Termination of an employment contract is one of the most complex and sensitive institutions of labor law, of exceptional importance for both employers and employees. From the employer’s perspective, it is not sufficient merely for a statutory ground for termination to exist. A resolution on employment termination must be carefully planned, legally grounded, and strategically structured. Any procedural error, insufficient reasoning, lack of relevant evidence, or failure to act in a timely manner may lead to litigation and annulment of such resolution.

For the employee, termination is a matter of professional and personal livelihood. Losing a job often means losing the primary source of income, as well as professional and social security. Precisely for that reason, the law provides employee protection, strict procedural requirements, the possibility of judicial review of the lawfulness of the employer’s resolution, and other mechanisms for the protection of rights arising from employment.

This institute carries weight due to the large number of labor disputes in court practice in the Republic of Serbia, where disputes concerning termination of employment occupy a significant place. Although the law prescribes that, in civil proceedings arising out of labor disputes, the court shall pay particular attention to the need for urgent resolution, practice shows that these proceedings often last for years, which further increases uncertainty and costs.

Legal Grounds for Termination of Employment Contract by the Employer

An employer may terminate an employment contract for several statutory reasons, which may be grouped as follows:

1. Reasons related to the employee’s working ability and conduct:

• if the employee does not achieve work results or lacks the necessary knowledge and abilities to perform the jobs he/she is assigned to;
• if the employee has been finally convicted of a criminal offence committed at work or in connection with work;
• if the employee does not return to work with the employer within 15 days from the date of expiry of the period of suspension of employment, i.e. unpaid leave.

2. Culpable breach of work duty
3. Failure to observe work discipline
4. Employer’s business needs

• if, due to technological, economic or organizational changes, the need to perform a certain job ceases to exist or there is a reduction in the volume of work (redundancy);
• if the employee refuses to conclude an annex to the employment contract in cases prescribed by law.

Each of the above grounds for termination requires a specific approach and proper implementation of the relevant procedure, since it is precisely at this stage that employers most often make mistakes. It should also be borne in mind that special protection against termination of employment contract is afforded to pregnant employees, employees on maternity leave, as well as persons using leave for childcare and special childcare, since during the duration of such leave, termination of employment contract is not permitted.

What Are the Most Common Mistakes Made by Employers?

1. Failure to issue and serve a warning on the existence of grounds for termination of employment contract, thereby depriving the employee of the right to defense

In the employment termination procedure due to a breach of work duty or failure to observe work discipline, the employer is required first to conduct the procedure prescribed by law by warning the employee in writing of the existence of grounds for employment termination and giving the employee a period of at least eight days to respond.

Only upon expiry of the time limit for response, i.e. after receipt of the employee’s statement, may the employer terminate the employment contract, if it assesses that the statutory conditions for termination have been met.

The purpose of the warning is to enable the employee to present their defense and to comment on the facts and reasons held against them, in particular as to whether they committed a breach of work duty or violated work discipline, whether there is fault on their part for the breach of work duty, and to point out all other circumstances relevant for the proper resolution of the specific case.

If such warning is omitted, the termination of employment contract is unlawful, regardless of whether the employee may in fact have committed a breach of work duty or violated work discipline.

2. Generic and unparticularized description of breaches of work duty and violations of work discipline

The resolution on employment termination, as well as the warning preceding it, in the case of a breach of work duty or disturbance of work discipline, must contain the legal ground for termination, a factual description of the relevant circumstances, as well as the evidence supporting such allegations.

A breach of work duty, i.e. failure to observe work discipline, must be reliably established. This implies mandatory identification and specification of the manner, place and time of the act constituting a culpable breach of work duty, i.e. a violation of work discipline.

A generic description of breaches, without adequate reasoning and without material evidence substantiating such allegations, renders the resolution on employment termination unlawful.

3. Fault as a mandatory element of breach of work duty

Fault represents the perpetrator’s mental attitude toward the breach of work duty and its consequences. An employer may terminate the employment contract of an employee who commits a breach of work duty, but only if the employee committed such breach through their own fault. Therefore, it is not sufficient for the employer to establish only the existence of an unlawful act; it is also necessary to reliably establish that the breach of work duty was culpable. If fault is absent, one of the essential elements of the ground for termination is also absent, and therefore there is no basis for the employee’s individual liability.

