Employee Termination in Armenia

Terminating an employment relationship in Armenia is a regulated legal process rather than a discretionary business decision. Unlike jurisdictions that recognize broad "at-will" employment principles, Armenian labour law requires employers to establish a statutory ground for dismissal and to comply with mandatory procedural requirements before employment may be terminated. Failure to satisfy either requirement may expose an employer to court proceedings, reinstatement of the employee, compensation for lost earnings, and other legal consequences.

For employers, employee termination is therefore not simply the final stage of an employment relationship. It is a legal process that begins long before the dismissal order is issued. Decisions relating to restructuring, redundancy, employee performance, disciplinary misconduct, or business closure must all be assessed against the requirements of the Labour Code to determine whether termination is legally permissible and, if so, which procedure must be followed.

Understanding Employment Protection in Armenia

Employment relationships in Armenia are primarily governed by the Labour Code of the Republic of Armenia. The Code establishes mandatory rights and obligations for both employers and employees and regulates the circumstances in which employment may be terminated. Most of these statutory protections cannot be waived by agreement, meaning that contractual provisions inconsistent with mandatory labour legislation are generally unenforceable.

One of the fundamental principles of Armenian employment law is that dismissal must always be based on a legal ground expressly recognised by legislation. An employer cannot terminate employment merely because the working relationship has deteriorated, business priorities have changed, or management has lost confidence in an employee. Unless the circumstances fall within one of the statutory grounds for termination, dismissal may be challenged before the courts.

This approach differs significantly from jurisdictions that recognise broader employer discretion in employment termination. Companies entering the Armenian market often assume that termination may be managed primarily through contractual provisions or probationary clauses. In practice, contractual arrangements operate within the framework established by the Labour Code and cannot replace the statutory grounds and procedures required by law.

For employers, this means that every proposed dismissal should generally begin with two separate legal assessments:

• Is there a lawful legal ground permitting termination?
• Has the employer complied with every procedural requirement applicable to that ground?

Lawful Grounds for Termination by the Employer

Under Armenian employment law, an employer cannot terminate an employment contract merely because the employee is no longer considered suitable for the business, management wishes to replace them, or the working relationship has become difficult.

The employer must identify a specific statutory ground for termination and demonstrate that the facts of the case satisfy that ground. The list of grounds established by the Labour Code is exhaustive. A reason that appears commercially reasonable but is not recognised by law will not, by itself, justify dismissal.

This distinction is particularly important for foreign companies accustomed to more flexible termination regimes. Armenia does not generally recognise at-will employment. Contractual language stating that either party may terminate employment at any time cannot override the mandatory protections of the Labour Code.

A lawful dismissal therefore requires three elements:

• A statutory ground for termination.
• Sufficient factual evidence supporting that ground.
• Compliance with the procedure applicable to that particular ground.

The employer's dismissal order should clearly state both the legal basis and the relevant facts. A generic reference to "business needs," "poor performance," "loss of confidence," or "breach of company policy" may be insufficient unless the employer connects those circumstances to a recognised statutory ground and supports the conclusion with appropriate evidence.

1. Liquidation of the Employer

An employment contract may be terminated where a legal entity is liquidated or an individual entrepreneur permanently terminates their activities.

Liquidation means that the employer itself ceases to exist or operate. It should be distinguished from a change of shareholders, sale of the business, merger, reorganisation, or replacement of management.

A change of ownership is not, by itself, a lawful ground for dismissing employees. Similarly, the reorganisation of a company does not automatically terminate existing employment relationships. Termination may become possible only where the transaction or reorganisation results in an actual reduction in the workforce or the elimination of particular positions.

Where liquidation is relied upon, the employer must follow the applicable notice, severance, final settlement, and documentation requirements. If a large number of employees will be dismissed, the mass-dismissal notification rules may also apply.

2. Reduction in Workforce or Positions

An employer may terminate employment because of a reduction in the number of employees or the elimination of positions where the reduction results from changes in:

• Workload.
• Economic conditions.
• Technological conditions.
• Organisation of work.
• Production-related needs.

This ground is commonly referred to as redundancy or staff reduction.

The employer must be able to demonstrate that the reduction is genuine. It is not sufficient to rename the position, dismiss the existing employee, and hire another person to perform substantially the same duties.

The business circumstances leading to the reduction should be documented. Relevant evidence may include management decisions, revised organisational charts, financial information, changes in production volume, restructuring plans, technological changes, or the discontinuation of a business function.

The employer must also consider whether an alternative position is available that corresponds to the employee's professional training, qualifications, and health condition. Where such a position exists, it should be offered before termination.

