All questions

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 decision (No. VIII Ips 258/2015 dated 5 April 2016) 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 such a 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 decision (No. VIII Ips 217/2016 dated 4 April 2017) 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 decision (No. Pdp 78/2016 dated 1 December 2016) 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 its confidence in the employee was broken 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 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 decisions (No. VIII Ips 24/2016 dated 30 August 2016 and No. VIII Ips 46/2016 dated 21 June 2016) 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 Court (No. VDSS Pdp 767/2016 dated 5 February 2018) 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 (No. VIII Ips 320/2015), 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 ruling (No. Pdp 767/2016) 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.

Outlook and conclusions

After the newly elected government was finally formed after an extended period of negotiations, it made an important decision to amend the minimum wage and, on 24 December 2018, Parliament passed an amendment, effective 1 January 2020, according to which not only was the amount of the minimum wage raised, the definition of the minimum wage was also changed, according to which the legally prescribed level of the minimum wage presents only the basic salary without any bonuses or expenses, therefore significantly increasing the amount of the minimum wage. This decision will surely resonate across the Slovenian economy as it will, inter alia, also affect pay grades, which will need to be amended to accommodate the new amounts.

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 advice 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.