Grounds for Termination
The labor contract may only be terminated by agreement of both employer and employee, by the employee’s resignation, by the death of the employee, by the expiry of the fixed term agreed upon in the contract, by the completion of the work for which the employee was hired, by an act of God or circumstances beyond the control of the parties (force majeure) and upon dismissal by the employer.
Is severance pay required?
If the employer dismisses the employee based on the general grounds known as “company’s needs,” such as changes in economic conditions, downsizing of the company, or in case of termination at will (when law permits it), certain severance compensations will be awarded to the employee. If the dismissal notice is not given 30 days in advance, the employee will be entitled to receive a severance compensation equivalent to one month’s remuneration.
If the employee is dismissed for cause, i.e. serious breach of contract by the employee, material misconduct, etc., no right to severance compensation arises for the employee.
If at the time of dismissal the social security contributions are not duly paid, the dismissal will not result in terminating the labor contract. Consequently, the employer could be forced to pay the remuneration and other payments established in the labor contract to the employee until these social security contributions are finally duly paid.
Labor release settlement agreements must be made available to the employee within 10 work days after him/her separation.