Termination of Employment Contracts in Egypt

1. Grounds for Termination (List)

It is extremely difficult under the law to terminate an employment contract before the expiry of its term without being viewed as wrongful termination and consequently be held liable for compensation. An employer cannot dismiss an employee unless the employee has committed a fundamental breach among those listed in Article 69 of the Labour Law.

2. Collective Dismissals

Collective dismissals do not have special regulations per se, unless they relate to full or partial closure of business. However, if a dispute arises between the employer and the employees in relation to any of their rights, including those relating to collective dismissals, either party may resort to collective bargaining procedures. There is no statutory trigger to the procedures. However, if one party initiates the process, the other party must participate.

If the employer wants to completely or partially shut down the establishment or a particular business thereof, for economic reasons, he may not do so unilaterally. He must first refer his request to a committee established as per a decree of the Prime Minister. Relatively recent judicial decisions are breaking away with this requirement. Egyptian courts now agree that the procedures prescribed by law are merely organizational procedures and the failure to follow them does not in itself render the termination of the employees’ contracts to be abusive.

In practice, an employer negotiates with the employees in return for the latter’s resignation rather than go through the long bureaucratic and uncertain route of the government committee and still pay compensation almost the same as that which the employer would have paid in case of wrongful dismissal.

3. Individual Dismissals

An employer may not terminate a limited duration contract before its term. If he does, he will be liable for damages. However, the employer is entitled not to renew the contract after the expiry of the contract’s duration without any obligation to pay compensation.

In an unlimited duration contract, an employee cannot be dismissed unless the employee is proven incompetent for the job or if he has committed a fundamental breach among those listed above. The decision of dismissal of an employee is taken exclusively by the Labour Court (not by the employer).

a. Is severance pay required?

Under Egyptian Law, there is no end of employment gratuity. The employer is obligated to pay only any amount he owes to the employee (example: any unpaid salary or consideration for accrued but unused leaves).

There are only two exceptions to this principle:

  • if the employer has agreed contractually to pay the gratuity; or
  • if the employee continues working for the employer after reaching the age of sixty for the period that he spent after reaching this age. In such case he should be entitled to an indemnity at the rate of a half-month wage for each of the first five years and one month for each following year for the years worked after attaining the age of 60.

4. Remedies for employee seeking to challenge wrongful termination

If the employer terminates an employment contract before the expiry of its term without the employee committing a fundamental breach, the termination will most likely be viewed as wrongful termination and consequently the employer will be held liable for compensation. The law provides a minimum compensation to be paid for abusive termination of unlimited period contracts, which is two months’ gross salary for each year of service. In addition, if the employer terminates the contract without notification or before the end of the notification period, the employer must pay the employee a sum equivalent to his salary during the notification period or what is left from it.

For more information, please contact L&E Global.
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