Category: Serbia

Leasing of employees – a situation in which employment agencies hire employees and act as their formal employers and then lease them to perform actual work for their client companies – has become a frequent phenomenon in Serbia the past few years. 

For employers, leasing employees instead of employing them seems like a win-win situation, providing them with the workforce they need without the hassle of dealing with administrative responsibilities associated with workforce management. Usually, a company’s obligation under this arrangement is to pay a monthly invoice to the employment agency and the agency will do the rest – register the employee with the competent social security authority, pay the salaries and contributions, and deal with other work-related issues prescribed by law.

Employee leasing was not invented in Serbia – it has been around for a couple of decades now. However, the legal framework regulating this practice does not exist in Serbia yet, leaving employees vulnerable to various types of abuse. Employers in Serbia turn to leasing agencies not only for administrative and financial reasons but primarily to avoid the strict legal requirements imposed by the Serbian Labor Act – especially those relating to temporary employment and dismissal.

The current Serbian Labor Act does not regulate the hiring of employees by employment agencies for the purpose of leasing them to the agencies’ clients. However, employment agencies are registered and operate in accordance with Serbian Employment and Unemployment Insurance Act, with the precondition of acquiring a permit from the Serbian Ministry of Labor. Services which the agencies are allowed to provide in accordance with the Employment and Unemployment Insurance Act are: providing information on possibilities and conditions of employment; searching jobs in the country and abroad; professional orientation and advising on career planning; and enforcing some of the measures of active employment policies based on a contract with National Employment Service. None of these services include hiring and leasing employees to the agency’s client companies to perform those companies’ actual work. Nonetheless, there are more than 90 employment agencies in Serbia which provide this service without proper legal regulation.

Directive 2008/104/EC of the European Parliament and the Council of the EU on temporary agency work prescribes the framework of working conditions for the employees hired via employment agencies in the EU, granting such employees basic protections and warranties in order to cater both to the employers and the employees. Although the Directive is not directly applicable in EU member states, these states must incorporate the Directive’s basic principles into their own local legislation – a requirement which also applies to Serbia on its EU integration path. In addition, the International Labour Organization’s (ILO) Private Employment Agency Convention no. 181 regulates this issue by granting guarantees to employees engaged via employment agencies which include, among other things, the freedom of association and collective bargaining, minimum wages, limitations for working hours, paternal protection, and so on.

In October 2016, the Serbian Ministry of Labor announced the draft of a law which would regulate the labor provided via employment agencies and which would harmonize Serbian legislation with the EU Directive. This draft law has yet to be presented to the public, and until that happens employees hired via employment agencies face discrimination and legal uncertainty, with no right to sick leave or vacation days, the potential for overwork, and, most importantly, no ability to seek damages or compensation from the company they actually work for, because they are formally employed with the agency. The practice of Serbian courts in cases of law suits filed by leased employees against both agencies and their actual employers is not unified; in some cases, the courts recognize the client company as the actual employer, while in other cases the courts deny the leased employee the legal protection against the actual employer and recognize only the agency as the employer.

It is imperative to pass a law regulating the hiring and leasing of employees by employment agencies in accordance with the EU Directive and ILO’s Convention as soon as possible. It is less relevant whether a new law is passed or the existing Labor Act or Employment and Unemployment Insurance Act is amended, as long as protection is provided for the employees and responsibilities are prescribed for the agencies and the actual employers in a way that is suitable for all parties involved.

By Marija Oreski Tomasevic, Partner, and Dunja Tasic, Senior Associate, Samardzic, Oreski, & Grbovic

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In recent years, many international companies set up its operations in Serbia, in the form of subsidiaries or branch offices, not least due to the generous incentives that have been provided through a number of government schemes.  

Such companies very often have the need to engage foreign employees, mainly due to wanting to provide trained staff for their Serbian subsidiaries, persons who have demonstrated experience in the field and are already familiar with the company policies.  In Serbia, employment of foreigners is regulated in a fairly thorough manner through the Act on Employment of Foreigners.  Besides the fact that it enshrines the right of employment of foreigners, it also prescribes certain limitations and special procedures which the employers are bound to comply with when employing foreign nationals.

