In a recent judgment (No. VIII Ips 11/2023) dated July 28th, 2022, the Supreme Court of the Republic of Slovenia addressed a significant legal issue pertaining to the termination of fixed-term managerial contracts. This case involved a potentially wrongful termination of a Managing Director’s contract, providing valuable insights into the interpretation of contractual clauses in light of statutory provisions. A Ljubljana Law firm reports on this case in this article.

What was the case about?

The issue arose from the plaintiff being appointed as the company’s managing director for a set four-year term, beginning on April 1, 2019, and ending on March 31, 2023. The plaintiff then signed an employment contract with the defendant for the same duration on April 8, 2019. It’s crucial to remember that managerial contracts are subject to the exceptions provided for in Article 73 of the ZDR-1 (Employment Relationships Act).

The plaintiff’s employment contract contained a specific provision, which stated that if the Managing Director were recalled or dismissed before the end of his term, the fixed-term employment would not be terminated, and he would remain employed (at another suitable post) until the contract’s expiry. Furthermore, it allowed for termination “in accordance with the law in the same manner as that of other employees of the Company.”

On November 3, 2020, the Supervisory Board dismissed the plaintiff from the position of Managing Director due to a lack of trust, which both parties acknowledged as not wrongful. The defendant subsequently issued a regular termination of the fixed-term managerial contract on November 27, 2020, citing incompetence and a regular termination of the fixed-term employment relationship on business grounds. The plaintiff’s employment was terminated on January 8, 2021, after the notice period elapsed.

What did the Supreme Court decide?

The ruling clarified the following:

1. Contractual Provisions Prevail: The court emphasized that Article 9(1) of the employment contract represented a specific contractual condition agreed upon by both parties. It provided that the fixed-term employment would not be terminated if the Managing Director were dismissed before the end of his term. This contractual provision prevailed over  more general statutory rules (even those that were basically universal practice).
2. Imposition of Conditions: The defendant’s attempt to impose conditions, such as the availability of a suitable post, after accepting an unconditional contractual obligation was found to be invalid. The court asserted that: once a party contractually agrees to a commitment, potential subsequent efforts to alter the terms cannot release them from fulfilling that obligation if the other party does not agree.
3. Validity of Business Reason: The court also held that the validity of the business reason for termination was irrelevant due to the failure to fulfill the agreed-upon contractual obligation.
4. Recognition of Employment Relationship is the Correct Claim in Such Cases: According to procedural rules, the essence of favorable decisions in dismissal disputes is not merely finding the illegality of the dismissal but recognizing that the employment relationship continues or exists. According to the court decision, the managerial worker is entitled to a continuation of the employment regardless of the termination.  

Main takeaways

The court decision brought in this case highlihgts the importance of special contractual clauses in fixed-term managerial contracts, especially when they are agreed upon and clearly accepted by both parties. It stresses that these contracts are sometimes different when compared or in relation to typical employment law rules and that parties are nonetheless required to adhere to their (contractual) obligations.

This case perhaps highlights best that the dismissal of a manager does not automatically or necessarily invalidate the employment contract. The case sets a rather important precedent that emphasizes the importance of respecting and adhering to contractual obligations and respecting the specific legal arrangements applicable to managerial roles.

This case and its contents may serve as a reminder to (both employers and employees) to more carefully draft and adhere to the terms of their employment contracts, esp. in the context of managerial positions, and to recognize the legal significance of contractual commitments made therein. 

Final notes

These regulations (concerning the cancellation of employment contracts) establish a legal basis for employers’ and employees’ rights and obligations in the workplace in Slovenia. A Ljubljana law firm can provide legal services in Slovenia: including legal advice and representation, to employers / employees on matters related to employment law / procedures, including the cancellation of employment contracts.

Finding yourself in need of legal services in Slovenia and looking for a Ljubljana law firm or (more specifically) a Slovenian civil law lawyer / employment law lawyer, consider contacting us using our contact details as published on our web page. A qualified employment lawyer or Ljubljana law firm can provide you with legal advice and representation – helping you navigate the complexities of Slovenian employment law and ensuring that your rights are protected.

You can find more information on employment law in Slovenia on the official pages of the Slovenian government. More employment-law topics can be found on our Ljubljana law firm publications page.