Yes, employers must have legitimate grounds to unilaterally terminate an employee.

The lawful reasons for termination, as per the provisions of the Egyptian Labor Law No. 12 of 2003 (the “Labor Law”), include:

1. Gross Misconduct¹: an employer may not terminate an employee unless the latter has committed a gross misconduct. An exhaustive list is provided under Article 69 of the Labor Law, as follows:
   • if it is established that the employee has assumed a false identity or submitted false documents.
   • if it is established that the employee has committed an error resulting in serious damage to the employer, provided the employer reports the event to the competent authorities within twenty-four hours from the time they are aware of its occurrence.
   • in case the employee repeatedly disobeys the safety regulations designed for the safety of employees and the establishment, provided that such safety regulations are placed in an obvious place and the employee was warned in writing.
   • if the employee is absent from work without legitimate justification for more than twenty (20) non-consecutive days during the same year, or more than ten (10) consecutive days, provided that a written warning for attendance to work is sent to the employee by the employer via registered post with acknowledgement of receipt prior to dismissal and ten days after their absence in the first case, and five days after absence in the second case.
   • if it is established that the employee has disclosed the secrets of the establishment at which the employee works, leading to serious damages caused to the establishment.
   • the employee competes the employer in its activity.
   • if during working hours the employee is found to be drunk or under the influence of an intoxicating substance.
   • in case the employee attacks the employer or the general manager; or grossly attacks any of the managers during working hours or due to work related reasons.
   • if the employee does not observe the controls prescribed in articles (192) through (194) of Book 4 of the Labor Law (related to strikes).
2. Poor Performance: Article 110 of the Labor Law added a case whereby unlimited term agreements may be terminated if the employee is proved to be “inefficient” as per the employer’s ratified regulations.
3. Termination During Probation: An employer may lawfully terminate an employee who is still under probation period due to ineligibility for the job.
4. Final Conviction: Employer may terminate an employee if the latter is convicted by a final ruling of a felony or a freedom-restricting penalty for a crime affecting honor, integrity, or public morals, unless the court orders a suspension of the sentence.²
5. Employee’s Disability: An employment agreement terminates if the employee becomes totally incapable of performing their duties.³ Also, if the employee becomes partially incapable, the contract remains valid, unless it is proven that the employer has no suitable alternative job for the employee to perform.
6. Termination Due to Sickness: The employer may not terminate the employment contract due to the employees’ sickness, unless(i) due to the employee’s total incapacity to perform his/her work, whatever the cause of such incapacity (as explained below); or (ii) the employee has fully used his/her sick leaves as determined by the Social Insurance Law in addition to his/her due unused annual leaves and is not recovered yet to resume work; hence, incapacitated.
7. Termination for Economic Reasons.

Note: in all events, the employer must provide the employee with their final dues until termination date.

Footnote(s):

¹ Employers have the power to impose all sorts of disciplinary actions except for dismissal. Dismissal of an employee falls under the sole competence of the labor courts.

² Art. 129 of the Labor Law

³ Art. 124 of the Labor Law.

Please note that the Labor Law provides for a redundancy process in case of full or partial closure of the entity; or reduction of size or business activity for economic reasons, only.

In such case, the employer is obliged to submit a redundancy request to a committee specifically formed. The request shall clarify the reasons behind the intended redundancy and the numbers and categories of employees who will be laid off. The said committee shall issue its decision within thirty days from the date of submitting the request. The employer shall notify the employees and the labor union of the submitted redundancy request and the decision of the committee. If its an approval, the approval shall indicate the date of its execution. Further, the employer must, in case there is no collective labor agreement regulating the same, consult with the labor union regarding the selection criteria of the employees who will be laid off after issuance of the decisions and prior execution of the same.

The redundant employee will be entitled to receive from the employer a compensation equivalent to a month’s salary per each year of the first five years of service, increased to one month and a half worth of salary for each of the following years.

Please note that, in practice, no employer follows the above meaning that redundancy in Egypt is normally reached through an amicable settlement with the employees.