The reduction procedure generally requires:

• Substantiation of the economic, technological, organisational, or production-related reason.
• Identification of the positions genuinely affected.
• Compliance with employee-retention priorities where applicable.
• An offer of suitable alternative employment, if available.
• Written notice.
• Payment of statutory severance.
• Issuance of a reasoned dismissal order.
• Payment of all final amounts due.

3. Employee's Non-Compliance With the Position or Work Performed

Employment may be terminated where the employee does not comply with the requirements of the position held or the work performed.

This ground should not be treated as a general right to dismiss an employee for perceived underperformance. The employer should be able to demonstrate objectively why the employee cannot properly perform the relevant duties.

Depending on the circumstances, relevant evidence may include:

• Documented performance assessments.
• Qualification requirements for the position.
• Professional certification requirements.
• Medical conclusions where the ability to perform the work is affected by health.
• Records of repeated errors.
• Failure to meet clearly established and objectively measurable standards.
• Results of a properly conducted professional evaluation.

The employment contract, job description, internal policies, and performance criteria should clearly establish what is expected from the employee. Where the employer has never formally defined the employee's duties or performance standards, proving non-compliance may be considerably more difficult.

This ground carries notice and severance consequences that depend in part on the employee's length of service.

4. Reinstatement of the Former Employee

An employment contract may be terminated where another employee is legally reinstated in their former position.

This may occur, for example, where a court declares a previous dismissal unlawful and orders the employer to reinstate the dismissed employee.

The employer should verify that the reinstatement directly affects the position occupied by the current employee. A reinstatement order should not be used as a broad basis for dismissing employees in unrelated positions.

Where possible, the employer should also consider whether another suitable vacancy can be offered to the employee whose position is affected.

5. Repeated Failure to Perform Employment Duties

An employer may terminate employment where the employee repeatedly fails, without a valid reason, to perform duties imposed by the employment contract or internal regulations.

The key word is repeatedly. A single breach will not ordinarily establish this ground unless another statutory basis for immediate termination applies.

In practice, the employer should have a properly documented disciplinary history. Termination through disciplinary measures generally requires the employee to have at least two active disciplinary sanctions.

Before imposing a disciplinary sanction, the employer should:

• Identify the specific duty that was breached.
• Establish that the duty arose from the employment contract, job description, or valid internal regulation.
• Document the violation.
• Request and consider the employee's explanation.
• Assess whether the employee had a valid reason.
• Apply the sanction within the statutory period.
• Ensure that the sanction is proportionate.
• Preserve evidence that the employee was informed of the relevant duties and policies.

Internal policies are particularly important. An employer will find it difficult to rely on a breach of internal rules if the rules were unclear, were not properly adopted, or were never communicated to the employee.

6. Loss of Trust

Loss of trust may constitute a lawful ground for termination, but it should not be treated as a purely subjective conclusion.

The employer should identify the conduct that caused the loss of trust and demonstrate why that conduct is sufficiently connected to the employee's responsibilities.

This ground is generally more relevant where the employee:

• Manages money or material assets.
• Has access to confidential or commercially sensitive information.
• Exercises substantial decision-making authority.
• Is responsible for financial reporting or compliance.
• Handles customer funds.
• Is entrusted with company property.
• Occupies another position requiring a heightened degree of reliability.

A statement that management "no longer trusts" the employee is unlikely to be sufficient without supporting facts. The dismissal order should explain the relevant act or omission and why it justifies termination under the applicable legal ground.

7. Long-Term Incapacity for Work

An employer may terminate employment because of long-term temporary incapacity where the employee has been unable to work:

• For more than six consecutive months.
• For more than 180 days during the preceding twelve months.

Days of maternity leave are excluded from this calculation.

This ground must be distinguished from ordinary short-term sick leave. Employees generally receive protection against dismissal during temporary incapacity, except where the statutory threshold for long-term incapacity is satisfied.

The employer should carefully verify:

• The duration of the incapacity.
• The relevant medical documentation.
• Whether any protected period must be excluded.
• Whether the incapacity is continuous or cumulative.
• Whether the employee belongs to another protected category.
• Whether the calculation satisfies the statutory threshold.

8. Refusal or Evasion of a Mandatory Medical Examination

Termination may be possible where an employee refuses or evades a medical examination that is mandatory for the performance of the relevant work.

The examination must genuinely be required by law or by the applicable occupational health and safety rules. An employer cannot create an arbitrary medical examination requirement and dismiss an employee merely for refusing it.

Before termination, the employer should document:

• The legal basis requiring the examination.
• The employee's obligation to undergo it.
• The notice given to the employee.
• The employee's refusal or evasion.
• Any explanation provided.
• Any reasonable opportunity given to comply.

9. Invalidation of a Foreign Employee's Residence Status

An employer may terminate the employment of a foreign employee where the employee's residence status is recognised as invalid.

