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The Employment Law Review
Law Business Research
Fourth Edition
Editor
Erika C Collins
The Employment Law Review
Reproduced with permission from Law Business Research Ltd.
This article was first published in The Employment Law Review 4th edition(published in March 2013 – editor Erika C Collins).
For further information please [email protected]
The Employment
LawReview
Fourth Edition
EditorErika C Collins
Law Business Research Ltd
The Law ReviewsThe Mergers and acquisiTions review
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ConTEnTs
Editor’s Preface ...................................................................................................xi Erika C Collins
Chapter 1 gLoBAL divERSiTy And inTERnATionAL EMPLoyMEnT ..................................... 1
Erika C Collins
Chapter 2 EMPLoyMEnT iSSuES in CRoSS-BoRdER M&A TRAnSACTionS .......................................................... 7
Erika C Collins and Michelle A Gyves
Chapter 3 SoCiAL MEdiA And inTERnATionAL EMPLoyMEnT ..................................................................... 14
Suzanne Horne and Eleni Konstantinou
Chapter 4 AuSTRALiA ............................................................................ 31Miles Bastick, Shivchand Jhinku and Zoë Adams-Lau
Chapter 5 AuSTRiA ................................................................................ 46Jakob Widner
Chapter 6 BELgiuM ............................................................................... 65Chris Van Olmen
Chapter 7 BRAziL ................................................................................... 81Vilma Toshie Kutomi
Chapter 8 CAnAdA ................................................................................ 99Jeffrey E Goodman and Christopher D Pigott
Chapter 9 ChiLE ................................................................................... 112Francisco della Maggiora M
Chapter 10 ChinA .................................................................................. 125Gordon Feng and Erika C Collins
Contents
v
Chapter 11 CoSTA RiCA ........................................................................ 143Carolina Soto Monge
Chapter 12 CyPRuS ................................................................................ 155George Z Georgiou, Anna Praxitelous and Natasa Aplikiotou
Chapter 13 CzECh REPuBLiC ............................................................. 170Lenka Velvarská
Chapter 14 EL SALvAdoR ..................................................................... 186Diego Martín-Menjívar and Carlos Roberto Rodríguez Salazar
Chapter 15 ESToniA .............................................................................. 201Heli Raidve
Chapter 16 FinLAnd ............................................................................. 218Petteri Uoti and Loviisa Härö
Chapter 17 FRAnCE ............................................................................... 229Deborah Sankowicz and Jérémie Gicquel
Chapter 18 gERMAny ........................................................................... 246Thomas Griebe and Jan-Ove Becker
Chapter 19 gREECE ............................................................................... 266Effie G Mitsopoulou and Ioanna C Kyriazi
Chapter 20 guATEMALA ....................................................................... 284Lionel Francisco Aguilar Salguero
Chapter 21 hong kong ..................................................................... 291Michael J Downey
Chapter 22 indiA ................................................................................... 309Manishi Pathak
Chapter 23 indonESiA ......................................................................... 327Nafis Adwani
Chapter 24 iRELAnd.............................................................................. 342John Dunne and Georgina Kabemba
Contents
Chapter 25 iTALy .................................................................................... 361Raffaella Betti Berutto
Chapter 26 jAPAn ................................................................................... 374Setsuko Ueno
Chapter 27 LATviA ................................................................................. 389Sigita Kravale
Chapter 28 LuxEMBouRg ................................................................... 405Guy Castegnaro, Ariane Claverie, Céline Defay, Christophe Domingos, Laurence Chatenier, Lorraine Chery and Evelyne Schoeser
Chapter 29 MALAySiA ............................................................................ 425Siva Kumar Kanagasabai, Selvamalar Alagaratnam and Foo Siew Li
Chapter 30 MALTA .................................................................................. 444Ron Galea Cavallazzi
Chapter 31 MExiCo ............................................................................... 454Miguel Valle, Jorge Mondragón and Rafael Vallejo
Chapter 32 nEThERLAndS ................................................................. 473Eugenie Nunes
Chapter 33 niCARAguA ....................................................................... 496Bertha Xiomara Ortega Castillo
Chapter 34 noRwAy .............................................................................. 506Gro Forsdal Helvik
Chapter 35 PERu ..................................................................................... 519José Burgos C
Chapter 36 PoLAnd .............................................................................. 535Roch Pałubicki and Karolina Nowotna
Chapter 37 PoRTugAL .......................................................................... 549Pedro Furtado Martins, Dora Joana and Nuno Pais Gomes
Contents
viii
Chapter 38 RoMAniA ............................................................................ 564Delia Paceagiu Ratoi, Iurie Cojocaru, Alexandru Lupu and Patricia-Sabina Macelaru
Chapter 39 RuSSiA .................................................................................. 577Irina Anyukhina
Chapter 40 SAudi ARABiA .................................................................... 596Amgad T Husein, John Balouziyeh and Fadil M Bayyari
Chapter 41 SingAPoRE ........................................................................ 608Ian Lim, Nicole Wee and Gordon Lim
Chapter 42 SLovAkiA ............................................................................ 622Katarína Matulníková
Chapter 43 SLovEniA............................................................................ 634Vesna Šafar and Martin Šafar
Chapter 44 SouTh AFRiCA .................................................................. 652Susan Stelzner, Stuart Harrison, Brian Patterson and Zahida Ebrahim
Chapter 45 SPAin .................................................................................... 673Iñigo Sagardoy de Simón
Chapter 46 SwEdEn .............................................................................. 693Erik Danhard and Jennie Lööw
Chapter 47 SwiTzERLAnd .................................................................. 705Ueli Sommer
Chapter 48 TAiwAn ............................................................................... 718Seraphim Mar
Chapter 49 TuRkEy ............................................................................... 731Serbulent Baykan and Handan Bektas
Chapter 50 ukRAinE ............................................................................. 744Svitlana Kheda
Contents
ix
Chapter 51 uniTEd ARAB EMiRATES ................................................ 758Ibrahim Elsadig
Chapter 52 uniTEd kingdoM .......................................................... 768Suzanne Horne
Chapter 53 uniTEd STATES ................................................................ 780Patrick Shea and Erin LaRuffa
Chapter 54 uRuguAy ............................................................................ 795Gabriel Ejgenberg
Chapter 55 viETnAM ............................................................................ 806Michael K Lee, Huong Thi Thanh Nguyen and Doan Ngoc Tran
Appendix 1 ABouT ThE AuThoRS .................................................... 819
Appendix 2 ConTRiBuTing LAw FiRMS’ ConTACT dETAiLS .. 853
xi
Editor’s PrEfacE
It has once again been my great pleasure to edit this most recent edition of The Employment Law Review. In reviewing chapters for inclusion in this edition, I was struck repeatedly by both the breadth and variety of laws and approaches to employment regulation across jurisdictions as well as the similarities, especially with regard to certain trends, some of which are discussed below. As with the earlier editions, this book is not meant to provide a comprehensive treatise on the law of any particular country but instead is intended to assist practitioners and human resources professionals in identifying key issues so that they may, in turn, help their clients avoid potentially troublesome (and often costly) missteps.
