Russia has a broad set of laws regulating labour relations between employers and employees. The main piece of legislation governing labour relations is the 2002 Labour Code of the Russian Federation (the Labour Code), as amended. In addition to this core legislation, labour relations are regulated by other laws and numerous regulations, including Russian legislation on trade unions, work safety, status of foreign nationals and others. Some of these rules and regulations were adopted in the 1930s and are still effective.
Generally Russian labour legislation is considered more favourable to employees. It applies equally to regular employees and top managers, as well as to foreign nationals employed by Russian or foreign businesses in Russia. All employers operating in Russia must provide their employees with a set of mandatory minimum guarantees and employment-related benefits and compensations.
It is a common opinion that Russian labour legislation is more about form than substance. All employers must comply with a number of rigid and formal procedures prescribed by law and must issue a huge amount of documents in hard copy to formalise hiring, promoting and demoting employees, disciplining them for violating job duties and employer’s rules, and terminating their employment. However, the likelihood that courts will support scrupulous employers that comply with all required formalities, for instance in cases of employment termination, is rather high.
Moreover, the recent trend in court practice is to support conscientious employers, and this often relates to big multinationals that comply with Labour Code requirements and pay salaries to employees in a timely manner (their employees’ salaries are usually higher than the average salary in a particular region), as well as providing a number of other benefits exceeding the statutory minimum. This approach is becoming more and more widespread, especially in disputes with white-collar employees when it becomes evident to the court that employees are in fact abusing their rights and their claims are aimed at obtaining a golden handshake rather than having anything to do with violations of their employment rights.
Russian legislation entitles employees and employers to participate in individual employment disputes and collective labour disputes and sets out special procedures to resolve them.
i Resolving individual employment disputes
There are no special employment tribunals in Russia. Employment disputes are resolved by the courts of general jurisdiction. In addition, employment disputes may be heard by commissions on employment disputes.
Resolving individual employment disputes by commissions on employment disputes
Under the Labour Code, the commissions on employment disputes (the Commissions) are formed by representatives of the employees and the employer on a parity basis.
Importantly, not all employment disputes may be resolved by the Commissions. Thus, under the Labour Code, an employee’s claims on reinstatement at work, transfer to another job, unlawful actions of the employer with regard to employees’ personal data processing and the employer’s claims on compensation of damage caused by the employee, etc. may only be referred to a court. In addition, all the disputes on compensation of moral damage may also not be resolved by a Commission and should be referred to a court.2
The Labour Code establishes a three-month statute of limitations for claims referred to the Commissions.3 The specific procedure and rules of consideration of labour disputes by the Commissions are established in the Labour Code. The decision of a Commission is obligatory for the employer. However, if an employee or an employer is not satisfied with the Commission’s decision, the decision may be challenged in a court of general jurisdiction within 10 days of the date it was received by the employee or employer.4
The consideration of labour disputes by Commissions is not an obligatory step, so the employee may refer his or her claim directly to a court, omitting the submission of a claim to a Commission.
In practice, very few organisations form Commissions and most of the employment disputes are considered by courts.
Resolving individual employment disputes by courts
Employees and employers are entitled to commence a court action against each other on a number of issues when they believe the other party has violated their rights. When filing a lawsuit against an employer, employees do not have to pay a state fee.
The Labour Code establishes specific statutes of limitations for employment disputes. The following statutes of limitations apply for particular types of employment disputes:5
- for employees’ claims over non-payment or incomplete payment of a salary and other amounts due – one year from the established payment date;
- for employees’ termination-related claims – one month from the date the employee received his or her termination order or work book from an employer;
- for other employees’ claims – three months from the date the employee learned or should have learned of the violation of his or her rights; and
- for employers’ claims over compensation of damage caused by the employee to the employer – one year from the day the damage was revealed.
It is possible to restore the limitations period if the employee or employer provides the court with justifiable reasons explaining why it was missed.
The procedure for consideration of employment disputes by courts is strictly regulated by the Russian Civil Procedure Code. In general, a court considers the merits of a case and if it finds a violation of the claimant’s rights, the court will make a decision in favour of the claimant. The consequences of the decision will differ depending on the particular case. In particular, the court may request the employer to pay the salary or other sums due to the employee, reinstate the employee at work, compensate moral damage to the employee or request an employee to compensate damage caused to the employer, etc.
