Download U-I-1706-2004

THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF CROATIA
No. U-I-1706/2004
Zagreb, 20 December 2006
The Constitutional Court of the Republic of Croatia, composed of Petar Klarić,
President of the Court, and Judges Marijan Hranjski, Mario Kos, Ivan Matija, Ivan
Mrkonjić, Jasna Omejec, Željko Potočnjak, Agata Račan, Emilija Rajić, Smiljko Sokol,
Nevenka Šernhorst, Vice Vukojević and Milan Vuković, deciding on the proposal to
institute proceedings to review the conformity of an act with the Constitution, at its
session held on 20 December 2006, rendered the following
RULING
I.
The proposal to institute proceedings to review conformity with the
Constitution of Article 8 para. 2 and Article 10 of the Labour Act (Narodne novine,
Nos. 38/95, 54/96, 65/95, 17/01, 82/01, 114/03, 123/03, 142/03 and 30/04) is hereby
not accepted.
II.
This ruling shall be published in Narodne novine.
Statement of reasons
1.
Vjesnik d.d. from Zagreb submitted a proposal for the Court to institute
proceedings to review conformity with the Constitution of the provisions of Article 8
para. 2 and Article 10 of the Labour Act (Narodne novine, Nos. 38/95, 54/96, 65/95,
17/01, 82/01, 114/03, 123/03, 142/03 and 30/04).
2.
The disputed Article 8 para. 2 and Article 10 of the Labour Act read as follows:
Commencement of employment
Article 8
(...)
(2) If the employer makes a contract with the employee for a job which,
considering its nature and kind of work and the employer's authority, has the
characteristics of a job for which a contract of employment is made, the employer
shall be considered to have made a contract of employment with the employee,
unless the employer can prove otherwise.
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Contract of employment for a definite period
Article 10
(1) A contract of employment may exceptionally be made for a definite period
of time whose termination is established in advance by objective reasons due to a
deadline, the completion of a particular job or the advent of a specific event.
(2) The employer shall not make one or more consecutive contracts of
employment for a definite period, establishing employment relations for the same
jobs, for a continuous period of more than three years, except in the case of
temporarily replacing an absent worker or if this is permitted by a law or collective
agreement.
(3) An interruption of work shorter than two months shall not be deemed an
interruption of the three-year period under paragraph 2 of this Article.
(4) The contract of employment for a definite period shall terminate upon the
expiry of the term stipulated therein.
(5) If the contract of employment made for a definite period contravenes the
provisions of this Act or if the employee continues to work for the employer even after
the expiry of the term for which the contract was made, it shall be deemed that the
employer made a contract of employment for an indefinite period.
(6)The employer shall inform his employees, employed by a contract of
employment made for a definite period, about available work for which they could
make an employment contract for an indefinite period with the employer, and enable
their advanced training and education under the same conditions as employees who
have made an employment contract for an indefinite period.
3.
In the proponent’s view, the disputed provisions are in breach of Article 49
para. 1 of the Constitution. He deems that the entrepreneurial freedom this article of
the Constitution guarantees “basically means that entrepreneurs may freely decide
about how they will achieve maximum profit”. He maintains that profit is achieved by
increasing income “through the interdependence and full control of expenses”, and
that “labour costs essentially affect” business expenses. In the proponent’s opinion,
“enforced contracting and various requirements such as those in Article 8 para. 2 and
Article 10 are attempts to force to employer to accept new employees”, and this legal
compulsion in contractual law excludes entrepreneurial freedom.
The proposal is not well founded.
4.
The Croatian Parliament is empowered to independently decide on the
regulation of economic, legal and political relations in the Republic of Croatia in
accordance with the Constitution and law (Article 2 para. 4 sub-para. 1 of the
Constitution). In this regulation the lawmaker must take account of the demands
placed before him by the Constitution, especially those that emerge from the principle
of the rule of law and those that protect certain constitutional benefits and values.
Immediately relevant for reviewing whether the disputed provisions of the Act comply
with the Constitution are Article 3, Article 16 and Article 49 para. 1 of the Constitution,
which read as follows:
Article 3
Freedom, equal rights… social justice… the rule of law… are the highest
values of the constitutional order of the Republic of Croatia and the ground for
interpretation of the Constitution.
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Article 16
Freedoms and rights may only be restricted by law in order to protect
freedoms and rights of others, public order, public morality and health.
Every restriction of freedoms or rights shall be proportional to the nature of the
necessity for restriction in each individual case.
Article 49 para.1
Entrepreneurial and market freedom shall be the basis of the economic
system of the Republic of Croatia.
5.
In accordance with Article 8 para. 1 of the Labour Act, employment is legally
grounded on the contract of employment. However, the legal order of the Republic of
Croatia also allows people to work on the grounds of other kinds of contracts; i.e., the
basis for performing work need not be a relationship of employment. However, if the
employer makes a contract with someone for a job which, considering the nature and
the kind of work and the authority of the employer, has the characteristics of a job
resulting in an employment relationship, then the disputed Article 8 para. 2 provides
that it shall be considered that the employer made a contract of employment with that
person (employee), unless the employer can prove otherwise.
