Dismissals and Termination of Employment in Bosnia and Herzegovina

FBiH: Under the FBiH labour law, an employer can terminate an employment contract:

• if the termination is justified due to (1) economic, technical, or organisational reasons, or (2) if the employee is not capable of conducting his / her contractual obligations; in both cases under the additional condition that the employer cannot be reasonably expected to offer the employee an alternative position, or provide to him / her any necessary training or equipment to perform an alternative role;
• if the employee has committed a serious offence or serious breach of his / her contractual obligations (in these circumstances the employer can terminate the employment contract with an immediate effect).
• in the case of minor violations of work obligations under the employment contract, an employment contract cannot be terminated without a prior written warning to the employee.

Republika Srpska: Under the labour law of Republika Srpska the employer may terminate the employment contract for the following justified reasons:

• if the employee has seriously violated work obligations under the Labour law of Republika Srpska, whereby the named law provides for an exhaustive list of activities that constitute serious violations of work obligations;
• if, due to economic, organisational and technological changes, the need for performance of specific work ceases, or a decrease of workload occurs, whereby the employer cannot secure the employee a different position;
• if the employee does not achieve certain work results or if he / she does not have the required knowledge or skills to perform his / her work;
• if the employee was sentenced for a criminal offence which was committed at work or is connected to the employee’s work;
• if the employee refuses to accept the conclusion of an annex to his / her employment contract;
• if the employee does not return to work within a period of five days after the expiration of a period of unpaid leave or a period of standstill of rights from the employment relation; or
• If the employee does not respect the work discipline; whereby the named law provides for an exhaustive list of activities that constitute breaches of work discipline.

FBiH / Republika Srpska: The employer must notify the employee in writing. The dismissal notice must include the reasons for the dismissal and their statutory basis. The dismissal notice must be delivered to the affected employee or, if the delivery is unsuccessful, the dismissal notice must be published on a bulletin board in the employer’s premises. In addition, in Republika Srpska, the dismissal notice must provide possible legal remedies for the affected employee in addition to reasons for the dismissal.

FBiH: The statutory minimum notice periods are seven days (employee to employer) and 14 days (employer to employee). The actual notice period is normally determined by internal company regulations and collective agreements, or if these do not exist, the notice period is incorporated into the employment contract. The Law on Employment of FBiH provides for the maximum allowed duration of notice period, i.e. a maximum of one month (employee to employer) and three months (employer to employee). The notice period commences on the day the employee is notified of the dismissal.

An employer may terminate an employment agreement without respecting the notice period, if the employee seriously breaches the work duties set out in the employment agreement.

Republika Srpska: The statutory minimum notice periods are 15 days (employee to employer) and 30 days (employer to employee). As in the Federation of Bosnia and Herzegovina, the actual notice period is typically regulated in either internal company regulation, collective agreements, or in the specific employment contract. The notice period does not have to be respected if the termination is due to a serious breach of work duties.

FBiH: An employer who employs more than 30 employees, and who intends, within the next three months, to terminate the employment contracts of at least five of its employees due to the economic, technical or organizational reasons, is obliged to consult the competent union and works council (if one exists).

Republika Srpska: If, due to economic, organizational, or technical reasons, an employer intends, to dismiss within 90 days:

1. ten employees, if the employer employs between 30 and 100 employees on an indefinite term, or
2. 10% of its employees, if the employer employs more than 100 employees on an indefinite term, or
3. 30 employees, if the employer employs more than 300 employees on an indefinite term,
4. the employer is obligated to adopt a programme to deal with the surplus of workers. The employer is then required to deliver this proposal to the union or works council (if one exists) for their opinion. The employer is further obligated under the Law to consider this opinion and to inform the union or works council of the stance taken.

FBiH: If there has been an unlawful dismissal or any irregularity in relation to the dismissal, the union can assist an employee in making his / her claims against the employer.

If there is no works council, an employer who employs more than 30 employees, and who in a three-month period intends to, terminate the employment agreements of at least five of its employees due to economic, technical or organizational reasons, it is obliged to consult the appropriate union and works council (if one exists).

Republika Srpska: As explained under “Involvement of works council” above.

FBiH: It is necessary to obtain prior approval of the relevant labour ministry if an employer proposes dismissing a union commissioner (the employee’s trustee) during and for a period of six months after his / her term of office.

FBiH / Republika Srpska: The relevant laws of FBiH and Republika Srpska do not recognize collective redundancies, as the redundancy is treated as an individual right.

Extraordinary dismissals

FBiH: The employer can terminate the employment contract without a notice if the employee has committed a serious offence or serious breach of his / her contractual obligations (in circumstances where it would be unreasonable to expect the employer to continue the employment relationship). The employee has the right to present its defence before the employer decides on the termination.

Republika Srpska: As above, an employer is entitled to terminate the employment contract with immediate effect if the employee commits a serious breach of work duties. Thereby, the Law on employment in RS (unlike in FBiH), provides a list of activities that constitute a serious breach of work duties. As in FBiH, the employee needs to be notified of the allegations against him / her and needs to be provided with the possibility to exercise his / her right to present his / her defence, before the employer decides on the termination.

FBiH: If the court determines that a dismissal is unlawful, it can oblige the employer to:

• return the employee to work at his / her request to the position he / she worked in, or other appropriate position, and to pay salary compensation equivalent to the salary that the employee would have received if he / she had worked, as well as the compensation for any damages caused to them;
• to pay the redundancy to which the employee is entitled in accordance
  with the law, collective agreement, employment rulebook or employment agreement; and other benefits to which the employee has the right, in accordance with the law, collective agreement employment rulebook or employment agreement.