The first necessary condition in order to conclude an employment agreement with a foreigner, is that the prospective employee should obtain a temporary residence approval or a permanent residence, and a work permit.  The following step entails submitting a request for employment of the organization competent for employment affairs, after which the authority checks if the employer dismissed any employees due to technological, economic or organizational changes on the position for which the request was made.  Finally, after all of these conditions are met, the competent authority will allow the request and issue the work permit.  However, an additional limitation to the regime of hiring foreigners in Serbia is provided in a recent opinion of the Ministry of Labour, according to which an employer hiring a foreigner can do so only by signing a fixed-term contract that will be valid only during the validity of the work permit.  If the employer decides to prolong the duration of the employment agreement, it can do so only by signing a new fixed-term contract, or by annexing the existing contract.

An intention to protect the domestic job market is more than evident, however viewed against the fact that foreign-trained employees can often contribute immensely to the process of work of modern companies, especially in the case of Serbia which has not stepped too far from its beginnings as a young transitional economy – there is certainly room for re-evaluation of this legal regime.

By Marija Oreski Tomasevic, Partner, and Sanja Dosen, Associate, SOG / Samardzic, Oreski & Grbovic

Intellectual property infringement through the circulation and sale of counterfeit goods is still very much both a global and a local issue. As modern day counterfeiting is now acquiring more sophisticated forms involving a plethora of new and usually unsuspected goods (for example, pharmaceuticals) and with the intent of not only existing on the black markets but infiltrating into the legal market flows as well, we are faced with the need for a more aggressive approach requiring first and foremost improved legislation and subsequently more efficient enforcement activities. 

Serbia’s eagerness to improve IPR enforcement, not only as one of the prerequisites on the path to European integration but also, simply, because intellectual property protection is very much a necessity in this modern day and age, is best reflected through the gearing up of the harmonization process of the country’s IP legislation with that of acquis communautaire. As a case in point, Serbia’s intellectual property-related legislation is, now, almost fully compliant with that of the EU except for a few minor tweaks still to be made with regards to – in-particular – copyright protection.

Setting up a strong legislative framework also serves as a stepping stone towards more efficient enforcement of intellectual property rights, ultimately allowing for greater awareness of the importance of the lawful use of intellectual property rights and a concurrent improvement of the local economy through the increase of workflow and filling up of state coffers. 

The implementation of a strong legislative framework with speedy and positive enforcement outcomes would have remained only semi-successful, however, without constant monitoring of EU and regional best practices and their introduction into the local environment, thus allowing for improved protection and a steady decrease in piracy rates.

Additionally, improving protection through a more decisive and goal-oriented approach from the business community on the one hand and the state and judiciary on the other has led to the current state of affairs, in which pre-enforcement activities involving (for instance) brand owners and their initiatives against counterfeiting and piracy have become just important as the enforcement activities by the state bodies.

As a result, we have come to witness significantly improved cooperation and more transparent communication between the business community and relevant state bodies, with law firms acting as intermediaries. 

On the official state level, the Government of the Republic of Serbia also recognized the need for more efficiency and transparency and thus undertook several steps to facilitate more fluid communication between inter-state bodies tasked with IPR protection. Since in Serbia, as in many other countries, there is a number of state bodies tasked with protecting and enforcing intellectual property rights, the responsibilities and tasks of these bodies often overlap – hence the necessity for facilitating more efficient cooperation between them, to allow for a more transparent and efficient protection of said rights. In wanting to achieve these results, the Government focused part of its efforts in 2014 on setting up a formal coordination body consisting of a work group to raise awareness on the importance of protecting intellectual property rights, another to gather and compile statistical data on intellectual property rights infringement cases, and another to develop the national strategy for further improvement of said rights. 

This more vigorous approach towards combatting modern day IPR infringement cases requires more expeditious rulings, and thus has also seeded the ground for the semi-specialization of courts consisting of panels of judges specialized in intellectual property rights protection.

In the recent amendments to Serbia’s Law on Court Organization and Law on Seats and Territories of Courts and Public Prosecutors two courts have been singled out to deal with intellectual property-related infringements involving both natural and legal persons. Significantly, this two-point contact existing through the Commercial Court in Belgrade and the Higher Court in Belgrade resulted in a decrease in the deferrals of IPR-related cases and in the unnecessary prolongations of already-lengthy judicial proceedings.

Of course, as elsewhere, although legislation and enforcement are at satisfying levels, improvements will always need to be made – if only because new “counterfeit trends” are knocking at our doors at this very moment.