Although breach of work duty and failure to observe work discipline both constitute disciplinary grounds for termination and require implementation of the same procedure, there is an important distinction between them. In the case of a breach of work duty, fault is necessary, whereas in the case of failure to observe work discipline, it is necessary that the employee was aware that by their conduct they were disturbing work discipline, as well as aware of the consequences that such conduct could produce.

Accordingly, the employer’s failure to establish the employee’s fault for a breach of work duty is a common mistake that may result in the unlawfulness of termination of employment contract.

4. Unclear criteria for determining which employee is redundant

One of the common mistakes made by employers in the procedure of determining redundant employees is the arbitrary selection of the employee whose employment will be terminated, without applying clear and objective criteria. Although the Labor Law does not specifically regulate the employer’s obligations in situations where there is no obligation to adopt a redundancy program, it does not give the employer the right to decide arbitrarily which employee is redundant where there are several employees performing the same job.

In such cases, the employer is required to apply appropriate and verifiable criteria based on which it will determine which employee is redundant. In addition, it is necessary first to examine the possibility of applying measures for resolving redundancy. Only after applying such criteria and determining that redundancy-resolution measures cannot be applied may the employer lawfully terminate the employment contract due to cessation of the need to perform a certain job.

Failure to apply objective criteria when determining redundancy is a very frequent deficiency in the employer’s conduct, which renders the resolution on employment termination unlawful.

5. Procedural omissions in case of failure to achieve work results

Failure to achieve work results as a ground for termination requires implementation of a special procedure. The employer must first reliably establish that the employee is not achieving the required work results and then notify the employee thereof in writing. In such notice, the employer must clearly specify in what the failure to achieve work results consists, provide the employee with concrete instructions and guidelines for improving work results, and leave the employee an appropriate period to improve those results.

If the employer leaves the employee an inappropriately short period for improving work results or fails to provide adequate instructions enabling the deficiencies identified to be remedied, the termination of employment contract will be unlawful.

Although this ground for termination is based on insufficient performance, effort and diligence of the employee, without a previously conducted procedure and without giving the employee a real opportunity to improve their results, there can be no lawful termination.

Consequences of Employers’ Mistakes in Terminating Employment Contracts

An unlawful resolution on employment termination entails certain consequences for the employer. The employee may seek before the court annulment of the unlawful termination resolution, reinstatement, compensation for damages in respect of lost earnings, as well as payment of the corresponding compulsory social insurance contributions for the period during which the employee did not work.

Instead of reinstatement, the employee may claim compensation for damages in an amount of up to 18 employee salaries, where the amount of compensation is determined according to the time spent in employment with the employer, the employee’s age, and the number of dependent family members. If the employer proves that circumstances exist due to which continuation of employment is not possible, the court may reject the request for reinstatement and award compensation of damages of up to 36 employee salaries. Where the court finds that ground for termination of employment did exist, but that the employer failed to implement the procedure prescribed by law properly, the court shall reject the employee’s request for reinstatement and award the employee compensation of damages in an amount of up to six employee salaries.

The employee also has the right to apply to the labor inspectorate, within 15 days from the date of instituting a labor dispute, requesting postponement of enforcement of the resolution and reinstatement with the employer. If the labor inspector finds that the employer’s resolution on employment termination has manifestly violated the employee’s right, enforcement of the termination resolution shall be postponed until a final court ruling is rendered.

In addition to civil-law consequences, certain conduct of the employer may, in cases prescribed by law, also lead to misdemeanor liability.

Why It Is Important to Understand the Risks Involved in Termination of Employment

A resolution on employment termination carries significant legal and financial risks for the employer. Improperly conducted termination may lead to court disputes, the obligation to reinstate the employee, payment of damages, and even misdemeanor liability. Therefore, it is not enough merely for statutory ground for termination to exist – every step of the procedure must be carefully and lawfully implemented. Understanding these risks enables the employer to make legally grounded decisions and reduces the possibility of disputes and additional costs.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.