Termination of the contract by mutual agreement: what you need to know

The law on the modernization of the labour market adopted by Parliament on 12th June introduces in particular the contractual termination of employment contracts, or in other words, termination by mutual agreement.

The new measure came into force on 28th July and provides a legal framework for negotiated departure.  The negotiation process involves rules which must be observed:

Procedure

The employee and employer sign a termination agreement to confirm their mutual consent. Both parties have 15 days in which to reverse their decision. The agreement is then sent to the Labour Department for approval.  If there is no reply within 15 days, the termination is automatically confirmed.

Compensation

Employees will at least receive the compensation required by law, exempt from tax, equal to 20% of their monthly salary multiplied by the number of years of service. It is importantto note that employees are entitled to receive unemployment pay.

Contesting the termination

An appeal may be lodged with the Industrial Tribunal within 12 months of approval of the termination agreement. Vitiated consent may be cited, for example in the event of an error or deceitful practices.

Proof

Because any challenge requires proof, a written record of the agreement should be kept (correspondence, the signed contract, etc.) even if no specific method is required for termination by mutual agreement. The existence of a mutual agreement is very valuable in the event of a dispute.

Olivier Pierson
Published on 2008.12.03