In Bulgaria, the employment contract is also the oldest and most common form of establishing an employment relationship, and its provisions apply in all cases unless otherwise stipulated by law. The Bulgarian Labour Code contains an exhaustive list of reasons for terminating an employment relationship – these include both general reasons (mutual agreement and unavoidable necessity) and reasons for which the will of only one of the parties is sufficient.

It is first important to determine when and for what reasons the employment contract is terminated. It is also important to determine whether the employer or the employee, or both parties, wish to terminate the contract. In any case, regardless of the reasons, the termination must be in writing – by order of the employer or by agreement between the parties.

I. Termination of the employment contract by mutual agreement

1. Termination by mutual agreement without severance pay
   An employment contract can be terminated at any time during its term at the request of either party. The request can be made by either the employer or the employee. If one party wishes to terminate the employment contract by mutual agreement, they must submit a written proposal to the other party. The party that has received the proposal has a period of 7 days to accept or reject it. If no response to the proposal is received within this period, the proposal is deemed to have been rejected.
2. Termination with severance pay
   The employer may, on its own initiative, propose to the employee that the contract be terminated by mutual agreement with severance pay. The minimum amount of severance pay is regulated by law – four times the last gross remuneration received. The gross remuneration includes the basic remuneration specified in the contract (or the net remuneration including tax and social security contributions payable by the employee) and any additional remuneration – bonuses, allowances, etc. The gross remuneration may also be less than the basic remuneration in cases where the employee received a sick note from their general practitioner in the previous month. Therefore, the basis for calculating the severance pay is the gross remuneration that the employee received in the month prior to receiving the proposal. The employee has a period of 7 days to accept or reject it. If no response to the proposal is received within this period, the proposal is deemed to have been rejected. Within the period, the employee has the option of requesting a higher amount of severance pay. The employer is not obliged to accept or pay this higher amount. If the parties have reached an agreement, they conclude a termination agreement, whereby the severance pay is to be paid within one month. Otherwise, the agreement is deemed not to have been concluded.

II. Unilateral termination

The termination of the employment relationship by means of a letter of termination is characterised by the fact that the employment contract is automatically terminated after the notice period has expired. If the notice period is not observed by one of the parties, compensation must be paid in accordance with Art. 220 of the Labour Code. According to Art. 326 (2) of the Labour Code, the notice period differs for fixed-term and permanent employment contracts. For permanent employment contracts, Bulgarian law provides for a notice period of 30 days, although it is permissible to stipulate a longer notice period (maximum 3 months) in the contract. The notice period for fixed-term employment relationships is 3 months, but no longer than the remaining term of the contract. Bulgarian labour law sets out a number of grounds for termination in Art. 328 ff. of the Labour Code, in which case the employer may terminate the employment contract by giving written notice within the periods specified in Art. 326 (2) of the Labour Code. These grounds are not related to any fault on the part of the employee. In this video, I will explain the most commonly used grounds for unilateral termination.

1. Grounds for termination related to the employer:

• Closure of the business - This scenario applies if the employer ceases trading. According to the established case law of the Supreme Court, it is not sufficient for the employer to state that they are ceasing their activities or that they have a reduced workload (which is an independent reason for the employer to terminate the contract). If it is a company, they must have filed an application with the commercial register to initiate liquidation proceedings. The initiation of the liquidation of companies also terminates their activities, and it should be borne in mind that the company itself has notified the tax office of its intention to cease its activities and be deleted from the commercial register before the application is submitted. Therefore, the reason for the termination of the employment contract due to the closure of the company can only be invoked after the decision to initiate liquidation has been registered.

