospective and active members ofoccupational and personal pensionschemes and their representativesbefore making certain specifiedchanges to the pension arrangements.

Under the Transnational Information andConsultation etc Regulations 1999 (whichimplement the European Works CouncilDirective), any undertaking or group ofundertakings with at least 1,000employees in the EU and 150 employeesin more than one EU state may have toset up a works council or a procedure forinforming and consulting employees atEuropean level. While the Regulationsclearly regulate the initial establishment ofthe employee negotiating, subsequentnegotiations are generally up to theparties to regulate.

The European Public Limited LiabilityCompany Regulations (which implementthe Workers Participation Directive)provide for the regular consultation of,and provision of information to, a bodyrepresenting the employees of thecompanies that have formed a EuropeanCompany, in respect of current and futurebusiness plans, production levels,management changes, collectiveredundancies, closures, transfers,mergers and so on. Management of theparticipating companies andrepresentatives of the employees will berequired to try to reach a voluntary

agreement on the employee involvementarrangements or to agree to rely onnational information and consultationrequirements. Failure to reach agreementwill result in default rules applying.

The Information and Consultation ofEmployees Regulations 2004 (whichimplement the Workers Information andConsultation Directive) apply toundertakings with 50 or more employees.The legislation does not oblige employersto set up a domestic works council, orsimilar information and consultationforum, in the absence of the legislativeprocedure being triggered. A request by10% of the undertaking’s employees willtrigger the procedure giving the employeran opportunity to negotiate a voluntaryinformation and consultation process.The nature, subject matter or timing ofinformation and consultation can betailored to the structure and ethos of theundertaking. If no agreement can bereached a default information andconsultation procedure will apply underwhich employers will be obliged to informand consult employee representatives inrelation to a number of matters, includingthe recent and probable development ofthe undertaking’s activities, its economicsituation and business decisions likely tolead to substantial changes in the undertaking.


12.1 GeneralUpon the transfer of an undertaking,employees are provided with protectionin that their contract automaticallytransfers from the transferor to thetransferee. Any dismissal connectedwith the transfer will, in principle, beunfair and give rise to an entitlement toclaim statutory compensation. Changesto terms and conditions of employmentby reason of the transfer are void, evenif agreed to by employees except inlimited exceptional circumstances. Firstwhere there is an economic, technicalor organisational reason for the change


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and it involves a change in theworkforce. This exception is narrowlyconstrued and would not apply to asimple post-acquisition contractharmonisation exercise. The secondsituation where changes may be madeinvolves insolvent employers. Finally, achange may be made if the employeeregards the change as beneficial.Employees can object to the transfer,should they do so their employment istreated as at an end and nocompensation is payable.


In the event of a transfer of anundertaking the employer of any affectedemployees must inform appropriaterepresentatives of the proposed transferlong enough before the transfer toenable consultation about any proposedmeasures to take place. There is nostatutory timetable over which theprocess must occur. Affected employeescan include any of the workforce ofeither transferor or transferee affected bythe transfer, even if they are nottransferring. Appropriate representativesare representatives of a trade unionrecognised by the employer or, in anyother case, appointed or electedemployee representatives. The object ofthe information exercise is to inform therepresentatives of the fact that a transferhas to take place, including when andwhy it is to take place, and its legal,economic and social implications for theemployee. The employer must alsoconsult with a view to reachingagreement about any proposed“measures” which will affect theemployees. The measures need not havea detrimental effect in order to trigger theobligation to consult. There is, however,no obligation to reach agreement.

12.3 Notification of AuthoritiesIn the absence of any collectiveredundancies, there is no obligation,from an employment perspective, tonotify the authorities of an acquisition ormerger. Competition issues may in

some cases require prior notificationand/or approval.

12.4 LiabilitiesIn the event that a transferor or transfereefails to comply with its information andconsultation requirements a complaintmay be made to an Employment Tribunaland if the complaint is upheld, theTribunal may award each affectedemployee compensation of up to13 weeks’ pay, with no limit on theamount of a week’s pay. In practice themaximum award of 13 weeks’ pay will beawarded unless there are exceptionalcircumstances justifying a lower award.The transferor and transferee are jointlyand severally liable for suchcompensation. Failure to inform andconsult will not prevent a transaction fromcompleting and injunctive relief is notavailable from the courts to prevent atransaction going ahead without theinformation and consultation obligationsbeing met.

13. Termination13.1 Individual TerminationAn employer wishing to terminate theemployment relationship must be carefulto comply with both the statutory andcontractual requirements with regard toreasons for and procedures leadingto dismissal.

13.2 NoticeStatute lays down a minimum period ofnotice, which will apply where thecontract of employment does not makeany provision for notice or thecontractual notice period is less than thestatutory minimum.

The statutory minimum period of noticeis one week for employees with serviceof more than one month but less thantwo years, and one week for eachcomplete year’s service for those whohave worked more than two yearssubject to a ceiling of 12 weeks’ noticeafter 12 years’ employment.

In practice, employees who are seniorexecutives will generally enjoy longernotice periods under their contracts ofemployment (typically three to sixmonths) and very senior employees (forexample, executive directors of largecompanies) may have much longernotice periods (although the UKCorporate Governance Code andinstitutional investor guidelines do notfavour a period of more than twelvemonths) and the Companies Act 2006requires shareholder approval forguaranteed terms of two years or more.Where a contract of employment doesnot state the notice period, whilst thestatutory minimum period of notice willgenerally be applicable to mostemployees, the common law will implyinto the contracts of more senioremployees a right to receive“reasonable notice” in excess of thestatutory minimum period. Theemployee’s seniority, length of serviceand the size of the business in whichthe senior employee works will befactors in determining the length ofnotice where the contract contains noexpress provision.

If an employee is dismissed without, orwith insufficient, statutory or contractualnotice without good cause, the employeemay sue the employer for damages forbreach of contract (i.e. “wrongfuldismissal”). The basic measure ofdamages will be the salary and benefitswhich the employee would have receivedduring the relevant notice period, but thismay be subject to adjustment to takeaccount of the remuneration theemployee can be expected to receivefrom new employment during what wouldhave been the notice period, tax andaccelerated payment.

If an employer prefers that an employeedoes not work his or her notice period,and the employee is not being summarilydismissed for gross misconduct, thegeneral practice is for employers to paysalary in lieu of the contractual noticeperiod. There are no special formalities



for making such payments (except as tothe deduction of tax where required).

13.3 Reasons for DismissalAlthough the employer is free to terminatethe contract of employment, the dismissedemployee may have the right to claimcompensation for unfair dismissal (eventhough the employee has received noticeor payment in lieu and has no contractualclaim) unless the employer can show therewas a reason for dismissal falling withinthe categories set out in the relevantstatute; these are misconduct, capability,illegality, redundancy or some othersubstantial reason.

The employer must show that one of thefair reasons for dismissal existed and thatit acted fairly and reasonably in decidingto dismiss. The employer must thereforebe careful to ensure, not only that there isa permissible statutory reason fordismissing the employee, but that a fairand reasonable procedure has beenfollowed in implementing the dismissal.

The compensation payable if theemployer unfairly dismisses an employeeis distinct from the compensation payableif the employer fails to comply with thenotice period described above.

To qualify for statutory protection fromunfair dismissal an employee mustnormally have at least one years’continuous employment.

The maximum compensation that may beawarded for most (non-discrimination)unfair dismissal claims is £87,700 as at1 February 2013. This figure is revisedannually in February. The EmploymentTribunal has the power to increase ordecrease an award by up to 25% if eitherparty has unreasonably failed to complywith the provisions of the ACAS StatutoryCode of Practice on disciplinary andgrievance procedures. It should be notedthat the vast majority of claims broughtbefore an Employment Tribunal aresettled before a hearing is reached.

Employment Tribunals in unfair dismissalcases have the power to orderreinstatement or re-engagement, buthistorically have tended to do so onlyoccasionally. If such an order is notcomplied with additional compensationwill be payable and the limits referred toabove do not apply to compensationawarded to an employee to cover theperiod from his or her dismissal until anyre-engagement/reinstatement order issupposed to be complied with.

13.4 Special ProtectionSpecial rules apply to dismissalsconnected with pregnancy or maternity,parental leave, health and safety, Sundayworking, the duties of pension trustees oremployee representatives, exercising theright to take time off to study, asserting astatutory right, trade union membership oractivities, transfers of undertakings, “spent”criminal convictions, breach of the WorkingTime Regulations, making a public interestdisclosure (“whistle-blowing”) and theNational Minimum Wage Act and selectionfor redundancy taking account of any ofthese matters.


As mentioned above, redundancyconstitutes a good statutory reason fordismissal and, although it may beapplicable to individual termination (forexample, if one employee’s specific jobdisappears), it is commonly associated withthe partial or total closure of a business.

Redundancy is a statutorily defined termand, subject to satisfying the eligibilitycriterion (broadly speaking two years’continuous employment), an employeewill be entitled to a statutory redundancypayment. The statutory redundancypayment is calculated by reference toage and length of service and themaximum payment is £13,500 fordismissals taking effect on or after1 February 2013. The maximumpayment is revised on 1 February eachyear. In some industries there may beenhanced contractual redundancy

packages available. Employers shouldtake care to comply with applicableconsultation requirements (see section12.2 above) and to select individuals forredundancy in a fair manner, since,although redundancy is a permissiblestatutory reason for dismissing anemployee (see section 13.3 above) theemployer must still prove that he acted ina fair and reasonable manner in selectingany particular individual for redundancy.

An employer must comply with thecontractual notice period whenemployees are made redundant or makea payment in lieu of such notice.

Where 20 or more redundancies areproposed at one establishment within aperiod of 90 days, consultation withappropriate representatives must takeplace at the earliest possible opportunity.Minimum time limits for consultation arelaid down and failure to consult or complywith the time limits gives the appropriaterepresentatives the right to complain toan Employment Tribunal, which maymake an award of compensation toemployees of up to 90 days’ pay peremployee. In practice unless there areexceptional circumstances the maximum90 days will usually be awarded. There isno cap on the amount that might beawarded. If the employer is proposing todismiss 100 or more employees, theconsultation process must start at least90 days before the first dismissal takeseffect. From 6 April 2013 the 90 dayconsultation period will bed reduced to45 days. Otherwise consultation muststart at least 30 days before the firstdismissal takes effect. The government iscurrently consulting on whether the 30day consultation period should applyregardless of the number of proposedredundancies, or alternatively, whether a45 day consultation period should applywhere 100 or more redundancies areproposed. There is also an obligation tonotify the Department for Business,Innovation and Skills of such proposedredundancies prior to giving notice and atleast 30 or 90 days prior to the first


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dismissal depending on the numbersinvolved. Failure to do so could give riseto a £5,000 fine. Injunctions cannotgenerally be granted to prevent theredundancies taking effect.

14. Data Protection14.1 Employment RecordsThe collection, storage and use ofinformation held by employers about theiremployees and workers (prospective,current and past) are regulated by theData Protection Act 1998 (“DPA”), whichimplements the EU Data ProtectionDirective. In addition, a considerableamount of guidance has also been issuedincluding the Employment Practices DataProtection Code. The Code is intended toassist employers in the understandingand implementation of the DPA. It is notlegally binding, however, failure to adhereto the Code will be a factor taken intoaccount when potential breaches of theCode are being considered by theInformation Commissioner. Infringementof data protection law can lead to fines,compensation claims from affectedemployees or regulatory action.

Essentially employers, as data controllers,are under an obligation to ensure thatthey process personal data about theiremployees (whether held on manual filesor on computer) in accordance withspecified principles including thefollowing: a requirement to ensure thatdata is accurate, up to date, and is notkept longer than is necessary and arequirement that it is stored securely to

avoid unlawful access or accidentaldestruction or damage to it.

Employers are generally advised toensure they have some sort ofdocument retention policy in place andto ensure that staff is aware of their dataprotection obligations.

14.2 Employee Access to DataEmployees, as data subjects, have theright to make a subject access request.This entitles them, subject to certainlimited exceptions, to be told what data isheld about them, to whom it is disclosedand to be provided with a copy of theirpersonal data. There is a 40-day timelimit for responding to such a request.Subject access requests cover personaldata held in manual and electronicrecords such as email. Legally, a chargeof £10 may be levied if a request ismade, regardless of the volume ofinformation sought.

14.3 MonitoringThe monitoring of employee email,internet and telephone usage and closedcircuit TV monitoring is regulated by theDPA amongst other pieces of legislation.Monitoring is permissible provided that itis carried out in accordance with the DPAprinciples and processing conditions(and, where appropriate, in accordancewith any other applicable legislation). Anyadverse impact of monitoring onemployees must be justified by its benefitto the employer and/or others. Expressemployee consent to monitoring is notusually required, however, employees

should be made aware that monitoring isbeing carried out, the purpose for whichit is being conducted and to whom thedata will be supplied, unless covertmonitoring is justified. Where disciplinaryaction is a possible consequence ofanything discovered, this too should bemade clear to employees.


An employer who wishes to provideemployee data to third parties must doso in accordance with the DPA principlesand processing conditions. In manycases, it may be necessary to obtainexpress consent to such disclosure in theabsence of a legitimate business purposefor the disclosure and depending on thenature of the information in question andthe location of the third party. Where thethird party is based outside the EEA, itshould be noted that the DPA prohibitsthe transfer of data to a country outsidethe EEA unless that country ensures anadequate level of protection for personaldata or one of a series of limitedexceptions apply. In the context ofcommercial transactions where employeedata is requested, care must be taken tocomply with the DPA. Where possibleanonymised data should be provided,where this is not possible the recipientshould be required to undertake in writingthat it will only use it in respect of thetransaction in question, will keep it secureand will return or destroy it at the end ofthe exercise.