The seniority, family burdens, age, and vocational abilities and skills of the employees shall be some of the criteria that may be drawn upon in the selection criteria. In all cases, these criteria shall observe keeping a balance between the interests of the employer and those of the employees.

Article 9 of the Labor Law stipulates that the merger of an establishment with another, or its transfer through inheritance, will, gift, sale—even if by public auction—assignment, lease, or any other means, shall not result in the termination of employment agreements of the establishment’s employees. In this respect, the successor is jointly liable with the previous employer(s)s for fulfilling all obligations arising from these contracts.

Based on the above, the Labor Law permits the automatic transfer of employees without having the option to reject such transfer. However, in practice, the executive authorities allow the automatic transfer of employees only in cases of: (i) merger; and (ii) inter-company sales. Accordingly, in other cases, transfer of employees is manually implemented meaning that the employee must consent on the transfer to the new entity and hence agree on the execution of the transfer documents.

Under the Labor Law, employees generally do not need to meet a minimum period of service to benefit from termination rights. Termination events must be assessed on a case by case basis to identify the risks and exposure of the employer which normally depend on the type of the employment agreement and the years of service of the concerned employee.

Generally, limited term employment agreements automatically expire upon the lapse of their term without the need to serve a notice. However, for limited term employment agreements with a total duration of five years or longer, the employee must provide a three-month notice before termination.⁴

For unlimited term employment agreements:

• Two months if the employee has been employed with the same employer for less than 10 years.
• Three months if the employee has been employed with the same employer for 10 years or more.

It is worth noting that it is not permitted to agree on waiving the notice requirement or reducing its duration; however, it is allowed to agree on extending this period. The employer may waive all or part of the notice period in the event that the employee initiates the termination of the contract.

In practice, certain categories of employees may typically have contractual notice periods exceeding the legal minimum but. These include senior executives and key personnel.

Footnote(s):

⁴ Art. 104 of the Labor Law.

Yes. If the employer terminates the employment contract without notice or before the notice period expires, they are required to pay the employee an amount equal to their salary for the full notice period or the remaining portion thereof.

In this case, the notice period or its remaining duration is counted as part of the employee’s service period, and the employer remains responsible for the associated obligations and liabilities.

However, if the termination is initiated by the employee, the contract ends as soon as they leave the job.

Yes, employers may add the employee under garden leave with full pay/benefits.

Yes, depending on the reason behind termination, a statutory process must be followed. Please see below examples on the same:

1. Termination for Gross Misconduct/Poor Performance: an employer may not impose any disciplinary action on employee, except after investigating the work-related incident. In this context, please note the following:

• Only work-related incidents may be subject to disciplinary procedures.
• Investigation must be in writing (except in case that the act incurs a penalty of warning or deduction of only a day’s wage).
• The employee must be notified in writing and given the opportunity to defend himself/herself.
• The investigation must be conducted within a maximum of seven days from the date the offence is discovered.
• A disciplinary decision must be in writing and must be accompanied with the reasons leading to this decision. An employer must impose a penalty on a violating employee within 30 days of the investigation.
• The employer, the legal department or any other person such as external legal counsel) or employee that has the required expertise (provided that the latter’s job title is not less than the employee subject to the investigation) may conduct the investigations.

It is very important to note that the employer is competent to apply and impose all disciplinary actions (stated exhaustively under the Labor Labor Law); except for the dismissal of the employee which is the sole and exclusive power of the labor courts.

2. Termination During Probation: termination must take place within the probation period to be lawful. There is no statutory need to serve a notice; however, in practice a notice is required for social insurance purposes.
3. Final Conviction: the employer has the right to terminate the employment agreement, even if it is for a limited term or for a specific task, if the employee is finally convicted of a felony or sentenced to a custodial penalty for a crime affecting honor, integrity, or public morals. The employer to hold evidence of the final conviction. The same evidence will be required for social insurance purposes.

A notice, for transparency reasons, is recommended.

