CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

1.1 Reasons for dismissal

An employer may terminate an employee's employment contract if there is a justified reason for doing so, namely:

  1. the failure to achieve the results of work determined by a collective contract, an act of the employer or a contract of employment, for a period of no less than 30 days, if the employee has previously been given instructions for work;
  2. his/her behaviour is such that he/she cannot continue working with the employer due to:
    • a breach in the regulations on occupational health and safety, thereby causing danger to their own health or that of other employees;
    • coming into work under the influence of alcohol or psychoactive substances, drinking during work hours or using psychoactive substances while refusing to submit to the appropriate test conducted by the relevant authority that would confirm these facts, in accordance with the specific regulations;
    • unjustified absence from work for 3 or more consecutive workdays, or 5 non-consecutive days during a period of 12 months;
    • a final court decision by which the employee is sentenced for a crime of abuse of authority;
    • revealing a trade secret as determined by an act of the employer:
    • abusive or insulting behaviour towards customers or other employees;
    • a crime committed at work or in relation to the work done;
    • use or disposal of the company car, machine or tool contrary to an act of the employer with which the employee was previously familiarized;
  3. at the time of hiring, or re-assignment to a different workplace, the employee provided untrue information related to their employment or performing of other duties; 
  4. he/she refuses to conclude an annex to the employment contract (in situations prescribed by the law)
  5. he/she abuses the right to absence due to temporary inability to work, especially if he/she worked elsewhere during his/her absence and if he/she does not deliver the Doctor’s findings within three days of the findings or a report on temporary inability five days after it has been issued;
  6. he/she does not return to work two days after his/her unpaid leave concludes, and 15 days after the reason ceased in the case of a stay of employment;
  7. in case of collective terminations by the employer, if he was not provided  with the option to switch his/her workplace in accordance with his qualifications, to offer training in order to change the qualifications or offer work at other employers and other measures provided for in the law;
  8. In other cases, provided for in the collective contract or employment contract;

The reasons for regular termination as set out in the Labour Act are as follows:

  • if the need for work ceases to exist for economic, technical or organisational reasons (‘notice due to business reasons’); or
  • the employee is incapable of fulfilling his employment-related duties due to certain personal characteristics or qualifications (‘notice due to personal reasons’); or
  • the employee intentionally breaches a contractual obligation (‘notice due to misconduct’); or
  • if the employee did not satisfy the employer’s requirements during the probationary period.

Generally, employers in Austria are not required to justify ordinary dismissals (Kündigungen). Nevertheless, they must observe prescribed notice periods and termination dates.

If an establishment employs five or more employees, however, these employees enjoy “General Protection against Dismissals”: an employee may challenge a dismissal if it has adverse effects on the individual’s personal life. In these cases, the employer must justify the dismissal for reasons related to employee capabilities, conduct or operational requirements if challenged by the employee.

Certain “vulnerable” employees enjoy additional “Special Protection against Dismissal” and may only be dismissed for one of several specific reasons, often only with the prior consent of competent authorities. These include women who are pregnant or who have recently given birth, parents on parental leave, works council members and employees formally classified as disabled persons.

Discriminatory dismissals or dismissals due to “illegal reasons” can also be challenged by employees.

1.2 Form

Termination must be in written form and given to the employee in person. It must contain the reasons for termination, an elaboration of the reasons and set out the employee’s right of appeal and the time limit for submitting the employee’s response prior to terminating the employment. This decision is given in the form of a decision by the director and is final.

Written form, including reasons for termination. Decision is to be delivered to the employee.

Unless otherwise stipulated in a collective agreement or employment contract, dismissals do not require any particular form. However, giving notice in writing is recommended. If “Special Protection against Dismissal” applies, rules may differ.

1.3 Notice period

The notice period depends on the ground for dismissal. If the ground for termination is one of the following:

  • a breach in the regulations on occupational health and safety;
  • an unjustified absence from work for 3 or more consecutive workdays, or 5 non-consecutive days during a 12-month period;
  • the use and disposal of the company car, machine or tool contrary to an act of the employer with which the employee was previously familiarized;
  • at the time of hiring, or re-assignment to a different workplace, the employee provided untrue information which relates to their employment or performing of other duties prior to the employment;
  • if he/she does not return to work two days after his/her unpaid leave concludes, and 15 days after the reason ceased in the case of a stay of employment;

Then, the employer is obliged to warn the employee in writing of the reasons for the employment termination, give evidence of those reasons, and allow the employee at least five working days to respond to the warning.