Contributed by Clifford Chance, London


263A Guide to Employment in the European UnionEuropean Union Law

European Union Law1. IntroductionThe EU has the right to legislate in theemployment field in pursuit of social policyand the principle of free movement.

EU legislation can take a number offorms. Articles of the Treaty Establishingthe European Community (andsubsequent amending Treaties) andRegulations are directly applicable inMember States. Directives requireMember States to legislate throughdomestic laws or other measures toachieve the purposes directed. In theemployment field, Directives are the mostusual form of legislation so that on aday-to-day basis it is still domesticlegislation and practice which determineswhat form EU law takes in each MemberState. However, a steady stream of casespassing through the European Court ofJustice (ECJ) has made it clear thatdomestic courts must interpret domesticlegislation which implements EU law, inaccordance with the intent of EU law.

The principle of free movement isrecognised by all Member States as acore concern of the EU; accordingly, theEU has been very active in legislating toimplement it. The scope for legislation inpursuance of social policy is wide, butpolitical factors have, in the past, limitedthe extent of legislative activity.

2. Treaty of LisbonThe Treaty of Lisbon sets out the objectivesof the European Community and MemberStates. These objectives include:

(a) the promotion of employment andsocial progress;

(b) the promotion of justice;

(c) the eradication of poverty; and

(d) the combating of social exclusionand discrimination.

The European Commission, which hasresponsibility for initiating the legislativeprocess and suggesting proposals for

legal measures to implement those rightswithin the EU’s area of competency, haspursued this responsibility with somevigour and many of the rights have nowbeen implemented through laws,collective agreements or practices. TheCommission’s Work Programme for 2013sets out the Commission’s priorities forthe next 12 months. One of the keyobjectives is to promote social inclusionand entry into the labour market.

3. Social DialogueFor many years, the president of theCommission has held meetings withUNICE (Union of Industrial andEmployers’ Confederations of Europe),CEEP (representing public sectoremployers) and ETUC (the EuropeanTrade Union Confederation) in a processknown as the “social dialogue”. “Jointopinions” have been concluded on anumber of issues, although they arevague and have no binding effect. TheLisbon Treaty gives “social dialogue” alegal status under which collectiveagreements can become binding at aEuropean level. Binding agreements havebeen reached on parental leave, part-timework and fixed-term work.

4. Europe 2020 StrategyThis strategy aims, amongst other things,to increase employment among 20-64 yearolds to at least 75%, to modernise andstrengthen education and training policiesand social protection systems, to raisecorporate social responsibility and toimprove access to childcare facilities andcare for other dependents. There aredetailed plans to implement various healthand safety initiatives, to promote intra-EUlabour mobility and to develop a EuropeanSkills, Competences and Occupationsframework. One key plan is to promote“flexicurity” (flexibility combined withemployment security), through use of,amongst other things, atypical employmentcontracts, in order to aid recovery from thefinancial crisis, increase sustainabledevelopment and social protection,

strengthen policies in employment andincrease access to the labour market.

In October 2010 the Committee of theRegions Bureau (CoB) proposed theestablishment of Territorial Pacts withlocal and regional authorities aimed atimplementing the 2020 strategy.

5. Legal MeasuresThis section summarises the mainmeasures that are already part of EU lawin the employment field and those legalmeasures which are proposed but arenow lying dormant.

5.1 Freedom of MovementThere is a large body of EU legislationimplementing the principle of freemovement. The most important effects ofthe legislation are to:

(a) enable EU nationals to work in anyMember State without the need for awork permit;

(b) co-ordinate certain aspects ofnational social security schemes;

(c) facilitate the recognition of certainqualifications between MemberStates; and

(d) ensure that employees sent from anyMember State to another to work doso on terms no less favourable thanthose applicable in the host country.

5.1.1 European pact on immigrationand asylum

The Pact is intended to form the basis ofCommon European Policy on immigrationand asylum. The Pact aims to:

(a) organise legal immigration to takeaccount of the priorities, needs andreception capacities determined byeach Member State, and toencourage integration;

(b) control illegal immigration, in particularby ensuring that illegal immigrantsreturn to their countries of origin or toa transit country;

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(c) make border controls moreeffective; and

(d) create a comprehensive partnershipwith the countries of origin and oftransit to encourage the synergybetween migration and development.

The Pact was adopted by the Council inOctober 2008. When it did so, it decidedto hold an annual debate on immigrationand asylum policies and so invited theCommission to present a report to it eachyear, based on Member States’contributions. The Commission may alsopresent recommendations on theimplementation of the Pact. The intendedaim was a Common European Policy onimmigration and asylum by 2012, thishowever is still under development. TheUK has opted out.

5.1.2 Directive 2009/52 providing forminimum standards on sanctionsand measures against employers ofillegally staying third country nationals

This Directive places the onus onemployers to check that prospectiveemployees who are third countrynationals have a residence permit, tocopy it, to retain records for inspectionand to notify employees to the authoritiesif they are not fully compliant. Sanctionssuch as fines, closure of businesspremises and loss or ineligibility for publiccontracts and subsidies will apply, andemployers will have an obligation to paythe cost of employees’ returns.

This Directive should have beenimplemented by Member States by20 July 2011. The UK has opted out.

5.1.3 Directive on the conditions of entryand residence of third countrynationals for the purposes of highlyqualified employment (Blue CardDirective 2009/50)

This Directive aims to simplify andstreamline the admission/residenceprocedure for highly skilled non-EUnationals to work in highly qualifiedpositions via introduction of an EU wide

‘blue-card’. Member States can elect thenumber of blue-cards to be granted perannum. This Directive should have beenimplemented by Member States by19 June 2011. The UK has opted out.

5.1.4 Proposed Directive on conditionsof entry and residence of non-EUnationals in the framework of anintra-corporate transfer (Com)(2010 378)

It is proposed to implement a Directivethat would permit the intra-corporatetemporary transfer of skilled workers onthe same working conditions as non-EUposted staff. The text of the Directive is tobe proposed by 2014. It is specificallyaimed at responding effectively andpromptly to demand for managerial andqualified employees for branches ofsubsidiaries of multinational companies.

5.2 Discrimination and Equality5.2.1 SexThe Treaty Establishing the EuropeanCommunity and the 1975 Equal PayDirective require Member States tomaintain the principle that men andwomen should receive equal pay forequal work. Decisions of the ECJ havegiven “pay” a very wide meaning.

Other Directives require the principle ofequal treatment to be observed in relationto: access to employment, vocationaltraining, promotion, working conditionsand pension schemes.

(a) Amendment of Directive 2006/54 onthe implementation of the principle ofequal opportunities and equaltreatment of men and women

This amendment recasts existinglegislation to incorporate ECJ decisionsand to consolidate seven existing textsincluding the Equal Pay and Burden ofProof Directives. This recast EqualTreatment Directive does not create anynotable new rights or obligations, butrather simplifies existing law.

The Directive should now have beenimplemented by all Member States.

(b) Directive on the application of theprinciple of equal treatment betweenmen and women engaged in anactivity in a self-employed capacity(to replace Directive 86/613/EEC)

This Directive introduces the entitlementfor self employed women and femalespouses and life partners ofself-employed workers, to 14 weeks’ paidmaternity leave and other benefits, suchas having the opportunity to pay into asocial insurance scheme which will covermaternity leave, sickness and old age.Member States can provide such benefitson a mandatory or voluntary basis.

Member States should have implementedthe Directive by 15 August 2012.

5.2.2 Race, Age, Religion or Belief,Disability or Sexual Orientation

The Equal Treatment Directives (alsoreferred to as the Race and FrameworkDirectives) require Member States to putin place measures that will ensure theprinciple of equal treatment of individualsin the European Union regardless of raceor ethnic origin, religion or belief, disability,age or sexual orientation in respect ofaccess to employment or occupation andmembership of certain organisations. TheDirectives should now have beenimplemented by Member States.

In 2008 the Commission published aproposal for a Directive prohibitingdiscrimination on any of the above groundsoutside the employment sphere fallingunder EU competence, including access toand supply of goods and services,education and public services. The form ofthis Directive is still under review.

5.2.3 Parental leave andpregnancy-related rights

Amendment of Directive 92/85 onintroduction of measures to encourageimprovements in the health and safety ofpregnant workers



The Commission has proposed a numberof amendments to the Pregnant WorkersDirective: (i) to increase the minimumperiod of paid maternity leave to 18 weeks(the Women’s Rights and Gender EqualityCommittee has subsequently proposed20 weeks) and the compulsory maternityleave period to six weeks; (ii) to ensure fullpay during the 18 weeks (or 20 weeks,according to the Women’s Rights andGender Equality Committee) with MemberStates having the option of imposing amaternity pay ceiling of not less than sickpay; (iii) prohibiting employers from takingpreparatory steps to dismiss an employeefollowing the maternity leave;(iv) introducing a right to request flexibleworking upon return from maternity leave;(v) giving the right to request writtenreasons for dismissal if a pregnant womanis dismissed at any time from the start ofpregnancy until 6 months following the endof maternity leave; (vi) giving employees theright to return from maternity leave to thesame or an equivalent post. On20 October 2010 the European Parliamentvoted in favour of extending maternity leaveto 20 weeks and backed the extension ofcompulsory maternity leave to six weeks.The Parliament also voted in favour ofworkers on maternity leave being paid theirfull salary for the 20 weeks. The Council ofMinisters has now rejected the Parliament’sproposals. Further proposals wereexpected in 2012 but did not materialise.

Directive on Parental Leave to replaceDirective 96/34

This new Directive increases parentalleave from three to four months for eachparent. The Directive applies to allworkers, but there is a possibility of aqualifying period of employment of up toone year. Parents returning from parentalleave have the right to request a changeto their working hours and not to besubjected to detrimental treatment ordismissal. There is an obligation toassess the specific needs of parents withdisabled children.

Member States had until 18 March 2012

to transpose the Directive into theirnational laws.

5.2.4 Posted workers(a) The aim of the Directive is to

improve access to information onthe terms and conditions ofemployment for service providersand posted workers; to ensure thereis a right to equal treatment ofposted workers in respect ofnational labour law and collectiveagreements in place where the workis performed; to ensure that thesame rules are universallyapplicable; and to improvecooperation between nationalauthorities to ensure enforcement iseffectively brought about throughsanctions and remedial action. Areview of Directive 96/71 on theposting of workers is currently beingundertaken due to concerns that theDirective’s implementation has notbeen satisfactory due, amongstother things, to the lack ofadministrative cooperation oreffective enforcement. The proposedamendments will, amongst otherthings, provide for improved accessto information on host country termsand conditions of employment,clarification on when an individualqualifies as a posted worker andimproved sanctions and remedies.

5.3 Pay5.3.1 Directive amending Directives

2006/48 and 2006/49 as regardscapital trading requirements and thesupervisory review of remunerationpolicies (Capital RequirementsDirective III (CRD3))

CRD3 contains a number of principlesregarding remuneration and corporategovernance in the financial servicessector. These aim to allow supervisors inMember States to impose sanctions onfinancial institutions whose remunerationpolicies pose an unacceptable risk. CRD3provides that 50% of any variableremuneration should be paid in shares orequivalent and at least 40% deferred over

a period of three to five years (60%should be deferred for particularly highvariable remuneration). Guaranteedbonuses should only be exceptional andshould only occur in the context of hiringnew staff and be limited to the first yearof employment.

The remuneration policy provisions cameinto effect on 1 January 2011.

5.3.2 Proposed Directive on the taking upand pursuit of the business of creditinstitutions and the prudentialsuspension of credit institutions andinvestment firms (CRD4)

CRD4 will replace and recast theRequirements Directive 2006/48 and2006/49. Currently under discussion iswhether the ratio between fixed andvariable pay should be limited to 1:1(or some other ratio) for certainemployees. In addition the draft Directiverequires credit institutions to put in placepolicies promoting gender, age,geographical, educational andprofessional diversity in its managementbody. It further provides thatrepresentation of each gender should notfall below one third on the managementbody. The text of the Directive is currentlyunder review as the proposals in relationto fixed and variable remuneration areproving controversial.

5.3.3 Alternative Investment FundManagers Directive (AIFM)

Annex II of the AIFM Directive sets outprinciples in relation to AIFMremuneration policies aimed atdiscouraging excessive risk taking. Theprinciples require an AIFM to:

(a) Have a remuneration policy that isconsistent with “risk profiles, fundrules or instruments of incorporation”of the underlying fund;

(b) Ensure that the remuneration policyavoids conflicts of interest;

(c) Review remuneration policies periodically;


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(d) Ensure there is some compliance/riskinput in the remuneration policy;

(e) Reward those working inrisk/compliance independently fromfront office;

(f) Set up a remuneration committee tomonitor remuneration policy (if the AIFMis significant in size and complexity);

(g) Take into account financial as well asnon-financial criteria when assessingindividual performance;

(h) Outlaw multi-year guarantees,guaranteed remuneration is to belimited to the first year in the contextof staff hiring;

(i) Ensure that variable remunerationincludes an adjustment for all types ofcurrent and future risks;

(j) Ensure that the variable remunerationis paid or vests only if it is sustainableaccording to the financial situation ofthe AIFM as a whole;

(k) Require staff to undertake not to usepersonal hedging strategies orremuneration and liability relatedinsurance to offset the risks embeddedin their remuneration arrangements;

(l) At least 50% of variable remunerationto consist of units or shares orequivalent ownership interests;

(m) At least 40% of variable remunerationto be deferred over a 3-5 year period(unless the AIF’s life is cycle shorter);

(n) 60% of particularly high variableremuneration to be deferred.

