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The reasons for regular termination as set out in the Labour Act are as follows:
Notice may be given without providing any reason (‘Kündigungsfreiheit’).
Both employer and employee may end the employment relationship without providing reason or cause.
However, a dismissal must not be abusive (wrongful or unlawful dismissal). Subject to certain exceptions, such a notice is unlawful where issued:
In any of the above circumstances, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary.
The employer may not terminate the employment relationship during the following periods, and notice given during these periods is void:
Written form, including reasons for termination. Decision is to be delivered to the employee.
There is no specific requirement. Notice of termination may be communicated verbally or by other means. For evidentiary purposes, it is strongly recommended that notice be issued in writing.
Regular termination: notice period ranges from two weeks to three months, dependent on the employee’s length of service with the same employer.
The three-month period is extended by an additional two weeks / one month for 50 / 55-year-old employees who have 20 or more years’ continuous service with the same employer.
Extraordinary termination (summary dismissal): no notice period. Termination during probationary period: notice period of at least seven days.
Termination by employee: notice period cannot be longer than one month if the employee has a good reason.
If the employment is terminated because the employee breaches his contractual obligations, notice periods are halved.
The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.
The notice period may vary depending on the written individual or collective employment contract. however, the notice period may be reduced to less than one month only by collective employment contract and only for the first year of service. The notice period must be the same for both parties.
The parties may agree on a probationary period of up to three months with a notice period of seven days.
The works council must be informed of the employer’s intention to dismiss. The works council‘s consent is required for dismissal of the following employees:
Except for mass dismissals, there is no statutory requirement to involve a works council.
If there is no works council, consent is given by the union commissioner (the union representative employed with the respective employer). The union‘s consent is required for the dismissal of a union commissioner during their period of office and for six months thereafter.
No involvement.
If the works council or union commissioner do not consent, consent can be substituted by a judicial or an arbitral decision.
Not necessary.
Employer who expects to terminate at least 20 employees, five of which due to business related reasons, all within a 90-days’ period, is obliged to duly consult the works council / union commissioner in order to possibly reach an agreement to save the employees and / or limit the number of terminations. The employer is obliged to provide the works council / union commissioner with written information concerning the reasons for termination, total number of employees, number, professions and positions of employees who are supposed to be terminated, election criteria for such employees, amounts and way of calculating their severance payments and measures undertaken to prevent such terminations. Employer is obligated to consider and explain all possibilities and suggestions that may lead to avoidance of terminations. Also, the Croatian Employment Agency needs to be informed about the previously mentioned points and consultations with the works council / union commissioner.
The statutory provisions regarding mass dismissals apply where the employer – within a time period of 30 days – gives notice for reasons unrelated to any particular employee and affecting:
The provisions governing mass redundancies do not apply in the event that business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.
Prior to giving notice, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. these bodies have consultation rights only. Neither the employees nor the cantonal office are able to block a mass dismissal.
The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees and (ii) intends to terminate at least 30 employees within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.
The employer negotiates:
An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.
Summary termination (summary dismissal) is defined as termination without notice, and is only lawful where there has been:
The employee is to be dismissed within 15 days of the day of becoming aware of the fact / reason for dismissal.
Both the employer and employee may terminate the employment relationship with immediate effect at any time for cause.
The requirements for termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three days of the party becoming aware of the serious breach allowing termination for cause.
If it is decided the dismissal is illegal, the employee is to be reinstated. Reinstatement is possible even before the end of the court procedure to determine the legality of the dismissal if the employee so requests. If the parties do not wish to continue with their employment relationship, the court shall at the employee‘s request determine:
In case of ordinary dismissals:
Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, late notice), the employee is entitled to the salary for the period until his contract expires or would have been ordinarily terminated. In addition, the court may require the employer to pay an indemnity of up to six months' salary.
In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the employee of a sum fixed by the court not exceeding two months' salary.
An employee with an open-ended contract who has two years’ continuous service with the same employer (and is not being dismissed due to an intentional breach of contractual obligation) is entitled to a severance payment. The statutory minimum severance payment is calculated by multiplying one-third of the average monthly salary in the preceding three months by the number of years’ continuous service with that employer. The severance payment is capped at six times the average monthly salary, unless otherwise provided for by law, by-law, collective agreement or work contract
Employees are entitled to a severance payment if they are over 50 years old and with 20 or more years service. If there is no contractual severance payment, an amount equal to between two and eight months' salary will be awarded by the court. However, the employer’s contributions to the employee’s pension fund over the entire period of service may be deducted from the severance payment. As a result, mandatory severance payments are rare.
Post-contractual non-competition clauses must last no longer than two years from the date of termination of the contract. The employer is obliged to pay compensation (at least one-half of the average monthly salary paid in the last three months of employment). The covenant will not be valid if the employee is a minor or if the employee‘s salary amounts to less than the average national salary.
The non-competition clause does not apply if: (i) the employee terminates the contract without notice period (extraordinary termination) and does not state that he does agree that the clause applies; or (ii) if the employee is dismissed without a justified reason, unless the employer undertakes to pay the prescribed remuneration for the duration of the clause.
