In dismissing staff anywhere in the world (except perhaps in the US, which subscribes to employment-at-will), “step one” – always – is determining whether the employer will fire the particular targeted worker for good cause. Where an employer can demonstrate good cause, a dismissal becomes much cheaper. Indeed, in some places (in so-called “lifetime employment” jurisdictions such as Germany, Japan, Korea, Iraq, Romania and Russia), the dismissal becomes possible because these jurisdictions prohibit most no-cause dismissals.
Where a dismissal is for demonstrable good cause, most countries offer employers broad freedom to fire without much or any notice or severance pay. But this principle is far narrower than it sounds because “good cause” is substantially less than a good business reason. After all, employers always have good business reasons for firing employees – no rational employer fires staff whose business needs weigh in favour of retaining. So “good cause” under law necessarily means more than merely a good business reason. Good cause usually means the employer can prove the targeted employee wilfully committed some material misconduct.
Each jurisdiction has its own local notion of which specific acts of employee misconduct constitute good enough cause to justify a no-severance-pay summary dismissal. And, of course, each case turns on its facts. But we might make a simple generalisation: good cause tends to mean egregious misconduct. Few jurisdictions’ notions of good cause reach poor performance, imperfect attendance, bad attitude or mismatched skill set. Even jurisdictions such as Korea that recognise poor performance as cause for dismissal tend to accept only well-documented, outrageously bad performance over a sustained period, and proof burdens become exceptionally high. Justifications for dismissal external to the targeted employee himself – business downturn, internal restructuring, sale of business assets - might offer economic justification for a dismissal, but economic necessity is a separate issue usually quite distinct from good cause.
Italy offers a representative concept of good cause. According to employment lawyers in Rome, an Italian employer can fire an employee for good cause (giusta causa) only when the employee’s act of “misconduct” makes the continuation of the employment relationship impossible. Examples of just cause are theft, riot and insubordination. Italian case law shows a series of sharply contrasting precedents which make it extremely difficult in practice for an employer to invoke good cause as grounds to fire an employee with speed and certainty.
Outside the US, the standard for good cause happens to be closely analogous to a similar concept under domestic US law: the wilful misconduct standard under US state unemployment compensation systems. As a general principle, in order to deny unemployment compensation benefits to an employee, his action must involve a wanton or wilful disregard of the employer’s interest, a deliberate violation of the employer’s rules, a disregard of standards of behaviour which the employer has the right to expect of his employees, or negligence in such degree or recurrence as to manifest culpability, wrongful intent, or evil design, or show an intentional and substantial disregard of the employer’s interests or of the employee’s duties and obligations to the employer.
Speaking broadly, where an outside-US employee commits an act of wilful misconduct that, if committed in the US, would be egregious enough to defeat a US state unemployment benefits claim, then we might expect the relevant local labour court to uphold a firing for good cause. The corollary, though, is that where an overseas employee misbehaves in an innocuous enough way that his actions, if committed in the US, would not offer a defence to his state unemployment benefits claim, then the relevant local labour court will not likely uphold a firing as for good cause. Embezzling money, vandalising equipment, bribing officials and attacking co-workers, – all are grounds for good-cause dismissal. But short of serious crime, the issue becomes murky.
A common conundrum in good cause analysis is the employer that thinks it has a legal justification to fire an employee who broke a posted work rule, a human resources policy or code of conduct provision. Imagine, for example, an overseas salesman who “entertains” clients at a strip club at his employer’s expense. Imagine this employer can make a strong case that these acts violated a standing employer work rule, HR policy or code of conduct provision on business entertainment, use of expense accounts, bribery/improper payments or sexual harassment. Can the employer fire this executive for good cause? Perhaps not. By anyone’s definition, intentionally breaking a work rule is wilful misconduct. But, the analysis becomes more nuanced. Being able to prove someone broke a posted rule/policy/code is not necessarily good cause, particularly if the infraction is innocuous or the rule is a technicality. Countries such as Costa Rica, the Czech Republic, Indonesia, Malawi, Peru, Philippines, Russia, Saudi Arabia, Ukraine, Vietnam and others list dischargeable infractions in their labour codes. We might call these “statutory list” jurisdictions. In them, an employer has no grounds to fire a rule-breaker unless the breached rule happens to reflect one of the grounds for dismissal on the country’s statutory list. The statutory lists in these countries might not include an infraction that fits this particular employee’s misdeeds.
