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Although we all hope that the beginning of a new job might be a positive experience, keep it for a long time and to be well paid, we know that this doesn’t always happen. Many factors can influence this ideal state to change. For this reason, we consider important to know the causes of termination of the employment relationship provided by the Panama Labor Code and the relevant procedures in each of the situations.
The reasons why an employment relationship could end are:
1.- By mutual consent. Must be recorded in writing and it cannot contain any waiver of the employee’s rights.
It is done through a document signed by both parties in which they voluntarily indicate their desire to end the employment relationship with the appropriate severance pay entitled by the worker.
2.- Due to the expiration of the agreed fixed term.
It’s the expiration of the agreed time of the employment contract.
3.- For the conclusion of the project/task covered by the contract.
It refers to the termination of an employment contract for a specific project or task.
4.- Due to the death of the worker.
In the event of the worker's death, wages and other labor benefits must be submitted by the employer to the competent Sectional Labor Court judge to give the money and benefits to the corresponding heirs.
5.- Due to the death of the employer, when it results in termination of the contract as an unavoidable consequence.
This reason for termination of the employment relationship applies only in exceptional cases such as a nurse who takes care of a person and, upon death, the employment relationship ends.
6.- For the extension of any of the causes that resulted in the suspension of contracts for a period exceeding the maximum authorized in the Labor Code for the respective cause, request by the employee.
This reason for the termination of the employment relationship applies in certain cases such as when the worker's illness or non-occupational accident exceeds a period of one year or in case of force majeure or fortuitous events that exceed the time limit established by law.
7.- Due to dismissal based on just cause, or the resignation of the worker.
It’s important to keep in mind that the reasons for dismissal are only those indicated in the law and these must be previously notified to the worker in writing, indicating the date on which the dismissal will take effect. Then, the employee won’t be able to allege a cause other than the expressed there.
On the other hand, if the termination of employment is due to resignation, the worker must notify the employer with a 15-day prior notice letter, unless it’s a technical employee who would have to notify 2 months in advance. The resignation letters must be sealed by the Ministry of Labor and Workforce Development (MITRADEL for its acronym in Spanish).
If the corresponding notice is not given then the employee must be obliged to pay the employer the equivalent of one week's salary, the sum may be deducted from the amount of the seniority premium.
If the resignation is for any justified cause provided by the law, the worker must indicate it in the written communication and will be entitled to compensation for justified resignation.
8.- By unilateral decision of the employer, with the formalities and limitations established in the Labor Code.
There are certain cases in which the employer could terminate the employment relationship, as far as the employer pays the employee severance and give 30 days' notice. If the employer chooses not to give advance notice then the employer must pay the worker the salary corresponding to that period.
These workers are, for example, those who have less than 2 years of continuous services or domestic workers, among others.
Every employee must be aware of this information in order to know how to handle the different situations that could arise at the time of the termination of the employment relationship. Ideally, the ending should be professional and in accordance with Panamanian law. It’s always better to leave a job on great terms and keep the door open for future opportunities.