For instance, if the court finds that the employer has dismissed the employee in breach of law, the dismissal will be held to be illegal and the employee will be reinstated at work (if he or she so requests). If the dismissal is found to be illegal, the employer will be ordered to pay the employee his or her average earnings for the period from the date of dismissal until the date of reinstatement or the court’s decision. In addition, the reinstated employee is entitled to moral damages (in disputes over dismissal, moral damages are normally an insignificant sum of not more than US$300), as well as reasonable compensation for expenses incurred by the employee’s attorneys, who are, in practice, compensated in considerably low amounts.
The decision of the court of first instance may be challenged in an appellate court within one month of the date the final decision on the case was issued. If the decision is not challenged, it comes into force upon expiry of the term of appeal. Particular decisions on labour disputes (i.e., on the employee’s reinstatement at work and on payment of salary for three months) are subject to immediate execution (i.e., even prior to the date it comes into force).
Importantly, if the statute of limitations has expired by the time the lawsuit has been filed and if the other party so claims, this would serve as an independent basis for refusing to satisfy the claim unless the party manages to prove that it had valid reasons to have missed the statute of limitations. If the statute of limitations has expired, but the other party does not claim that the statute should be applied, the court cannot unilaterally apply the statute of limitations.
Importantly, the parties to an individual employment dispute may conclude a settlement agreement, in which they may specify mutually agreed terms on the settlement of the employment dispute. The settlement agreement is to be approved by a judge and entails termination of consideration of a dispute.
ii Resolving collective labour disputes
A collective labour dispute is a dispute between employees (their representatives) and employers (their representatives) regarding the establishment and change of working conditions (including salaries), the conclusion, modification and implementation of collective agreements and in connection with the refusal of the employer to take into account the opinion of the employees’ elected representative body when adopting internal policies.6
The procedure of resolving collective labour disputes consists of the following stages: (1) a conciliation procedure; and (2) consideration of a collective labour dispute with the involvement of an intermediary or in labour arbitration. A conciliation procedure is obligatory in the case of collective labour disputes and only if the parties did not reach an agreement within a conciliation procedure may they proceed with negotiations on resolving a collective labour dispute with the involvement of an intermediary or in labour arbitration. The Labour Code establishes specific rules for the consideration of collective labour disputes in any of the above procedures.7 Compliance with the decisions adopted in the course of resolving collective disputes is obligatory for employees and employers participating in these disputes.
The Russian Constitution and the Labour Code envisage employees’ right to a strike as one of the means of resolving a collective labour dispute.8
The Labour Code provides cases when employees or their representatives may organise a strike, which include cases when: (1) conciliation procedures did not lead to the resolution of the collective labour dispute; or (2) the employer (its representatives) either does not comply with the agreements reached by the parties to the collective labour dispute or does not comply with the decision of labour arbitration.9 During a strike, employees may temporarily refuse to perform their job duties (fully or partially). The Labour Code provides rather strict rules on conducting a strike (which include obligatory preliminary notification of an employer of an upcoming strike and the obligation of the parties to conduct negotiations during a strike to resolve a collective labour dispute). Importantly, employees are not allowed to conduct a strike in some cases (e.g., during periods of military or emergency regimes or when conducting a strike creates a threat to the security of the state, life and health of other people). If a strike is conducted in violation of any of the rules and procedures, it may be considered illegal by a court.
In addition, during the consideration and resolution of a collective labour dispute, employees have the right to hold meetings and demonstrations and picket in support of their claims. Importantly, these collective actions may only be conducted in accordance with the procedures established by Russian legislation and entail, in particular, preliminary registration with local state authorities and the obligation to maintain public order during such actions, etc. Any collective action conducted in violation of established requirements may be cancelled by authorised state bodies.
III TYPES OF EMPLOYMENT DISPUTE
There are various types of employment dispute that may arise in Russia.
Disputes that can be initiated by employees cover a vast range of aspects of employment relations and may be grouped as follows:
- unfair dismissal and reinstatement at work;
- disputes over the non-payment or incomplete payment of salaries or other amounts due to the employees (including non-payment or incomplete payment of salaries and other amounts due to an employee upon termination of employment);
- all other disputes, including:
• recognition of labour relations;
• challenging disciplinary penalties;
• breach of policies and contracts (not relating to non-payment of salaries and other monetary amounts);
• discrimination; and
• employees’ personal data protection, etc.
