15 Oct, 2019

The Agency Employment Bill- strengthening the rights of “leased” employees or the ultimate downfall of the working class?

The International Labor Organization Convention No. 181 on Private Employment Agencies, dating back to 1997, as one of the main reasons for passing the Convention cites recognition of the role of private employment agencies in the functioning of the labor market, as well as the need to provide employees with protection from abuse and guarantee freedom of association and enhancing social dialogue.  On 20 February 2013, the National Assembly of the Republic of Serbia adopted legislation ratifying the Convention, bearing in mind that strengthening social dialogue at all levels is, inter alia, one of the requirements of Chapter 19 (Social Policy and Employment) on Serbia’s EU accession journey.

Serbian labor legislation, primarily the Labor Act, only recognizes the contractual relationship between employee and employer, leaving the issue of engaging and assigning an employee through an agency (“Agency“) unregulated. However, the practice of employment through Agencies in the Republic of Serbia exists, since this type of employment is not explicitly prohibited. According to the Ministry of Labor, Employment, Veteran and Social Affairs (“Ministry”), as of September 2018, there were 111 registered Agencies in the Republic of Serbia.  Through the Agencies, workers are hired by the most high-volume companies, especially in the construction and agriculture sectors, and most recently developers have been hired in this way.  Agencies with engaged staff generally enter into temporary and casual work contracts, which is why the engaged employees are denied certain rights since they are hired without employment relationship.  For instance, Agency workers are denied the right to annual leave, the right to pay in case of temporary inability to work and similar rights enjoyed by employees.

It is estimated that about 2% of employees in the Republic of Serbia earn “salaries” from contracts with Agencies.  This percentage mirrors the average percentage of staff hired via Agencies in EU Member States, with the main difference being that in the Republic of Serbia the degree of abuse of this type of employment, in terms of curtailing Agency worker rights, is far more pronounced owing to the fact that this type of employment is unregulated.

The position of Agency workers has not come to the fore, on the back of which the Agency Employment Bill was recently sent forward for debate in the National Assembly (“Agency Bill“).  According to the announcement of the Ministry as of 13 August 2019, the Agency Bill will improve the position of Agency workers in Serbia by affording them equal rights to salaries, remuneration, working hours, holidays, leave and other employment rights, as compared to permanent employees.  The introduction of a legal framework for Agency work will bring Serbia’s labor legislation into line with the international standards of the International Labor Organization and the EU.  As stated in the Agency Bill, the aim of this act is to combat the gray economy, i.e. reducing unreported employment, as well as restoring order and preventing unfair competition between the Agencies, by regulating how they operate.  The proposed legislation is expected to have a positive impact on the labor market, primarily through contributing to improving the material and social security of “leased” employees and increasing the number of employment contracts.  Down the line, it should lead to greater numbers of “leased” employees moving to direct employment.

Under the provisions of the Agency Bill, an Agency is a company or entrepreneur registered with the authority, which concludes employment relationships with employees in order to assign them temporarily to beneficiary employers to work there under their supervision and direction.  Agency licenses are to be issued by the Ministry and are renewable for a period of five years.

A beneficiary employer may be a registered legal entity, entrepreneur, a representative office or branch of a foreign legal entity on the territory of the Republic of Serbia, a state body, an autonomous province, and local self-government for whom and under the supervision and direction of whom an assigned employee works temporarily.

Beneficiary employers and Agencies conclude an employee assignment contract, which must be concluded in writing and contains all elements envisaged by the Agency Bill.

An assigned employee is any individual engaged by an Agency with a view to being assigned to a beneficiary employer to work temporarily under its supervision and direction.

LEAVING THE GRAY ZONE

The Agency Bill ought to eliminate the practice of Agencies engaging workers without concluding employment contracts.  The Agency Bill foreseesthat an assigned employee must have an open-ended of fixed-term employment contract with the Agency.  In practice, workers often entered into temporary and casual work contracts with Agencies to work with other legal entities and entrepreneurs.  To date, Agency workers have been placed in a discriminatory position compared to permanent employees because they are not entitled to the equal employment rights. In this regard, the Agency Bill seeks to level the playing field and protect assigned workers by, inter alia, imposing fines of RSD 800,000 to RSD 1,500,000 on legal entities that assign employees but that have not concluding an employment contract with them.

