Labour and employment disputes in Slovenia that cannot be resolved amicably or, in certain cases, through alternative dispute resolution (ADR), fall under the exclusive jurisdiction of specialised labour and social courts, which are organised within the district and higher court system and judged at first and second instance in both individual and collective disputes. The primary legislation regulating procedure in labour and employment disputes is the Civil Procedure Act and the Labour and Social Courts Act. The legislative framework in labour and employment disputes is mainly composed of the Employment Relationship Act, the Labour Market Regulation Act and, in cases where a certain branch is bound by a collective agreement, the relevant collective agreements in force.
Until September 2017, a third-instance judicial ruling on extraordinary legal remedies by the Supreme Court was also accessible, specifically in cases of disputes relating to the termination of employment relationships, under more favourable conditions than in civil procedures and was often used in employment disputes in accordance with the Labour and Social Courts Act. In this regard, a significant amount of good case law was generated. However, with the amendment of the Civil Procedure Act (effective since September 2017), access to this third instance has been limited to cases of the most evident breaches of procedural provisions and is now allowed only if the conditions under the Civil Procedure Act are met, and there is no consideration for the special nature of employment law.
In September 2017, a new Class Action Act was adopted, which came into force in April 2018. Among other things, the Class Action Act introduced the option for employees to combine their individual employment claims in a form of class action against the employer; however, this only applies in cases where conditions for filing a class action are met. As the new Class Action Act has introduced a completely new way of resolving joint employment lawsuits, it is yet to be seen how these changes will be implemented in practice.
Employment disputes in the public sector, however, are subject to specific provisions and procedural steps under the Civil Servants Act and the Administrative Disputes Act, which must be taken before the employee (i.e., a civil servant) files a lawsuit against the state or local government (i.e., the employer).
In general, Slovenian legislation provides sufficient protection to employees and their rights, and adequated flexibility for employers to adjust the content of individual employment contracts to the employer's specific needs and work structure if the employer has sufficient knowledge of Slovenian labour law to follow its provisions correctly.
The procedure in both individual and collective employment disputes is subject to the Civil Procedure Act; one also has to take into account the specific provisions of the Employment Relationship Act, the Labour and Social Courts Act, the Collective Agreements Act and, as of April 2018, the Class Action Act.
Specialised labour and social courts have exclusive jurisdiction over labour (both individual and collective) and social disputes. Labour courts of first instance have the status of district courts and their judges the status of a district court judge. There is only one labour court of second instance, the Higher Labour and Social Court, which is the only specialised court of second instance in Slovenia and has jurisdiction over all second instance labour and social disputes in the territory of the Republic of Slovenia.
The labour courts give priority to resolving labour disputes, therefore labour and employment disputes are among the fastest procedures in Slovenia. As such, a first instance court decision may be delivered within a year of filing a lawsuit.
i Individual employment disputes
If, while an employment relationship is current, the employer breaches the employee's rights or fails to fulfil its obligations in accordance with that relationship, the employee has the right to demand, by way of a written claim, that the employer remedies the breach or fulfils its obligations towards the employee. If the employer does not remedy the breach or fulfil its obligations within eight working days of receiving the employee's written claim, the employee has the right to demand judicial protection of his or her rights by filing a lawsuit with the competent labour court within a preclusive period of 30 days of the expiry of the aforementioned employer's deadline for the voluntary fulfilment of the obligations or remedy of the breach.
If an employment relationship has been terminated and the employee wishes to dispute either the termination, another form of cancellation of his or her employment agreement or a disciplinary measure, the employee must file a lawsuit with the competent labour court within 30 days of being served with the termination or after being informed of the breach.
The above-stated deadlines for filing a lawsuit are extended if the parties agree to an ADR method.
Notwithstanding the above-mentioned deadlines, all monetary claims arising out of an employment relationship (e.g., payment of salary, severance pay and damages) can be filed directly with the competent labour court. The statute of limitations for these monetary claims is five years.
