Contractual termination of employment, trial period, notice period, and other updates to labour law: Bill no. 1108

Government Bill no. 1108 instituting the conventional termination of the employment contract and amending certain provisions of Law no. 729 of 16 March 1963 on employment contracts, as amended, and Ordinance-Law no. 677 of 2 December 1959 on working hours, as amended (2025-03, 31 March 2025), submitted to the Bureau of the Parliament (Conseil National) on 30 April 2025, stems from parliamentary draft law no. 259 adopted by the Parliament on 28 November 2023.

The Government has amended the initial provisions proposed by the Parliament. The Parliamentary Committee to which Bill no. 1108 will be referred may also make amendments to add to or delete from it.

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SUMMARY

Bill no. 1108:

• enshrines the conventional termination of employment contracts;
• updates a number of rules in order to "secure the relationship between employer and employee" and "provide a more effective framework for the arrival of employees in a company" (Explanatory memorandum to Bill no. 1108), in particular:
  • clarification of the arrangements for the trial period ("période d'essai"), which may be renewed once;
  • additions relating to the notice period ("délai de préavis" or "délai-congé"), simplified;
  • formalisation in writing of an employment contract concluded for a working week of less than the legal working week or one considered as equivalent by a collective labour agreement or a company agreement;
  • extension to minors emancipated for reasons other than marriage of the possibility of concluding an employment contract in Monaco without the assistance of their legal representative;
  • abolition of the exemption from stamp duty and registration fees for employment contracts for manual and domestic workers.

Entry into force:

• The provisions relating to the conventional termination of the employment contract (art. 1 to 9) come into force as from the assimilation of the conventional termination resulting from Monegasque law to the conventional termination existing in the neighbouring country, and this, with regard to the unemployment insurance scheme referred to in the Protocol of agreement of 8 March 1968 instituting a conventional scheme of financial assistance for workers involuntarily deprived of employment, referred to in Ministerial Order no. 68-151 of 8 April 1968. The contractual termination of employment is governed in France by articles L1237-11 to L1237-16 of the Labour Code, which resulted from Law no. 2008-596 of 25 June 2008 on the modernisation of the labour market.
• The provisions relating to employment contracts concluded for a weekly working time of less than the legal working time or considered as equivalent by a collective labour agreement or a company agreement (art. 15 amending Ordinance-Law no. 677) come into force within 6 months of publication of the Law in the Journal de Monaco.
• The other provisions of the Law (articles 10 to 14 amending Law no. 729) apply immediately (from the day after its publication in the Journal de Monaco).

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PROVISIONS OF BILL No. 1108 (before referral back to the parliamentary Committee)

• Establishment of conventional termination of employment contracts (permanent contracts "CDI" only)

The Explanatory Memorandum to Bill no. 1108 points out that "The contractual termination of an employment contract differs from the negotiated termination, also known as amicable termination, of an employment contract, which is already recognised by the courts on the basis of the second paragraph of Article 11 of Law no. 729 of 16 March 1963 on employment contracts, as amended, which provides that “the termination of a contract [of indefinite duration] may take place without notice if it results from the agreement of the parties”.

Unlike negotiated termination (rare in practice), conventional termination of a permanent employment contract (CDI) "is the result of a rapid, organised and controlled process [approval by the labour inspector], which helps to safeguard the interests of the parties": freedom of consent for the parties, "fair and satisfactory compensation".

Unlike draft law no. 259, which provided for the insertion of the conventional termination of the employment contract into Law no. 729 of 16 March 1963 on employment contracts, Bill no. 1108 (L.) incorporates it into its first chapter, with modifications to the initial provisions. Its provisions are of public order:

→ Contractual termination by mutual agreement between the employee and the employer in the private sector (it may not be imposed by either party, failing which it will be null and void or requalified), which does not apply to dismissal or resignation, must be the subject of a written agreement setting out the terms and conditions of the termination. On pain of nullity, the written agreement must be drawn up in accordance with the procedures laid down by ministerial order. It may not be prohibited by collective agreement. Any clause to the contrary is deemed unwritten. (art. 1, 3 L.). Modification

→ The contractual termination must be preceded by one or more preliminary interviews, during which the employee may be assisted by a staff representative or any other employee of the company. If the employee is assisted, the employer may also be assisted by a person of his/her choice from among the other employees, or in the case of companies with fewer than 50 employees, by a person belonging to his employers' union or by another employer in the same industry. The termination agreement is null and void if the employee or the employer is assisted by a person not mentioned above, or if the employer is assisted when the employee is not (art. 2 L.). Modification

→ The effective date of termination of the employment contract is set by mutual agreement between the parties, although this date cannot be set before the day after the agreement has been approved by the Labour Inspectorate. (art. 3 L.).

→ The amount of the termination indemnity is set by mutual agreement between the parties, subject to the following rules (art. 4 L.) Modification :

1. Employees with less than 2 years' seniority: the amount of the indemnity may not be less than 1/4 month's salary per year of seniority. In the event of an incomplete year, the indemnity is calculated in proportion to the number of full months. The Explanatory Memorandum includes the calculation formulas.
2. Employees with at least 2 years' seniority: the amount of the indemnity may not be less than the amount of the dismissal indemnity set in application of the provisions of article 1 of Law no. 845.
3. Where a Monegasque collective agreement or internal regulations grants, in the event of termination of the employment contract at the sole initiative of the employer, compensation that is more favourable to the employee than that provided for in points 1°) and 2°), it is not applicable in the event of termination by agreement. In this case, the indemnity provided for in point 2°) applies.