Furthermore, as explained in the Agency Bill, assigned employees shall be afforded the same working conditions (salaries, working hours, holidays, occupational health and safety) enjoyed by permanent employees – comparative employee, and under the supervision and direction of whom assigned employees work.  Therefore, assigned employees will enjoy the same working conditions and benefits as comparable employees doing the same job.  On the other hand, the question remains as to whether having an employment contract with an Agency, open-ended or fixed-term, provides any certainty to an employee who is assigned to another beneficiary employer, or whether the assigned employee will be assured of returning to the same workplace after taking annual leave or sick leave, and that another employee will not “take his place”, etc.  Also, it is unclear whether e.g. banks would apply identical lending terms and conditions to permanent employees and Agency workers i.e. would they be treated equally.

The Agency Bill also contains certain restrictions aiming to prevent any abuse of this type of employment. One of the restrictions is that fixed-term employee assignment contracts may be used to engage a maximum of 10% of the total number of employees employed directly by the beneficiary employer at the time of conclusion of the contract. However, the restriction does not apply to employees assigned to the beneficiary employer who have open-ended employment contracts with an Agency.

In order to prevent beneficiary employers from continuously hiring assigned employees for fixed-terms, a restriction will apply whereby Agencies will not be permitted to assign employees for a fixed-term where those employees have already been permanently employed by the beneficiary employer or through that or another Agencies for a period of 24 months, save where temporary work with the beneficiary employer is permitted for a longer duration under the Labor Act. The above restriction does not apply to employees holding open-ended employment contracts with the Agency and who are assigned to beneficiary employers because they enjoy all the rights arising from open-ended employment.  Also, these employees have the right to pay between assignments and the right to redundancy pay when the Agency cannot assign them to another beneficiary employer.

Beneficiary employers are jointly and severally liable for the Agency’s obligation to pay salaries, remuneration and reimburse travel expenses to assigned employees. Additionally, the beneficiary employer must compensate the assigned employee for injury or loss incurred at work or in relation to work and occupational disease, while the Agency is alternatively liable if the assigned employee cannot collect compensation from the beneficiary employer.

What could cause some controversy is the fact that the Agency Bill allows for employee assignment in the public sector, save for civil servants of the Republic of Serbia and officials in local self-government and autonomous provinces. This means that employees can be assigned in the health sector, education, justice, culture. By assigning employees through Agencies, the number of public sector employees would not be formally increased, thereby providing a backdoor to the public sector employment ban, which is still in force in the Republic of Serbia.

AGENCY EMPLOYMENT IN THE WESTERN BALKANS REGION

Under Montenegrin legislation, Agencies are regulated by the Labor Act.  Agencies may be licensed by the competent ministry if, inter alia, agency employment is its sole activity.  Similar to the Agency Bill, in Montenegro, Agencies are required to conclude fixed-term or open-ended employment contracts with prospective employees.  Assigned employees derive their rights from their relationship with the Agency.  Equal rights for employees directly employed by the beneficiary employer and assigned employees are ensured through equal and fair pay i.e. there can be no salary gap between employees, permanent or assigned, doing the same or similar jobs and having the same qualifications, i.e. level of education and occupation.  Additionally, assigned employees are entitled to pay for periods when not on assignment with the beneficiary employer.  In addition, no longer requiring the services of an assigned employee prior to expiry of the term of assignment does not give a beneficiary employer grounds for termination of the employment contract.

The main difference between Montenegrin regulations and the Agency Bill is the fact that Montenegrin law does lay down restrictions related to employee assignment contracts either in terms of the number of employees or in terms of the duration of the assignment.

Unlike the Montenegrin Labor Act, but like our Agency Bill, the Croatian Labor Act sets down an employee assignment time restriction.  Namely, an assigned employee cannot be assigned to the beneficiary employer to do the same job for a continuous period of more than three years, unless this is necessary to cover a temporarily absent employee or for some other objective reasons allowed by a collective agreement.  An interruption of less than two months shall not be considered as an interruption of the three-year period.  This act also allows Agencies to conclude fixed-term and open-ended employment contracts.  Agencies may not charge fees to assigned employees where an employment contract is concluded directly between the assigned employee and the beneficiary employer.  A similar provision is also contained in the Agency Bill.  The assigned employee is guaranteed the same rights, and he/she may claim compensation from the Agency or the beneficiary employer for injury or damage at work or concerning work and occupational disease.

Agency employment in the BiH and the Republic of North Macedonia has not yet been regulated.

