ILEJ & PARTNERS, in cooperation with Karanovic & Partners

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Municipal civil courts have the jurisdiction for most of the claims relating to employment. There is only one specialised Labour Court on a municipal level, and it handles labour law disputes in Zagreb metropolitan area. Jurisdiction regarding the lawfulness of strikes and lockout is given to the county courts.


The Main Sources Of Employment Law

In Croatia the main source of employment law is the Labour Act which is accompanied by Work Safety Act, Labour Market Act, Act on Suppression of Undeclared Work and various acts regarding social welfare of the employees (Pension Insurance Act, Compulsory Health Insurance Act etc.), European Law (such as Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I)), Collective Agreements, Employment Rulebooks, individual Employment Agreements, and decisions. As for the employee, principle is that if a certain right is regulated differently in different sources of law (i.e., in Labour Act and in individual employment agreement), the regulation which is the most favourable for the employee will be applied.


National Law And Employees Working For Foreign Companies

A national law is applicable if the parties of an employment agreement choose Croatian law or in other cases when it is applicable by law. If the parties choose foreign law as applicable, that law would apply, as long as it is not depriving the employee of the protection afforded to them by provisions that cannot be derogated from by an agreement under the law that would have been applicable (employee habitually carries out work, place of business in which the employee was engaged is situated) in case that the applicable law was not chosen.


National Law And Employees Of National Companies Working In Another Jurisdiction

National law would be applicable when an employee is working in another jurisdiction, if the parties of the employment agreement chose Croatian law as the applicable law. If there was no choice of law, Croatian law could be applied as place of business where the employee was engaged, if the applicable law could not be determined by a place of habitual carrying of work.


Data privacy

The employer is allowed to process certain personal data, in connection to employment, of the employees. General principles of the General Data Protection Regulation apply.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

Agreements should be concluded in writing, however if concluded orally they will not be found null and void. If an agreement is oral, an employer is obligated to issue a written confirmation of the agreement before the beginning of work. It is possible to electronically sign an agreement by using a qualified electronic signature for it to be considered a validly executed employment agreement.


Mandatory Requirements
  • Trial Period

    • Trial Periods can be agreed upon when concluding an employment agreement for a period of up to six (6) months. However, it can be agreed that the trial period will be prolonged if the employee was temporarily absent from work during the trial period (e.g., due to a sick leave, maternity or parental leave, etc.). Such prolongation should be proportionate to the time during which the employee was absent from work so that overall duration of the trial period does not exceed six (6) months. If an employee fails to comply with the requirements for the specific workplace, that qualifies as justified grounds for termination of the employment agreement. Notice period, in this case, is at least one (1) week.

  • Hours Of Work

    • Full-time working hours cannot be longer than 40 hours per week. Unless otherwise agreed in the employment agreement, collective bargaining agreement, or agreement concluded between works council and the employer, it is deemed that employees employed on full-time bases are obliged to work 40 hours per week. Everything above full-time working hours is overtime. The employee is free to conclude an additional employment agreement with another employer for the maximum of additional eight (8) hours per week but needs to notify its employer of such work. Employees need to observe the rules on statutory non-compete when concluding agreements for additional work with other employers.

  • Special Rules For Part-time Work

    • Part-time work is considered to be everything below full-time working hours, however, the employee cannot be working for several employers for more than 40 hours per week. When entering into an agreement with each employer the employee needs to notify the employer about their other current part-time employment agreements. If for acquiring certain rights from an employment agreement previous length of the employment is of importance, then the periods of part-time work for the same employer will be deemed as full-time work. The earnings and other material rights of the employee will be determined and paid in proportion to the agreed working hours unless otherwise regulated by a collective agreement, employment rulebook, or employment agreement. The employer is obliged to consider the request of an employee to work part-time or full-time but is not obliged to accommodate such request (only to provide a reasoned written response). A part-time employee must have the same working conditions as a full-time employee in a comparable situation. The employer is obliged to provide training and education to part-time employees under the same conditions as to full-time employees.

    Hours of work must be shortened when it is not possible to protect the employees (even after all safety and protective measures are implemented) from harmful effects. This shortening of working hours must be in proportion to the harmful effects of working conditions to the health and working capacity of the employees. These types of jobs and working hours are determined by special regulations. The employee who is working on one (1) of these jobs cannot be working for longer hours than specified by the regulation and cannot be working for several employers. Such part-time work will be equal to full-time work when actualising the employees’ rights from employment or in connection to employment.

  • Earnings

    • The earnings can be determined by (almost) all sources of employment law. If the salary has not been determined, the employer shall pay to the employee the appropriate salary. Appropriate salary is the amount that is usually paid for equal work. If it is not possible to determine the usually paid salary for such work, the salary will be declared by the court based on the circumstances of each case.

