In this master’s thesis, I discuss the justification of a business reason as one of the specifically stated legal reasons for the regular termination of the contract of employment on the basis of the Employment Relationships Act (ERA), the Amended Employment Relationships Act (ERA-A), and Employment Relationships Act-1 (ERA-1). According to the historical development and creation of a business reason, I find that a business reason as such was introduced by the Employment Relationships Act in 2002. Until then, a substantial approximation of a business reason can be found in the issue of permanent redundancies due to urgent operational reasons; this term was used by the labour legislation on the basis of the Employment Relationships Act of 1990. The idea of a business reason, although differently phrased, was also dealt with by Yugoslav legislation.
Through normative activities, the regulation of a business reason changed both in terms of content and language. Business reasons can be of an economic, organizational, technological, structural or similar nature. It always arises in the sphere of the employer and does not depend on the employee. A business reason causes a cessation of needs for a certain employee's work, under the terms of the contract of employment (the contractual nature of the employment relationship). Therefore, the business reason must be justified and must prevent the continuation of the work under the terms of the contract of employment. The latter requirement arises from ERA-1, as ERA required that a business reason, in addition to being substantiated, was also valid and as such prevented the continuation of the employment relationship between the employee and the employer. The case law has confirmed on several occasions that a business reason is a business decision of the employer, rooted in the employer’s free economic initiative, and the court cannot judge its economy, necessity, and sensibility. The court only assesses whether the justification of a business reason has been sufficiently demonstrated and whether it has actually led to the cessation of needs for a certain employee's work under the terms of the contract of employment, which prevented the continuation of the work under the terms of the contract of employment. In this context, the court warns of the abuse of the institute of termination of the contract of employment in the sense of fictitious and contrived business reasons.
This thesis contains an analysis of three actual terminations of the under the terms of the contract of employment due to a business reason and the accompanying final judicial outcomes.