Procedures For Terminating the Agreement
Please note the specific and very formal rules on unilateral termination of employment by the employer as there is only a limited number of reasons for such a decision i.e. Regardless of the specific reason for employment termination, the employer must render a decision in writing containing a detailed explanation of the reason and the termination procedure as well as information on the employee`s post-termination rights and obligations such as notice period duration, severance payment (if any), non-compete obligations (if any), privileged information, return of employer`s property, intellectual property issues and similar issues.
An employment contract cannot be terminated without previous written warning issued to the employee. The FBH Labour Law recognizes two types of breaches i.e. light breaches of duties and severe breaches of duties, whereas the breaches are not listed themselves. The employer should make a list of both types of breaches in the Employment Rulebook. In addition, such breaches can be listed in collective bargaining agreements whereas an individual employment agreement would not be appropriate to avoid any different treatment of employees. In case of light breaches of duties, the employee should first be given a written notice turning attention to the breach with a formal notification that in case the light breach is repeated in the next six months, the employer intends to terminate the employment.
In case of severe breaches of duties, the employment can be terminated immediately, without notice period and without severance payment, with the exception of the following procedural requirements:
- the breach has occurred within the last year;
- the employer learned about the breach in the last 60 days (general rule for FBH);
- the employee was given a chance to state his/her defence prior to the decision to terminate employment.
Employment contracts cannot be terminated without previous written warning issued to the employee. The RS Labour Law differentiates the following types of breaches i.e. light breaches of duties, severe breaches of duties and severe breaches of work discipline. Both severe breaches of duties and severe breaches of working discipline are listed by the RS Labour Law. In case of severe breaches of duties and severe breaches of working discipline, the employment can be terminated immediately, without notice period and without severance payment, with the exception of the following procedural requirements:
- the employer may terminate the agreement based on the above stated procedure within 3 months of the day he/she learned of the breach and 6 months from the day the breach has occurred, at the latest;
- the employee was given a chance to state his/her defence prior to the decision to terminate employment.
FBH: The Employee may terminate his/her employment at any time, by a written statement with a minimum seven days’ notice (FBH) unless collective bargaining agreements, Labour Enactments or the Employment Contract prescribe longer notice periods. In any case, the notice period for termination of employment by the Employee may not be longer than one month. The Employee is not obliged to justify the reasons for such termination. If the reason for such termination is breach of duties by the Employer, there is no obligation of providing a notice period. Based on the Employee’s notice on termination, the Employer issues a Resolution on Employment Termination.
RS: The Employee may terminate his/her employment at any time, by a written statement with a minimum 15 days’ notice period. The Employee is not obliged to justify the reasons for such termination. If the reason for such termination is breach of duties by the Employer, the employee shall give notice to the employer on the employment termination at least one day prior to the employment termination day. Based on the Employee’s notice on termination, the Employer issues a Resolution on Employment Termination.
The employee may terminate the employment contract based on the above stated procedure of termination in case of breach of duties by the Employer, no later than 15 days from the day of learning that the employer has violated the obligations stipulated by the law or employment contract.
Termination On Notice
According to the Labour Laws, the notice period is only mandatory in the case when the employee is being dismissed due to underperformance, if an employee refused to sign the annex and when termination of employment is due to technological, economical or organizational reasons, when the notice period is at least 30 days. In all other cases of employment termination by the Employer, the employment terminates on the date when the Resolution on Employment Termination is delivered to the Employee (unless internal employment regulations of the specific Employer provide for a notice period). In case of a court dispute, the Employer is obliged to provide proof for existence of justifiable reasons for termination.
Termination By Reason Of The Employee's Age
In case of retirement, the Employer may unilaterally issue a Resolution on employment termination (without the Employee’s consent or request) only if the employee has reached 65 years of age and at least 20 years of pensionable service (cumulative conditions) or if based on the records it is determined that employment of the employee lasts for 40 years. In other cases, when the employee has fulfilled conditions for early retirement which are prescribed by special retirement regulations (although he or she has not reached 65 years of age and 20 years of pensionable service) the employee’s request is mandatory. In such cases, when the employee submits a request, the Employer issues a Resolution or enters into Mutual Agreement with the employee which confirms employment termination due to retirement.
