Invention at Work: Ambiguous Law Hinders Employee Rewarding

Written by: Stjepan Lović, attorney

Although the Labor Act (ZOR) has been amended five times in the last ten years, it still contains provisions that not only cause ambiguities but are also mutually contradictory. For instance, the provisions regulating the rights and obligations of employees and employers in cases where an employee creates an invention or technical improvement during the employment relationship that the employer uses. It should be noted that such cases are not very common in practice, which is why there are not enough court decisions to conclude the existence of a unified stance on certain issues.

Particularly those related to the method of determining the amount of the reward that the employee is entitled to for the achieved invention or technical improvement. In this regard, it is necessary to emphasize that the ZOR contains two contradictory provisions regulating the method of determining that reward. Interestingly, these provisions have been present in the ZOR in the same substantive manner since 1995.

Is it ‘compensation’ or ‘reward’?

Namely, Article 98, paragraph 3 of the ZOR stipulates that an employee has the right to a reward for an invention created at work or in connection with work, which is determined either by a collective agreement or an employment contract or a special agreement between the employer and the employee. Paragraph 5 of the same article stipulates that if the reward is not determined by any of these agreements, the court determines an appropriate reward.

In the same way, Article 100 of the ZOR establishes the method of determining the reward for technical improvement. However, Article 150, paragraph 1 and 3, item 9 of the ZOR imposes an obligation on the employer to consult the workers’ council before making a decision on the amount of compensation for inventions and technical improvements that belong to the employee, during which the employer is obliged to provide the workers’ council with data important for making the decision and assessing its impact on the position of the employee. If, of course, there is a workers’ council established at that employer.

However, if according to Articles 98 and 100, the reward for an invention or technical improvement can only be agreed upon by a collective agreement or an employment contract or a special agreement, the employer cannot unilaterally decide or regulate the method of determining that reward and its amount through internal acts. Therefore, the imposition of the obligation on the employer to consult with the workers’ council regarding the amount of compensation that he is already obliged to pay to the employee according to the conditions agreed upon in one of the previously mentioned ways is entirely superfluous.

It can be observed that the ZOR itself does not use the same terminology for these cases, as it sometimes uses the term ‘reward’ and at other times the term ‘compensation’.

Invention or technical improvement?

There is also the question of what is considered an invention and a technical improvement. In practice, there is no unified definition, so it is sometimes difficult to determine whether a particular work created by the employee meets the conditions for the payment of a reward, provided that it is used by the employer for his business.

For example, the Collective Agreement for Hospitality defines an invention as a newly created solution to a technical problem that the employer can use in his business and which meets the legal conditions for obtaining a patent. Thus, the incorrect linking of inventions only to those solutions that meet the conditions for obtaining a patent significantly limits the rights of employees to obtain a reward, as the process of patenting a solution is lengthy and often uncertain.

Such a definition of an invention is also contained in the valid Collective Agreement for Construction, which further defines the term ‘technical improvement’ as a technical solution that improves the production process through a more purposeful use of known technical means and technological processes, thereby achieving greater efficiency, better product quality, savings in materials and energy, better use of machines and devices, better product monitoring, and greater safety at work or obtaining a new product that is not subject to a patent.

Therefore, it is more certain for the employee to seek a reward based on the created ‘technical improvement’, if, of course, his solution meets the criteria from the cited definition. But all this does not prevent the employee and the employer from defining the terms ‘invention’ and ‘technical improvement’ differently in the employment contract or other agreements. And this is rare in practice.

Opinion of the Ministry of Labor

Certainly, the opinion of the Ministry of Labor, Pension System, Family and Social Policy published in 2019 on its official web-site is interesting.

In it, among other things, the Ministry takes the position that, considering that the job title, i.e., the nature and type of work for which the employee is employed, or a short list or description of jobs is one of the essential data that every employment contract must contain, and that the employee in the employment relationship is obliged, according to the instructions given by the employer in accordance with the nature and type of work, to personally perform the assigned job, the provision on technical improvement does not apply to those jobs that the employee performs as his regular jobs in accordance with the concluded employment contract.

Such an opinion further complicates the rights of employees to obtain a reward for technical improvement. And although it is not binding on the courts, it is certainly an argument for employers to reject employees’ requests for the payment of the corresponding reward.