  • Holidays/Rest Periods

    • Employees are entitled to at least four (4) weeks of paid annual leave, in case that the employees have not been working the whole year they have the right to pro-rata annual leave. The rest period of 30 minutes is granted to every employee working at least six (6) hours a day. Daily rest is at least 12 hours of continuous rest in a 24-hour period. Weekly rest is continuous 24 hours each week to which daily rest is added.

  • Minimum/Maximum Age

    • The minimum age for entering an employment is 15. If the person is attending obligatory elementary education and is older than 15 and younger than 18 then that person also cannot be employed. Maximum working age is not prescribed by law.

  • Illness/Disability

    • In case of temporary incapacity for work, the employee is obliged to notify the employer as soon as possible and deliver a certificate from the doctor regarding their incapacity and expected duration within three (3) days. There is a ban on terminating the employment in case of temporary incapacity due to work-related injury or professional illness during healing, i.e., the recovery. The employees who were temporary incapacitated for work for the above reasons have the right to be reinstalled on the jobs they were performing before the injury, business related illness or illness. If those are not available, the employer must offer an employment agreement for a similar job.

  • Location Of Work/Mobility

    • The location of work is a mandatory element of each employment agreement. The employer has the right to determine closely the place of work, bearing in mind the rights and dignity of the employee. Also, the employer must ensure appropriate working conditions for its employees. There is a possibility to agree that the employees will be working remotely (for jobs that are preformed exclusively through ICT) or from their homes. These types of work arrangements require that employment agreements contain certain mandatory provisions.

  • Pension Plans

    • There is a mandatory pension insurance in which the employer has to allocate a certain part of each monthly salary for each employee. This amount is taken out of the gross income amount. There are additional voluntary pension funds in which the employee alone, or in agreement with the employer, can invest.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • Croatian employees are entitled to several parenthood related rights, including maternity leave, paternity leave, parental leave, etc. Maternity leave is activated 28 days before expected birth (in some cases, 45 days before expected birth) by child’s mother and can last for the first six (6) months after childbirth (at least 70 days of maternity leave must be used directly after the childbirth ). Paternity leave can be used anytime since the childbirth and during the following six (6) months, in duration of 10 days for 1 child or 15 days in case of twins, triplets, etc. Parental leave can be used by both parents, or by only one parent. Its usage can start 6 months after childbirth, and it can be used anytime until child’s eighth (8) birthday. Duration of the parental leave depends on the number of children in the family and on the fact whether only one parent uses the parental leave, or it is used evenly by both parents. Following that, parental leave lasts for four (4) months, if used evenly by both parents after birth of first (1) and second (2) child, or 15 months if used evenly by both parents after birth of twins or for third (3) and any subsequent child. If parental leave is used predominantly by one (1) parent, parental leave lasts for six (6) months, if used after birth of first (1) and second (2) child, or 28 months if used after birth of twins or for third (3) and any subsequent child. The other parent always has the right to use the remaining 2 months of parental leave. In addition, the employees have the right to an adoption leave in duration of six (6) months after adoption of a child up to 18 years old. If twins or more children are adopted at the same time, or the adoptee is a third (3) child in the family or if a single adoptee has special needs, this leave is prolonged for additional 60 days for each adopted child.

    The employer cannot refuse to employ women due to pregnancy. Furthermore, pregnant women, women who have given birth and women who are breastfeeding cannot be offered a changed employment agreement with less favourable conditions. The employer cannot terminate pregnant women, parents while using any of the rights related to parenthood nor in a period of 15 days as of parent’s return to work.

  • Compulsory Terms

    • Employment agreements or a written confirmation on employment agreement has to have data for identification of the contracting parties, place of work or a remark that the work will be executed in different places or remotely/from home, details of the work position, or shortlist or description of work tasks, start date, note whether the employment is for a definite or an indefinite term, duration of annual leave or description on how it will be determined, termination procedure and notice periods, basic gross salary and schedule of payments, duration of working day or week and whether such work is full-time or part-time work, right to education, trial period. For certain specific types of employment agreements, there are special terms that need to be included.

  • Non-Compulsory Terms

    • The parties of an employment agreement can agree to any other terms, most notably, post-contractual non-compete and non-solicitation clauses. In any case, if the agreed terms are less favourable, then the ones provided by other sources of employment law will be applied.


Types Of Agreement

Employment agreements can be fixed-term agreements or agreements for an indefinite period. Also, the Labour Act recognizes several categories of special employment agreements, such as employment agreements of seasonal employees, employment agreements for additional work and employment agreements concluded with temporary employment agencies.