Member States must transpose theDirective into national law by 22 July 2013.

5.3.4 Commission proposed measures toreduce gender pay gap

The Commission’s 2010-2015 genderequality strategy is based on fivepriorities: getting more women into thelabour market, equal pay, equality insenior positions, tackling gender violenceand promoting equality beyond the EU.

5.3.5 Commission Green Paper -Corporate Governance in financialinstitutions and remuneration policies

This Green Paper invites views on how toenhance the consistency andeffectiveness of EU action onremuneration for directors of listedcompanies; what further EU measuresshould be taken; whether the favourabletax treatment of stock options and othersimilar remuneration should be discussedat EU level because of the risky practice itmight encourage; whether the role ofshareholders, employees and employeerepresentatives should be strengthened inestablishing employment policy; whetherseverance packages should be regulatedat an EU level; and whether the variablecomponent of remuneration in financialinstitutions which have received publicfunding should be reduced or suspended.

Commission Proposals are expectedbefore the end of 2012.

5.4 Employment Protection5.4.1 Transfer of UndertakingsThe 1977 Acquired Rights Directiverequired Member States to approximatetheir laws so that the rights of employeesare safeguarded in the event of transfersof undertakings or businesses. Nationallaws under the Directive should invalidatea transfer of a business as a good reasonfor a dismissal and automatically transferemployees with the undertaking orbusiness. The Directive gave rise tointerpretation problems (there have beennumerous judgments of the ECJconcerning it), so an Amending Directivewas adopted in June 1998 but this,although it now defines a “transfer”, hasnot resolved all interpretation difficulties.The original Directive and the AmendingDirective were consolidated into a singleDirective (2001/23/EC) which took effectin April 2001.

5.4.2 InsolvencyA 1980 Directive imposes on MemberStates a duty to ensure that in the eventof an employer’s insolvency, “guaranteeinstitutions” meet employee claims where

necessary. This Directive has beenamended several times and in theinterests of clarity and rationality a newDirective (2008/94/EC) was published on28 October 2008. Building on (andreplacing) earlier Directives the Directiveextends the protection afforded toemployees in the event of their employer’sinsolvency by expanding the definition of“insolvency” to include situations otherthan liquidations and ensuring thatatypical workers (e.g. part-time andfixed-term employees) are also covered. Itrequires Member States to expresslystipulate which institution is responsiblefor meeting employees’ pay claims ininsolvency situations. Member Statesshould have transposed the provisions ofthe Directive by October 2011.

5.4.3 Atypical EmploymentPart-time, fixed-term and temporaryemployment are classed by theCommission as “atypical”. Directives havebeen adopted in relation to this, includingthe Part-Time Workers Directive, whichshould now have been transposed intonational legislation. This ensures thatpart-time workers are entitled to equal orpro-rata treatment with regard to all termsand conditions of employment relative toa “comparable full-time worker”.

A Directive on fixed-term work wasadopted to provide protection for thoseemployees working under fixed-termcontracts. It provides that employersmust ensure that fixed-term employeesare treated no less favourably thancomparable permanent employees. Alimit on the number of consecutivefixed-term contracts and the maximumduration of successive contracts isimposed in order to prevent abuse ofsuccessive fixed-term contracts. TheDirective should now have beenimplemented in Member States.

The Temporary Agency Workers Directive(2008/104) promotes the principle ofequal treatment of temporary andpermanent workers and more specificallyprovides as follows:



(a) Equality of treatment in basic workingconditions (for example pay, maternityleave, holiday) with terms that wouldhave applied if the employee wereemployed directly;

(b) Temporary agency workers shouldhave a right to be informed ofpermanent employment opportunitiesin the undertaking for which they areworking and to have equal access tocollective facilities such as childcareand transport facilities;

(c) Derogation is permissible if thetemporary agency worker has apermanent contract with agency andis paid between assignments; and

(d) Member States are to specify whetherthe right to equality of treatmentextends to pension, sick pay andfinancial participation schemes.

The Directive should have beentransposed by Member States intonational law by 5 December 2011.

5.4.4 Proof of EmploymentA Directive on written proof ofemployment relationships requiresemployers to inform employees of theterms and conditions applicable to theiremployment. Member States should nowhave implemented this Directive.

5.4.5 Working TimeThe Working Time Directive of 2003consolidated earlier Directives andregulates working time including theaverage working week which it fixes at amaximum of 48 hours. This Directivemade special provisions for certaineconomic sectors e.g. mobile workers,and there are also a number of additionalDirectives which deal with theseeconomic sectors. This Directive shouldnow have been implemented by allMember States.

The European Commission is currentlyconsulting on two options to amend theDirective (i) to address practical difficultiescaused by ECJ rulings that on-call time is

working time and that where rest breaksare missed compensatory breaks mustbe taken straight after; or (ii) a morecomprehensive review dealing withadditional issues including opting out ofworking time limits, paid annual leave andflexible working patterns.

5.4.6 Equitable WageThe Commission has adopted an Opinionon the introduction of an equitable wageby Member States, but this has nobinding legal effect.

5.4.7 Protection of Young People at WorkA Directive on the protection of youngpeople at work includes restrictions onworking time and provides for specialhealth and safety protection for workersunder the age of 18.

5.5 Pensions5.5.1 Directive on supplemental improving

the portability of pension rights The Directive aims to make it easier forworkers to preserve their pension rightson changing jobs. It aims to maintainpension rights through a fair treatment ofdormant rights. A vesting period (a periodof active employment required in order totrigger entitlement to a supplementarypension) will be established.

The proposal was published in 2005 andhas been subject to ongoing discussions.On 7 July 2010, the Commissionpublished a Green Paper on pensions inorder to collect input from a wide rangeof stakeholders and to break the currentdeadlock. Discussions are currently in astate of deadlock.

5.6 Information and Consultation5.6.1 Collective RedundanciesThe Collective Redundancies Directiverequires employers who are contemplatingcollective redundancies to inform andconsult employee representatives and tonotify the public authorities.

5.6.2 Transfers of UndertakingsThe Acquired Rights Directive (alreadyreferred to above) also requires

employers to give employeerepresentatives information aboutproposed transfers and, in certainsituations, to consult them as well.

5.6.3 Health and SafetyThe Health and Safety FrameworkDirective gives those employeerepresentatives with specific responsibilityfor health and safety matters informationrights on risk and consultation rights onall health and safety issues.

5.6.4 European Company Statute andWorker Involvement Directive

In October 2001, the Council of Ministersof the European Union formally adoptedlegislation in relation to the establishmentof a European Company, to be known byits Latin name of “Societas Europeae”(“SE”). The European Company Statute isestablished by two pieces of legislation; aRegulation directly applicable in MemberStates establishing the company lawrules and a Directive on WorkerInvolvement. This should now have beenimplemented by Member States.

The legislation gives companies theoption of forming a SE which will be ableto operate on a European-wide basis andbe governed by community law directlyapplicable in all Member States. The SEis able to operate throughout the EU withone set of rules and a unifiedmanagement and reporting system ratherthan having to comply with the variousnational laws of each Member Statewhere it has subsidiaries.

The Directive on Worker Involvementstipulates that upon the creation of aEuropean Company, negotiations mustbe initiated with a special negotiatingbody representing the employees with aview to reaching agreement on theinvolvement of all employees of the SE’sconstituent companies in arepresentative body. If a mutuallysatisfactory arrangement cannot benegotiated, the Directive contains a setof “standard rules” in its annex thatwould apply instead. These measures


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essentially oblige managers of the SE toprovide regular reports on the basis ofwhich there must be regular consultationof, and information to, a bodyrepresenting the companies’ employees.Employees also have board participationrights in certain circumstances. Thecompanies’ current and future businessplans, production and sales levels,implications of these for the workforce,management changes, mergers,divestments, potential closures andlay-offs must be included in such reports.

Employment contracts and pensions arenot covered by the European CompanyStatute; they are subject to the national lawof each Member State within which theheadquarters and branches are operated.

5.6.5 European Works CouncilsThe (recast) European Works CouncilsDirective concerns the establishment ofa European Works Council or aprocedure in Community-scaleundertakings, and Community-scalegroups of undertakings, for the purposeof informing and consulting employeesregarding business decisions made inone country covered by the Directivewhich affect the employees and impacton their interests in another countrycovered by the Directive. The Directivedefines a community scale undertakingas an undertaking with at least 1,000employees within Member States, and,at least 150 employees in two or moreMember States. Companies in thosecountries that are not covered by theDirective, for example American

companies, will be bound by it in theirdivisions located in countries that haveadopted the provisions of the Directive ifthey meet the threshold number ofemployees. The Directive provides thatthe nature, composition, competenceand functioning of the Council mustnormally be agreed between centralmanagement and a special negotiatingbody drawn from employeerepresentatives. In case no agreementcan be reached, the Directive lays downminimum requirements to be compliedwith. The recast Directive was publishedon 18 May 2009 and had to betransposed by Member States by5 June 2011.

5.6.6 National Information andConsultation

The Employee Information andConsultation Directive aims to ensure thatworkers are adequately informed andconsulted before serious decisionsaffecting them are taken. Employees havea right to be informed and consultedbeyond consultation about redundanciesand transfers of undertakings on moregeneral issues such as the undertaking’sactivities and economic situation. TheDirective allows Member States to limit theinformation and consultation obligations ofundertakings with fewer than 50 or 20employees. All Member States should nowhave implemented the Directive.

5.6.7 Takeover BidsA Directive on Takeover Bids was adoptedon 21 April 2004. The main thrust of theDirective is to give employees information

and consultation rights in companytakeover bid situations. When an offerdocument is made public, the boards ofthe offeree company and offeror mustcommunicate it to the representatives oftheir respective employees or, where thereare no such representatives, to theemployees themselves. Member Statesshould have implemented the Directive by20 May 2006.

5.6.8 TeleworkingA framework agreement on telework wasformally signed in July 2002 and shouldnow have been implemented by MemberStates. It lays down a general frameworkof rights and protections for teleworkers(homeworkers) including provision forworkers’ representatives to be informedand consulted on the introductionof teleworking.

5.7 Health and SafetyWorkplace health and safety has been animportant area of EU legislative activity.National variations in workplace healthand safety rules have been generallyrecognised as possible obstacles to theproper development of a free market.This has encouraged the Commission tomake proposals, and there are asubstantial number of Directives in thisarea. These range from Directives layingdown general health and safetymanagement principles (the “FrameworkDirective”) to Directives aimed at specificindustries or activities. The Working TimeDirective is a health and safety Directive.


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um o

f 20

days

per

yea

r.

nTe

n pu

blic

hol

iday

s pe

r ye

ar.

nM

inim

um o

f 20

wor

king

day

s pe

r ye

ar.

nD

urin

g fir

st y

ear

of s

ervi

ce, e

mpl

oyee

onl

yen

title

d to

pai

d an

nual

leav

e af

ter

eigh

tm

onth

s’ s

ervi

ce.

270 A Guide to Employment in the European UnionAppendix Country by Country Comparisons


Maternity and

Fam

ilyLeave Entitlement

nP

regn

ant w

omen

ent

itled

to e

ight

wee

ks’

mat

erni

ty le

ave

prio

r to

expe

cted

birt

h, a

nd e

ight

wee

ks a

fter.

Entit

led

to fu

ll pa

y th

roug

hout

.

nE

ither

par

ent

has

the

right

to

unp

aid

par

enta

l lea

ve f

or t

wo

year

s.

nW

omen

ent

itled

to

15 w

eeks

’ mat

erni

ty le

ave.

nFa

ther

ent

itled

to

ten

days

’ pai

d pa

tern

ityle

ave

afte

r th

e bi

rth.

nFe

mal

e em

ploy

ees

entit

led

to 4

10 d

ays’

leav

efo

r ea

ch c

hild

. 45

days

of t

his

leav

e sh

ould

be

befo

re e

xpec

ted

birt

h.

nE

ntitl

emen

t to

leav

e fo

r tw

o ye

ars

follo

win

gbi

rth

in r

espe

ct o

f firs

t, se

cond

and

thi

rd c

hild

.S

ix m

onth

s fo

r ev

ery

child

the

reaf

ter.

nM

ater

nity

and

Fam

ily L

eave

Ent

itlem

ent

leav

em

ay b

e us

ed b

y th

e fa

ther

of t

he c

hild

or

byon

e of

the

chi

ld’s

gra

ndpa

rent

s.

Minimum

Notice by

Employer and

Term

ination Payments

nIf

empl

oym

ent

com

men

ced

befo

re 3

1D

ecem

ber

2002

, unl

ess

agre

ed o

ther

wis

e,w

hite

or

blue

-col

lar

empl

oyee

s ar

e en

title

d to

seve

ranc

e pa

y pr

ovid

ed h

e or

she

has

com

plet

ed t

hree

yea

rs’ s

ervi

ce.

nA

mou

nt o

f pay

men

t dep

ends

on

leng

th o

fse

rvic

e an

d ra

nges

from

2 to

12

mon

ths’

sal

ary.

nIf

empl

oym

ent

com

men

ced

afte

r 31

Dec

embe

r20

02, t

he S

tatu

tory

Cor

pora

te E

mpl

oyee

Ret

irem

ent

Sch

emes

Act

app

lies.

Em

ploy

ers

to c

ontr

ibut

e 1.