After a lawsuit has been filed, the procedure follows the general rules of the Civil Procedure Act, with some specifics addressed under the Labour and Social Courts Act to take into account the specific nature of employment disputes and the notion that the employee is the weaker party in an employment dispute (e.g., a speedy resolution of labour and employment disputes whereby deadlines for procedural acts are in most cases explicitly set and shorter than in civil procedures; the duty of the court to obtain and assess additional evidence if the existing evidence does not provide an adequate basis for a decision; and the option for the court to impose on the employer the payment of all expenses relating to the production of evidence). In disputes regarding the existence or termination of an employment relationship, the employer bears its own expenses regardless of the outcome of the judicial dispute.
Either party may file an appeal with the Higher Labour and Social Court in Ljubljana against the decision of the labour court of first instance. One noteworthy amendment in this respect was the extension of the deadline for filing an appeal from 15 to 30 days, which came into effect with the amendments to the Civil Procedure Act in September 2017. The same amendment package significantly reduced the access to the third instance ruling of the Supreme Court, which is now accessible only in exceptional cases under the Civil Procedure Act and contingent on prior success with a motion to allow this extraordinary remedy by the Supreme Court.
With regard to ADR, each judicial proceeding governed by the Civil Procedure Act – therefore including judicial proceedings in employment disputes – entails an invitation to join a mediation procedure prior to opening the main court hearing. If both parties agree to a mediation procedure, the court procedure is halted for three months during which the parties try to reach an agreement through a mediation centre. There are mediation centres adjoining the courts; however, the parties may agree to choose other mediation institutes to resolve the dispute. If the mediation procedure is successful and a settlement is reached and sent to the court, the settlement shall be signed as a court settlement, thus having the immediate and same effect as a final court decision. However, if the parties are unable to reach an agreement, the dispute is returned to the court to be resolved. The parties may also settle at any time during the court proceedings in the form of either a court settlement or an out-of-court settlement; the latter has the nature of a regular agreement without the status of an immediately effective and enforceable agreement, unless it is signed as such before a notary. As in many cases, an amicable resolution of an employment dispute is a preferred method of resolving employment disputes, and many courts actively pursue and promote amicable resolution of such disputes.
If the option is provided by a collective agreement, the parties of an individual employment agreement may agree to resolve the dispute through arbitration, but this type of case is not very common under Slovenian law.
As in other types of disputes, a constitutional appeal to the Constitutional Court of the Republic of Slovenia is possible in employment disputes if there has been a violation of fundamental human rights or freedoms, as guaranteed by the Constitution. As a rule, a constitutional appeal may be filed only against a court decision after the parties have exhausted all (ordinary and extraordinary) legal remedies provided by the law.
ii Collective employment disputes
Under the Labour and Social Courts Act, a collective employment dispute may arise in the following circumstances:
- between the parties to a collective agreement, or between the parties to a collective agreement and third parties on the validity of a collective agreement and the execution thereof;
- on competency for collective bargaining;
- on compliance of collective agreements with relevant legislation, compliance among collective agreements and compliance of an employer's general acts with the law and binding collective agreements;
- on the legality of strikes and other industrial action;
- on workers' participation;
- on the competence of a union in relation to employment relationships;
- on the status of a representative union; and
- in other cases provided by law.
There are procedures specific to each of the above-mentioned types of collective dispute; however, in general, the Collective Agreements Act prescribes a peaceful manner of dispute resolution as the preferred method, and lists the possible methods of negotiation, intervention and arbitration. If ADR methods are not successful, collective employment disputes also fall under the jurisdiction of the labour and social courts and the rules of civil procedure are applied with some specific changes (i.e., the judicial procedure begins with the filing of a motion as opposed to filing a lawsuit, and the parties to the judicial proceeding are called participants, and, pursuant to the Labour and Social Courts Act, inclusion as one of these participants is extended to all persons, bodies and associations that are holders of rights and obligations in the relationship at issue). A court decision in a collective employment dispute has a general effect, meaning that any person who gains a certain right through the court decision can enforce it, even if that person was not a participant in the court proceeding. To this end, a court decision that affects a collective agreement or a general act of an employer must be published in a public or other relevant gazette.