In addition, the employee has the right and duty to remain at work for at least 30 days from the day they receive notice that their employment contract is to be terminated, i.e. a termination notice.

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.

Although Austrian law does provide statutory minimum notice periods and dates, employers are free to designate their own notice regimes based on collective agreements and employment contracts. In case of conflicting regulations, however, employees will always benefit from the most favourable rule, pursuant to the “favourability principle” (Günstigkeitsprinzip).

Austrian employment law distinguishes between white-collar (Angestellte) and blue-collar workers (Arbeiter), providing separate notice models for each.

White-collar workers are entitled to receive at least six weeks notice and up to five months notice, always depending on the length of their employment relationship. These terms may be modified, although no notice period may exceed six months. In addition, white-collar workers benefit from statutory notice dates, ensuring that employment relationships may only end at the end of any given annual quarter. It is possible to agree contractually that a termination is possible on the 15th or last day of any given month.

If not otherwise stipulated by collective agreement, blue-collar workers are subject to a notice period of at least 14 days. In practice, however, collective agreements often guarantee more generous notice periods. 

From 1 January 2021, the notice periods and termination dates for white-collar workers will apply to blue-collar workers. In industries where seasonal businesses predominate, collective agreements may contain different provisions and set shorter notice periods. When concluding employment agreements with blue-collar workers, it is also possible to contractually agree on a termination on the 15th or last day of any given month.

1.4 Involvement of works council

Montenegrin Labour Law does not recognize work councils. The closest institution to a work council is a trade union (see information below).

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:

  • members of the works council; and
  • candidates running for works council positions and members of the election committee for a period of three months following the announcement of the results of the election to the works council; and
  • employee representatives in a body of the employer; and
  • employees with diminished ability to work and employees in immediate danger of physical disability; and
  • employees over 60 years of age.

If a works council exists at an establishment, it must be informed of any proposed dismissals at least one week in advance. Within this timeframe, the works council may object, explicitly approve or refrain from commenting on the dismissal. The termination is void if the employer fails to comply with this requirement, either by failing to notify the works council or by failing to wait for its response within that week.

1.5 Involvement of a union

The representative trade union must be invited to give its opinion on the redundancy programme draft if it becomes necessary to implement a redundancy programme and give its complaints to the Employment agency regarding redundancy proceedings.

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.

1.6 Approval of state authorities necessary

No approval from the state authority is necessary according to the Montenegrin Labour Law.

If the works council or union commissioner do not consent, consent can be substituted by a judicial or an arbitral decision.

Obligatory only for certain groups of employees (e.g. severely disabled persons, works council representatives, pregnant women, and employees on parental leave).

1.7 Collective redundancies

If, within a 90-day period, the employer plans to conduct a collective dismissal of 20 or more employees, he must:

Conduct consultations and consider the opinion of the Union, or Employee representatives if there is no union, in order to reach an agreement regarding the lack of need for those employees’ work and reach a solution. The employer must respond to these in written form and consider them in order to reach a mutually beneficial solution; the consultation must last at least 30 days. The employer must inform the employment agency about the consultation and give all relevant information regarding the consultation in writing. Employees cannot be terminated before 30 days have elapsed after the consultation conclusion is delivered to the Employment agency.

The employer must deliver to the Union or Employee representatives, in written form, and for the purpose of conducting consultations, the following:

  1. reasons the employees’ work is no longer required;
  2. number of all employees;
  3. criteria for determining which employees’ work may no longer be needed;
  4. number of employees whose work might be no longer needed and their data as well as data pertaining to their places of work and positions;
  5. criteria for calculating severance; and
  6. measures taken by the employer in order to take care of the employees whose work is no longer needed: i.e. re-assignment to other work with the same employer with their qualifications, training for a different position with the same employer, assignment to another employer or other measures dictated by the contract.

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.

When collective dismissals (Massenkündigungen) are imminent, employers are required to notify the Austrian Employment Service 30 days in advance. For the sake of this notification procedure, collective dismissals are defined as employment terminations affecting:

  1. at least five workers in an establishment of 21 to 99 employees; or
  2. 5% or more of the workforce at an establishment of 100 to 600 employees; or
  3. at least 30 workers at an establishment of more than 600 employees; or
  4. at least five workers aged 50 or over, regardless of company size.