One of the common themes during 2012 was an increase in the promulgation of laws and regulations designed to increase flexibility and lower the costs of labour for employers while maintaining sufficient protections for employees. A prime example of this trend is the passage throughout 2012 of legislation in EU Member States implementing the EU Directive on Temporary Agency Work, which came into effect in December 2011. The Directive and related implementing legislation ensure certain minimum compensation and benefits for temporary agency workers while also increasing flexibility for employers. Both Vietnam and Mexico also adopted legislation in 2012 that sanctions, but also places limitations on, labour outsourcing arrangements. In Brazil, President Dilma Rousseff’s Greater Brazil Plan also has been aimed at increasing employment and avoiding the slowdown and economic crisis faced by other jurisdictions. Among the employment-related measures implemented pursuant to the Greater Brazil Plan are relief from payroll contributions for the information technology sector and other incentives to foster employment. Finally, in the UK, a novel idea is under consideration that would allow an employer to issue an ownership interest in the company to the employee in exchange for the employee’s agreement not to be protected by the unfair dismissal laws.
While these efforts are, of course, aimed at benefiting workers by addressing unemployment, a number of them also are by-products of another trend: the implementation of austerity measures in response to debt crises in Europe and elsewhere. Fewer unemployed citizens means lower entitlement spending for governments. Other
xii
Editor’s Preface
employment-related austerity measures also have been implemented or proposed that are less beneficial to employees and jobseekers. In the Netherlands, for example, the period of time during which an individual can collect unemployment benefits was reduced from three years to two. Portugal continues to consider a reduction of remuneration and benefits for civil servants and employees public enterprises.
This fourth edition once again includes several general-interest chapters – one addressing employment issues in cross-border mergers and acquisitions, one addressing social media in the workplace, and another addressing global diversity initiatives. This edition also boasts the addition of five new countries, bringing the number of covered jurisdictions to 52.
I wish once again to thank our publisher, particularly Lydia Gerges, Adam Myers and Gideon Roberton; all of our contributors; and my associate, Michelle Gyves, for their tireless efforts to bring this edition to fruition.
Erika C CollinsPaul Hastings LLPNew YorkFebruary 2013
201
Chapter 15
Estonia
Heli Raidve1
I INTRODUCTION
The main law regulating employment relations in Estonia is the Employment Contracts Act2 (‘the ECA’), adopted in 2009 (in force since 1 July 2009). In drafting the ECA, the main EU directives have been transposed into national legislation. The general principles of the civil law (General Part of the Civil Code Act 2002,3 and Law of Obligations Act 2002,4) also apply to employment relations. In addition, there are several laws related to specific aspects of employment relations, for example the Empoyees’ Trustee Act (2009),5 the Aliens Act (2011),6 the Community-scale Involvement of Employees Act (2007),7
1 Heli Raidve is the founding partner and chairwoman at Heli Raidve Labour Law Office.2 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXX060K1&keel=en&pg=1&ptyy
p=RT&tyyp=X&query=t%F6%F6lepingu+seadus.3 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X30082K4&keel=en&pg=1&p
tyyp=RT&tyyp=X&query=Tsiviilseadustiku+%FCldosa+seadus+%28seisuga+5%2E04%2E2011%29.
4 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X30085K4&keel=en&pg=1&ptyyp=RT&tyyp=X&query=V%F5la%F5igusseadus+%28seisuga+18%2E07%2E2011%29.
5 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XX10005K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=t%F6%F6tajate+usaldusisiku.
6 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXXXX14K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=v%E4lismaalaste.
7 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X90012K2&keel=en&pg=1&ptyyp=RT&tyyp=X&query=t%F6%F6tajate+%FCle%FChenduselise.
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the Equal Treatment Act (2009),8 the Occupational Health and Safety Act (2000),9 the Public Holidays and Days of National Importance Act (1999),10 the Trade Unions Act (2002),11 the Citizen of the European Union Act (2010),12 the Personal Data Protection Act,13 and numerous regulations by the Estonian government and Ministry of Social Affairs, describing in more detail certain provisions established by the Employment Law and other laws.
One can turn to a public conciliator or a court of first instance with a collective labour dispute. The resolving of collective labour disputes are regulated by the Collective Labour Dispute Resolution Act (1995) and the statutes of offices of labour dispute conciliators (2005). Labour dispute committees or courts of first instance deal with individual labour disputes; the procedure is regulated by the Individual Labour Dispute Resolution Act (2000).
