Procedures For Terminating the Agreement
There must be proper legal grounds for termination of an employee, and different legal grounds may lead to different severance packages. Before any lawful termination, an employer is generally obligated to provide notice to the employee, unless the employer is willing to pay compensation in lieu of such required notice. In practice, an employer may require an employee to acknowledge the receipt of this notice by signature.
The employer must pay a terminated employee his or her final salary and severance package within 48 hours of the employee’s termination date.
If the employee requests it, the employer must provide an employment certification upon the employee’s termination. An employment certification must include the employee’s start and end dates, type of employment or position, and, if applicable, previous positions and duration of employment in each position.
Under Cambodian labour laws, an employer may dismiss an employee who commits an act of serious misconduct. However, the employer must do so within seven days of learning about the misconduct.
If an employee resigns, an employer does not need to pay any compensation (e.g., damages for termination and payment in lieu of notice) except for benefits already incurred during employment (e.g., unpaid wages and compensation of remaining unused annual leave). However, if the resignation is caused by the employer's malicious action or fault, such as mistreatment of the employee or repeated infringement of the employment contract, the employer must pay damages to the employee in accordance with damages owed due to wrongful termination.
Termination On Notice
As a rule, an employer may not unilaterally terminate an FDC before its expiration date. The termination of an FDC must be predicated on a mutual agreement, an act of God, or some serious misconduct committed by the employee. If an employer unilaterally terminates an employee before the contract’s expiration date, the employer must pay the employee damages at least equal to the wages he or she would have received had the contract been fulfilled in full.
If the employer does not want to renew an FDC after its expiration date, the employer must give an employee notice 10 or 15 days in advance if the FDC had a duration of more than six (6) or 12 months, respectively. Failure to give a non-renewal notice within the appropriate timeframe renders the FDC automatically renewed as another FDC with the same terms and duration (or as a UDC, if it exceeds the maximum length of an FDC).
An employer may terminate a UDC for any reason if the employer has provided the employee proper prior notice, which must be given between seven (7) days to three (3) months in advance of the termination, depending on the employee's seniority. However, the employer must pay a severance package to the employee. Moreover, if the reason for termination is not valid, the employer may be required to pay damages to the employee. Similar notice obligations apply to employees. However, it is common that employers allow employees to resign at any time without requiring employees to pay damages for cutting their contracts short, so long as they provide reasonable prior notice.
Termination By Reason Of The Employee's Age
Cambodian labour laws are silent on termination of an employee due to his or her age. The termination must, however, be predicated on legal grounds. For instance, an FDC can only be prematurely terminated due to mutual agreement, force majeure, or serious misconduct. For a UDC, on the other hand, an employer must respect the notice requirement and pay the severance package. The ambiguity is in whether an employee's age may be considered as a valid reason for terminating a UDC without having to pay damages on top of the regular severance package.
Automatic Termination In Cases Of Force Majeure
Force majeure is one of the grounds for employment contract suspension or termination. Where, as a result of a natural disaster, flood, earthquake, war, or other “acts of God” that make the continuity of work impossible, employers and employees alike are entitled to suspend employee contracts for a maximum of three (3) months.
What is deemed an “act of God” is different for employers and employees. For employers, an event of force majeure occurs when there is a natural disaster (e.g. flooding, earthquakes, or wars), or when the public authorities order the employer’s businesses to be closed. In light of these events, employers may exercise their right to suspend or terminate employment contracts. However, when the business is closed due to bankruptcy or judicial liquidation it is not considered an event of force majeure. Cambodian Labour Law, on the other hand, views an employee’s chronic illness, disability, mental illness, or imprisonment as an event of force majeure on which the employee may predicate the suspension or termination of his or her own contract.
In the event of force majeure, an FDC may be prematurely terminated without the employer being required to pay any damages. Similarly, terminating a UDC in a case of force majeure does not trigger the prior notice requirement or require any damages to be paid.
The Labour Law allows a mass layoff or collective dismissal resulting from a reduction in an establishment’s activity or an internal reorganisation that is foreseen by the employer. An employer seeking to carry out a mass layoff of employees must: i) establish the order of the layoffs in light of professional qualifications, seniority within the establishment, and family burdens of the workers; ii) inform the workers’ representatives in writing in order to solicit their suggestions on the measures for a prior announcement of the reduction in staff and the measures taken to minimise the effects of the reduction on the affected workers; and iii) lay off employees with the least professional ability first, followed by employees with the least seniority. Seniority must be increased by one year for a married employee and by an additional year for each dependent child.
Dismissed employees have priority to be re-hired for the same position for two (2) years. Employees who have priority for re-hire are required to inform their employer of any change in address during this layoff period. If there is a vacancy, the employer must inform the concerned employee by sending a registered letter to his last address. The employee must appear at the establishment within one (1) week after receiving the letter.
Termination By Parties’ Agreement
Parties are free to mutually agree to terminate employment contracts, including FDCs and UDCs. Agreements to terminate employment contracts should be in writing and signed by both parties.
Directors Or Other Senior Officers
Directors or other senior officers of a company are generally considered employees of the company and therefore enjoy all the rights and benefits of employees under Cambodian Labour Law. They may also be subject to Cambodian corporate laws, such as the Law on Commercial Enterprises dated 19 June 2005, to other corporate governance regulations, or to the company's articles of incorporation.