The requirements of the notification procedure are met if the employer informs the competent agency in writing and waits one month before carrying out the intended dismissals. Any failure to observe these rules will render all pertinent dismissals void.

1.8 Summary dismissals

Montenegrin Labour Law does not permit dismissal without notice. Notice has to contain the reasons for dismissal, evidence indicating that the conditions for dismissal have been obtained and a deadline for responding to the notice. The deadline may not be shorter than 5 days.

Summary termination (summary dismissal) is defined as termination without notice, and is only lawful where there has been: 

  1. a serious breach of employment obligations, or
  2. the employment relationship between the parties is no longer possible for another important reason (there are, therefore, two possible reasons: (i) breach of employment obligations; or (ii) another important fact; in either case, the employment relationship must not be possible any longer).

The employee is to be dismissed within 15 days of the day of becoming aware of the fact / reason for dismissal.

A summary dismissal (Entlassung) does not require observance of any particular notice periods but must be issued without undue delay. Summary dismissals are possible for good reasons only, as regulated by law. Disloyalty, untrustworthiness, or persistent refusal to carry out one’s contractually agreed duties are typical reasons for a summary dismissal.

Summary dismissals are effective even if they do not meet the above requirements. However, summary dismissal may then be treated as a regular dismissal, meaning the respective protection against dismissal is applicable.

1.9 Consequences if requirements are not met

If a court determines during the proceedings that the employee’s employment relationship has been unlawfully terminated, the court will decide that the employee is to be reinstated and compensated for damage. The employee’s right to compensation for financial damage is to be calculated as the amount of the lost salary and all other earnings he/she would have earned at work, in accordance with the law, collective agreement and employment contract, as well as payment of contributions for mandatory social insurance.

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:

  1. the date of termination of the employment contract; and
  2. compensation for damages, which ranges from three to eight times the employee’s average monthly salary over the previous three months (depending on the employee’s age, length of contract and obligations in relation to supporting family members or other dependants as defined by family law).

Non-compliance by the terminating party with the prescribed or agreed periods or dates of notice constitutes untimely notice. Although such untimely notice remains effective, it entitles the employee to dismissal compensation (Kündigungsentschädigung). Such compensation consists of the remuneration that the employee would have received had the dismissal been properly expressed (i.e. all due remuneration between the actual termination of employment and the date of termination prescribed by law, collective agreement, works agreement or employment contract).

An employee is entitled to General Protection against Dismissal may claim reinstatement in court. Reinstatement is granted if it is proven that the termination of the employment contract has adverse personal effects on the employee's life (e.g. little chance of finding employment of similar standing and income in a reasonable time) and the employer cannot adequately justify the termination.

1.10 Severance pay

If the employment contract is terminated because a certain job becomes unnecessary, the employer must pay severance pay as set by the labour rulebook/collective agreement or employment contract.

Severance pay is given to employees who have worked for that employer longer than 18 months.

The severance pay is given as the sum of one third of the employee's average gross salaries paid over the previous six months, for each year of work with that employer, or 1/3 of the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.

Severance pay cannot be lower than three average monthly salaries without taxes and contributions in the past 6 months, or three times the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.

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

Austrian law distinguishes between two severance pay models: one is applicable to all employment relationships established prior to 1 January 2003 (“old model”), and the other to employment agreements signed after that date (“new model”).

The old severance pay model requires the employer to pay a sum based on the length of service at the end of the employment relationship unless it is the employee who terminates the contract or if the employee is dismissed without notice for good cause (i.e. summary dismissal). If the employment relationship is terminated after three years employment, the employee is entitled to severance pay of two months salary. After 25 years, the employee is entitled to twelve months salary.

The new severance pay scheme requires the employer to pay a sum of 1.53% of every monthly salary into an employee severance fund (Betriebliche Vorsorgekasse). At the end of any given employment, the employee may then either request disbursement of the collected amount or leave it in the fund for further investment.

1.11 Non-competition clauses

Contractual non-competition clauses may contain a number of jobs which the employee cannot do in his/her own name and on his/her own behalf (i.e. not in his/her capacity as an employee of the company) or for a different entity without the approval of the employer.  If the employee violates this obligation, he/she may be terminated.

