Termination of indefinite term employment agreements

A. General rules and procedure:

1. If the employee works under an employment contract of indefinite term for more than twelve (12) months, the following conditions must be met for his/her dismissal to be valid:

• i. The employment contract is terminated in writing;
• Legalseverancepaymentispaidtothedismissedemployee;
• The employment contract of the dismissed employee must have been registered with the payroll records of the social security institution.

These formalities must be observed even if the dismissal is due to the fault of the employee, such as for inadequate execution of work entrusted to him/her, failure to comply with contractual obligations, or even as discipline for misconduct.

Failure to meet any of these conditions will result in the termination being null and void, and the employment agreement will remain in force, with the following recently introduced exceptions:

• a)  In case the employer did not notify the dismissal in writing, the dismissal is validated if the employer does so within 1 month from the service of a relevant lawsuit or the filing of a complaint with the Labor Inspectorate.
• b)  In cases where the amount of dismissal compensation paid is less than the legal one due to manifest error or reasonable doubt regarding the basis of calculation, the court does not invalidate the dismissal, but obliges the employer to pay the additional amount.

The employer must also announce the dismissal within four (4) days to the competent authorities through the electronic system “Ergani” of the Labor and Social Security Ministry. Failure to do so will not render the dismissal void but may give rise to a compensation claim by the dismissed employee, who may have not been able to receive part of the unemployment allowance due to the delayed announcement.

Note that the above also apply to persons in positions of management, trust, oversight, etc. in the undertakings.

2. In principle it is not necessary for the letter of termination to mention the reasons and causes influencing the employer’s decision to terminate the employment agreement. That is to say, the employer is not obliged to invoke any reason to justify his action.

However, the employer’s right to terminate the employment agreement is not unlimited, but subject, like all other rights, to the restrictions of Article 281 of the Civil Code, which, as a general rule, forbids the abusive exercise of rights (please see also below under (B2).

3. As mentioned above, termination of the employment contract must be in writing, and must be communicated to the employee. For the termination to be valid, when done by a legal entity, the relevant notice must be signed by the natural person who, under law or the rules of the legal entity, expresses the will of the entity and is authorized to do so.

If the employee refuses to sign the termination notice (as a proof or receipt thereof) and the proof of receipt of severance payment, then the termination notice must be delivered by a court bailiff.

The severance payment must be deposited in a bank account and can, in certain cases, be paid in instalments.

B. Restrictions on termination

1. The list of new law 4808/2021

Law 4808/2021, which was published in the Government Gazette on 19.06.2021, includes for the first time a list of invalid dismissal cases, including cases already provided by existing laws, cases formulated in the past years by case law (e.g., dismissals in retaliation for the exercise of a legal right by the employee) and newly introduced cases in line with other provisions of the law 4808/2021 (e.g., the dismissal of fathers within a specific period from childbirth, the dismissal due to the exercise of rights against workplace violence and harassment or rights for the leaves relating to flexible arrangement available to parents and caregivers, employees who exercise the right to disconnect or who refuse (to apply for) working time arrangements etc.).

The list of the article 66 (Protection from dismissals) of the respective Law provides that the dismissals below are invalid:

• a) Dismissals due to discrimination against the employee or retaliation due to gender, race, color, political beliefs, religious or philosophical beliefs, lineage, national or ethnic origin, sexual orientation, age, gender identity or characteristics, disability or union membership or lack thereof;
• b) Dismissals taking place in reaction to the exercise of a legal right by the employee. We note indicatively the following cases falling within this category, pursuant to case law: cases where the employee was dismissed in retaliation to a request to be paid for overtime work, due to the employee participating in a strike, the employee opposed a unilateral harmful change of his employment terms, the employee complained alleging that his personality was harmed, the employee denied additional work not falling within his duties, the employee filled a complaint to the Labor Inspectorate regarding the exercise of psychological violence etc.);
• c) dismissals prohibited by other legal provisions and especially:
  • i. due to discrimination as provided in law 4443/2016 (including discrimination due to complaint or request for legal protection or equal treatment);
  • ii. due to the exercise of rights in case of violence and harassment;
  • iii. of pregnant women and women who recently gave birth or fathers of newborn children regarding a specific period pursuant to art.15 law 1483/1984, when there is no important reason;
  • iv. in retaliation to a request for or the actual use of the special leaves available to parents and caregivers or flexible work arrangements provided by other provisions of 4808/2021;
  • v. during the annual leave pursuant to par.6 art.5 law 539/1945;
  • vi. dismissals of employees with many kids, disabled ones and in general of persons hired pursuant to law 2643/1998, when the conditions introduced by art.11 law 2643/1998 are not met;
  • vii.employees performing military service according to art. 11 law 3514/1928;
  • viii.employees of touristic business under training according to par.4 law; 1077/1980;
  • ix.in breach of group dismissals restrictions;
  • x.trade union officials and members of the representative committees of the employees in combination to other legal provisions, when there is no important reason;
  • xi.due to unionization pursuant to art.14 law 1264/1982;
  • xii.due to the non-acceptance by the employee of a proposal to work part time or in rotation;
  • xiii.of employees who in good faith denied a different working time arrangement (provided by law and allowing for 2 hours additional work per day on the same remuneration, in exchange of 2 hours less work per day on another period, or taking time off or a combination thereof) agreed at a collective level or did not apply for that when the employer already asked them to do so;
  • xiv.of employees exercising the right to disconnect pursuant to par.5 art.9 law 3846/2010 (i.e., remote working employees exercising the right to not respond to emails, calls etc. outside working hours).

