Is the Mini Labour Reform headed in the right direction?

Last Friday the Ministry for labour, Family, Equal Opportunities and Social Affairs (“the Ministry”) published on its website three drafts of proposals of amendments of the Employment Relationship Act, Labour Market Regulation Act and Labour Inspection Act, which constitute the so-called “mini labour reform”. This was done without the full cooperation of all the parties of the social dialogue (three employers’ associations protested and did not attend the session of the Economic and Social Council of Slovenia (“ESS”) due to an ongoing clash regarding the work of the ESS). The Employers’ association of Slovenia reacted to this blow on the same day with their own nine-page long proposal of the labour and social legislation.

According to the Ministry, the proposed measures should ensure a more effective intervention of the labour inspectorate, legal safety of the employees, incentives for employers to conclude employment contracts for indefinite period of time and larger social safety of the employees upon termination of employment relationship.

The highlight of this reform are the measures regarding “hidden employment relationships”, which are camouflaged with civil agreements. It is old news that there are (too) many individuals performing work via civil agreements rather than on the basis of an employment agreement on the Slovenian labour market. Under the mini labour reform, in case a legal dispute about existence of the employment relationship arises, the burden of proof of (non-)existence of the employment relationship lays with the employer. Next, the labour inspectorate will have the authority to order the employer to offer the employee an appropriate employment agreement in three days, if it establishes that the elements of the employment relationship are present in the case at hand. If the individual rejects this offer, they will have to terminate their cooperation with the company. To make sure that these measures are truly effective, they are accompanied with very high fines in case of breach: EUR 10,000 to 30,000 for the employers (small employers (less than 10 employees) EUR 5,000 to 10,000)), EUR 3,000 to 8,000 for the responsible person of the employer. The individuals carrying out of the work will not remain unpunished either, the stipulated fine is between EUR 500 and 2,500. The individual may be exempt from payment of a fine if they prove that the work performance was based on the condition that such civil agreement is concluded (e.g. public announcement of a job post, registration as sole entrepreneur (“s.p.”) at the same time as commencement of work), or if they report the employer to the Labour Inspectorate before the control under the proposed act enters into force or exercise their rights with the employer or seeks judicial protection.

It seems that some of the proposed changes are not headed to the flexibility of the labour market, but quite the opposite. Yes, there are currently too many breaches regarding hidden employment relationships and employers are mostly pursuing solely their economic interest, but it is questionable whether proposed changes are a way of solving this problem and not just creating an additional one. Such strict regulation could lead to massive terminations of agreements and worsening of relations, since both parties will want to avoid exposure to hefty fines and even more individuals may end up at the Employment Service of Slovenia.

Other relevant changes are:

• severance pay is due with the last salary (currently on the day of termination of employment relationship);
• redefinition of the “due to incapacity” reason for ordinary termination of employment agreement: the wording is amended so it is clear that this reason is connected to capability of the employee as well as their conduct; employee’s conduct must, of course, be objectively established and must influence the incapability of continuation of the working process;
• redefinition of the termination date of employment in case the employee is absent from work due to temporary inability to work due to illness or injury: it shall be the last day of absence from work due to temporary inability to work due to illness or injury (under the current legislation the employee actually had to come to work for one day after the mentioned absence which represented difficulties in practice);
• entitlement to unemployment benefit also in case of mutual termination of employment up to six months (currently not the case), but with a few particularities:  the employee  will be able to waive this right, the funds will be paid by the Employment Service of Slovenia just as in all other cases, but the funds will be provided by the employer and in case the employee gets a new job in the period in which they would otherwise be entitled to the mentioned benefit, the employer will not be reimbursed with the proportional part of the unpaid funds;
• measures to increase the involvement of citizens of working age in the labour market by increasing the efficiency of the activation of all unemployed persons (e.g. gradual sanctioning of inactivity, decrease of the benefit due to inactivity/breach, payment of 20% of the last benefit for the recipients with lower education even after employment if they are re-employed within the period of time in which they would still be entitled to the benefit) and intensive search for new employment during the notice period (mandatory – currently it is optional; in case of breach, the individual will be receiving a lower benefit for three months) as well as no reimbursement of costs of the employer for the period in which the employee was looking for new employment (currently employers are reimbursed by the Employment Service of Slovenia).

At this stage, the above mentioned proposals are open for public discussion, comments and proposals may be submitted until 9 December 2016. We believe (and hope) that these versions of the proposals will be redrafted before they are sent to the Parliament.