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The Newly Adopted Law on Employment Agencies – Equal Rights for Employees but Unequal Rights for Employers

The Newly Adopted Law on Employment Agencies – Equal Rights for Employees but Unequal Rights for Employers

Serbia
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After a long wait and numerous criticisms from the private sector and NGOs, Serbia has adopted the Law on Agency Employment (the “LAE”) which starts to apply from 1 March 2020. The purpose of the law is to provide equal treatment for employees leased by agencies to employers.

Whether this goal is achieved remains to be seen, although the general reaction does not seem to be entirely favorable.

Background for adopting the LAE

Up until now the practice staff leasing was entirely unregulated, but implicitly allowed by governmental authorities and courts. This gray zone status of leased employees led to lowering of employment terms for leased employees compared to “regular” employees that were engaged directly by the employer for whom they work.

In reality, leased employees had very few legal protection mechanisms that regular employees enjoyed and there were not regulatory requirements for agencies that leased employees.

The standards introduced by LAE

The LAE aimed to rectify these shortcomings of an unregulated market that emerged in the legal vacuum regarding staff leasing by obliging employers to provide equal terms of employment to leased employees in comparison to comparative employees working with the employer and by providing a legal framework for staff leasing agencies.

The key rights acknowledged and guaranteed to leased employees include equal pay and other types of remuneration, health and safety conditions and annual vacation days as those provided to regular employees with an employer.

A threshold is set for the number of leased employees that can be engaged by an employer that runs at no more than 10% of the number of total employees.

Although the LAE does raise the bar of employee rights in some key aspects in a broader sense, some of the key rights are still missing.

New solutions or new problems?

It could be argued that an entirely new set of problems and ambiguities were created by the enactment of the LAE.

One of the most glaring objections to the LAE can be found in what seems to be a limitation of relief that can be sought before courts by a leased employee. By a strict reading of the letter of LAE, leased employees can claim up to 18 monthly salaries in case of unlawful termination of their employment.

Coupled with the fact that labor disputes before Serbian courts can last up to 6 years, the limitation of recourse of leased employees can lead to a gross inequality between regular and leased employees, and create an entirely new disbalance between the two.

Another highly questionable rule of the LAE labeled “presumption of leasing” by which employees that provide services for an employer or sit in the premises of another entity other than their employer, are presumed to be leased employees.

Finally, even employers using leased employees are potentially exposed to risks if they are not careful in their business dealings with staff leasing agencies.

For example, the LAE introduces a joint and severable liability of user employers for salaries and other remuneration of leased employees. This can lead to financial exposure of employers in the event that, for example the agency goes bankrupt or refuses to pay the salaries for leased employees.

Bearing in mind that the law starts to apply from March 2020 a thorough revision of the terms of agreements with staff leasing agencies is recommended for all companies, in order to off-set some of the inherent imbalances and unclarities of the newly fashioned LAE.

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

By Milan Samardzic, Partner, and Boris Radojcic, Senior Associate, Samardzic, Oreski & Grbovic

Serbia Knowledge Partner

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