The list is not exhaustive, and employees can still contest dismissals for reasons not included in the list, however, the protection of the employee is broader for the listed cases.

2.The general rule of good faith

As mentioned above, the employer’s right to terminate the employment is not unlimited, but subject, like all other rights, to the restrictions of Article 281 of the Civil Code which, as a general rule, forbids the abusive exercise of rights. Such rule is reinforced by the provisions of article 24 of the Revised European Social Charter.

In view of the above, in each case the dismissal must be examined as to whether it was in accordance with principles of good faith and fair practice, as well as whether there is any conflict with the social or economic purpose of the right, and if the above limits are obviously exceeded.

Indicatively, pursuant to Greek court precedents, a dismissal is considered void if motivated by minor reasons, such as if the termination is due to animosity, hatred, or resentment, or took place for reasons of retribution for prior employee behavior which was legal but unpopular with the employer.

In case of dismissals for financial-technical reasons (i.e., reorganization of the employer’s business necessitating reduction of staff), the choice of the persons to be dismissed must be made in accordance with objective criteria (i.e., either objectively proven competence of the employee or social criteria, such as marital status, children, health problems, age and difficulty to find a new job). As a general rule, pursuant to case law, in case of equally competent employees, the employer must choose to dismiss the less weak person from a social perspective. Moreover, before dismissal (which is considered as the “last resort” “ultimum refugium” in Latin), the employer must explore alternative solutions, such as employment in another vacant position (even inferior one).

3.Dismissal during the annual leave

Employees are protected from dismissal during their annual leave.

4.Group dismissals

Under Greek law, dismissals are considered to be collective when they take place for reasons not related to the specific person dismissed and concern within the same month:

• more than six employees for an undertaking or establishment with 20 to 150 employees; and
• more than 5% of the staff and in any event more than 30 employees for an undertaking or establishment with more than 150 employees

In the above cases, the number of dismissed employees who are between 55-67 years old cannot exceed 10% of the total number of dismissed employees.

Group dismissals were in the past subject to a permission by the competent supervising authority (which in practice was almost never provided). Currently, following a legislative amendment in 2017, group dismissals are subject to a specific procedure outlined in law, involving information to and consultation with the employees’ representatives and notification of the relevant documentation to the competent supervising authority. Dismissals take place based on an agreement with the employees in the context of consultation, a decision by the supervising authority affirming that the employer complied with the consultation and information obligations or the lapse of a specific time from the above notification.

C. Right of the employee to contest the validity of a dismissal – consequences.

The employee is entitled, within three months from termination, to file a claim for cancellation of the termination.

For the cases in the dismissal prohibition list mentioned above, the burden of proof is partially reversed and in case the employee establishes, before a court, facts from which it may be concluded that the dismissal falls within the above list, it shall be for the employer to prove the opposite.

Moreover, the consequences for the employer in case of an invalid dismissal falling within the list are more severe.

Until the reform introduced by the Law, if a dismissal was found invalid by court (often after several years), the employer had to re-employ the dismissed employee and pay wages in arrears for the interim period, which created a prolonged uncertainty regarding not only the validity of the dismissal but also the overall financial cost. This remains the rule for cases of invalid dismissals in the list.

On the contrary, under the new regime, for all other cases of invalid dismissal (including e.g., in case of dismissals for financial – technical reasons, due to the incorrect application of social criteria for the selection of the employees to be dismissed) the court may alternatively, following a request by either party, impose a penalty of an amount equal from 3 monthly regular wages to twice the legal dismissal compensation.

The same can apply for invalid dismissals falling within the list, but only upon a request by the employee.

The obligation of the employer to re-employ and the amounts payable are affected if the employer substantiates that the employee has found another employment and can therefore not be rehired and/or was receiving wages from another employer in the meantime. The same applies in case the employee deliberately fails to find another employer although this is objectively possible considering his circumstances, since such practice is considered unfair by the Greek Civil Law (art281).

D. Calculation of severance payment, time of payment and consequences of non-payment

Issues of severance payment of employees after termination by the employer are determined by the provisions of Law 2112/1920, as amended and supplemented by law 3198/1955, Law 3863/2010 (Article 74, par. 2), Law 3899/2010 (Article 17, par. 5b), Law 4093/2012 and Law 4111/2013.

The regime is the same for both blue and white-collar employees since the introduction of art.64 law 4808/2021, the respective change entered into force on 1-1-2022.