As another example of how these statutory lists work in practice, imagine a manufacturing multinational that posts on its intranet a globally applicable work rule instructing factory workers to shut down their machines at the end of their shifts, and saying that violators are subject to dismissal for a first offense. Imagine that excellent business reasons support this rule: safety, plant security, machine maintenance, power conservation. And imagine that all workers in the company’s factories worldwide have signed acknowledgements agreeing to comply with this particular rule. Having globally implemented the rule and having collected these employee acknowledgements, the US-based headquarters may assume it can fire, for good cause, any worker who intentionally clocks out and leaves his machine running. But this assumption is wrong. In what we are calling “statutory list” jurisdictions, firing someone for breaking this rule will not likely be for good cause because “leaving machine running” will not likely appear on those countries’ lists of statutory dismissal grounds.
This said, an employer overseas is usually well advised to articulate comprehensive rules that set out grounds for good-cause dismissal, particularly in countries such as Bahrain, Colombia, France, Japan, Korea, Oman and Russia that affirmatively require written work rules. An employer’s argument that a misdeed amounts to good cause is always stronger where the infraction violates a posted work rule that purports to subject violators to dismissal.
Sometimes local law prohibits employers from dismissing for good cause even workers who commit infractions that do appear on a country’s statutory list of for-cause dismissible infractions. For example, most countries will recognise theft as grounds for a good-cause firing, but labour courts abroad often excuse proven theft of small change and cheap goods. German Civil Code § 626 includes “theft” as grounds for dismissal without any express de minimus exception, but in 2009 Germany’s highest labour court held otherwise in its widely publicised Emmely case involving an employee (known across Germany both as “Barbara E.” and “Emmely”) who had pocketed a handful of employer coupons worth €1.30. As another example, many countries impose laws expressly banning workplace harassment, but many court cases in those countries often hold dismissal too severe a punishment for proven harassers. Canadian courts apply a “proportionality” test that makes every dismissal a fact question; a Canadian employer firing someone for proven theft or harassment might not have good cause if dismissal is disproportionate to the employee’s specific misdeed.
All this said, though, employers overseas sometimes do have demonstrable good cause justifying a dismissal. At that point the question becomes: what does demonstrating good cause mean for an employer? The answer differs depending on whether the employer is in a so-called “lifetime employment” jurisdiction such as Germany, Iraq, Japan, Korea, Romania, Russia. In lifetime employment jurisdictions, no-cause firings are flatly illegal, so the only legal way to fire someone who refuses to leave is for the employer to demonstrate good cause (or economic necessity, discussed below). No good cause means no dismissal. Indeed, in these lifetime employment jurisdictions, statutory severance pay tends not to come into play, and in countries such as Japan does not even exist: a worker either gets fired for good cause and gets no severance pay or else that worker is the victim of a wrongful dismissal and so is entitled to a court award of reinstatement and back pay – but no severance pay.
Outside lifetime employment jurisdictions, good cause for dismissal is not necessary to fire anyone, but being able to prove good cause makes a big difference. In the words of Argentine lawyers explaining the rule in Argentina (a typical no-lifetime-employment jurisdiction), the “general principle in force is private sector employers can freely dismiss their employees without just cause by paying severance pay based on the salary and seniority of the employee.” Employers in these jurisdictions can usually fire staff unilaterally without good cause, but subject to separation pay liability – notice pay, severance pay and the payments due in any dismissal such as final pay check proportional accrued vacation, proportional bonus, proportional “thirteenth month pay” and other accrued benefits. Further, having good cause tends not to excuse obligations under statutory dismissal procedures such as dismissal communication requirements, grievance resolution procedures and notice to employee representatives and government labour agencies. Indeed, because countries impose these procedures to probe employer grounds for dismissal, countries have a policy reason to enforce their procedural requirements even where an employer obviously has good cause. For example, in a highly publicised 2008 case, Parisian rogue trader Jérôme Kerviel singlehandedly lost his bank employer, Société Générale, US$7.2 billion in unauthorised trades. Even though French police arrested and incarcerated Kerviel, French dismissal procedure laws blocked a quick firing. In a front-page article, the Wall Street Journal chronicled why French dismissal procedures forced Société Générale to retain Kerviel on its “headcount” for over a month.
Having said all this about good cause dismissals around the world, in real life it may only be the exceptional situation where an employer invokes good cause for dismissal to fire an employee who, in turn, goes on to sue in court, challenging the grounds for dismissal. In practice, employers everywhere, particularly in “lifetime employment” jurisdictions, often negotiate an agreed separation with a release of claims – that is, a resignation and waiver in exchange for a cash pay-out. Employers and employees negotiate these settlements against the backdrop of the issues discussed in this article.