Mega COVID-19 Law with the Amendment – a labour law aspect
Authors: Kaja Baškovič, Darja Miklavčič
On 28 April 2020, the Slovenian Parliament adopted the Act Amending the Act Determining the Intervention Measures to Contain the COVID-19 Epidemic and Mitigate its Consequences for Citizens and the Economy, the so called Act Amending the Mega COVID-19 law. The law came into force on 1 May 2020, however, the provisions relating to the reimbursement of the salary compensation and the related exemption from social security contributions, exemption from contributions for pension and disability insurance and occupational insurance as well as the monthly crisis allowance will be applicable retroactively, namely from 13 March 2020.
Considering there have been quite a few amendments to the legislation during the last month, including in the area of labour law measures, we briefly outline the implemented regulation after the enforcement of the Act Amending the Mega COVID-19 Law.
When referring to the Act Determining the Intervention Measures to Contain the COVID-19 Epidemic and Mitigate its Consequences for Citizens and the Economy (ZIUZEOP) as adopted on 2 April 2020, we are using the term “Mega COVID-19 Law”, while when referring to the Act Amending the Act Determining the Intervention Measures to Contain the COVID-19 Epidemic and Mitigate its Consequences for Citizens and the Economy adopted on 28 April 2020, we use the term “Act Amending the Mega COVID-19 Law”. When a specific rule or measure is in force only since the enactment of the Act Amending the Mega COVID-19 Law, this is explicitly stated.
1. LABOR LAW MEASURES AND THEIR VALIDITY
The main labour law measures implemented with the Mega COVID-19 Law are:
- reimbursement of the salary compensation for employees temporarily waiting for work at home with associated reimbursement of social security contributions;
- reimbursement of the salary compensation for employees, who are not able to perform work due to force majeure, with associated reimbursement of social security contributions;
- payment of pension and disability contributions for employees, who are still performing work, together with the crisis allowance.
The Act Amending the Mega COVID-19 Law additionally implements payment of professional insurance contributions.
The adopted measures apply from 13 March 2020 to 31 May 2020. If the epidemic will not be terminated by 15 May 2020, the deadlines for expiry of measures running out on 31 May, will be prolonged for 30 days.
During the period of enforcing the interim measures, the provisions of the Act on Measures in the Field of Salaries and Contributions will not be used regarding the partial reimbursement of the salary compensations to the employees waiting for work. However, the provisions with which this Law is regulating the reimbursement of the salary compensation in case of quarantine, are still in force.
The Act Amending the Mega COVID-19 Law is interfering with several currently valid provisions which is why it clarifies in the transitional and final provisions that the procedures initiated under the Mega COVID-19 Law will also be completed in accordance with these provisions, unless completion in accordance with the terms of the Act Amending the Mega COVID-19 Law is more favourable to the beneficiaries. As a more favourable it is particularly suggesting a solution not resulting in the recovery of state aid.
It is also important to note that it will still be possible to submit an application for the assertion of rights retroactively, i.e. for the period from 13 March 2020, in case the beneficiary has not already done so. The deadline is 8 days from the enactment of the Act Amending the Mega COVID-19 Law, i.e. until 9 May 2020.
2. CONDITIONS UNDER WHICH A COMPANY IS ENTITLED TO RECEIVE STATE AID
The Act Amending the Mega COVID-19 Law sets out general conditions under which the companies are eligible for receiving state aid. It is providing, inter alia, that the total amount of received public funds cannot exceed EUR 800,000 per entity as well as that the state aid cannot be granted to companies who were already in trouble on 31 December 2019.
If the total amount of received public funding by a large company exceeds the amount of EUR 800,000, the public funds allocated for salary compensations in case of employees waiting for work or not working due to force majeure as well as for the exemption from disability and pension insurance contribution’s payment for working employees, can be paid in accordance with points a) or b) below:
a) Public funds for salary compensations and exemptions of contributions should be allocated in accordance with point 3.10 of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (OJ C no. 91 I dated 20 March 2020 and amendment OJ C 112 I dated 4 April 2020) in accordance with the following conditions:
- the total amount of public funding for salary compensation and exemption from contributions does not exceed 80% of the individual employee’s monthly gross salary;
- the aid is intended only for employees who would otherwise be laid off as a result of the disruption or reduction of operations resulting from the COVID-19 outbreak; and
- the employment relationships of the employees, for whom employers received the aid, must be maintained throughout the whole period of collecting public funding.
b) Public funds for salary compensation and exemption from contributions shall be allocated in accordance with Article 107 (2) (b) of the Treaty on the Functioning of the European Union, subsequent to the prior approval of the measure by the European Commission. Companies eligible for receiving the public funds are those who demonstrate that the actual damage caused by the COVID-19 outbreak exceeded the total amount of the salary compensation and exemption from the contributions as well as exemption from the pension and disability insurance contributions for employees who are still performing work.