In this regard, we note that final conviction for a felony or a sentence involving deprivation of liberty for an offense violating honor, trust, or public morals—unless the sentence is suspended—is a valid reason for terminating an employee’s service. This is outlined under article 129 of Labor Law. Such termination differs from disciplinary dismissal as stated in Article 69 of the same law and it is regarded as an exceptional right granted to the employer to protect the reputation of their company. Therefore, there is no contractual violation involved. Instead, such termination is an exercise of an exceptional right granted to the employer to safeguard the reputation of the company, which may be harmed if an employee convicted of a felony, or a dishonorable offense remains within the organization.

4. Termination Due to Sickness: the employer shall notify the employee of his/her wish to terminate the contract before the lapse of fifteen (15) days from the date the employee has consumed his/her sick leave and the balance of their annual leave. If the employee recovers before the notice period, the employer shall not be entitled to terminate the contract due to the employees’ sickness. The employer must hold the approved medical reports confirming the sickness and the consumption of the leaves.
5. Termination Due to Incapacity: employment may be terminated due to the employees total incapacity, regardless of the reason for that incapacity.

While in the event of partial incapacity , the employer may not terminate the employment contract until the employer is proven to not have any other job which the employee may satisfactorily undertake. The existence or non-existence of such other job shall be established according to the provisions of the  no. 149 of 2018 (“Social Insurance Law”). If it is established that such other job exists, the employer shall transfer the employee to that job upon the employee’s request, without prejudice to the provisions of the Social Insurance Law. The employer must hold the approved medical reports evidencing the incapacity.

6. Termination for Economic Reasons: please revert to our answers under Q2 above.

Note: in all events, the employer must provide the employee with their final dues until termination date.

Termination may be considered as an unfair dismissal if it is not based on a lawful termination, which would entitle the employee to claim compensation against the employer for unfair dismissal. Compensation for unfair dismissal is a minimum of the equivalent of the Statutory Severance Pay (as defined below).

If termination is lawful but has missed a legal requirement – employers may face challenges in reflecting the termination of the employment relationship or proving that the termination was lawful. This must be assessed on a case-by-case basis; challenges may include difficulties in de-registering the employee from the employer’s social insurance file.

Collective agreements may include additional protections beyond those provided under the Labor Law. In such case, employers must comply with both the Labor Law provisions and those under the collective agreements to Labor Lawfully terminate an employment relationship.

In addition, trade unions or employer organizations that are part of a collective agreement have the right to file Labor Lawsuits on behalf of their members if there is a breach of the collective agreement, including issues related to termination. This means that employees do not have to take legal action independently; their union may represent them, ensuring collective protection under the terms of the agreement.⁵

Further, during investigation that shall precede termination, the employee’s union has the right to designate a representative to be present, ensuring that any disciplinary action or termination is conducted fairly and in compliance with the collective agreement.⁶

Footnote(s):

⁵ Art. 165 of the Labor Law.

⁶ Art. 64 of the Labor Law.

Yes, depending on the reason behind termination. In this context, please see below examples:

1. Termination for Gross Misconduct/Poor Performance: Termination as a disciplinary action falls within the sole powers of the labor courts. Accordingly, and from a strict theoretical perspective, a dismissal request to the labor courts must be submitted. Once approved, the employer must de-register the employee from their social insurance files by submitting social insurance form 6 (“Form 6”).
2. Termination During Probation: as explained above, for social insurance purposes, the employer must notify the employee with its intent to terminate during probation period. With a copy of the notice and the employment contract, the employer to de-register the employee from its social insurance file marking the reason behind termination as ineligibility during probation.
3. Final Conviction: the employer must obtain proper documentation of the final conviction, which is mainly, the court ruling issued against the employee, before proceeding with the termination. Following which, the employer must de-register the employee from the National Organisation for Social Insurance (“NOSI”) by submitting Form (6) to the competent NOSI office, reflecting the termination of the employee due to the final conviction.
4. Termination Due to Sickness:. in cases where an employee is terminated due to sickness, the employer must retain official medical reports that confirm the employee’s condition and the exhaustion of their leave entitlements. Please refer to our answer under Q8 above.
5. Termination Due to Incapacity: in cases where an employee is terminated due to incapacity, the employer must retain official medical reports that confirm the employee’s condition and the exhaustion of their entitled sick leaves as well as a proof that the employer does not have an alternative job for the employee, in case of partial incapacity (as clarified under Q 8 above. Following which, the employer must de-register the employee from their social insurance files by submitting Form 6.
6. Termination for Economic Reasons: please revert to our answers under Q2 above.

