Insufficiently precise provisions of the law, unharmonized court practice, as well as the average duration of the employment disputes, were affected creating the “fear of litigation” amongst many employers. Due to the stated reasons, instead of unilateral employment termination, even in cases when there is firm evidence confirming its lawfulness and validity, the employers tend to execute the mutual agreement on employment termination, as well as to pay certain one-time compensation on the said basis.
The risk in case of losing employment dispute is definitely higher for the employer in case the employee established employment relation an indefinite period, due to which reason it is no surprise that it has become common practice to establish employment on a definite period due to “temporary increase of the scope of work” with new employees.
Having in mind that the maximal duration of the probation work is six months, the employers sometimes prolong the probation work of the employees through work on a definite period, before deciding to establish employment for an indefinite period with the employee in question.
If we exclude special cases when work on a definite period can be established for a period longer than 24 months (with and without interruptions), the Labour law stipulates that the employment relation on a definite period can be established due to "objective reasons that are justified by the deadline or by the execution of a certain job or the occurrence of a certain event, during the duration of those needs".
The stated legal provision indicates that it refers to the employer's temporary need to perform certain tasks or to engage additional executors for the existing tasks, which the employer is obliged to state in the employment agreement itself – one of the mandatory elements of the employment agreement is the basis for establishing the employment relation on definite period.
In the event that the conditions prescribed by the Labor law for establishing employment relation on a definite period are not met, employers are exposed to practically the same risk as in case of termination of employment relation established on an indefinite period.
Namely, the Labor law stipulates that "if employment agreement on definite period is executed contrary to the provisions of this law or if the employee remains working for the employer for at least five working days after the end of the period for which the agreement was executed, it is considered as if the employment relation was established on indefinite period".
Therefore, if the employee could prove that there was no objective need for the work on a definite period, but that there was a constant need to perform specific tasks for the employer, i.e. a greater number of executors, the claim could refer not only to the annulment of the resolution on termination of the employment agreement, but also to determine the existence of the employment relation on indefinite period.
Due to the aforementioned reasons, employers should pay special attention to the fulfilment of not only the formal conditions for establishing an employment relation on a definite period, but also the existence of an actual need for temporary engagement of an individual.
By Jelena Nikolic, Partner, JPM & Partners, JPM & Partners