• Dissolution of parts of the business - closure of a part of the company occurs when there are separate departments within the company, whereby the separation must be on an organisational, territorial and functional basis. With the closure of the relevant part of the company, there is no longer any need to carry out the activity in question, which necessitates the termination of the employment contracts of the employees engaged in the closed part of the activity. According to case law, the difference between the closure of part of a business and the reason under Art. 328(1)(1) of the Labour Code – "closure of the company" – is only quantitative. In the case of the reason under Art. 328, para. 1, point 1 of the Labour Code, there is a complete closure of the company and the cessation of all its activities for the future, and it ceases to exist as an employer. The reason under Art. 328(1)(2)(1) of the Labour Code exists if the activities of a specific organisational unit of the company are discontinued, but this unit does not have the characteristics of an employer within the meaning of § 1(1) of the supplementary provisions of the Labour Code. It is essential that the unit being shut down is an independent unit within the company and its structure. This structural unit should be a separate and relatively independent organisational unit within the overall structure of the company (its department, branch, workshop, division, sector, etc.) with relatively independent management in the management hierarchy. The closure of a part of a company should be distinguished from cases of internal organisational restructuring of the company. Internal restructuring occurs when the activities of the company or a part of the company are reorganised through a merger, amalgamation, separation or division. In such a restructuring, the activities of the department or unit concerned remain in place but are distributed to other units or merged with some existing units. In these cases, there is no closure of a part of the company, as the activity continues to be carried out, albeit in a different organisational form.

• Staff reductions - This is the most common reason for terminating employment contracts with employees. This involves a reduction in the number of employees in the same or similar positions, regardless of the underlying reasons. For this reason, a requirement has been introduced in practice that the employer may not re-establish the same or a similar position or increase the number of positions for which redundancies have been made during a period of six months from the date of the redundancy decision.

• Decline in the volume of work. In this case, the employer cannot provide the employee with enough work for objective reasons. These reasons must always be external to the company, e.g. decline in demand, loss of market share, etc.

• Work stoppage lasting more than 15 working days – the work stoppage may affect the activities of the entire company or only one department.

In the event of closure of the company, part of the company, staff reductions and a decline in work, the employer must carry out a selection procedure to determine which employees in the same or similar job positions according to the job description are to be made redundant.

2. Reasons for dismissal related to the employee:

• The employee does not have the necessary training or professional qualifications for the job – there are numerous court rulings that explain the procedure here. This deficiency must be permanent, not just for one task, and it is not mandatory that it existed at the time the contract was concluded. It can also occur later. In this case, the order for termination must be justified – which training or professional qualifications are lacking. The reasons may also be set out in a separate document, provided that the employee is aware of this and this can be proven.

• If the employee refuses to follow the company to another location of employment, the employee should be invited to relocate with the company ( ). If they refuse, the employer can terminate the contract unilaterally with a period of notice.

• Upon commencement of the employment relationship, after the employee has acquired and exercised a pension entitlement upon reaching the required insurance service age – the contract is not automatically terminated upon reaching the service age. The employee must have submitted their pension entitlement.

III. Extraordinary termination without notice by the employer (Art. 330 Labor Code)

The employer in Bulgaria may also terminate the employment relationship extraordinarily and without notice in accordance with Art. 330 (1) and (2) Labor Code:

• If the employee is arrested for the purpose of enforcing a criminal sentence;
• If a professional ban is imposed by a court or other state authorities;
• If the employee is removed from the relevant professional register (e.g. for pharmacists, doctors, etc.);
• If the employee refuses to perform work that is suitable for him or her in view of his or her state of health;
• If the employee is dismissed for disciplinary reasons

Dismissal is the most severe of all disciplinary measures and can only be applied in cases of gross violations of work discipline. These are listed in the Labour Code. Some of them are:

• Being late (at least 3 times in a month and no less than 1 hour);
• If the employee is absent for 2 consecutive days;
• Systematic violations of work discipline – systematic means at least 3 violations, which may be of different types;
• if the employee does not appear at work sober.

When terminating employment for disciplinary reasons, the employer must comply with the criteria set out in the Labour Code – the severity of the violation, the circumstances under which it occurred and the employee's behaviour must constitute a serious violation. This assessment by the employer is subject to judicial review. There are strict legal regulations governing disciplinary proceedings – after the employer has established the violation, they must first request a statement from the employee. This is done by means of an invitation. Once the statement has been submitted (it can be in writing or oral), the employer must take it into account when deciding on disciplinary measures. If the proceedings are not carried out, the dismissal is declared null and void.

IV. Termination by the employee

In contrast to the employer, the employee is entitled to terminate the contract simply by submitting a letter of resignation, without having to provide any reasons.
In the event of termination, regardless of the reasons, the employee's work book must be completed within 7 days of the termination of the employment relationship.

You can find more information on Bulgarian labour law here.