CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

1.1 Reasons for dismissal

The Employment Relationship Act (‘Zakon o delovnih razmerjih’ or ‘ZDR-1’) distinguishes between ordinary and extraordinary termination of the employment contract. Ordinary termination is termination with notice period, which is only possible due to a business reason, reason of fault, incapacity to work, inability to work due to disability, or the unsuccessful completion of a probationary period, any of which render continuation of the employment under the conditions of the existing employment contract impossible.

A business reason occurs when the performance of certain work is no longer required under the conditions of the current employment contract due to economic, organizational, technological, structural or similar reasons on the employer’s side.

Reasons of incapacity are: non-achievement of expected work results because the worker has failed to carry out the work in due time, professionally and with due quality, or non-fulfilment of the conditions for carrying out work as stipulated under the law and executive regulations issued on the basis of law due to which the worker fails to fulfil or cannot fulfil the contractual or other obligations arising out of the employment relationship.

Extraordinary termination is termination without notice period and is only possible if:

  • it is based on one of the exhaustively provided reasons in ZDR-1; and
  • taking into account all the circumstances and interests of employer and employee, continuation of the employment until the end of the notice period or until the expiry of the employment contract is considered impossible; and
  • it is given within 30 days of establishing the reason for extraordinary termination, and within six months of the occurrence of that reason.

Employees with more than six months’ continuous service with an employer which employs more than ten employees (in exceptional cases: more than five) will fall under the Protection Against Dismissals Act. Dismissals must be justified for business-related reasons (e.g. business closure), conduct-related reasons (e.g. theft) or person-related reasons (e.g. health).

1.2 Form

Termination notice must be given in writing, providing for an explanation of the reasons for termination and pointing out possible legal remedies available the employee and his rights regarding unemployment insurance.

In case of ordinary termination of an employment contract due to reason  of fault, the employer must, before serving the employee with termination notice, give the employee a written warning regarding fulfilment of his obligations and the possibility of termination if he fails to comply. Such a warning can be issued within 60 days of establishing the breach and within six months of the occurrence of the breach. If employee commits another breach of this or any other obligation from the employment, within a year after the warning and if such breach is serious enough, the employer may terminate the employment contract.

In case of ordinary termination given by employer due to reason of fault or incapacity (or in case of extraordinary termination), the employer must notify the employee in writing about the initiated proceeding before serving the employee with a termination notice. The notification must include details of the alleged violations of the employee’s obligations or his / her alleged incompetence and thus provide the employee the opportunity to defend him- / herself within a reasonable period. The notice must be given at least three business days prior to the date of the hearing during which the employee can present his / her defence. The employer is (in some exceptional cases) released from such duty if it would be unreasonable to expect it to provide the employee such an opportunity. The employee can also request that a representative of his trade union and / or his legal representative are / is present at the hearing.

Written form necessary, signed by a duly authorised representative of the employer. Must not be faxed or emailed.

1.3 Notice period

Ordinary termination

The notice period depends on the length of service with the respective employer. As a general rule, the statutory minimum notice periods (unless otherwise determined by a collective bargaining agreement, employer's by-laws or an individual employment contract) are:

  1. in case of unsuccessful completion of a trial period: seven days;
  2. in case of ordinary termination by the employee:
    • 15 days for employees with less than one year of service and
    • 30 days for employees with more than one year of service;
  3. due to ordinary termination by the employer due to business reasons or incapacity:
    • 15 days for employees with less than one year of service;
    • 30 days for employees with more than one year of service; and
    • for employees with two or more years of service, the 30-day notice period increases for two days for each year of employment with the employer but cannot exceed 60 days. For employees with 25 years or more years of service, the notice period is 80 days, unless otherwise provided by a collective bargaining agreement.      

If the employment contract is terminated due to employee fault, okthe statutory notice period is 15 days.

Extraordinary termination: there is no notice period.

Bankruptcy, liquidation proceeding, winding down of the employer or a compulsory settlement.

In a bankruptcy procedure, the bankruptcy administrator may terminate employment contracts of employees who have become redundant due to initiation of the bankruptcy procedure with a 15-day notice period.

In case of winding down of the employer for other reasons, the notice period is 30 days.