It should be noted that the employee may request that the court adopts an interim measure on his / her return to work until the final decision in the court dispute has been made.

Republika Srpska: the same as above.

FBiH: An employee with a contract concluded for indefinite period of time, who has worked at least two years continuously for the same employer, has a statutory right to severance pay if his / her employment contract has been terminated by the employer. The sum depends on the employee’s length of continuous work. Severance payments are normally set out in collective agreements, employment agreement and internal company rulebooks. The relevant law prescribes the statutory minimum and maximum for severance payment. The minimum amount is calculated based on the formula: one- third of the employee’s average monthly salary (paid to the employee during the three months prior to dismissal) for each year of service. The maximum amount of statutory severance is six average salaries paid to the employee in the three months prior to the termination of the employment contract.

The method and deadline for payment is normally set out in a written agreement between the parties. It should be noted that the employer is not obliged to make a severance payment if the reason for dismissal is due to the employee’s breach of contract or obligations that arise from the employment relationship.

Republika Srpska: An employee with an employment contract concluded for indefinite period who has at least two years of continuous work has a statutory right to severance payment, unless the employment agreement is terminated for any of the following reasons:

• the worker has made a serious violation of work duties prescribed by the Labour law of Republika Srpska;
• the employee, within a period of five working days after the expiration of unpaid leave or standstill of labour rights, does not return to work; or
• the employee does not respect work discipline or
• the employee is sentenced for a criminal offence committed at work or connected to his / her work.

The sum of the severance payment depends on the length the employee has continuously worked for the employer. The minimum and maximum amounts of the severance payment are identical to the amounts prescribed in FBiH (please see above).

Non-competition clauses are permitted under the labour laws.

FBiH: The Law on Employment of FBiH provides for a statutory and a contractual non-competition clause. The statutory non-competition clause stipulates that an employee is not entitled – on his / her own, or a third party’s account – to contract or perform work which is within the business activities of his / her employer, without prior approval of the employer.

The parties can also agree on an additional restrictive covenant into the contract restricting the employee from working for a competing business, or from conducting business in competition with the employer on his / her own or a third party’s account, after the termination of the employment contract. The term of the covenant cannot exceed two years from termination. For a restrictive covenant incorporated in the employment contract to be valid, the employer must compensate the employee with at least 50% of his / her average salary (over the three-month period preceding termination) during the restricted (non-competition) period.

Republika Srpska: Similar provisions as stated above also apply in the Republika Srpska, with two key differences:

1. the statutory non-competition clause is limited to employees that are employed full-time (in FBiH there is no limitation in this regard);
2. the maximum term of the restrictive contractual covenant is limited to one year following termination;
3. the contractual covenant is limited to the territory of Republika Srpska (in FBiH there is no territorial limitation); and
4. the minimum compensation that must be provided to the employee during the contractual covenant is 50% of his / her average salary (calculated over the six-month period preceding termination).

Not applicable

It should be noted that in Bosnia-Herzegovina, the business activities and actions of a company are governed by its management. Under the law of Business Entities FBiH, management may consist of a company director, or of a company director and one or more executive directors. Under the law of Business Entities of the Republika Srpska, a limited liability company may have a director or board of directors.

Both in the Federation of Bosnia and Herzegovina and in Republika Srpska, directors can either be employed by the company under a standard employment contract or under a “special” type of contract regulating all their obligations, rights and engagement conditions, including termination. If the “special” contract, i.e., management contract, is concluded, then standard labour law principles do not apply. In addition, the Labour Law in FBiH provides that, even if a standard employment contract is concluded with the director / executive directors, certain sections (provisions) of the named law do not apply to it (i.e., working time, annual leave and absences, employee protection, salary and salary remuneration and dismissal).

Therefore, in Republika Srpska, general labour law principles will apply to a director unless the director has a ”special” contract, i.e., a management contract. In the Federation of Bosnia and Herzegovina, the mandatory provisions on dismissal do not apply to directors, irrespective of whether an employment contract or a management contract is concluded.

The table below deals with directors who have concluded a “special” contract in Republika Sprska or an employment contract or management contract in the Federation of Bosnia and Herzegovina. Directors with standard employment contracts in Republika Srpska are dealt with in the “Dismissal of employees” section.

The labour law principles do not apply to directors with “special” contracts, i.e., management contracts in Republika Srpska, and to directors with either a management contract or an employment contract in the Federation of Bosnia and Herzegovina. In these cases, the management contract will set out the reasons for dismissal.

The form will depend on the provisions of the management contract, although it is highly likely that notification of dismissal will be required to be in writing and delivered to the director.

It depends upon the provisions of the management contact.

No involvement.

No involvement.

Not required.

Not applicable.

Not applicable.

Depends on the provisions of the special contract.

If the director has a special contract, any severance payment will be as provided for in such contract. This will usually provide for a larger sum.

Under the Law of Business Entities of FBiH the company director and executive directors cannot, without approval of the relevant corporate body as per the company’s statute, in their position as director / executive directors or as employees of another company, nor as independent contractors, participate in activities which are or could be in a competitive relation to the company’s business activities.

By the Law of Business Entities of Republika Srpska, members of the board cannot directly or indirectly be involved with another business entity, which performs competitive business activities, unless with provided authorization.

In both FBiH and Republika Srpska either by statute or an establishing act of the company, the non-competition clause can be prolonged for a period after the duty of a director / executive director has ceased, but for no longer than two years.

As the parties negotiate the terms of the special contract, they may agree to the inclusion of non-competition clauses.

Not applicable.