Bulgarian law contains an extensive legal framework regulating the termination of employment agreements.  Employment agreements can be terminated either with the consent of both parties or unilaterally by the employer or the employee on the grounds exhaustively listed by the Labour Code. 

1. Termination Upon Mutual Consent

In order to avoid the more stringent procedural requirements related to unilateral termination, the employer may find it preferable to suggest termination of employment by mutual consent of the parties. Bulgarian law recognises two types of mutual consent termination of labour agreements. 

Mutual consent termination might be achieved upon either party’s initiative by way of execution of a written agreement to that effect.  Such agreement could be reached by means of a written offer and acceptance or incorporated in a single written instrument and is not associated with the payment of specific termination compensation. 

Further, the employer is entitled to offer to the employee termination of the employment against payment of compensation amounting to at least 4 times the last gross monthly remuneration received by the employee for the month preceding the one in which the offer for termination was made. In this case the procedure for termination commences by an offer of the employer to the employee for termination of the employment in exchange for compensation.  Generally, the employee has seven calendar days to accept the termination offer. If the offer is accepted, the agreed compensation must be paid within one month after the agreement’s termination date, specified in the offer. Failure of the employer to pay the compensation due within one month from the termination date voids the termination.

2. Unilateral Termination

2.1 Grounds

Individual labour agreements may be validly terminated by the employer only on those grounds explicitly stated in the Labour Code and strictly following the procedure set out therein. On the contrary, termination by an employee might be made without any ground, as long as the employee observes the term of the prior written notification to the employer, or is prepared to pay the compensation due to the employer in the event of failure to comply with said term.

The legal grounds for termination of an employment agreement with prior notice by the employer are as follows: (i) closing the enterprise, in which the individual is employed, or of a part of the enterprise; (ii) reduction of the number of working positions; (iii) decrease of work volume; (iv) discontinuation of work by the employing enterprise for more than 15 business days; (v) lack of capacity of the employee for effective performance of his/her labour duties; (vi) lack of professional qualification or required educational background, necessary for effective performance of the labour duties; (vii) refusal of the employee to relocate to another town or location together with the enterprise, in which the employee works; (viii) change of the requirements for performance of the labour duties inherent to the position, provided that the employee fails to meet these requirements; (ix) the employee acquiring the right to retire on old age pension; (x) objective impossibility for performance by the employee; (xi) if the position has to be vacated for an employee who was reinstated in the position after having been illegally dismissed; (xii) execution of an agreement for assignment of management with members of the managing bodies of the employing entity (in the latter case an employer is entitled to terminate employment agreements only with managerial personnel; this right lapses upon the expiry of nine months from the commencement of the agreement for assignment of management).

The Labour Code further provides for other valid grounds for termination of an employment agreement by the employer without serving notice to the employee. By way of example, these include the employee being deprived (by a sentence issued by a criminal court) of his/her right to exercise the profession or to take the position he/she occupies and others that are not under the control of the employer, i.e. they arise notwithstanding the employer’s behaviour.  One of said grounds is the impositions of disciplinary sanction for gross violation of the work discipline. Dismissals on disciplinary grounds involve a strict procedure provided for by the law. Namely, prior to imposing any disciplinary sanction the employer is obliged to hear the explanations of the employee or accept his written statement and to collect evidence. The disciplinary sanction shall be imposed by a motivated order in writing having the contents explicitly prescribed by the Labour Code, which is further served to the employee. Any failure to comply with the procedural rules leads to illegality of the termination that could be proclaimed by the competent courts of law upon request of the dismissed employee. 

2.2 Notice Period

Labour agreements of a defined term may be terminated with a three months prior written notice, where those of unlimited duration - with 30 (thirty) days prior written notice, unless a longer notice period is provided for in the respective individual agreement of unlimited duration.  In any event, such period may not exceed 3 (three) months.

2.3. Protection Against Dismissal

Pursuant to the Labour Code certain categories of employees (like partially disabled, pregnant female employees, female employees who are mothers of children up to three years of age, etc.) are protected against dismissal on particular grounds, like partial closing of the enterprise, reduction of working positions, decrease of the workload, etc.
Dismissal of protected employees is subject to the prior consent of the competent Labour Inspectorate. In addition, in the event of prospective dismissal of a disabled employee or an employee suffering from certain diseases, the employer must also obtain the opinion of a specific Labour Expert Medical Commission.

2.4. Selection

The Labour Code entitles the employer to select between employees to be dismissed due to partial closing down, reduction of working positions and decrease of the work volume. The employer may exercise this selection right in its own discretion. However, in all cases of dismissal of employees occupying one and the same position the employer is obliged to select the ones to be dismissed. Failure to select in the cases discussed in the previous sentence causes illegality of the dismissal.

2.5. Collective Dismissal

In some cases, in parallel to the individual termination process, a collective dismissal procedure may also need to be followed. The term “collective dismissal” is defined as dismissal in the course of which one employer dismisses a specified minimum number of employees within 30 days on its own discretion for one or more reasons that are not related to the personality of the dismissed employees. Every event of collective dismissal gives rise to certain notification and consultation obligations of the employer, including, by way of example, (i) notice to the employees’ representatives of the employer’s intention to start a collective dismissal; (ii) consultation with the employees’ representatives; and (iii) notice to the regional division of the Employment Agency.

2.6. Consequences of Unlawful Unilateral Dismissal

Events of procedural or substantive non-compliance with the relevant legal provisions on termination of employment give the employee grounds to bring a claim before the competent court of law. Along with declaring the dismissal illegal, the court may, at the employee’s request, reinstate the employee, who has been unlawfully dismissed to the position occupied by him/ her prior to the dismissal. Such reinstatement has retroactive effect, i.e. the unlawful dismissal is deemed to be void and the reinstatement takes effect as of the date of the dismissal. Again at the employee’s request, the court may award to the employee compensation in the amount of his gross wage for the period for which the employee remained unemployed, up to a maximum of six months. 

Court proceedings related to labour disputes are free of charge for the dismissed employees, i.e. they are exempt from payment of state fees.

3. Financial Consequences of Termination and Reporting Requirements

The Bulgarian labour law establishes different types of compensation payments due to employees upon termination of their employment. In all events of termination of employment the employee is entitled to compensation for the unused paid annual holiday.

Employees may claim compensation where the dismissal occurs with inadequate prior notice, when such is required. The amount of the payment must cover the gross remuneration due to the employee for the part of the notification period of which the notice falls short.

Additional termination compensation is also payable to employees who have acquired the right to retire on old age pension, regardless of the reasons for the termination and provided that the employee has not received such compensation before.

Employees are entitled to compensation also if the dismissal is on the grounds of closing down of the employing entity or parts thereof, reduction of working positions, decrease of the volume of work, discontinuation of work by the employing enterprise for more than 15 (fifteen) business days, etc. and the employee has been left unemployed for a period of up to one month. In these cases the severance payment will equal the gross wage payable for the respective period.

Notwithstanding the termination ground, the employer should inform the Bulgarian National Revenue Agency about the termination of any labour agreement by filing a standard notification form within 7 (seven) calendar days thereof. Failing to comply with the above mandatory requirements might result in imposition of a pecuniary sanction amounting to BGN 15,000 (appr. EUR 7,700) for each particular event of default. A fine of BGN 10,000 (appr. EUR 5,200) may also be imposed to the employer’s official who has failed to perform such obligation.