How to Legally Terminate an Employment Contract in Egypt:

A Guide for Employers and Employees

The Difference Between Resignation, Dismissal, and Termination of Contract by Mutual Agreement:

The Egyptian Labor Law outlines several ways to terminate an employment contract, including resignation, dismissal, and termination by mutual agreement.

What are the legal conditions for termination of employment by the employer?

In the Egyptian Labor Law No. 12 of 2003 and its amendments, termination of employment by the employer is subject to specific legal conditions aimed at protecting the rights of the worker. These conditions are as follows:

1. Valid Justification:

Indefinite contract: The employer may not terminate an indefinite labor contract without a valid and sufficient justification related to one of the following:

• The worker’s breach of one of their obligations, such as gross negligence in the performance of work, repeatedly violating labor regulations, or disclosing the company’s secrets.
• The worker’s unfitness to fulfill their job duties, provided that this is objectively proven.

Fixed-term contract: A fixed-term labor contract expires at the end of its term. However, the employer may terminate the contract before the expiration of its term in very specific cases stipulated by law, such as if the worker is convicted by a final judgment of a felony or imprisonment for a crime involving honor, integrity, or public morals (unless the court orders the suspension of the execution of the penalty).

2. Notice:

• The employer must notify the worker in writing of the termination of the contract before a certain period, as follows (Article 111 of the Labor Law):
• Two months: If the worker’s continuous service with the employer does not exceed ten years.
• Three months: If the period of continuous service exceeds ten years.
• The notice period starts from the day after the notification is delivered to the worker.
• The notice period cannot be subject to a condition precedent or a void condition (Article 112 of the Labor Law).
• If the employer terminates the contract without notice or before the expiration of the notice period, the employer shall pay the worker an amount equivalent to their wages for the notice period or the remaining part thereof (Article 118 of the Labor Law).

3. Appropriate Timing of Termination:

The termination must take place at a time appropriate to the working conditions (Article 111 of the Labor Law).

4. Grounds for Dismissal Without Notice or Compensation (Article 69 of the Labor Law):

An employer may dismiss a worker without notice, pay, or compensation including but not limited to:

• If the worker assumes a false identity or submits false documents.
• If the worker commits a serious mistake that results in a serious material loss to the employer, provided that the employer informs the relevant authorities of the incident within twenty-four hours of its occurrence.
• If the worker repeatedly fails to observe the instructions required for the safety of workers and the establishment, provided that these instructions are written, posted in a visible place, and the worker knowingly acknowledges them in writing, despite being warned in writing.
• If the worker is absent without an acceptable excuse for more than twenty consecutive days within a single year, or more than ten non-consecutive days, provided that the dismissal is preceded by a written warning from the employer to the worker after their absence of ten days in the first case and five days in the second case.
• If it is proven that the worker has disclosed the establishment’s secrets that result in serious damage to the establishment.
• If the worker competes with the employer in the same activity.
• If the worker is found during working hours in a state of drunkenness or influenced by a narcotic substance.
• If the worker assaults the employer, one of their superiors, or colleagues during or because of work.
• If the worker fails to fulfill the essential obligations of the labor contract.

5. The worker’s rights upon termination of employment by the employer:

Regardless of the reason for termination, the worker is entitled to the following rights:

• The wages earned for the period worked until the date of termination.
• The accrued and unused annual leave allowance.
• Severance pay in accordance with Article 126 of the Labor Law (after at least one year of service).
• In case of unfair dismissal (i.e., without valid justification or in violation of legal procedures), the worker is entitled to additional compensation not less than two months’ wages for each year of service.
• A certificate of experience from the employer.

When is a worker entitled to claim compensation?

A worker is entitled to claim compensation in several cases under the Egyptian Labor Law No. 12 of 2003 and its amendments, including the following key cases:

• Unfair dismissal: If the employer terminates the worker’s employment contract without a valid and sufficient justification related to the worker’s breach of their fundamental obligations or unsuitability for the job, provided this is objectively proven (in indefinite contracts), or if they fail to follow the correct legal procedures for dismissal, the worker has the right to claim compensation, and the court will assess the amount of compensation, but not less than two months’ wages for each year of service.
• Termination of a fixed-term employment contract before its expiration: If the employer terminates the fixed-term labor contract before the expiration of the agreed period without valid justification, the employer is obligated to compensate the worker for the remainder of the contract term, unless the parties agree otherwise. The exception to this case is if the termination is due to force majeure or a sudden accident beyond the employer’s control.

• Worker injury: If a worker is injured during the course of employment or due to work, or if they contract an occupational disease due to the nature of their work, resulting in total or partial disability or death, the worker is entitled to compensation as stipulated in the Social Insurance Law.

• The employer’s violation of the terms and conditions of employment: If the employer violates their fundamental obligations stipulated in the labor contract, labor law, or workplace regulations, causing harm to the worker, the worker has the right to claim compensation for the damages incurred.
• Delay in payment of wages and dues: If the employer delays in paying the worker’s wages or other entitlements (such as severance pay or vacation pay) without a legal basis.
• Damaging the worker’s reputation or defamation: If the employer commits acts that damage the worker’s reputation or unfairly defames the worker.

Procedures for claiming compensation:

To claim compensation, a worker should take the following steps:

1. File a complaint with the relevant labor office: The labor office serves as the primary authority for the amicable settlement of labor disputes.
2. File a lawsuit before the labor court: If an amicable settlement cannot be reached at the labor office, the worker has the right to file a lawsuit with the labor court to claim their rights and compensation.

What are the legal procedures to be followed when terminating an employment contract?

In the event of any of the aforementioned grounds for terminating an employment contract, whether initiated by the worker or the employer, the termination of the employment contract requires adherence to the following procedures:

1. Provide the worker with the legally required notice of termination.
2. The employer must personally serve the worker with an official termination letter specifying the reason for termination and its effective date.
3. The employer is obligated to settle all the worker’s financial entitlements, including accrued wages, severance pay, unused annual leave, compensation for unfair dismissal, and any other outstanding dues.
4. The worker is required to return any property belonging to the employer (e.g., equipment or documents).
5. Upon completion of the process, official contract termination documents must be signed by both parties, including the worker’s acknowledgment of receipt of all their financial entitlements

The Importance of Legal Compliance

Legal compliance when terminating an employment contract is critically important to protect the rights of all parties and to avoid legal disputes that could result in significant financial and reputational losses. Whether the contract is terminated through resignation, dismissal, or mutual agreement, adhering to legal procedures ensures that each party’s position remains secure and preserves the reputation of both the organization and the employee.

At this stage, the role of a specialized labor law attorney becomes vital, providing the appropriate legal advice, properly drafting agreements, and ensuring compliance with all regulatory requirements. This facilitates a fair and secure termination of the contractual relationship for all parties involved.

Let us assist you in ensuring smooth compliance and safeguarding the rights of your company and employees — contact Nehal Al-Akkad, Associate Lawyer, via email at [email protected] for specialized legal consultation that ensures your success under the new regulations.