The termination of employment initiated by the employer is often reasoned with unfavorable business results. A verdict of the Supreme Court clarifies, however, that the exact wording of such reasoning could be crucial.
According to the underlying case, the employee performed work at the defendant as a sales representative. The annual turnover of the defendant decreased compared to the result of the previous years. The defendant terminated the employment relationship of the applicant and declared downturn in business as grounds of termination. The court of original jurisdiction found the reasons valid, but the appellate court found the termination unlawful because the reason of ‘downturn in business’ does not meet the requirements of clearly specified grounds since it does not describe unambiguously why the employer terminated the relationship.
According to the judicial practice, the requirement of clearly specified grounds means that the circumstances provided as reasons of termination shall describe unequivocally why the employer does not need the work of the employee anymore. The Supreme Court ruled that the employee did not receive information on whether the downturn of business was a result of the performance of the applicant or that of the operation of the employer. In the former case, the employer should have specified which duties were breached by the employee that led to the downturn, whereas in the latter case, the employer should have clarified that the termination is part of a downsizing or reorganization. Since the notice did not describe any of the above, the grounds of termination did not meet the requirement of clear specification, authenticity and substantiality.
This is an educational case because downturn in business is the most common indirect reason of terminations. However, there is a difference if the downturn is attributable to objective circumstances independent from the performance of the employee or these circumstances have been created by the employee. Both cases shall be clearly described in the notice of termination. Clear specification, authenticity and substantiality of reasons for termination shall be checked carefully before delivering the notice of termination because in case of unlawful termination, the employer might be obliged to pay compensation amounting up to twelve months of absentee pay. Engaging a lawyer before communicating the notice of termination may protect employers from excessive costs.