The employment relationship is a fundamental aspect of the labor market, and the termination of this relationship is a matter of significant legal importance. In Egypt, the termination of the employment relationship is governed by various laws and regulations, including the Egyptian Labor Law No. 12 of 2003 (the “Law”). This article aims to provide an overview of the legal framework surrounding the termination of employment in Egypt, including the grounds for termination, notice periods, severance pay, and dispute resolution mechanisms.
Grounds for Termination
Under Egyptian law, the employment relationship may be terminated based on both subjective and objective grounds. Subjective grounds include reasons related to the employee’s conduct or performance, such as misconduct, repeated violations of work rules, or poor performance. Objective grounds, on the other hand, are circumstances that are beyond the control of the employee, such as redundancy due to economic or technological reasons.
Termination for Cause:
The specific grounds for termination for cause, also known as termination without notice or disciplinary dismissal, are outlined in Article 61 of the Egyptian Labor Law No. 12 of 2003. The law provides a non-exhaustive list of grounds that may justify the termination of an employment relationship without providing a notice period or severance pay. The grounds for termination for cause include:
• Gross Misconduct: Termination for gross misconduct can occur when an employee engages in serious misconduct that violates the employment contract or work rules established by the employer. Examples of gross misconduct may include theft, fraud, violence, harassment, or any behavior that seriously breaches the employer’s trust.
• Repeated Violation of Work Rules: If an employee consistently and knowingly violates the work rules established by the employer, despite previous warnings or disciplinary actions, the employer may terminate the employment relationship for cause. However, it is important for the employer to demonstrate that the violations were significant and repetitive.
• Incompetence or Negligence: If an employee consistently demonstrates incompetence or negligence in the performance of their duties, resulting in significant harm or loss to the employer, the employer may terminate the employment relationship without notice. However, it is crucial for the employer to establish that the incompetence or negligence is severe and not merely a result of inadequate training or supervision.
• Absence Without Justifiable Excuse: If an employee is absent from work for an extended period without a valid reason or justifiable excuse, the employer may terminate the employment relationship for cause. However, the employer must consider the circumstances surrounding the absence and provide an opportunity for the employee to clarify or justify their absence before taking such action.
• Breach of Confidentiality: If an employee breaches their duty of confidentiality by disclosing sensitive or confidential information of the employer or engaging in activities that harm the employer’s reputation or business interests, the employer may terminate the employment relationship without providing notice or severance pay.
It is important to note that the grounds for termination for cause should be substantiated by evidence and follow the principles of due process. Employers should adhere to fair and reasonable procedures, such as providing the employee with an opportunity to present their defense or conducting a proper investigation, before terminating the employment relationship for cause.
Termination for poor performance:
Termination for poor performance is one of the grounds for ending an employment relationship under Egyptian law. When an employee consistently fails to meet the expected standards of performance, an employer may consider terminating the employee’s contract for cause. Here are some key points regarding termination for poor performance under Egyptian law:
• Performance Expectations: Employers are entitled to set reasonable performance expectations for their employees, which should be communicated clearly and objectively. Performance standards can be outlined in employment contracts, job descriptions, performance evaluation criteria, or other relevant documents. These expectations should be reasonable and aligned with the nature of the job and the employee’s qualifications.
• Documentation and Feedback: Employers should maintain proper documentation of the employee’s performance issues, including any performance reviews, warnings, or other relevant records. Regular feedback and performance evaluations are crucial in addressing performance concerns and giving employees an opportunity to improve. Employers should provide constructive feedback, guidance, and support to help employees meet the desired performance level.
• Performance Improvement Plan (PIP): Before resorting to termination, employers often implement a Performance Improvement Plan (PIP) to provide the employee with a clear roadmap for addressing their performance deficiencies. A PIP typically outlines specific performance goals, timelines, and support mechanisms to assist the employee in improving their performance. The PIP should be communicated in writing to the employee and provide a reasonable timeframe for improvement.
• Reasonable Time for Improvement: The law does not specify a specific timeframe for improvement, as it may vary depending on the nature of the job and the circumstances. However, employers are generally expected to provide a reasonable opportunity for the employee to remedy their performance issues within a defined period. The duration of the improvement period should be reasonable and take into account the complexity of the job and the employee’s level of experience.
• Fair Evaluation and Consideration: During the improvement period, employers should conduct fair and objective evaluations of the employee’s progress. The evaluation should consider the efforts made by the employee, the support provided by the employer, and any external factors that may have influenced the employee’s performance. If, despite the improvement period, the employee fails to meet the required performance standards, the employer may consider termination for poor performance.
• Procedural Requirements: When terminating an employee for poor performance, employers should follow any contractual or legal procedural requirements. This may include providing written notice of the termination, adhering to any notice periods specified in the employment contract or applicable law, and ensuring that the termination decision is well-documented and communicated to the employee in a clear and respectful manner.
It is important to note that termination for poor performance should be based on objective and reasonable criteria. Subjective judgments or biases should be avoided, and the process should be conducted in good faith. Employees should be given a fair opportunity to address their performance issues and should be treated with dignity and respect throughout the process.
Objective Grounds Based Termination:
Under Egyptian law, termination of the employment relationship can also occur based on objective grounds. Objective grounds refer to circumstances that are beyond the control of the employee and generally involve economic or technological factors affecting the employer’s operations. Here are further details regarding termination based on objective grounds:
• Redundancy: Redundancy occurs when the employer no longer requires the employee’s position due to economic reasons, restructuring, or technological advancements. Redundancy may arise from factors such as business closure, downsizing, mergers, or automation. Employers must demonstrate a legitimate business reason for the redundancy and provide appropriate documentation to support their decision.
