In Croatia, employment is regulated by the Constitution of the Republic of Croatia (National Gazette 56/90, 135/97, 113/00, 28/01, 76/10 and 5/14), the Community acquis of the European Union, international agreements, the Employment Act (EA) (National Gazette 93/14 and 127/17), other laws and regulations, collective agreements, agreements concluded between works councils and employers, working regulations and employment contracts.
The EA provides general rules of employment law. Unless otherwise provided for by the EA or any other laws and regulations, where a right arising from employment is differently regulated, the most favourable right for employee applies (Article 9.3 of the EA).
Municipal courts are the first-instance courts for employment-related disputes, while district courts render decisions upon appeals against the decisions of municipal courts. The Supreme Court of the Republic of Croatia renders decisions upon appeals against the decisions of district courts when second appeals are allowed.
ii BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
Pursuant to Article 10 of the EA, employment is established by virtue of an employment contract.
An employment contract has to be concluded in writing, but its existence and validity are not affected by failure of the parties to enter into a written contract. Where the employer fails to conclude a written employment contract or fails to deliver a letter of engagement prior to commencement of employment, it is deemed that an employment contract of indefinite duration is concluded (Article 14 of the EA).
By virtue of Article 12 of the EA, an employment contract may be concluded for a fixed term if the end of employment is determined by objective conditions, such as reaching a specific date, completing a specific task or the occurrence of a specific event.
Duration of all successive fixed-term employment contracts may not exceed three consecutive years, unless where it is necessary for the purpose of replacing a temporarily absent employee or where it is established on objective grounds allowed by law or collective agreement. Interruption of less than two months is not regarded as an interruption of the three-year period. If the employment contract is not concluded in compliance with the provisions of the EA, or if an employee continues to work for the employer after the expiry of the contract, it is deemed that the contract was of indefinite duration.
An employment contract or letter of engagement must contain information concerning:
- the parties and their residence or seat;
- the place of work or a reference that work is performed at various places;
- the title, nature or category of work for which the employee is employed or a brief specification or description of the work;
- the date of commencement of employment;
- in case of a fixed-term employment contract, the expected duration thereof;
- the duration of paid annual leave to which the employee is entitled or the procedures for its determination;
- the length of notice periods to be observed by the employee and employer or the method for its determination;
- basic salary, bonuses and frequency of remuneration payment to which the employee is entitled; and
- the duration of a regular working day or week (Article 15 of the EA).
In addition, the EA envisages mandatory content of an employment contract: (1) for permanent seasonal jobs (Article 16); (2) at an alternative workplace (Article 17); and (3) in case of expatriation of the employee (Article 18).
Employment contracts may be amended only upon the employer's and employee's mutual agreement, in writing (Article 8.4 of the EA; Article 286.2 of the Obligations Act (National Gazette 35/05, 41/08, 125/11 and 78/15)). However, pursuant to judicial practice of the Supreme Court (Revr-191/2004), the employment contract may be amended by the implied consent of both parties.
ii Probationary periods
According to Article 53 of the EA, a probationary period may be agreed upon by the employment contract and its length may not exceed six months.
Failure to fulfil the position's requirements during the probationary period is a just cause for terminating the employment contract. In case of a contracted probationary period, a notice period is a minimum of seven days.
iii Establishing a presence
A foreign company with a seat in an EU Member State may permanently perform business activities in Croatia and, therefore, hire employees through a company, a branch office or a business established in Croatia.
In addition, a foreign company with a seat in a non-EU Member State or in a non-European Economic Area (EEA) Member State may hire employees through a subsidiary established in Croatia (Article 52.1 of the Commerce Act (National Gazette 87/08, 96/08, 116/08, 116/08, 76/09, 114/11, 68/13 and 30/14)).
Nevertheless, within a temporary and periodical transborder provision of services and for no longer than three months, a foreign employer with a seat in an EEA Member State may assign the employee (1) to work in Croatia for the employer on a contractual basis concluded between the foreign employer and the service beneficiary in Croatia; (2) to work for the foreign employer's branch office in Croatia or for the company owned by the same group that the foreign employer belongs to; or (3) to be ceded through a temporary employment agency to a beneficiary in Croatia (Article 86 of the Foreigners Act (FA) (National Gazette 130/11, 74/13, 69/17 and 46/18)).