Labour dispute committees (‘LDCs’) operate permanently in the administrative field of the Ministry of Social Affairs (Labour Inspectorate) and their operating costs are covered by the State Budget. There are 11 permanently operating LDCs in Estonia. The chairman of each LDC is a Labour Inspectorate official with a higher legal education, who is appointed by the Ministry of Social Affairs. Two voluntary assessors, one a representative of the employer and the other of the employees, are also members of the committee. An LDC resolves claims with a value of up to €10,000. An LDC administers justice and resolves the dispute collegially. An LDC resolution enters into force and becomes an execution document with the legal power of a court decision if neither of the disputing parties addresses the court of first instance within 30 days with a request for another hearing of the matter.
Individual and collective labour disputes are resolved by the general courts of Estonia. There are three court instances. District courts are the courts of first instance, and are located in the largest cities; two regional courts (Tallinn and Tartu) are the appellate courts; and the Civil Law Department of the Supreme Court is the final court instance, which evaluates whether the appellate courts have correctly interpreted and applied the law and have properly followed the principles of the Civil Procedure Law.
State supervision over labour relations is exercised by the Labour Inspectorate that operates in the administrative field of the Ministry of Social Affairs.
8 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXX006K3&keel=en&pg=1&ptyyp=RT&tyyp=X&query=v%F5rdse+kohtlemise+seadus.
9 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X30078K7&keel=en&pg=1&ptyyp=RT&tyyp=X&query=t%F6%F6tervishoiu.
10 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=2012X19&keel=en&pg=1&ptyyp=RT&tyyp=X&query=p%FChade+ja.
11 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X30087K2&keel=en&pg=1&ptyyp=RT&tyyp=X&query=ameti%FChingute+seadus.
12 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XX00043K2&keel=en&pg=1&ptyyp=RT&tyyp=X&query=euroopa+liidu+kodaniku.
13 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXX041K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=isikuandmete+kaitse+seadus.
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II YEAR IN REVIEW
The first thing that characterises the field of labour law in Estonia in 2012 is the continued decrease in labour disputes.
When the current ECA entered into force in 2009, there were 6,371 statements of claim concerning a labour dispute filed to the LDCs and 856 to the courts of first instance. The numbers of claims filed were respectively 3,803 and 682 in 2010, and 2,909 and 416 in 2011.
In the first three quarters of 2012, LDCs have received 2,274 statements of claim. Although the exact and full data for 2012 is not available at the time of writing this chapter, it can be predicted that there will be fewer filed statements of claim both to courts and to LDCs as compared with 2011.
In addition, legislation concerning temporary agency work was introduced. In June 2012, provisions concerning the differences in concluding an employment contract with a temporary agency worker were added to the ECA.
Another ‘front-page’ topic is employee strikes. In March 2012, both a trade union of teachers and the Estonian Trade Union Confederation (ETUC) independently organised a general strike and several smaller trade union sympathy strikes. Court actions that have not yet reached a final resolution were launched in connection with the legality of the strikes.
III SIGNIFICANT CASES
In 2012 the Supreme Court of Estonia made some very interesting labour law related decisions.
In its decision 3-2-2-135-11 of 4 January 2012, the Supreme Court analysed an alleged case of unequal treatment and explained that in resolving a discrimination-related claim, the court has to establish the fact, from which it can be presumed that an act of direct or indirect discrimination has taken place. When the court has established such a fact, the burden of proof is transferred to the employer, after which the legitimacy of the difference in treatment shall be assessed (if there is a reasonable basis for the different treatment).
In its decision 3-3-1-6-12 of 16 April 2012, the Supreme Court analysed the term of transfer of businesses for the purpose of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses. The Supreme Court explained that the relevant criteria for assessing the transfer of a business may include:a type of business;b transfer of immoveable property, means of production and other means;c takeover of immaterial resources and the organisation;d the continuance of client and supplier relations;e the similarity of the action preceding and following the transfer;f the continuance of economic activity, and if the activity was suspended, the time
of the suspension;
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g in the case of so-called businesses with small means, the retaining of staff is very important;
h the earlier activities of the acquirer of the undertaking; andi the place of business of the transferor and the acquirer, overlapping of members
of management bodies.
In its decision 3-2-1-60-12 of 6 June 2012, the Supreme Court explained that when the employee cancels the employment contract extraordinarily on grounds that the employer has considerably delayed with payment of wages, the court has to assess whether the delay was important for the purpose of law and if the employee cancelled the contract within a reasonable term after learning of the breach.
In its decision 3-2-1-82-12 of 10 October 2012, the Supreme Court found that the conclusion of a fixed-term employment contract for the period of a commercial campaign is not prohibited, but in this case the employer has to prove exactly when the campaign ended. If the employer does not prove the end date of the campaign, the fixed-term employment contract becomes an employment contract entered into for an unspecified term on the basis of law.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
Employment contracts concerning work periods in excess of two weeks must be concluded in writing and signed by both parties. A written document of an employment contract shall contain at least the following data:a the name, personal identification code or registry code, place of residence or seat
of the employer and the employee;b the date of entry into the employment contract and commencement of work by
the employee;c a description of duties;d the official title if this brings about a legal consequence;e the agreed remuneration payable for the work (wages), including remuneration
payable based on the economic performance and transactions, and the manner of calculation, the procedure for payment and the time of falling due of wages (pay day), also taxes and payments payable and withheld by the employer;
f other benefits if agreed upon;g the time when the employee performs the agreed duties (working time);h the place of performance of work;i the duration of holiday;j a reference to the terms for advance notice of cancellation of the employment
contract or the terms for advance notice of cancellation of the employment contract;
k a reference to the rules of work organisation established by the employer; andl a reference to a collective agreement if a collective agreement is applicable with
regard to the employee.
