Termination of the employment contract by agreement of the parties

According to § 79 of the Employment Contracts Act (hereinafter referred to as the "Employment Contracts Act"), the parties may terminate both fixed-term and open-ended employment contracts at any time by agreement. Based on the principle of freedom of contract, the TLS does not impose any further obstacles or conditions for the termination of an employment contract if the parties have agreed to it. It is important that both parties agree to the termination of the contract and that they agree on the terms of the termination by agreement (e.g. the date of termination, the payment of any benefits, etc.).

The basic termination by agreement of the parties is suitable for situations where the employer and the employee wish to terminate the employment contract by agreement.

What form should the agreement take?

There is no written form requirement for termination by agreement in the law. However, it is recommended that termination of an employment contract by agreement of the parties be in writing or in a form that can be reproduced in writing (e.g. by e-mail) to avoid any subsequent disputes. In the event of a dispute, it is very difficult to prove that an oral agreement and the terms and conditions of termination have been agreed.

What should be agreed?

It is essential to agree on the last day of the employee's employment, as the employer is under an obligation to pay the employee's final invoice on the last day of the employee's employment.

If the aim is to exclude further claims and disputes, these should be made explicit and clear.

When can you not consider an employment contract terminated by agreement of the parties?

An employment contract cannot be terminated by an implied declaration of intent, silence or omission. The employment relationship does not end by agreement of the parties if the employee leaves the job and the employer does not require the employee to return to work.

According to the case-law of the Supreme Court, an employer cannot terminate an employment contract by agreement of the parties if the employee has not submitted a petition for termination by agreement of the parties but has submitted a petition for extraordinary termination of the employment contract.

What should be taken into account when terminating an employment contract by agreement?

If the contract is terminated by agreement of the parties, the employee can withdraw his or her consent to the termination of the employment contract by agreement of the parties on the basis of §§ 90 et seq. of the General Part of the Civil Code Act (hereafter: GCCA). Section 90 of the Civil Code provides that a transaction which has been entered into under the influence of substantial mistake, fraud, threat or violence may be rescinded in accordance with the procedure laid down by law. Thus, an employee can withdraw his or her consent if, for example, the consent was given by mistake. If the employee withdraws his or her consent, he or she can take the matter to the labour dispute body and claim performance of the employment contract and payment of remuneration. Alternatively, the worker can terminate the contract after withdrawal of consent on the grounds of breach by the employer, including by claiming compensation up to three months' average pay.

In addition, the employee can seek a declaration that the termination agreement is null and void (§ 84 et seq. of the Civil Code) before a labour dispute body, for example if the agreement is contrary to good morals. If the nullity is established, the employee can, in the same labour dispute, claim performance of the employment contract and payment of remuneration, or terminate the contract on the grounds of breach by the employer, including compensation up to three months' average remuneration.

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