The rules that apply to termination of public employees, that is employees of the state and municipals, are quite different from the rules that apply for the private sector. There are comparable rules that for employees of the state and employees of municipals.
After receiving a letter of termination the notice period takes effect at the end of that calendar month. If the employee does not receive a letter of termination before the end of the month an extra month is added to their notice period. When the employment of a state or municipal employee is terminated it must be done due to objective considerations. There are different procedures depending on whether the cause of the termination relates to the employee or the employer. An employee must be issued a reprimand if the cause of the termination is directly linked to them. If the reason for the termination is to do with the employer, for instance because of reduction in the number of employees due to a reorganisation of an agency, then the employer is not obliged to give the employee a reprimand before the termination takes effect.
A fixed term contract cannot be terminated except when it contains a clause stating that the contract may be terminated by either party before the expiry of the contract. The nature of fixed term contracts is an employment for a certain period of time and when that time has passed the job ends. If a termination takes place without a clause in the contract allowing that, the termination in not valid.
Employees of state and municipals have the right according to Administrative procedure act no 37/1993 to demand a written reason for the termination. Termination is an act of administration decision and therefore the administrative act applies when an employee of the state or the municipals is laid off.
On municipal employees there are no laws that apply directly but the collective wage agreements have clear rules that apply. They state that a reprimand must be given before a termination takes effect.
In general, the wording in the collective agreements of BSRB’s affiliated unions are similar on these matters since most of them negotiate with the Icelandic Association of Local Authorities, that is the joint representative of local authorities in negotiations, other than Reykjavik City.
For government employees the Government act, No. 70/1996 applies.
According to the act the employer has the right to terminate an employment on two reasons; because of actions by the employee and for reasons that are linked to the employer and/or workplace.
In general, the state can't dismiss an employee without giving him a reprimand first. Furthermore, the termination must be built on the same case as the reprimand applied to. That means that the action in question has to be repeated and no amends made by the employee. This was the case in the judgement no 384/2005 by the Supreme Court of Iceland.