III RESTRICTIVE COVENANTS
Without the employer's approval, employees may not enter into business transactions in the field of economic activity pursued by their employer ('legal ban of competition'; see Article 101 of the EA).
Article 102 of the EA prescribes that employers and employees may establish a period of time following the termination of the employment contract during which employees are not allowed to take employment with an employer's market competitor or enter into business transactions that are regarded as competition to the employer ('contractual ban of competition' (the Contract)).
The Contract may not be concluded for a period exceeding two years after the date of termination of employment. It may be an integral part of the employment contract. In any case, it must be concluded in writing.
The Contract is binding only if the employer has committed to compensating the employee for the duration of the ban in the amount of at least half of the average salary paid to the employee in the three months prior to the termination of the employment contract (Article 103 of the EA).
i Working time
Pursuant to Article 61 of the EA, full-time work is 40 hours a week. Full-time employees are, however, allowed to conclude an employment contract with another employer for a maximum of eight hours per week or up to 180 hours per year, with the written consent of the employer or employers with whom they had already concluded an employment contract.
In accordance with Article 62 of the EA, part-time work is any working time shorter than full-time work. Employees are not allowed to work for several employers with a working time exceeding 40 hours per week.
Article 69 of the EA prescribes that the normal working hours for night employees may not, in four months, exceed an average of eight hours in any 24-hour period. However, where, based on a danger assessment, night employees are exposed to special hazards or heavy physical or mental strain, an employer has to ensure that employees do not work more than eight hours in any 24-hour period during which they perform night work.
If work is organised in shifts that include night work, a change of shifts has to be ensured to limit the uninterrupted work in a night shift to a maximum of one week (Article 71 of the EA).
Nevertheless, by virtue of Article 88 of the EA, provisions of the EA on maximum duration of weekly working time and night work do not apply to employees whose duration of work time cannot be measured or predetermined, or whose working time can be determined by the employees themselves (e.g., managing executives).
Additionally, unless otherwise provided for by specific provisions, an employer may, for his or her adult employees, provide for derogations from the provisions on duration of work time for a night employee, provided that the employee is afforded equivalent periods of compensatory rest (Article 89 of the EA).
Pursuant to Article 65 of the EA, if employees work overtime, their total working time may not exceed 50 hours a week. Moreover, overtime work per employee may not exceed 180 hours a year, unless otherwise provided for by collective agreement, in which case it may not exceed 250 hours a year.
Employees are entitled to increased remuneration for overtime work (Article 94 of the EA), which has to be paid in money (Article 92 of the EA). The EA does not envisage the rate for overtime remuneration – it has to be set by virtue of employment contract, working regulations or collective agreement.
V FOREIGN Workers
A third-country national or a stateless person may enter into an employment contract under the conditions stipulated by the EA and the FA (Article 23 of the EA). The FA envisages conditions for employment with the employer with a seat in Croatia.
According to Article 73 of the FA, third-country nationals (those who are not nationals of an EEA Member State or the Swiss Confederation) may work in Croatia on the basis of a residence and work permit or work registration certificate issued by the Croatian Ministry of Interior, but only in the job for which they were issued the permit or certificate and only with the employer with whom they are employed.
By way of exception, third-country nationals may work in Croatia without any permit or certificate, among other things, if they have been granted permanent residence.
Also, by virtue of Article 153 of the FA, nationals of EEA Member States or the Swiss Confederation and their family members, and those who are entitled to residence in Croatia, may work and provide services in Croatia without any permit or certificate.
A residence and work permit based on the annual quota (set by the Croatian government) is granted to third-country nationals who meet the criteria for approval of temporary residence pursuant to the FA, and if they prove (1) their employment, (2) that they have acquired educational qualification and skills, and (3) that their place of employment (mentioned under point (1)) is a company, branch office, subsidiary, business, association or institution registered in Croatia (Article 75 of the FA).