Disputes over the non-payment or incomplete payment of salaries or other amounts due to employees have been the most popular type of dispute in Russia in past years. For instance, in the first half of 2017, this type of dispute constituted around 90 per cent of all employment disputes in Russia.
Employers initiate disputes significantly less frequently. Disputes that can be initiated by employers may be grouped as follows:
- disputes over compensation of damage caused by employees during the performance of employment duties;
- challenging orders and fines imposed by the State Labour Inspectorate and other state bodies in the context of employment relations;
- recognition of strikes as illegal and compensation for the damage caused by them; and
- contesting of the actions of a trade union (e.g., refusal to consent to the termination of a trade union leader in certain instances), etc.
IV YEAR IN REVIEW
The end of 2016 and 2017 produced quite a number of significant legal developments and cases that have affected law enforcement practice and procedures themselves.
In 2016, Russia adopted several laws changing the procedures for the protection of employees’ rights and increasing the corresponding guarantees for employees.
On 3 July 2016, a law was adopted to introduce changes to the procedure for the resolution of labour disputes with employees (Law No. 272-FZ).10 This law entered into force on 3 October 2016. Law No. 272-FZ introduced changes to the Labour Code, Civil Procedure Code and Administrative Offences Code concerning employers’ obligations for the timely payment of salaries and other monetary amounts to employees.
Law No. 272-FZ has not only increased an employer’s monetary liability for delays in paying salaries and other amounts (payment for vacation, severance pay and bonuses, etc.) to an employee, but has also changed the procedural terms for the resolution of disputes over salary and other payments to employees.
Under previous regulations, employees had only three months to apply to a court with a claim over the non-payment or incomplete payment of salaries or other amounts due (including non-payment or incomplete payment of salaries and other amounts due to an employee upon termination of employment).
Law No. 272-FZ introduced changes according to which an employee may apply to a court within one year of the established payment date for any amounts due to him or her. That said, the general statute of limitations for other employment disputes remains the same – three months, and one month for termination-related disputes.
Further, Law No. 272-FZ amended the Labour Code and established a rule whereby if the employer fails to pay a salary or other amounts to an employee in a timely manner, the employee is entitled to receive interest (monetary compensation) in the amount of at least 1/150th of the Russian Central Bank’s key interest rate (currently -7.75 per cent) on the unpaid amount for each day of delay, starting from the day after the established payment date until the date of actual settlement (inclusive). The previous provision of the Labour Code provided for monetary compensation for this violation in the amount of 1/300th of the Russian Central Bank’s effective refinancing rate.
Another significant change introduced by Law No. 272-FZ is its amendment to the Russian Civil Procedure Code, under which lawsuits for the restoration of employment rights may also be filed with a court at the plaintiff’s (employee’s) place of residence. Under previous regulation, employees generally had to file employment lawsuits against their employers at a court having jurisdiction over the territory where the employer is registered. Now, when employees are entitled to choose between two courts, the employees tend to file lawsuits in the courts at their place of residence, not the place of the employer’s registration.
This new rule may become an issue when the employer and employee reside in different regions, as the employer will have to present itself before a court in another region of Russia. This is usually the case when an employee worked remotely (i.e., he or she did not go to the office) and was based in another region. This is always the case for sales companies and the pharmaceutical industry, whose salespersons and medical representatives are spread all over the territory of Russia. It may be the case that a company, registered in Moscow, will have to face an employment dispute initiated by an employee in any of Russia’s 85 regions (including Siberia or the Russian Far East). However, even if an employee used to work at the company’s office, he or she may have a registered address in another city or region and choose to file the lawsuit there. Employees were actively choosing this new option in 2017.
For some time after Law No. 272-FZ was amended, employers were trying to circumvent the new jurisdiction rules by introducing into employment agreements a rule on contractual jurisdiction under which all employment disputes with a given employee should be resolved at a court where the employer has its registered address.
However, the Supreme Court, in one of its cases, ruled that the inclusion of such a contractual jurisdiction limits the right of the employee to access justice and judicial protection and reduces the level of labour guarantees in comparison with that stipulated by law and, therefore, should not be applied.11 Although this ruling itself does not have a binding effect, it may serve as guidance for other courts and it is quite unlikely that other courts will interpret the law in a different manner.
During 2017, the Supreme Court addressed a number of other important employment law issues.
