Legal Path to Successfully Terminating Employment Due to Technological Redundancy: Key Steps

Employers often face various challenges imposed by the market, leading to changing needs – from hiring new employees to reducing staff numbers. According to the Labor Law (“the Law”), employment can be terminated in several ways. For employers, the most secure method is mutual termination of the employment contract. However, a common problem for employers is terminating contracts due to technological redundancy, mainly because of the complexity, rigidity, and formality of the procedure. Thus, employers must be careful when basing termination decisions on this reason. We will discuss the most critical aspects of this process and what to pay attention to in order to avoid damage and potential annulment of the termination decision.

Circumstances Leading to Termination Due to Technological Redundancy

Termination due to technological redundancy occurs if, due to:

• Technological changes (changes in processes and work methods);
• Economic changes (financial changes in the employer’s situation);
• Organizational changes (reorganization of jobs, changes in job descriptions); the need to perform certain jobs ceases (elimination of jobs) or the volume of work decreases (reduced number of workers).

In the process of determining excess employees, some employers are obligated to implement a program for resolving excess employees. An employer must create a program for resolving excess employees if the need for permanent employees ceases within a period of 30 days.

The obligation to implement a program applies if the need for work ceases for:

• 10 employees at an employer with more than 20 but less than 100 permanent employees;
• 10% of employees at an employer with at least 100 but no more than 300 permanent employees;
• 30 employees at an employer with more than 300 permanent employees;
• At least 20 employees within a period of 90 days.

In other cases, the employer is not obliged to implement a program for resolving excess employees, but legal practice has established that the employer must make a decision on technological redundancy, with the same content as the program itself.

Differentiating Technological Redundancy Situations

We distinguish between situations where specific jobs are eliminated, making all employees in these jobs redundant, and situations where only the number of workers in certain jobs is reduced.

In this article, we will focus on situations where jobs are eliminated, and according to the Law, it is not necessary for the employer to create a program for resolving excess employees. This situation is more common in smaller companies, i.e., employers with a smaller number of employees.

Steps to Follow During the Termination Process Due to Technological Redundancy

1. Decision to Eliminate Jobs – decision on organizational, economic, or technological changes (“Decision on Eliminating Jobs”).
   • The decision must include:
     • A description of the changes leading to job elimination (technological, economic, and/or organizational), with a detailed explanation of the reasons for the changes, what the changes consist of, and how they led to job elimination;
     • Description of the consequences of the changes (cessation of need for certain jobs, amendments to the Job Organization and Systematization Regulation, offer of annexes, delivery of termination notices, etc.);
     • Information on whether measures for resolving excesses are applicable (relocation to other jobs, working for another employer, retraining or further training, part-time work but not less than half of full-time work, and other measures);
     • Information on the number of employees who are considered technologically redundant;
     • A 30-day period from the Decision on Eliminating Jobs to the official elimination of jobs and issuing the Termination Notice;
     • Provision that the Decision takes effect 8 days after being posted on the notice board.

2. Decision on Amendments to the Regulation on the Organization and Systematization of Jobs
   • The Regulation itself removes jobs previously eliminated by the Decision on Amendments;
   • The Decision on Amendments comes into effect 8 days after being posted on the notice board.
3. Termination Notice
   • If there is no room for applying measures for resolving excesses or the employee refuses the annex offering such measures, the employer issues a Termination Notice to employees declared redundant. The Notice must include an explanation and legal remedy advice. The explanation largely relies on the previously made Decision on Eliminating Jobs.

Employer’s Obligations Upon Termination

• The employer is obligated to pay all unpaid wages, wage compensations, and other earnings the employee is entitled to until the termination date, within 30 days from the date of termination;
• Severance pay due to technological redundancy at the amount established by the general act and employment contract, but not less than a third of the employee’s salary for each completed year of employment with the employer. The employer must pay the severance before the termination date.
• According to the Law, the employer cannot employ another person for the same job within three months from the termination date of the previously employed person.

Importance of Understanding Legal Procedures

Regardless of the severance pay amount paid by the employer from its own funds, as determined by the Law or a higher amount established by the general act or employment contract, the employee is still entitled to unemployment compensation. A thorough understanding of legal procedures, making appropriate decisions, and preventing potential risks for the employer are crucial for conducting a proper termination process due to technological redundancy, and must be strictly adhered to.

Legal Path to Successfully Terminating Employment Due to Technological Redundancy: Key Steps   Written by Sofija Stefanović, in cooperation with Mina Radojević Vlačić   This text is for informational purposes. For more specific advice, we recommend consulting labor law attorneys, Mina Radojević Vlačić or Sofija Stefanović, who will carefully consider your case and suggest further steps.