Termination of an employment contract at the employer’s initiative without substantive justification

In cases No. U-I-16/21, U-I-27/21 (Decision dated 18 November 2021, Official Gazette RS, No. 202/21), upon the request of seven representative trade unions, the Constitutional Court decided on the constitutionality of the regulation of the Employment Relationship Act and the Public Servants Act, on the basis of which an employer or a superior could terminate the employment contract of an employee or public servant for business reasons without having to justify the business reason in any way, provided that the employee met the conditions for acquiring the right to an old-age pension. A request for a review of the constitutionality of the challenged regulation was also filed by the Advocate of the Principle of Equality, alleging discriminatory treatment on the grounds of age as regards the statutory regulation of the regular termination of an employment contract after the fulfilment of the statutory conditions for obtaining an old-age pension. The applicants alleged, inter alia, that this regulation is inconsistent with Article 4 of ILO Convention No. 158 concerning Termination of Employment at the Initiative of the Employer and Article 24 of the European Social Charter (revised) in conjunction with Article 8 of the Constitution, in so far as it allowed the possibility of the unsubstantiated termination of an employment contract that was not based on the existence of a serious or justified reason, but rather on the fulfilment of retirement conditions and the employer’s subjective decision.

In its assessment of the challenged statutory regulation, the Constitutional Court emphasised that in order to terminate an employment contract at the initiative of the employer under both of the mentioned international instruments there must exist a valid reason related to the employee’s capacity or conduct or to the operational requirements of the particular employer that justifies the termination of the employment contract. This entails the requirement to substantiate the grounds for termination as an essential element of the protection of workers against the unjustified termination of an employment contract by the employer. If the statutory reason for the termination of an employment contract does not satisfy these substantive requirements, it cannot constitute a valid reason for termination within the meaning of Article 4 of ILO Convention No. 158 and Article 24 of the European Social Charter (revised) in concrete cases.

The legislature’s allegations that fulfilment of the conditions for entitlement to an old-age pension constitutes a valid reason for termination on business grounds, without the employer in question being required to justify the termination as such would allegedly entail an administrative burden for the employer, did not satisfy these substantive requirements. The exclusion of the employer’s obligation to justify the business reason also deprived workers who would have been dismissed under the challenged regulation of adequate labour law protection with regard to the termination of the employment relationship, since the challenged regulation did not enable a substantive review of the justification of the reason for termination. The Constitutional Court therefore held that the termination of an employment contract at the initiative of the employer for a business reason because the employee meets the conditions for acquiring the right to an old-age pension, without the employer’s decision being justified by serious objective reasons arising from the employer’s own sphere, and as a result depriving the employee of adequate labour law protection with regard to the termination of the employment relationship, is inconsistent with Article 4 of ILO Convention No. 158 and Article 24 of the European Social Charter (revised), and consequently with Article 8 of the Constitution.