Employer mistakes or misunderstanding of the law is a common cause of disputes related to employment termination. A recent review of employment issues found that it is common for employers in Mongolia to make process errors when terminating an employment contract.
In particular, this type of dispute is common due to procedural errors in decision-making on the grounds of redundancies, reducing number of staff, and incompetence in terms of occupations/position, skills, and health.
In light of recent changes to the Labor Law of Mongolia we will review key provisions of the old Labor Law and compare with the new provisions of the 2021 Labor Law.
Under the 1999 Labor Law, an employer terminated an employment contract on one of the following grounds.
- liquidation of the employer` s business entity or organization, branch or unit thereof, abolition of the job or position within it, or reducing the number of employees;
- it has been determined that the employee fails to meet the requirements of the job or position due to the lack of professional qualifications or skill, or health reasons;
- an employee has attained 60 years of age and is eligible to receive a pension;
- repeated breach by the employee of the labor disciplinary rules or commission or a serious breach for which the employment agreement specifically provides termination of the labor relations;
- it has been determined that an employee who is responsible for assets or money has lost the trust of the employer due to an act or omission;
- an employee is elected or appointed to another salaried work;
- arising on the grounds set forth in the contract.
Under the 2021 Labor Law, most of these termination grounds remain in place, However # (6) and (7) are excluded. The new regulation provides grounds for termination of employment if an employee is found to have forged documents proving his / her education, profession and qualifications at the time of hiring.
Additionally, (2) profession, qualification level, and health are separated and given as two separate grounds. In terms of profession and qualification level, the precondition was set in law to warn the employee on the grounds that he / she is found to be incompetent in terms of profession and qualification and to provide them possible time to improve their profession and qualification level and performance of work. A medical condition must determine by a decision of the hospital’s labor inspection commission.
(4) Labor disciplinary: For repeated disciplinary violations.
In practice, the most common legal grounds used by an employer to terminate an employment contract are (1) and (2). Common mistakes made by employers are not giving notice within the legal timeframe, not being signed and certified by the employee when issuing termination notice, issue dismissal/termination order without waiting for the notice period to expire, failure to allow to perform the employee’s duties without issuing termination order, and hand over timeframe not being included in the termination order.
An employee’s failure to qualify for a work in terms of profession, skills, or health is often mistaken for dismissal at the discretion of the director or head of the company and organization without a formal decision from the industry or organization’s qualification commission or attestation and medical labor verification commission.
In order to correct above mistakes, if employer follows the following steps when terminating an employee’s employment agreement pursuant to 1999 Labor law:
a) The termination of an employment contract shall be notified 30 days in advance, a 45-day notice shall be given in the event of a mass dismissal, and a 60-day notice shall be given if the contract is terminated.
b) Upon receipt of the notice, the employee shall sign a copy thereof. One copy is kept by the employee and the other by the employer
c) Provide the employee with the opportunity to perform his or her duties during the notice period.
d) Employer should pay a severance pay in an amount equal to employee’s average salary for 1 month or more if employee who has been dismissed on the grounds that employee acted for military service, a business entity or branch has been liquidated, position demolished, reducing number of employees, disqualified for work in terms of profession or health. In connection with severance pay there is no upper limit, but 1 month severance pay meets legal requirement. In the event of a mass dismissal, the amount of the severance pay shall be determined in consultation with the employee’s representatives.
e) Termination/dismissal order shall be issued. This order shall specify the legal grounds for termination and the deadline for hand over the work.
f) The employer must make a complete record in the social and health insurance book and provide the termination order, social and health insurance book, and severance pay on the last day of dismissal/termination.
The 2021 Labor Law has not made any significant changes to the termination process and will follow the above- mentioned process by labor law 1999. As for the change, it is not necessary to allow an employee during the period of termination notice and it is possible to dismiss him / her after payment including notice period. Massive dismissal lasts 90 days. Massive dismissal is determined that the number of employees in an organization with a certain number of employees is fired.
If the employee has been terminated on the grounds of the employer has transferred ownership, the business entity or organization has been liquidated, position demolished, reducing number of employees, disqualified for work in terms of profession and health, following a severance pay amount shall be paid. Severance pay has to be paid in equal amount of basic salary as follows.
a) If worked for 6-2 years, 1 month or more basic salary
b) If worked for 2-5 years, 2 months or more of basic salary
c) If worked for 5-10 years, equivalent to 3 months or more of basic salary
d) If worked for 10 or more years, 4 or more months basic salary
In the event of a mass dismissal, the employer shall negotiate with the employee’s representatives, but the amount of the severance pay shall not be less than that specified above.
The termination order shall be issued in writing prior to the handover and shall be presented to the employee and a copy of the decision shall be handed over. If the employee refuses to accept the decision, it shall be deemed that the decision has been sent by mail to his / her place of residence.
Upon the employee’s request, the employer is obliged to provide a reference within 5 days.