Post-contractual non-competition restrictions may last for a maximum of two years after employment is terminated. However, such restrictions are only valid if the employer undertakes to pay monetary compensation to the employee in the employment agreement.

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.

Non-competition clauses are only valid insofar as they last for no more than one year after the termination of employment, are restricted to the employer’s line of business and if the employee’s monthly income is above a certain threshold at the end of the employment relationship (e.g. for 2020, EUR 3,580 for contracts concluded after 29 December 2015). Also, contractual penalties are limited by law to six net monthly remunerations (without taking into account the 13th and 14th annual salary). If the parties agree to such a contractual penalty, the right to observe the non-competition clause or the compensation of any further damage is excluded.

A non-competition clause may not cause undue hardship to the employee’s career when weighed against the employer’s justified business interests.

Judges may limit the scope of a clause, or the contractual penalty to be paid when violating the law. Non-competition clauses are generally rendered void when the employer carries out the dismissals.

1.12 Miscellaneous

The employment termination resolution is void if, on the date the resolution is passed, the employer was aware of the existence of the grounds for using pregnancy leave, maternity leave, or leave for the special care of a child, or if the employee, within 30 days of termination of employment, informs the employer of the existence of these circumstances and submits the appropriate certificate from an authorized physician or other competent authority.  

Also, an employer may not terminate employment, or put an employee in a disadvantageous position in any other way, because of his/her status or activities as an employees’ representative, trade union member, or because of his/her participation in trade union activities.

As for disabled persons, the employer is obliged to make it possible for any disabled employee to perform work suited to his/her working capability. Also, the employer must find another suitable job for any employee who is compromised by his/her disability in his/her job. Only if the employee refuses to accept such a job may the employer serve an employment termination resolution. If the employer cannot provide the disabled employee with a job suitable for his/her working capability, then such an employee will be considered redundant.

Not applicable.

Not applicable.

2. Dismissal of managing directors

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.

2.1 Reasons for dismissal

An employer may terminate an employee's employment contract if there is a justified reason for doing so, namely:

  1. if a Director’s mandate has elapsed and he/she is not re-elected, or if he/she is dismissed before the end of his mandate, the contract is cancelled unless otherwise provided for by a special law, or by the employment contract.
  2. for failure to achieve the results of work determined by a collective contract, an act of the employer or a contract of employment, for a period of no less than 30 days, if the employee has previously been given instructions for work;
  3. if his/her behaviour is such that he/she cannot continue working with the employer due to:
    • a breach in the regulations on occupational health and safety, thereby causing danger to their own health or that of other employees;
    • coming into work under the influence of alcohol or psychoactive substances, drinking during work hours or using psychoactive substances while refusing to submit to the appropriate test conducted by the relevant authority that would confirm these facts, in accordance with the specific regulations;
    • unjustified absence from work for 3 or more consecutive workdays in continuation, or 5 non-consecutive days during a period of 12 months;
    • a final court decision by which the employee is sentenced for a crime of abuse of authority;
    • revealing a trade secret as determined by an act of the employer:
    • abusive or insulting behaviour towards customers or other employees;
    • a crime committed at work or in relation to the work done;
    • use or disposal of the company car, machine or tool contrary to an act of the employer with which the employee was previously familiarized;
  4. at the time of hiring, or re-assignment to a different workplace, the employee provided untrue information related to their employment or performing of other duties; 
  5. he/she refuses to conclude an annex to the employment contract (in situations prescribed by the law)
  6. he/she abuses the right to absence due to temporary inability to work, especially if he/she worked elsewhere during his/her absence and if he/she does not deliver the Doctor’s findings within three days of the findings or a report on temporary inability  five days after it has been issued;
  7. he/she does not return to work two days after his/her unpaid leave concludes, and 15 days after the reason ceased in the case of stay of employment;
  8. in case of collective terminations by the employer, if he was not provided  with the option to switch his/her workplace in accordance with his qualifications, to offer training in order to change the qualifications or offer work at other employers and other measures provided for in the law;
  9. In other cases, provided for in the collective contract or employment contract;

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.

A company may revoke the appointment or terminate the service contract without cause, but must do so in compliance with applicable notice periods and termination dates.

