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The preclusive time limit for exercising the employer’s right to terminate employment: the legal nature and practical significance of Section 101(3) of the Labour Law

Section 101(3) of the Labour Law (Darba likums) underlines that an employer may give notice for termination of an employment contract upon the grounds set out under Clauses 1, 2, 3, 4 or 5 of Section 101(1).

Such notice must be issued no later than one month from the date on which the breach was discovered, excluding the period of the employee’s temporary incapacity for work, the period during which the employee was on leave or the period during which the employee did not perform work for other justified reasons, but in any event not later than 12 months from the date on which the breach or conduct was committed.

In practice, this provision is often perceived merely as a procedural requirement. However, the relevant case-law of the Supreme Court highlights that it is not a technical formality per se, but rather a rule defining the limits of an employer’s right to provide notice of termination.

This reasoning follows from the Latvian Supreme Court’s recent judgment of 3 December 2025 in Case No. SKC-397/2025, Civil Case No. C771090124. In the latter judgment, the Supreme Court expressly confirmed that the right to give notice of termination of an employment contract on the basis of Section 101(1)(3) of the Labour Law may be exercised not later than 12 months from the date on which the breach was committed and if this time limit is missed, the right to give notice is lost.

By way of example, if in 2026 an employer wishes to terminate an employment contract resulting from the breach or conduct carried out by an employee that took place during 2024, the employer’s right to give notice has ceased due to the expiry of the statutory time limit.

This finding is consistent with the Supreme Court’s earlier case-law. For example, in the judgment of 9 March 2011 in Case No. SKC-762/2011, the Supreme Court characterised the one-month period from the date of discovery of the breach as a preclusive time limit, namely, a time limit that extinguishes a subjective right. In that regard, the Supreme Court reached a very similar conclusion and formulated it even more clearly in the aforementioned judgment of 2025: if an employer does not exercise its right within the statutory time limit, that right ceases to exist and any notice of termination given thereafter is unlawful precisely because of a breach of the procedure for terminating the employment contract.

Although in the earlier judgments the term “limitation period” has been used, the Supreme Court’s approach is to treat the time limit as a preclusive substantive-law time limit and not as a limitation period that may be interrupted, renewed or restarted.

In Case No. SKC-397/2025, the Supreme Court not only reiterated that the time limit is preclusive in nature, but also expressly applied this understanding to the 12-month limit within the meaning of Section 101(3) of the Labour Law. This consideration is important in practice, as it is precisely the 12-month limit that is most often overlooked.

Attention is usually focused on the one-month period as of the date of the conduct or breach discovery, while an insufficient assessment is made of whether more than 12 months have passed since the breach itself was committed, which makes notice of termination impossible irrespective of when the information came to the employer’s attention.

At the same time, the judgment in Case No. SKC-397/2025 also highlights another legally significant aspect.  The Supreme Court underlined that Section 101 of the Labour Law provides an employer with the option to not only give notice of termination but, in certain cases, also to bring a claim before a court for termination of the employment relationship. In practice an employer often finds themselves in situations where the ‘classic’ grounds for notice under Section 101(1) are no longer applicable or cannot be applied with sufficient legal certainty.

Nevertheless, it would be premature to conclude a court claim is always an equivalent substitute for a missed right to give notice. Litigation is longer, more expensive and often involves significant uncertainty, particularly in situations where the employee is a trade union member or where questions of suspension arise in parallel. Therefore, the employer should organise its internal controls in order to avoid missing the statutory time limit.

Determining the date of discovery of the breach: not every indication is the ‘date of discovery’

From an employer’s perspective, the most difficult question is usually not whether the time limit is preclusive, but rather when exactly it starts to run.

In this respect, the Supreme Court’s judgment of 18 June 2020 in Case No. SKC-493/2020, Civil Case No. C73391518, is particularly important. In this judgment, the Supreme Court emphasised the court has a duty to determine precisely, clearly and unambiguously the date on which the breach was discovered, from which the time limit laid down in Section 101(3) of the Labour Law begins to run. General references to the fact that the relevant circumstances were “already known” to the employer are not sufficient.

In another judgment, the Supreme Court highlighted that a shortage identified during an inventory count is not in itself a breach; it is the consequence of a specific person’s action or omission. This leads to an important practical conclusion: the day on which the employer first notices a result, such as a shortage of property, loss of data or another discrepancy, is not automatically the day on which the breach forming the basis for the notice of termination was discovered.

In more complex cases, it may be necessary to establish exactly what happened, which person acted improperly, what the causal link was and how significant the damage caused was. The Supreme Court therefore upheld, in cases involving prolonged or complex breaches, the date of discovery may be the date on which the internal investigation was completed and a report or opinion was prepared establishing the breach.[1]

This approach is also consistent with the Supreme Court’s judgment of 16 December 2015 in Case No. SKC-2486/2015, Civil Case No. C12159814. Here, when assessing the issue of loss of trust, the Supreme court upheld the decisive moment was when the results of the investigation were received, the circumstances of the incident were established and the employee’s fault was determined. In other words, it is not the first suspicions, but rather the sufficient information obtained as a result of the investigation, that established the employer’s right to use the notice mechanism provided for under Section 101(1) of the Labour Law.

