Employment contract termination in Estonia

Estonian employment law has not been covered for a while but recently the issue of different grounds of terminating the employment relationship has come up in our practice. So it is a fitting time to refresh some of the basics of the Estonian employment contract act.

Not termination exactly, but a common way to end an employment relationship is by a mutual agreement. As it is quite uncommon that both parties simultaneously come to a same understanding that they wish to end the employment agreement, then in reality "mutual" is often a unilateral wish of one party mainly the employer. While it is always good to end a relationship in a friendly way, it is important not to be pressured into signing a termination based on mutual agreement when in reality that is not the case. It is often fair to ask for a compensation and employers often do offer compensation as well.

If the employer wants to terminate the employment then they have to have a legal ground for it. The grounds can be economical (liquidation or bankruptcy of the company or lay-offs) or deriving from the employee. The latter means that the employee has to have significantly breached their obligations or continued a breach despite a prior warning. There are quite a few formalities involved in this and consulting a legal expert prior to termination intention or after receiving a latter of termination might be necessary. In case of illegal termination, penalties do apply.

The employee can terminate the agreement without any grounds by giving a 30 days' notice. Under certain circumstance the employee can terminate the agreement without following the notice period.

Contrary to general belief, termination in probation time cannot be done without justification by the employer or the employee. True, the notification period is shorter, 15 days, but grounds for termination still have to be given