The Act Amending the Mega COVID-19 Law does not stipulate that the above conditions are in use already from 13 March 2020 but are only applicable after the enforcement of the Act Amending the Mega COVID-19 Law, i.e. 1 May 2020.
3. REIMBURSEMENT OF SALARY COMPENSATION FOR EMPLOYEES WAITING FOR WORK AT HOME OR NOT PERFORMING WORK DUE TO FORCE MAJEURE
Conditions for exercising the right
Employers from the Republic of Slovenia are eligible for reimbursement of the compensation in two cases:
a) when the employer cannot provide work for their employees and sends them to wait for work
Employers who sent their employees to wait for work until the 31 May 2020 at most, and estimate that their revenue in the year 2020 will decrease for more than 10% compared to 2019, are eligible for reimbursement under the new Mega COVID-19 Law (the Mega COVID-19 Law stipulates that their revenue in the first half of 2020 will decrease for more than 20% over the same period in 2019, while at the same time they will not reach more than 50% of revenue growth in the second half of 2020 compared to the same period in 2019). If the employer has not been in business throughout the entire year 2019, he is entitled to enforce the measures if he estimates that in 2020, his average monthly revenue will be more than 10% lower than the average monthly revenue in 2019. If the employer has not yet operated in 2019 at all, he is eligible to enforce the measures if he estimates that his average monthly revenue in 2020 will reduce for more than 10 % due to the epidemic compared to the average monthly revenue prior to 12 March 2020. If subsequently, while reviewing the annual reports for the year 2020, it turns out that the conditions have not been fulfilled, the employers will have to return the received funds.
The Act Amending the Mega COVID-19 Law additionally gives a definition on how to assess the above revenue calculation, namely net sales revenue determined in accordance with accounting rules, together with parental benefits. In addition, it stipulates that the above condition regarding the decrease of income does not have to be fulfilled by employers who have the status of a humanitarian or disability organization, since they are nevertheless considered to be beneficiaries under this Act.
Eligible employers for the above measures are the ones who cannot provide work for their employees due to the effects of the COVID-19 epidemics. The Mega COVID-19 Law also determines that the intent behind these interim measures is the preservation of jobs, however, it is not clear whether the employer must preserve jobs after these measures are in force or how long would such an obligation be binding. Based on the latest explanations, this commitment is only applicable for the duration of the provisional measures.
The posting of the employee to wait for work must be in writing and should include provisions on the specified time of the waiting for work, possibilities and the method of calling the employee back to work early and the amount of salary compensation. If an employee uses his annual leave during the temporary wait for work, he is entitled to salary compensation in accordance with the Employment Relationships Act (i.e. 100% salary compensation).
Employee who is posted to temporarily wait for work retains all his rights and obligations that arise from his employment contract, unless the Act Amending the Mega COVID-19 Law stipulates differently. The employer is not allowed to order overtime if such work could be done with the employees who are currently waiting for work.
While the employee is temporarily waiting for work, he or she has a duty to return to work at the employer’s order, to up to seven consecutive days in the current month. The employer must notify the Employment Service of Slovenia about this in advance. Under the Act Amending the Mega COVID-19 Law it is no longer required that the employee returns to work for 7 consecutive days, hence these days can be freely spread during the current month. It should be noted that the Act Amending the Mega COVID-19 Law does not predict that a provision modifying a provision for performing work while waiting for work would also be applicable from 13 March 2020 onwards.
b) when the employees cannot perform work due to force majeure
The Mega COVID-19 Act defines COVID-19 epidemic as force majeure.
The employers who have paid the salary compensation to employees who were not able to perform work due to force majeure are eligible for reimbursement. In this case the employer must declare that the employees are not performing their work due to force majeure resulting from childcare due to the closing of schools and kindergartens and other objective reasons or because of their inability to come to work due to the ban of public transport or the closure of borders with neighbouring states, and are thus receiving salary compensation.