In the event of confirmed compulsory settlement, the employer may terminate the employment contracts of those employees who have been characterized as redundant in the redundancy programme with a 30-day notice period. Compulsory settlement (or compulsory composition) is a proceeding for an insolvent debtor which: (i) enables financial reorganisation of the debtor; and (ii) assures partial payment of the creditor’s claim, both aimed at ensuring the further operation of the debtor.

Statutory minimum notice period: four weeks to seven months, dependent on length of service. It is possible to agree upon a probationary period of a maximum of six months with a statutory notice period of only two weeks. Collective bargaining agreements may provide for variations.

1.4 Involvement of works council

The employer must inform and consult the works council or workers’ representative in relation to the collective dismissal of a large number of employees.

Save for exceptional cases, the employer cannot terminate the employment contract of a member of a works council or a workers’ representative without the prior consent of the works council. The immunity applies for the length of the appointment and a year after the lapse of the mandate.

If the employer intends to dismiss an employee who is not a trade union member, the employer must, at the employee’s request, notify the works council / works representative in writing of its intention to terminate (ordinary or extraordinary termination) the employee’s employment contract. The works council / works representative must give its opinion within six days. Silence is deemed to mean the works council / works representative does not oppose to the termination. It may oppose the termination if it considers there are no substantial reasons for the termination or the termination procedure has not been carried out in accordance with the ZDR-1. The employer is not bound by the opinion of the works council / works representative and can continue with the termination despite a negative opinion.

Works council (if established) must be properly informed prior to dismissal of an employee (excluding high ranked executives). The works council must approve the dismissal of an employee who is a member of the works council.

1.5 Involvement of a union

If the employer intends to dismiss an employee who is a trade union member, the employer must, at the employee’s request, notify the trade union in writing of its intention to terminate (ordinary or extraordinary termination) the employee’s employment contract. The trade union must give its opinion within six days. Silence is deemed to mean the union does not oppose to the termination. It may oppose the termination if it considers there are no substantial reasons for the termination or the termination procedure has not been carried out in accordance with the ZDR-1. The employer is not bound by the opinion of the trade union and can continue with the termination despite a negative opinion.

An employer cannot terminate an employment contract of an appointed
or elected trade union representative without the prior consent of the trade union. The immunity applies for the length of the appointment and a year after the lapse of the mandate.

The trade union is involved in mass redundancies (see below).

No involvement.

1.6 Approval of state authorities necessary

The employer may only dismiss an employee who is pregnant, during breastfeeding (one year after birth) or on parental leave, and for one month thereafter, only with the prior consent of the labour inspectorate, if there are reasons for extraordinary termination of the employment contract, or if proceedings for terminating the employer’s business have been initiated.

Obligatory for certain groups of employees, e.g. the severely disabled, pregnant women, and employees on parental leave or dismissals in the context of collective redundancies.

1.7 Collective redundancies

The employer must prepare a redundancy programme if it is established that for business reasons, the work performed by a certain number of workers will become unnecessary in the next 30 days. The numbers of workers who need to be made redundant for this to apply are as follows: 

  1. at least 10 workers where the employer employs more than 20 and fewer than 100 workers; or
  2. at least 10% of workers where the employer employs at least 100 workers but fewer than 300 workers; or
  3. at least 30 workers where the employer employs 300 workers or more.

In determining which workers are to be made redundant, the employer must take the following criteria into consideration: the employee’s qualifications, work experience, performance, length of service, medical health and social status, whether the employee is a parent of three or more minors, or if
the employee is the sole provider for a family with minors. The employer can determine his own criteria instead of those provided by the collective bargaining agreement if the trade union agrees with them.

The employer must inform and consult trade unions, the works council and the National Employment Office (‘Zavod za zaposlovanje Republike Slovenije’) regarding its intention to institute mass redundancies and a redundancy programme for business reasons. The employer cannot terminate employment contracts until 30 days after the National Employment Office has been informed in detail of the mass redundancy. The National Employment Office may increase this period to 60 days.

Collective redundancies are dismissals within 30 days of the following numbers of people:

  1. more than five employees in an establishment of 20 to 60 employees; or
  2. 10% or more than 25 employees in an establishment of 60 to 500 employees; or
  3. at least 30 employees in an establishment of 500 or more employees.