Automatic Termination In Cases Of Force Majeure
Employment agreement may be terminated upon objective impossibility for the execution of the employment contract.
FBH: In cases in which an employer employing more than 30 employees is to terminate employment of at least five employees in the next three months due to technical, economical or organizational reasons, a collective redundancy procedure requirement is triggered which includes primarily the obligation to consult with the workers` council or union. Consultation must start at least 30 days before the terminations are intended.
The employer must in such cases draft a collective redundancy program with the content legally required.
The collective redundancy procedure usually takes up to 5 - 6 months.
Please note that based on the aforementioned assumptions in relation to the Transaction, the Company does not meet the prescribed requirement (neither in RS, nor in FBH) in relation to the number of employees, which would trigger the obligation of the employer to draft a redundancy program as described above.
RS: The employer is obliged to adopt a Redundancy Program for resolving redundancies (hereinafter: the program), in case he/she determines that due to technological, economic or organizational reasons, within a period of 90 days, the need for employment of employees who are employed for an indefinite term will cease, for at least:
- 10 employees with an employer employing more than 30 employees and less than 100 employees for an indefinite period of time;
- 10% of employees with an employer employing more than 100 employees for an indefinite period of time;
- 30 employees with an employer employing over 300 employees for an indefinite period of time.
Please note that the redundancy program shall be adopted by the employer who plans to terminate the employment relationship with 30 workers within a period of 90 days, for the reasons stated above, regardless of the total number of employees with the employer. The redundancy program must comply with the legal requirements.
The Redundancy Program must first be aligned (consulted) with the Council of Employees (if formed) and Union (if formed). If no such organizations are formed, it is advisable to consult directly with the employees.
The employer is obliged to submit the draft redundancy program to the Union or the Council of Employees no later than eight days from the day from the day of determining the draft redundancy program proposal, with the request to the Union or Council of Employees to provide their opinion on the program.
Termination By Parties’ Agreement
The Employee and Employer can enter into a Mutual Agreement on Employment Termination. The content of this Agreement is subject to free arrangement between the parties. In any case this agreement should regulate all mutual rights and obligations in relation to employment termination (termination notice, severance payment, non-competition clause, repossession of items, etc.). We highlight that, from the Labour Law perspective, severance payment is not mandatory in this case but it can be stipulated by the parties. Also, if a non-compete clause is agreed, the maximum period is up to two years (FBH) / one year (RS) after the termination of employment and the Employer is obliged to pay to Employee at least 50% of his/her average salary in three months prior to employment termination, for each month of duration of the non-compete clause.
Directors Or Other Senior Officers
The engagement of a Director/Management Board can be executed through establishing employment for an indefinite or fixed term or without establishing employment, in which case a separate Contract on mutual rights and obligations in accordance with the employment rules of the employer is mandatory.
FBH: It is important to note that sections of the Labour Law that regulate working hours, breaks and leaves, protection of employees, salaries and termination of employment are not applicable to Directors/CEOs and it is recommendable for these matters to be regulated in the Contract.
RS: Please note that the director is entitled to remuneration for work which is considered as a salary and other rights, obligations and responsibilities in accordance with the contract. Such provision of RS Labour Law imposes an obligation to a company to agree on at least a minimum salary in the employment/management contract with the director.
Special Rules For Categories Of Employee
Employers cannot terminate employment during pregnancy, temporary inability to work due to sickness or injury sick leave for work related reasons, maternity leave and the childcare period as prescribed by the Labour Laws.
There are no specific regulations regarding Whistleblower Systems, however there are two laws regarding the protection of persons who report corruption:
- — On state level Law on protection of persons who report corruption in BiH institutions (''Official Gazette of Bosnia and Herzegovina'' No. 100/13);
- — On entity level in the Republic of Srpska ("RS") - Law on protection of persons who report corruption (''Official Gazette of Republika Srpska No. 62/17).