The Supreme Court’s case-law to date therefore highlights mere suspicions, a whistleblower report, inventory results, discrepancies in data or another initial indication do not necessarily mean the employer already has ‘sufficient’ information to give a notice of termination to an employee.

Note, however, the employer may not artificially postpone the moment at which the grounds for notice are discovered by unjustifiably delaying the investigation or deferring the assessment of the facts. Therefore, the decisive criterion is not the formal name of the investigation, but its objective necessity and the timeliness of the employer’s actions.

The institution of suspension is of particular relevance in this context. For example, in Case No. SKC-493/2020, the Supreme Court emphasised the suspension of an employee may, in certain cases, be permissible for the duration of an inspection or investigation, in order to prevent the employee from interfering with the establishment of the facts or from continuing to cause damage.

Suspension may therefore be a legally permissible measure in of itself, nevertheless, it neither suspends nor restarts the notice period. The Supreme Court has expressly stated suspension, unlike incapacity for work, leave or other circumstances justifying absence, does not prevent the employer from communicating with the employee, requesting an explanation and taking a decision. Therefore, a period of suspension is not one of the exceptions listed under Section 101(3) of the Labour Law that are excluded from the calculation of the one-month period.[2]

Continuing breach, earlier breaches and the limits of the effect of criminal proceedings

In the context of employment relationships, not all breaches are one-off in nature. This is clearly demonstrated within the Supreme Court’s judgment of 20 May 2025 in Case No. SKC-192/2025, Civil Case No. C29289022. The Supreme Court upheld that, in the event of prolonged absence from work, the continuing nature of the breach is relevant.

As long as the breach has not ceased and an employee continues not to attend work, an employer has the discretion to decide whether and at what point such conduct should be regarded as a material breach of the employment contract. Accordingly, the moment of discovery of a breach is not automatically linked to the first day of absence or the day on which an explanation was requested.

Notably, it allows a distinction to be drawn between a genuinely continuing breach and a one-off breach that has already been completed. If an employee fails to attend a workday without a justified reason, the employer is not required to prove the entire time limit began to run on the very first day of absence and has irreversibly expired. However, no broader conclusion should be drawn from the Supreme Court’s wording. In other words, the doctrine of a continuing breach cannot be used to classify any earlier, one-off conduct as a continuing breach.

A similar, although factually specific, approach can also be seen in the Supreme Court’s judgment of 23 September 2014 in Case No. SKC-2501/2014, Civil Case No. C33397312. In this judgement, the Supreme Court assessed a situation in which, after returning from a business trip, the employee had not worked a single day for the relevant employer and had at the same time entered into an employment contract with another employer.

The Supreme Court upheld the purpose of the one-month period for giving notice is to protect an employee who continues to work after committing a breach. If an employee (of their own volition) no longer attends work and has entered into another employment relationship, the employer’s delay in giving notice of termination does not render the notice invalid. However, the judgment must be interpreted with caution: it is not a general basis for discretionary application of time limits, but rather a solution based on the specific circumstances of the case.

A separate question that arises is whether an employer may rely on earlier breaches that may no longer be used as an independent basis for notice in order to prove the materiality of a more recent breach. The Supreme Court’s judgment of 31 March 2021 in Case No. SKC-86/2021, Civil Case No. C30671019, provides valuable insight concerning this question. The Supreme Court emphasised the time limits laid down under Section 101(3) of the Labour Law do not restrict an employer’s right to refer to an employee’s earlier conduct, which occurred before the running of those time limits began, in order to substantiate the materiality of a later breach. In other words, an outdated breach can no longer serve as an independent ground for notice, but it may provide relevant context for properly assessing the seriousness of the current breach and whether continuation of the employment relationship remains possible.

The impact of criminal proceedings on the time limits laid down under Section 101(3) of the Labour Law is also important. At least two firm conclusions follow from the Supreme Court’s case-law:

1. First, criminal proceedings do not suspend or restart the preclusive time limit.
2. Second, criminal proceedings, an expert examination or material obtained in the course of such proceedings may constitute an important source of evidence for determining when the employer objectively became aware of sufficient information regarding the constituent elements of the breach. In other words, criminal proceedings may affect not the legal nature of the time limit, but the proof of the moment of discovery.

In its judgment of 15 March 2017 in Case No. SKC-704/2017, the Supreme Court emphasised that the existence of criminal proceedings does not remove the employer’s obligation to comply with the time limits for giving notice. Accordingly, an employer cannot justify a delay in giving notice solely by the fact that criminal proceedings are taking place in parallel or their outcome is being awaited.

If the breach has already been discovered and the internal investigation has, in substance, been completed, the time limit laid down under Section 101(3) of the Labour Law continues to run irrespective of the progress of the criminal proceedings.