The employer must duly notify the employment agency, which is a state authority with local branches, of the proposed redundancies in writing prior to serving dismissal letters. However, the employment will not end before expiry of the waiting period after notification (in general one month, exceptions possible). Further, on condition that the employees of the establishment have elected a works council, the employer must prior to serving notice of termination engage in time-consuming negotiations with the works council to reach a reconciliation of interests (‘Interessenausgleich’), which is usually combined with negotiations regarding a social plan (‘Sozialplan’).

1.8 Summary dismissals

Not applicable.

Dismissal without notice is in general only possible where there has been a serious breach of duty. Notice must be delivered within two weeks after a representative of the employer with the authority to dismiss has gained knowledge of the reason for dismissal.

1.9 Consequences if requirements are not met

If the court finds that the employer has failed to comply with statutory requirements, it will declare the employment termination unlawful and reinstate the employee with retroactive effect (ex tunc), recognizing the employee’s period of service and other rights arising from the employment relationship.

Instead of reinstatement, the court may, at employer’s or employee’s proposal:

  1. determine that the termination was invalid and that the employment relationship lasted until the first instance judgment was issued; or
  2. recognise the employee’s period of service and other rights arising out of the employment relationship – the employee is then given the rights arising out of the employment relationship as if the employment contract had not been terminated; or
  3. award appropriate monetary compensation of a maximum of 18 months’ salary, calculated on the basis of the average monthly salary received in the final three months preceding the termination.

The employee may seek legal protection due to unlawfulness of termination within 30 days from the service of the termination notice.

If employees file a successful action within three weeks following the receipt of the written notice: Employees are reinstated and awarded continued payment of salary. High ranked executives who themselves have authority to employ or dismiss a significant part of the workforce are not entitled to claim reinstatement if the employer does at least file a motion to terminate the employment combined with a severance. The court will in such cases terminate their employment and award severance pay of up to a maximum of 18 months’ remuneration.

1.10 Severance pay

An employee whose employment contract has been terminated for a business reason or reason of incapacity, is entitled to a severance payment. The amount depends on the number of (full) years of service with the employer (including the employment with the employer’s legal predecessors). The basis for calculation is the average monthly salary, which the employee has received or would have received if working in the last three months prior to the end of employment.

Severance pay is calculated as follows:

  • 1/5 of the average monthly salary for each year of employment with the employer if the duration of the employment is between one and ten years; or
  • 1/4 of the average monthly salary for each year of employment with the employer if the duration of the employment is between ten and 20 years; or
  • 1/3 of the average monthly salary for each year of employment with the employer if the duration of the employment exceeds 20 years.

The amount of the severance payment may not exceed ten times of the average monthly salary received in the final three months preceding the termination unless an applicable collective bargaining agreement stipulates otherwise.

In the event of termination of the employment contract for a fixed period concluded for one year or less, generally with few exemptions, the employee is entitled to severance pay in the amount of 1 / 5 of the base (base being the employee’s average monthly salary for full-time in the last three months, or during the working period prior to the termination). If the contract is concluded for a period longer than one year, the severance pay increases proportionally.

The same provisions regarding severance payment as above apply to workers whose employment contract has been terminated in a bankruptcy / liquidation / winding down of the employer or compulsory settlement proceeding. In a compulsory settlement proceeding, however, the employer and worker may stipulate in writing the manner, form or reduction of the severance payment if a greater number of jobs with the employer would be jeopardised by a full payment.

No statutory severance payment. But based on court order (see above) claims are possible. Further, severance payments may be due because of   an amicable settlement by the parties, especially common if the justification of a dismissal may be doubtful, and in case of dismissals for business-related reasons according to:

  1. a social plan (‘Sozialplan’) to be agreed between the employer and the works council or determined by a conciliation board, or
  2. a collective bargaining agreement (‘Sozialtarifvertrag’) to be agreed between the employer or relevant employers association on the one hand and the union on the other.

1.11 Non-competition clauses

A non-competition clause is only valid if agreed upon in writing in the employment contract. ZDR-1 allows the use of this clause for employment contracts for indefinite term as well as for fixed term employment contracts for managerial workers. The clause can last only up to two years following termination. The clause must provide for a method of calculating the compensation to be given to the employee, otherwise it is invalid. The employee must receive at least one-third of his average monthly salary (calculated over the three months immediately preceding termination) for each month of
the restricted period. If the clause prevents the employee from gaining a comparable salary, the employee is entitled to compensation during the restricted period.

