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Practice Area Articles

Bulgaria

February 05, 2024

By Paul Hastings Professional

KEY DEVELOPMENTS FOR 2024

Digitalising employees’ employment histories

Pursuant to Bulgarian employment law, employees are required to have an official paper document, known as a "workbook", which provides details of the employee’s employment history (i.e., the date the employee started work for each employer, periods of leave or absence, the date and grounds for any termination, the employee's agreed remuneration, etc.). The employee's first employer must issue and supply the employee with a workbook within five days of the employee commencing employment. At present, the workbook is issued on paper only. However, paper workbooks impose a significant administrative burden on both employees and employers, especially where the workbook is lost or damaged but proof related to the status of the employee is needed. To solve such potential problems and inconvenience, the Bulgarian Parliament adopted a Law for Amendment and Supplement of Bulgarian Labour Code (the “Law”) in late 2023. The new Law provides for paper workbooks to become electronic and be part of a national digital register of employment, kept by the National Revenues Agency (the Bulgarian authority that administers tax and social security contributions). Based on the Law, employees will be able to access their electronic employment records through the new electronic register of employment and employers will have the right to access data about their employees which has been entered by former employers. The exception is information about agreed remunerations and most termination compensations received by the employee (unlike presently, when such information is visible from the records in the paper workbook). The Law is scheduled to enter into force on 1 June 2025. Until then, employers are obliged to continue the administration of paper workbooks. Nonetheless, further details concerning the procedure for access to information in the new electronic register of employment shall be provided by an ordinance of the Council of Ministers. Pursuant to the Law, this should happen by no later than 1 June 2024.

New legislative developments on whistleblowing

The Bulgarian Parliament has adopted the Law on the Protection of Persons Who Report Breaches or Publicly Disclosed Infringement Information, also known as the Law on Whistleblowing, which transposes the requirements of EU Directive No. 2019/1937 (the “Whistleblowing Directive”). The Law on Whistleblowing was transposed to provide effective protection to whistleblowers, i.e., to these individuals working for or in contact with a public or private organization, who are often the first to learn of threats or harm to the public interest. The Law on Whistleblowing entered into force in May 2023, except for the provisions regulating the requirements for the establishment of internal reporting channels inside companies. Employers in the private sector having between 50 and 249 employees had a compliance deadline to establish an internal reporting channel in their companies by no later than 17 December 2023. Those covered by the new law are further obliged to adopt rules regulating the internal reporting channel in the company (as well as to review these rules at least once every three years), and to organize the processing of reporting. It is important to note that reporting employees are subject to (predominantly employment law) protection, such as prohibition of disciplinary measures, no dismissals, and no reduction in remuneration. Additionally, employees designated by the employer to register and process the reports inside the company are obliged to regularly submit statistical information to the Commission for Personal Data Protection (the Bulgarian central authority in terms of external reporting and protection of reporting persons).

Regulations on remote work

Proposed amendments to the regulation of remote work have lately been the subject of much public debate. In August 2023, а Bill for Amending and Supplementing Bulgarian Labour Code focusing on remote work performance (the “Bill”) was published for public consultations. The main purpose of the Bill is to further enhance the legal framework applicable to remote work, as well as to the emerging hybrid working model in Bulgaria. The Bill introduces a new approach to determining the place of work from which the employee shall carry out remote work. The so-called “right of the employees to disconnect” has also been introduced – employees who carry out their work remotely shall have no obligation to communicate electronically with the employer during their daily and weekly rest periods. Further, the Bill has proposed an alternative reporting system of remote work – employers can now choose to either use a standard form report document to be completed monthly by employees, or an automated reporting system. As of early 2024, the Bill was still at the stage of public consultation, and has not yet been submitted for discussions with the Bulgarian Parliament. Employers should monitor for potential legislative developments in 2024 related to the adoption of the Bill, to ensure compliance with any relevant changes to the current regulations.

With thanks to Kalina St. Tchakarova and Silviya Apostolova of Djingov, Gouginski, Kyutchukov & Velichkov for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

Whistleblowing

At EU level, whistleblowing and public disclosures by downstream whistleblowers are an important tool for the enforcement of EU law and policies. Such persons provide Member States’ and European Union (EU) law enforcement systems with information that leads to the effective detection and investigation of infringements of EU law.

Individuals working for or in contact with a public or private organization are often the first to learn of threats or harm to the public interest arising in this context. Through whistleblowing, they play a key role in detecting and preventing infringements. However, they often refrain from reporting for fear of retaliation.