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At the same time, for the protection of employees, the ECA provides that an employment contract also shall be deemed to be entered into if an employee commences work that, under the circumstances, can be expected to be done only for remuneration. If the data has not been communicated to the employee before commencement of work, the employee may demand it at any time. The employer shall be obligated to communicate data within two weeks as of the receipt of such a request.
According to the ECA, it is the employer’s obligation to ensure that a written employment contract is signed. If the employer employs an employee without a written employment contract, an administrative penalty may be imposed by the Labour Inspectorate.
The ECA states a general principle that employment agreements shall be concluded for an indefinite period. At the same time, in exceptional situations the law permits fixed-term employment contracts. According to Article 9, Part 1 of the ECA, an employment contract may be entered into for a specified term of up to five years if it is justified by good reasons arising from the temporary fixed-term characteristics of the work, especially a temporary increase in work volume or performance of seasonal work. If duties are performed by way of temporary agency work, an employment contract may be entered into for a specified term also if it is justified by the temporary characteristics of the work in a user undertaking. For the period of substitution of an employee who is temporarily absent, an employment contract may be entered into for a specified term of the period of the substitution.
According to law, an employment contract may be amended only by agreement between the parties. The law does not require a written form to amend the employment contract. According to case law of the Supreme Court (decision 2-1-117-11 of 7 December 2011) an employment contract shall be also deemed to be amended if the parties have orally agreed upon new provisions of the employment contract. In practice, amendments to an employment contract are still predominantly drawn up in writing.
According to the ECA, the employment contract can be changed unilaterally only in certain circumstances.
Pursuant to Section 37 of the ECA, the employer may unilaterally reduce the wages agreed upon, if due to unforeseen external circumstances it cannot provide work for the employee. Such reduction of wages must be preceded by negotiations and the offer of other work, if possible. The employer may not reduce wages to below the minimum wage of the Republic of Estonia (€290 in 2012). If the employee does not agree with the payment of wages, he or she may cancel the employment contract and the employer is obliged to pay the employee compensation to the extent of one month’s average wage.
According to Section 18 of the ECA, a pregnant employee and an employee who has the right to pregnancy and maternity leave has the right to request the temporary easing of working conditions. If the employer cannot provide the employee with easier work, the employee shall be released from performing duties and shall be paid wages from public funds.
ii Probationary periods
According to law, a four-month probationary period applies automatically to all employment contracts entered into for an unspecified term. The parties may agree in
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the employment contract to reduce the probationary period or not apply it at all. In the case of a fixed-term employment contract, the probationary period may last half of the duration of the contract, but not more than four months.
The purpose of the probationary period is to assess whether the employee’s health, knowledge, skills, abilities and personal characteristics correspond to the level required for performance of the work. During the probationary period both parties may cancel the employment contract with an advance notice period of 15 days. The employer must substantiate what were the unsatisfactory results of the probationary period. The employee does not have to substantiate the cancellation of the employment contract.
iii Establishing a presence
A foreign company may hire employees from Estonia without officially being registered to do business in the country. In Estonia employees can be hired directly as well as through agencies that source employees.
According to Section 8¹ of the Taxation Act, a foreign company (i.e., a non-resident company) may authorise a tax representative to represent the non-resident for the performance of the obligations arising in Estonia from an act concerning a tax. A legal entity founded in Estonia or a branch of a foreign legal entity entered into the Estonian commercial register may act as a tax representative. All the rights and obligations of a registered taxable person who is a non-resident extend to the tax representative. A tax representative shall submit an application to the Estonian Tax and Customs Board to be issued with an activity licence of a tax representative, which shall be reviewed within 20 calendar days. The list of tax representatives of non-residents shall be published on the Tax and Customs Boards website.14
According to Section 18 of the Taxation Act, non-resident legal persons and employers are required to register themselves in the regional structural unit of the Tax and Customs Board. Section 21 of the same law regulates the requirements for registration of a permanent establishment, and Section 22 the requirements for registration of non-resident employers. If the application is satisfied, the applicant shall be entered into the register as a taxable person.
If a foreign employer that has not officially registered its presence in Estonia hires residents of Estonia as employees, the employer shall pay the employees their full salary and the employees themselves shall be responsible for the payment of personal income tax and mandatory state social security payments, as well as for reporting the income to the competent authorities.
For all matters concerning non-residents, the Estonian Tax and Customs Board has an e-mail address: [email protected].
V RESTRICTIVE COVENANTS
A restrictive covenant is permitted only if agreed by both parties. Such covenants apply during employment and no additional payment is required.
14 www.emta.ee/index.php?id=3275.
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After the termination of the employment contract, the parties may agree on a period of restraint of trade of up to one year. The agreement must be in writing, and a reasonable monthly compensation shall be paid for the employee after the termination of the employment contract.
The parties may agree on a contractual penalty in case of a breach of the restraint of trade clause. In its decision 3-2-1-39-11 of 23 May 2011, the Supreme Court explained that since the restraint of trade is a restriction of the employee’s right to freely choose a field of activity and a workplace, the compensation paid for the clause shall be fair and shall compensate for the restriction of choosing a workplace.
In the same decision the Supreme Court explained that the regulation of standard terms provided for consumer protection in the Law of Obligations Act shall apply to the employment contract and that the employee should also considered as a customer. Due to this, the court shall on its own initiative inspect whether the compensation paid for the employee and the agreed contractual penalty are proportional and fair. The employee has the right to cancel the restraint of trade clause if the employer is in breach of the contract or if the employer’s interest in the restraint of trade clause is no longer apparent.