2.2 Form

Termination must be in written form and given to the employee in person. It must contain the reasons for termination, an elaboration of the reasons and set out the employee’s right of appeal and the time limit for submitting the employee’s response prior to terminating the employment. This decision is given in the form of a decision by the director and is final.

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).

A valid shareholder’s resolution is required on revocation of appointment as managing director and on termination of the service contract. A managing director has only to be notified in writing if so agreed in the service contract.

2.3 Notice period

The notice period depends on the ground for dismissal. If the ground for termination is one of the following:

  • a breach in the regulations on occupational health and safety
  • an unjustified absence from work for 3 or more consecutive, or 5 non-consecutive days during a 12-month period;
  • the use and disposal of the company car, machine or tool contrary to an act of the employer with which the employee was previously familiarized;
  • at the time of hiring, or re-assignment to a different workplace, the employee provided untrue information which relates to their employment or performing of other duties prior to the employment;
  • if he/she does not return to work two days after his/her unpaid leave concludes, and 15 days after the reason ceased in the case of a stay of employment;

Then, the employer is obliged to warn the employee in writing of the reasons for the employment termination, give evidence of those reasons, and allow the employee at least five working days to respond to the warning.

 In addition, the employee has the right and duty to remain at work for at least 30 days from the day they receive notice that their employment contract is to be terminated, i.e. a termination notice.

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.

Revocation of appointment: possible without notice.

Termination of the service contract: Austrian law does provide statutory minimum notice periods and dates, and rarely does collective agreements and their notice periods and termination dates apply unless a more favourable contractual agreement exists. Managing directors generally have fixed-term contracts or long contractual notice periods.

2.4 Involvement of works council

Montenegrin Labour Law does not recognize work councils. The closest institution to a work council is a trade union (see information below).

No involvement.

No involvement.

2.5 Involvement of a union

The representative trade union must be invited to give its opinion on the redundancy programme draft if it becomes necessary to implement a redundancy programme and give its complaints to the Employment agency regarding redundancy proceedings.

No involvement.

No involvement.

2.6 Approval of state authorities necessary

No approval from the state authority is necessary according to the Montenegrin Labour Law.

Respective commercial court brings a resolution on registration of the resolution in the court registry. The court’s resolution and registration are declaratory.

Not required.

2.7 Collective redundancies

If, within a 90-day period, the employer plans to conduct a collective dismissal of 20 or more employees, he must:

Conduct consultations and consider the opinion of the Union or Employee representatives if there is no union, in order to reach an agreement regarding the lack of need for those employees’ work and reach a solution. The employer must respond to these in written form and consider them in order to reach a mutually beneficial solution; the consultation must last at least 30 days. The employer must inform the Employment agency about the consultation and give all relevant information regarding the consultation in writing. Employees cannot be terminated before 30 days have elapsed after the consultation conclusion is delivered to the Employment agency.

The employer must deliver to the Union or Employee representatives, in written form, and for the purpose of conducting consultations, the following:

  1. reasons the employees’ work is no longer required;
  2. number of all employees;
  3. criteria for determining which employees’ work may no longer be needed; and
  4. number of employees whose work might be no longer needed and their data as well as data pertaining to their places of work and positions;
  5. criteria for calculating severance;
  6. measures taken by the employer in order to take care of the employees whose work is no longer needed: i.e. re-assignment to other work with the same employer with their qualifications, training for a different position with the same employer, assignment to another employer or other measures dictated by the contract.

Not applicable.

Not applicable.

2.8 Summary dismissals

Montenegrin Labour Law does not permit dismissal without notice. Notice has to contain the reasons for dismissal, evidence indicating that the conditions for dismissal have been obtained and a deadline for responding to the notice. The deadline may not be shorter than 5 days.

Not applicable.

A summary dismissal (‘Entlassung’) does not require observance of any particular notice periods, but must be issued without undue delay. Summary dismissals are possible for good reasons or serious breach of duty, as regulated by law. Disloyalty, untrustworthiness, or persistent refusal to carry out one’s contractually agreed duties are typical reasons for a summary dismissal.

2.9 Consequences if requirements are not met

If a court determines during the proceedings that the employee’s employment relationship has been unlawfully terminated, the court will decide that the employee is to be reinstated and compensated for damage. The employee’s right to compensation for financial damage is to be calculated as the amount of the lost salary and all other earnings he/she would have earned at work, in accordance with the law, collective agreement and employment contract, as well as payment of contributions for mandatory social insurance.