Specific Rules For Companies in Financial Difficulties
In case of financial difficulties i.e. if a bankruptcy proceeding is opened over a company, all employment contracts are terminated in accordance with the applicable Bankruptcy Act. Upon the opening of the bankruptcy proceedings over a company, the employees are entitled to request compensation of damages due to early termination of the employment contract, severance pay or other rights acquired until the day of opening the bankruptcy proceeding, and are considered as creditors in the bankruptcy proceeding against the company.
Special Rules For Garden Leave
There is no specific provision regarding garden leave.
Restricting Future Activities
An employer and an employee may agree a contract stipulating that the employee, for a specific period of time following the ending of an employment agreement, however no longer than two years (FBH) / one year (RS), may not be employed with a competitor of the employer, and that he/she may not, either for his/her own account or for the account of a third party, enter into
FBH: The statutory severance payment is awarded to the employee whose indefinite term employment contract is being unilaterally terminated by the employer for reasons which are not breaches of duties, after at least 2 years of employment. The minimal amount is 1/3 of the average salary of the employee (calculated based on the last three months prior to employment termination) for each year of work for the employer. The maximum amount should be six average salaries of the employee; however, the employer and employee can agree on a higher compensation which is not considered statutory severance payment.
RS: The statutory severance payment is awarded to the employee whose indefinite term employment contract is being unilaterally terminated by the employer for reasons which are not breaches of duties, after at least 2 years of employment. The minimal amount is 1/3 of the average salary of the employee (calculated based on the last three months prior to employment termination) for each year of work for the employer. The maximum amount should be six average salaries of the employee (calculated based on the last three months prior to employment termination). However, the employer and employee can agree on a higher compensation which is not considered statutory severance payment.
Special Tax Provisions And Severance Payments
FBH: Severance will not be taxed only when the employer is the one terminating the employment contract with the employee. When the employment agreement is terminated by the employee, as well as in the case of a mutual termination of the agreement, the severance payment is taxable. In these cases, the employer is obliged to calculate, not only the income tax, but also all contributions.
RS: Severance will not be taxed if:
- — severance paid upon retirement up to the amount of the last three salaries paid to the person retiring,
- — paid upon termination of employment paid up to the minimum amount prescribed by the labour law.
Allowances Payable To Employees After Termination
Employers are not required to contribute to any allowances payable to employees after termination, as employers already contribute during the employment agreement through payment of unemployment insurance.
Time Limits For Claims Following Termination
FBH: Regardless of the reason for employment termination, the employee can challenge the decision of the employer within 30 days from such a decision in a non-formal procedure directly between the employer and employee. The employer would in such cases render a decision within the next 30 days. The employee, if not satisfied with the new decision of the employer, can approach the court within the next 90 days. In case a court finds that the employment termination was wrongful either due to lack of proof on the reasons for termination or due to procedural mistakes made by the employer, the employee can request reinstatement and payment of all salary compensations and social security contributions and other remunerations which would usually be awarded to the employee for the whole period since termination to reinstatement. It should be noted though that except in cases in which the employee is seeking monetary claims (unpaid salaries or salary compensations and other work-related remunerations), he/she might lose the right to access the court if he/she has not approached the employer in the non-formal procedure before the employer in a timely manner.
RS: The employee can challenge the decision of the employer within 30 days from such a decision in a non-formal procedure directly between the employer and employee. The employer would in such cases render a decision within the next 30 days. The employee may also approach the court within 6 months from the day on which the employee found out about the breach of his/her rights by the employer, to request the protection of his/her employment rights. The employee is entitled to request a protection of its employment rights i.e. to challenge the lawfulness of termination of the employment contract before the competent court, requesting the court to decide that the employee shall be reinstated, compensated for damage, and that his/her contributions for compulsory social insurance shall be paid for the period in which the employee has not been working.