III TYPES OF EMPLOYMENT DISPUTES
The Labour and Social Courts Act distinguishes between employment disputes in the following respects:
- the conclusion, existence, term and termination of the employment relationship;
- the rights, obligations and responsibilities arising from the employment relationship between the employee and employer or their legal successors;
- the rights and obligations arising from the relationship between the employee and the user for whom the employee was sent to work under an agreement between the employer and the user of the employer's workforce;
- the employment procedure for candidates;
- the rights and obligations arising out of industrial property created in employment relationships;
- company scholarships undertaken between an employer and a student; and
- voluntary internships.
However, the most commonly encountered types of employment disputes are those relating to unlawful termination, discrimination in the workplace, violations of non-compete clauses and different types of monetary claims (payment of salary, severance pay and damages, etc.) as described in more detail below.
i Existence of employment relationship
If the elements of an employment relationship exist in a relationship that is otherwise not formally concluded by way of a written agreement or using a different type of agreement (e.g., a civil law contract), the employee may demand to be offered an employment agreement by the employer. If the employer fails to provide the employee with the employment agreement within eight days of receiving a written request from the employee, the latter may file a lawsuit on the establishment of an employment relationship within 30 days of the expiry of the eight-day deadline. Elements of an employment relationship include voluntary involvement of the employee in the organised work process of the employer, work for payment, continuous performance of work and performing work according to the instructions and under the supervision of the employer.
ii Unlawful termination
Among the most common types of employment disputes are those that arise from unlawful termination. In this regard, many terminations are proclaimed unlawful because of breaches of the procedural provisions that need to be strictly observed by an employer when terminating an employment agreement. The correct procedure for terminating an employment agreement depends on the type of termination (i.e., ordinary or extraordinary). An extraordinary termination of an employment agreement by an employer can be carried out because of serious breaches of an employment agreement by an employee; for example, if an employee is absent from work for five or more consecutive days and fails to notify the employer of the reason for the absence. An ordinary termination of an employment contract can be carried out for business reasons or because of fault or incompetence. The Employment Relationship Act specifies the exact procedure that needs to be followed to lawfully terminate an employment agreement for each termination reason.
As an example, the Employment Relationship Act explicitly provides that, in cases of termination for reasons of fault or incompetence, an employer must provide an employee with the opportunity to defend himself or herself at a meeting between the two parties. The termination must also be carried out according to legally prescribed deadlines (e.g., in cases of termination due to incompetence, the termination notice must be served to the employee within six months of the first occurrence of the valid reason for termination). If an employer fails to comply with the procedural provisions of the Employment Relationship Act, the termination of an employment agreement shall be deemed as unlawful if challenged by the employee in a judicial proceeding.
iii Discrimination claims
A special type of employment dispute arises from an act of discrimination against an employee in the workplace. The Employment Relationship Act defines discrimination as the unequal treatment of individuals based on their personal circumstances, such as racial or ethnic origin, nationality, religious affiliation, physical or mental disability, health status, gender, sexual orientation, age, socioeconomic status, parenthood, external appearance, union membership, political convictions and world view. Discrimination can occur on different occasions; for example, in the process of selecting candidates for a post, the payment of salary, or in the process of terminating an employment relationship. In the event of discrimination, an employee can file a lawsuit against an employer with the competent labour court, where the employee can also claim damages in relation to discrimination under the general provisions of civil law. When assessing the amount of damages to be awarded to an employee, the court shall take into account that the damages must be effective and proportionate to the damage suffered by the employee and must discourage the employer from repeating the infringements.
iv Monetary claims
Other common types of employment disputes relate to monetary claims, such as payment of wages and other benefits and payments to which an employee is entitled under statutory provisions and employment agreements. The legal basis for monetary claims is provided by the Employment Relationship Act, binding collective agreements, general acts of the employee and the employment agreement, in relation to which the amount of certain payments that an employer is obliged to pay to an employee is provided by specific legislation or government regulations. While an employee must observe certain procedural steps before being entitled to judicial protection, monetary claims can be filed directly with the labour court. The statute of limitations is five years after the due date.
