Under Serbian labour legislation, employment can be established for a definite (fixed) or indefinite term. Employment for indefinite term is intended to be a general rule, and employment for a definite (or limited) term an exception reserved for specific circumstances and principally subject to time limitation (24 months or 36 months for newly established companies).
The rationale is to curb abuses by the employers and protect stability of employment in an economy which has historically struggled with unemployment and where finding a job is comparatively tough (although this seems to be changing for the better – in some industries at least).
In spite of this, employment for a limited term is oftentimes used indiscriminately and without much regard to the law, since it provides more flexibility when it comes to termination of employment. It is safe to say that many employers do not realise that it is not their prerogative to decide on employment for a limited term, but rather something that needs to be justified by objective circumstance in each individual case (e.g. temporary increase of workload, work on specific tasks/projects limited to a certain time period, replacement of absent employee etc.).
Conclusion of employment agreement for limited term without proper legal basis can have serious consequences for the employer. In addition to potential problems with the Labour Inspectorate, this is a basis for employees to file a claim for recognition of employment for indefinite term (which usually happens after employment for definite term is discontinued). This can create a lot of difficulties and costs as plaintiffs are entitled to salary compensation for the duration of litigation procedure, and on top of that can opt for reinstatement or additional monetary compensation.
Based on the existing case law it can be concluded that the courts are rather reserved when it comes to these kinds of claims, i.e. they generally place a high burden of proof on the plaintiff (except in case of obvious and drastic violations). However, tendencies in case law can change over time, or even abruptly, which was apparent with regard to some legal issues which are closely related. Namely, in case of claims for recognition of employment by persons engaged outside of employment (service agreement, temporary work agreements etc.), there was an understanding that recognition of employment was only possible in case of work performed without any legal basis whatsoever (so called “factual work”), while over time courts began accepting such claims as long as it was determined that the factual relationship between the parties amounted to employment (i.e. that the formal legal basis did not correspond to the factual situation).
It is quite feasible that courts’ approach to cases involving abuse of employment for limited term could undergo the same evolution toward a more liberal stance and lesser burden of proof for the plaintiff.
In any case, the risks for the employers should not be underestimated, even in industries where demand for work force is currently high (resulting in fewer disputes), because employment is a long-term relationship and there is always a possibility that unforeseen issues or disputed might arise. Foremost, in order to curb the risks, employers need to make sure that employees do not continue to carry out their duties after expiry of employment contract for limited term, because this can be a reason for recognition of employment for indefinite term.
Even more importantly, employers should make sure that maximum duration of engagement on temporary basis is not exceeded, because this is the most clear-cut violation of the law, and easiest to prove. Note that discontinuation (i.e. ”break”) between two employment contracts nor change of work position do not cause the term to start anew, although there are currently different opinions on the latter in judicial practice.
Limited duration of temporary employment does not apply in certain cases, such as replacement of absent employee, work on a specific project, employment of foreign citizen based on work permit etc. Nonetheless, if the employer wants to take advantage of such exceptions, it needs to make sure that legal conditions are met, and that facts that justify the exception are properly documented.
Although this is often overlooked in practice, it is highly recommendable to state reasons for temporary employment initially in the employment agreement. One relevant court decision concluded that this is not mandatory, but nonetheless we believe that this obligation can be derived from the law and that aside from that it puts the employer in a much better position in case of dispute, when the employer is generally required to prove the basis for temporary employment.
The manner in which relevant work positions are treated in the employer’s Systematization Act (if they are systematized at all), can also be indicative of whether there is need for permanent employment on certain positions, or the need for work is indeed temporary.
Finally, if there is clearly no legal basis for employment for limited term, employers should use alternatives such as employment with probation period (which is however limited to 6 months).
Damjan Despotović, partner
Srećko Vujaković, partner
This text is for informational purposes only and is not legal advice. Feel free to contact us if you need additional information.