The parties to an employment agreement may agree on post-termination restrictive covenants prohibiting competitive activity by the former employee. Such covenants are subject to a number of requirements and restrictions, including the following:
Not applicable.
Not applicable.
It should be noted that the title ‘managing director’ is not recognised under the Croatian Companies Act or other relevant applicable legislation. The Croatian Companies Act recognises only a ‘director’, who is authorised to represent the company and obliged to be registered as a member of the management board with the respective commercial court.
A managing director need not to have an employment agreement with the company, or any other type of agreement, in order to be able to represent the company.
Where a managing director has a managing / service agreement which falls under the regulation of Croatian obligatory law, only the provisions of the managing / service agreement apply. If aspects of the relationship are not dealt with in the managing / service agreement, the relevant provisions of the Croatian Obligations Act will apply.
Where a managing director does not have any employment or managing / service agreement with the company, he shall be treated as a member of the management board only.
The table below sets out the position under Croatian law with respect to the managing directors of a limited liability company, with and without service agreements.
In general, the managing director is an employee of the company. In certain situations, and subject to the prohibition of circumventing employment law, the managing director might be a self-employed person who has entered into a service agreement with the company.
The following comments relate to situations whereby the managing director is an employee of the company.
No special reasons required (unless otherwise specified within the statute of the company or the contract itself).
Where the managing director has a service agreement, the provisions of that service agreement (and consequently the Croatian Obligations Act) will apply.
If the managing director is a member of the management board according to the statute of the company (and not only appointed by resolution of the shareholders), the company statute may set out that revocation is only possible for special reasons.
Notice may be given without providing any reason (‘Kündigungsfreiheit’).
Both the employer and the managing director may end the employment relationship without providing reason or cause.
However, a dismissal must not be abusive (wrongful or unlawful dismissal). Subject to certain exceptions, such a notice is unlawful where issued in particular:
In any of the above circumstances, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months’ salary.
The employer may not terminate the employment relationship during the following periods, and notice given during these periods is void:
Valid shareholders’ resolution on revocation of appointment as member of the management board. Registration of this revocation with the court registry. Termination of the service agreement in the same form in which the agreement has been signed (Obligations Act provisions shall apply).
There is no specific requirement. Notice of termination may be given verbally or by other means. For evidentiary purposes, it is strongly recommended that any notice be issued in writing.
The provisions set forth by Swiss Company Law must also be taken into account for managing directors. For example, in a company limited by shares (‘Aktiengesellschaft’), the appointment and dismissal of persons entrusted with managing and representing the company is part of the non-transferable and inalienable duties of the board of directors.
According to the Croatian Companies Act, the appointment of a director of the company can be revoked at any time without notice (for no special reason). Some restrictions (not strictly defined) can be set out within the statute of the company.
If the director has a service agreement, the notice period will be as set out in the service agreement.
The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.
The notice period may vary depending on the written individual or collective employment contract. often employers and managing directors agree on longer notice periods in their employment agreements than the default rule foreseen by law. The notice period must be the same for both parties.
The parties may agree on a probationary period of up to three months with a notice period of seven days.
No involvement.
Except for mass dismissals, there is no statutory requirement to involve a works council.
No involvement.
No involvement.
Respective commercial court brings a resolution on registration of the resolution in the court registry. The court’s resolution and registration are declaratory.
Not necessary.
Not applicable.
The statutory provisions regarding mass dismissals apply where the employer – within a time period of 30 days – gives notice for reasons unrelated to an individual employee (including a managing director) and affecting (numbers include employees and managing directors):
The provisions governing mass redundancies do not apply in the event business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.
Prior to giving notice, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. These bodies have consultation rights only. Neither the employees nor the cantonal office can block a mass dismissal.
The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees (including managing directors) and (ii) intends to terminate at least 30 employees (including managing directors) within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.
The employer negotiates:
An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.
Not applicable.
Both the employer and the managing director may terminate the employment relationship with immediate effect at any time for cause.
The requirements for a termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three days of the party becoming aware of the serious breach allowing termination for cause.
If there is no valid shareholder resolution, the revocation will be invalid and the court will refuse to register it in the court registry. Where the managing director has a service agreement, he could claim:
In case of ordinary dismissals:
Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, late notice), the managing director is entitled to the salary for the period until his contract expires or could have been ordinarily terminated. In addition, the court may require the employer to pay an indemnity of up to six months salary.
In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the managing director of a sum fixed by the court not exceeding two months salary.
Severance pay may be specified in the managing director’s service agreement (this is usually a large sum).
Managing directors are entitled to a severance payment if they are over 50 years old and with 20 or more years service. If there is no contractual severance payment, an amount equal to between two and eight months salary will be awarded by the court. However, the employer’s contributions to the managing director’s pension fund over the entire period of service may be deducted from the severance payment. As a result, mandatory severance payments are rare.
The managing director, as a member of the management board, is prohibited from doing the following without the approval of the supervisory board (or the shareholders, if the company does not have a supervisory board):
The parties to an employment agreement may agree on post-termination restrictive covenants prohibiting competitive activity by the former managing director. Such covenants are subject to a number of requirements and restrictions, including the following.
Not applicable.
Not applicable.
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