v Claims relating to non-compete clauses
In cases where technical, production or business knowledge or business connections are acquired in the course of an employee's work or in connection with work, the employee and the employer may, in the employment contract, agree upon a non-compete clause, prohibiting the employee from pursuing and performing competitive activity after the termination of the employment contract by taking advantage of the knowledge and business connections acquired during the employment relationship with the current employer. Non-compete clauses can be agreed for a maximum of two years. The validity of non-compete clauses is conditional upon agreement on remuneration for respecting the non-compete clause, which must be concluded in writing and is usually included in the provisions of the employment agreement. If an employer considers that an employee is in breach of the non-compete clause, the employer can file a lawsuit against the employee for remuneration in the form of damages. In cases of this kind, the burden of proof is on the employer, who has to prove that the employee caused damage to the employer by exploiting the knowledge and business connections acquired during the employment relationship.
IV YEAR IN REVIEW
Labour and employment dispute case law in Slovenia develops at a slow but steady pace. Some notable cases have contributed to the development of case law in this area.
With regard to claims for the establishment of an employment relationship, the Supreme Court issued a decision2 in which it revised the precedent set by existing case law with regard to the procedural preconditions for filing a claim to establish an employment relationship and for challenging an unlawful termination of the employment relationship, which according to previous case law had to be claimed simultaneously. The Supreme Court ruled that imposing this demand on the employee was too severe and was unreasonable given that an employment relationship that had yet to be established could not be terminated, and particularly since these preconditions did not derive from law but were based on previous case law.
Regarding termination of an employment relationship due to a fault by the employee, the Supreme Court issued a decision3 in which it ruled that a termination letter must specify the termination reason and the type of fault must be defined (i.e., intent or negligence). Therefore, the fact that an employee has breached contractual or other obligations arising from the employment relationship does not, in itself, present a valid reason to terminate the employment agreement for fault if the fault is not substantiated in the termination letter.
Regarding claims for reintegration and the related question of broken trust between employee and employer, the Higher Labour and Social Court issued a decision4 in which it ruled that the court must assess whether the continuation of an employment relationship is still possible, depending on the specific circumstances of the case and the interests of the contracting parties. In this regard, the Higher Labour and Social Court pointed out that the reasons for the termination of the employment agreement should not be confused with the circumstances and interests of the disputing parties in relation to the possibility of continuing the employment relationship. In this particular case, the employer claimed that it had lost confidence in the employee because of alleged violations of the employment contract with elements of a criminal offence, even though the state prosecutor found that the employee did not commit the alleged violations and the charges against him were withdrawn. The Court therefore held that the mere fact that a criminal proceeding was in progress against the employee is in itself not a circumstance that would prevent the continuation of the employment relationship. For this reason, the Court granted the employee's reintegration claim. The employer filed for an extraordinary legal remedy against this decision with the Supreme Court, stating that, as the employee worked in the field of childcare in a kindergarten, there was a possibility of negative media coverage and protests by the parents of children, even though the employee did not commit the alleged violations or criminal offences, and therefore it was not in the interests of the employer to continue the employment relationship with the employee as it could severely affect the future work process. The employee responded by raising the point that a criminal proceeding against an employee cannot in itself constitute an admissible reason for the termination of an employment relationship by a court ruling, especially in this case as the criminal proceeding against the employee was based on allegations made by the employer (and which later turned out to be unfounded); otherwise this could lead to a situation in which an employment relationship could be terminated regardless of whether criminal allegations subsequently proved to be unfounded.
This trial is still ongoing and the outcome will produce important case law on the aforementioned issues.
Regarding employment disputes arising from discrimination, the Supreme Court issued two important decisions5 in which it ruled that even though the burden of proof with regard to discrimination claims is on the employer, the employee is not relieved of the procedural duty to substantiate the claim by providing proof of the claim. The employee must therefore precisely define the circumstances that outline the existence of discrimination. Loose statements alone, to the effect that the employer discriminated against the employee, are not enough to transfer the burden of proof to the employer.