If an employer terminates an employee without proper approval, the termination may be deemed arbitrary or wrongful, leading to Statutory Severance Pay; reinstatement; and/or potential fines.

Note: in all events, the employer must provide the employee with their final dues until termination date.

From a Labor Law perspective, the Labor Law provides that employers cannot terminate employment contracts based on race, gender, religion, political opinion, social status, or union activity. Employers cannot terminate or discriminate against a worker due to pregnancy, childbirth, or breastfeeding.

• In addition, the Egyptian constitution guarantees non-discrimination among citizens, it states that all citizens are equal before the law, enjoy equal rights and public duties, and cannot be discriminated against based on religion, belief, gender, origin, race, color, language, disability, social class, political or geographical affiliation, or any other reason.⁷
• On the other hand, the penal code protects citizens from discrimination and harassment by imposing penalties for various offenses. It punishes any person involved in actions or omissions that cause discrimination based on gender, origin, language, religion, or beliefs, which undermine equal opportunities or public peace. Offenders are exposed to imprisonment and fines ranging from EGP 30,000 to 50,000, or either of them.⁸ The code also criminalizes discrimination with the intent to disturb public peace, subjecting offenders to imprisonment and fines.⁹
• The penal code further addresses sexual harassment, whether verbal, physical, or electronic, with penalties of imprisonment for 2 to 4 years and fines ranging from EGP 100,000 to 200,000. The sentence increases to 3 to 5 years of imprisonment and fines between EGP 200,000 and 300,000 if the harassment occurs in the workplace, involves multiple individuals, or is repeated, or either of them.¹⁰ Furthermore, sexual harassment with the intent to obtain sexual favors from the victim results in imprisonment for a period not less than five years.¹¹

Footnote(s):

⁷ Article 53 of the Egyptian constitution 2014

⁸ Article 161 bis of the penal code

⁹ Article 176 of the penal code

¹⁰ Article 306 bis A of the penal code

¹¹ Article 306 bis B

Consequences for the employer may include potential, civil liability (compensation for damages (including Statutory Severance Pay) and reinstatement; criminal individual liability; and fines.

Generally speaking:

• Limited term employment agreements automatically terminate upon the expiry of their term, unless renewed in writing.
• Employers may not terminate female employees on maternity leave.
• Employers are also prohibited from terminating employees during their sick leave’ while noting that in some cases termination would be legal.
• Employers cannot terminate an employee for participating in Labor Lawful union activities or for filing complaints regarding labor rights.

Egypt does not have a comprehensive whistleblowing Labor Law. However, specific legislation provides protections for whistleblowers or informers under certain circumstances, as detailed below. Generally, Egyptian laws require and encourage citizens to report any crimes or violations they witness. These laws ensure that individuals are protected and not harmed by the same. There have been ongoing efforts and discussions about strengthening protections for whistleblowers, but comprehensive and specific local whistleblower protection laws have not yet been fully established.

In this regard, and while the Labor Law does not regulate specific regulations and procedures for whistleblowing; however, the Ministerial Decree no. 185 of 2003 establishes that direct supervisors who fail to report workplace violations related to their duties should be subject to disciplinary action starting from a three days’ salary deduction with the highest (at the fourth occurrence) being a demotion to a lower grade without prejudice to the salary. Further, guards, doormen and supervisors are fully and personally liable for enforcing certain provisions within their respective roles. They are required to promptly notify the appropriate authorities of any assaults they experience in the course of their duties. These provisions include those related to employee inspections and the management of product and asset entries and exits, irrespective of their value.

Article 96 of the Egyptian Constitution guarantees the protection of witnesses, accused persons, whistleblowers and victims, when necessary and in accordance with the Labor Law. We understand that the government has recently been adopting a secured system for anonymous reporting, whereby it encourages any person to report any corrupt acts or violations witnessed, without fears as well as to ensure protection of whistleblowers during all stages of reviewing their complaints before all competent authorities.

