Mutual termination of employment contracts under Monaco labour law
The Monaco mutual termination employment contract is a major new feature of Monegasque labour law introduced by Law No. 1.583 of 2 December 2025. This mechanism, previously unknown in Monaco, allows an employer and an employee under an open-ended contract to jointly agree on the termination of their employment relationship. It operates outside the traditional frameworks of dismissal or resignation, including terminations under article 6.
Mutual termination is based on the principle of free and informed consent. To ensure this, the law establishes a strictly regulated procedure. First, the parties must hold one or more preliminary meetings. Then, they execute a written termination agreement. A cooling-off (withdrawal) period applies. Finally, the agreement must be approved by the Labour Inspector.
The Labour Inspector plays a central role. In particular, they verify both the regularity of the procedure and the overall balance of the agreement. This approval is mandatory.
Key steps and financial terms in mutual termination
The termination agreement sets out the financial terms of the separation. It must include a specific termination indemnity. While this indemnity is freely negotiated, it remains subject to statutory minimum thresholds. Once approved, the Monaco mutual termination employment contract produces the legal effects of a consensual termination. As a result, it offers enhanced legal certainty for both employer and employee.
This new feature forms part of a broader effort to modernise Monegasque labour law. More specifically, it aims to encourage negotiated employment terminations while reducing litigation risks. The provisions relating to mutual termination are scheduled to enter into force in March 2026, following publication in the Official Journal.
More broadly, Law No. 1.583 also introduces additional changes to employment law in Monaco. Consequently, it highlights the importance of properly structuring employment contracts and complying with hiring formalities from the outset.
As a law firm with a strong focus on employment law, we assist employers throughout the entire employment lifecycle, from contract drafting and hiring formalities to negotiated exits and dispute prevention. We provide tailored guidance to ensure that any Monaco mutual termination employment contract is valid, secure, and aligned with your objectives. Contact us for more information.
