Termination of employment via a mutual agreement

Termination of the employment contract via a mutual agreement of the employee and the employer is a very comfortable means of putting an end to employment, but it’s got one basic shortcoming – you need consent of both parties to get it in place. This is not always possible or easy to achieve, but why not try it first? A mutual agreement of that kind – as all contracts – may be negotiated.

The mutual agreement may terminate any employment contract, without limitations. It gives the parties much freedom in determining terms and conditions for separation:

  • the date of termination may be appointed freely, without any limitations on the period between the date of signing the agreement and the effective date of termination;
  • the moment of termination may be defined not only as a date-month-year date (which is most common), but also by indicating a future event, which the parties intend to trigger termination;
  • the agreement on termination may be concluded under a condition precedent;
  • the parties may agree on additional employee benefits, such as extra severance payments or outplacement programmes.

Termination of employment via the mutual agreement may be effected not only through a written instrument, but also through conduct of the parties, which implies the intent and consent to separation.

Termination of employment via a mutual agreement is recommendable mainly to employers because there are no direct statutory employee claims attached to it (as in relation termination at notice or without notice). Depending on the circumstances, the employee does have an option to challenge the validity or effectiveness of the mutual agreement if it is faulty or deficient in legal terms (e.g. if the employee demonstrates that he or she acted in error under a threat on signing the agreement), but proceedings of that kind are more difficult for the employee.

How do you terminate the employment contract?

Employment contracts, like all other things, don’t last forever. How does termination of employment work under Polish law?

Fixed terms contracts (like the trial period contract or the contract for a definite period of time) generally terminate automatically upon lapse of time for which they have been concluded.

Termination of the employment contract may also be achieved by specific legal actions aimed at that very purpose, undertaken either by both parties or one of them. The actions in question include:

  • termination via an agreement between the employer and the employee;
  • termination at earlier notice by the employer or the employee;
  • immediate termination without notice by the employer or the employee (in situations listed by law).

All employment contracts may be terminated via an agreement or without notice – in the latter case provided that immediate termination is based on statutory grounds. As far as termination at earlier notice is concerned, applicable procedures and notice periods may differ depending on the kind of the contract. It is important to see to all formal termination requirements so that potential claims based on unfair or illegal termination could be avoided.

I will discuss particular termination options in greater detail in the next entries.

How to change the employment contract?

The employment contract has been in place for a while and you need to change some of its terms. What do you have to do?

There are two ways the employment contract can be amended:

  • an agreement between the employer and the employee, which usually takes the form of a written annex/addendum to the employment contract;
  • variation through notice by the employer.

The parties may amend the employment contract via a written annex at any time while the contract is in force and to the extent they both agree on.

Variation of the employment contract by the employer is a procedure specific for labour law, which allows the employer to change certain terms of employment, contingent on the employee’s consent. Variation is effected through notice, which means that there is some time space between the moment when the employer declares his or her intention to change the employment contract, and the moment when the amendments take effect.

The employer’s declaration on variation of the employment contract must be made in writing and name new (changed) terms of the employment. After such a declaration has been served on the employee, he or she may either accept or reject the new employment terms. In the event of rejection the employment contract terminates on lapse of the applicable notice period. If the employee fails to inform the employer of his of her refusal to accept the new employment terms before lapse of the first half of the applicable notice period, it is understood that acceptance has been given, provided that the employer’s declaration contains a clear instruction in this respect. In absence of such an instruction, the employee has got time until the end of the applicable notice period to reject the new employment terms.

As you can see, variation through notice by the employer may lead to termination of the employment contract.

Formally, the employee has no power to interfere in the legal effects of this procedure, he or she may only accept or reject the new terms, the latter case resulting in dissolution of the employment contract. So the choice is like between black and white and it’s not easy, especially for those who don’t welcome the changes proposed by the employer but cannot afford to lose their jobs.

Variation through notice is applicable to material changes of the employment terms, usually those to the detriment of the employee (pay decrease, promotion withdrawal, position change).

Variation through notice is not available to the employee. The employee may only ask the employer to change the employment terms via an annex to the employment contract, but such a proposal is not binding on the employer.

Because variation through notice may lead to termination of the employment contract, it is governed by general provisions on terminating employment contracts through notice (I will write about that soon). As a result, the same restrictions apply (e.g. it is obligatory to name a reason for variation through notice in relation to employment contracts for an indefinite period of time; certain categories of employees are protected from variation through notice).

Replacement employment contract

Technically speaking, a replacement employment contract is a kind of the employment contract for a definite period of time. However, because of its special purpose, it is governed by some other rules e.g. on termination.

A replacement employee is hired to substitute for the employee during his or her justified absence from work. Because of that the duration of the replacement employment contract normally covers the period of the replaced employee’s absence. Although there are no minimum requirements with respect to the length of the replacement period, in practice usually long-lasting absences (i.e. resulting from an illness or maternity/childcare leave) are dealt with by hiring replacement employees.

Unlike regular employment contracts for a definite period of time, replacement contracts may be terminated by notice even if they do not contain a clause to that effect. The notice period is 3 working days.

Employment contract for a definite period of time

The employment contract for a definite period of time is concluded – as the name indicates – for a fixed term agreed on by the parties. There are no statutory requirements as to the minimum length of employment under a contract of that kind.

The duration of the contract may be determined in various ways, e.g.:

  • by providing an exact closing date (day-month-year) – the most common arrangement;
  • by indicating the number of days, weeks or months;
  • by naming an event, occurrence of which terminates the contract.

The employment contract for a definite period of time comes to an end by virtue of law upon lapse of time for which it was concluded, without the need for the parties to make any representations or notices. There is no legal duty to continue employment in such a case (in particular the employee has no power to demand renewal or extension of the employment contract), but the parties may agree on further cooperation.

An employment contract for a definite period of time offers less stability and protection against termination than the employment contract for an indefinite period of time. Because of that, the Labour Code provides for a statutory mechanism to prevent employers from entering into a series of employment contracts for a definite period of time. Namely, the third consecutive employment contract of that kind between the same parties is considered, by operation of law, a contract for an indefinite period of time, provided that the intervals between the end of the preceding contract and the beginning of the following contract do not exceed 1 month. Executing an addendum extending the period of the first or second employment contract for a definite period of time counts as concluding a separate contract of that kind.

As a rule, the employment contract for a definite period of time may not be terminated before completion of time for which it was concluded. However, the parties may insert a contractual clause allowing to terminate the contract at two weeks’ notice, provided that the contract is concluded for longer than 6 months.