Pursuant to Article 76 of the FA, residence and work permits outside the annual quota may be issued to, among others: frontier workers; third-country nationals holding key positions in companies, branch offices or subsidiaries; third-country nationals transferred as part of internal staff relocation inside companies and other necessary persons (as defined by the Protocol on the Accession of Croatia to the Marrakesh Agreement Establishing the World Trade Organization); third-country nationals employed in a company in which they hold a share exceeding 51 per cent or in a business of which they are the sole owners; and employees providing services on behalf of or in the name of a foreign employer that is not entitled to an establishment in EEA Member States. Residence and work permits for other necessary persons (as defined by the Protocol on the Accession of Croatia to the Marrakesh Agreement Establishing the World Trade Organization) and for employees providing services on behalf of or in the name of a foreign employer that is not entitled to an establishment in EEA Member States are subject to prior approval of the Croatian Ministry of Interior. Residence and work permits outside the annual quota may also be granted to third-country nationals who meet the criteria for approval of temporary residence and who (1) perform key activities in a company, or who hold an ownership share in that company of at least 51 per cent, where the company is a holder of incentive measures in accordance with a regulation on investment promotion, or carries out strategic investment projects in conformity with regulations on strategic investment projects in Croatia; or (2) perform jobs or carry out projects in Croatia pursuant to international treaties on professional and technical assistance that Croatia concluded with the European Union, another state or an international organisation.
Residence and work permits outside the annual quota may be granted to third-country nationals under the same conditions as within the annual quota, who in addition enclose an explanation of why their employment is justified, including information on their professional knowledge, qualification and working experience, and reasons why the position cannot be fulfilled from the Croatian national employment market, with certain exceptions.
According to Article 90 of the FA, residence and work permits shall cease to be valid if:
- the temporary residence of the third-country national ceases;
- the conditions on the basis of which it has been issued no longer exist;
- the third-country national performs an activity for which a residence and work permit has not been issued;
- the third-country national works for an employer and was not issued a residence and work permit in relation to this employment; or
- a third-country national or an employer does not respect employment regulations, health and pension insurance regulations and other regulations that have to be complied with when the related activity is being performed.
Based on a work registration certificate, certain categories of third-country nationals may work in Croatia up to 90, 60 or 30 days in a calendar year (Articles 82 and 83 of the FA).
VI GLOBAL POLICIES
Based on Article 26 of the EA, an employer with at least 20 employees is obliged to adopt and make publicly available working regulations governing remuneration, organisation of work, procedures and measures for protecting employee dignity, anti-discrimination measures and any other issues of importance for employees if the issues are not regulated by collective agreement.
Adoption of working regulations is subject to consultations with the works council (Article 150 of the EA). Working regulations must contain the date of entry into force and they may not enter into force prior to the expiry of the eight-day period of their publication (Article 27 of the EA).
According to Article 4 of the Ordinance on Manner of Publication of Working Regulations (National Gazette 146/14), working regulations have to be published in a way that is available to all employees and laid out in a visible place on the premises of employment. However, they may be made available to employees on the employer's website, or, at the employee's request, by email.
The EA does not prescribe that employment documents have to be drafted in Croatian, nor does it have provisions regarding translation of employment documents.
However, as Croatian is the official language of Croatia, in case of an inspection by the Ministry of Labour and Pension System Work Inspectorate, employers would have to translate their employment documents into Croatian if they were not in Croatian already. In addition, since employment contracts have to be submitted to Croatian pension and health insurance authorities (failure to do this is a misdemeanour), they have to be in Croatian.
Furthermore, Article 8 of the EA states that employers are obliged to enable employees to acquaint themselves with employment-related regulations before they start working. Therefore, if employees do not speak the language of the respective employment document, they are not acquainted with it. Employees could claim before a court that their employment contract is null and void because it is contrary to the aforementioned provisions of the EA or provisions of the Obligations Act on equality of subjects (Article 3) and fair conduct (Article 4) in the obligation relationship. Employees could also claim that their employment contract be determined null and void based on the fact that they were misled with respect to the content of the employment contract (Article 280 of the Obligations Act).
VIII EMPLOYEE REPRESENTATION
Employees of an employer with at least 20 employees have the right to take part in decision-making on issues related to their economic and social rights and interests (Article 140 of the EA).
By virtue of Article 141 of the EA, employees have the right to elect one or more of their representatives to create a works council. The procedure for establishment of a works council may be initiated upon the proposal of a trade union or at least 20 per cent of the employees of an employer.