Criminal Procedures Code no. 150 of 1950 (“CPC”): Any person who becomes aware of a crime for which the public prosecution may file a lawsuit without a complaint or request is entitled to report it.  Additionally, the CPC obliges public employees and those entrusted with public services who become aware of a crime – during or as a result of their work – for which the public prosecution may file a lawsuit without a complaint or request to immediately report such crime to the public prosecution or the nearest police officer.

Law no. 23 of 2023: This law grants financial incentives for individuals who, among others, report or assist in the discovery of tax evasion incidents.

The National Anti-Corruption Strategy 2023-2030: The ACA has been actively combating corruption and overcoming challenges to justice, through the formulation and implementation of national anti-corruption strategies, raising awareness about the harmful effects of corruption, and encouraging the reporting of crimes and violations in alignment with Egypt’s Vision 2030 and international anti-corruption conventions. The National Strategy is founded on key principles, including:

• Transparency: Providing clear and timely access to data, information, and documents to support anti-corruption efforts.
• Participation: Promoting the expression of opinions and reporting of corruption to anti-corruption agencies.

Under the Labor Law employers have the right to undertake a full or partial closure, or reduce the size or scope of business activity due to economic reasons. In such case, the employer is obliged to submit a request to the competent committee, which shall clarify the reasons for seeking the redundancy and the numbers and categories of employees who will be laid off.

In the cases where the employer is entitled to terminate the contract for economic reasons, the employer, on a temporary basis, may instead assign other work to the employee different than what was agreed upon, even if it differs from the employee’s original work. The employer may also reduce the salary of the employee up to not less than the minimum wage. Please refer to our answers under Question 2 above.

Additionally, we note that the Labor Law prohibited the employer from modifying the terms of the employment contract or assign tasks beyond what was agreed, unless it is necessary to prevent an accident, address damages, or respond to force majeure. In such case, changes made must be temporary and should not violate the employee’s rights. Alternatively, employers are allowed to train employees for different roles to align with technological progress within the company.

The use of artificial intelligence (AI) and automated decision-making in employment decisions, such as recruitment and termination, may present several legal and ethical risks such as breach to the Egyptian personal data protection Labor Law, unfair dismissal breaches to the Labor Law and discrimination. Further, the Labor Law does not address the implications of AI on employment however it confirms the necessity to maintain the confidential information relating to the company and its business.

There are no AI-specific Labor Laws that are issued to date in Egypt but rather an AI charter and national strategy issued by the Egyptian National Council for AI.

In this respect, the charter provided that no individual should be harmed by the application of an AI system. Anyone adversely affected by an AI system should be allowed to challenge his/her findings based on clear, easy-to-understand information about the factors and reasoning on which it was based as a basis for the prediction, recommendation or decision.

As clarified above, an employee who is unfairly dismissed would be entitled to file a court claim against their employer before the courts. In this respect, the minimum statutory severance pay should not be less than the following:

Termination would be considered as an unfair dismissal, which would entitled the employee to claim compensation against the employer for unfair dismissal. Compensation for unfair dismissal is a minimum of:

1. two months’ pay for each year of service;
2. two months’ pay for the notice period or three months’ pay if the employee exceeded ten years of service;
3. compensation for the unused leaves; and
4. any other benefits that have been granted the employee.

(the “Statutory Severance Pay”)

Benefits that should be calculated in the Statutory Severance Pay include: any benefits granted to the employee that are general in nature and are granted on a continuous and consistent basis. Such benefits will be considered as “acquired rights” and hence the employer will be obliged to include the same under the Statutory Severance Pay. Additionally, benefits that are pre-determined and unconditional must form part of the Statutory Severance Pay calculations. Examples of which, include, fixed bonuses. In all cases, this always remains subject to the discretion of the courts.

Any condition or agreement that contradicts the provisions of the Labor Law shall be deemed null and void, even if it predates its enforcement, if it results in a reduction of the employee’s rights as stipulated under the Labor Law.