VI WAGES
i Working time
It is presumed that an employee works 40 hours over a period of seven days (full-time work), unless the employer and the employee have agreed on a shorter working time (part-time work).
As a general rule, a full-time employee’s working hours must not exceed eight hours per day or 40 hours per seven-day period. The employer and employee can agree that the working time is divided within the recording period unequally (summarised working time).
The maximum weekly working time for minors is shorter and varies from 15 to 35 hours per week depending on the age of the minor. The maximum weekly working time for school and kindergarten teachers and other educators is also shorter.
According to the ECA, night work is between 10pm and 6am. If the working time falls within the night work time frame, the employer shall pay 1.25 times the wage for the work, unless it has been agreed that the wage includes remuneration for working at night.
A night worker, who works at least three hours of his or her daily working time or at least one-third of his or her annual working time at night, is permitted to work on average eight hours over a period of 24 hours at most. If a night worker’s health is affected by a working environment hazard or the characteristics of his or her work, the employee is not permitted to do overtime work.
Exceptions to the restriction specified in this rule may be made by an employment contract or collective agreement in the cases specified in Article 17(3) of Council Directive 2003/88/EC concerning certain aspects of the organisation of working time,15
15 OJ L 299, 18 November 2003, pp. 9–19.
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and provided working does not harm the employee’s health and safety and the working time does not exceed the limit (average of 48 hours per seven-day period).
Persons under 18 years of age are not permitted to do night work, except in cases where the minor does light work in the field of culture, art, sports or advertising under the supervision of an adult between 8pm and midnight.
ii Overtime
An employer and employee may agree that the employee undertakes to do work over the agreed working time (overtime work). In the case of calculation of the summarised working time, overtime work means work exceeding the agreed working time at the end of the calculation period.
The summarised working time with overtime work shall not exceed on average 48 hours per seven-day period over a calculation period of up to four months, unless a different calculation period has been provided by law.
An employer and employee may agree on a longer working time than 48 hours if the summarised working time does not exceed on average 52 hours per seven-day period over a calculation period of four months and the agreement is not unreasonably detrimental to the employee. The employee may cancel the agreement at any time, notifying thereof two weeks in advance.
As a rule, the employer must obtain the employee’s consent before the employee is made to work overtime. Exceptionally, the employer may require an employee to work overtime in cases such as force majeure, in order to deal with the consequences of a natural disaster, etc. The employer cannot request such kind of overtime work from a minor, a pregnant person or an employee who has the right to pregnancy and maternity leave even in a case of an emergency.
Regardless of whether overtime work is performed on a voluntary basis or on account of a compulsory request by the employer, overtime work must be compensated by additional payment or time off in lieu. An employer shall compensate for overtime work by time off equal to the overtime, unless it has been agreed that overtime is compensated for in monetary payment. Upon compensation for overtime work in money, an employer shall pay an employee 1.5 times the wage (i.e., additional remuneration for overtime must not be less than 50 per cent higher than the employee’s hourly rate of pay).
The law prohibits persons under 18 years of age from doing overtime.
VII FOREIGN WORKERS
The employer is under no obligation to maintain a separate register of alien employees. According to Section 285 of the Aliens Act,16 employers must notify the Police and Border Guard Board, which also maintains the proper register of alien employees.
There are no limits on the number of foreign workers a workplace or a company may have, but it should be noted that if a work permit is required for the particular
16 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXXXX14K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=v%E4lismaalaste.
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workers, the requirements and procedure of receiving the work permit may differ based on the number of workers and their professions.
If a foreigner enters Estonia on a visa, the maximum term of the work permit is one year. In such a case the foreigner may stay in Estonia for not more than 90 days in a six-month period. If the foreigner enters and resides in Estonia on the basis of a residence permit, the term of the work permit may not exceed five years (if the person is employed on the basis of an employment agreement). After the expiry of the term of the first visa or residence permit, foreign workers are entitled to submit documents for obtaining a new visa or residence permit.
Estonia is a Member State of the European Union and has also joined the Schengen Agreement. If a citizen of an EU Member State, European Economic Area State or the Swiss Confederation (or his or her family members) has established legal employment relations or is a self-employed person in Estonia, a work permit is not necessary for him or her. However, if a citizen of an EU Member State, European Economic Area State or the Swiss Confederation is willing to reside in Estonia for more than 90 days, counting from the first day of entry, he or she shall register with the Office of Citizenship and Migration Affairs and receive a registration certificate. The above-mentioned registration obligation is not applicable if the person has a valid travel document and he or she:a resides in Estonia for up to six months per year from the date of first entry if the
aim of residence is to establish legal employment relationships in Estonia; orb is employed in Estonia, but resides in another EU Member State to which he or
she returns at least once per week.
Although Estonia has numerous agreements on the establishment of a visa-free regime, which allows citizens of many countries to travel to Estonia without a visa, citizens of any country not listed above will need a work permit to work in Estonia.
A company registered in Estonia and employing a foreign worker shall withhold and pay personal income tax and social contributions if the place of performance of the particular work is Estonia. As for EU Member States, there is an option to continue to pay social security payments in the employee’s country of residence while being employed in another EU Member State.
An alien employee is under the protection of the ECA of Estonia.
VIII GLOBAL POLICIES
According to Section 5 of the ECA, a written document of an employment contract shall contain a reference to the rules of work organisation established by the employer.
According to Section 12 of the Equal Treatment Act17 and Section 11 of the Gender Equality Act, the employer shall inform employees of the rights and obligations provided for in those Acts in an appropriate manner.
