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Labour law

When an employment relationship ends in discord

Kristel Tiits Kristel Tiits

Sometimes a falling-out between colleagues brings an employment relationship to an end, as a recent real-life case showed: co-workers at a company in the restaurant industry had a row about who was voting for the Centre Party and who was not. The war of words continued on the following days and culminated with one of the employees being terminated for creating a hostile atmosphere at work. That employee turned to the labour dispute committee to challenge the decision. 

First, let’s take a look at what the possible grounds are in the first place for terminating an employment contract entered into for an unspecified term. According to the Employment Contracts Act, there are two grounds for cancelling an employment contract: ordinary and extraordinary. The ordinary cancellation option is available only by the employee, the employer does not have this option. However, either the employer or employee can cancel the employment contract extraordinarily. 

The easiest option is agreement between the parties

The most common grounds for extraordinary cancellation of an employment contract is by agreement (Employment Contracts Act § 79). From the employer’s standpoint, this is the most convenient way and the cancellation of an employment contract terminated by agreement cannot later be contested. Yet there are several aspects in the case of an agreement to cancel the contract that are worth noting. For example, to avoid later disputes, agreement should be reached on claims that are waived and what compensation will be paid to the employee. For example, the employer may pay additional compensation to the employee in the case of an agreement between the parties. At the same time, it is not allowed to agree that the employment contract is terminated by agreement and the employer does not pay the employee holiday pay for holiday time earned but not used. In that case, the employee has the right to challenge the decision afterward, because the employee received less money. However, if the employee took the holiday and received holiday pay, the employer has the right to withhold from the final settlement the amount paid as holiday pay – in other words, to offset it. Advance consent from the employee for the offsetting is not necessary. 

In addition to termination of employment contract by agreement, the Employment Contracts Act provides two grounds for extraordinary cancellation of contract at the initiative of the employer: for a reason arising from the employee (Employment Contracts Act § 88) and for economic reasons (Employment Contracts Act § 89). The employer must always provide a reason consistent with the Employment Contracts Act for extraordinary cancellation of employment contract on these grounds.

For example, the Employment Contracts Act specifies eight grounds for extraordinary cancellation of employment contract for reasons arising from the employee. One of these states that the employment contract may be terminated if the employee has not successfully performed the duties of employment. But the employee’s performance must be monitored and documented during four months – e.g., a log must be kept. There are grounds for termination of employment contract also if the employee has, in spite of being warned by the employer, failed to comply with reasonable orders from the employer or if the employee failed to perform duties of employment. If the employer issues a second warning to the employee for the same act, the employment contract may be terminated at the initiative of the employer. This was the ground cited by the employer in the decision made in case of the row noted at the start of this article – failure to comply with reasonable orders issued by the employer and creating a hostile work environment. However, the employee filed an appeal to the labour dispute committee, claiming to have been treated poorly and discriminated against. In the end, the incident was resolved before the hearing of the committee as the employer and employee managed to reach a compromise in the course of a several-hour discussion, and the employer paid the employee one month’s salary as severance, meeting the employee part way. 

How to dismiss someone who drinks on the job?

An employment contract can also be cancelled for a reason arising from the employee if the employee is at work in an intoxicated state. Proving intoxication is quite complicated in practice, because for the purposes of the General Data Protection Regulation, establishing that a person is in such a state involves processing of special-category personal data and this requires the employee’s consent. Not only that – the subjects can withdraw their consent at any time and say they are not willing to take a breathalyser test. In such a case, the employer can rely on testimony from other employees stating that the smell of alcohol could be detected on the person’s breath and that the person had coordination problems, staggered, etc. If the employee becomes aggressive, an option is to call the police. The police can establish whether the person is drunk. 

In order to ensure the proper rules of conduct for handling a case of an employee who is suspected of being intoxicated on the job and if necessary terminating the employment relationship with intoxicated person, I recommend that the procedure for determining intoxication be specified in each company’s internal procedures. The internal procedures are obligatory for the employee and alternatively the employee can be asked for consent for processing personal data, although it should be remembered in this case that the employee can withdraw the consent at any time. 

Termination of agreement with an employee in poor health

Life inevitably will bring up cases where the employees’ health keeps them from discharging their work duties properly or where they have to abruptly start taking care of a family member who is ill. In such a case, the employee can extraordinarily cancel the employment contract on the basis of subsection 91 (2) of the Employment Contracts Act. The employer can also cancel the employment contract extraordinarily if the employee has been absent from work due to health for more than four months (Employment Contracts Act § 88, due to reduced incapacity for work due to a health condition). The four months need not be consecutive; rather, these can be cumulated for the entire calendar year. 

Recently, the labour dispute committee deliberated on an incident at an industrial enterprise where the employee had been on sick leave for seven months. The employee was responsible for repairs of large pieces of machinery, but his illness involved balance problems. The employer carried out a risk analysis and terminated the contract on the basis of clause 88 (1) 1) – the employee had not coped for an extended period with performing duties of employment due to a health condition, which prevented the employment relationship from being continued. The employment contract was terminated with no advance notice, i.e. the employee had worked for the company for 10 years but was not notified 90 days in advance. The employer nevertheless acted correctly; because an employment contract can in certain cases be terminated without advance notice; and since the employer had conducted a thorough risk analysis in regard to the employee, which showed that if the employee operated the machinery, it would pose a risk to the employee and co-workers, it was not possible to continue to employ him during the advance notification term. However, the employee contended that his rights under the Equal Treatment Act had been violated and the employer’s decision was appealed to the labour dispute committee. The committee found that the employer behaved correctly and a very compelling argument was precisely the thorough risk analysis prepared by the employer. Thus, it is half the battle to dot the legal i’s and document all of the relevant information in writing. 

Employers should be more attentive

In practice, there are occasionally cases where the employer has not acted properly in extraordinarily cancelling the employment contract. This may lead to a labour dispute, which takes not just a toll on nerves but also means expenses on hiring legal advisers, to say nothing of possible damage to reputation. 

One of the most interesting cases of last summer occurred at a manufacturing company. An employee there was publicly cautioned, and a meeting was convened to convey the caution to the employee and the text of the warning was posted on a wall as well. This was considered degrading to the employee and constituted a violation of personal data protection regulations as personal information concerning that employee was made public. The employee submitted a declaration of extraordinary cancellation of the employment contract on the basis of Section 91 of the Employment Contracts Act – the employee had been treated in a degrading manner. The employer became upset and issued yet another warning to the employee and cancelled the employment contract extraordinarily on the basis of Section 88 – a reason arising from the employee. But, after some time had passed, the employer was called before the labour dispute committee as the employer had ignored the declaration of cancellation of employment contract filed by the employee. The declaration of cancellation must under any circumstances receive a response within 30 days, either the acknowledgment must be made that yes, the employer behaved in a degrading manner, or the declaration must be challenged before the labour dispute committee. In this case, the labour dispute committee ordered that three months’ compensation be paid to the employee, finding that the employer had indeed behaved in a degrading manner.