Pursuant to Article 142 of the EA, the number of works council members is determined in accordance with the number of employees. The number varies from a minimum of one representative (for up to 75 employees) to a maximum of nine representatives (for 751 to 1,000 employees).
The works council is elected for a term of four years (Article 144 of the EA). All employees of an employer have the right to elect and be elected, except for members of management and supervisory bodies and their family members (Article 145 of the EA). Lists of candidates for employee representatives may be proposed by trade unions whose members are employed by an employer, or a group of employees enjoying the support of at least 20 per cent of employees (Article 146 of the EA).
Before rendering decisions prescribed by Article 150 of the EA, an employer has to consult the works council about the proposed decisions or the decisions shall be null and void. On the other hand, pursuant to Article 150 of the EA, certain employers' decisions may be rendered only with the prior consent of the works council (on dismissing certain categories of employees, including certain categories of employees in a collective redundancy, etc.). If the works council refuses to give its consent, an employer may, within 15 days, ask that the consent is replaced by a court decision or an arbitration award.
If the works council has not been established, all its rights and obligations may be exercised by a trade union's representative, except the right to appoint employees' representatives in an employer's supervisory body (Article 153 of the EA).
IX DATA PROTECTION
i Requirements for registration
According to Article 29 of the EA, employees' personal data may be collected, processed, used or disclosed to third parties only if it is regulated by the EA or any other law, or where it is necessary for the purpose of exercising rights and obligations arising from employment or pertaining thereto.
Regulation (EU) No. 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (the General Data Protection Regulation (GDPR)) and the Act on Implementation of General Data Protection Regulation (AIGDPR) (National Gazette 42/18) regulate the protection of personal data on natural persons and the free movement of personal data in Croatia.
Processing of biometric data of employees is allowed for the purposes of recording working hours and recording entry and exit of the business premises, if prescribed by law or as an alternative to other solutions for recording working hours or entry and exit of the business premises, under the condition that the employee gives explicit consent for processing biometric data, in accordance with the provisions of the GDPR (Article 23 of the AIGDPR).
ii Sensitive data and background checks
Pursuant to Article 24 of the EA, when concluding an employment contract and during employment, the employee is obliged to inform the employer about sickness or any other circumstances precluding the exercise of employment obligations or harming the life or health of people that the employee makes contact with.
During the process of selecting applicants for a job and concluding an employment contract, as well as during employment, the employer may not request any information from an employee that is not directly related to employment, and answers to questions that are not allowed may be sustained (Article 25 of the EA).
The EA prohibits discrimination against pregnant women and those who have recently given birth or are breastfeeding, with respect to their employment, and therefore the employer may not request any information whatsoever about pregnancy (Article 30 of the EA).
X DISCONTINUING EMPLOYMENT
The EA envisages in Article 115 that the employer is allowed to terminate employment contracts for legitimate reasons by giving statutory notice or notice stated in the employment contract (i.e., regular dismissal), if:
- the need to perform certain work ceases for economic, technological or organisational reasons (i.e., dismissal on business grounds);
- employees are not able to fulfil their employment obligations as a result of their permanent characteristics or capacities (i.e., dismissal on personal grounds);
- employees violate their employment obligations (i.e., dismissal because of misconduct); or
- employees did not satisfy their probationary period.
When making a decision about a dismissal on business grounds, an employer that employs 20 or more employees has to take into account an employee's tenure, age and maintenance.
Also, an employer who has dismissed an employee for business reasons shall not employ another employee in the same post for six months following the date of giving notice of dismissal. Should a need for employment for the same work arise within that period, an employer is obliged to offer an employment contract to the employee that it dismissed for business reasons.
A fixed-term employment contract is terminated upon its expiry (Article 112.1.2 of the EA). It may be terminated by means of regular notice only if this option is provided for by the contract (Article 118 of the EA).
Pursuant to Article 116 of the EA, an employer has just cause to terminate employment without a notice period (i.e., extraordinary dismissal) in cases where continuation of employment is regarded as impossible as a result of a severe breach of employment obligations or any other fact of critical importance, and recognising all the circumstances or interests of both contracting parties, but solely within 15 days of the date when the employer gained knowledge of the fact constituting grounds for extraordinary dismissal.