The law does not establish formal requirements for the rules of work organisation and for the notification obligation provided in the Acts. Usually, most of the
17 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXX006K3&keel=en&pg=1&ptyyp=RT&tyyp=X&query=v%F5rdse+kohtlemise+seadus.
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Estonian employers draw up a document that includes rules on hiring employees and termination of the employment contract, an overview of the organisation of working time and guaranteeing of property protection, starting and finishing the working day, communication with guests and clients, principles of equal treatment and obligations of the parties, general requirements on occupational safety and health, etc. At the same time, the employer may establish the rules of the organisation with different documents, for example with a decision of the management board. In larger companies, the rules of the organisation also contain the values, visions and the mission of the company.
It is important that the employers are aware of the rules of the organisation and that they have the opportunity to examine them. Generally, the rules established by the employer are specified in the employment contract. Usually, the rules are introduced to the employees against a signature, although it is not required by law. Internal work rules are not required to be coordinated with state authorities. Work rules are coordinated with a trade union and representative (if they exist). Documents are prepared in Estonian. Although the law does not require it, the documents are translated into a language that is understandable to the foreign language speaking employees. Work rules are usually prepared in writing; larger companies tend to use the company’s intranet to distribute them.
IX TRANSLATION
According to Section 8(3) of the Language Act,18 all employees and public servants shall be provided with work-related information in Estonian, unless otherwise provided by law. The employment contract is generally concluded in Estonian; on the other hand, according to Section 19 of the Language Act, the parties may agree to use any other language. The Act does not require the translation of the contract into a foreign language, thus, the non-translation of labour documents is not punishable by law.
According to Section 5(2) of the ECA, the parties must behave loyally towards one another and the employment contract shall be communicated by the employer to the employee in good faith, clearly and unambiguously. For these reasons it is good practice in Estonia to use bilingual employment contracts for foreign employees and to translate the documents necessary for the performance of duties (e.g., the employment contract and its supplements, rules of work organisation, etc.) to a language understandable to the employee.
X EMPLOYEE REPRESENTATION
Trade union membership is generally low in Estonia and the negotiating power of the unions is rather limited.
18 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXXXX08K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=keeleseadus.
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The legal status of trade unions is regulated by the Trade Unions Act (2000).19
A trade union is considered to be a type of non-profit making organisation. The legal personality of a trade union begins when it has been registered in the register of the trade unions and it ends when the trade union is removed from the register. The law also regulates the rights of employees to establish a trade union and act as its representatives.
Persons have the right to freely, without prior permission, form trade unions, and to join or not to join them. Members of the Defence Forces who are in active service in the Defence Forces are prohibited from founding and joining a trade union.
A trade union may be formed by at least five employees. A federation of trade unions may be founded by at least five trade unions. A confederation of trade unions may be founded by at least five nationwide trade unions or federations of trade unions of an area of activity or profession.
According to law, an employer is required to grant a workroom for a trade union, if possible, enable them to hold events, allow a member of a trade union at least five days free from work in order for him or her to participate in training, allow him or her to examine without hindrance the work organisation, etc.
Another employees’ representative beside the trade union is the employees’ trustee.The Employees’ Trustee Act20 regulates the activities of an employees’ trustee
in representing the employees and public servants, who authorised him or her, in relations with the employer and the employees. A trustee is deemed to be an employees’ representative within the meaning of the ECA.
The trustee shall be elected for three years by secret ballot during the general meeting of the employees, unless the general meeting decides otherwise.
Upon transfer of the enterprise, the authority of a trustee shall be in force until the expiry thereof but not for longer than one year after the transfer.
A trustee has the right to examine the working conditions and work organisation, represent employees, get information and training from the employer, use the employer’s premises, involve experts when needed, etc.
An employee shall, by agreement with the employer, perform the duties of a trustee during working time or outside of working time. The employer must guarantee the trustee work-free time of four to 40 hours a week to perform his or her duties, depending on the number of employees.
A trustee shall retain the average wage for the time of performance of his or her duties pursuant to and for the time of training. According to the ECA, Section 94, before cancellation of the employment contract with the employees’ representative the employer shall seek the opinion of the employees who elected the person to represent them or the trade union about the cancellation of the employment contract. The employees who elected the person to represent them or the trade union shall give their opinion within 10 working days of being requested for it. The employer shall take the
19 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=X30087K2&keel=en&pg=1&ptyyp=RT&tyyp=X&query=ameti%FChingute+seadus.
20 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XX10005K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=t%F6%F6tajate+usaldusisiku.
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opinion of the employees into account to a reasonable extent. The employer shall justify disregard for the opinion of the employees. If the employer unlawfully terminates the employment contract with the employees’ representative, the representative has the right to request reinstatement in employment and a larger compensation compared to ordinary employees – instead of the usual amount corresponding to the average wage of three months, the employees’ representative shall be paid a compensation in the amount of the average wage for six months.
There are no mandatory regulations regarding how frequently the representatives must meet.
XI DATA PROTECTION
i Requirements for registration
The Personal Data Protection Act21 regulates the collection, storage and use of the information held by the employers about their employees.
The employer may process the employee’s data without the consent of the employee to the extent that is necessary to carry out the employment contract: for example, personal identification code, name, address, and bank account number are necessary for the declaration and payment of taxes related to wages. In the case of processing personal data to carry out the employment contract, the registration of the business in the Data Protection Inspectorate is not required.
The processing of other personal data shall be carried out by agreement of the parties, which must be prepared in writing. The employee shall be notified on the collection of data both for carrying out an employment contract and in the case of an agreement between the parties.