For example, this is particularly important in cases involving the discovery of forged documents submitted or used by an employee. In this context, the following two situations must be distinguished.

If the breach was a one-off act and completed earlier, the logic applied by the Supreme Court in Case No. SKC-397/2025 does not allow the 12-month period to be calculated from the later date of discovery. Under such circumstances, the issue is not the renewal of the time limit, but rather the fact that the right to give notice on that specific ground may have been lost.

Conversely, if the forged document continues to be used in the employment relationship, if an unlawful state of affairs is maintained on that basis, or if it only becomes objectively possible at a later stage to identify the content of the breach and the person responsible, there may be grounds to discuss a continuing breach. Even in such a situation, however, the employer cannot rely on the court interpreting the preclusive time limit broadly.

The case-law therefore allows for a dispute regarding the correct moment of discovery, not regarding interruption of the time limit.

In Case No. SKC-1892/2014, the Supreme Court disagreed with the approach that the final decision in the criminal proceedings should automatically be regarded as the moment of discovery of the breach. The Supreme Court emphasised the 12-month period laid down under Section 101(3) of the Labour Law is final and cannot be extended, regardless of when the breach was discovered.

In the same case, the Supreme Court further emphasised the duration of criminal proceedings cannot in itself justify the conclusion an employer’s right to give notice is preserved after the expiry of the 12-month period and the mere continuation of the consequences of a breach does not in itself amount to a continuing breach.[3]

The practical application of the Supreme Court’s case-law

The Supreme Court’s case-law provides employers with a clear indication on what is often decisive is not the reprehensibility of an employee’s conduct, however, an employer’s ability to react in a timely, documented and legally correct manner.

The preclusive time limit is not intended to protect dishonest conduct, it is solely intended to ensure legal certainty, the stability of employment relationships and to prevent an employer from keeping old breaches “in reserve” and using them only when it appears convenient to do so.

Therefore, in practice, an employer should not rely on later procedural constructions, but rather on a well-organised internal control system. Such a system should include at least four elements:

1. First, a clear obligation for line managers and heads of structural units to report possible breaches without delay.
2. Second, documentation of breaches or conduct from the moment the first indication is received, clearly distinguishing between merely a suspicion and what has been factually verified.
3. Third, a predefined procedure for internal investigations or service inquiries, with reasonable deadlines, designated responsible persons and an obligation to preserve evidence.
4. Fourth, control mechanisms that allow breaches to be detected in a timely manner, such as inventory checks, access logs, compliance reviews, internal audits, reporting channels and other internal control tools.

Such an approach is important not only from the perspective of preserving the right to give notice, but it also enables the employer to stop harm in a timely manner, reduce losses, preserve evidence and ensure transparency of management.

In other words, Section 101(3) of the Labour Law disciplines not only an employee, but also the employer. The Supreme Court’s case-law on this issue imposes on employers a requirement of professional internal organisation.

In summary, the following conclusions may be drawn:

1. First, the Supreme Court’s most recent case-law leaves no room for doubt that the time limit laid down in Section 101(3) of the Labour Law is preclusive.
2. Second, the employer must be aware the 12-month limit is not a flexible time limit that may be adjusted on grounds of fairness.
3. Third, in complex cases, the central dispute will most often concern when the breach was truly discovered, not whether an indication of it appeared earlier.
4. Fourth, suspicions and suspension do not necessarily mean a breach has been discovered, but they also do not give the employer unlimited time.
5. Fifth, in cases involving continuing breaches, the Supreme Court’s case-law provides for a different approach from that applicable to one-off breaches, but the approach must not be unjustifiably expanded.
6. Sixth, the safest way for an employer to preserve their rights is not to seek a way to “rescue” a missed time limit, but to establish an internal control and response system in which significant breaches are discovered and legally assessed in a timely manner.

The legal significance of Case No. SKC-397/2025 is therefore twofold. On the one hand, it closes the debate on whether an employer may base notice of termination on breaches falling within Section 101(1)(3) of the Labour Law that occurred several years earlier – and the answer to that question is negative. On the other hand, it opens a broader discussion of practical importance for employers concerning the correct determination of the time when a breach was committed and when it was discovered in complex, prolonged and factually complicated situations. It is precisely this issue that is likely to give rise to the main legal disputes in the future.

Jānis Kubilis

Attorney-at-Law, Partner

Madara Zeltiņa

Senior Associate

[1]            Please refer to the judgment of the Supreme Court of the Republic of Latvia of 18 June 2020 in Case No. SKC-493/2020, Civil Case No. C73391518.

[2]            Please refer to the judgment of the Supreme Court of the Republic of Latvia of 18 June 2020 in Case No. SKC-493/2020, Civil Case No. C73391518.

[3]          Please refer to the judgment of the Supreme Court of the Republic of Latvia of 30 September 2014 in Case No. SKC-1892/2014.