A non-competition clause may be agreed only when the employment contract is terminated by mutual agreement, due to ordinary termination of the contract by the employee, ordinary termination by the employer due to reason of fault, or extraordinary termination of the contract by the employer and if the employee has gained technical, production or business know-how and business connections while carrying out work or in connection to
his / her work. However, the non-competition clause must not prevent the employee from obtaining appropriate employment. 

The parties can mutually agree to waive the enforcement of the clause if they wish to do so.

Post-contractual non-competition covenants are only valid if the employer promises to pay at least half of the entire usual remuneration (including fringe benefits etc.) during the term of the clause. However, compensation and other income must not exceed 110% (subject to a necessary relocation   of the employee: 125%) of the former total remuneration. Dismissal will usually trigger this payment obligation. Post-contractual non-competition covenants only apply to competition-relevant activities (e.g. employee may also work for a competing company during the post-contractual non-competition covenant if the activity there is not relevant to competition).

1.12 Miscellaneous

The employer cannot, without the prior consent of the relevant organization, terminate the employment contracts of works council members or supervisory boards representing workers, workers’ representatives (including those on the council of an institution), or appointed or elected trade union representatives.

Other categories of protected workers include older workers, parents and disabled persons.

The employer may not terminate the employment contract of an older employee, who has reached the age of 58 or of an employee, who has less than five years until qualifying for an old-age pension due to a business reason without his written consent.

This protection does not apply if:

  1. the employee is assured a right to unemployment benefit until he fulfils the minimum conditions for receiving an old-age pension; or
  2. appropriate new employment is offered to the employee; or
  3. in the event the employee has already fulfilled the above conditions for protection against the termination of the employment contract when he concluded the respective contract, unless the contract was concluded according to item (ii); or
  4. proceedings have been initiated for terminating the business of the employer.

The employer is not allowed to terminate the employment contract of mothers during their pregnancy, while breastfeeding of children up to the age of one, or the contracts of parents during their parental leave in the form of full absence from work, and for one month thereafter. This notwithstanding, the written employment contract can be terminated with the prior consent of the labour inspectorate, if there are reasons for extraordinary termination of the employment contract, or if proceedings for terminating the employer’s business have been initiated.

The employer may terminate the employment contract of a disabled person:

  1. due to his incapacity to perform work subject to the conditions set out in the employment contract; or
  2. due to business-related reasons;
  3. but both are subject to the conditions set out in legislation governing pension and disability insurance or work rehabilitation, and the employment of disabled persons.

This does not apply if proceedings have been initiated for terminating the business of the employer.

Not applicable.

2. Dismissal of managing directors

Under Slovenian law, the managing director, that is a legal representative of the company does not need to have an employment agreement with the company, or any other type of agreement, in order to be able to represent the company.

The table below sets out the position under Slovenian law in respect to a ‘managing director’, who has been appointed for the term of office in accordance with the Slovenian Companies Act, with or without a management agreement (civil).

If the ‘managing director’ is in an employment relationship with the company, both corporate and employment aspects must be taken into account. From the employment perspective, the employer and managing director can agree to regulate their employment relationship differently than prescribed by law regarding:

  1. the conditions and limitations of fixed-term employment,
  2. working time,
  3. provision of breaks and rest periods,
  4. the remuneration,
  5. disciplinary responsibility, and
  6. termination of the employment contract.

If the parties do not agree to regulate their relationship differently, the statutory provisions apply (please see the general section above).

2.1 Reasons for dismissal

The managing director of a limited liability company may be recalled at any time by a resolution of a general assembly, irrespective of whether the managing director has been appointed for a fixed or indefinite period. The conditions for the recall of the managing director are to be determined in the contract concluded between the managing director and the company (management agreement). If the company has a supervisory board, then the supervisory board appoints and recalls (dismisses) the managing director.

At joint stock companies, the supervisory board may (prior to the end of a manager’s term of office) recall (dismiss) members of the management board for the following reasons:

  1. if the member is in serious breach of his obligations; or
  2. if the member is not able to manage the operations; or
  3. if the general assembly passes a vote of no confidence in him (unless the vote of no confidence has been passed based on clearly unsubstantiated reasons); or
  4. if other economic and business reasons exist (e.g. significant changes in shareholder structure, reorganisation, etc.)

