A contract of employment may be terminated in the following conditions, other than on the employer’s initiative:

• unilaterally by the worker;
• by mutual agreement of the parties;
• on the death of the worker or the employer when it causes the employer’s activities to cease;
• on the expiration of the agreed term;
• on the employer’s insolvency or liquidation;
• on the worker’s retirement.

Also, with a valid justification for such termination, such as the worker’s behaviour, or on economic grounds due to a lack or scarcity of work, or force majeure, the employer may unilaterally end the employment contract.

Severance

If an employee’s employment is terminated without cause, the employer is required by law to pay the employee mandatory severance compensation within four days of receiving notice of termination, as follows:

• Seniority compensation – equivalent to the highest monthly salary for each year of employment or period longer than three months, using the highest monthly salary as a base and the regular and ordinary salary accrued during the previous working year. Such basis has a maximum ceiling amount provided by the applicable bargaining agreement (three times the average of all wages provided by such collective bargaining agreement) and a minimum cap amount (one gross monthly salary).
• Compensation in lieu of notice – In the event of a termination of employment without justified cause, the employer must give the employee prior written notice. If the employer fails to provide such notice, it must provide severance pay in lieu of notice, which is calculated as 15 days’ salary plus one or two monthly wages (depending upon each specific case).
• Pending days till the end of the month – If the dismissal does not occur on the final day of the month, the employer is required to pay a compensation equal to the proportional wage for the days remaining in the month in which the dismissal occurred.
• Compensation for unused vacations – For the year in which the dismissal occurred, the employee is entitled to compensation equivalent to the vacation pay in proportion to the days effectively worked.

Notice Period

The notice period is 15 days when the contract is terminated on the employee’s initiative.

When an employee’s contract is terminated on the employer’s initiative, the length of notice is calculated using the following scale: 15 days if the employee has less than three months of service, one month if the employee has three months to five years of service, and two months if the employee has more than five years of service. In small businesses, the notice period is never longer than one month.