Therefore, if a contract has the basic characteristics a contract of employment, then it
shall in accordance with Article 8 para. 2 of the Employment Act be deemed a
contract of employment. The burden of proof that it is not a contract of employment
lies with the employer. If the employer cannot prove that it is another kind of contract
(for example – temporary work contract, author’s contract, contract of agency and the
like) it shall be considered a contract of employment.
6.
It is a basic rule that a contract of employment is made for an indefinite period.
Exceptionally, the Labour Act allows making a contract of employment for a definite
period if it concerns work whose termination is determined in advance by objective
reasons due to a deadline, the completion of a particular job or the advent of a
specific event (Article 10 para. 1 of the Labour Act).
The Act also includes some presumptions when the contract is deemed to be for an
indefinite period. One of them is given in the disputed Article 10 para. 5 of the Labour
Act: if the contract was made for a definite period in breach of the provisions of the
Labour Act or if the employee remains working for the employer even after the expiry
of the time for which the contract was made, it shall be deemed that the contract of
employment was made for an indefinite period.
A contract of employment for a definite period cannot be made for the same jobs for
an unbroken period of more than three years. An exception is replacing a temporarily
absent employee or if law or the collective agreement so permit (Article 10 para. 2 of
the Labour Act).
The Labour Act also regulates some specific obligations the employer has in relation
to contracts of employment for a definite period. Thus the employer has the obligation
to:
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- inform his employees employed by a contract of employment for a definite period
about vailable work for which they could make an employment contract for an
indefinite period with the employer (Article 10 para. 6),
- enable employees working for a definite period advanced training and education
under the same conditions as employees who made a contract of employment for an
indefinite period (Article 10 para. 6), and
- every three months report to the workers’ council about the number of employees
working for a definite period and the reasons for their employment (Article 144 para.
1 sub-para. 5 of the Employment Act).
7.
The proponent challenges the conformity of the disputed provisions of the
Labour Act with the Constitution because in his view the constitutionally guaranteed
entrepreneurial and market freedom is absolute, and the “enforced negotiations”,
obligations and “preconditions” provided for in the disputed provisions contravene the
freedom of contracting in employment.
In challenging the constitutionality of Article 8 para. 2 and Article 10 of the Labour Act
the proponent starts from the wrong assumption that the freedoms and rights
guaranteed in the Constitution, including entrepreneurial freedom, are absolute. This
view is wrong because Article 16 of the Constitution provides that freedoms and
rights may be restricted in cases provided for in the Constitution. Constitutionally
guaranteed rights and freedoms are limited by the equal rights of others and the
common interest of the community as a whole. The legislator thus has the right to
restrict freedoms or rights by law, however, this restriction must have a legitimate
purpose and a reasonable proportionality must exist between the restriction and the
purpose that the restriction is to achieve (Article 16 of the Constitution).
In this sense the entrepreneurial freedom guaranteed in the Constitution is not
absolute, which emerges, among others, from the provisions of Article 49 paras. 2
and 3 of the Constitution (The State shall ensure all entrepreneurs an equal legal
status on the market. Abuse of monopoly position defined by law shall be forbidden.
The State shall stimulate the economic progress and social welfare and shall care for
the economic development of all its regions.) Furthermore, Article 1 of the
Constitution defines the Republic of Croatia also as a social state in which social
justice is one of the highest values of the constitutional order (Article 3 of the
Constitution).
Bearing in mind all the above, on the grounds of the authority in Article 2 para. 4 subpara. 1 of the Constitution, the legislator, in elaborating his constitutional powers for
regulating economic, legal and political relations in the Republic of Croatia, was
empowered to prescribe in the Labour Act, as the general act regulating employment
relations in the Republic of Croatia, the principles for establishing employment i.e. for
making a contract of employment. Although the Labour Act accepts the civil-law
concept of employment in which free will, expressed through the freedom of
contracting and making a contract of employment, is one of the more important
characteristics of the contract of employment, the Court holds that the legislator is
also empowered to prescribe certain restrictions on the freedom of contracting.
The Constitutional Court here starts from the fact that the employee is as a rule the
economically weaker party of the employment contract, so the legislator is
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empowered to restrict the parties’ freedom of contracting to protect him. In the
Court’s view this legal regulation does not contravene the constitutional principles of
entrepreneurial and market freedom. Entrepreneurial and market freedom cannot be
interpreted in such a way that only the absolute freedom of contracting in labour
relations would satisfy them, i.e. the “non-existence” of legal regulations connected
with contracting employment.
8.
Considering the grounds on which the proponent disputed Article 8 para. 2
and Article 10 of the Labour Act and the disputed provisions themselves, in relation
to what was said in Point 4 of the reasons for this ruling in connection with the
relevant constitutional provisions, the Constitutional Court finds that the disputed
provisions are not in breach of the Constitution.
Pursuant to the above, on the grounds of Article 43 para. 1 of the Constitutional Act
on the Constitutional Court of the Republic of Croatia, the Court has ruled as in Point
1 of the order.
The ruling on publication in Narodne novine in Point II of the order is grounded on
Article 29 of the Constitutional Act on the Constitutional Court of the Republic of
Croatia.
PRESIDENT
Petar Klarić, LLD, m. p.