Special Rules For Categories Of Employee
Cambodian Labour Law provides additional protections to specific categories of employees, including minors (i.e. children under 18), female employees, and employees working in certain industries.
For instance, minors cannot sign their employment contracts without the consent of their parents or guardians unless they are emancipated. Minors cannot perform any work considered hazardous. Minors also cannot work more than eight (8) hours a day, and they must be given 13 hours of rest period between shifts.
Women are entitled to paid maternity leave of 90 days and should only perform light work for two (2) months after returning from maternity leave. Moreover, one (1) year after child delivery, mothers may spend up to a total of one (1) hour of their working hours each day breast-feeding their children. An employer who employs more than 100 women must have a nursing room and a day-care centre for their children. If the employer is not able to have a day-care centre in its workplace, it must cover the expenses of the private day-care centres used by the female employees.
In addition to these general provisions, Cambodian labour laws also contain special provisions for agricultural employees, such as those employed on plantations, on farms (e.g. engaged in the growing of crops and the raising of animals), in forestry, and at fisheries.
The garment, textile and footwear production industry in Cambodia is a major part of Cambodia's workforce and employees in this industry may be considered some of the most vulnerable in the country. Therefore, the MLVT is active in protecting their rights and benefits, and numerous regulations have been enacted that are applicable only to employees working in this industry. For example, these employees are entitled to expedited seniority back payments, while seniority back payments for employees in other industries have been suspended until December 2021.
Specific Rules For Companies in Financial Difficulties
Cambodia lacks comprehensive rules for companies facing financial difficulties. Cambodian Labour Law specifies that bankruptcy and judicial liquidation are not “acts of God” that would trigger a force majeure clause. Thus, employers facing either of these situations remain obligated to respect their employees' rights and benefits protected under the law.
The recent amendment to the Labour Law provides that an employer is not required to pay its employees any damages or compensation in lieu of prior notice if the employer terminates the employees due to the necessary closure of the business, as outlined in the MLVT's regulations. However, the MLVT has not issued such regulations as indicated in the amendment, and therefore which instances where a company is closed without having damages remain ambiguous.
Restricting Future Activities
Cambodian labour law explicitly provides that any contractual provision between an employer and an employee that prohibits the employee from engaging in any activity after employment is null and void. Nevertheless, it is still common in practice for employment contracts to contain "non-complete," "unfair competition," or "survival provisions" clauses.
Cambodia does not have a dedicated whistle-blower law, and still in the process of drafting it.
Special Rules For Garden Leave
The concept of garden leave is not addressed in Cambodia. The term “garden leave” generally refers to the period during which an employee stays away from the workplace or works remotely during the notice period. The employee remains on the payroll and is in the process of terminating their employment but is permitted neither to go to work nor to commence any other employment during the garden leave. Assuming that an employer provides an employee notice of termination in a manner consistent with the Labour Law, placing an employee on garden leave would not contravene the Labour Law.
The only time that employees are allowed to be away from work under the Labour Law is during the notice period of a UDC. An employee is entitled to receive full wages and benefits and is entitled to two days' paid leave per week to look for new employment.
Employers are obligated to pay severance to employees after an FDC ends or is terminated. The severance for FDCs must be 5% of all wages the employee received during the FDC, unless the parties agree to a higher amount.
Cambodian labour laws were amended recently to require employers to pay severance to employees under UDC once every six (6) months in accordance with the new 'seniority payment' plan. The total amount of seniority payments to be made to each employee on an annual basis is equal to 15 days of an employee’s average daily salary (wages and other fringe benefits). When a UDC employee is terminated, the employee is entitled to a severance package that includes this final seniority payment, any seniority back payment owed for seniority periods before the amendment, and any compensation that may be required to be paid in lieu of notice. At present, however, as a result of the COVID-19 outbreak and its impact on business, the Cambodian government has postponed the obligation to make seniority back payments or ongoing seniority payments until 2022, except for employers in the garment and footwear sector.
In addition, at the end of the employment relationship, regardless of the type of employment contract, the severance package may also include the employee’s final salary, compensation for remaining unused annual leave, damages, and any other benefits agreed between the parties. The severance package may be more limited depending on the reason for the employee’s termination.
Additionally, both employers and employees are required to pay monthly contributions to the NSSF for the employees' pension scheme. Employers have an obligation to collect and pay their and their employees’ contributions for the pension scheme at any partner bank no later than the 15th day of the following month.
In case the employer is unable to pay for annual contributions, a request must be made to the NSSF. This annual contribution payment must be made in the month following a request for a contribution payment. The contribution payment must be made every year, and employers must pay the contribution as per the calendar year. The NSSF may adjust the contribution amount at the beginning of the following year.
Special Tax Provisions And Severance Payments
Employees’ salaries are taxed at a progressive rate capped at 20% of their income, while their fringe benefits are taxed at a fixed rate of 20%. Employers are obligated to withhold these taxes from employees and to pay tax authorities on a monthly basis. However, there are some exemptions to these taxes.
Allowances Payable To Employees After Termination
Cambodian Labour Law does not require employers to pay employees any allowance after an employee’s termination, unless an allowance has otherwise been agreed upon by the parties. The law requires solely that all severance owed to the employee is fully paid.
Time Limits For Claims Following Termination
The statute of limitations on all claims to outstanding compensation owed to employees, including wages, fringe benefits, damages, or otherwise, is three (3) years from when the compensation was originally due.