Termination of Employment Agreement

TERMINATION OF EMPLOYMENT AGREEMENT

An employment agreement, as a legal agreement which regulates the relations between the worker and the employer, may be terminated unilaterally, by mutual consent, or judicially. i.e., a unilateral, judicial and consensual termination of the employment agreement are possible, and this article shall explain them in more detail.

Establishing an employment by concluding an employment agreement

The employment between the employer and the worker is based on an employment agreement, i.e. if the employer concludes an agreement with the worker regarding the performance of their work, which, with respect to nature and type of work and the authority of the employer, possesses the characteristics of the work which is the subject of the employment, the employer is considered to have concluded an employment agreement with the worker, unless the employer proves otherwise.
Pursuant to the Labour Act (official gazette of the Republic of Croatia ˝Narodne novine˝, Nos. 93/14, 127/17, 98/19), an employment agreement is concluded between the employer and the worker in written form, usually before the start of work or on the day of the start of work. In the event that the employer failed to conclude a written employment agreement with the worker, he is obliged to issue him a written certificate of the concluded employment agreement prior to the start of work.
As a rule, an employment agreement is concluded for an indefinite period of time and binds the parties until terminated, but exceptionally, it may be concluded for a specific period of time in order to establish an employment whose termination is determined in advance by objective reasons which are justified by the deadline, the performance of a certain job, or the occurrence of a certain events.

Essential content of the employment agreement

Article 15 of the Labour Law stipulates that the employment agreement, i.e. the written certificate, must contain all important details in question, and at the very least the following:

- the parties and their place of residence, i.e. registered office,

- the place of work, and if there is no permanent or main place of work, a note that the work is performed in various places,

- the name of the workplace, i.e. the nature or type of work, for which the worker is employed, or a short list or description of duties,

- the date of start of work

- the expected duration of the agreement, in the case of a fixed-term employment agreement

- the duration of paid annual leave to which the worker is entitled, and in the event that such information cannot be provided at the time of concluding the agreement (or issuing the certificate), the method of determining the duration of that leave,

- notice periods which must be observed by the worker and the employer, and in the event that such information cannot be provided at the time of concluding the agreement (or issuing the certificate), the method of determining such notice periods,

- the basic salary, salary supplements, and payment schedule to which the worker is entitled,

- the duration of a regular working day or week

Termination of the employment agreement

Pursuant to Article 115 of the Labour Act, the employment agreement ends in the following cases:

- with the death of the worker

- with the death of the employer (if they are a natural person) or their termination (if they are a legal entity)

- when the worker reaches 65 years of age and 15 years of pensionable service, unless the employer and the worker agree otherwise,

- by mutual consent between the worker and the employer,

- by submitting a final decision on the recognition of the right to a disability pension due to a complete loss of work fitness,

- by dismissal

- by the decision of the competent court.

Termination of the employment agreement

Although pursuant to Article 112 of the Labour Act, the termination of an employment agreement is not specified as one of the ways in which the agreement ceases, from the principle of autonomy as a fundamental principle in concluding an employment agreement, it follows that the employer and worker, by mutual and mutually valid expression of will, may amend or terminate the employment agreement in the same way as they have concluded it.
Therefore, one of the ways to terminate an obligatory legal relationship is the termination of an agreement, i.e. the cessation of a valid agreement whose obligations are completely or partially unfulfilled, although it is not provided for by the Labour Act, but rather by the Act on Obligatory Relations.

The latter Law stipulates the following as reasons for terminating the employment agreement:

- impossibility of fulfilling obligations from the agreement,

- change of circumstances,

- lack of certainty that the other party will fulfil their obligations,

- certainty that the other party will not fulfil their obligations; these reasons must arise in the time between the conclusion of the agreement and the due date of the debtor's obligation.

Unilateral termination of the employment agreement

Since the employment agreement is a bilateral agreement, both the employer and the worker have certain rights and obligations. Thus, in an employment, the employer is obliged to provide the worker with a job and to pay him a salary for the work performed, and the worker is obliged, according to the instructions given by the employer, to personally perform the work undertaken in accordance with the nature and type of work.
With regard to the aforementioned obligations, modern law allows the employer and the worker to include special clauses in the employment agreement, which foresee the possibility of unilateral termination of the employment agreement for certain reasons and in certain situations.
The most well-known and widespread is the termination clause (clausula irritatoria), a clause in the agreement which allows one party to withdraw from the employment agreement if the other party fails to fulfil their obligations. It should be noted that in bilateral agreements, like the employment agreement, one party is not obliged to fulfil their obligation from the agreement if the other party does not fulfil it, so that in case of unilateral termination of the employment agreement there is always a conscientious party who has fulfilled their obligation, as opposed to the other side which has failed to do so. In this case, the conscientious party to the agreement may waive full performance by submitting a written request to the other party to terminate the agreement.

Consensual termination of the employment agreement

When both the employer and the worker wish to terminate the employment of their own free will, it is possible to mutually terminate the employment agreement concluded for an indefinite period. On the other hand, when the period for which the fixed-term employment agreement was concluded expires, it ends by operation of law, and it is not necessary to conclude a separate mutual termination of the fixed-term employment agreement, since the worker is no longer obliged to work after that point.
Pursuant to the Labour Act, the consensual termination of an employment agreement concluded for an indefinite period must be concluded in writing. Termination of such a agreement may be proposed by both the employer and the worker. It is important to note that neither party is obliged to accept the proposal for mutual termination proposed by the other party.
In the event of a consensual termination of the employment agreement, neither the employer nor the worker are obliged to comply with the notice period, and the employer is not obliged to pay the worker severance pay. However, by agreement, it is possible to regulate the issue of severance pay, as well as the date of termination of the employment at the end of the period for which the worker would be entitled to a notice period in the event of the termination of the employment agreement.
In any case, when terminating the employment agreement by mutual consent it is recommended to agree on the cessation date of the employment agreement; on the method of settlement of monetary obligations of the employer towards the worker, such as overtime pay, annual leave from the previous year and the like; on the method of settlement of monetary obligations of the worker towards the employer, such as the return of funds invested in continuing education, training and the like; on the use of annual leave, severance pay (if it is expressly agreed in the employment agreement in case of consensual termination or if the worker and the employer agree on severance pay).
The worker must bear in mind that in the event of a consensual termination of the employment agreement, they cannot claim unemployment benefits from the Croatian Employment Service.

Judicial termination of the employment agreement

In cases where the court has determined that the termination of the employment agreement by the employer is inadmissible, it will order the worker to be reinstated. However, in such a case, and at the request of the worker or employer, the court shall terminate the employment agreement if it is filed before the conclusion of the main hearing before the court of first instance.
In the case described above, and whenever it is not acceptable for the worker to continue their employment, the court shall, at their request, determine the date of termination of the employment and award them a compensation in the amount of at least three and at most eight prescribed or agreed monthly salaries of that worker, depending on the duration of the employment, age and maintenance obligations imposed on the worker.
The court can also issue a decision on termination of the agreement at the request of the employer, if there are circumstances which justifiably indicate that the continuation of the employment, taking into account all the circumstances and interests of both parties to the agreement, is not possible.