53%

of r

emun

erat

ion

to a

fund

,em

ploy

ee r

ecei

ves

the

bala

nce

of t

heco

ntrib

utio

ns u

pon

term

inat

ion.

nB

lue-

colla

r no

tice

perio

d: g

ener

ally

14

days

.

nW

hite

-col

lar

notic

e pe

riod:

six

wee

ks, i

ncre

ases

to fi

ve m

onth

s af

ter

25 y

ears

’ ser

vice

.

nW

ith e

ffect

from

1 J

anua

ry 2

013

empl

oyer

sha

ve t

o pa

y a

levy

of a

ppro

xim

atel

y €1

13(2

013)

upo

n th

e te

rmin

atio

n of

an

empl

oym

ent

that

was

sub

ject

to

man

dato

ry u

nem

ploy

men

tin

sura

nce.

How

ever

, in

cert

ain

case

s th

eem

ploy

er is

exe

mpt

from

the

levy

.

Con

trac

ts fo

r an

inde

finite

per

iod

of t

ime

(out

side

the

tria

l per

iod)

:

nB

lue-

colla

r w

orke

rs: 3

5 da

ys n

otic

e w

hen

6m

onth

s’ t

o fiv

e ye

ars’

ser

vice

. Inc

reas

es t

o11

2 da

ys’ n

otic

e (fo

r em

ploy

ees

hire

d be

fore

2012

) or

129

days

’ not

ice

(for

empl

oyee

s hi

red

afte

r 20

12) d

epen

ding

on

leng

th o

f ser

vice

.

nW

hite

-col

lar

wor

kers

: Not

less

tha

n th

ree

mon

ths

whe

n up

to

five

year

s’ s

ervi

ce.

Incr

ease

s de

pend

ing

on le

ngth

of s

ervi

ce.

nE

mpl

oym

ent

can

also

be

term

inat

ed b

ypa

ymen

t in

lieu

of n

otic

e.

nC

ontr

acts

with

an

inde

finite

ter

m: 3

0 da

ys’

writ

ten

notic

e, lo

nger

not

ice

perio

d ca

n be

agre

ed, b

ut n

ot in

exc

ess

of t

hree

mon

ths.

nIf

the

empl

oyer

fails

to

com

ply

with

the

min

imum

not

ice

perio

d th

e em

ploy

ee is

entit

led

to a

n am

ount

equ

al t

o hi

s/he

r gr

oss

rem

uner

atio

n fo

r th

e pe

riod

ofno

n-co

mpl

ianc

e.

nU

pon

term

inat

ion

of e

mpl

oym

ent,

the

empl

oyee

is e

ntitl

ed t

o be

pai

d in

lieu

of

accr

ued

but

unta

ken

holid

ay e

ntitl

emen

t.

nU

pon

term

inat

ion

of e

mpl

oym

ent

by r

easo

n of

illnes

s th

e em

ploy

ee is

ent

itled

to

com

pens

atio

n fro

m t

he e

mpl

oyer

of t

wo

mon

ths’

gro

ss p

ay p

rovi

ded

that

he

has

atle

ast

five

year

s’ s

ervi

ce a

nd h

as n

ot r

ecei

ved

com

pens

atio

n on

the

sam

e gr

ound

s du

ring

the

last

five

yea

rs o

f em

ploy

men

t se

rvic

e.

nIn

the

cas

e of

dis

mis

sal a

s a

cons

eque

nce

ofth

e cl

osur

e of

all

or p

art

of t

he e

nter

pris

e, a

redu

ctio

n in

wor

kfor

ce o

r in

the

vol

ume

ofw

ork

and

susp

ensi

on o

f wor

k fo

r m

ore

than

15 w

orki

ng d

ays

empl

oyee

s ar

e en

title

d to

com

pens

atio

n eq

ual t

o th

eir

gros

s pa

y fo

r th

epe

riod

of u

nem

ploy

men

t up

to

a m

axim

um o

fon

e m

onth

’s r

emun

erat

ion.

nU

pon

term

inat

ion

of e

mpl

oym

ent

(for

wha

teve

rre

ason

), if

the

empl

oyee

is e

ligib

le fo

r a

retir

emen

t-ag

e pe

nsio

n, h

e is

ent

itled

to

com

pens

atio

n eq

ual t

o tw

o m

onth

s’ g

ross

pay;

if t

he e

mpl

oyee

has

wor

ked

for

the

sam

eem

ploy

er fo

r th

e la

st t

en y

ears

of h

isem

ploy

men

t, th

e co

mpe

nsat

ion

is e

qual

to

six

mon

ths’

gro

ss r

emun

erat

ion.


The Czech Repub

licCyprus

Denmark

Minimum

Wage

nS

tatu

tory

min

imum

wag

e: C

ZK

8,0

00(a

pp

rox.

€28

0) p

er m

onth

or

CZ

K 4

8.10

(ap

pro

x. €

1.70

) p

er h

our,

bas

ed o

n a

40-h

our

wee

k.

n€8

55 p

er m

onth

for

offic

e cl

erks

and

sho

pas

sist

ants

- r

isin

g to

€90

9 af

ter

6m

onth

s’em

ploy

men

t.

nN

o st

atut

ory

min

imum

wag

e, b

ut m

inim

umw

age

set

by c

olle

ctiv

e ag

reem

ent

for

a la

rge

perc

enta

ge o

f the

wor

kfor

ce; o

ther

em

ploy

ees

rece

ive

cust

omar

y w

age

for

indu

stry

sec

tor.

Maximum

Weekly Hours

n48

hou

rs p

er w

eek

(40

hour

s of

sta

ndar

dw

eekl

y ho

urs

+ e

ight

hou

rs o

f ove

rtim

e)av

erag

ed o

ver

a re

fere

nce

perio

d of

26

or52

wee

ks if

agr

eed

in a

col

lect

ive

agre

emen

t(u

p to

one

yea

r).

nO

ften

redu

ced

by c

olle

ctiv

e ag

reem

ents

.

n48

hou

rs.

n48

hou

rs o

n av

erag

e.

nG

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent

to37

hou

rs.


nM

inim

um fo

ur w

eeks

, fiv

e w

eeks

for

empl

oyee

s of

sta

te b

odie

s (s

even

day

wee

k).

n20

or

24 d

ays

depe

ndin

g on

leng

th o

fw

orki

ng w

eek.

nFi

ve w

eeks

and

hol

iday

sup

plem

ent.

Maternity and

Fam


n28

wee

ks’ m

ater

nity

leav

e, 3

7 w

eeks

if t

hem

othe

r ga

ve b

irth

to m

ore

than

one

chi

ld.

nS

tatu

tory

mat

erni

ty p

ay a

nd o

ther

ben

efits

paya

ble

by s

ocia

l sec

urity

.

nU

npai

d pa

rent

al le

ave

until

the

chi

ld r

each

esth

ree

year

s of

age

.

n18

wee

ks p

aid

mat

erni

ty le

ave.

nE

ach

pare

nt m

ay h

ave

an 1

8 w

eek

unpa

idle

ave

due

to a

birt

h or

ado

ptio

n of

a c

hild

.

n7

days

’ unp

aid

emer

genc

y le

ave

per

annu

mdu

e to

forc

e m

ajeu

re.

n4

wee

ks’ p

regn

ancy

leav

e be

fore

birt

h.

nU

p to

14

wee

ks’ m

ater

nity

leav

e af

ter

birt

h.

nTw

o w

eeks

’ pat

erni

ty le

ave

afte

r bi

rth.

n32

-46

wee

ks’ p

aren

tal l

eave

for

each

par

ent.

nP

ay: 5

0% o

f sal

ary

durin

g pr

egna

ncy

and

mat

erni

ty le

ave

for

sala

ried

empl

oyee

s.

nN

o sa

lary

ent

itlem

ents

for b

lue-

colla

r em

ploy

ees.

How

ever

, usu

ally

suc

h em

ploy

ees

are

entit

led

tofu

ll or

par

tial s

alar

y fo

r up

to 1

4w

eeks

sub

ject

toco

llect

ive

agre

emen

ts, i

f any

.

nR

emai

ning

leav

e is

unp

aid

by t

he e

mpl

oyer

,ho

wev

er, e

mpl

oyee

s w

ill be

ent

itled

to

gove

rnm

ent

bene

fits.

Minimum

Notice by

Employer and

Term

ination Payments

nA

t le

ast

two

mon

ths’

not

ice,

dep

endi

ng o

n th

ere

ason

s fo

r di

smis

sal.

nS

tatu

tory

ent

itlem

ent

to r

edun

danc

y pa

ymen

tin

an

amou

nt r

angi

ng fr

om 1

-3 m

onth

s’av

erag

e sa

lary

dep

endi

ng o

n th

e le

ngth

of

empl

oym

ent,

also

pay

able

by

mut

ual

agre

emen

t co

nclu

ded

on t

erm

inat

ion

ofem

ploy

men

t fo

r se

lect

ed s

tatu

tory

term

inat

ion

reas

ons.

nU

nfai

r di

smis

sal:

com

pens

atio

n fo

r w

ages

and

bene

fits

whi

ch t

he e

mpl

oyee

wou

ld h

ave

rece

ived

if t

he e

mpl

oym

ent

had

cont

inue

d or

durin

g th

e re

leva

nt n

otic

e pe

riod

in t

he c

ase

ofla

wfu

l ter

min

atio

n. C

ompe

nsat

ion

exce

edin

gsi

x m

onth

s m

ay b

e re

duce

d by

the

cou

rt,

upon

the

em

ploy

er’s

app

licat

ion.

nO

ne t

o ei

ght

wee

ks’ p

aid

notic

e de

pend

ing

onle

ngth

of s

ervi

ce.

nTw

o w

eeks

’ to

two

year

s’ w

ages

dep

endi

ngon

a n

umbe

r of

fact

ors.

nU

sual

ly 1

4 to

120

day

s’ n

otic

e fo

r w

orke

rs.

nO

ne m

onth

’s n

otic

e fo

r sa

larie

d em

ploy

ee w

ithon

e to

six

mon

ths’

ser

vice

.

nTh

erea

fter

notic

e pe

riod

one

mon

th’s

not

ice

for

ever

y th

ree

year

s of

em

ploy

men

t up

to

six

mon

ths’

not

ice

afte

r ni

ne y

ears

’ ser

vice

.

nS

ever

ance

pay

of o

ne, t

wo

and

thre

e m

onth

s’sa

lary

for

sala

ried

empl

oyee

s w

ith 1

2, 1

5, a

nd18

yea

rs’ s

ervi

ce r

espe

ctiv

ely.



Estonia

Finland

France

Minimum

Wage

n€2

90 p

er m

onth

and

€1.

80 p

er h

our.

nN

o st

atut

ory

min

imum

wag

e.

nM

inim

um w

ages

set

or

influ

ence

d by

sec

tora

lco

llect

ive

agre

emen

t.

nS

tatu

tory

min

imum

wag

e (S

MIC

).

nJu

ne 2

012

: €9.

40 p

er h

our.

Maximum

Weekly

Hours

nE

ight

hou

rs p

er d

ay o

r 40

hou

rs p

er w

eek.

nO

vert

ime

mus

t be

com

pens

ated

pre

fera

bly

bytim

e of

f in

lieu

or b

y ad

ditio

nal p

aym

ent.

Add

ition

al r

emun

erat

ion

for

over

time

mus

t no

tbe

less

tha

n 50

% h

ighe

r th

an t

he e

mpl

oyee

’sho

urly

rat

e of

pay

.

nU

sual

ly 4

0 ho

urs.

nG

ener

ally

red

uced

by

colle

ctiv

e ag

reem

ent.

n10

hou

rs p

er d

ay, o

r 48

hour

s pe

r wee

k or

an

aver

age

44 h

ours

per

wee

k in

a 1

2 w

eek

perio

d.

Holiday

Entitleme

nt**

n28

cal

enda

r da

ys p

er c

alen

dar

year

. n

Four

to

five

wee

ks a

nnua

lly.

nH

olid

ay b

onus

usu

al b

ut n

ot s

tatu

tory

.

nFi

ve w

eeks

.

Maternity

and

Family

Leave

Entitleme

nt

nFe

mal

e em

ploy

ees

entit

led

to 1

40 d

ays

leav

e,st

artin

g at

leas

t 70

days

prio

r to

exp

ecte

d bi

rth.

nP

ay -

100

% a

vera

ge in

com

e pa

yabl

e fro

mst

ate

fund

s.

nFa

ther

ent

itled

to

10 d

ays

paid

leav

e du

ring

the

mot

her’s

leav

e, o

r w

ithin

tw

o m

onth

s of

the

birt

h. T

his

is p

aid

by t

he s

tate

.

nA

fter

the

preg

nanc

y an

d m

ater

nity

leav

e on

eof

the

par

ents

is e

ntitl

ed t

o pa

rent

al le

ave.