Secrecy/Confidentiality

Act on the Protection of Unpublished Information with Market Value can be applicable in some cases. Furthermore, based on the Labour Act, inventions have to be kept as a business secret and cannot be shared with a third person without the employers’ approval. Further confidentiality and secrecy provisions can be agreed.


Ownership of Inventions/Other Intellectual Property (IP) Rights

The employee is obligated to inform their employer regarding an invention made at work or in connection with work. This invention must be kept as a business secret. The invention belongs to the employer, and the employee has the right to a reward as prescribed by a collective agreement, employment agreement, or special agreement. If a reward has not been prescribed or agreed, the court will decide on the appropriate reward. If the invention is in connection with the employers’ business and is not accomplished at work or in connection to work, the employee is obligated to notify the employer and offer the transfer of rights to this invention. The employer must respond to the offer within one (1) month. The employer has pre-emption right regarding the transfer of the invention. The same applies to technical developments if used by the employer. All the inventions and technical developments of the appointed employees belong to the beneficiary of the appointed employees, and appointed employees have the right to a reward for their inventions as well.


Pre-Employment Considerations

There is no statutory obligation to perform certain pre-employment considerations (with some exceptions in regulated professions). However, if the employer has enacted a systematization of work positions, it should not hire a person that does not possess the prescribed qualifications. It should be noted that when choosing a future employee, the employer cannot ask employee to disclose data which is not in direct correlation with the employment relationship, and the potential employee is not obliged to answer these questions.


Hiring Non-Nationals

When hiring citizens of the European Economic Area there are no limitations except for the need to register a temporary stay in the case that the employee is residing in Croatia for longer than three (3) months. However, when hiring third-country national (non-EEA citizens) there is a need to obtain a residence and work permit or a certificate on registered work (the certificate is issued only for described work and one employer). In some cases, before filing a request for residence and work permit the employer has to request a labour market test to establish whether this employee is needed on the market. There is a list of jobs for which the mentioned test is not needed. Employees can work without residence and work permit and certificate if they have a regulated temporary stay in Croatia based on different grounds, and/or an EU blue card. Also, persons granted temporary protection in Croatia can work in Croatia without a need to obtain residence and work permit.


Hiring Specified Categories Of Individuals

An employer who has more than 20 employees has to employ, on the appropriate work position with appropriate work conditions, a certain number of persons with disabilities. Special provisions are set out protecting special groups of employees, as previously mentioned – i.e., pregnant women.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Outsourcing and Sub-contracting are not regulated by law.

The temporary employment agencies need to be registered with the Ministry of Labour. Only such agencies can offer temporary employment agency services on Croatian market. Such agencies conclude special employment agreements with employees and separate agreements with the beneficiaries of their services. Beneficiaries can use the work of same temporary employee for a maximum of three (3) years (some limited exceptions apply). Also, beneficiaries cannot use services of temporary employment agencies to replace employees who were terminated due to business reasons or in a collective redundancy procedure for six (6) months after terminations.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

Changes to a contract are usually conditioned with mutual agreement between the employer and the employee. When the conditions of work are changing the employer has to terminate the contract and offer to the employee a new employment contract, or an annex to the existing employment agreement can be signed. This offer has to be accepted by the employee otherwise the rules for termination of employment will be applied.


Change In Ownership Of The Business

If a business is transferred to a new employer, all employment agreements of the employees will be transferred to the new employer, provided that these agreements relate to the company and the business of the company which is the subject of the transfer.

The employees maintain all the rights from the employment relationship which they acquired before the transfer to a new employer. The new employer takes over all the rights and obligations from the transferred employment agreements.


Social Security Contributions

Pension insurance contributions and taxes are paid by the employer for the employee and are deducted from the gross salary (gross 1). Gross 1 is not total cost of the employee – the employer is also paying health insurance contributions for each employee, as employer’s obligation (gross 2).


Accidents At Work

The Work Safety Act provides a set of measures which have to be applied to prevent accidents at work. These measures and conditions have to be ensured by the employer.

Work-related injury and professional illness which an employee has suffered working are deemed to be deriving from the employer and the employer is liable for these injuries on the principle of strict liability. The employer can be exempted from responsibility, or this responsibility can be minimised if the damage is a result of force majeure, by intent or gross negligence of the employee or a third party, on which the employer could not influence and which consequences the employer could not prevent, despite the protection measures.


