Limitations on terminations

In the Icelandic labour market, the general rule applies that parties to an employment relationship, i.e. employer and employee, are free to terminate employment contracts without having to justify such termination or provide a reason thereto. In some cases, however, there are provisions for certain notification-of-termination protection or limits in laws and collective wage agreements.

The following consist of limits to the dismissal of an employee:

  • An employee who has notified of the intention of taking parental leave, or who is on such leave, or pregnant women or women who have recently given birth (NOTE – SA terms state less than 14 weeks) may not be dismissed unless there are valid reasons for doing so, in which case the dismissal must be sent with written reasoning thereto. Such circumstances may not be in connection with the employee taking maternity/paternity or parental leave or notification of such leave. This is provided for in Article 30 in Act No. 95/2000 on Maternity/Paternity Leave and Parental Leave.

    Here you can access a notification of pregnancy form, although usually the notification is usually given during an interview involving the employee and a supervisor. In most cases, the rights or the employee are respected. In some cases, however, it can be a good idea to provide such notification formally and have a supervisor confirm reception of such information by submitting an appropriate form.

    The Maternity/Paternity Leave Fund does not require notification until x weeks before the anticipated date of birth, and it is therefore good to have completed the notification on such a form. It should be noted that the spouse not carrying the child, and therefore not, according to the Act on Parental Leave xxx, granted 2 weeks of parental leave, does not enjoy protection before signed documents are sent to the Maternity/Paternity Leave Fund. As a result, notification of becoming a father/mother that does not carry the child is no guarantee for the person in question being granted parental leave although expecting a child. For further details, see here.

    Parental leave can be planned immediately after maternity/paternity leave, although no vacation payments are made. If this is done, the employer has no right to interfere, but if parental leave is taken later, he has the right to deny such leave and make a request thereto.

  • The appointed Union Shop Steward enjoys special workplace protection according to Article 11 on Trade Unions and Industrial Disputes No. 80/1938. According to this Act, employers may not terminate the employment of the shop steward as a result of their work as shop steward nor may shop stewards be made to suffer any adverse consequences due to the fact that a union has asked them to undertake shop steward duties for the union. The shop steward shall also have preferential right to employment in the event that the number of employees in a company needs to be reduced.
    The shop steward must fulfil his duties to the company. If he does not do so, however, he may be dismissed, but the violations must be several and the employer must have issued several reprimands or admonitions before this is possible to enable the shop steward to remedy his violations or conduct.
    In order for the shop steward to enjoy protection, he must have been formally appointed by VR. Each appointment period is two years.

  • Workers’ safety representatives and workers’ representatives on the safety committee, elected by employees on the basis of Section II of Act No. 46/1980 on Working Environment, Health and Safety enjoy the same protection as shop stewards.

    Safety representatives may not be dismissed due to their work as safety representative or due to their membership in the safety committee. Moreover, they may not be penalised for their membership in the safety committee or in any other manner penalised because they have been entrusted to sit on the committee or been elected as safety representatives. These employees shall have preferential right to employment in the event that the number of employees in a company needs to be reduced.

    These employees must fulfil their duties to the company. If they do not do so, however, they may be dismissed, but the violations must be several and the employer must have issued several reprimands or admonitions before this is possible to enable the application of remedial actions or improvement of conduct.

  • Article 4 of Act No. 72/2002 on Workers’ Rights in the Event of Transfers of Undertakings states that: Employers are not permitted to dismiss an employee due to changes in ownership of the company, or part thereof, both before and after the change in ownership unless economic, technical or organisational reasons so require which entail changes to the company’s human resources.

    This prohibition, however, is not universal, and each case must be examined individually. This rule, for example, does not apply if the change in ownership is due to bankruptcy.

  • According to the Act No. 27/2000 on Prohibition on Termination of Employment Due to Family Responsibilities, an employee may not be dismissed solely on the grounds of family responsibilities that he bears. This applies to the duties of the employee as regards children, spouse or close relatives that reside in the same household and clearly require his/her care or guardianship due to e.g. illness or disability.

  • It is prohibited to dismiss an employee who has requested changes on the basis of Act No. 150/2020 on the Equal Status and Equal Rights of Women and Men.

    This prohibition applies for one year after the corrective measure request has been submitted.

  • A new Act on the Protection of Whistleblowers came into force on 1 January 2020. The Act provides for certain protection for employees who provide information on legal infractions or other objectionable conduct practised in the operation of their employer. The protection is on the condition that the employee has followed the provisions of law and follows the rules provided therein. The objective of the Act is to encourage the disclosure of violations of law and other objectionable behaviour in the operations of companies and thereby reduce such conduct. Employees are thereby provided with the opportunity to disclose information and/or share data in good faith as regards violations of law to parties who can ensure the cessation of such violations of law or objectionable conduct.

    The protection means that the dissemination of this information is not considered a breach of the confidentiality obligations to which the employee is bound. Such disclosure is not considered criminally punishable or liable for the person in question and cannot lead to administrative consequences or onerous measures against employee rights.

    The Act states that in companies employing, as a rule, 50 employees on a yearly basis must, in consultation with employees, establish rules of procedure regarding these laws. The purpose of this is to make it easier for employees to utilise the laws and to make it easier for employers to respond to such dissemination. AOSH is responsible for monitoring that employers establish such rules. 

  • According to Article 1 of Act No. 80/1938 on Trade Unions and Industrial Disputes, employers, foremen and other representatives of employers are not permitted to attempt to influence the political views of their workers, their attitude to dealing with trade unions or political association or industrial disputes by terminating their employment or threatening such termination. It also prohibits influencing employees through monetary payments, promises of profit or refusal to effect just payments.