The

first

one

and

a h

alf y

ears

is c

ompe

nsat

ed b

yth

e st

ate

is a

t a

rate

equ

al t

o th

e em

ploy

ees’

aver

age

sala

ry. T

he p

aren

ts a

re e

ntitl

ed t

o us

eth

e le

ave

until

the

chi

ld is

thr

ee. D

urin

g th

ese

cond

hal

f of t

he le

ave

the

pare

nt is

ent

itled

to a

chi

ldca

re a

llow

ance

.

nP

aren

ts a

re a

lso

entit

led

to 3

-6 d

ays

off d

urin

gth

e ye

ar. T

his

is c

ompe

nsat

ed b

y th

e st

ate

inth

e am

ount

of m

inim

um s

alar

y.

n10

5 da

ys’ m

ater

nity

leav

e (in

clud

ing

Sat

urda

ys).

n15

8 da

ys’ p

aren

tal l

eave

(inc

ludi

ng S

atur

days

).

nP

ay: a

vera

ge 6

5% o

f gro

ss s

alar

y pa

id b

yS

ocia

l Sec

urity

dur

ing

mat

erni

ty a

nd/o

rpa

rent

al le

ave.

nIn

gen

eral

, col

lect

ive

barg

aini

ng a

gree

men

tsin

clud

e an

ent

itlem

ent

to fu

ll sa

lary

dur

ing

upto

the

firs

t th

ree

mon

ths

of t

he m

ater

nity

leav

eto

be

paid

by

the

empl

oyer

.

n54

day

s pa

tern

ity le

ave

from

1 J

anua

ry 2

013.

nP

ay: a

vera

ge 6

5% g

ross

sal

ary

paid

by

Soc

ialS

ecur

ity.

nU

npai

d pa

rent

al le

ave

until

chi

ld is

thr

eeye

ars

old.

n16

wee

ks’ m

ater

nity

leav

e.

nP

ay: 8

0.32

% o

f sal

ary

up t

o a

ceilin

g pa

id b

yS

ocia

l Sec

urity

.

nTh

ree

days

’ birt

h pa

tern

ity le

ave

on fu

ll pa

y.

n11

day

s’ u

npai

d pa

tern

ity le

ave.

nTh

ree

year

s’ u

npai

d pa

rent

al le

ave.



Estonia

(con

tinue

d)Finland (c

ontin

ued)

France (c

ontin

ued)

Minimum

Notice by

Employer and

Term

ination Payments

nB

etw

een

15 a

nd 9

0 ca

lend

ar d

ays

depe

ndin

g on

the

stat

utor

y gr

ound

s re

lied

on fo

r te

rmin

atio

n.

nTe

rmin

atio

n w

ithou

t no

tice

is p

erm

issi

ble

only

in e

xtre

me

circ

umst

ance

s e.

g. a

sev

ere

viol

atio

n of

wor

k du

ties.

nIf

notic

e ob

ligat

ions

are

not

com

plie

d w

ith,

empl

oyee

ent

itled

to

com

pens

atio

n eq

ual t

o a

day’

s av

erag

e w

age

for

each

day

of n

otic

eno

tgiv

en.

nR

edun

danc

y te

rmin

atio

n pa

ymen

t is

one

mon

th’s

sal

ary.

n14

day

s to

six

mon

ths’

not

ice

depe

ndin

g on

leng

th o

f ser

vice

, unl

ess

othe

rwis

e ag

reed

.

nFu

ll pa

y ov

er n

otic

e pe

riod.

nC

ompe

nsat

ion

of 3

to

24 m

onth

s’ s

alar

y in

case

s of

unl

awfu

l ter

min

atio

n.

nLe

ss t

han

six

mon

ths’

ser

vice

– u

sual

lypr

ovid

ed fo

r in

Col

lect

ive

Bar

gain

ing

Agr

eem

ents

or

com

pany

cus

tom

s.

nS

ix m

onth

s’ t

o tw

o ye

ars’

ser

vice

- u

sual

ly o

nem

onth

’s n

otic

e.

nA

bove

two

year

s’ s

ervi

ce -

two

mon

ths’

not

ice.

nE

xecu

tives

- t

hree

mon

ths’

not

ice.

n1/

5th

of m

onth

ly s

alar

y fo

r ea

ch y

ear

ofse

rvic

e af

ter

one

year

’s s

ervi

ce p

lus

2/5t

h of

mon

thly

sal

ary

for

each

yea

r of

ser

vice

bey

ond

10 y

ears

’ ser

vice

.




Germany

Greece

Hungary

Minimum

Wage

nS

tatu

tory

min

imum

wag

e in

the

nur

sing

serv

ices

and

tem

por

ary

emp

loym

ent

sect

ors;

min

imum

wag

es s

et o

r in

fluen

ced

by

sect

oral

/reg

iona

l col

lect

ive

bar

gain

ing

agre

emen

t or

ord

inan

ce.

nA

new

sys

tem

for

form

ulat

ing

the

lega

lm

inim

um s

alar

y w

ill be

est

ablis

hed

Q1

2013

.M

inim

um w

ages

est

ablis

hed

by c

olle

ctiv

eag

reem

ents

bin

d on

ly t

he e

mpl

oyer

s w

ho a

rem

embe

rs o

f the

con

trac

ting

unio

n.

nU

nski

lled

adul

ts w

ith le

ss t

han

thre

e ye

ars

serv

ice

have

a m

inim

um m

onth

ly s

alar

y of

€586

.08

/ m

inim

um d

aily

wag

e €2

6.18

(ove

r25

yea

rs o

f age

) and

a m

inim

um m

onth

lysa

lary

of €

510.

95 /

min

imum

dai

ly w

age

€22.

83 (u

nder

25

year

s of

age

).

nM

onth

ly m

inim

um w

age

for

2012

is H

UF

93,0

00 (a

ppro

x. €

330)

.

nG

uara

ntee

d m

inim

um w

age

for

2012

is H

UF

108,

000

(app

rox.

€38

5) fo

r em

ploy

ees

with

seco

ndar

y ed

ucat

ion

or s

econ

dary

pro

fess

iona

led

ucat

ion

and

perfo

rm w

ork

with

a s

econ

dary

prof

essi

onal

edu

catio

n re

quire

men

t.

nC

olle

ctiv

e ag

reem

ents

may

als

o es

tabl

ish

am

inim

um p

ay r

ate

for

empl

oyee

s of

cert

ain

cate

gorie

s.

Maximum

Weekly Hours

n48

hou

rs p

er w

eek

(eig

ht h

ours

per

day

, six

days

a w

eek)

.

nM

ax. d

aily

hou

rs m

ay b

e ex

tend

ed t

o 10

onl

yif

the

aver

age

wor

king

hou

rs w

ithin

six

cale

ndar

mon

ths

or 2

4 w

eeks

do

not

exce

edei

ght

hour

s pe

r da

y.

nP

rohi

bitio

n on

wor

king

on

Sun

days

and

pub

licho

liday

s ex

cept

whe

re t

he n

atur

e of

the

wor

kre

quire

s co

ntin

uous

ope

ratio

n.

nD

iffer

ent

rule

s m

ay b

e ag

reed

in c

olle

ctiv

eag

reem

ents

or

appr

oved

by

the

supe

rvis

ing

stat

e tr

ade

offic

e.

n40

hou

rs.

nR

educ

ed b

y co

llect

ive

agre

emen

t to

37-

40ho

urs

in c

erta

in c

ases

(ban

ks e

tc).

nEi

ght h

ours

per

day

and

40

hour

s pe

r wee

k.

nEm

ploy

er a

nd e

mpl

oyee

may

agr

ee u

p to

12

hour

s pe

r day

in c

erta

in e

xcep

tiona

lci

rcum

stan

ces

(ext

ende

d da

ily w

orki

ng ti

me)

.

nP

rohi

bitio

n on

wor

king

on

Sun

days

and

pub

licho

liday

s ex

cept

whe

re th

e na

ture

of t

he w

ork

requ

ires

cont

inuo

us o

pera

tion.


nM

inim

um fo

ur w

eeks

’ pai

d ho

liday

.

n25

-30

days

(bas

ed o

n a

five-

day

wor

k w

eek)

stan

dard

for

sala

ried

empl

oyee

.

nA

ge-r

elat

ed h

olid

ay e

ntitl

emen

t is

no

long

erpe

rmitt

ed.

n20

day

s (5

day

wee

k)/

24 d

ays

(6 d

ay w

eek)

.

nIn

crea

sed

with

sen

iorit

y up

to

25 d

ays

(five

day

wee

k) o

r 30

day

s (s

ix d

ay w

eek)

/ f

orem

plo

yees

with

ove

r 25

yea

rs o

f p

rior

serv

ice

26 d

ays

(five

day

wee

k) o

r 31

day

s(s

ix d

ay w

eek)

.

nS

tatu

tory

ent

itlem

ent

depe

nds

on t

heem

ploy

ee’s

age

and

var

ies

from

a m

inim

um o

f20

day

s to

30

days

.

nC

olle

ctiv

e ag

reem

ents

may

pro

vide

for

mor

epa

id h

olid

ays

or e

xtra

hol

iday

s in

cer

tain

circ

umst

ance

s.



Germany

(con

tinue

d)Greece

(con

tinue

d)Hungary

(con

tinue

d)

Maternity and

Fam


n14

wee

ks’ m

ater

nity

leav

e (fo

ur w

eeks

bef

ore

the

expe

cted

birt

h an

d ei

ght

wee

ks a

fter

birt

h).

nP

ay: 1

00%

usu

al n

et d

aily

pay

(par

tially

reim

burs

ed b

y so

cial

fund

).

nTh

ree

year

s’ p

aren

tal l

eave

per

ch

ild -

eith

er p

aren

t.

nD

urin

g pa

rent

al le

ave,

mon

thly

pay

men

t of 6

5 to

67%

of t

he fo

rmer

regu

lar n

et p

ay, u

p to

€1,

800

per m

onth

, for

a m

axim

um p

erio

d of

14

mon

ths

(sub

ject

to a

max

imum

per

iod

of 1

2 m

onth

s of

pare

ntal

leav

e be

ing

take

n by

one

par

ent).

n17

wee

ks’ m

ater

nity

leav

e.

nP

ay*

50%

of n

otio

nal s

alar

y by

soc

ial f

und,

bala

nce

of n

orm

al s

alar

y pa

yabl

e by

em

ploy

erfo

r 15

or

30 d

ays.

The

reaf

ter,

paid

by

stat

e.

nTw

o da

ys p

aid

fam

ily le

ave

for

fath

ers.

nA

t le

ast

four

mon

ths’

unp

aid

pare

ntal

leav

e .

nA

dditi

onal

mat

erni

ty le

ave

- 6-

mon

ths

durin

gw

hich

, m

othe

rs a

re p

aid

the

min

imum

wag

eby

the

Sta

te O

rgan

izat

ion

for

the

Une

mpl

oyed

(OA

ED

).

nFe

mal

e em

ploy

ee e

ntitl

ed t

o 24

wee

ks’

mat

erni

ty le

ave,

whi

ch t

hey

may

tak

e fro

m fo

urw

eeks

bef

ore

the

expe

cted

birt

h.

nA

fter

the

24 w

eek

mat

erni

ty le

ave,

in c

erta

inci

rcum

stan

ces,

eith

er p

aren

t is

ent

itled

to

addi

tiona

l unp

aid

leav

e of

up

to t

hree

yea

rsfro

m t

he c

hild

’s b

irth.

nFa

ther

s ar

e en

title

d to

a fi

ve-d

ay p

aid

holid

ayfo

llow

ing

the

birt

h of

the

ir ch

ild (s

even

day

s in

the

case

of t

win

s).

nE

xtra

hol

iday

s w

here

the

re a

re c

hild

ren

unde

r16

yea

rs (u

p to

sev

en d

ays

depe

ndin

g on

the

num

ber

of c

hild

ren)

.

Minimum

Notice by

Employer and

Term

ination Payments

nU

p to

two

year

s’ s

ervi

ce -

four

wee

ks’ n

otic

e to

the

15th

day

or t

he e

nd o

f the

cal

enda

r mon

th.

nU

p to

20

year

s’ s

ervi

ce -

not

ice

is o

n a

slid

ing

scal

e of

1 to

7 m

onth

s to

the

end

of th

eca

lend

ar m

onth

.

nG

ener

ally,

no

stat

utor

y re

dund

ancy

pay

men

t(u

nles

s re

quire

d un

der c

olle

ctiv

e ba

rgai

ning

agre

emen

t or s

ocia

l pla

n).

nW

hite

col

lar e

mpl

oyee

s: m

inim

um n

otic

e on

e to

four

mon

ths’

not

ice

and

seve

ranc

e pa

y fro

m1

to 6

mon

ths’

pay

dep

endi

ng o

n se

nior

ity o

r no

notic

e gi

ven

and

seve

ranc

e pa

y fro

m 2

to12

mon

ths’

pay

dep

endi

ng o

n se

nior

ity. S

peci

alre

gula

tions

pro

vide

for a

dditi

onal

sev

eran

ce p

ayfo

r em

ploy

ees

who

fulfil

led

seve

ntee

n ye

ars

ofse

rvic

e or

mor

e on

12

Nov

embe

r 201

2.

nB

lue

colla

r em

ploy

ees:

five

to 1

65 d

ays’

pay

.

nM

inim

um 3

0 da

ys n

otic

e. In

crea

sing

up

to 9

0da

ys d

epen

ding

on

leng

th o

f ser

vice

.

nLo

nger

not

ice

of u

p to

six

mon

ths

can

beag

reed

.

nS

tatu

tory

not

ice

perio

d m

ay n

ot b

e ap

plic

able

toex

ecut

ive

empl

oyee

s.

nEm

ploy

er m

ust e

xem

pt e

mpl

oyee

from

wor

k fo

rat

leas

t hal

f of t

he n

otic

e pe

riod

and

mus

tco

ntin

ue to

pay

the

empl

oyee

’s s

alar

y w

hile

he

perfo

rms

wor

k an

d hi

s ab

senc

e fe

e w

hile

he

isex

empt

from

wor

k.

nS

ever

ance

pay

: 1-6

mon

ths

abse

nce

fee

depe

ndin

g on

the

leng

th o

f em

ploy

men

t.