In this context, the importance of providing effective protection to whistleblowers is increasingly recognized both at EU and international level and is the reason for the adoption of Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (the “Whistleblowing Directive”). The latter directive is yet to be transposed in Bulgarian law.

A Bill on Whistleblower Protection was submitted for discussions with Bulgarian Parliament in October 2022, aimed at transposing the Whistleblowing Directive. It regulates the conditions, modalities and measures for the protection of persons in the public and private sectors who report or make public information on infringements of Bulgarian law or European Union acts. The Bill was distributed among the competent Parliament committees for discussion; however, no progress was reached as of 1 December 2022 and it has not been put to vote yet.

Employers should monitor for potential legislative developments in 2023 related to the transposition in Bulgarian law of the Whistleblowing Directive to ensure compliance with any relevant changes to the current rules.

Minimum wages

Employers in Bulgaria are obliged to comply with the Bulgarian law requirements on minimum wages. However, with reference to the recently adopted Union-wide Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union (the “Directive”), a Bill for Amendment and Supplement of Bulgarian Labour Code was submitted in the Bulgarian Parliament aimed to reflect the Directive rules.

The new Bill for Amending and Supplementing Bulgarian Labour Code provides for the minimum wage in Bulgaria to be linked to the Directive’s reference values. Essentially, it is proposed to introduce and guarantee a minimum amount for the national minimum wage, which will be set by 31 October of the current year - for the next calendar year, in an amount not less than 50 per cent of the gross average wage for the country for the 12 months preceding the setting.

Employers should monitor for potential legislative developments in 2023 related to the adoption of the Bill for Amending and Supplementing Bulgarian Labour Code to ensure compliance with any relevant changes to the current legislation.

Promotion of Employment (to help and facilitate the inclusion of inactive persons of working age, their education and training for gaining professional qualification, skills and knowledge).

In 2022 legislative amendments were introduced via the Law on Amendment and Supplement of the Law on Promotion of Employment, the aim of which was to help and facilitate the inclusion of inactive persons of working age, their education and training for gaining professional qualification, skills and knowledge. However, these newly introduced rules remained without any secondary legislation on their application.

A new Draft Decree of the Council of Ministers on Amendment and Supplement of the Rules on the Application of the Law on Promotion of Employment were introduced for public discussions with the Council of Ministers’ online portal for public consultations. The proposed amendments include:

optimization of the existing administrative procedure for registering jobseekers and reducing the administrative burden for employers when applying for funds under the employment and training incentives;
regulating activities to promote the integration into employment of the economically inactive;
regulating the terms and conditions for financing procedures for the validation of professional knowledge, skills and competences of unemployed persons.

As of 1 December 2022 the Draft Decree is still in the process of public discussions and is yet to be adopted by the Bulgarian Council of Ministers.

Employers should monitor for potential legislative developments in 2023 related to the adoption of the Draft Decree to ensure compliance with any relevant changes to the current legislation and to consider new options for receiving funding for employment and training incentives.

With thanks to Silviya Apostolova and Kalina St. Tchakarova of Djingov, Gouginski, Kyutchukov & Velichkov for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

Introduction of electronic workbooks

Each employee in Bulgaria is issued a workbook, which is an important document because it certifies certain circumstances related to the employee’s employment, such as the position held, remuneration, start date and termination of employment, etc. Some employers have been pushing for the introduction of an electronic workbook replacing the current paper version to reflect an ever more digitalised working environment. However, there are concerns that a poorly planned transition to the electronic format may lead to confusion and a greater administrative burden.

At the end of July 2021, a group of Parliament members submitted a proposal for an amendment to the Labour Code which would see the introduction of an electronic workbook. The proposal was distributed among the competent Parliament committees for discussion. Following the Parliament committees’ discussions, the proposal shall be subject to vote by Parliament members.

Employers should continue to monitor the situation for potential legislative developments related to the introduction of the electronic workbook and update their practices to ensure compliance with any relevant changes to the current rules.

Clarification re deadline for reinstatement following unlawful dismissal

Under Bulgarian labour law, the court may reinstate the employee to their position if they have been unlawfully dismissed. The employee has two weeks to return to work after being notified of the reinstatement. However, the case-law of the Bulgarian Supreme Court of Cassation was inconsistent as to when this two-week period starts running for the employee – i.e. whether this is after learning about the effective court judgment for reinstatement or only after receiving a specific notice for reinstatement from the court.