The employer should confirm the official status before taking action. A pending renewal, administrative delay, or uncertainty regarding immigration documentation should not automatically be treated as formal invalidation.

This ground may involve a short statutory notice period, but the employer should still issue a properly reasoned dismissal decision and complete the final settlement.

10. Presence at Work Under the Influence of Alcohol or Drugs

Employment may be terminated where the employee is present at the workplace under the influence of:

• Alcohol.
• Narcotic drugs.
• Psychotropic substances.

The employer should obtain reliable evidence. Depending on the circumstances, this may include:

• A medical examination.
• An internal incident report.
• Witness statements.
• Security records.
• The employee's written explanation.
• Other objective evidence.

11. Absence for the Entire Working Day Without a Valid Reason

Failure to attend work for the entire working day without a valid reason may constitute a lawful basis for dismissal.

The employer should first establish:

• The employee's scheduled working day.
• The fact of their complete absence.
• The absence of approved leave or remote-work arrangements.
• Attempts made to contact the employee.
• The explanation provided by the employee.
• Whether the reason for absence was valid.

An absence should not automatically be treated as unjustified before the employee is given an opportunity to explain. Medical emergencies, family emergencies, transport disruptions, or other circumstances may require assessment.

Accurate attendance records are essential. Employers operating flexible, hybrid, or remote-working arrangements should clearly define when and where attendance is required.

12. Failure to Provide Documents Required During Pandemic-Related Isolation

The Labour Code also contains a ground connected with exclusion from work during isolation declared in relation to the COVID-19 pandemic. It may apply where an employee is excluded from work for more than ten consecutive working days or more than twenty working days during the preceding three months because they failed to provide the documents required to attend work.

Reasons That Do Not Automatically Justify Termination

Certain circumstances may create business difficulties but do not independently amount to lawful grounds for dismissal. These include:

• A change of shareholders or company ownership.
• Corporate reorganisation without an actual staff reduction.
• A general personality conflict.
• Management's preference for another employee.
• Dissatisfaction that is not connected to an objectively documented statutory ground.
• A desire to rehire the employee on less favourable terms.
• An employee's pregnancy, leave, lawful strike participation, or another protected status.
• Discriminatory considerations unrelated to professional qualities.
• A decision generated solely through automated processing without meaningful human assessment.

Financial difficulties alone do not permit an employer to dismiss an employee solely to offer the same work again on worse terms. Where the employer needs to change essential employment conditions, it must follow the statutory procedure for introducing those changes. Termination may become possible only if the employee refuses the properly proposed changes and the relevant legal requirements are satisfied.

The Dismissal Order Must Be Specific

Regardless of the ground used, the employer should issue a clear and reasoned dismissal order. The order should identify:

• The applicable legal ground.
• The relevant factual circumstances.
• The documents supporting the decision.
• The effective termination date.
• The notice provided or compensation in lieu of notice.
• The severance payable, where applicable.
• The final amounts due to the employee.

A dismissal order should not merely repeat the wording of the Labour Code. It should explain how the statutory ground applies to the particular employee.

For example, instead of stating only that the employee is dismissed because of "staff reduction," the order should identify the organisational or economic change, the position being eliminated, the relevant management decision, and the applicable termination procedure.

Similarly, a dismissal for repeated failure to perform duties should identify the relevant duties, the violations, the active disciplinary sanctions, and the facts demonstrating repetition.

Employer Checklist Before Selecting a Termination Ground

Before proceeding, the employer should answer the following questions:

1. 01

   Is the proposed reason expressly recognised by the Labour Code?

   If not, the termination should not proceed on that basis.

2. 02

   What facts establish that ground?

   Identify the specific, documented facts that satisfy the statutory requirements.

3. 03

   What documents support those facts?

   Contracts, policies, assessments, medical records, or management decisions, as relevant to the ground relied upon.

4. 04

   Does the employee belong to a protected category?

   Pregnancy, leave, or another status may restrict or condition the employer's ability to terminate.

5. 05

   Is prior notice required?

   Confirm the applicable notice period for the ground being relied upon.

6. 06

   Must an alternative position be offered?

   Relevant particularly for redundancy and non-compliance with the position.

7. 07

   Is severance payable?

   Confirm whether statutory severance applies and calculate the correct amount.

8. 08

   Are disciplinary sanctions required?

   Relevant for termination based on repeated failure to perform duties.

9. 09

   Is consultation, notification, or third-party consent necessary?

   Some grounds and some categories of employee require additional procedural steps.

10. 10

    Does the dismissal order clearly explain the legal and factual basis?

    The order should connect the statutory ground to the specific facts of the case, not merely restate the law.