An employer who wants to enforce his right to reimbursement, must fulfil the same conditions regarding the loss of revenue as if he was applying for reimbursement of salary compensations paid to employees who are temporarily waiting for work (therefore a 10% decrease of revenue in the year 2020 compared to the year 2019).
The employer must notify the Employment Service of Slovenia on the day of termination of the employee’s absence that his or her absence due to force majeure has ended.
The amount of the reimbursement of the salary compensation for employees temporarily waiting for work or not performing work due to force majeure
The employee is entitled to a compensation of 80% of the salary in both situations (i.e. when an employee is posted to wait for work or when he or she cannot perform work due to force majeure), which cannot be lower than the minimum salary in the Republic of Slovenia.
The Act Amending the Mega COVID-19 Law explicitly stipulates that the amount of the reimbursement during the interim measures will be the same for all employees, regardless of the reason for their absence (i.e. either waiting for work at home or due to force majeure), namely the same as the Employment Relationships Act provides for employees who are temporarily absent from work due to the employer’s inability to provide work for business reason, i.e. compensation of 80% of the salary.
The Republic of Slovenia will cover the total paid compensation reduced for the contributions of the insured (however, not exceeding the average salary in the Republic of Slovenia for the year 2019), calculated on a monthly basis.
Relief from contribution payment in case of employees waiting for work or not performing work due to force majeure
The employers are exempted from contribution payments for all social security contributions for the salary compensations paid between 13 March and 31 May for employees who are temporarily absent from work and for employees who are not performing work due to force majeure, since the contributions will be fully covered by the Republic of Slovenia, however the payment shall not exceed the average salary in the Republic of Slovenia for year 2019, calculated on a monthly basis.
The relief from contribution payment is not applicable for certain categories of employers (e.g. state budget users).
Enforcing the right to reimbursement of the compensation
The employers will enforce the right to reimbursement of the compensation by submitting an online application to the Employment Service of Slovenia within 8 days after the posting of the employees to wait for work, but no later than 31 May 2020. It will still be possible to submit an application for the assertion of rights retroactively, i.e. for the period from 13 March 2020, in case the beneficiary has not already done so. The deadline is 8 days from the enactment of the Act Amending the Mega COVID-19 Law, i.e. until 9 May 2020.
The reimbursement of salary compensations will not be available for employers who:
- are direct or indirect state or municipal budget users and whose public revenue share in the year 2019 was exceeding 70%;
- perform financial or insurance activities falling within group K under the standard classification of activities, unless they were employing 10 or less employees on 13 March (the Act Amending the Mega COVID-19 Law provides protection for small employers, while the Mega COVID-19 Law exempted all employers engaged in such activity from the circle of beneficiaries regardless of their number of employees);
- are foreign diplomatic representations and consulates, international organizations, representations of international organizations and institutions, associations and agencies of the European Union in the Republic of Slovenia (the Mega COVID-19 Law did not know this exception);
- are not fulfilling their statutory and other monetary non-tax liabilities in accordance with the act governing the financial administration or are collected by the tax authority, or if they have unpaid debts on the date of application (same applies for employers who did not submit all withholding tax returns for the last five years); or
- have insolvency proceedings started over them.
Together with the application, an employer will need to submit a statement (i) on temporary posting of employees to wait for work at home or (ii) on incapability of performing work due to force majeure, for the correctness of which he will be criminally and materially liable. In addition, he will have to provide evidence of posting employees to wait for work at home or of justified absence due to force majeure resulting from the care of children due to the closing of kindergartens and schools or the inability to come to work due to the ban of public transport or the closure of borders with neighbouring countries.
The Employment Service will need to decide on the submitted application within 8 days with a resolution that should include the subject matter, the basis for calculating the compensation, the method of calculating and the amount of the reimbursement, the content of claims for salary compensation including their annexes, the reasons for rejecting the claim for compensation, the deadline for payment for the Republic of Slovenia, the repayment period, monitoring, reporting, sanctions for breach of contract and monitoring its execution.
The reimbursement for the employers who paid the salary compensation, except the ones whose compensation of employees’ salaries is not borne by the employer, will be paid monthly, in proportion or in full on the 10th day of the month following the payment of the salary compensation. The employer is entitled to reimbursement of the salary compensation for an actual monthly or weekly workload, and also for a holiday or other day off if the employee would have worked on such a day.
Supervision and the repayment of three times the received aid
Administrative and financial supervision over the execution of the Act will be done by the Employment Service, while the inspection will be carried out by the Inspectorate of the Republic of Slovenia.