At the end of 2021, the Bulgarian Supreme Court of Cassation determined that the two-week period for returning to work starts running after the receipt of a certain notice for reinstatement by the relevant court. If the notice has not been duly served, the two-week period starts running as of the date the employee manifests her/his willingness to return to work.

Employers should consider the judgment and in the event of a finding of unlawful dismissal, carry out steps to reinstate the employee at the appropriate time.

Clarification of law relating to permitted termination grounds

Bulgarian law does not recognize termination for convenience. Instead, the employer must substantiate one of a limited number of legal grounds for termination, including ‘closing a part of the enterprise’ and ‘reduction of the number of working positions’. In some circumstances, the employer is also obliged to carry out a selection procedure to determine which employees should be dismissed.

Inconsistent interpretation by the Bulgarian Supreme Court of Justice of some key aspects of the termination process lead to increasing difficulty for employers to comply with the relevant rules. An interpretive judgment by the Supreme Court of Cassation on the matter was issued at the end of 2021. The judgment determined the distinctive characteristics between ‘closing a part of the enterprise’, ‘internal reorganization’ and ‘reduction of the number of working positions’, as well as clarify the circumstances in which the employer is obligated to carry out a selection process.

Pursuant to the judgment, ‘closing a part of the enterprise’ shall mean removing an organizational unit from the enterprise structure, while ‘reduction of the number of working positions’ shall mean reducing all or part of the staff list or the numbers of certain positions. In the case of ‘closing a part of the enterprise’, the employer is entitled (but not obliged) to carry out a selection process. This selection process should involve an assessment of employees performing identical or similar work in the remaining organizational unit at the same location.

Employers should consider this judgment and comply with the specific procedural requirements related to the particular termination ground relied upon.

KEY DEVELOPMENTS FOR 2021

New options for employers during epidemic emergencies

Due to the Covid-19 pandemic, several new options were introduced in the Bulgarian Labour Code in an attempt to facilitate employers in managing their resources and personnel better, while retaining their employees. During the state official epidemic-related emergency state, employers are entitled to:

unilaterally introduce work at home or telework;
suspend the work of the enterprise, part of the enterprise or of individual employees;
introduce part-time work for employees working full-time in the enterprise or in a separate unit of the enterprise; and
grant unilaterally paid annual leave days to an employee, where his/her work is suspended due to the declared state of (epidemic) emergency.

Major legislative changes of the Bulgarian Labour Code

The scope of application of the Bulgarian Labour Code was extended to cover employees having their place of work in Bulgaria, regardless of their nationality or the nationality of their employer. Further, the Labour Code will also apply to Bulgarian employers who employ third-country nationals abroad.

Another key amendment is that the maximum overtime hours may be increased from 150 to 300 hours per year by virtue of a collective labour agreement.

Also, the minimum length of service in order to get entitlement to use paid annual leave for the first time, was reduced from eight to four months.

National minimum wage and compensation rates

As of 1 January 2021, the minimum national wage increased from BGN 610 (approx. EUR 310) to BGN 650 (approx. EUR 330).

The minimum amount of the daily compensation for unemployment for 2021 increased from BGN 9 (approx. EUR 4.5) to BGN 12 (approx. EUR 6). However, the maximum amount remains the same— at BGN 74,29 (approx. EUR 38).

KEY DEVELOPMENTS FOR 2020

Recent case law on holiday entitlement and reinstatement

The Court of Justice of the European Union ("CJEU") has recently addressed the question as to whether employees who are unlawfully dismissed and then reinstated into their previous positions are entitled to any annual leave accruing in the period from dismissal up to reinstatement. It was common practice for the Bulgarian Supreme Court of Cassation not to award compensation in such cases on the basis that the employee had not actually performed work during that period and as such, no annual leave had accrued. However, the CJEU noted that such dismissals are, in principle, unpredictable and beyond the control of the employee concerned. As a result, the CJEU held that employees should be entitled to annual leave accruing in the period between termination and reinstatement and should receive a payment in lieu of such annual leave to the extent their employment is subsequently terminated.

Implementation of Persons with Disabilities Act

The Persons with Disabilities Act recently came into force and introduces some key requirements aimed at improving access to employment for disabled persons.

The new legislation has introduced a mandatory quota for employers in respect of the hiring of individuals with permanent disabilities. This requirement applies to employers with more than 50 employees. Relevant employers must notify the Employment Agency to confirm that they fulfil the quota by 31 March each year. Certain exemptions apply depending on the circumstances (for example, if an employer purchases goods or utilises services that are produced, traded or provided by certain registered enterprises or cooperatives of disabled persons, they may not be subject to the quota requirements in respect of the month in which they purchase such goods or utilise such services).

