As the violence in Libya intensifies following the battle for Tripoli international airport in the summer of 2014, many foreign companies are considering their future position in Libya and  whether or not they will return to the country. During the period 2005- 2011, the former regime  sought to try and open up Libya’s economy and invited a number of international companies to carry out a wide range of infrastructure projects, many of  which required significant amounts of manpower. Those international companies are now nearly all  absent from the country although many still have a number of staff on their payroll in Libya.

The Libyan Labour Law was brought up to date and codified in 2010, one of the last things the former regime did before the February 2011 Revolution.  It is particularly employee friendly – the former regime promoted itself as being friendly to  workers, its title was the Socialist Peoples’ Libyan Arab Jamahiriya.

Although the law is codified, there are a number of procedural and practical steps that are  unwritten and require a significant amount of local knowledge in order to ensure that pitfalls are  avoided, particularly when terminating contracts of employment.

Termination procedures for unlimited term contracts are fairly straightforward. In the absence of  an express term which provides for this, a local Libyan employee is not entitled to a payment on  the termination of their employment (such as a redundancy payment in other jurisdictions) and is only entitled to one month’s notice of termination, no matter how long the  employee has been employed by the company.

The position for expatriate workers is different. In  addition to notice, the Labour Law sets out a  formula for calculating termination payments which directly relates to length of service. The  reason expatriate workers receive a termination payment whereas local Libyan workers do not, is that Libyan workers are considered to have already received compensation by way of the  employer’s contributions into the employee’s social security fund during the course of their employment.

Compensation may, however, be payable when an employer seeks to terminate a fixed term contract.  Whilst a fixed term contract can be an advantage in some cases, as it terminates automatically on  the expiry of its term, the contract cannot be terminated by the employer before the end of the contract term without the employee’s agreement, and without a compensation payment  for the unexpired term of the contract.

However, the Ministry of Manpower has wide-ranging jurisdiction to deal with employee grievances  relating to the operation or termination of employment contracts and it also has a great deal of  power in terms of the awards it can impose. The Ministry can by its own motion refer any  employment-related claim to the local courts, recommend that a certain course of action be taken  and even order reinstatement.

Accordingly, companies should carefully document the termination steps they have followed, so they   can demonstrate that the reason for termination and the procedure followed were fair. A  well-documented termination process should also be followed, even where it is likely that a generous settlement  package will be negotiated.

When a company wishes to enter into settlement discussions with an employee, the company should bear in mind that, as there are no statutory means  by which employment claims can be compromised, there is nothing to prevent an employee subsequently  bringing a claim, even where a settlement agreement has been signed.

For this reason, all the terms of a termination agreement should be set out in writing, in both  English and Arabic (even for local Libyan employees). We also recommend that the company arranges  for an independent third party (such as a notary public) to witness the execution of the  termination agreement.

In addition, as there is no concept of “without prejudice” negotiations in Libyan law, any attempt  to negotiate a settlement on the termination of a contract of employment could become evidence the  employee subsequently uses before the Ministry of Manpower, or any local court. Care should  therefore be taken during preliminary settlement discussions, and with the content of the  settlement agreement itself, so that the employee cannot subsequently use this against the company.