Employers have a number of options under the applicable law to respond to employee misconduct. It is important to distinguish between two options: a violation for which the employee is given a warning and a violation for which a warning alone is not enough and the employer wants to terminate the employment contract. In both cases, specific rules apply on how to do it without facing problems later.

The main laws that currently govern the relationship between employees and employers are:

• the Employment Contracts Act (TLS);
• the Law of Obligations Act (VÕS); and
• the Individual Labour Dispute Resolution Act (ITVS).

Violations for which the employee is warned

In all cases where an employee has breached their duties, a warning may be given to the employee. The usual content of the warning is informing the employee of the fact that they have violated their job duty and warning them that their employment contract can be terminated if a violation occurs again.

Warnings may be given for any violations, such as being late for work or leaving work earlier, improper behavior towards customers, failure to inform the employer of computer problems that prevent the employee from performing their job duties, disparaging the employer on social media, etc. Unregulated by TLS and uncontestable by employees, warnings have no direct consequences for the employee. If the employment contract is terminated after several warnings, the employee can contest the cancellation of the contract and, in the event of a dispute, the employer must prove that the warnings were justified (i.e. the employee actually violated their job duties).

Subsection 88 (3) of the TLS provides that an employer may cancel an employment contract due to a breach of an employee’s obligation or a decrease in their capacity for work if the cancellation is preceded by a warning given by the employer. The warning does not necessarily have to be in writing, but if a need for proof arises, it is easier to prove a written warning than any other form of warning. There are also important nuances as regards giving a warning – it must clearly state that a future violation may lead to the termination of the employment contract.

Violations for which the employment contract can be terminated

There are a number of situations where an employer may be forced to terminate an employment contract extraordinarily for a reason attributable to the employee. Such situations are set out in the Employment Contracts Act. Read below about the details of these situations.

An employment contract can be terminated, among other things, if the employee has been previously warned and, despite the warning, disregards the employer’s reasonable instructions or fails to comply with their job duties. The following grounds for termination of the employment contract by the employer are also related to warnings:

• The employer may terminate the employment contract extraordinarily if the employee has been at work in a state of intoxication despite the employer’s warning.
• The employer may cancel the employment contract due to a breach of the employee’s duties or decrease in their capacity for work (the capacity for work due to state of health can be assumed to be decreased if the employee has been unable to work due to their state of health for a period of four months) if the cancellation is preceded by a warning given by the employer (for example, if a shop assistant continues to be late for work despite a warning and, as a result, the shop is not opened at the prescribed time and the owner of the premises (a shopping centre) claims a contractual penalty from the employer).

Employers can also terminate an employment contract in the event of serious breaches, even if no warning has been given. The grounds for such termination are as follows:

• The employer has committed a theft, fraud or other act that brings about the loss of the employer’s trust in the employee (any crimes must also be reported to the police).
• The employee has brought about a third party’s distrust in the employer (e.g. the employee disparages their employer and the employer’s attitude towards customers in the media).
• The employee has wrongfully and to a significant extent damaged the employer’s property or caused a threat of such damage (for example, the employee violates road traffic rules and, as a result, gets in a road accident with the employer’s car).
• The employee has violated the obligation of maintaining confidentiality or restriction of trade (for example, the employee starts a business offering similar services as the employer).

It is important to note that the employer may cancel an employment contract only within a reasonable time after they learnt or should have learnt of the circumstance serving as the basis for the cancellation (subsection 88 (4) of TLS). The length of a reasonable period of time must be assessed on the basis of factual circumstances, including the time needed to establish the violation. To avoid disputes, when a violation is discovered, the circumstances should be identified as soon as possible, including asking the employee for explanations, and once the violation has been exhaustively established and it is major, then an application for termination of the employment contract should be submitted at the earliest opportunity.

It should be kept in mind that extraordinary cancellation of the employment contract is the most stringent remedy that can be applied if the employee has significantly violated their job duties. For example, if an employee is three minutes late to work for several consecutive days, there is reason to give the employee a warning, but, as a rule, not cancel the employment contract extraordinarily, although clause 88 (1) 3) of the TLS would in principle allow cancellation. Thus, the significance of the violation, including its consequences for the employer, must always be assessed.

However, if you are an employee and want to terminate the employment contract with your employer on an extraordinary basis, read more here.

Summary

Employers have a number of options under the applicable law to respond to employee misconduct. In the case of minor violations, the employee can be given a warning, and after several warnings, this may constitute grounds for the extraordinary cancellation of the employment contract. However, if the employee has committed a serious breach, the employer has the right to terminate the employee’s contract with immediate effect. The significance of the violation must be assessed on a case-by-case basis. An important aspect is the impact of the violation on the employer.

If the employee has damaged the employer, the employee will normally have to compensate the employer for the damage. The extent of compensation depends on the factual circumstances in which the damage occurred.

For specific questions related to the termination of employment contracts, you can quickly find answers in the advice section.

Published in Raamatupidamisuudised