Ireland

Italy

Latvia

Minimum

Wage

nS

tatu

tory

min

imum

wag

e of

€8.

65 p

er h

our.

nM

inim

um p

ay le

vels

exi

st in

cer

tain

indu

strie

s.

nN

o st

atut

ory

min

imum

wag

e.

nC

olle

ctiv

e ag

reem

ents

pro

vide

min

imum

leve

lof

pay

/ben

efits

.

nIn

201

3 LV

L 20

0 (a

ppro

x. €

285)

per

mon

th fo

rfu

ll-tim

e em

ploy

ees.

Min

imum

hou

rly r

ate

isLV

L 1.

203

(app

rox.

€1.

72).

Maximum

Weekly Hours

n48

hou

rs.

nS

tand

ard

wor

king

wee

k is

gen

eral

ly 3

5 to

39ho

urs.

n48

hou

rs.

nS

tand

ard

wor

king

wee

k ge

nera

lly 4

0 ho

urs.

nN

orm

al w

orki

ng ti

me

is 4

0 ho

urs

per w

eek.

nA

ggre

gate

d w

orki

ng ti

me

may

not

exc

eed

56ho

urs

a w

eek.


n20

day

s..

nFo

ur w

eeks

’ pa

id le

ave.

nC

olle

ctiv

e ag

reem

ents

may

pro

vide

for

mor

e.

nFo

ur w

eeks

’ pai

d le

ave.

Maternity and

Fam


n42

wee

ks’ m

ater

nity

leav

e (s

tate

ben

efit:

80%

of s

alar

y up

to

ceilin

g pa

yabl

e du

ring

first

26w

eeks

).

n40

wee

ks’ a

dopt

ive

leav

e (s

tate

ben

efit:

80%

of s

alar

y up

to

ceilin

g pa

yabl

e du

ring

first

24w

eeks

).

n14

wee

ks’ u

npai

d pa

rent

al le

ave

per

child

.

n15

day

s’ p

aid

mar

riage

leav

e.

nfiv

e m

onth

s’ p

aid

mat

erni

ty le

ave

+ o

ne d

ayfa

ther

’s le

ave

in 2

012-

2015

(with

the

poss

ibilit

y of

an

addi

tiona

l tw

o da

ys in

pla

ceof

the

mot

her).

nM

ater

nity

pay

- 8

0% o

f nor

mal

pay

(col

lect

ive

agre

emen

t m

ay p

rovi

de fo

r ad

ditio

nal p

ay, u

pto

100

% p

ay).

nFa

ther

’s le

ave

– 10

0% o

f nor

mal

pay

.

n10

– 1

1 m

onth

s’ p

aid

pare

ntal

leav

e.

nP

aren

tal l

eave

pay

- 3

0% o

f nor

mal

pay

for

six

mon

th p

erio

d (in

alte

rnat

ive,

bab

y si

ttin

gvo

uche

rs s

ubje

ct t

o sp

ecifi

c re

gula

tions

and

budg

et li

mits

in 2

013-

2015

).

n11

2 da

ys’ p

aid

mat

erni

ty le

ave

(max

140

day

s).

nS

tate

mat

erni

ty p

ay o

f 80%

of a

vera

gem

onth

ly e

arni

ngs

(sub

ject

to

spec

ified

lim

itsun

til 3

1 D

ecem

ber

2014

), pa

yabl

e by

soci

alse

curit

y.

n10

day

s’ p

aid

pate

rnity

/ado

ptio

n le

ave.

nS

tate

pat

erni

ty p

ay o

f 80%

of a

vera

ge m

onth

lyea

rnin

gs (s

ubje

ct t

o sp

ecifi

ed li

mits

unt

il 31

Dec

embe

r 20

14),

paya

ble

by s

ocia

l sec

urity

.

n1

½ y

ears

’ chi

ldca

re le

ave.

n70

% o

f ave

rage

mon

thly

ear

ning

s is

pai

d un

tilth

e ch

ild r

each

es t

he a

ge o

f one

(sub

ject

to

spec

ified

lim

its u

ntil

31 D

ecem

ber

2014

),pa

yabl

e by

soc

ial s

ecur

ity.

Minimum

Notice by

Employer and

Term

ination Payments

n1

to 8

wee

ks’ n

otic

e de

pend

ing

on le

ngth

ofse

rvic

e.

nS

tatu

tory

ent

itlem

ent

to r

edun

danc

y pa

ymen

tsu

bjec

t to

cer

tain

con

ditio

ns.

nC

ompe

nsat

ion

for

unfa

ir di

smis

sal u

p to

tw

oye

ars’

rem

uner

atio

n.

nD

amag

es fo

r w

rong

ful b

reac

h of

con

trac

t.

nTw

o w

eeks

to

12 m

onth

s’ n

otic

e de

pend

ing

on le

ngth

of s

ervi

ce/g

rade

.

nD

efer

red

com

pens

atio

n te

rmin

atio

n pa

ymen

t -

annu

al s

alar

y di

vide

d by

13.

5 x

n° o

fye

ars’

serv

ice.

nU

njus

t di

smis

sal c

ompe

nsat

ion

and/

orre

inst

atem

ent

depe

ndin

g on

the

cas

e an

d/or

on t

he e

mpl

oyer

’s w

orkf

orce

.

nN

one/

10 d

ays’

/1 m

onth

’s n

otic

e de

pend

ing

ongr

ound

s fo

r di

smis

sal.

nE

mpl

oyee

is e

ntitl

ed t

o fu

ll pa

y du

ring

notic

epe

riod.



Lithuania

Luxembourg

Malta

Minimum

Wage

nLT

L 5.

15 (

€1.4

9) p

er h

our;

LTL

850

(€24

6.18

) p

er m

onth

. n

Sta

tuto

ry m

inim

um w

age.

nA

s at

1 O

ctob

er 2

012:

€1,

846.

51 p

er m

onth

for

non-

qual

ified

em

ploy

ees

over

18/

€2,2

15.8

1 fo

r qu

alifi

ed w

orke

rs.

nN

atio

nal m

inim

um w

age

of €

158.

11 p

er w

eek.

n€1

51.3

3 pe

r w

eek

in t

he c

ase

of y

oung

peo

ple

and

trai

nees

age

d 17

.

n€1

48.4

9 pe

r w

eek

in t

he c

ase

of y

oung

peo

ple

and

trai

nees

age

d 16

and

you

nger

.

Maximum

Weekly Hours

n48

hou

rs p

er w

eek

(incl

udin

g ov

ertim

e).

n40

hou

rs p

er w

eek

(exc

ludi

ng o

vert

ime)

.

n40

hou

rs p

er w

eek.

n48

hou

rs p

er w

eek

aver

aged

ove

r a re

fere

nce

perio

d ra

ngin

g fro

m 1

7 to

52

wee

ks. A

nin

divi

dual

opt

-out

is a

lso

poss

ible

.


n28

cal

enda

r da

ys.

n25

wor

king

day

s’ h

olid

ays.

nM

inim

um fo

ur w

eeks

and

four

day

s ex

clud

ing

natio

nal a

nd p

ublic

hol

iday

s.

Maternity and

Fam


n12

6 da

ys’ p

aid

preg

nanc

y an

d ch

ildbi

rth

leav

e.

nO

ne m

onth

s’ p

aid

pate

rnity

leav

e.

n14

cal

enda

r da

ys’ u

npai

d pa

rent

al le

ave

per

year

for

empl

oyee

s w

ho h

ave

child

ren

unde

r14

yea

rs o

ld.

nU

p to

thr

ee y

ears

’ chi

ld c

are

leav

e, 7

0% o

fin

sure

d in

com

e is

pai

d un

til t

he c

hild

is o

neye

ar o

ld, 4

0% o

f ins

ured

inco

me

is p

aid

until

the

child

is t

wo

year

s ol

d or

100

% is

pai

d un

tilth

e ch

ild is

one

yea

r ol

d (p

aym

ents

are

sub

ject

to s

tatu

tory

thr

esho

lds)

.

n16

to

20 w

eeks

’ mat

erni

ty le

ave

(sta

tein

dem

nity

is p

ayab

le).

nS

ix m

onth

s’ fu

ll tim

e pa

rent

al le

ave

or 1

2m

onth

s’ p

art-

time

pare

ntal

leav

e (s

tate

inde

mni

ty is

pay

able

).

nS

peci

al le

ave

of u

p to

2 d

ays

per

child

per

year

in c

ases

of s

erio

us il

lnes

s or

acc

iden

t of

ade

pend

ent

child

.

nS

peci

al p

aid

leav

e da

ys (i

.e. d

eath

of a

rel

ativ

e,w

eddi

ng, e

tc).

n18

wee

ks’ m

ater

nity

leav

e.

n10

0% o

rdin

ary

pay

for

18 w

eeks

.

nS

peci

al le

ave

(8 w

eeks

with

nom

inal

pay

men

tde

term

ined

by

the

Soc

ial S

ecur

ity D

epar

tmen

t;th

e re

mai

nder

unp

aid)

if r

equi

red.

nFo

ur m

onth

s’ u

npai

d pa

rent

al le

ave.

Minimum

Notice by

Employer and

Term

ination Payments

nG

ener

ally,

tw

o m

onth

s’ n

otic

e (fo

ur m

onth

s in

spec

ified

cas

es).F

ull p

ay o

ver

notic

e pe

riod,

com

pens

atio

n fo

r un

used

vac

atio

n an

dse

vera

nce

com

pens

atio

n be

twee

n 1

and

6m

onth

s’ s

alar

y, d

epen

ding

on

the

leng

thof

serv

ice.

nN

o no

tice

or s

ever

ance

pay

for

dism

issa

lfo

rca

use

nN

o no

tice

in c

ase

of t

erm

inat

ion

for

serio

usm

isco

nduc

t.

nLe

gal n

otic

e: 2

to

6 m

onth

s’ n

otic

e de

pend

ing

on le

ngth

of s

ervi

ce.

nS

tatu

tory

sev

eran

ce in

dem

nity

: 1 t

o 12

mon

ths’

pay

dep

endi

ng o

n le

ngth

of s

ervi

ce .

nN

o no

tice

requ

ired

in c

ases

of t

erm

inat

ion

for

disc

iplin

ary

reas

ons.

nA

max

imum

of 1

2 w

eeks

’ not

ice

depe

ndin

g on

the

leng

th o

f ser

vice

for

redu

ndan

cy.



The Netherlands

Poland

Portug

al

Minimum

Wage

nS

tatu

tory

min

imum

wag

e.

n€1

,469

.40

per

mon

th f

or e

mp

loye

es a

ged

23 o

r ov

er,

excl

udin

g ho

liday

allo

wan

ce.

nIn

201

3 th

e m

inim

um s

tatu

tory

wag

e is

1,6

00P

LN g

ross

(app

rox.

€40

0) p

er m

onth

.n

Sta

tuto

ry m

inim

um w

age.

nIn

201

2 €4

85 p

er m

onth

.

Maximum

Weekly Hours

n60

hou

rs.

nA

vera

ge 3

6-40

hou

rs b

y co

llect

ive

orin

divi

dual

agre

emen

t.

nA

vera

ge 4

0 ho

urs

(gen

eral

ly e

ight

hou

rs p

erda

y in

a fi

ve d

ay w

ork

wee

k).

nC

an b

e ex

tend

ed u

p to

an

aver

age

of48

hour

s pe

r w

eek

by o

vert

ime

hour

s.

n40

hou

rs.

nG

ener

ally

redu

ced

by c

olle

ctiv

e ag

reem

ent.


n20

day

s, u

sual

ly in

crea

sed

by in

divi

dual

or

colle

ctiv

e ag

reem

ent

plus

hol

iday

allo

wan

ce o

f8%

of s

alar

y.

n20

wor

king

day

s w

hen

the

empl

oyee

has

been

wor

king

up

to 1

0 ye

ars.

n26

wor

king

day

s w

hen

the

empl

oyee

has

been

wor

king

mor

e th

an 1

0 ye

ars.

n22

day

s (fi

ve d

ay w

eek)

.

Maternity and

Fam


n16

wee

ks’ m

ater

nity

leav

e.

nP

ay: 1

00%

of s

alar

y up

to

ceilin

g.

n26

wee

ks’ u

npai

d pa

rent

al le

ave.

nTw

o da

ys’ p

aid

pate

rnity

leav

e.

nFo

ur w

eeks

’ fos

ter

care

or

adop

tion

leav

e.

n20

– 3

7 w

eeks

of m

ater

nity

leav

e (d

epen

ding

on t

he n

umbe

r of

chi

ldre

n bo

rn).

nA

dditi

onal

4 -

6 w

eeks

of m

ater

nity

leav

e(w

hich

can

be

gran

ted

to m

othe

r or

fath

er o

fch

ild u

pon

thei

r re

ques

t).

nTw

o w

eeks

’ pai

d pa

tern

ity le

ave

at 1

00%

ofre

mun

erat

ion.

nM

ater

nity

/ pa

tern

ity p

ay o

f 100

% o

fre

mun

erat

ion

paid

by

soci

al s

ecur

ity.

nTh

ree

year

s’ u

npai

d pa

rent

al le

ave

for

each

pare

nt u

p to

chi

ld’s

four

th b

irthd

ay.

n12

0 da

ys’ i

nitia

l par

enta

l lea

ve: M

othe

r en

title

dto

min

imum

of s

ix w

eeks

’ exc

lusi

vepa

rent

alle

ave.

nFa

ther

10-

20 d

ays

excl

usiv

e pa

rent

al le

ave

-ba

lanc

e of

120

day

s ca

n be

sha

red.

n30

add

ition

al d

ays

at p

aren

ts’ o

ptio

n (i.

e. 1

50 d

ays)

.

n30

add

ition

al d

ays

(i.e.

