Dear friends and clients,
In light of the ongoing COVID – 19 pandemic and the state of emergency declared in Republic of Serbia on March 15, below is a short overview of key legal issues affecting companies operating in Serbia:
State of Emergency:
State of Emergency was declared in Serbia on 15 March 2020. The decision was accompanied by a number of administrative measures aimed at limiting the spread of the COVID – 19 virus. For instance, working hours of certain business have been limited, schools and kindergartens are suspended, bordercrossings have been severely restricted, public gathering of more than 50 people have been banned etc.
It is expected that new measures will be announced and implemented depending on the development of the situation. NKO will continue to closely monitor the new developments and will provide regular updates on our LinkedIn profile: https://www.linkedin.com/company/nko-partners/
Work from home
After issuing a recommendation to that effect, on March 16, the Government adopted and announced the Decree on Organization of Work during the State of Emergency (‘’Decree’’). Pursuant to the Decree employers are obliged to organize work from home or work from distance whenever this is possible in accordance with the general act or employment contracts. Even if work from home is not regulated by the existing internal regulation, employees may be directed to work from home or from distance based on employer’s decision, if this is practicable from the standpoint of work organization.
Employer’s decision needs to contain the working hours and the method of supervision over employees’ work. Employers are required to keep records of employees who are referred to work from home. Although the Decree is a general act of lower rank in relation to the Labor Law, we are of the opinion that due to the exceptional circumstances, the Decree provides legal grounds for organizing work from home during the state of emergency without signing of annexes to the employment contracts (which is a requirement in accordance with the Law in the normal circumstances).
For those business activities which cannot be performed from a distance, employers are required to adjust the work process to the state of emergency, which means: (i) organizing work in shifts if possible, in order to limit the number of employees in the premises; (ii) organizing meetings electronically (video link etc.); and (iii) postponing business trips within the country or abroad.
Employers are obliged to observe general, specific and extraordinary measures for protection of health and safety at work, in line with the Law on Protection of the Population from Infectious Diseases. Specifically, employees who are in contact with the clients/customers or share the workspace with other employees, have to be provided with sufficient quantities of protective equipment. The Decree comes into force on the day of its announcement.
In line with the above, it is up to the employers to decide which jobs can be preformed from distance and which cannot, but there should be an objective justification for employer’s decision.
Paid leave due to suspension of work or decrease of work
Due to the virus outbreak and the ensuing administrative and preventive measures, many employers will face temporary decline of business operations. In accordance with the Labor Law (Article 116) this enables employers to refer all or some of the employees to a paid leave of up to 45 working days.
Paid leave may be extended for more than 45 working days subject to the approval by the Ministry of Labor and obtained opinion by the labor union in the particular branch.
This covenant may be used to mitigate the economic effects of the virus outbreak for the employer, since employees are entitled to a reduced salary compensation, equal to 60% of the average salary in the previous 12 months (but the compensation may not be lower than the minimum salary).
Paid leave may be ordered based on employer’s unilateral decision, which has to contain reasons justifying this measure (i.e. temporary cessation or decrease of some or all work operations).
Cessation of work based on administrative order or employer’s decision
In case that some businesses are mandated to suspend their work operations due to administrative orders or inability to maintain health and safety at work, employees can be referred to paid leave for an indefinite time in line with Article 117 of Labor Law. Specifically, cassation of work may be based on the decision of the state authority or the employer, but in either case this entails complete shut-down of the work process mandated by objective reasons.
In this case compensation is determined in line with employer’s general act or employment contract. If this issue is not regulated by internal regulations yet, the employer should adopt amendments to the Employment Rulebook and stipulate the mechanism for calculating the compensation of salary during paid leave. In case of employers who are bound by collective bargaining agreement concluded with labor unions, the issue of compensation during paid leave should be regulated by such collective bargaining agreement.
Anyway, although the Labor law does not specify the amount of compensation during the shutdown, our opinion is that this compensation should not be lower than compensation for paid leave, i.e. 60% of the average salary in the previous 12 months, since there is no other benchmark that could be applicable for this situation.
If the labor union agrees to a lower compensation this should be stipulated in the amendments to the collective agreement. If the labor union does not cooperate and does not want to sign the amendments to the collective agreement, in our opinion the employer may determine the amount of compensation unilaterally, as long as it not lower than the above benchmark.
Measures which would mandate cessation of work operations for some businesses have not been adopted yet, but this is something to be monitored as the situation develops.
Redistribution of work hours:
Article 57 of the Labor Law allows redistribution of working hours in some situations, to the effect that working hours are distributed unevenly between different periods (insofar as the average weekly hours over a six months period are equal to the regular working hours).