Prior to regular dismissal because of an employee's misconduct, an employer is obliged to alert the employee in writing of his or her employment obligations indicating possible dismissal should the breach of obligations persist, and prior to regular or extraordinary dismissal because of the employee's misconduct, the employer is obliged to give the employee the opportunity to present his or her defence (Article 119 of the EA).
The notice of dismissal has to explain in writing the reasons for dismissal (Article 120 of the EA).
By virtue of Article 121 of the EA, a notice period begins on the date of notice of dismissal. However, the notice period is suspended during:
- parental or adoption leave;
- half-time work;
- part-time work because of intensive childcare;
- leave of a pregnant or breastfeeding employee;
- leave or part-time work to take care of a child with severe developmental disabilities;
- treatment or recovery from injury at work or an occupational disease; and
- service in national defence forces.
In case of suspension of the notice period as a result of temporary incapacity for work, employment shall be terminated, at the latest, six months after the date of notice of dismissal.
Unless otherwise provided for by collective agreement, working regulations or employment contract, the notice period is not suspended during annual and paid leave, and the period of temporary incapacity for work of the employee who is released from obligation to work during the notice period.
According to Article 122 of the EA, a notice period depends on the length of tenure with the same employer. It is a minimum of two weeks (for less than one year) and a maximum of three months (for 20 years). In case of an employee who has continuously worked for the same employer for 20 years, the notice period is extended by two weeks if the employee has reached 50 years of age, and by one month if the employee has reached 55 years of age. In case of dismissal because of an employee's misconduct, the notice period is halved. The employer is obliged to pay compensation and recognise all other rights to the employee released from the obligation to work during the notice period, as if the employee had worked until the expiry of the notice period.
An employer may not dismiss employees during their pregnancy, maternity, parental or adoption leave, periods of part-time work, periods of short-time work resulting from intense childcare, leave of pregnant women or a breastfeeding mother, and periods of leave or short-time work as a result of caring for a child with serious developmental disabilities, and within 15 days of the end of pregnancy or the end of use of such entitlements (Article 34 of the EA), as well as employees who have suffered from injury at work or occupational disease during temporary incapacity for work resulting from medical treatment or recovery (Article 38 of the EA).
Article 126 of the EA prescribes that when an employer dismisses an employee following two years of tenure, unless dismissal is given as a result of an employee's misconduct, the employee is entitled to severance pay for each year of tenure with the employer. It may not be lower than one-third of the average monthly salary earned by the employee in the period of three months prior to dismissal and, unless otherwise provided for by the law, collective agreement, working regulations or employment contract, it may not exceed six average monthly salaries earned by the employee during three months prior to dismissal.
Finally, an employment contract may be terminated by a written agreement between the employee and employer (Articles 112 and 113 of the EA).
ii Collective redundancies
According to Article 127 of the EA, an employer that may have at least 20 redundancies, out of which at least five employment contracts would be terminated on economic grounds, over 90 days, is obliged to begin consultations with the works council in order to avoid or reduce the number of redundancies and supply the works council with all the relevant information in writing.
The employer also has to notify the Croatian Employment Service (CES) of the consultations. Projected collective redundancies notified to the CES may take effect no earlier than 30 days after the notification; however, the CES may, until the last day of the respective time limit, request that either collective or individual redundancies are postponed for a maximum of 30 days, if the employer is able to ensure the continuation of employment for employees during this extended period (Article 128 of the EA).
XI TRANSFER OF BUSINESS
Article 137 of the EA sets the rules regarding employees' protection in case of transfers.
In the event of a transfer to a new employer of an undertaking, business, or part of an undertaking or business retaining its economic integrity, all employment contracts of employees of the undertaking or part of the undertaking being transferred, or of those who are connected with the business or part of the business being transferred, are transferred to the new employer.
Employees whose employment contracts are transferred retain all the rights arising from employment that they had acquired until the employment contract transfer date. The employer to which employment contracts are transferred accepts all the rights and obligations arising from the contracts in unaltered form and scope, as of the transfer date.
The transferee and transferor are jointly and severally liable for obligations that arose from employment before the date of transfer.
No major changes are expected in the area of employment law in Croatia in 2019; therefore, employers are likely to deal with the same employment-related issues as in previous years.
1 Mila Selak is a partner at Ostermann & Partners LLP.