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Legal Tools for Reducing Negative Impacts of the State of Emergency onto Labor Relations in Serbia

Legal Tools for Reducing Negative Impacts of the State of Emergency onto Labor Relations in Serbia

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Over one month has gone by as of the day when the state of emergency was declared, and many special regulations applicable to labor relations were adopted.

And, in spite of the prompt state intervention, many issues remain alive amid new measures in domain of labor relations directly relating to the position of employers during the state of emergency, and indirectly to their employees.

That is why, in the continuation of this text, we have endeavored to provide some clarifications of the numerous dilemmas that the Serbian economy faces in practice these days.

Part-time employees work

If the state of emergency caused a decrease in workload at the employer, the employer may consider introducing part-time work of employees. This may apply to all employees, or only to some individual organizational units with the employer, depending on the needs of the process and organization of work.

Anyway, the employer is obliged to provide part-time employees with the same working conditions that apply for full-time employees, except that part-time employee's earnings shall be reduced on a pro rata temporis principle, in proportion to the time spent working.

Since this triggers change of employees’ earnings and elements for determining salaries (working hours), it is necessary that each employee first accepts these changed working conditions, i.e. reduced earnings commensurate with part-time work. 

For this reason, the employer must provide each employee with (i) the specific notification which includes reasons for changing the working conditions, and (ii) the draft annex to the employment contract.

And, this draft annex must specify change of the amount of employees’ earnings due to decrease of her/his working hours, and modify their working hours from full-time to part-time.

While each employee has the right to refuse to enter into this annex to the employment contract, the employer, on the other hand, may terminate employment contracts to dissenting employees in such cases.

Surplus of employees as one of the consequences of the COVID-19 virus epidemic

Nationwide restrictions that followed COVID-19 virus pandemic not only obstructed, but also completely paralyzed some branches of the Serbian economy. This called for economic and organizational restructuring of many employers, which ultimately led to redundancies and job cuts.

So, if the employer determines that within next 30 days, due to such changes/restructurings, services of some permanent employees will no longer be needed, such employer may be obliged to adopt a program for solving the surplus of employees (“Program).

And, not every employer will have to fulfil this statutory obligation, but the one that:

  • has more than 20 and less than 100 permanent employees, and at least 10 of those employees will be made redundant;
  • employs between 100 and 300 permanent employees, and at least 10% of those employees will be made redundant;
  • has over 300 permanent employees and at least 30 of those employees will be made redundant;
  • determines that at least 20 employees will cease to work within 90 days, regardless of the total number of employees.

Prior to the adoption of the Program, the employer is obliged to take appropriate measures for further employment of redundant employees in cooperation with the representative union with the employer (if any) and the National Employment Service.

The Program must include: reasons for termination of the need for work of employees, total number of employees with the employer, number, qualification structure, age and length of service of employees who are redundant and the jobs they perform, criteria for determining redundancy of employees, measures for employment: transfer to other jobs, work with another employer, retraining, part-time not shorter than the half of full-time job and other measures, means of addressing the social-economic position of redundancies and the deadline for termination of the employment contract.

The employer is obliged to submit the draft Program for opinion to the representative union with the employer (if any) and to the National Employment Service no later than eight days from the day the Program proposal is determined. Within 15 days from the receipt of the Program, the union may express its opinion about it, while the National Employment Service may propose measures to prevent or minimize the number of employment contracts’ terminations, i.e. to provide retraining, re-qualification, self-employment and other measures for the new employment of redundant employees. The employer is obliged to consider and take into account these proposals and opinion, and to inform their creators about its position regarding those measures within 8 days (as of receipt of those respectively, we assume, because the subject matter law is not clear when this deadline begins to run).

The criterion for determining the surplus of employees cannot be employees’ absence from work due to temporary disability, pregnancy, maternity leave, child care and special child care.

If the new circumstances triggered the sequence of events described above, termination of the employment of an employee who has been declared redundant entails the employer’s obligation to make severance pay before the termination of the employment. This obligation applies only to permanent employees who have worked, at least one year, for/with the employer. 

The amount of severance pay is determined by a collective agreement, by a rulebook, or by an employment contract, but cannot be lower than the sum of one-third of the employee's salary for each completed year of employment with the employer at whom he is entitled to severance pay. Therefore, the severance pay set forth within the internal labor acts may only be higher than the amount guaranteed by the law, and therefore, never lower, since such a provision would be null and void.

If the employer does not pay the employee severance pay and cancels his employment contract, the employer is exposed to the risk of misdemeanor liability - the employee can report this employer to the labor inspection which, if it finds any irregularities and violation of labor rules made by the employer, shall order to the employer to reinstate the employee to work.

In terms of protection of rights and privileges, employees who were made redundant and employees who did not receive severance pay (in whole or in part) before termination of employment, may recourse to the state courts in two following proceedings:

  • for annulment of the decision on the unlawful termination of the employment contract (if the dismissal was given for unjustified reasons, or if the procedure for giving the termination of the employment contract prescribed by labor rules was not followed). The deadline for initiating a labor dispute is 60 days from the day of this decision reception by the employee.
  • severance pay litigation. Given that the pecuniary claims arising from labor relations become obsolete in 3 years from the date of maturity, the same applies to the severance pay. Therefore, if the claim for collection of discontinuance wage is not filed within the mentioned deadline, the claimant shall be precluded from taking any action in that regard.

After making employees redundant, time limited restriction to freely select and employ new employees automatically apply to all employers who exercised the aforementioned rights and privileges.  

So, if the need for the same jobs with the employer reappears within three months from the date of making redundancies for such positions, the employer will not have freedom to immediately employ candidates of his choice, but shall be obliged to offer his former employees their jobs back. Upon expiry of the said period, the employer will regain legal power to freely choose the person with whom he wishes to conclude a new employment contract.

Finally, employees that are made redundant are entitled to financial compensations under the Serbian Employment and Unemployment Insurance Law. These entitlements may be exercised if employees have previously been insured for a period of at least 12 months continuously, or in the last 18 months with interruptions, although the amount of each compensation will depend on specific time length of previous insurance. Also, eligible employees access such compensation privileges by submitting respective claims to the National Employment Service no later than 30 days from the date of when their employment has been terminated. In order to prevent the spread of the virus infection, now all applicants have the opportunity to submit their applications to the National Employment Service electronically.

State intervention

As one of the remedial measures for the business stagnation caused by the COVID-19 virus epidemic, the Serbian government undertook to provide financial assistance for employers in the private sector who, during the state of emergency, do not terminate employment contracts to significant number of their employees,

Namely, the newly introduced regulation governs fiscal benefits and direct giving to private sector companies and financial assistance to citizens in order to mitigate the economic consequences of COVID-19 disease. It provides for the payment of grants from the budget of the Republic of Serbia in the amount of the minimum net salary for March 2020. Such grants are scheduled for May, June and July 2020. In this case, payment of grants shall be made on the basis of the working time criteria, which is determined thorough data from the PPP-PD tax application for the corresponding accounting period. 

Conversely, an employer who reduces the number of employees by more than 10% from 15 March 2020 until the expiration of three months from the last payment of these direct benefits, loses the right to use such benefits. This penalty applies only in case of laying off permanent employees. On the other hand, there are no consequences if employments expire or are terminated to employees with fixed-term employment contract dated before 15 March 2020, ending within the time frame from 15 March 2020 until the expiration of three months from the last payment of direct benefits.

By Ivana Cvetkovic Diafa, Senior Associate, and Miomir Stojkovic, Principal, Stojkovic Attorneys

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