Further, any settlement that involves a waiver or reduction of the employee’s rights arising from the employment agreement shall be deemed null and void if made during the agreement’s validity period or within three months of its termination, provided it contradicts the provisions of the Labor Law.

In this regard, the only right an employee may legally waive is their entitlement to take annual leave when directed to do so by their employer. This waiver must be made in writing.

Based on the above, we note that in practice, a settlement arrangement may be reached if both the employer and employee mutually agree to amicably terminate the employment relationship. A settlement package is expected to include a settlement agreement, a release form, social insurance form 6 and a resignation. The settlement agreement may include post termination covenants such as non-compete, confidentiality and non-solicitation.

Potential risks, include coercion and legal/court challenges. In other words, employees may claim that they were forced to sign the agreement under pressure and hence challenge it in labor court who usually protecting to employees.

The Civil Code tackles the implementation of the non-compete clause in post-termination cases. The code stipulates that, if the work entrusted to the employee exposes them to the employer’s clients, or to business/trade secrets, the parties may agree that after the termination of the employment contract, the employee may not compete with the employer or participate in any project that competes with the employer.

Enforceability: A post-termination non-compete clause is legally enforceable, provided that:

• the employee is of legal age at the time of concluding the contract.
• the work entrusted to the employee must allow them to gain access to business secrets, and be exposed to the employer’s clients.
• the non-compete clause must be relative, and cannot apply for an indefinite period of time. A certain period of time during which competition is prohibited must be specified, in addition to a specific geographic area, and defined scope of applicability.

Reasonableness: The reasonableness is assessed by the judge on a case-by-case basis. The courts developed the above three enforceability conditions in order to uphold rights relating to freedom of work and of trade.

It is also important to note that an employee could be entitled to set aside a post-termination non-compete clause if (i) the employer terminates the employment contract without a justified cause, or (ii) if the employee terminates the contract as a result of the employer’s wrongdoing.

Yes. The employee has a duty to keep all information to which they have/had access as confidential, during their term of employment. The Labor Law also entitles the employer to dismiss an employee if it is proved that they have divulged the company’s confidential information, leading to material damages.

The confidentiality clause can be used to protect the company post- termination or expiry of the employment relationship, by ensuring the employee never shares confidential information, know-how, or business/trade secrets.

Employers are legally required to issue at the employee request and at no charge:

• at contract termination, a certificate stating the date of employment, the date of termination, the type of work performed, and the benefits received; and/or
• a certificate specifying their experience and professional competence, both during the contract’s validity and upon its termination.

At the employee’s request, the certificate may also include details of the salary received and the reason for ending the employment relationship.

Under the Labor Law, terminating employment can be complex and highly regulated, often favoring employee rights. Employers frequently encounter legal, procedural, and financial challenges when dismissing employees. Below are the key difficulties and strategies to mitigate them.

Challenges:

• Strict and restrictive provisions of the Labor Law in favor of the employee.
• Requirement for disciplinary procedures.
• Sole dismissal powers with the labor courts, in cases of gross misconduct.

Mitigations:

• Ensure legal compliance before termination.
• Document performance and misconduct issues in writing.
• Follow proper Disciplinary Procedures.
• Review of employment related agreements.
• Use non-disclosure and non-compete agreements/clauses.

A draft of the new labour law is set to be issued soon to fully replace the Labor Law. The draft introduces several proposed changes to the Labor Law as well as new concepts. Such changes include changes to termination matters.

These changes include:

• Poor performance as a basis for lawful termination has been removed.
• Neither of its parties may terminate unlimited term agreements unless for lawful and sufficient reason. In case of termination from the employer side, they would be required to compensate the employee at the rate of two months per year of service and benefits.
• In case of renewing the contract for less than 4 years, any party may terminate it by giving a 2 months’ notice provided that in case of termination from the employer’s side, they would be obliged to compensate the employee at the rate of 1 month per year of service; and
• Employees are now granted the right to terminate their contracts if the employer breaches key obligations whether legal or contractual and termination in these cases is considered as a termination of the contract by the Employer without legitimate justification.

We note that answers under this question are based on the last draft of the labor law that we have and hence it cannot be relied on as it is still subject to change before its final issuance.