Supreme Court Decision Confirms Collective Regulation of Seniority Allowance

Following a period of uncertainty, the Supreme Court adopted Decision VIII Ips 168/2018 on 19 December 2018, in which it provided a guidance to the correct interpretation of collective bargaining with regards to seniority allowance.

Varying interpretations of articles 129 and 222 of the Employment Relationships Act have emerged in theory as well as in practice, alongside the related question of whether it is possible to provide a different amount of seniority allowance in the collective agreement, as well as taking into consideration the seniority e.g. taking into consideration only the length of service at the latest employer, as opposed to the total sum of the length of service.

After experts took the position that the above-mentioned areas can be the subject of collective regulation, the High Court adopted two decisions to the contrary. However, the Slovene Supreme Court ruled on the appeal on the point of law in case no. VIII Ips 168/2018 and confirmed the position of the experts.

In its decision, the Supreme Court noted that the question pertains to the area of collective bargaining with regards to the very substance or rather seniority allowance. In this part, the court concluded that the parties to the collective agreement were given a legal framework, which allows them to regulate seniority allowance based on the length of service with the last employer and in the appropriate percentage.

The court further explained that article 129 of the Employment Relationships Act provides neither the minimum amount of seniority allowance, nor the length and method of taking the length of service into consideration. The parties to the collective agreement therefore have discretion with regards to regulating the amount of extra payment for years of service, as well as regulating the percentage assessment of this extra payment. This part is left to collective regulation, as the Employment Relationships Act merely recognizes the right to seniority allowance and does not regulate it in detail.

The effect of this decision is that when dealing with seniority allowance, either the total length of service or the length of service with the last employer may be taken into consideration, depending on the possible different regulation in the collective agreement. Further, parties to the collective agreement may also agree on the percentage assessment of the seniority allowance, apart from the length and method of taking it into consideration. The decision also represents fertile ground for future collective bargaining.

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