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:

  1. compensation for damages; or
  2. fulfilment of contractual obligations in accordance with the provisions of the Croatian Obligations Act.

If there is no valid shareholder resolution, the revocation of appointment as managing director will be invalid.

It is possible for the revocation to be valid and for the termination of the service contract to be invalid. If this is the case, the managing director is entitled to continued payment of salary and adequate employment.

2.10 Severance pay

If the employment contract is terminated because a certain job becomes unnecessary, the employer must pay severance pay as set by the labour rulebook/collective agreement or employment contract.

Severance pay is given to employees who have worked for that employer longer than 18 months.

The severance pay is given as the sum of one third of the employee's average gross salaries paid over the previous six months, for each year of work with that employer, or 1/3 of the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.

Severance pay cannot be lower than three average monthly salaries without taxes and contributions in the past 6 months, or three times the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.

Severance pay may be specified in the managing director’s service agreement (this is usually a large sum).

Austrian law distinguishes between two severance pay schemes: one is applicable to all employment relationships established prior to 1 January 2003 (‘old model’), and the other to employment agreements signed after that date (‘new model’).

 The old severance pay model requires the employer to pay a sum based on the employee’s length of service at the end of the employment relationship unless it is the employee who terminates the contract or if the employee is dismissed without notice for good cause (i.e. summary dismissal). If the employment relationship is terminated after three years employment, the employee is entitled to severance pay of two months salary. After 25 years, the employee is entitled to twelve months salary.

The new severance pay scheme requires the employer to pay a sum of 1.53 % of every monthly salary into an employee severance fund (‘Betriebliche Vorsorgekasse’). At the end of any given employment, the employee may then either request disbursement of the collected amount or to leave it in the fund for further investment.

2.11 Non-competition clauses

Contractual non-competition clauses may contain a number of jobs which the employee cannot do in his/her own name and on his/her own behalf (i.e. not in his/her capacity as an employee of the company) or for a different entity without the approval of the employer.  If the employee violates this obligation, he/she may be terminated.

Post-contractual non-competition restrictions may last for a maximum of two years after employment is terminated. However, such restrictions are only valid if the employer undertakes to pay monetary compensation to the employee in the employment agreement.

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):

  1. being a member of the supervisory board or management board of another company with the same business activities; or
  2. performing business activities equal to those of the company for his or somebody else’s account; or
  3. using the company’s premises for performing business for his own or somebody else’s profit. The company is entitled to compensation for any damage caused.

Non-competition clauses are only valid insofar as they are concluded for the duration of no more than one year after the termination of employment, are restricted to the employer’s line of business and if the employee’s monthly income is above a certain threshold at the end of the employment relationship (e.g. for 2020, EUR 3,580 for contracts concluded after the 29th December 2015) Also, contractual penalties are limited by law to an amount of six net monthly remunerations (without taking into account the 13th and 14th annual salary). If the parties agree on such a contractual penalty, the right to observe the non-competition clause or the compensation of any further damage is excluded.

A non-competition clause may not represent an undue hardship on the employee’s career when weighed against the employer’s justified business interests. Judges may limit the scope of a clause, or the contractual penalty to be paid when violating the law. Non-competition clauses are generally rendered void when employers are responsible for dismissals.

2.12 Miscellaneous

The employment termination resolution is void if, on the date the resolution is passed, the employer was aware of the existence of the grounds for using pregnancy leave, maternity leave, or leave for the special care of a child, or if the employee, within 30 days of termination of employment, informs the employer of the existence of these circumstances and submits the appropriate certificate from an authorized physician or other competent authority.  

Also, an employer may not terminate employment, or put an employee in a disadvantageous position in any other way, because of his/her status or activities as an employees’ representative, trade union member, or because of his/her participation in trade union activities.

As for disabled persons, the employer is obliged to make it possible for any disabled employee to perform work suited to his/her working capability. Also, the employer must find another suitable job for any employee who is compromised by his/her disability in his/her job. Only if the employee refuses to accept such a job may the employer serve an employment termination resolution. If the employer cannot provide the disabled employee with a job suitable for his/her working capability, then such an employee will be considered redundant.

Not applicable.

Not applicable.