In processing the personal data of the employee, principles of legality, purposefulness, minimalism and security shall be followed. Personal data must be protected from third parties and for that purpose the employer is obliged to apply the necessary technical means. The employee has the right to get information on the collected data and to demand the correction of the data.
ii Cross-border data transfers
Transfer of personal data from Estonia is permitted only to a country that has a sufficient level of data protection. Transfer of personal data is permitted to the Member States of the European Union and the states party to the Agreement of the European Economic Area, and to countries whose level of data protection has been evaluated as sufficient by the European Commission. Transfer of personal data is not permitted to a country whose level of data protection has been evaluated as insufficient by the European Commission.
Transfer of personal data to foreign countries without a sufficient level of data protection is only allowed when permitted by the Data Protection Inspectorate or the data subject.
21 www.legaltext.ee/et/andmebaas/tekst.asp?loc=text&dok=XXXX041K1&keel=en&pg=1&ptyyp=RT&tyyp=X&query=isikuandmete+kaitse+seadus.
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iii Sensitive data
A special regulation applies for the processing of sensitive personal data.The following are sensitive personal data:
a data revealing political opinions or religious or philosophical beliefs, except data relating to being a member of a legal entity in private law registered pursuant to the procedure provided by law;
b data revealing ethnic or racial origin;c data on the state of health or disability;d data on genetic information;e biometric data (above all fingerprints, palm prints, eye iris images and genetic
data);f information on sex life;g information on trade union membership; andh information concerning commission of an offence or falling victim to an offence
before a public court hearing, or making of a decision in the matter of the offence or termination of the court proceeding in the matter.
Sensitive personal data can be processed only on agreement between the parties.If the employer appoints a person responsible for the processing of sensitive
personal data, the person’s name, term of authorisation and contacts shall be sent to the Data Protection Inspectorate. In that case, the registration of the business in the Data Protection Inspectorate is not necessary.
If the employer has not appointed a person responsible for the processing of sensitive personal data and notified the Data Protection Inspectorate thereof, the business is required to register the processing of sensitive personal data with the Data Protection Inspectorate.
iv Background checks
Background checks on employees are a customary way of collecting personal data, for which, generally, the consent of the employee is required.
Checking the creditworthiness of the employee is not performed in labour relations. Data on the employee’s wages is permitted to be sent to the bailiff, who under the law realises the execution of court decisions and the collection of sums ordered with a court decision.
As of 1 January 2013, everyone, including the employer, has under the Punishment Register Act the right to get an extract from the Punishment Register confirming the punishment or its absence of another person (employee). The issuing of documentation by the Punishment Register is chargeable and the applicant must be identified.
XII DISCONTINUING EMPLOYMENT
i Dismissal
The parties may always terminate the employment contract by mutual agreement without giving a reason. Since upon termination of the contract by agreement the employee has
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no right to receive unemployment insurance benefit, employment contracts are rarely terminated in Estonia on the basis of that.
The employer may cancel the employment contract on two grounds: for economic reasons deriving from the employer, for example, due to lay-offs and for reasons deriving from the employee.
Extraordinary cancellation of the employment contract due to the employee is permitted only for a good reason, due to which the continuance of the employment relation can no longer be presumed, especially if the health and skills of the employee do not correspond to the performed work (decrease in capacity for work), the employee loses the employer’s trust, repeatedly breached his or her duties, competes with the employer, etc.
It is presumed that the cancellation of the employment contract is preceded by a warning. An advance warning is not required if the employee has committed a very serious breach of work obligations, causes serious damage to the employer, loses the employer’s trust, etc.
If the employee’s contract is cancelled due to a decrease in his or her capacity for work (e.g., ill health or lack of skills), the employer shall offer other work to the employee, where possible, and if needed retrain the employee at its own expense.
In the case of cancelling the employment contract with an employees’ representative (working environment representative or trustee), it is necessary to turn to the trade union or employees who selected the person and to ask their opinion on the cancellation of the contract. The opinions of the employees and trade union shall be reasonably taken into consideration by the employer, or substantiated if not taken into consideration. The notification of state representatives on the cancellation is not required.
Estonian labour law favours a secure exit from an employment relation, thus, the employee shall be notified of the cancellation of the contract, if possible, 15 to 90 calendar days in advance depending on the duration of the employment relation.
The employment contract may be cancelled without an advance notification if the act committed by the employee is so serious that advance notice cannot be reasonably demanded from the employer. If a labour dispute resolution body establishes that the cancellation of the employment contract was unlawful, the employment contract shall be deemed as terminated as of the date it would have been terminated if the term for advance notice dependent on seniority had been followed. In this case the labour dispute resolution body shall order the payment of the compensation not received for the shorter notice term.
A special regulation has been established for persons who are pregnant and persons with the right to pregnancy and maternity leave. The cancellation of the employment contract due to declining health or lack of skills (e.g., due to a decrease in capacity for work) is not permitted with these persons. At the same time, if these persons cause damage to the employer or are competing with the employer, or commit some other breach, there are no restrictions for the extraordinary cancellation of the contract.
If a labour dispute resolution body establishes in a later dispute that the cancellation of the employment contract was unlawful, the employee has the right to demand to be reinstated in employment and average wages for the period of being absent from work. In the case of representatives of pregnant persons, persons who have the right to pregnancy and maternity leave, and employees, those requirements shall be met
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without argument. In the case of other, ‘ordinary’ employees, the employer has the right to contest the reinstatement application and to request the labour dispute resolution body to terminate the contract again and order the payment of a financial compensation to the employee. Another option for the employee is to waive the right to be reinstated, and to request the employment contract to be terminated once again, and compensation to be paid. In the case of ordinary employees, the compensation ordered for payment is three months’ wage, and for pregnant persons and employees’ representatives six months’ wage, which the labour dispute resolution body can increase or decrease.
