Termination of Employment Contracts in Colombia

1. Grounds for Termination

According to article 62 of the Labor Code, the employer can terminate an employment contract with cause in the following circumstances:

  • Having been cheated, or been subject to deception by the employee through the presentation of false certificates for admission or with the purpose of getting undue benefits;
  • Any acts of violence, insult, poor treatment or serious indiscipline carried out by the employee, during the performance of his or her duties, against the employer, his or her family members, high-level personnel or fellow co-workers;
  • Any serious acts of violence, insult or poor treatment carried out by the employee, while not performing its duties, against the employer, his or her family members, representatives or partners, heads of workshops or security personnel;
  • Any material damage caused intentionally by the employee against the buildings, works, machinery, equipment, raw materials, instruments and any other objects related to work, and any serious negligence that jeopardizes the security of persons or objects;
  • Any immoral or delinquent acts committed by the employee in the workplace or during the performance of his or her duties;
  • Any serious breach of obligations or prohibitions pursuant to articles 58 and 60 of the Labor Code, or any serious fault considered as such in collective bargaining agreements, arbitration decisions, individual employment agreements or regulations;
  • The arrest of the employee for more than 30 days, unless he or she is subsequently absolved of any charges (jurisprudential restrictions have to be considered to apply this cause);
  • The disclosure of technical or commercial secrets or matters that are confidential, causing damages to the company;
  • The poor performance of an employee given his or her abilities and in comparison with the average performance of similar positions, and the employee does not improve his or her performance within a reasonable time, despite being requested to do so by the employer;
  • The systematic breach of the employer’s legal or conventional obligations without valid reason;
  • Any habits of the employee that disturb the discipline of the establishment;
  • The employee’s systematic refusal to accept the preventive, curative or healing procedures prescribed by the employer’s doctor or health authorities in order to avoid illness or injury;
  • The employee’s ineptitude in carrying out his or her duties;
  • The fact that the employee is granted a retirement or disability pension while in the service of the employer; and
  • Chronic or contagious illness of the employee that is not work-related, or any other illness or injury that has not been cured within 180 days (jurisprudential restrictions have to be considered to apply this cause).

2. Collective Dismissals

When terminating employment agreements, please be advised that Colombian Labor Law establishes a restriction for a collective dismissal of employees. For such purposes it is considered to be a collective dismissal when within a time frame of six (6) months the employer terminates unilaterally an amount of employees in the terms of the following table:

Number of employees in the Company Percentage of employees dismissed
More than 10 less than 50 30%
50 or more but less than 100 20%
100 or more but less than 200 15%
200 or more but less than 500 9%
500 or more but less than 1000 7%
1000 or more 5%

Under the collective dismissal scenario, the employer will need to obtain a prior, discretional authorization from the Ministry of Labor in order to be able to terminate legally the employment contracts. However, in any case, the employer must pay to all the dismissed employees the legal indemnification for termination without cause of the employment contract.

3. Individual Dismissals

Under Colombian labor law, if the employer terminates the employment relationship without cause, the employee is entitled to an indemnification payment.

a. Is severance pay required?

Yes, the severance pay varies depending on the type of contract, the employee’s salary and seniority within the company.

  1. In the case of fixed-term agreements, the severance salaries will correspond to the remaining time until completion of the term.
  2. In the case of indefinite term agreements, the following table indicates the amount of the severance to be paid to employees upon termination of the employment agreement:
Years Worked Amount Payable (expressed in days)
1 year or less 30 days of salary if the employee’s salary is below 10 minimum monthly legal salaries (MMLS).
20 days of salary if the employee´s salary is 10 or more MMLS1.
More than one year 20 days of salary per year or proportionally for fraction thereof, in addition to the 30 days of the first year, if the employee’s salary is below 10 MMLS.
15 days of salary per year or proportionally for fraction thereof, in addition to the 20 days of the first year, if the employee´s salary is 10 or more MMLS.

4. Separation Agreements

The separation agreements are usually signed in mutual consent scenarios in which the parties settle in a total and definite manner all-eventual differences and disputes.

Under this type of termination, the company grants the employee a settlement amount, which is usually calculated as the mandatory indemnification plus an additional amount in order to encourage the employee to sign the document (otherwise the employee will probably have no reason to negotiate and will rather go for the option of unilateral termination). Usually, the additional amount rages from 10% – 30% over the severance amount.

As compensation, the employee will declare that he/she satisfactorily received all the payments and benefits that he/she was entitled to during the labor relationship and at its termination, and thus, he/she resigns to file any future claim before the judicial or administrative authorities for any future and eventual differences.

The document may be signed either (i) before a judicial authority or labor inspector, case in which both parties must assist to an appointment previously arranged with the labor judge, or (ii) before a public notary in Colombia.

a. Is a Separation Agreement required or considered best practice?

The best practice (less risky) during a termination of a labor relationship is to enter into a settlement agreement with the former employee. The termination can be by mutual consent or by resignation of the employee.

b. Does the age of the employee make a difference?


Are there additional provisions to consider?

If the employee has stability protection, it would be necessary to include a clause in the settlement agreement in which the employee states that although he/she knows about the special protection he/she has, it is his/her decision to terminate the labor agreement.

5. Remedies for employee seeking to challenge wrongful termination

The best way to terminate an employment agreement is through a settlement agreement according to the provisions explained above.

1 Ten minimum salaries are equivalent to approximately USD$2,254 (at an exchange rate of COP$3,058).

For more information, please contact L&E Global.
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