This is a potential solution for employers who are experiencing a temporary decline in business, but who expect that this will be compensated by higher work requirements in the future. In that sense, employers may require some or all employees to work shorter hours in the upcoming period (e.g. 30 hours a week), which will be compensated by longer working hours in the later period (e.g. 50 hours a week).
Note that redistribution of working hours does not affect the salary, which remains the same irrespective of the fluctuation in distribution of working hours. Thus, this is a solution mainly for employers who expect increase of business operations after the crisis is over.
Some employers are referring employees to annual leave while the business is in decline, so that they would be available once normal operations resume. Note that in accordance with the law, decisions on annual leave may be delivered electronically, but they must be delivered at least 15 days prior to the day of commencement of the leave. The exception is if employees themselves request the annual leave, when the prior notice is not required.
Employers should make sure to observe internal regulations when it comes to usage of annual leave. In addition, referring employees to use annual leave without their consent and mandatory prior notice, may engender discontent within the organization, and even measures by the Labor Inspectorate. In other words, this would be a more ‘’aggressive approach’’, which should be used with caution.
Due to reduced business operations and requirements for work force, some employees may consider switching to part-time employment (i.e. engagement for less than 40 hours per week), in order to reduce the costs and optimize employees’ efficiency.
In order to implement this model with the existing employees, annexes to the employment contracts would need to be signed, which would stipulate the exact weekly work hours, while the precise work schedule may be determined subsequently by the employer.
Note that transition to part-time employment (permanent or temporary) may not be imposed on the employees, and that it is predicated on their consent.
Employees for a definite term and other forms of employment
Employment contracts of the employees engaged for a definite term may be terminated if their engagement is no longer required due to the reasons related to the pandemic and state of emergency (e.g. reduction of business operations). The same applies to contracts for temporary and occasional jobs and other forms of engagement outside of employment, although the covenants of the individual contracts should be observed in each individual case.
Application of disciplinary measures and sanctions
At the present moment there are no administrative measures which ban or prohibit certain business or work operations. Therefore, employees are required to come to work and conduct their work assignments, unless certain measures are implemented by the employer itself. By the same token, employees may be sanctioned for failing to honor their work schedule or perform their work assignments.
Notwithstanding the aforementioned, employers should be extremely cautious when applying disciplinary sanctions (suspension, reduction of salary, termination of employment etc.), whenever there are indications that employee’s failure may have been caused by the extraordinary circumstances connected with the pandemic and/or the state of emergency. In other words, employees may not be held accountable for breach of employment duties or discipline which could not have been reasonably avoided due to reasons beyond their control. Otherwise, there is a risk of subsequent legal action, but in some case also of negative publicity.
Health and safety at work
Employers are generally obliged to ensure adequate work conditions in terms of health and safety at the workplace. In light of the present circumstances, employer should especially make sure that additional measures and precautions are implemented in order to reduce the chances of contamination amongst employees at the work place (e.g. procurement of sufficient quantities of sanitation gents, observance of hygiene measures, limiting the number of people in the premises, use of protective masks etc.).
In that regard, employers should observe instructions and recommendation by the competent authorities and also consult with specialized agencies which are engaged for health and safety services. Furthermore, if there is a suspicion that an employee has COVID-19 symptoms, the employer is obliged to remove the employee from work, notify competent health institutions and follow protocols issued by the competent authorities.
Termination of employment based on redundancy is predicated upon permanent cessation of requirements for a particular type of work or work position. In other words, cessation or reduction of requirements for work needs to be permanent in order to justify termination of employment based on redundancy.
Therefore, at this stage redundancy procedures based on the decline of business seem premature, as it is yet to be seen what the long-term effects of this health crisis will be (in particular on certain businesses). In that sense, the courts would likely not uphold termination of employment based on redundancy due to anticipated or future reduction of business operations, as opposed to the reasons which have already been realized.
Nevertheless, this is something that may have to be considered as the crisis unfolds, depending on the further developments and economic effects of the situation.
Force majeure / change of circumstances
The pandemic of the COVID-19 and the ensuing administrative measures are likely to affect many businesses and contractual relationships, which raises the question of legal qualification of the crisis and whether it constitutes force majeure or change of circumstances (rebus sic stantibus) in the sense of the law.
On a general note, circumstances at hand could be qualified as force majeure in accordance with the Law on Torts and Obligations (Article 263), and as such could excuse the debtor from its contractual obligations. Nonetheless, each case should be examined individually, depending on the contractual covenants and on how exactly the parties’ performance of contractual obligations was affected by the virus outbreak.
Similarly, the situation related to the virus outbreak can be qualified as change of circumstances, and as such trigger mechanisms for rescission or revisions of individual contracts, in line with Article 133 of the Law on Torts and Obligations. Of course, same as with force majeure, each case would have to be considered individual in order to determine whether the legal conditions are met.