• Workforce Reduction: Employers may need to reduce their workforce to address economic difficulties or changes in market conditions. In such cases, terminations may be necessary to maintain the viability of the business. Employers should ensure that the criteria for selecting employees for termination are fair, non-discriminatory, and based on objective factors such as skills, qualifications, performance, seniority, or job category.
• Job Elimination: If a particular job or position becomes obsolete or is no longer required due to changes in the organization’s structure, technology, or workflow, the employer may terminate the employee holding that position. The employer must provide a valid justification for the elimination of the job and demonstrate that it is not a mere pretext to terminate the employee.
• Force Majeure: Termination based on force majeure occurs when unforeseen circumstances beyond the employer’s control make it impossible to continue the employment relationship. Force majeure events may include natural disasters, war, or other extraordinary events that significantly impact the employer’s ability to operate or fulfill its contractual obligations.
• Expiry of Fixed-Term Contracts: If an employment contract has a fixed term and reaches its natural expiration, the employment relationship is terminated by operation of law. The employer is not obligated to provide notice or severance pay unless otherwise specified in the contract or applicable collective agreements.
• Statutory Retirement Age: Termination of the employment relationship may occur when an employee reaches the statutory retirement age specified by law or the employment contract. The retirement age in Egypt is generally 60 years, but it may vary based on the nature of the work or specific agreements.
It is important to note that even in cases of termination based on objective grounds, employers must adhere to procedural requirements, such as providing reasonable notice periods or severance pay as required by the law or the employment contract. Employers should also ensure that the selection criteria for termination are fair, non-discriminatory, and based on objective factors.
Procedures of Termination
The Egyptian legislator adopts two criteria in drawing the procedures of terminating the employments contracts. The first criterion depends on the nature of the contract and differentiates between the infixed term employment contracts that can be terminated upon a notice, and the fixed term employment contracts that cannot be terminated unless a court ruling is granted. The second criterion depends on reasons beyond the termination and differentiates set of reasons require to obtain to get administrative decision from the Manpower Authority.
Termination by a Notice:
The Law gives the employer the right to terminate the infixed terms employment contracts upon a notice in cases of termination for cause and poor performance. The duration of the notice period depends on the length of service of the employee and is as follows:
• Two months for employees with a service period of less than ten years.
• Three months for employees with a service period exceeding ten years.
During the notice period, the employee is entitled to continue working and receiving their regular salary and benefits, unless the employer chooses to release them from work and pay them in lieu of notice.
Termination by a Court Ruling:
In the fixed terms employment contracts, the employer is requested in case of termination to recourse to the court to get a dismissal decision. The same may be optionally adopted by the employer in the infixed term employment contracts.
Termination by administrative Decision:
The objective grounds-based termination of the employment relationship including the redundancy, the workforce reduction, the job elimination, and the force majeure-based terminations, requires to get an administrative decision from the Manpower Authority approving the termination.
Employers should maintain proper documentation of the objective grounds justifying the termination, such as financial records, restructuring plans, or technological advancements. This documentation helps support the employer’s position in case of any disputes or legal challenges related to the termination.
This also requires from the employers to ensure that terminations based on objective grounds are not discriminatory. Employees should be selected for termination based on fair and non-discriminatory criteria, such as skills, qualifications, performance, seniority, or job category. Discrimination based on factors such as gender, religion, race, or disability is prohibited by Egyptian labor laws.
In situations where termination is based on objective grounds, Egyptian law generally requires employers to provide severance pay to the affected employees. The amount of severance pay depends on factors such as the length of service, the employee’s salary, and any relevant provisions in the labor law or collective bargaining agreements. The specific calculation method may vary, but it typically involves a certain number of months’ salary for each year of service.
In cases of termination without cause, employees are entitled to receive severance pay, which is calculated based on their length of service. The Law stipulates that for each year of service, the employee is entitled to a severance payment equal to one month’s salary. Fractional years are calculated proportionally.
It is worth noting that severance pay is not applicable in cases of termination for cause, such as gross misconduct or serious violation of employment obligations. In such instances, the employer has the right to terminate the employment relationship without providing any compensation.
Dispute Resolution Mechanisms
If an employee believes that their termination was unfair or unlawful, they have the right to challenge it through various dispute resolution mechanisms available under Egyptian law. The employee may file a complaint with the Ministry of Manpower and Immigration within 60 days from the date of termination. The Ministry will attempt to mediate between the parties to reach an amicable settlement.
If mediation fails, the employee may file a lawsuit before the competent labor court within the jurisdiction, seeking reinstatement or compensation for unfair termination. The labor courts have the authority to review the termination and assess its legality based on the grounds provided by the Law. The court’s decision can be appealed before higher labor courts, following the regular judicial procedures.
The termination of the employment relationship under Egyptian law is subject to various regulations and procedures designed to protect the rights of both employers and employees. The grounds for termination, notice periods, severance pay, and dispute resolution mechanisms are all important factors to consider when dealing with employment termination in Egypt. It is crucial for both employers and employees to adhere to the legal requirements and seek legal advice when necessary to ensure compliance with the applicable laws and regulations.