Obligations of Entrepreneurs Who Registered Temporary Suspension of Business

Considering that the state of emergency in the Republic of Serbia was introduced on 15 March 2020, and that, as a result, a number of decrees, orders and conclusions were adopted which derogated from certain constitutionally guaranteed human and minority rights, one of the issues that created many uncertainties was the position of entrepreneurs in the newly created circumstances. More specifically, the question arose as to the obligations of an entrepreneur who registered a temporary suspension of business activity during the state of emergency, and the position of their employees in such a situation.

Namely, the introduced state of emergency did not suspend labour law regulations. The only regulation adopted in relation to this matter was the Decree on the Organisation of Employers’ Work During the State of Emergency, which has been in force since 16 March 2020 and which obliges employers to organise safe work for employees during the relevant period.

Measures for ensuring safe work for employees include remote work and work from home, where possible given the nature of the entrepreneur’s business activity, as well as shift work, which would imply a smaller number of employees and engaged workers being present in an enclosed space at the same time.

In addition, the entrepreneur is obliged, in order to ensure the protection and health of employees, engaged workers and clients, to provide all general, special and extraordinary measures relating to the hygienic safety of premises and persons, in accordance with the Law on the Protection of the Population from Infectious Diseases.

Essentially, during the state of emergency, an entrepreneur, like all other employers, has the obligation to ensure occupational safety and health, in accordance with all applicable provisions of the Law on the Protection of the Population from Infectious Diseases, as well as the regular preventive measures prescribed by decrees, orders and conclusions adopted by the competent authorities.

However, despite all decisions adopted by the competent authorities, there are entrepreneurs who, due to the nature of their business activities, simply do not have the organisational conditions necessary to enable their employees to work remotely or from home. Therefore, they may resort to the right prescribed under Article 90 of the Serbian Company Law — namely, the temporary suspension of business activity.

The deregistration of business activity before the Serbian Business Registers Agency may last for as long as the state of emergency remains in force in the country, provided that the issue of the employees’ status has previously been resolved. The suspension of business activity is temporary, and in such a case the entrepreneur is obliged to display a notice on the period of suspension at the place where the business activity is performed, and to register the change in accordance with the law.

The greatest challenge in this situation is the status of employees and the options available to an entrepreneur who decides to temporarily suspend business activity. In accordance with Article 176, paragraph 1, item 5 of the Serbian Labour Law, temporary suspension of business activity is not a reason for termination of an employment agreement, since the entrepreneur does not cease to operate by being deleted from the register, but only temporarily suspends the performance of their business activity.

Moreover, the Serbian Company Law does not require an explanation of the reasons for the suspension of business activity. Furthermore, since the Decree provides that an entrepreneur-employer must ensure occupational safety and health, the possibility of remote work or work from home, as well as shift work with a smaller number of people and potentially reduced working hours, an entrepreneur who does not have the organisational conditions and possibilities to implement all or some of the prescribed measures may resort to the application of the institutes set out below, in accordance with the Serbian Labour Law.

Article 116 of the Serbian Labour Law prescribes that an employee is entitled to salary compensation of at least 60% of the average salary earned in the previous 12 months, provided that such compensation may not be lower than the minimum wage determined in accordance with the law, during a work interruption or reduction in the scope of work that occurred without the employee’s fault, for a maximum of 45 working days in a calendar year.

Exceptionally, in the event of a work interruption or reduction in the scope of work that requires a longer absence, the employer may, with the prior consent of the minister, refer the employee to leave for longer than 45 working days, with salary compensation as provided in paragraph 1 of that Article.

In a situation where the entrepreneur continues operating during the state of emergency in such a way that some employees work from home, while some employees are placed on forced leave because it is not possible to ensure occupational safety and health for them at the workplace, the entrepreneur may apply another legal mechanism, prescribed under Article 117 of the Serbian Labour Law.

According to that provision, an employee is entitled to salary compensation in the amount determined by the general act and the employment agreement during a work interruption caused by an order of a competent state authority or the competent body of the employer due to the failure to ensure occupational safety and protection of life and health at work, where such safety is a condition for further work without endangering the life and health of employees and other persons, as well as in other cases in accordance with the law.

The general act and employment agreement may also determine other cases in which an employee is entitled to salary compensation.

It is evident that the application of these two legal mechanisms leads to different outcomes, which can primarily be seen in the amount of salary compensation paid. In one case, the amount is fixed by law, while in the other it is determined by the entrepreneur through the general act and the employee’s employment agreement.

The situations in which one of these two mechanisms should be applied are interpreted differently. However, it is undisputed that, before applying either of them, each specific case must be taken into account and the appropriate mechanism applied accordingly.

In addition to these options, an entrepreneur has several other ways to overcome the challenge of suspending business activity and resolving the status of employees, but only as a last resort, after a detailed assessment of the above-mentioned mechanisms, preventive measures, and all decisions adopted by the competent authorities in relation to their business operations as a result of the declaration of the state of emergency in the country.

Some of these options include a written mutual termination of the employment agreement in accordance with Article 177 of the Serbian Labour Law, or termination of the employment agreement by the entrepreneur in accordance with Article 179, paragraph 5, item 1 of the Serbian Labour Law, if, due to technological, economic or organisational changes, the need to perform a particular job ceases or the scope of work is reduced.

Taking all of the above into account, when deciding on the temporary suspension of business activity, an entrepreneur should carefully examine, in each specific case, all conditions for the application of the legal mechanisms mentioned above, so that the final outcome is in the best interest of both the entrepreneur and the employees, without endangering the livelihood of employees in the newly created extraordinary circumstances.