Termination of employment in the event of an employer’s liquidation is based on the combined application of labor law and company law rules, which makes this institute particularly interesting from the perspective of legal theory and case law. Unlike cases of termination of employment based on the unilateral will of one of the contracting parties, liquidation represents a change in the status of a company that directly produces effects in the sphere of employment relationships, independently of the will of the contracting parties.

In this regard, by the judgment of the Supreme Court, case no. Prev 999/23 of 24 April 2025, it was held that the relevant moment for the termination of employees’ employment relationships is the initiation of liquidation, since after the liquidation procedure has been initiated, the company may perform only actions and activities related to conducting and completing the liquidation procedure. This means that such a company ceases operations within the meaning of Article 176, paragraph 5 of the Labor Law.

The cited provision of the Labor Law stipulates that an employee’s employment relationship terminates if the employer ceases operations, which represents one of the cases of termination of employment independent of the will of the employee and the will of the employer, i.e., termination by operation of law.

The Company Law provides that liquidation is completed by the adoption of a decision on the completion of liquidation, after which the company is deleted from the Register of Business Entities. Therefore, the initial conclusion might be that the employer ceases operations only upon completion of the liquidation procedure and deletion of the company from the register of business entities.

However, according to the court’s position, the moment of termination of the employment relationship is tied to an earlier point in time—namely, the initiation of the liquidation procedure. Under the provisions of the Company Law, from the moment liquidation is initiated, the company’s business activities essentially lose the characteristics of regular operations. In this sense, the liquidator, acting as the company’s legal representative, is authorized exclusively to undertake actions aimed at completing tasks commenced prior to the initiation of liquidation and actions necessary for conducting the liquidation procedure, i.e., to perform other activities necessary for carrying out the liquidation of the company, but not actions related to the continuation of the regular business activity for which the company was established. Thus, from the moment liquidation is initiated, the company’s business activity is reduced to status-related and operational actions, while regular business operations effectively cease.

Accordingly, the judgment clarified that termination of employment with an employer undergoing liquidation occurs at the moment the liquidation procedure is initiated, by operation of law and independently of the will of the contracting parties. Therefore, the decision on termination of employment adopted by the liquidator has a declaratory character and serves solely to confirm a legal consequence that has already occurred, which has significant implications for judicial protection of employees’ rights, as well as for the scope of the employee’s rights vis-à-vis the employer.

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