Increase in employee claims expected as a result of new interpretation

Article 24(b) of the European Social Charter requires contracting states to recognize the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief. On the basis of this requirement of adequate compensation, an application was made for a constitutional review of the Employment Contracts Act in case No 3-2-1-79-13.

Under the Act, an employee may claim a compensation payment where an employer purports to cancel their employment contract without a valid reason. The default amount of compensation is three months’ average wages, although this can be increased or reduced by the court or employment dispute committee depending on the circumstances of termination and the interests of the parties. Where compensation is awarded, the contract will be terminated by the court or employment dispute committee (except in the case of pregnant employees, employees entitled to maternity leave and employee representatives).

The Supreme Court, sitting as a full court of all the judges, decided that the Act is constitutional, ruling that the court or the employment dispute committee is legally authorised to terminate employment contracts which were initially terminated by the employer without a valid reason. The court reasoned that such a termination is valid because employees are entitled to adequate compensation when a contract is terminated in this way. Significantly, the court explained that such compensation may include moral damages (which includes compensation for non-financial loss such as anxiety and distress) as well as unpaid wages for the period between after the employer’s initial unlawful termination and the entry into force of the judgment terminating the contract. This interpretation of the Act is likely to result in employees claiming increased levels of compensation in future.