Termination of Employment Contract During Probationary Period

Termination of Employment Contract During Probationary Period

While the probationary period is ongoing, if the employee does not meet reasonable expectations, the employment contract can be terminated relatively easily, without complications, right?

We can agree that this is the very purpose of a probationary period. 

As an employer, you have given a chance to a new, unfamiliar candidate. Even if this employee has previously worked for you, they were not engaged in the role they are now hired for.

By concluding an indefinite-term employment contract, you have demonstrated your intention for long-term or “permanent” cooperation. However, you reserved the right to reassess in case the employee fails to meet your expectations, making the probationary period a useful legal option.

Considering this, the Labor Law stipulates: 

Article 36

An employment contract may stipulate a probationary period for performing one or more related jobs specified in the employment contract. 

The probationary period may last up to six months. 

Before the expiry of the probationary period, the employer or the employee may terminate the employment contract with a notice period not shorter than five working days. The employer is obliged to justify the termination of the employment contract. 

If an employee fails to demonstrate adequate work and professional capabilities during the probationary period, the employment shall terminate on the date the probationary period expires, as specified in the employment contract.

Unfortunately, it has become clear that the candidate did not meet your reasonable expectations, so you will terminate their employment contract. 

What could go wrong?

Positions Eligible for Probationary Period

You can stipulate a probationary period for roles where you, as an employer, deem it necessary to verify knowledge and capabilities. Whether the candidate is new to you or someone who has worked for you in different roles, the key is that the probationary period applies to one or more related or connected tasks. 

It is also assumed that the new hire understands the expectations placed on them.

Duration of the Probationary Period

The probationary period does not necessarily need to be six months. For instance, the employer can set a period of three months, after which, if the contract is not terminated, the employee continues their employment without interruption. The six-month duration is commonly used in practice to allow employers more time to assess the employee’s competencies. 

Moreover, the probationary period can also be stipulated in fixed-term employment contracts. For example, a one-year fixed-term employment contract could include a four-month probationary period.

How to Terminate a Contract?

The law provides two options for termination of employment contract during probationary period:

1. Non-Renewal at the End of the Probationary Period:

   The employer may decide that the employee has not demonstrated sufficient competence or capability to continue working after the probationary period. In this case, the employment terminates on the date specified in the contract. 

   Although the Labor Law does not explicitly require it, court practice insists that the decision confirming the termination must be justified. This prevents the employee from challenging the reasons for termination if no justification is provided. 

2. Early Termination of employment During Probation:

   The employer can terminate the contract before the probationary period expires, with a notice period not shorter than five working days. The employer must provide a justification for the termination.

The Justification for Termination of Employment Contract

The most common pitfall for employers is the justification itself, as the law does not specify what it should include. Its form and content are shaped by logic and court practice.

Termination Decision

Employers must justify their decision to terminate. Simply stating that the employee did not demonstrate the required competence or capability is not enough. The justification must have substantive value, as it will be subject to legal scrutiny. 

An employer may also attach a report or similar internal document, prepared by a supervisor or committee, detailing the employee’s performance with supporting evidence. This documentation becomes critical in any legal proceedings.

Warning of Grounds for Termination of Employment Contract 

In standard terminations (outside of probation), employers must issue a **warning** if the employee has violated work discipline or failed to meet obligations. This warning gives the employee a chance to address the issues before further steps are taken. 

While such warnings are not explicitly required during probation, recent court rulings suggest that even in probationary terminations, the employer must provide written notice of performance deficiencies and allow time for improvement.

Key Takeaway

Court practices remain inconsistent regarding probationary terminations. Employers must carefully navigate termination processes to avoid significant financial risks. Consulting with legal professionals is highly recommended to ensure compliance in each specific case.

Law Firm Petrovic Mojsic & Partners