Discipline And Grievance

An employer of 20 or more employees has to appoint the person who, apart from it is authorised to take and address the grievances of employees in connection to the protection of the dignity of employees. If the number of employees exceeds 75, two (2) persons of different genders need to be appointed to this position. If employees have a grievance, they can demand the protection and execution of their rights from the employer within a certain time limit. If employees’ rights were not protected by the employer (or if such protection cannot be objectively sought from the employer), employees can see protection in court.


Harassment/Discrimination/Equal pay

There is a general ban on discrimination which also includes the right to equal pay. The claims can be brought to the ombudswoman and/or ombudsman for gender equality before filing a claim before the competent court. Harassment claims need to be addressed by the appointed person or the employer and can be brought by the employee to the employer or the appointed person authorised by the employer for the protection of the dignity of employees. These claims have to be resolved within eight (8) days. If the claims are not resolved within the deadline, the employee has the right to file a claim before the competent court within additional eight (8) days and to stop working until given proper protection.


Compulsory Training Obligations

The employer shall provide training and education whenever changes and a new way of working or organisation of work are applied. The employer is obligated to provide to the employee, depending on the possibilities and work needs, education and training.


Offsetting Earnings

The employers cannot, without the employees’ consent, enforce their claims towards the employees by withholding salary or any part thereof. For such offset employees also -cannot give consent in advance.


Payments For Maternity And Disability Leave

There is an Act on Maternity and Parental Support regulating the percentile of salary that is granted to the employees who are using these rights. Disability leave is covered partially by the employer and partially by health insurance depending on the duration of the leave.


Compulsory Insurance

Only health and pension insurances are obligatory and are paid by the employer for the employee.


Absence For Military Or Public Service Duties

There are no provisions as the military and public service is voluntary.


Works Councils or Trade Unions

Employees working for an employer who has at least 20 employees have the right to participate in the decision-making process regarding the questions of their economic and social rights. The works council will be elected upon a proposal of the trade union or 20 % of employees. Works council representatives are bound by the Labour Act to keep all the information as a business secret that they receive while performing their duties as works council representatives. The employees have the right to form a trade union and be a part of a trade union. The employers have the right to form and be a part of the employer’s association.


Employees’ Right To Strike

The employees have the right to strike. The strike has to be announced to the employer and the solidarity strike as well. Several conditions have to be met for the strike to be lawful, in the case of an unlawful strike, the employer has the right to claim damages.


Employees On Strike

Employees who have participated in a strike, the salary and additions on salary can be adjusted according to the time spent on strike. Organising or participating in a lawful strike does not represent a breach of employment obligations. The employee cannot be put in a less favourable position compared to other employees due to organising or participating in a strike. The employment can be terminated due to the employee’s participation in an unlawful strike or if an employee has breached other employment obligations during the strike.


Employers’ Responsibility For Actions Of Their Employees

According to the Obligations Act, the employer is liable for the damages caused by their employee while working or in connection to work to the third party unless the employer proves that there were circumstances that exempts the employee from liability. The employer has the right to claim compensation from the employee if the employee has acted with intent or gross negligence. The employer can claim the compensation from the employee only within six (6) months since covering the damages.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

The dismissal can be ordinary and extraordinary. For both types, there are specific grounds prescribed by law. The notice period is agreed in the employment agreement or defined by law. Before ordinary termination caused by the employee’s misconduct, the employer shall deliver a warning in writing due to an employment obligation breach and point out the possibility of termination, this can be omitted if there are circumstances in which this is not to be expected from the employer. Before ordinary and extraordinary dismissal, the employer shall enable the employee to lay out their defence, unless under the circumstances this is not expected from the employer.


Instant Dismissal

Extraordinary termination by the employer or the employee is granted without notice if there is a particularly difficult breach of obligations or another extremely important fact, due to which, bearing in mind all the circumstances and interests of both parties, the continuation of employment is not possible. Such termination is possible within 15 days since becoming aware of the fact that represents the grounds for dismissal.


Employee's Resignation

An employee can terminate the employment agreement without stating a reason with a notice period which cannot be longer than one (1) month, if the employee has an especially important reason.


Termination On Notice

Notice periods can be agreed in the employment agreement, and if not, minimum notice period prescribed by law applies. This notice period depends on the time the employee was employed by the same employer. In case that the reason for dismissal is employee’s misconduct, the notice period prescribed by law is shortened to one half of the prescribed minimum


Termination By Reason Of The Employee's Age

The employment can be terminated when the employee reaches 65 years of age and has 15 years of pensionable service.


Automatic Termination In Cases Of Force Majeure

There are no relevant provisions that grant automatic termination due to force majeure.


