Dismissal without cause: why the termination letter should state the reasons

In decision 00040-2022, the Second Chamber of the Supreme Court of Justice set a precedent that supports a recommendation we have made consistently since 2017, when the labor procedure reform took effect: when dismissing an employee with full severance, the termination letter should state a clear, reasoned justification reflecting the employer's reasons for ending the employment relationship.

Article 85(d) of the Labor Code provides that the employment relationship may end by the sole will of the employer. The provision does not require the termination letter to state any further grounds. This is the exercise of the principle of dismissal without cause, still in force in Costa Rica, which requires the employer to pay the employee's full statutory entitlements.

However, the reform gave employees the right to claim that a dismissal is discriminatory, on the grounds listed in Article 404 of the Labor Code, and therefore to seek protection through a summary proceeding. Although the employee bears the burden of proof when bringing that proceeding, failing to state an objective rationale in the termination letter may create risk if the employee manages to present indications or evidence of discriminatory treatment.

In the case at hand, Justice Olaso Álvarez, who did not write the decision, took the time to add a note to it stating:

In other words, where the employment relationship ends, which in my view should be treated as what is commonly called “dismissal with employer liability”, the reasons for the separation need to be stated in the certificate only if the employee expressly requests it. However, because the reform opened the procedural possibility for the employee to bring special protection proceedings on any analogous ground of discrimination (Articles 404 et seq. and 540 et seq. of the Labor Code), which would also apply where the relationship ends with payment of all labor entitlements, I consider that, although the reasons for the separation should only be stated when the employee so requests, in order to safeguard the objective reasons that led the employer to end the relationship in the face of a claim of that nature, the employer should take the precaution of including the objective reasons for ending the employment relationship, so as to give effect to its right to prove those reasons when it is alleged that the termination was intended to discriminate against the employee (Article 478(10), ibid.).

Article 478 of the Labor Code sets out the employer's procedural burden of proof, and paragraph 10 specifically places on the employer “the justification of the objectivity, reasonableness and proportionality of the measures or conduct alleged to be discriminatory in all claims related to discrimination” (translation).

We can therefore conclude that the principle of dismissal without cause still exists in Costa Rica, based solely on the employer's will, and the law does not expressly require the termination letter to state additional grounds. At the same time, in discrimination claims the burden of proof does not rest entirely on the employee, since Article 478 assigns specific obligations to the employer.

Accordingly, and in the words of Justice Olaso Álvarez, to the extent the circumstances of the dismissal allow, every employer should take the precaution of including the objective grounds for ending the employment relationship, bearing in mind that the employer's will alone may not necessarily be enough.

Although this practice is not an express legal requirement for dismissals with full severance, it brings transparency to the process, strengthens the employer's position in any later litigation and shows that the employer acted in good faith in handling the separation.

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