→ The parties have a withdrawal period ("délai de rétractation) of 15 calendar days from the date of signature of the agreement, although a longer period may be specified in the agreement. No disciplinary sanction may be incurred, nor any measure having the effect of adversely affecting the career development of the employee for having made use of his right to withdraw (if this were the case, the said sanction or measure would be null and void) (art. 5 L.).

→ Approval procedure ("homologation") by the labour inspector, which begins at the end of the withdrawal period. The labour inspector has 15 working days to check that the information contained in the termination agreement complies with the law. This period is suspended in the event of a request for the communication of documents and a interview with the parties, together or separately. The interview with the parties would be mandatory when the employee benefits from protection under Law no. 459 of 19 July 1947 amending the status of staff delegates, Law no. 957 of 18 July 1974 on the exercise of trade union rights in companies, or Law no. 1.457 of 12 December 2017 on harassment and violence at work (art. 6 L). Modification

→ Appeals (art. 7) Modification:

• Approval cannot be the subject of a dispute separate from that relating to the termination agreement. Any dispute concerning the termination agreement, the homologation or the refusal of homologation falls within the jurisdiction of the Labour Court (Tribunal du travail), to the exclusion of any other contentious or administrative appeal.
• The judicial appeal must be lodged, on pain of inadmissibility, within 6 months of the date of approval of the termination agreement.

→ Criminal provisions (art. 8) Modification: list of offences punishable by a fine of between €1,000 and €2,250 (inaccurate information in the agreement due to bad faith; use of the contractual termination agreement, terms or conditions inserted as a result of fraud, violence, coercion or threats; disciplinary sanction or measure with the purpose or effect of adversely affecting the career development of an employee who refuses to enter into an agreement; offences concerning the payment of compensation).

• Amendment to Law no. 729 of 16 March 1963 on employment contracts, as amended

Bill no. 1108 amends the system initially proposed by the Parliament: changes, new features and removal of the presumption of resignation in the event of voluntary abandonment of post by the employee which was envisaged by draft law no. 259.

→ Addition of "cases in which the law imposes a particular form" on the employment contract (art. 2 L. 729), as a result of the insertion in Ordinance-Law no. 677 of an article devoted to employment contracts concluded for a weekly working time of less than the legal working time, which must be formalised in writing. New

→ Extension to minors emancipated for reasons other than marriage of the possibility of concluding an employment contract in Monaco without the assistance of their legal representative (art. 2 L. 729). This amendment takes account of "foreign legislation [which] allows minors to be emancipated for reasons" other than marriage. "This is the case in French law, where a judge may emancipate a minor where there are ‘just grounds’". Article 13 of the IPL Code provides that "Judgments handed down by foreign courts and having the force of res judicata shall be recognised by operation of law in the Principality if there is no ground for refusal within the meaning of Article 15" (Explanatory Memorandum to Bill 1108). New

→ Removal of the exemption from stamp duty and registration fees for employment contracts for manual and domestic workers, in that it "creates a breach of equality between employees depending on the trade concerned" (Explanatory memorandum to Bill 1108) (art. 2 L. 729). New

→ Clarification that "The validity of the employment contract is conditional, depending on the case, on obtaining the authorisation or completing the declaration formalities provided for in article 4 of Law no. 629 of 17 July 1957 regulating the conditions of recruitment and dismissal in the Principality, as amended, and on the future employee obtaining a work permit". The aim here is to "establish a link" between the provisions of Law no. 729 and those of Law no. 629, which make private employment in Monaco subject to these formalities. (art. 2 L. 729).

→ Framework for the trial period: starting date ("at the point at which the employment relationship begins"); possibility of renewing the trial period once, with detailed rules. (art. 4 L. 729) Modification

→ Clarification that the employment contract is terminated, without notice or compensation, if the work permit is revoked during its term, or if the work permit is refused (new art. 5-1 L. 729 ). Modification

→ Changes to the length of the notice period (art. 7 L. 729) Modification :

• a) for employees who have been with the same employer for more than 6 uninterrupted months, it is specified that the right to 1 month's leave applies "regardless of the duties performed by the employee";
• b) for employees who have been with the same employer for more than 2 uninterrupted years, the length of the notice period would be 2 months (elimination of the possibility of choosing, as an alternative, a notice period of 1 month as well as a special indemnity that can be cumulated with the indemnities for dismissal or redundancy established by law or, where applicable, with those awarded under the employment contract, internal regulations, collective labour agreements or customary practice, "motivated by the fact that the choice of special compensation is almost never implemented because it is inconsistent with the traditional calculation of notice based on salary");
• c) for managerial staff ("cadres") with more than 2 uninterrupted years of service with the same employer: a 3-month notice period "in accordance with current practice as confirmed by case law". A manager with less than 2 years' seniority falls within the scope of letter a).

→ Possibility of notifying the notice period by hand-delivered letter against receipt (the date of hand-delivery setting the starting point for the notice period), in order to lighten the existing formalities (LRAR). (art. 9 L. 729).

• Amendment to Ordinance-Law no. 677 of 2 December 1959 on working hours, as amended

→ New provision concerning the employment contract concluded for a period of less than the statutory 39 hours per week or the period considered to be equivalent by a collective labour agreement or, failing that, by a company agreement (new art. 1-1 OL 677): it must be concluded in writing for each employee individually, no later than the date on which performance of the work commences (new art. 1-1, paragraph 1 OL 677).

→ Remuneration for hours worked in excess of the duration set out in the contract when the employee is employed for less than 19 hours and 30 minutes per week, with the exception of jobs with variable working hours defined by ministerial order (new art. 1-1, paragraph 2 OL 677).

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