CEO's Thoughts

Mutual Termination Agreement for International Employees

By March 6, 2017 No Comments
Mutual Termination Agreement for International Employees

By Ben Wright, CEO Velocity Global

I was speaking with a company recently that decided to terminate their employee in Asia unilaterally for non-performance.  While the facts of the case are clear with regards to the non-performance of job responsibilities, the company elected to “cut right to the case” and terminate the employment relationship without first seeking a mutual termination agreement.  And as you can guess the result was an upset employee that immediately took the case to a local labor attorney working on contingency.  In this situation, the termination occurred in a country where mutual termination is mandated… but the concept still applies anywhere you employ people.

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Mutual Termination Agreement Elements

When it comes time to part ways with your employee in an overseas location, you should seek a mutual termination agreement as the preferred course.  Outlined in a countersigned legal document, both parties agree to the final terms of the contract.  While these terms vary by country, a general rule of thumb is that you should include the following elements:

  •  Notice Period: This should outline whether or not the employee is asked to work through the remaining period or paid in lieu of work.
  • Amount and Timing of Final Payments: Upon termination, provide the employee with the amount and timing of final payments, including:
    • Unused Vacation
    • Pro-rated 13th-month salary payments
    • Unpaid expenses or commissions, or any other forms of remuneration/ reimbursement
  • Last Day of Work

In exchange, the employee agrees that the aforementioned consideration is accurate and complete so that no further liabilities are owed by the employer.  It is also wise to ask for a release from any employee-related liabilities or legal action against the employer.  

Please be aware that this is not legal advice, but rather years of experience working with companies that employ (and in some cases terminate) people across the globe.  Seeking a mutual understanding with the departing employee – regardless of the background for which the termination occurred – will lead to putting a solid fence around any current or future liabilities.  For more information regarding international termination best practices, refer to our previous post here.

Further, consider that such agreements may or may not be legally valid in a country.  If you find that labor law doesn’t recognize mutual termination agreements that doesn’t mean you shouldn’t still pursue such an agreement; an employee may consider that the final decision whether or not the document itself holds up in court.

In countries like Brazil, even if you obtain a mutual agreement on the terms of separation the employee has a 5-year statute of limitations to file suit in the labor courts for unjust termination.  Or in Turkey, you can have a mutual termination agreement as long as it includes a “reasonable benefit” for the departing employee.   

Long story short, seek an agreement with the outgoing employee… and engaging a local employment attorney is always good measure before doing anything! If you have any questions regarding termination policies, give Velocity Global a call today.

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