If an employer during the period of receiving the reimbursement of the salary compensation (i) is not paying the net salary compensation, (ii) is ordering overtime even though he could perform this work with the employees waiting for work, or (iii) is not notifying the Employment Service before the return of the employee to work, he will have to repay three times the received aid.
If an employer starts liquidation proceedings during the period of receiving the reimbursement or after this period, which is equal to the period of receiving the reimbursement, he will have to return the received aid in full.
4. RELIEF FROM PAYMENT OF THE CONTRIBUTIONS FOR PENSION AND DISABILITY INSURANCE FOR EMPLOYEES WHO STILL WORK AND A CRISIS SUBSIDY
The Republic of Slovenia will pay the employee’s and employer’s contributions for pension and disability insurance borne by the employer for all the employees who are still performing work during the validity of the interim measures (therefore between 13 March and 31 May 2020).
Direct and indirect state or municipal budget users, employers performing financial and insurance activities falling within group K of the standard activities classification, unless they were employing 10 or less employees on 13 March (the Mega COVID-19 Law did not include small employers among beneficiaries), and foreign diplomatic representations and consulates, international organizations, representations of international organizations and institutions, associations and agencies of the European Union in the Republic of Slovenia (these employers were beneficiaries under the Mega COVID-19 Law) are not entitled to these measures.
Employers must pay the monthly crisis subsidy to all employees still working, in the amount of EUR 200, which is exempt from taxes and contributions, provided that their last monthly salary was not exceeding three times the minimum salary.
The crisis subsidy must be paid at the same time as their salary. It is payable to the employees for each day of work, as well as for holidays and other days off if they would actually perform work on said days. In the event that the employee has not worked for a full month or that the measures have not lasted for a full month or that the employee works part-time (unless this part-time employment agreement is based on specific rules), the Act Amending the Mega COVID-19 Law provides for the payment of a proportionate part of the crisis subsidy.
For the monthly crisis subsidy paid to persons with disabilities who work, the disability companies and employment centres may claim the right to reimbursement at the Public Scholarship, Development, Disability and Maintenance Fund of the Republic of Slovenia. Disabled persons must be paid the full allowance even in case of part-time work under the Employment Relationships Act.
5. REPAYMENT OF THE RECEIVED FUNDS AND CRIMINAL PROVISIONS REGARDING WORK AND PAYMENT OF THE SOCIAL SECURITY CONTRIBUTIONS
The entities that have claimed (i) reimbursement of the salary compensation for employees temporarily waiting for work or (ii) reimbursement of the paid contributions for employees temporarily waiting for work and have distributed profits, purchased own shares or own business shares, paid awards to management or part of salaries for business performance to management in 2020 or for 2020 after the entry of this act into force, will have to repay the received funds together with the statutory default interest. The Act Amending the Mega COVID-19 Law is changing the wording of this provision (the Mega COVID-19 Law stipulated that the employer will have to return the received funds also if he would pay part of salaries for business performance for other employees; it also stipulated that in case of a breach of Article 99 the employer will also have to return the funds received for pension and disability insurance contributions for employees who are still performing work or for reimbursement of the salary compensation for employee not working due to force majeure). The amended Article 99 provision will be applicable from 1 May 2020 when the Act Amending the Mega COVID-19 Law came into force (and not retroactively).
If an entity claiming rights under the Mega COVID-19 Law successively verifies that it did not fulfil the necessary conditions for their enforcement, it should notify the Financial Administration of the Republic of Slovenia no later than until the deadline for the submission of the corporate tax return for 2020, or for the submission of the corporate tax return for the period that includes data for the second half of 2020, or the deadline for the submission of the corporate activity income tax return for 2020, and repay the received aid within 30 days of the declaratory decision.
The control in this area will be performed by the Financial Administration of the Republic of Slovenia.
For violating the provisions of the Mega COVID-19 Law, the employer and the employer’s responsible person can be fined. The amount of the fine is specified in a range and depends on the size of the employer.
6. SEASONAL WORK IN AGRICULTURE
In order to solve the problem of shortage of seasonal agricultural workers, the Mega COVID-19 Law provides for the possibility of posting employees temporarily waiting for work to perform occasional or temporary work in agriculture. The Act Amending the Mega COVID-19 Law additionally stipulates that such employee must obtain the written consent of his employer in order to perform such agricultural work. In addition, the Employment Service may also refer a person entered in the register of unemployed persons to the holder or member of the agricultural holding.