Navigating employment termination in the Faroe Islands requires a thorough understanding of local labor laws to ensure compliance and avoid potential disputes. The legal framework governing employment relationships provides specific guidelines for both employers and employees regarding the process, grounds, and consequences of ending an employment contract. Adhering to these regulations is essential for employers operating in the islands, whether they are local entities or international companies employing staff remotely.
Properly managing terminations involves understanding notice period requirements based on employee tenure, calculating applicable severance pay, identifying valid grounds for dismissal, and following mandated procedural steps. Employers must also be aware of employee protections designed to prevent unfair or wrongful dismissal. This guide outlines the key aspects of employment termination in the Faroe Islands as they are expected to apply in 2025, providing a framework for compliant practices.
Notice Period Requirements
The required notice period for terminating an employment contract in the Faroe Islands typically depends on the employee's length of service with the company. These periods are often stipulated in collective agreements or individual employment contracts, but minimum statutory periods apply if no other agreement is in place or if the statutory period is more favorable to the employee.
Here are common minimum statutory notice periods based on tenure:
| Employee Tenure | Minimum Notice Period (Employer to Employee) |
|---|---|
| Up to 6 months | 1 week |
| 6 months to 3 years | 1 month |
| 3 years to 6 years | 3 months |
| 6 years to 9 years | 4 months |
| 9 years or more | 6 months |
Notice periods for employees terminating their employment are generally shorter, often one month, regardless of tenure, unless otherwise agreed or stipulated in a collective agreement. It is crucial to check applicable collective agreements, as they often provide more generous notice periods than the statutory minimums.
Severance Pay Calculations and Entitlements
Severance pay in the Faroe Islands is not universally mandated for all terminations. Entitlement to severance pay typically arises in specific circumstances, most commonly when an employee is dismissed after a significant period of service, particularly if the dismissal is not due to serious misconduct by the employee.
Under certain conditions, employees dismissed after 10 or 15 years of continuous employment may be entitled to severance pay. The amount is usually calculated based on the employee's salary and length of service.
- After 10 years of service: Entitlement to 1 month's salary.
- After 15 years of service: Entitlement to 2 months' salary.
- After 18 years of service: Entitlement to 3 months' salary.
These entitlements are often linked to specific legislation or collective agreements. Severance pay is generally not required for employees who resign or are dismissed for gross misconduct. Collective agreements may provide for different or additional severance entitlements, so reviewing the relevant agreement is essential.
Grounds for Termination
Employment contracts in the Faroe Islands can be terminated based on various grounds, broadly categorized as termination with cause and termination without cause (but with valid reasons).
- Termination with Cause (Summary Dismissal): This occurs when an employee is dismissed immediately without notice due to serious misconduct or a fundamental breach of their employment contract. Examples include theft, gross insubordination, violence, or other actions that make the continuation of the employment relationship untenable. The burden of proof for serious misconduct lies with the employer.
- Termination Without Cause (Dismissal for Valid Reasons): This type of termination requires a valid and objective reason, but it is not due to serious misconduct allowing for immediate dismissal. Valid reasons can be related to:
- Employee's conduct: Repeated minor misconduct, poor performance (if documented and attempts at improvement have failed), or frequent absenteeism (if not protected by law, e.g., due to illness).
- Employer's circumstances: Redundancy due to operational needs, restructuring, financial difficulties, or closure of the business.
Dismissal must always be justified and based on objective grounds. Discrimination based on protected characteristics (age, gender, religion, etc.) is strictly prohibited and constitutes wrongful dismissal.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful, employers must follow specific procedural steps. Failing to adhere to these procedures, even if the grounds for dismissal are valid, can render the termination unfair.
Key procedural requirements typically include:
- Warning (for performance/conduct issues): For dismissals related to performance or conduct (unless it's gross misconduct), the employee should generally receive prior written warnings detailing the issue, expected improvements, and consequences of failure to improve.
- Hearing/Meeting: The employee should be given an opportunity to present their case and respond to the reasons for the proposed dismissal. This meeting should be documented.
- Written Notice: The employee must receive formal written notice of termination. The notice should clearly state the effective date of termination and the notice period. While not always legally required to state the reason in the notice itself (except in specific cases or if requested), the employer must be able to provide a valid reason if challenged.
- Payment of Final Dues: Ensure all outstanding wages, holiday pay, and any applicable severance pay or other entitlements are calculated and paid correctly upon termination.
- Issuance of Employment Certificate: Upon request, the employer must provide the employee with a written certificate detailing the period of employment and the nature of the work performed.
Documentation is critical throughout the process, including records of warnings, performance reviews, meeting minutes, and the final termination letter.
Employee Protections Against Wrongful Dismissal
Employees in the Faroe Islands are protected against wrongful or unfair dismissal. A dismissal can be considered unfair if:
- It is not based on valid grounds (e.g., discriminatory reasons, retaliation for protected activities).
- The correct procedures were not followed (e.g., no warning given when required, no opportunity to be heard).
If an employee believes they have been unfairly dismissed, they can challenge the termination, often through their trade union or by seeking legal counsel. Remedies for wrongful dismissal can include:
- Reinstatement: The employee is returned to their former position.
- Compensation: The employer is ordered to pay the employee financial compensation for losses suffered due to the unfair dismissal. The amount of compensation depends on factors such as the length of service, the severity of the unfairness, and the employee's financial loss.
Common pitfalls for employers include insufficient documentation of performance or conduct issues, failing to provide adequate warnings, not following the correct notice periods, and terminating for discriminatory or unsubstantiated reasons. Employers must act fairly and reasonably throughout the termination process.