180

day

s in

tot

al).

nP

aren

tal l

eave

allo

wan

ce -

100

% a

vera

gew

age

for

120

days

or

80%

ave

rage

wag

e fo

r15

0 da

ys o

r 83

% a

vera

ge w

age

for

180

days

- pa

yabl

e by

soc

ial s

ecur

ity.

Minimum

Notice by

Employer and

Term

ination Payments

nO

ne t

o fo

ur m

onth

s’ n

otic

e de

pend

ing

onle

ngth

of s

ervi

ce.

nG

ener

ally

bet

wee

n a

half

and

two

mon

ths’

sala

ry p

er y

ear o

f ser

vice

dep

endi

ng o

n ag

e an

dle

ngth

of s

ervi

ce a

nd re

ason

s fo

r ter

min

atio

n.

nE

mpl

oym

ent

cont

ract

of i

ndef

inite

dur

atio

n:

•Tw

o w

eeks

’ if t

he e

mpl

oyee

was

em

ploy

edup

to

six

mon

ths;

•O

ne m

onth

if t

he e

mpl

oyee

was

em

ploy

edfo

r at

leas

t 6

mon

ths;

•Th

ree

mon

ths

if th

e em

ploy

ee w

asem

ploy

ed fo

r at

leas

t th

ree

year

s;

nTh

e em

ploy

ee r

ecei

ves

rem

uner

atio

n du

ring

the

who

le n

otic

e pe

riod.

nA

dditi

onal

sta

tuto

ry s

ever

ance

pay

men

t in

the

case

of

redu

ndan

cy a

mou

ntin

g fro

m 1

-3m

onth

s’ r

emun

erat

ion

depe

ndin

g on

leng

thof

ser

vice

.

n15

to

75 d

ays

depe

ndin

g on

the

leng

th o

fse

rvic

e fo

r re

dund

ancy

dis

mis

sal.

nN

o no

tice

requ

ired

in c

ases

of t

erm

inat

ion

for

disc

iplin

ary

reas

ons.

nN

otic

e of

ter

min

atio

n of

ter

m e

mpl

oym

ent

cont

ract

is 7

to

60 d

ays

depe

ndin

g on

the

type

of t

erm

em

ploy

men

t co

ntra

ct a

ndits

dura

tion.

nR

edun

danc

y co

mpe

nsat

ion

whe

reem

ploy

men

t co

mm

ence

d be

fore

1

Nov

embe

r 20

11:

•S

ervi

ce u

nder

a p

erm

anen

t em

ploy

men

tco

ntra

ct p

rior

to 3

1 O

ctob

er 2

012:

1m

onth

bas

ic s

alar

y (M

BS

) + S

enio

rity

allo

wan

ce (S

A))

X N

o. o

f yea

rs s

ervi

ce.

Com

pens

atio

n ca

nnot

be

less

tha

n th

ree

MB

S a

nd S

A



The Netherlands

(con

tinue

d)Poland

(con

tinue

d)Portug

al (c

ontin

ued)

•S

ervi

ce u

nder

fixe

d te

rm c

ontr

act

up t

o31

Oct

ober

201

2: t

wo

days

’ sal

ary

for

each

mon

th o

f the

con

trac

t if

it is

> 6

mon

ths

in d

urat

ion.

Thr

ee d

ays’

sal

ary

for

each

mon

th if

it is

< 6

mon

ths

•S

ervi

ce u

nder

per

man

ent

and

fixed

ter

mem

ploy

men

t co

ntra

cts

afte

r 31

Oct

ober

201

2:

–S

ervi

ce w

ill on

ly b

e co

nsid

ered

if t

heem

ploy

ee h

as le

ss t

han

12 y

ears

’se

rvic

e an

d/or

the

com

pens

atio

n fo

r th

epr

evio

us p

erio

d of

ser

vice

doe

s no

tex

ceed

240

x m

inim

um n

atio

nal w

age

(i.e.

€11

6,40

0 fo

r 20

12)

–20

day

s of

MB

S +

SA

per

yea

r of s

ervi

ce

–1

day

= (1

MB

S +

SA

) /30

–M

BS

cei

ling

of 2

0 x

min

imum

nat

iona

lw

age

(i.e.

€9,

700

for

2012

)

nR

edun

danc

y co

mpe

nsat

ion

whe

re e

mpl

oym

ent

com

men

ced

on o

r afte

r 1 N

ovem

ber 2

011:

•P

erm

anen

t an

d fix

ed t

erm

con

trac

ts:

–20

day

s of

MB

S a

nd S

A p

er y

ear

ofse

nior

ity

–1

day

= (1

MB

S +

SA

) /30

–M

BS

cei

ling

of 2

0 x

min

imum

nat

iona

lw

age

(i.e.

€9,

700

for

2012

)

n15

to

45 d

ays’

sal

ary

and

a se

nior

ity p

aym

ent

for

each

full/

part

ial y

ear

of s

ervi

ce, i

n th

e ca

seof

an

unla

wfu

l dis

mis

sal.



Romania

Slovakia

Slovenia

Minimum

Wage

nR

ON

700

per

mon

th (

app

rox

€155

) fo

r17

0ho

urs

per

mon

th.

nS

tatu

tory

min

imum

wag

e: E

UR

337

.70

per

mon

th o

r €1

.941

per

hou

r as

of

1 Ja

nuar

y 20

13.

nM

inim

um w

age

of €

763.

06 p

er m

onth

(as

at1

Janu

ary

2012

).

Maximum

Weekly Hours

n40

hou

rs p

lus

eigh

t ho

urs

over

time.

nB

y ex

cept

ion,

max

imum

wee

kly

hour

s m

ay n

otex

ceed

48

hour

s ca

lcul

ated

as

an a

vera

geov

er fo

ur m

onth

s.

n40

hou

rs.

n38

.75

in t

wo

shift

ope

ratio

ns.

n37

.5 in

thr

ee s

hift

oper

atio

ns.

n40

hou

rs p

lus

a m

axim

um e

ight

hou

rs o

verti

me.

nIn

cas

e of

an

unev

en d

istri

butio

n of

wor

king

hour

s: 5

6 ho

urs.


n20

wor

king

day

s.n

Four

wee

ks (2

0 w

orki

ng d

ays)

.

nFi

ve w

eeks

if e

mpl

oyee

rea

ches

33

year

sof

age.

nFo

ur w

eeks

.



Romania (c

ontin

ued)

Slovakia

(con

tinue

d)Slovenia

(con

tinue

d)

Maternity and

Fam


n12

6 da

ys’ m

ater

nity

leav

e.

nP

ay: 8

5% o

f ave

rage

inco

me

up t

o a

ceilin

g of

12 m

onth

s’ m

inim

um s

alar

y i.e

. RO

N 8

,400

(app

rox.

€ 1

,860

) pay

able

by

soci

al s

ecur

ity.

n5

or 1

5 da

ys’ p

aid

fam

ily le

ave

for

birt

h of

ach

ild, d

epen

ding

on

atte

ndan

ce o

f chi

ldra

isin

gco

urse

s.

nC

hild

care

leav

e un

til t

he c

hild

is o

ne o

r tw

oye

ars

old

(or

thre

e fo

r ch

ildre

n w

ith d

isab

ilitie

s),

at t

he p

aren

t’s e

lect

ion.

nP

ay: 7

5% o

f the

ave

rage

inco

me

but n

ot le

ssth

an a

mon

thly

sta

tuto

ry p

ay o

f RO

N 6

00(a

ppro

xim

atel

y €1

33) a

nd n

ot m

ore

than

RO

N3,

400

(app

roxi

mat

ely

€755

) for

chi

ldca

re le

aves

until

the

child

turn

s on

e, a

nd R

ON

1,2

00(a

ppro

xim

atel

y €2

70) f

or c

hild

care

leav

es u

ntil

the

child

turn

s tw

o, p

ayab

le b

y th

e st

ate.

n34

wee

ks’ n

orm

al m

ater

nity

/pat

erni

ty le

ave

(but

onl

y on

e pa

rent

elig

ible

).

n37

wee

ks’ m

ater

nity

leav

e if

sing

le p

aren

t.

n43

wee

ks’ m

ater

nity

leav

e if

mul

tiple

birt

hs.

nP

aym

ents

pro

vide

d by

sta

te S

ocia

l Ins

uran

ceC

ompa

ny fr

om s

ickn

ess

insu

ranc

e fu

nds.

nU

npai

d pa

rent

al le

ave

until

the

child

is th

ree

year

s ol

d, p

aren

tal l

eave

is fu

nded

by

the

stat

e.

n10

5 da

ys’ m

ater

nity

leav

e to

beg

in 2

8 da

ysbe

fore

the

exp

ecte

d da

te o

f chi

ldbi

rth

atth

ela

test

.

nA

fter

mat

erni

ty le

ave

a fu

rthe

r 26

0 da

ys’

pare

ntal

leav

e to

be

take

n by

eith

er p

aren

t.

nA

ll m

ater

nity

, pat

erni

ty a

nd p

aren

tal l

eave

pay

born

e by

soc

ial s

ecur

ity.

nP

ater

nity

leav

e: 1

5 da

ys t

o be

tak

en w

ithin

6m

onth

s of

chi

ldbi

rth

and

75 d

ays

to b

e ta

ken

befo

re t

he c

hild

’s t

hird

birt

hday

.

Minimum

Notice by

Employer and

Term

ination Payments

n20

bus

ines

s da

ys’ n

otic

e.

nN

o le

gal t

erm

inat

ion

paym

ent.

nO

ne m

onth

’s n

otic

e in

gen

eral

.

nTw

o m

onth

s’ n

otic

e fro

m e

mpl

oyer

ifem

ploy

ed fo

r at

leas

t on

e ye

ar a

nd le

ss t

han

five

year

s.

nTh

ree

mon

ths’

not

ice

from

em

ploy

er fo

rte

rmin

atio

n du

e to

org

anis

atio

nal r

easo

ns o

rem

ploy

ee’s

inab

ility

to p

erfo

rm w

ork

on h

ealth

grou

nds

if em

ploy

ed fo

r at

leas

t fiv

e ye

ars.

nC

ompe

nsat

ion

equa

l to

sala

ry o

ther

wis

epa

yabl

e fo

r th

e du

ratio

n of

cou

rt p

roce

edin

gsup

to

36 m

onth

s w

here

dis

mis

sal i

n br

each

of

Labo

ur C

ode.

nS

tatu

tory

sev

eran

ce p

aym

ent

for

term

inat

ion

due

to o

rgan

isat

iona

l rea

sons

or

empl

oyee

’sin

abilit

y to

per

form

the

wor

k on

hea

lth g

roun

dsra

ngin

g fro

m a

t le

ast

the

aver

age

mon

thly

earn

ings

to

at le

ast

five

times

the

ave

rage

mon

thly

ear

ning

s de

pend

ing

on t

he le

ngth

of

the

empl

oym

ent.

nS

tatu

tory

sev

eran

ce p

aym

ent

for

term

inat

ion

due

to o

ccup

atio

nal a

ccid

ent

or d

isea

se (o

r a

thre

at t

here

of),

over

expo

sure

to

a da

nger

ous

envi

ronm

ent

of a

t le

ast

10 t

imes

the

ave

rage

mon

thly

ear

ning

s.

n30

- 1

20 d

ays’

not

ice

depe

ndin

g on

gro

und

for

term

inat

ion

and

leng

th o

f ser

vice

.

nS

ever

ance

pay

of b

etw

een

1/5th

and

1/3rd

of a

mon

th’s

sal

ary

in e

ach

case

cap

ped

at 1

0m

onth

s’ s

alar

y ac

cord

ing

to le

ngth

of s

ervi

ce.

A Guide to Employment in the European UnionAppendix Country by Country Comparisons

282


Spain

Sweden

UK

Minimum

Wage

n€6

41.4

0 p

er m

onth

.n

No

stat

utor

y m

inim

um w

age:

wag

e ra

tes

ofte

nre

gula

ted

by c

olle

ctiv

e ag

reem

ent.

nS

tatu

tory

min

imum

wag

e: £

6.19

per

hou

r(fr

om O

ctob

er 2

012)

for

adul

ts, £

4.98

(fro

mO

ctob

er 2

012)

for

youn

g pe

ople

age

d 18

to

20, a

nd £

3.68

for

16 a

nd 1

7 ye

ar o

lds

(from

Oct

ober

201

2).

Maximum

Weekly Hours

n40

hou

rs a

vera

ged

on a

nnua

l bas

is.

nO

ften

redu

ced

by C

BA’

s.

n40

hou

rs -

may

be

redu

ced

byco

llect

ive

agre

emen

t.

nA

vera

ge w

eekl

y w

orki

ng h

ours

in t

otal

(incl

udin

g ov

ertim

e) m

ay n

ot e

xcee

d 48

hou

rsdu

ring

any

four

mon

th p

erio

d or

50

hour

s pe

rca

lend

ar m

onth

, with

an

annu

al li

mit

of20

0ho

urs

gene

ral o

vert

ime

per

year

.

n48

hou

rs p

er w

eek

aver

aged

ove

r 17

wee

ks.


n30

cal

enda

r da

ys.

nM

inim

um 2

5 da

ys.

n5.

