ARTICLE Law on Agency Employment aimed at prevention of labor abuse

ARTICLE Law on Agency Employment aimed at prevention of labor abuse

     The most common way of establishing an employment relationship in the Republic of Serbia is on the basis of an employment contract concluded between the employee and the employer. 
However, an employee can also establish an employment relationship through an employment contract concluded with a temporary staffing agency, which further assigns the employee to the beneficiary employer, for the purpose of temporary work. This way of establishing an employment relationship is foreseen and regulated by the Law on Agency Employment.


SUBJECT OF REGULATION
The Law on Agency Employment regulates the rights and obligations of employees who enter into an employment contract with a temporary staffing agency. The employee is assigned to a beneficiary employer for the purpose of temporary work, and the law regulates the exercise of certain rights based on work relationship, working conditions of temporary staffing agencies, procedures and conditions of assigned employees, the relationship between the agency and the employer, as well as the obligations of the agency and the beneficiary employer towards the assigned employees. 
In consequence, when establishing an employment relationship through a temporary agency there are three actors, namely:


1. Temporary staffing agency – a company or entrepreneur registered with the competent authority. 
2. Assigned employee – natural person who is employed in the agency.
3. Beneficiary employer – legal entity, entrepreneur, subsidiary or branch of a foreign legal entity, state authority, authority of an autonomous province or local self-government unit, where the assigned employee temporarily performs work.


ESTABLISHMENT OF EMPLOYMENT RELATIONSHIP
A precondition for worker to be assigned to a specific beneficiary employer through an agency is a concluded contract between the agency and the employer. This contract is concluded in writing, and the mandatory content is prescribed by the Law on Agency Employment. Furthermore, essential elements of this contract are the obligation of the employing organization to provide the agency with accurate information on its needs, such as the number of assigned employees, the time period, the place of work, the type of work and tasks to be performed, the working conditions, as well as the salary and/or wages and any other rights and obligations.
After the agency and the beneficiary employer conclude a contract defining the mutual relationship, i.e. specifying the requested employee profile and all the working conditions, the agency concludes an employment contract with the assigned employee for an indefinite or fixed period of time.
With a fixed-term contract, the assigned employee is engaged only for the period of time that is contracted with the beneficiary employer. Of course, if the employer assesses that there is a need to rehire the assigned worker, the agency can offer a new fixed-term employment contract. However, the assigned employee cannot be rehired by the same beneficiary employer for more than 24 months in total, regardless of whether it may be through the same or a different agency, unless the applicable Labor Law prescribes otherwise.  
If the same assigned employee is hired by the same beneficiary employer for more than 24 months in total, it is considered that the assigned employee has established an employment relationship for an indefinite period with the beneficiary employer.
In the case of an indefinite-term contract between the agency and the employee, the work status of the assigned worker can have two forms:


1. Active status - represents the time that the assigned employee spends working for the beneficiary employer,
2. Inactive status - represents the employee's inactivity time. During the inactive period, the agency is obliged to provide all the necessary conditions to the employee, even though the employee is not working i.e. is not assigned for the period.


LIMITATIONS AND PROHIBITIONS 
The Law on Agency Employment foresees restrictions regarding the conclusion of contracts on the assignment of employees. It stipulates that the total number of employees assigned for a fixed term to the beneficiary employer cannot exceed 10% of the total number of employer’s workers on the date of the conclusion of the contract on assignment of employees. The same applies in case there is an amendment of the contract with the purpose of increasing the number of assigned employees. 
Also, the law expressly stipulates the number of employees that can be hired by the beneficiary employer who has less than 50 employees on the day of contract signing with the agency. 


-    2-9 employees – 1 assigned employee
-    10-19 employees – 2 assigned employees
-    20-29 employees – 3 assigned employees
-    30-39 employees – 4 assigned employees
-    40-49 employees – 5 assigned employees


However, the aforementioned restrictions do not include assigned employees who have an employment contract with the agency for an indefinite period of time, regardless of the period for which they are assigned to the beneficiary employer.
Furthermore, inter alia, it is prohibited for a staffing agency to:
-    Conclude an Employee Transfer Agreement with another staffing agency.
-    Assign an employee to workplaces of state employees of the Republic of Serbia.
-    Assign an employee to workplaces of officials in local authorities and authorities of autonomous provinces.
-    Assign an employee as the replacement of a beneficiary employer’s employee in case of an organized strike.

