We have been posting series of articles describing the process for termination of an Employment Agreement for failure of the employee to perform. In short, it is not easy unless the company has a clearly defined and regularly used process for employee performance evaluation via a special review “Commission”. In practice, many smaller companies may not have such rules and will not have the time or resources to devote to such a review process by a formal Commission. If this is the case, what alternative options are there for a company to terminate an unsatisfactory employee?
If employee performance is an issue, our Mongolian lawyers advise our clients to look for patterns in breaches of employee discipline. Job “performance” and “discipline” are different grounds for termination under Mongolian law. Article 40.1.4 of the Labor Law provides that an Employment Agreement may be terminated at the initiative of the employer if the employee repeatedly “breaches employment discipline” or conducts a serious breach, as specified in the Employment Agreement, for which immediate termination of the Employment Agreement is stipulated. This may be useful as in many cases where an employee’s performance is inadequate there will also be breaches of discipline to consider.
Many Mongolian companies treat issues such as being late to work, poor work performance, or non-performance of assigned tasks as a breach of employment discipline under Article 40.1.4. Companies normally will specify within an internal employment handbook or rulebook a list of actions and behaviors which will be considered breach of employment discipline.
Where an employee has repeatedly breached employment discipline as outlined in the company rules the employer may choose to terminate the Employment Agreement. In making such determination, the employer must demonstrate multiple separate breaches of discipline. Each breach must be determined and proven separately. Each breach should be supported by a separate item of evidence. It is not mandatory for employer to impose disciplinary sanction on employee for every occurrence of breach, however the breach must be formally noted (usually via a disciplinary warning letter).
Under article 131.1 of the Labor law there are three types of disciplinary sanctions the employer may impose on an employee: a warning, decrease employee’s salary by up to 20 percent for up to 3 months, dismissal (termination of employment). Legislation does not require the employer to impose disciplinary sanctions in any particular order.
A Serious Breach under Article 40.1.4 includes actions or inactions which contradict the Employment Agreement obligations of the employee and which cause negative impact on the rights and interests of the employer such as damage of the employer’s property or harm to employer’s business or reputation. Actions which will be considered serious breach must be specified (listed) in the Employment Agreement. In the event of occurrence of any of the specified serious breach events, the employer may immediately terminate the Employment Agreement (a single occurrence is enough to support termination).
So, where an employee whose job performance is a problem also frequently comes into the office late or violates company policies regarding use of vehicles or communications with clients or co-workers, these disciplinary infractions may be used to build a case for termination of employment due to breach of discipline. Assuming all infractions are properly documented, this approach is less likely to be found to have been improperly applied by a court.
Termination of employment under Article 40.1.4 does not require severance compensation and there is no requirement for a notice period. Companies may consider termination under Article 40.1.4 in alternative to forming a Commission and doing a performance evaluation. A series of infractions and warning is all that is required to establish the legal case for termination.