When does your employer have the right to withdraw from the employment contract?

Imagine you have signed a contract, started a new job and are looking forward to a new challenge. Suddenly, your employer tells you that it is terminating your contract. What does this mean? And is it even legal?

Resigning from an employment contract is an exceptional and specific institution. Unlike a normal termination of employment by notice or agreement, resignation is a legal fiction that the employment contract never existed. This method of terminating the employment relationship is particularly relevant when one of the parties breaches the essential terms of the contract. This breach should lead to the impossibility of continuing the employment relationship in order for resignation to be possible.

Resignation is different from a traditional termination of employment contract or a termination agreement. If the employer rescinds the contract, it means that it will be viewed as if it had never been formed.

What the law says

The Labour Code defines that resignation from an employment contract is only possible prior to the start of employment. Once you start work, the employer must use the standard methods of termination, i.e. notice, agreement or immediate termination (which also has strict conditions).

Court decisions show that employers and employees often make the mistake of confusing resignation with dismissal. Termination means the end of the employment relationship with a certain notice period, whereas resignation has a retroactive effect in the legal sense – i.e. as if the contract had never been created.

When the employer has the right to withdraw from the employment contract

Withdrawal from an employment contract is only possible in the following specific situations:

You have fundamentally violated the terms of the employment contract: If the employer finds out before you start work that you have provided false information, for example about your qualifications or previous experience, he can withdraw from the contract. For example, you said you had a university degree but in reality you have not completed any studies.

You have not started work: If you signed a contract but did not show up for work on the day you started and did not give any excuse, the employer can cancel the contract if it does not know about the obstacle on your side within seven days. Specifically, the Labour Code states: “If the employee does not report to work on the agreed date without being prevented from doing so by an obstacle to work, or if the employer does not learn of the obstacle within one week (§ 350a), the employer may withdraw from the employment contract.” This means that they will not have to treat you as an employee and you will not be subject to the notice period.

If your situation changes between signing the contract and starting work so that you no longer meet the conditions for the job, the employer can resign. For example, if you have lost your driving licence and were due to start as a supply driver, or a doctor assesses that you cannot do the job during an initial examination.

As far as the obstacle on your side is concerned, the employer can also learn about it from a third party, but it is important that it learns about it within the seven days mentioned above. After that, he cannot withdraw from the employment contract. At the same time, he cannot do so if you have already started work, even if he wants to do so on the first day. In that case, he would have to use the classic termination option.

The employer can only terminate the contract if there are legal grounds for doing so. If your employer unilaterally resigned without a legal reason, you can claim compensation. Use our legal advice service to find out what you are entitled to.

The employer must deliver the withdrawal in writing to the employee in question, see Section 34 of the Labour Code. A written form is required for a withdrawal from an employment contract, otherwise it is not taken into account. Again, it must be delivered to the employee at the latest before the employment relationship begins – i.e. before the employee starts work.

Who has the right to what?

Upon termination of the employment contract, all obligations between the employer and the employee cease. However, there are several key issues that need to be resolved at the time. For example, the return of work equipment. The employee must return everything that the employer has provided to him or her for the performance of his or her work. At the same time, any damages need to be settled – if either party has suffered damage as a result of the wrongful termination of the employment contract, they can claim compensation.

What happens if the employer resigns unlawfully?

If your employer resigns unlawfully, you have the right to defend yourself. You can claim damages for the loss you have suffered or even demand that he or she reinstate you.

For example, if your employer writes to you the day before you start work saying that he has changed his mind and has a better candidate, you can go to court and seek justice.

What do the courts say?

In one of its decisions , the Supreme Court confirmed that if an employer terminates an employment contract without a lawful reason, it may be liable to pay damages to the employee, for example for loss of earnings. In this case, the employer argued that the employee had not provided truthful information about his qualifications. However, the court held that the information provided was not so material as to justify termination.

In another judgment, the issue was whether an employer could terminate an employment contract if the employee failed to report for work and failed to report on time. The court confirmed that the employer was entitled to resign because the employee had not documented the impediment to work within the statutory seven-day period.

What does this mean? The courts look at each case individually and take into account whether all the conditions for resignation have been met. If the employer resigns without a valid reason, the employer is not only liable to pay damages to the employee, but also runs the risk of the resignation being invalid.

Summary

Rescission of an employment contract is an exceptional institution in employment law, which means that the contract is treated as if it had never been made. An employer can only rescind an employment contract before the employee starts work and only under the conditions set out by law, for example if the employee has not provided truthful information about his or her qualifications, has not started work without apology or has lost the qualifications to perform the job. If the employer resigns unjustifiably, the employee can claim compensation or even reinstatement. Case law shows that the decision in these cases is individual and depends on the specific circumstances – for example, in one case the court ruled that the resignation due to misqualification was not justified, while in another case it supported the employer when the employee failed to document the impediment to work within the statutory time limit.