In 2012, a court of first instance made an interesting decision on the size of compensation. The employee had been working for 18 years as a doctor in a hospital that cancelled the doctor’s employment contract extraordinarily without advance notice or compensation. The court established that the cancellation of the employment contract was entirely unfounded. Since the high technology equipment the doctor worked with existed only in two hospitals, one of which the doctor was having the dispute with, and in the other all positions were filled, the doctor was not able to find work in Estonia and had to go to Sweden to be employed. According to law, the employee is entitled to receive a compensation of three months’ average wage. The court found that it was an extraordinary situation, where the employee could not find work in the studied profession in the doctor’s home country, and had to leave family and a young child and commence work in another country due to the employer’s unlawful actions. The court decided that the ordinary compensation of three months should be doubled and ordered the payment of six months’ compensation, as well as an additional three months’ compensation for the shorter notice period.
ii Redundancies
The cancellation of an employment contract due to lay-off is permitted if the performance of the employment contract becomes impossible due to a decrease in the work volume or reorganisation of work or on other grounds arising from the employer (i.e., there is no work). A lay-off is also deemed to be the termination of an employment contract due to bankruptcy or liquidation of the employer.
The lay-off of pregnant persons, persons with a right to maternity leave, persons on parental leave and persons using an adoptive parents’ leave is not permitted, except in the case of liquidation or bankruptcy of the employer.
Employees’ representatives and employees who are raising a child under three years old have the preferential right of keeping their job. To select the person to be laid off, the remaining employees have to be compared, following the principle of equal treatment.
Another job, if possible, shall be offered to the person being laid off, and retraining, if required, at the employer’s expense. If a lay-off is inevitable, a declaration of cancellation due to lay-off shall be presented to the employee in writing or in a format that can be reproduced in writing (via e-mail for example). The cancellation of the employment contract shall be substantiated.
In the event of a lay-off, the employer shall provide employees 15 to 90 calendar days of notice, depending on the duration of the employment relation. If the termination of the employment contract is necessary immediately, the employer has to compensate
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financially for the shorter notice term. During the notification term, the employee has the right to a reasonable amount of free time to find new work.
Upon cancellation of an employment contract, the employer shall pay an employee compensation of one month’s average wage of the employee. If the employee has an employment history of over five years, the Estonian Unemployment Insurance Fund shall pay to the employee an additional compensation to the extent of one to three months’ average wages.
All laid-off persons have a right to be registered as unemployed and to apply for an unemployment insurance benefit (180 to 360 days depending on the insurance period), for which an insurance indemnity of 40 to 50 per cent of the former average wage is paid.
It is a case of collective lay-off if:a an employer with up to 19 employees cancels the contract with at least five
employees;b an employer with 20 to 99 employees cancels the contract with at least 10
employees; andc an employer with 100 to 299 employees cancels the contract with at least 10 per
cent of employees.
In the case of collective lay-off, the employer is obliged to start an information and consultation process with employees, trade unions and trustees and notify the national Unemployment Insurance Fund. The employer must notify the Estonian Unemployment Insurance Fund twice. The lay-off begins with informing the trustees or, in their absence, the employees. The employer must send a transcript of the information to the Estonian Unemployment Insurance Fund concurrently. After consulting with the employees, the employer must submit the results of the consultations and the names of the people being laid off.
If a later dispute reveals that the employer had no grounds for lay-off or that the requirements for selecting the person being laid off have been breached, or that no other available job was offered to the laid off person, etc., the employee has the right to request to be reinstated and be paid average wages, or a new termination of the contract and compensation (see the previous clause).
XIII TRANSFER OF BUSINESS
Council Directive 2001/23/EC on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses has been incorporated into the ECA of Estonia. The transfer of business should be preceded by the notification of the trustees and employees at least a month in advance, which launches the information and consultation process. Sections 112 and 113 of the ECA protect the employee in case of transfer of enterprise. According to law, employment contracts shall transfer to the transferee of an enterprise unamended if the enterprise continues the same or similar economic activities. A transferor and transferee of an enterprise are prohibited from cancelling an employment contract due to the transfer of the enterprise. See also Supreme Court decision 3-3-1-6-12 of 16 April 2012 (see Section III, supra).
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XIV OUTLOOK
On 1 January 2013, new ECA provisions will take effect, giving fathers paid paternity leave during a two-month period before or after the birth of a child (until 2013, paternity leave was not paid).
Great reforms are not expected to take place in Estonia in 2013. It is hoped that strike disputes that took place in March 2012 shall soon be settled by a court decision. A reform of collective labour relations is planned in 2014, during which the Collective Agreements Act and the Collective Labour Dispute Resolution Act will be modernised.
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Appendix 1
about the authors
Heli RAidveHeli Raidve Labour Law OfficeHeli Raidve graduated from Tallinn School of Economics (1994, Legal Studies, specialised in customs law), University of Õigusinstituut (2002, baccalaureus artium), and University of Tartu (2010, magister iuris).
Heli Raidve’s three main fields of operation are being the founding partner, chairwoman and lawyer of Heli Raidve Labour Law Office, being a faculty member of Tallinn University of Technology and being a mentor of the Estonian enterprise business mentor programme. Her daily job involves counselling employers and representing them in court and labour dispute committees.
Heli has participated in the coordinating workgroup of the Employment Contracts Act which came into force in 2009, she is the author or co-author of 11 books and has published over 90 articles. In the past four years she has given over 200 lectures about labour law, has performed in the Annual Meeting of Estonian Jurists, and has trained the chairpersons of labour dispute committees and judges.
In 2012, Chambers and Partners ranked Heli Raidve Labour Law Office as in the top 10 of Estonia’s best labour law specialists.
Heli RAidve lAbouR lAw officeGonsiori 25-12Tallinn 10147EstoniaTel: +372 646 2359Fax: +372 646 [email protected]
