Feb 7

Termination of employment by agreement and severance payment – when do you become entitled to it?

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You have decided to terminate employment with your current employer by agreement and you believe that you would be entitled to severance payment provided that the employment was terminated by agreement. Unfortunately, you are wrong. Severance payment which belongs to everyone under the law is payable only provided that the employment is terminated from four specific legal reasons.
These reasons include the case when the employer or its part is dissolved or relocated (Section 52 (a) and (b) of the Labor Code) and also when the employee becomes redundant, following the employer’s decision (Section 52 (c)), i.e. the so called organizational reasons. If your employment is terminated from the said reasons, you will be entitled to severance payment in the amount of one, two or three times the amount of your average earnings, depending on the length of your employment with the respective employer. It is important, however, to have the particular reason specified in your employment termination agreement, otherwise the employer might object that the reason for termination of employment by agreement was entirely different; in the case of a court dispute, it is up to the employee to prove that the reason for termination subject to the legal severance payment actually occurred.
The last specific case when the employee is entitled to severance payment by the law (both in the case of termination given by employer and in the case of termination by agreement) is termination from the reason in accordance with Section 52(d) of the Labor Code, i.e. if the employee may no longer perform their job based on a medical report. In such case, the employee is entitled to severance payment of twelve times the amount of their average monthly earnings by the law (this does not apply in the case that circumstance in accordance with Section 270(1) of the Labor Code occur). The employer will make the severance payment on the nearest pay day, unless both parties agree otherwise.
If the employee starts working for a new employer and enters into an employment agreement with the new employer immediately after termination of the previous employment, severance payment will not be reduced and claim for the severance payment still remains valid. Receipt of severance payment affects the payment of unemployment benefits; the employee becomes entitled to unemployment benefits only after the period covered by severance payment expires.
If you need advice concerning termination of your employment or if you have any questions concerning your employment, please do not hesitate to contact us.
28 January 2019
Mgr. Lenka Shánělová
Junior Associate