COMPARISON WITH WESTERN EUROPE COUNTRIES

In many Western European countries, agency employment has been around for decades, with the rights and obligations of assigned employees regulated by law.

In Austria, the Temporary Employment Act stipulates that assigned employees shall enjoy the same treatment and working conditions as those directly employed by the beneficiary employer, whereby assigned employees conclude an employment contract with the Agency.  As stipulated by the Agency Bill, assigned employees in Austria who have open-ended employment contracts with an Agency shall be entitled to pay between assignments.

Typical for Switzerland is that temporary Agency employment has a better reputation than in other European countries. Specifically, the regulations there provide significantly less legal protection for employees on dismissal, compared to the rest of Europe.  Also, there are no strict restrictions on the conclusion of fixed-term employment contracts, so temporary Agency employment is not seen as means of evading the regulations.

France is considered to be one of the leading countries in the world when it comes to temporary Agency employment, as the protection of the rights of assigned employees and the conditions and work of Agencies are regulated by the Labor Act.  An employee and an Agency conclude an fixed-term employment contract that cannot exceed 18 months, or 9 months if the employee is urgently engaged on security grounds or to replace an employee who has already concluded a fixed-term employment contract, but is not currently available.  French legislation does not restrict the number of assigned employees available to beneficiary employers, employees who have concluded fixed-term employment contracts with an Agency.

It is estimated that there are more than 10,000 Agencies in Germany engaging about 2% of the employed population.  The main disadvantage of this type of employment, both in Germany and in neighboring countries, is that temporarily assigned employees are not sufficiently integrated into the work environment of the beneficiary employer.  This may be due to the fear of the employees directly employed by the beneficiary employer that they will lose their jobs, which leads to them being hostile towards assigned employees and making they feel like “outsiders”.  Also, there have been instances of beneficiary employers preventing the complete integration of assigned employees by making them wear uniforms of a different color to distinguish them from directly employed employees.  On the other hand, assigned employees need to invest much more effort and time to establish a sincere relationship and trust with the beneficiary employer to allow them to deploy their know-how and experience to successfully perform the job assigned.  This kind of relationship is especially difficult to establish in situations where an employee is assigned to a second beneficiary employer after a certain time and then to a third one, etc.

CONCLUSION

Enactment of the Agency Bill would place Serbia among those states that have taken it upon themselves to regulate this area.  This is of particular importance for all working-age people in Serbia as it would bring the gray zone that is “leased” employment into the light.  Besides, adoption of the act will bring Serbia’s labor legislation into line with international standards of the International Labor Organization and the EU, which will certainly help in closing out Chapter 19 (Social Policy and Employment).  Bearing in mind the provisions of the Agency Bill, we believe that an Agency Employment Act could contribute to equal treatment of assigned and directly hired employees, especially in terms of rights to annual leave, working hours, salaries, etc.

That said and following an analysis of the Agency Bill and comparative legislation, we find that certain restrictions that the proponent had in mind do not exist in neighboring countries.  Furthermore, we believe that the scope of the Agency Bill is too narrow to effectively strengthen the rights of assigned employees.  Restricting the number of employees who can be assigned and who have fixed-term Agency employment contracts (up to 10% of the total number of employees directly employed by the beneficiary employer) may lead to a flood of employees directly hired by beneficiary employers which have been so fare hired large numbers assigned employees.   Consequently, beneficiary employers might look to reduce the number of assigned employees they hire thereby putting pressure on Agencies to conclude open-ended employment contracts with those employees.  Therefore, part of the work done by assigned employees would now be transferred to employees directly hired by the beneficiary employer.  Also, this restriction could have a negative impact on those beneficiary employers who have been hired large numbers of Agency employees, and who have afforded the assigned employees with the same treatment as they treat those directly employed – thus, this could have a negative impact on those beneficiary employers who have never abused this kind of “employment”.  Bearing in mind the aforementioned restriction, and bearing in mind that the objective, inter alia, is to ensure the social security of assigned employees, greater pressure should be put on Agencies to conclude open-ended employment contracts.

We also believe that the issue of integrating assigned employees into the work environment should not be neglected. It is indisputable that a cordial work environment and collegiality are conducive to productivity, so every beneficiary employer who more often than not uses “leased” employees should have a HR officer with responsibility for this particular issue.

Authors: Milinko Mijatović and Slavica Purić