In disputes relating to non-compete clauses, the most common issue is the legal nature of the payment for damages to which an employer is entitled because of a breach of the non-compete clause by an employee. The question arises whether the legal nature of a contractually agreed payment for damages is a contractual penalty or a claim for damages under the provisions of the Obligations Code on business liability for damages. The essential difference between a contractual penalty and a damages claim lies in the burden of proof of the existence and the amount of damage sustained by an employer. In the first case, the employer does not need to prove it sustained any actual damage to be entitled to the full amount of the contractually agreed monetary penalty, while in the second case the employer has to prove the existence and amount of actual damage sustained. A decision of the Supreme Court6 provided an interpretation that is favourable to employers, in that the parties to the employment contract may agree on a contractual penalty, meaning that neither the existence nor the amount of damages needs to be proved by the employer if the employee breaches the non-compete clause.
In March 2016, the Supreme Court issued a decision on this matter,7 ruling that a contractually agreed payment for the breach of a non-compete clause is by nature a contractual penalty and therefore the employer does not need to prove the existence and the amount of actual damage. In December 2016, the Higher Labour and Social Court issued a ruling8 in which it disregarded the previous case law and ruled that the provisions of the Obligations Code on contractual penalties are less favourable to the employee than the provisions on non-compete clauses provided by the Employment Relationship Act; therefore, the employer is required to prove all the elements of business liability for damages, which includes the existence and amount of actual damage sustained. The Higher Labour and Social Court explained that using the contractual penalty as provided under the Obligations Code represents a simplification, to the detriment of the employee, and which is contrary to the main narrative of the Employment Relationship Act. Contractual penalties agreed in an employment agreement for breach of a non-compete clause should therefore be deemed null and void.
V OUTLOOK AND CONCLUSIONS
After the newly elected government was finally formed following an extended period of negotiations, it made an important decision to amend the minimum wage and, on 24 December 2018, the Parliament passed an amendment, effective as of 1 January 2020, which not only introduced a rise in the amount, but also changed the definition of the minimum wage. Under the new definition, only the basic salary, without any bonuses or expenses, constitutes the legally prescribed level of the minimum wage, thereby significantly increasing the amount of the minimum wage. The government's adoption of this decision is a response to the fact that employers had begun to intensively change their internal policies and rules determining their pay systems, all with the intention of reducing the effects of the expected salary increase.
In addition, the newly elected government began a tax reform with the purpose of reducing labour costs. From 2019 onwards, the payment of the annual leave allowance up to the amount of the average gross salary in Slovenia is not subject to tax (whereas previously it was tax-free only up to the amount of the minimum legally prescribed salary). The government's plan also includes a change to the income tax scale, with an increase in the number of tax classes and an increase in general tax relief, although the government has yet to confirm these legislative amendments.
In the framework of the pension reforms that have been adopted, effective as of 1 January 2020, pensions of retirees gradually increase through the vesting percentage of pensions for men and women. The reforms also entitle all persons meeting the conditions for retirement on age grounds to 'dual status', which means they may continue to work while also receiving part of the applicable pension.
With regard to the general tenor of labour and employment dispute resolution, Slovenian law has tended, and will continue, to prefer mediation and other forms of amicable dispute resolution. Employment disputes arising from the existence of employment relationships or from their unlawful termination remain the most common types of disputes, largely because of employers' failure to adhere to the strict procedural steps required in terminating employment agreements, although these can be easily prevented by obtaining professional help and guidance. It is of paramount importance to obtain such guidance as early as possible in the dismissal process (i.e., as soon as an employer has made a decision to terminate an employment agreement), because by the time an employee has filed a lawsuit, procedural errors cannot be remedied. Procedural provisions under Slovenian law are strict; however, with professional help, adherence to even the strictest provisions may be achieved and many unlawful termination rulings prevented.
1 Ljuba Zupančič Čokert is a partner at Law Firm Miro Senica and Attorneys, Ltd.
2 No. VIII Ips 258/2015 dated 5 April 2016.
3 No. VIII Ips 217/2016 dated 4 April 2017.
4 No. Pdp 78/2016 dated 1 December 2016.
5 No. VIII Ips 24/2016 dated 30 August 2016 and No. VIII Ips 46/2016 dated 21 June 2016.
6 No. VDSS Pdp 767/2016 dated 5 February 2018.
7 No. VIII Ips 320/2015.
8 No. Pdp 767/2016.