Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Generally, an employer must dismiss an employee based on a valid cause, which must be notified to the employee in writing. Dismissal may be based on personal or economic grounds. The grounds are defined and assessed by the Labour Court.

Personal cause concerns dismissal for misconduct, gross misconduct, professional insufficiency, disability certified by the occupational physician and disorganisation of the company owing to a long sick leave (beyond six months).

Dismissal based on economic grounds may be owing to elimination or transformation of jobs in the context of economic difficulties, a risk to competitiveness or technological changes. Should the employer consider at least two layoffs, it has to comply with the rules for collective redundancy.

Also, article 6 of Law No. 729 of 16 March 1963 enables an employer to dismiss an employee without expressly or implicitly providing a motive for the dismissal. This possibility is available to any employer in Monaco unless the application of article 6 is expressly excluded by a collective bargaining agreement. To use this option, the employer has to pay a specific dismissal indemnity.

The collective agreement or even the employment contract may restrain the number of grounds for dismissal.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

A notice period has to be given at the moment of, not before, the dismissal. The notice period covers the period between the dismissal and the end of the contract.

The duration of the notice period will depend principally on the type of termination, the applicable collective bargaining agreement, the professional category to which the employee belongs and the employee’s length of service.

In the event of a dismissal other than for gross misconduct, the law provides that an employee is entitled to a notice of which the duration varies depending on his or her seniority as follows:

  • for a length of service of less than six months: no notice period is applicable;
  • for a length of service of between six months and two years: one month’s notice is required; and
  • for a length of service of at least two years: two months’ notice is required.

 

In any event of dismissal, the employer has the right to choose between asking the employee to work during the notice period or to be paid without working during this period.

In either case, the employee is entitled to receive the same amount of salary, including any benefits.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

In the case of gross misconduct, the employee is dismissed without a notice period (or termination indemnities).

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

In addition to a notice period, the employer has to pay a legal dismissal indemnity, which depends both on seniority and grounds of dismissal.

In the case of dismissal (except for gross misconduct and article 6 of Law No. 729), an employee with at least two years’ service is entitled to the legal dismissal indemnity under article 1 of Law No. 845 of 27 June 1968.

In substance, the indemnity corresponds to one-fifth of the monthly salary multiplied by the number of years of seniority, plus two-fifteenths of the monthly salary for each year of service beyond 10 years. However, collective bargaining agreements often provide a calculation of indemnity that is more favourable.

In the case of dismissal under article 6 (without mentioning the grounds of dismissal within the dismissal letter), the employer pays the dismissal indemnity under article 2 of Law No. 845. In substance, such indemnity corresponds to one daily salary for each month of seniority. This indemnity cannot exceed six months of salary.

In the case of dismissal for gross misconduct, no severance is payable.

Procedure

Are there any procedural requirements for dismissing an employee?

Monaco law provisions do not provide a general procedural requirement to dismiss an employee. Nevertheless, a prior interview is highly recommended to reduce the judicial risk and is required by case law for dismissals under article 6 of Law No. 729.

A specific procedure is required should an employee be under particular protection given by law, the result of which is that the required prior approval from a commission chaired by the labour inspector must be obtained.

Collective layoffs must be implemented following a specific procedure.

Collective agreements often mention a required formalism to dismiss an employee. In these cases, such provisions are binding for the employer.

Employee protections

In what circumstances are employees protected from dismissal?

This concerns employees benefiting from legal protection because of their private life or their delegation. Such protection applies to staff representatives, union delegates, pregnant women, fathers taking paternity leave, employees benefiting from maternity leave, adoption leave and family support leave, harassment referents and Labour Court judges.

Such protection restrains both the grounds of dismissal and the implementation of dismissal. The employer is not entitled to dismiss a protected employee during the entire duration of his or her protection (depending on the nature of the protection) except for gross misconduct (without any link with the event that justifies the protection) or for termination or reduction of the business activity. In this case, a specific procedure must be followed by the employer before the implementation of the dismissal.

The above-mentioned protected employees cannot have their employment terminated without requiring and obtaining the prior approval of a specific commission chaired by the labour inspector.

Should the commission refuse the dismissal, the employer has to renounce the implementation of the dismissal at least until the end of the duration of the protection.

Should the dismissal not comply with these provisions, it would be declared null and void and sanctioned by the reintegration of the employee plus potential damages.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

The implementation of collective dismissals is mainly regulated by Law No. 629 and Amendment No. 12 of 28 July 1970 to the National Collective Bargaining Agreement dated 5 November 1945, which imposes some procedural steps before implementing any such decision.

Three main issues must be considered regarding the preparation and the implementation of a collective social plan:

  • the drafting of an information document containing all essential elements regarding the decision to restructure, its motivation, its implementation and the measures taken by employers to minimise adverse impacts on employees;
  • circulation of the information to staff representatives, discussing with them and collecting their comments and choices on the measures taken towards implementing the restructuring (ie, adopted to decrease the number of dismissals); and
  • implementation of the restructuring plan by obtaining required authorisations as the case may be, notifying of the terminations and paying termination indemnities.

 

The duration of staff representatives’ prior consultation depends on the number of dismissals and the situation of the company.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Class actions are not recognised under Monaco law. The rule is that each employee should present an individual claim in front of the Labour Court. A class action differs from collective disputes concerning a collective issue excluding all individual claims.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Employers are not entitled to impose or even provide a retirement age. The retirement age is provided by Law No. 455, dated 27 June 1947, on retirement for employees and fixed at 65 years.

Employees have the right to obtain their pension early at the age of 60, or 55 for women who have brought up at least three children younger than 16 years of age. However, this is a decision for employees to make.

Employers can terminate an employee’s contract for retirement only if the employee has reached the legal age for retirement (ie, 65 years old). In this case, the employer must pay its employee legal dismissal indemnity plus provide the notice period.