The Constitutional Court: Lawsuit for Payment of Mandatory Social Insurance Contributions Does Become Time-barred

The Constitutional Court: Lawsuit for Payment of Mandatory Social Insurance Contributions Does Become Time-barred

February 27, 2024

The practice of the courts of the Republic of Serbia regarding an employee’s right to claim payment of contributions for mandatory social security by an employer in the court proceeding has been inconsistent in the previous period.

Namely, the following standings could be encountered in previous judicial practice:

  • deciding on this matter does not fall within the jurisdiction of the court, but is subject to an administrative (tax) proceeding, i.e., before the competent administrative (tax) authority, i.e., according to the provisions of the Law on Tax Procedure and Tax Administration (“LTPTA”), since the contribution represent public revenue; accordingly, such lawsuit of the employee shall be dismissed (e.g., Conclusion of the Civil Department of the Supreme Court of Cassation dated March 23, 2010, and Decision of the Court of Appeal in Belgrade no. Gž1 3263/2014 dated November 13, 2014);
  • deciding on this matter falls within the jurisdiction of the court and constitutes a labor dispute, since taxes and contributions (for mandatory social insurance) paid from and on a salary constitute salary within the meaning of the provisions of the Labor Law (e.g., Decision of the Constitutional Court no. Už-3506/2012 dated February 21, 2013).

Furthermore, judicial practice has also been inconsistent regarding the jurisdiction of the court deciding on this matter, i.e., whether a basic or higher court is competent (e.g., Decision of the Court of Appeal in Belgrade no. Gž1 17/2014 dated February 20, 2014).

In addition, there was long a prevalent view in practice, based on the provision of Article 114e of the LTPTA, that the right of an employee to claim the payment of contributions does not become time-barred (e.g., Judgment of the Supreme Court of Cassation no. Rev2. 204/21 dated July 8, 2021). This provision, namely, stipulates that the provisions of the LTPTA governing the statute of limitations of the right to determination, collection and refund, as well as the settlement of due obligations through offsetting, do not apply to contributions for mandatory social insurance. Based on this provision, numerous court decisions were made in the previous period, obliging employers to pay contributions, especially for the period before 25-30 years for which the competent branch of Pension and Disability Insurance Fund of the Republic of Serbia did not have evidence that the contributions were paid.

Position of the Constitutional Court

The Decision of the Constitutional Court of the Republic of Serbia no. Už-11435/2020 dated February 2, 2023, has provided a new interpretation of the law, significantly different from the previous practice.

Namely, the respective standing is essentially based on the following:

  • LTPTA regulates tax procedure, i.e., the rights and obligations of taxpayers in this regard;
  • LTPTA, as well as the Law on Contributions for Mandatory Social Insurance, prescribe that contributions are public revenue, which the employer is obliged to pay for the employee (i.e., from and on the salary);
  • the Labor Law stipulates that the salary is considered the salary that includes taxes and contributions paid from the salary.

In accordance with the aforementioned provisions, the Constitutional Court concludes:

  • that contributions are public revenue, calculated and paid by the employer as the obligor for the employee;
  • that contributions, in a part, constitute an integral part of the salary, and therefore, a claim arising from employment;
  • that the relationship between the employer and the employee constitutes a civil law, i.e., obligation law relationship;
  • that LTPTA regulates a completely different relationship, i.e., the one between the Tax Administration and the taxpayer (employer), and therefore cannot be applied in a court dispute concerning the employee’s claim against the employer for unpaid contributions;
  • that the employee’s claim against the employer for payment of contributions for mandatory social insurance becomes time-barred, as well as any other claim arising from employment.

The Constitutional Court, therefore, considers that the application of the provisions of the LTPTA to the civil, i.e., obligation law relationship between the employer and the employee, would constitute arbitrary application of the law, thereby violating the employer’s right to a fair trial.

Conclusion 

The employee’s claim for the payment of contributions arising from employment constitutes a claim arising from employment, and therefore becomes time-barred in accordance with the provisions of the Labor Law and the Law on Obligations, i.e., within a period of three years from the date the obligation was incurred.

On the other hand, the right of the Tax Administration to determine and collect this obligation from the employer as the obligor in administrative (tax) proceeding does not become time-barred.

Finally, the question arises as to what remains available to an employee who, after the expiration of the aforementioned period, finds that contributions have not been paid for the entire period of employment with the employer (which is most often the case in practice). In this case, the employee can initiate proceedings before the labor inspectorate, as well as before the Tax Administration, with an uncertain outcome.

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