National Tripartite Agreement

A National Tripartite Agreement was concluded on 17 June 2020 between the Council of Ministers, employer representatives and trade unions. The Agreement is valid for a period of two years and deals with various topics related to the labour market and immigration, such as minimum remuneration requirements and the repeal of minimum social contributions for certain industries and professions. It also foresees an expansion to the functions of the Employment Agency to manage the import of workers and specialists from other countries to satisfy the needs of the Bulgarian labour market from time to time.

KEY DEVELOPMENTS FOR 2019

New rules on electronic files for employees

In May 2018 the Council of Ministers adopted a new Ordinance on the Creation and Storage of Electronic Documents on Employee Files (“Ordinance”). The Ordinance permits electronic documentation for employment files and generally regulates the types of electronic documents that may be part of the employee's file and the requirements for the creation, transmission and storage of electronic documents.

The key changes include:

the type of employment-related documents which may be created and/or stored electronically must be specified in the internal labour rules adopted by the employer;
the documents must be created in compliance with Regulation (EU) No 910/2014 and the Bulgarian Act on the Electronic Document and Electronic Certification Services. Electronic documents should be signed by electronic signature whereas the ones created by the employer must always be signed by a qualified electronic signature. In addition, the Ordinance provides that an employer's electronic statements regarding electronic documents sent by the employee shall be served through an electronic registered delivery service;
an employer may not refuse to accept a paper-based document from an employee and must provide the employee with paper copies of electronic documents if requested; and
the Ordinance introduces certain requirements regarding the functionality of the information system used by the employer for creating and/or storing electronic documents in the employee’s file including, among others, a qualified electronic time stamp, as well as other time certifications and record tracking mechanisms.

Employer’s obligations under the new Disability Act

The new Disability Act, which was enacted by Parliament on 18 December 2018, imposes an obligation on employers to hire disabled workers according to the following quota:

employers with 50-99 workers must employ one permanently disabled worker; and
employers with 100 or more workers must ensure that 2% of their average staff are disabled workers.

Employers will be required to notify the Bulgarian Employment Agency of any vacant position and their quota.

These quotas are in addition to any occupational rehabilitee employees or workers. An employer who fails to comply with the quota requirements will be liable to pay a monthly compensation contribution equating to 30% of the minimum monthly salary (currently BGN 560) for each vacant position for a permanently disabled worker.

Increase in the maximum monthly amount of contributory income

As of 1 January 2019, the maximum monthly social income over which employers and employees have to pay social security contributions increased from BGN 2,600 to BGN 3,000.

KEY DEVELOPMENTS FOR 2018

Posted Workers

Legislative changes have introduced express regulations on the posting of employees to the territory of another Member State of the EU or Switzerland. For the duration of the posting, the employer should provide at least the same minimum working conditions as the employees performing the same or similar work in the host country. The employer should inform the employee in writing of the relevant minimum working conditions in the host country at least one business day before the start date of the posting. The employer and the employee should execute a prescribed written additional agreement to the labour contract amending the employment relationship for the period of the posting.

Extended Categories of Individuals Entitled to Benefit from Child-Birth and Adoption Leave

The scope of the individuals entitled to a child-birth and adoption leave has broadened by virtue of amendments of the Bulgarian Labour Code effective as of 1 June 2017. This encourages a more flexible approach to parental leave, including the ability for grandparents to use maternity/paternity leave in certain circumstances.

Access to the Bulgarian Labour Market

Recently, the government authorities have been working towards implementing changes to the rules governing access to the Bulgarian labour market for non-EU nationals. The main goal of the proposed changes is to facilitate access by non-EU nationals to the labour market for research, study, training, voluntary service, pupil exchange schemes or educational projects, thus implementing the rules of Directive (EU) 2016/801.

New Employee Protections Impacting M&A Deals

Pursuant to a new law that came into force on 22 December 2017 shares in Bulgarian limited liability companies can only be transferred to buyers if the target has no outstanding employee debts or taxes in the 3 years prior to closing.

With thanks to Kalina St. Tchakarova, Silviya Apostolova, Youliana Naoumova and Sonya Stoyanova of Djingov, Gouginski, Kyutchukov & Velichkov for their invaluable collaboration on this update.