Termination Clause Under Labor Law 14 of 2025

(How the new Egyptian labor law redefines termination rights and obligations for employers and employees

Introduction

With the introduction of Egypt’s Labor Law No. 14 of 2025, employment termination has become one of the most closely examined aspects of labor relations. For business owners and HR managers, understanding the termination clause under this new legal framework is critical to maintaining compliance, preventing disputes, and ensuring fair treatment for employees.

The new law, effective 1 September 2025, introduces clear rules on how and when employment contracts can end—whether by resignation, dismissal, or mutual agreement—aiming to balance the rights of both employers and employees while curbing arbitrary terminations.

This article provides a practical, legally grounded analysis of the termination clause under Law 14/2025, explaining what it means, how it should be drafted, and what employers must now consider when ending employment relationships.

1. The Legal Foundation: Articles Regulating Termination

The termination of employment is governed mainly under Part Four of Law No. 14/2025, covering “Termination of Employment Relationship” (الفصل الرابع – انتهاء علاقة العمل). The relevant provisions include:

Article 111 to Article 121, which outline the conditions under which a contract may be terminated.
Article 114, which specifies the grounds for termination by either party.
Article 116, which regulates resignation procedures and employee rights to retract resignation.
Article 118, which deals with arbitrary dismissal and compensation.
Article 120, which introduces judicial authorization for disciplinary dismissals.

These articles collectively redefine termination as a structured legal process—not merely a managerial decision.

2. Employer’s Right to Terminate: Now Restricted and Regulated

Under previous law (Law 12/2003), employers had relatively broad discretion to dismiss employees for “valid reasons,” often leading to disputes about what constituted justification.

Under Law 14/2025, the termination clause must comply with strict conditions:

Termination can only occur for legitimate reasons, such as:
1. Closure of the business or downsizing (Art. 114, Para. 1).
2. Completion of a fixed-term contract or project (Art. 111).
3. Repeated violation of work regulations after due warning (Art. 120).
4. Gross misconduct, but only with judicial authorization (Art. 120).
5. Force majeure or economic restructuring that necessitates termination (Art. 114).

➡️ Key Takeaway:
Employers cannot unilaterally terminate an employee’s contract without following due process. Even misconduct-related termination now requires court or administrative approval, significantly reducing arbitrary dismissals.

3. Employee Resignation: A Formalized and Protected Process

The new law eliminates the long-standing abuse of pre-signed resignation letters (“استمارات استقالة على بياض”).

According to Article 116, an employee’s resignation is not valid unless:

It is submitted in writing,
Approved by the competent Labor Office, and
The employee does not retract it within ten (10) days from acceptance.

If the employee withdraws resignation within that period, it is considered null, and the employment relationship continues as if no resignation occurred.

➡️ For HR Managers:
You must update your internal policies to route all resignations through official labor authorities. Any resignation not ratified as per Article 116 can expose the company to legal liability for unlawful termination.

4. Notice Period Requirements

Law 14/2025 establishes uniform notice periods depending on the type of contract:

Three (3) months’ notice for indefinite contracts (Article 118).
One (1) month’s notice for employees under probation (Article 117).
For fixed-term contracts, notice requirements depend on the agreed duration, unless terminated early (discussed below).

Failure to comply with notice obligations entitles the affected party to monetary compensation equivalent to the unserved notice period.

5. Compensation for Unlawful or Arbitrary Dismissal

Perhaps the most significant reform in Law 14/2025 is the expansion of compensation rights for employees dismissed without legitimate cause.

Under Article 118, if an employer terminates an indefinite contract without proper justification, the employee is entitled to:

Compensation equal to two (2) months of total wages for each year of service, calculated based on the last received salary.
The compensation is capped at a minimum of three months’ wages, regardless of tenure.

➡️ Legal Insight:
This formula doubles the protection level compared to Law 12/2003 (which provided one month per year). It signals a clear legislative shift toward strengthening employee security.

6. Termination of Fixed-Term Contracts

Termination of fixed-term contracts before expiry is regulated under Article 111 and Article 118.

If the employer ends the contract early without cause, compensation equals one month’s pay for each year (or part thereof) of service.
If the employee resigns early without cause, they may owe similar compensation to the employer.
After five consecutive years of renewal, compensation becomes due even if the term ends naturally.

➡️ Compliance Note:
Employers should avoid repeatedly renewing short fixed-term contracts to evade obligations — after five years, the law treats such employment as continuous service for compensation purposes.

7. Disciplinary Termination: Judicial Authorization Required

Under Article 120, employers no longer have unilateral authority to terminate for disciplinary reasons.

Instead, dismissal for misconduct requires:

Filing a request to the Competent Disciplinary Committee or Labor Court,
Presenting evidence of misconduct, and
Awaiting judicial authorization before execution.

Only upon approval can the employer lawfully dismiss the employee.

➡️ Practical Impact:
This adds procedural delay but ensures fairness and transparency. Employers must maintain proper documentation, warnings, and internal investigation reports.

8. Termination by Mutual Agreement

Article 115 permits termination by mutual consent, provided both parties agree in writing and acknowledge receipt of all rights.

However, the agreement must not:

Waive statutory rights (e.g., minimum notice or compensation).
Include coercive or fraudulent terms.

➡️ HR Best Practice:
When drafting mutual termination agreements, include a clause confirming that the employee voluntarily signs and has received all legal entitlements in accordance with Law 14/2025.

9. Termination for Economic Reasons or Force Majeure

Under Article 114 (Para. 2), employers may terminate employment for economic restructuring or force majeure, such as closure, bankruptcy, or unavoidable events.

However, the employer must:

Obtain Ministry of Labor approval,
Notify employees and pay severance compensation, and
Provide a justification report outlining financial necessity.

Failure to obtain approval renders the termination invalid, exposing the employer to reinstatement claims and compensation.

➡️ Tip for Business Owners:
Document and retain financial evidence (e.g., loss statements, closure decisions) to support any economic termination claims.

10. Practical Recommendations for Employers & HR Managers

Area	New Legal Requirement	Practical Action
Termination Clause	Must cite legitimate grounds under Art. 114	Update employment contracts accordingly
Resignation Process	Requires ratification and 10-day retraction right (Art. 116)	Route all resignations through official channels
Notice Period	3 months (indefinite contracts), 1 month (probation)	Include compliant notice clauses
Unlawful Dismissal	2 months’ wage per year compensation (Art. 118)	Budget for potential termination liabilities
Disciplinary Dismissal	Needs court/committee authorization (Art. 120)	Maintain detailed disciplinary records
Economic Dismissal	Requires Ministry approval (Art. 114)	Retain justification and financial records
Mutual Termination	Written agreement, no waiver of statutory rights	Use standardized mutual termination template