Collective Dismissals

If the employer will no longer need at least 20 employees in 90 days’ period, out of which at least five (5) employee’s dismissals would be based on business reasons, that employer is obligated to, in an appropriate and timely manner, conduct a consultation with the works council to conclude an agreement for the purpose of eliminating and/or reducing the number of no longer needed employees. The employer shall notify the Croatian Employment Service about this consultation. The employees cannot be dismissed before a period of 30 days has passed since delivering the notice of consultation. Croatian Employment Service can prolong the notice period for an additional 30 days if it can secure the continuance of employment for employees.


Termination By Parties’ Agreement

This agreement must be concluded in writing.


Directors Or Other Senior Officers

Provisions of the Labour Act regarding the termination, notice period and the severance do not apply to Members of Management Boards. For this reason, the rules on termination of their employment agreements are either agreed in their employment agreements or general rules on termination for contracts from Civil Obligations Act apply.


Special Rules For Categories Of Employee

Employees who are under 18 have special provisions and limitation in relation to working hours – the maximum working hours in 24 hours is eight (8) hours, overtime work is banned for minors. Night work is generally banned, except in certain circumstances.

Night workers are considered to be employees who are working regularly at least three (3) hours during night work, and they should not be working longer than an average eight (8) hours for each 24 hours in a four (4) month period.

The employer cannot terminate pregnant women, parents while using any of the rights related to parenthood nor in a period of 15 days as of parent’s return to work. If the employer is notified within 15 days since the termination notice is given that parent will be using some of the parenthood related rights or that the employee is pregnant, the termination is null and void. As an exception to the rule above, in case the company is being liquidated, termination of an employee using parenthood related right due to business reasons is valid.

Employment cannot be terminated while the employee is healing and /or recovering from a professional illness or work-related injury.


Specific Rules For Companies in Financial Difficulties

There is an Act on Insurance of Employees’ Claims in the Event of Bankruptcy of the Employer which grants the protection of material rights of employees in cases of emplyoer’s bankruptcy or account block. Apart from this, the rules for termination due to business reasons apply.


Restricting Future Activities

Contractual non-compete clauses are binding for the employee if agreed upon and if during the duration of non-compete the employer is paying the compensation at least in the amount of one-half of the average salary paid to the employee in the last three (3) months before the termination of employment. The non-compete can be valid even without the compensation from the employer if a contractual penalty is agreed. The contractual non-compete must be concluded in writing and cannot last longer than two (2) years since the employment termination.


Whistleblower Laws

There is an Act on the Protection of Reporters of Irregularities by which employers who are employing more than 50 employees have to form an internal mechanism for the reporting of irregularities. The employer cannot place employees in an unfavourable position due to reporting of irregularities – i.e. terminate their employment, withhold salary, etc.


Special Rules For Garden Leave

Garden leave is possible during the notice period which is followed by termination of employment. The employee during the notice period and on garden leave must be paid the usual salary and the employer will recognise all the rights of the employee as if the employee is not on garden leave.


Severance Payments

The employee has the right to a severance payment if the employer is terminating the agreement after two (2) years of continuous work unless the reason for dismissal is caused by the employee’s conduct. The agreed severance payment cannot be agreed in the amount of less than one-third of the average employee’s salary in the last three (3) months of work for each full year of continuous employment, however, unless otherwise agreed this amount cannot be higher than six (6) average salaries.


Special Tax Provisions And Severance Payments

Severance payments are tax-deductible up to a prescribed amount after which they are taxed as a normal salary. Severance payments in case of mutual termination agreements are fully taxable.


Allowances Payable To Employees After Termination

All allowances that are agreed upon can be paid to employees.


Time Limits For Claims Following Termination

After delivery of the termination notice, the employee can within 15 days appeal the employer’s decision, i.e., so-called request for the protection of the employee’s rights. The employer has 15 days since receipt of employee’s appeal to comply with it. If the employer refuses the request, or has not provided a response, the employee has an additional 15 days to file an action before the competent court.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

The employee is considered to be in a weaker position when compared to the employer, therefore our employment law is structured to be always in favour of the employee. This principle is reflected through all aspects of employment relations and safeguards employees as weaker parties.



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Contact a Contributing Author:
Dora Horvat
ILEJ & PARTNERS, in cooperation with Karanovic & Partners
Croatia


Lucijan Loje
ILEJ & PARTNERS, in cooperation with Karanovic & Partners
Croatia


Disclaimer:

© 2024, ILEJ & PARTNERS, in cooperation with Karanovic & Partners. All rights reserved by ILEJ & PARTNERS, in cooperation with Karanovic & Partners as author and the owner of the copyright in this chapter. ILEJ & PARTNERS, in cooperation with Karanovic & Partners has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: February 2024