By Dragomir Kojic, Partner, and Tamara Bubalo, Associate, Karanovic & Nikolic

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On 12 July 2017, Serbian Commission for Protection of Competition (the “Commission”) enacted a Decision by which it enacted a measure for protection of competition due to implementation of concentration contrary to the legal obligation to notify the Commission of the concentration and to receive its prior approval, even though the legally stipulated revenue thresholds for reporting the concentration in this particular case were met (the “Decision”).

The Decision was enacted against the Serbian company „Prointer IT Solutions and Services” LLC, given the fact that the stated company implemented concentration created by acquisition of individual control over company “Alti” LCC, also a Serbian company. The established measure for protection of competition imposed by the Commission in this particular case amounts to 6.7 million RSD. According to the Competition Act, the measure for protection of competition is to be imposed against a market participant that breached specific provisions of the Competition Act in the monetary equivalent of up to 10% of total annual revenue generated on territory of the Republic of Serbia. The exact amount of the measure is valued in each specific case. The Commission released a statement regarding the Decision, in which it explained that the imposed measure is set at 6.7 million RSD in this particular case, given the fact that the concentration in question would not have distorted or prevented the competition on the Serbian market had it been reported in accordance with the law.

The Decision was enacted after completion of ex officio instituted proceedings for the investigation of the above described breach of the Competition Act.

It needs to be pointed out that the Decision is not yet final and binding, and that administrative proceedings may be initiated against it by filing an administrative suit within 30 days.

This marks the first time the Commission enacted a decision by which it imposed a penalty for failure to notify a concentration and obtain Commission’s prior approval before implementing it, and should serve as an indicator for Commission’s future behavior – one may expect its greater proactivity in detecting and punishing these kinds of breaches in the future.

Bearing in mind that the competition law is still a relatively new area of law in Serbia (the first Competition Act was introduced in 2005, merely 12 years ago), it is safe to say that the Commission’s practice is still being established, greatly relying on EU Commission’s guidelines and practices.

It can be noted that there is no sufficient awareness of legal consequences of breaching the Competition Act in Serbia. Additionally, the Commission’s fees for notifying a concentration are fairly high, which can be considered as a possible reason for one’s failure to submit a concentration notification, thus breaching its obligation under law.  Up until now, there has not been a case of imposing a measurement for failure to notify the Commission of a concentration, which also may be interpreted as one of the reasons why concentration participants were willing to risk not notifying the concentration because of the chances of being punished were not as high.

Given the Commission’s practice to interpret the law extensively and even consider itself competent to decide upon not only concentrations implemented on Serbia’s soil, but also the extraterritorial ones, and now taking into consideration the enacted Decision, it remains to be seen if future concentration participants shall be motivated to notify the Commissions of concentrations more frequently and whether the Commission will, indeed, become more proactive in detecting and punishing Competition Act breaches in similar cases.

By Milan Samardzic, Partner, and Dunja Tasic, Senior Associate, SOG / Samardzic, Oreski & Grbovic

Serbian legislation provides for a maternity leave compensation in the amount of the mother’s average salary in the last 12 months before the leave. The compensations is paid from the state budget, but the procedure of ascertaining the right to maternity leave compensation is conducted by local government.

Some employers tried to manipulate the system by making unjustified salary raises to their pregnant employees, thus raising their average salary. Serbian authorities have increased scrutiny on such raises, and started declining the raises they deem to be unjustified.

The payments of maternity leave compensations are made by employers, but are latter reimbursed to them when the authorities enact a resolution on the right to maternity leave compensation. Due to this time discrepancy, it often happens that the employers become aware of their raises being declined only after they have paid substantial amounts of money to their employees on maternity leave that at that point cannot be reimbursed anymore.

Since it is not unusual for pregnant women to work until the end of their terms, it can happen that they get a legitimate raise during the term, which the administration will not accept, thus significantly decreasing the future mother’s maternity leave compensation and causing damage to the employer which already paid the increased compensation.

If the raise is declined, there is a possibility of an appeal and a lawsuit before the Administrative Court, as the last resort. However, these procedures tend to be slow, and can last for more than a year or two. Also, the current practice of both the Ministry of Labor, Employment, Veteran, and Social Security Affairs and the Administrative Court shows that the original rulings are usually upheld.

Therefore, it is important for the annex of the employment contract for salary increase to explain in detail the reasons for this raise and to correlate it with the increase in workload or the level of employee’s responsibilities. The better the raise is explained, the chances it will be accepted by the Serbian authorities are higher.

By Marija Oreski Tomasevic, Partner, and Dusan Dincic, Senior Associate, SOG / Samardzic, Oreski & Grbovic