Until recently, Greek law allowed employers to terminate open-ended employment contracts at any time without providing a reason. The rationale behind this was that, save for exceptional circumstances, the employer is required to pay statutory severance upon terminating the contract of any employee who has worked for more than 12 months regardless of whether or not there was a valid reason for termination. Termination without cause is also recognised under the well-established precedent of the Greek Supreme Court, provided that it is not done for reasons of discrimination, as an act of revenge or in breach of the employer’s redundancy selection process, or does not constitute any other act of bad faith.
Although terminating an employment contract is a red-tape process in Greece, regulated by laws 2112/1920 and 3198/1955, and special attention is required throughout the various steps, employers could make business decisions on headcount with relative flexibility, as they did not have to give grounds for making an employee redundant. This also made matters less personal and it did not give rise to claims from employees.
As of 17 May 2019, however, things have changed and employers must now have a valid reason to terminate an employment contract even if they pay statutory severance. In the absence of a valid reason, termination is considered null and void. Law 4611/2019 transposed into Greek law the provisions of the Revised European Social Charter, article 24 of which provides “the right of all workers not to have their employment terminated without valid reasons for such termination”. Article 24 further provides that the reason for termination must relate to the employee’s capacity or conduct, or be based on the occupational requirements of the business.
In the absence of a valid reason, the employee could challenge and potentially reverse the decision to terminate, while the burden of proof would lie with the employer. If the court decided that there was no valid reason, the employee would have the right to be reinstated, and receive back wages as well as compensation for wrongful dismissal. In this regard, it is interesting to note that Greek lawmakers have taken the view that any compensation for wrongful dismissal should be over and above the statutory severance pay to which the employee is entitled upon termination of their employment.
The new law creates a more litigious environment for employers, increasing the likelihood of employees challenging contract termination and raising claims. Furthermore, it remains to be seen how the Greek courts will interpret what constitutes a valid reason and what precedent will be established and shape best practice in the future. In the meantime, employers are advised to pay close attention to the steps they take in managing the termination of employment contracts in Greece so as to mitigate the risks of litigation and potential reversal of their termination plans.