6 w

eeks

(28

days

).

Maternity and

Fam


n16

wee

ks’ m

ater

nity

leav

e (1

8 w

eeks

’ lea

ve if

mor

e th

an o

ne c

hild

is b

orn)

. The

sam

e le

ave

appl

ies

to a

dopt

ion.

nP

ay: 1

00%

of r

efer

ence

con

trib

utio

n ba

sepr

ovid

ed b

y th

e S

ocia

l Sec

urity

Sys

tem

dur

ing

mat

erni

ty le

ave.

nTw

o da

ys’ p

aid

leav

e fo

r ch

ild’s

birt

h an

d fo

rde

ath,

acc

iden

t, cr

itica

l illn

ess,

hos

pita

lisat

ion,

or s

urgi

cal i

nter

vent

ion

with

out

hosp

italis

atio

nof

a c

lose

rel

ativ

e. (I

f it

requ

ires

a jo

urne

y th

epa

id le

ave

is fo

ur d

ays)

.

n13

day

s of

pat

erni

ty le

ave

(plu

s tw

o ex

tra

days

per

addi

tiona

l chi

ld b

orn)

.

n60

day

s m

ater

nity

leav

e be

fore

birt

h.

n48

0 da

ys’ p

aid

pare

ntal

leav

e (p

re-b

irth

mat

erni

ty le

ave

incl

uded

). Th

e be

nefit

whi

ch is

paid

by

the

Soc

ial I

nsur

ance

Offi

ce m

ay b

edr

awn

at a

ny t

ime

until

the

chi

ld r

each

es t

heag

e of

eig

ht o

r co

mpl

etes

the

firs

t cl

ass

ofsc

hool

.

nP

ay is

80%

of o

rdin

ary

sala

ry a

s pe

r ru

les

ofN

atio

nal S

ocia

l Sec

urity

Sys

tem

for

390

days

(up

to a

cer

tain

cap

), pl

us S

EK

180

per

day

for

90 d

ays.

nD

iffer

ent

rule

s ap

ply

if th

e ch

ild w

as b

orn

befo

re 1

Jan

uary

200

2 or

bef

ore

1 Ju

ly 2

006

resp

ectiv

ely.

nO

ne y

ear’s

mat

erni

ty le

ave.

nS

tatu

tory

Mat

erni

ty P

ay fo

r 39

wee

ks.

n13

wee

ks’ u

npai

d pa

rent

al le

ave

(risi

ng t

o 18

wee

ks fr

om M

arch

201

3.

nTw

o w

eeks

’ pai

d pa

tern

ity le

ave

at b

asic

SM

Pra

te.

nA

dopt

ion

leav

e of

bet

wee

n 26

wee

ks a

ndon

eye

ar.

nU

ntil

2015

– 6

mon

ths’

add

ition

al p

ater

nity

leav

e (u

p to

thr

ee m

onth

s’ a

t ba

sic

SM

P r

ate)

.


Spain

(con

tinue

d)Sweden (c

ontin

ued)

UK (c

ontin

ued)

Minimum

Notice by

Employer and

Term

ination Payments

n15

day

s’ n

otic

e fo

r ob

ject

ive

dism

issa

l.

nU

nfai

r di

smis

sal:

45 d

ays’

sal

ary

per

year

of

serv

ice

up t

o 42

mon

ths’

sal

ary

for

the

perio

dof

ser

vice

s re

nder

ed b

etw

een

the

com

men

cem

ent

date

and

11

Febr

uary

201

2an

d 33

day

s’ s

alar

y pe

r ye

ar o

f ser

vice

up

to24

mon

ths’

for

the

perio

d of

ser

vice

s fro

m12

Febr

uary

201

2 on

war

ds.

n20

day

s’ s

alar

y pe

r ye

ar o

f ser

vice

up

to12

mon

ths’

sal

ary

(fair

obje

ctiv

e di

smis

sal).

nU

pon

term

inat

ion

of a

tem

pora

ry c

ontr

act

ase

vera

nce

paym

ent

of e

ight

day

s’ s

alar

y pe

rye

ar o

f ser

vice

. Thi

s w

ill in

crea

se p

rogr

essi

vely

:ni

ne d

ays’

pay

for

cont

ract

s en

tere

d in

to a

fter

1 Ja

nuar

y 20

12; 1

0 da

ys’ p

ay fo

r co

ntra

cts

ente

red

into

afte

r 1

Janu

ary

2013

; 11

days

’pa

y fo

r co

ntra

cts

ente

red

into

afte

r 1

Janu

ary

2014

and

12

days

’ pay

for

cont

ract

s en

tere

din

to a

fter

1 Ja

nuar

y 20

15.

nO

ne t

o si

x m

onth

s’ n

otic

e de

pend

ing

on t

heem

ploy

ee’s

leng

th o

f ser

vice

or

age

(the

latt

er,

if th

e em

ploy

ee w

as e

mpl

oyed

prio

r to

1Ja

nuar

y 19

97).

Long

er n

otic

e pe

riod

may

be

stip

ulat

ed in

col

lect

ive

agre

emen

ts o

r th

ein

divi

dual

em

ploy

men

t co

ntra

ct.

nFu

ll pa

y an

d ot

her

bene

fits

thro

ugho

utno

tice

perio

d.

nN

o st

atut

ory

seve

ranc

e pa

y.

nO

ne t

o 12

wee

ks’ n

otic

e de

pend

ing

on le

ngth

of s

ervi

ce.

nS

tatu

tory

red

unda

ncy

paym

ent

(if r

edun

danc

y)up

to

a m

axim

um o

f £13

,500

dep

endi

ng o

nle

ngth

of s

ervi

ce (f

rom

1 F

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ary

2013

).

nC

ompe

nsat

ion

for

unfa

ir di

smis

sal c

ombi

ned

max

imum

of £

87,7

00 p

lus

annu

al in

dexa

tion

(from

1 F

ebru

ary

2013

).

* P

rovi

ded

by t

he s

tate

and

by

the

empl

oyer

by

law

and

/or

colle

ctiv

e ag

reem

ent

Not

e: t

he c

onte

nts

of t

his

tabl

e pr

ovid

e a

broa

d ov

ervi

ew o

nly,

for

grea

ter

deta

il pl

ease

see

the

rel

evan

t se

ctio

n of

the

Gui

de**

Exc

lusi

ve o

f pub

lic o

r re

ligio

us h

olid

ays


A Guide to Employment in the European UnionContacts

284


This publication has been prepared withthe assistance of lawyers in each of the27 Member States of the European Union.

This publication and its companionbooklet Employee Share Plans in Europeread together, provide an introduction toemployee benefits and employment lawin each Member State. Copies ofEmployee Share Plans in Europe areavailable from Clifford Chance’sPublications Unit in London.

This publication has been prepared bythe Employment Unit of Clifford Chancein London with assistance from lawyersin other European offices of CliffordChance and contacts in other law firmsin Europe. The principal Clifford Chancecontributors were:

n Tania Stevenson (editor) (London) –Tel: +44 207006 8938. Email:[email protected]

n Sara Schermerhorn (Amsterdam) –Tel: +31 20711 9332. Email:[email protected]

n Xavier Remy and Gert Cuppens(Brussels) – Tel: +32 2 533 5911.Email:[email protected] /[email protected]

n Nicole Engesser Means (Frankfurt) –Tel: +49 697199 3163. Email:[email protected]

n Albert Moro and Isabelle Comhaire(Luxembourg) – Tel: +352 48 50 50 1.Email:[email protected] /[email protected]

n Juan Calvente and Jorge Martin-Fernandez (Madrid) – Tel: +34 91 59075 00. Email:[email protected] /[email protected]

n Simonetta Candela and MarinaMobiglia (Milan) – Tel: +39 02 806 341.Email:[email protected]/ [email protected]

n Christian Lacheze (Paris) – Tel: +33 14405 5337. Email:[email protected]

n Janka Brezaniova (Prague) – Tel: +420 22255 5250. Email:[email protected]

n Stanislav Holec (Prague for hiscontribution in respect of the SlovakRepublic) - Tel: +420 22255 5251. Email:[email protected]

n Anna Halas (Warsaw) - Tel: +48 22429 9512. Email:[email protected]

The principal contributors from other lawfirms in Europe, whose help and assistancewe gratefully acknowledge, were:

n Dr Martin Huger/Hans Laimer -Schönherr Rechtsanwälte GmbhAttorneys at Law, Tuchlauben 17, A-1010 Vienna, POB 41, Austria. Tel: +43 1 534 37-384. Fax: +43 1 534 37 64082. Email:[email protected]. Web:www.schoenherr.at

n Sergey Penev/Svetla Ivanova - PenevLLP, 19A Patriarch Evtimii Blvd, 1142Sofia, Bulgaria. Tel: +359 2/930 0970, 988 8036. Fax: +359 2 930 0978. Email: [email protected]. Web: http://www.penev.eu

n Xenios L. Xenopoulos & Co, AluminiumTower, 5th Floor, 2 Limassol Avenue2003 Nicosia, Cyprus, PO Box210036, 1500 Nicosia Cyprus. Tel: +357 22 33 69 33. Fax: + 357 22 33 69 33. Email: [email protected]. Web: www.xenopoulos.com.cy

n Helene Amsinck/Tommy Angermair -Kromann Reumert, Sundkrogsgade 5,DK-2100 Copenhagen, Denmark. Tel: +45 70 12 12 11. Fax: +45 70 12 13 11. Email: [email protected] /[email protected]. Web: www.kromannreumert.com

n Karin Madisson/Kaia Kuusler -Sorainen Law Offices, Pärnu mnt.15,10141, Tallinn, Estonia.Tel: +372 640 0900. Fax: +372 640 0901. E-mail: [email protected] /[email protected]. Web: www.sorainen.com

n Johanna Haltia-Tapio – HannesSnellman Attorneys Ltd, Eteläranta 8,FIN 00131, PO Box 333, Helsinki,Finland. Tel: +358 9 2288 4298. Fax: +358 9 2288 4210. E-mail: [email protected]. Web: www.hannessnellman.com

n Betty Smyrniou – Bahas, Gramatidis &Partners, 26 Filellinon Street, Athens105 58, Greece. Tel: +30 210 33 18 170. Fax: +30 210 33 18 171. E-mail: [email protected]: www.bahagram.com

n Richard Lock/Adrienn Piskóti –Lakatos, Köves És Társai, 1075Budapest Mádach Imré ut 14, Hungary.Tel: +361 429 1300. Fax: +36 1 429 1390. Email: [email protected];[email protected]

n Terence McCrann/Paul Buchanan –McCann FitzGerald, Riverside One, SirJohn Rogerson's Quay, Dublin 2,Ireland. Tel: +353 1 829 0000. Fax: +353 1 829 0010. E-mail:[email protected]

Contacts


285A Guide to Employment in the European UnionContacts

/ [email protected]: www.mccannfitzgerald.ie

n Andis Burkevics/Lāsma Rugāte -Sorainen Law Offices, Kr.Valdemaraiela 21, Riga LV 1010, Latvia. Tel: +371 67 365 000. Fax: +371 67 365 001. E-mail:[email protected] /[email protected]. Web: www.sorainen.com

n Algirdas Pekšys/Jurgita Venckuté -Sorainen Law Offices, Jogailos G.4,LT0 1116 Vilnius, Lithuania. Tel: +370 526 85040. Fax: +370 526 85041. E-mail: [email protected]/ [email protected]. Web: www.sorainen.com

n Matthew Brincat - Ganado &Associates, Advocates; 57 StChristopher Street, Valletta, MaltaVLT08. Tel: +356 21 247902; Fax: +356 21 240550. E-mail:[email protected]. Web: www.jmganado.com

n Sandra Lima Da Silveira – CuatrecasasGonçalves Pereira RL, Praça Marquêsde Pombal, 2 1250-160 Lisbon,Portugal. Tel: +351 21 355 3803. Fax: +351 21 354 97 84. E-mail:[email protected]

n Mara Moga Paler - Clifford ChanceBadea, Excelsior Center, 28-30Acadamieistreet, Sector 1, Bucharest01006, Romania. Tel: +40 (21) 21 66 66 17. Fax: +40 (21) 21 66 66 111. E-mail: [email protected]

n Dr. Ralf Peschek / Urska Gliha- WolfTheiss, Bleiweisova 30, 1000 Ljubljana,Slovenia. Tel: +386 1 438 00 00. Fax: +386 1438 00 25. E-mail: [email protected] /[email protected]. Web: www.wolftheiss.com

n Henric Diefk/Kerstin Kamp-Wigforss –Mannheimer Swartling, Lilla Torget 1,Box 1711, SE-11187, Stockholm,Sweden. Tel: +46 8 5950 6391. Fax: +46 8 5950 6001. E-mail: [email protected] /[email protected]. Web: www.mannheimerswartling.se

© Clifford Chance, 2013.

Clifford Chance LLP is a limited liability partnership registered in England andWales under number OC323571.

Registered office: 10 Upper Bank Street, London, E14 5JJ.

We use the word ‘partner’ to refer to a member of Clifford Chance LLP, or anemployee or consultant with equivalent standing and qualifications.

This publication does not necessarily deal with every important topic nor cover everyaspect of the topics with which it deals. It is not designed to provide legal or otheradvice.

If you do not wish to receive further information from Clifford Chance about events orlegal developments which we believe may be of interest to you, please either sendan email to [email protected] or contact our databaseadministrator by post at Clifford Chance LLP, 10 Upper Bank Street, Canary Wharf,London E14 5JJ.

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