Contract Termination: A Comprehensive Guide
Contract Termination
1. Extinction of Employment Contract
Termination of an employment contract signifies the end of the employment relationship between a company and its employee. The contract ceases to exist, permanently dissolving the obligations of both parties. Contract termination differs from suspension, as termination is final while suspension is temporary.
2. Termination by Mutual Agreement
This type of termination occurs when both the employer and employee agree to end the employment relationship. The expression of this intent must be freely given.
3. Extinction for Reasons Stated in the Contract
Contractual termination clauses are valid only when they don’t constitute an abuse of rights by the employer. If deemed abusive, the worker may be entitled to compensation. When the specified condition is met, the contract automatically terminates. However, if one party prevents the condition’s fulfillment, the contract remains in effect, free from the condition. There is no right to compensation unless agreed upon.
3.3 Termination Due to Completion of Work or Service
This type of termination applies to fixed-term contracts. Upon contract completion, except for interim and training contracts, the employee is entitled to compensation (eight days per year of service, or proportionally less for shorter periods). For fixed-term contracts exceeding one year, a 15-day termination notice is required.
4. Termination Initiated by the Employee
Employees can terminate their contracts in the following cases:
4.1 Resignation
Resignation is a voluntary termination of the contract without a specific cause. It requires a notice period as specified in the collective agreement or local custom (usually 15 days).
4.2 Abandonment
Abandonment occurs when the worker leaves the job intending to terminate the contract without notice. This constitutes a breach of contract.
4.3 Termination for Cause
Employees can request contract termination based on the employer’s breach of contract, including:
- Substantial changes in working conditions contrary to professional training or dignity.
- Continued delays or non-payment of wages.
- Any other material breach by the employer, except in cases of force majeure.
5. Termination Initiated by the Employer: Dismissal
The law allows employers to dismiss workers for various reasons, including:
- Non-compliant behavior of the worker.
- Reasons linked to the worker but not constituting a breach of contract.
- Reasons related to company operations, organization, and interests.
5.1 Disciplinary Dismissal
Disciplinary dismissal occurs when the employer terminates the contract due to a serious and culpable violation of the employee’s obligations. The breach must be significant, not minor.
5.1.1 Grounds for Dismissal
While serious and culpable failure is the generic cause for disciplinary dismissal, specific examples include:
5.1.2 Procedure
- Employer’s Actions: The employer has 60 days from the date of knowledge of the breach to initiate dismissal, and within six months of the breach’s occurrence. Dismissal must be communicated in writing.
- Employee’s Options: Upon dismissal, the employee can either accept it (ending the contract without compensation) or reject it and file a claim within 20 working days.
5.2 Objective Dismissal
5.2.1 Grounds for Dismissal
Objective grounds for dismissal include:
- Worker’s Ineptitude: Must be discovered or occur after employment commences.
- Lack of Adaptation to Technical Changes.
- Job Redundancy.
- Absenteeism: Reaching 20% of working days in two consecutive months or 25% in four discontinuous months within 12 months, provided that the total absence rate of the center’s staff exceeds 5% during the same periods. Absenteeism does not include absences due to legal strikes, worker representation duties, maternity leave, accidents, pregnancy-related illness, childbirth, breastfeeding, approved leaves, illnesses or non-occupational accidents exceeding 20 consecutive days, or absences due to gender-based violence.
5.3 Dismissal Due to Technical, Organizational, Economic, Production, or Force Majeure Reasons
5.3.1 Characteristics
This type of dismissal, governed by Article 51 of the Spanish Workers’ Statute (TRLET), can be based on economic grounds (e.g., reducing losses), technical grounds (e.g., mechanization), organizational grounds (e.g., restructuring), or production grounds (e.g., production surpluses). These reasons can justify individual or collective dismissals and are considered objective grounds for termination.
5.3.2 Requirements
Dismissals based on these reasons affecting a certain number of workers within 90 days are considered collective redundancies.
5.3.3 Procedure
Employers planning collective redundancies must seek permission from the labor authority. The procedure involves requesting authorization and initiating a consultation period with worker representatives.