TERMS OF EMPLOYMENT OF THE ASSIGNED EMPLOYEE

The Law on Agency Employment stipulates that the working conditions applied to beneficiary employers’ own workers are to be fully applied to the assigned employees as well. This means that the beneficiary employer sets the terms of employment that are applicable to both those employees who have signed a contract directly with the employing organization, as to those assigned by the staffing agency. Equal working conditions refer to:
-    duration and schedule of work hours;
-    overtime work;
-    night shift;
-    rest during work; 
-    daily, weekly and annual leave;
-    leave with salary compensation;
-    elements for the calculation and payment of salary, wages and expenses;
-    occupational safety and health;
-    labor law protection of pregnant women and nursing mothers;
-    labor law protection of youth;
-    prohibition of discrimination on all grounds.

The agency is obliged to pay the salary, wages and reimbursements to the assigned employee for the assignment period based on the data provided to it by the beneficiary employer, but also based on the data available to it. This means that the agency has the obligation of payment even in the case the beneficiary employer does not provide the agency with the necessary data. It such case, the agency has to use any data available to it, i.e. the average number of working hours for the month in question.
The agency must not charge the assigned employee for its service of assignment to the beneficiary employer. The agency must not charge the person who worked as an assigned employee but after the termination of the assignment concluded an employment contract with the beneficiary employer.
The Law also stipulates that the assigned employee who has an employment contract with the agency for an indefinite period of time has the right to salary compensation in the period between two assignments to beneficiary employers (inactive status). The amount of such payment cannot be less than the minimum wage, and in the event of termination of the employment relationship initiated by the agency, the assigned employee has the right to severance pay based on the excess of employees, in accordance with the regulating Labor Law.


TERMINATION OF EMPLOYMENT CONTRACT
In accordance with the regulating Labor Law and general acts of the agency, i.e. of the beneficiary employer, the agency may cancel the employment contract of the assigned employee or impose another measure if there is a justified reason for it, related to the employee's ability to work and/or employee’s behavior, as well as for other reasons stipulated by the law. 
The beneficiary employer is obliged to notify the agency without delay, in writing, of the existence of the aforementioned circumstances, and also to provide all the necessary evidence to determine the circumstances that represent grounds for dismissal.

In case of illegal dismissal, the assigned employee has the right to initiate a labor dispute against the agency for compensation of damages in the competent court in the amount of the remaining wages from the moment of termination of the employment relationship until the end of the duration of the agreed assignment (maximum of 18 wages), as well as the right to payment of taxes and contributions for that same period.

OBLIGATIONS OF THE BENEFICIARY EMPLOYER
The beneficiary employing organization is obliged to provide work assignments to the assigned employee, organize, manage and supervise the work of the assigned employee, give instructions, ensure working conditions and ensure occupational safety and health, in the same way that it does for its own employees. In particular, when concluding the assignment agreement, the beneficiary employer is to inform the agency on the work conditions for positions for which assignment is being made, any other working conditions of comparable positions, and to submit an extract from the ruling general act. The beneficiary employer is also to inform the agency on any changes in the stated conditions as quickly as possible.
The Law on Agency Employment expressly stipulates the obligation of the beneficiary employer to ensure occupational safety and health for assigned employees. Beneficiary employer is to inform the assigned employee on potential risks and specific safety measures at the assigned workplace before the beginning of work. In addition, it is the obligation of the beneficiary employer to organize medical examinations for the assigned employee, in accordance with the regulations on occupational safety and health.


STEP TOWARDS IMPROVING THE POSITION OF ASSIGNED WORKERS
Temporary agency employment represents a significant and unavoidable form of work engagement of working age population. It was necessary to pass a law that would guarantee equal treatment of both assigned workers and workers of the beneficiary employer, which was done by passing the Law on Agency Employment in 2019.
Given that this form of employment has existed in practice for a long time, but without any legal framework, the adoption and implementation of the Law on Agency Employment as necessary to bring order to this area, and also to reduce and prevent labor abuse.

 

Authors

Nikola Komnenović, Partner

Branka Dželajlija, Senior Associate

Aleksandra Mrdović, Attorney at Law
 

*The information in this document does not represent legal advice and is provided for general informational purposes only.

**Partner, Senior Associate, Associate and/or Junior Associate refers to Independent Attorney at Law in cooperation with IVVK Lawyers.

***For any question regarding cooperation and/or business proposal, please contact our BD at marina.tanaskovic@ivvk.rs 

03/10/2022

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