1. The basis for the severance payment due will be gross regular wages (i.e., not including special payments):

• Of the final month before termination of employment, for those with steady salary; or
• The average of the last two months’ gross salary for those with fluctuating salaries (calculated by units of work time, rates, etc.).
• Regarding the blue-collar employees an overall of 22 daily wages is considered as monthly wages according to law 4808/2021, however since this may be contradicting to other legal provisions the above may differ and more complex calculations should take place.

Regular wages mean wages and any other benefits granted, not on a temporary basis, but permanently and steady as regular contractual or statutory compensation for work.

2. The amount of payable severance payment depends on the manner of termination (with or without warning /advance notice) and the length of service of the employee.

More specifically, in case of termination of employment agreements of indefinite term, the following periods of notice must be provided for the employer to pay to the employee half (1/2) of the severance payment the latter would receive if his employment contract was terminated without notice. The maximum period of notice is four (4) months.

• Employees working under the same employer for more than twelve (12) months up to two (2) years are dismissed upon one – month prior notice.
• Employees working under the same employer for more than two (2) years up to five (5) years are dismissed upon two – month prior notice.
• Employees working under the same employer for more than five (5) years up to ten (10) years are dismissed upon three – month prior notice.
• Employees working under the same employer for more than ten (10) years are dismissed upon four – month prior notice.

3. Furthermore, as regards the amount of the payable severance payment due to termination of indefinite term employment agreements, Law 4093/2012 (which was published on 12.11.2012) introduced several changes. More specifically, an employer shall pay to a dismissed employee a minimum (legal) compensation. The specific amounts can be found in the tables below that apply to both white and blue-collar employees as of 1-1-2022. The tables are as follows:

It should be noted that employees having worked under an employment contract of indefinite term for more than 17 years as of 12.11.2012 (date of publication of Law 4093/2012) shall receive the additional amounts of compensation specified in the following table whenever they are dismissed. For the calculation of such additional compensation, the time of service completed as of 12.11.2012 is taken into consideration. In addition, the basis for compensation due will be regular wages of the last month before termination of employment which do not exceed the amount of €2,000. The amounts are set out, as follows:

The above amounts of compensation are the minimum ones provided by law, thus higher amounts may be paid if otherwise stipulated in the employment contract, the internal labor regulation of the company or due to established past practice.

Any agreement with the employee for compensation exceeding the minimum provided by law (golden parachutes, etc.) is in principle valid and must be considered although there is case law according to which contractually agreed compensation may still be subject to the maximum compensation described under (5) below.

1/6 Increment: The Supreme Court (“Areios Pagos” in Greek) has consistently held (indicatively, decisions 639/67, 317/70 and 1023/80 of the Supreme Court) that holiday bonuses and leave are included in the concept of regular wages. Therefore, wages will be calculated, for purposes of calculating due compensation, at a surcharge rate of 1/6.

5. Maximum compensation: Under paragraph 1 of article 5 of Law 3198/1955 and established case law (indicatively, decisions 512/1993 and 1750/2008 of the Supreme Court), if the monthly wages on which severance payment is calculated exceed eight times the daily wage of a blue-collar employee, multiplied by 30, then the excess will not be considered.

6. Employees who may retire: The employer may dismiss an employee who has fulfilled the conditions to receive full pension, by paying 50% or 40% (if the employee has subsidiary social security) of the applicable without prior notice dismissal compensation. This currently applies to blue-collar employees as well since the change of their regime pursuant to law 4808/2021.

7. Time of payment of severance payment: Under Paragraph 3 of Article 74 of Law 3863/2010, the employer, on termination of employment, must pay a portion of the compensation representing pay for two (2) months (if the compensation due exceeds the employee’s earnings for two months). The remainder shall be paid in bi-monthly installments, none of which may be lower than two months’ salary, unless the remaining amount is less.

8. Consequences of failure to pay compensation: Termination without payment of the statutory severance payment (or higher compensation agreed upon) is void, and the employee has a claim for re-employment, wages in arrears and potentially compensation for moral damages.

In cases where the amount of dismissal compensation paid is less than the legal one due to manifest error or reasonable doubt regarding the basis of calculation, the court does not invalidate the dismissal, but obliges the employer to pay the additional amount.

Severance payment must be paid even when the employee is dismissed for underperformance or breach of the employment agreement. Non-payment is allowed by law only (a) in case penal complaints have been filed against the employee for actions or omissions during his/her work or if the employee is charged with a misdemeanor (in which case, if the employee is acquitted, the employer in principle must pay the severance payment); (b) in case of bankruptcy; (c) in case of force majeure; or (d) if the employee in purpose caused his/her dismissal in order to receive the severance payment.

As mentioned under (C) above, the employee is entitled, within three months following written notice of termination, to file a claim for cancellation of the termination. Alternatively, he/she may, within six months, file an action for payment of the statutory compensation due to him/her.

Author:

Katerina Basta