Limited companies (‘GmbH’): the company may revoke the appointment / terminate the service contract without cause, unless the articles of association or the contract provide otherwise. Stock corporation companies (‘AG’): revocation of appointment / termination of service contract only with important reason. Withdrawal of confidence by resolution of the shareholders may be an important reason to revoke the appointment as such, but it does not justify a termination of the service agreement.

2.2 Form

In limited liability companies, managing directors are recalled by shareholders’ resolution. In joint-stock companies, members of the management board are recalled by the supervisory board. In a one-tier system, the board of directors recalls the executive directors (if appointed). The manager / managing director must be notified in writing about the recall.

By valid shareholders’ resolution or, if a supervisory board is established, a valid supervisory board resolution on revocation of appointment as managing director and on termination of the contract; both must be delivered to the managing director in written form (signed by the representative of the shareholders’ meeting / supervisory board).

Note: a supervisory board is mandatory at companies with limited liability with more than 500 employees, and at stock corporations.

2.3 Notice period

No statutory notice period. The notice period depends on the provisions of the management contract or other contract setting out the legal basis for the (contract / letter of) appointment of the manager.

Revocation of appointment: no statutory notice period (true for both limited companies (‘GmbH’) and stock corporation companies (‘AG’)). Termination of the service contract:

  • GmbH: managing directors usually have fixed-term contracts or long contractual notice periods. However, the statutory minimum notice period is just four weeks, and may be extended depending on the length of service.
  • AG: a managing director’s service contract must be a fixed-term contract (max. five years, min. one year), and only summary dismissal – generally without notice – is possible.

2.4 Involvement of works council

No involvement.

No involvement.

2.5 Involvement of a union

No involvement.

No involvement.

2.6 Approval of state authorities necessary

The recall resolution must be registered in the court/business register. The registration has a declaratory effect.

Not required.

2.7 Collective redundancies

Not applicable.

If one wants to be on the safe side the notification of the employment agency shall at least count in managing directors of a GmbH.

2.8 Summary dismissals

Not applicable.

Generally only possible in case of a serious breach of duty. Notice must be delivered within two weeks of the shareholders’ meeting / supervisory board’s meeting at which the shareholders / supervisory board members were informed of the reasons which will justify the termination. Further, such meeting has to be arranged within due course if some of its members become aware of the aforementioned reasons.

2.9 Consequences if requirements are not met

The managing director cannot be reinstated (even if the recall was unjustified). However, the managing director has the right to compensation or reimbursement for damages in accordance with the general principles of civil law. There is no statutory compensation. Compensation is based on income, and provisions for its calculation are to be set out in the management contract or other contract setting out the legal basis for the appointment of the manager.

The revocation of an appointment as managing director and / or termination of the service contract will be invalid. It is possible for the revocation to be valid, but the termination of the service contract invalid. In such cases, the managing director is entitled to continued payment of salary.

2.10 Severance pay

The amount of severance pay is not regulated by the Companies Act. According to the Companies Act, however, in joint stock companies the severance pay may be paid out only in case of early termination (and only due to specific reasons), whereby the general assembly may determine the highest amount. Severance pay is set out in the articles of association of the company or in (the managing director’s) contract.

There is no statutory severance payment. Severance payments are subject to negotiation, but amounts granted by a supervisory board are limited by the criminal offence of ‘fraudulent breach of trust’.

2.11 Non-competition clauses

The articles of association of the company may provide a non-competition clause. To be valid, the prohibition on competition cannot be longer than two years, unless the member of the management board has been recalled (for the reasons set out above) by the supervisory board, or the managing director has been recalled by the general assembly. In these circumstances, the prohibition cannot be longer than six months.

Post-contractual non-competition clauses are possible. However, the permitted scope is not clearly fixed by statutory law but depends on the merits of the single case (somehow confusing case law). In any case, the post-contractual non-competition clause only applies to competition-relevant activities. To avoid high risks the company shall promise to pay a reasonable compensation (at least half the fixed salary) during the term of the clause, the term shall not exceed a period of two years and the regional and factual scope shall be focused on activities carried out by the manager during the last two years of service. There is no statutory limit which must not be exceeded by the compensation and other income generated by the former managing director during the term of the covenant not to compete, but the parties may agree on a limit according to the law applicable to employees.

2.12 Miscellaneous

Not applicable.

Due to the sophisticated case law it is highly recommendable to not use standard forms but to seek advice of a specialist in the case given.