Labour Dispute: Imposition of a Disciplinary Sanction

Insight No.04/26                          May 2026

In brief

Article 123 of the Labour Law of Mongolia ("Labour Law") regulates labour disciplinary misconduct and the corresponding disciplinary sanctions. In practice, disputes arising from the imposition of disciplinary sanctions constitute a noticeable share of labour disputes adjudicated by the courts.

In this insight, we highlight a decision of the Supreme Court of Mongolia concerning a labour dispute over the invalidation of a disciplinary sanction and summarize the key legal points that are particularly relevant for employers when imposing a disciplinary sanction.

Factual background

The employer, Company X (“Employer”), imposed a “warning” disciplinary sanction on Employee O (“Employee”) by an order dated 19 June 2024. Subsequently, by an order dated 17 July 2024 of the same year, the Employer imposed another disciplinary sanction of a 20% reduction in basic salary for one month (“Second Disciplinary Sanction”). The Employee filed a claim with the court seeking to invalidate the order imposing the Second Disciplinary Sanction, arguing that the Employer had unlawfully imposed multiple disciplinary sanctions for a single misconduct and had failed to obtain any explanation or statement from the Employee prior to imposing the sanction. At the time the Second Disciplinary Sanction was imposed, the Employee was on annual leave and only became aware of the disciplinary sanction after returning to work. On this basis, the Employee argued that the Employer had breached Articles 123.3 and 123.6 of the Labour Law.

In response, the Employer argued that the imposition of the disciplinary sanction was justified, as the Employee had committed additional misconduct instead of rectifying previously identified violations.

Court Decisions

The dispute was reviewed at three levels of the court. The First Instance Court fully upheld the Employee's claim, whereas the Appellate Court reached a contrary decision, dismissing the claim in its entirety. Ultimately, the Supreme Court of Mongolia ("Supreme Court") upheld the decision of the First Instance Court, thereby invalidating the Employer's order imposing the Second Disciplinary Sanction.