In one dispute over salary, the Supreme Court addressed salary indexation. Under the Labour Code, companies should arrange for salary indexation in accordance with the procedure prescribed in a collective bargaining agreement, accords or local policies. Indexing of salaries should reflect increases in consumer prices for goods and services.12 The interpretation of this rule still remains unclear as the Labour Inspectorates believe that employers must conduct annual indexation, while some courts believe that it is up to employers to decide whether this should be done.
In a given case, under the company’s policy, indexation at the company is only conducted if the company reaches certain economic performance indicators. Based on its economic results, the company decided not to conduct salary indexation of its employees, one of whom tried to challenge this in court.
According to the Supreme Court, the Labour Code does not make any stipulations regarding indexation mechanism requirements. Therefore, employers have the right to elect any way to conduct indexation and to set the conditions for its application (including its frequency, the procedure for determining the value of indexation and the list of payments subject to indexation) depending on the specific circumstances of their activities and their level of solvency. The Court also stated that indexation itself is not the only way to ensure a wage increase – other ways may include, for example, paying bonuses. In the case discussed, the Court ruled that the company acted in accordance with its policy and was not obligated to index the salary of the employee.13
In another resolution, the Supreme Court considered a claim over severance payment resulting from termination. The employee, who was employed in the Far North of Russia, was terminated because of staff redundancy. Under Russian law, in cases of staff redundancy in the Far North of Russia (or equivalent territories), employers are required to pay the employees severance pay in the amount of one of their monthly average salaries. If the employee confirms that he or she is still unemployed within three months of termination, the employer must pay him or her a second and third severance payment. In exceptional cases, the average monthly salary should be retained in the fourth, fifth and sixth months after the date of termination, provided that there is a corresponding decision by the employment centre and that within one month of termination, the employee applied to the employment centre and was not employed.14
In the present case, the employee claimed that the ex-employer failed to provide him with severance pay for the fourth, fifth and sixth months of unemployment after redundancy, even though the employee was not able to find new employment and was registered with the employment centre.
However, the Supreme Court noted that employers are not by default obligated to pay severance pay for the fourth, fifth and sixth months of unemployment. For such a payment, there has to be exceptional circumstances and the employment centre did not prove that such circumstances existed in this case. Exceptional circumstances for such severance pay to apply include the following: social insecurity of the dismissed employee, the employee’s lack of livelihood and dependency of disabled family members. Thus, the fact that the person is unemployed cannot serve, by itself, as a ground for additional severance payments.15
The above position may also be applied to severance pay for the third month after redundancy in other regions of Russia (i.e., not the Far North or equivalent territories), where overall severance pay is more limited.
Another noteworthy case considered by the Supreme Court related to the recognition of a services contract as an employment agreement.
In a case where several persons were engaged by a company under services contracts and claimed recognition of their actual employment relations, the Supreme Court named the distinctive features of an employment agreement and a services contract.
Thus, according to the Supreme Court, a services contract has the following main features:
a the purpose of a services contract is to obtain a concrete result, and not to perform work as such;
b the contractor remains an independent party and acts at its own risk.
On the other hand, when a person performs work under an employment agreement, he or she:
- a undertakes to perform a certain labour function;
- b is included in the staff of the company;
- c should follow the work regime;
- d works under the supervision and guidance of the employer; and
- e should not bear labour-related risks.16
Furthermore, in 2017, Russian courts increased the protections available for pregnant women.
Russian law prohibits staff redundancy of pregnant women (as well as termination of employment on any other grounds on the company’s initiative, except in the case of liquidation of the company).17 In quite a number of cases, the courts have reinstated women at work when their employment had been terminated on the company’s initiative and at the time of termination they were pregnant, even if the company was not aware of the employee’s pregnancy or the employee was no longer pregnant by the time the employee’s claim for reinstatement at work was considered in court.18
V OUTLOOK AND CONCLUSIONS
i Developments to the procedure of consideration of employment disputes on the horizon
The Russian parliament (the State Duma) is currently considering a number of relevant draft bills that are supposed to change procedures for resolving employment disputes.
The first one relates to increasing the statute of limitations for employment disputes.
Under this bill, the statute of limitations for employment disputes will increase from one to three months for disputes related to employment termination, and from three to six months for other individual employment disputes. The statute of limitations for disputes related to payment of salary and other sums due to an employee remains the same.19
Under the second bill, the Russian Labour Inspectorate would be able to apply to a court in the interests of employees.
Currently, the Labour Inspectorate has the authority to monitor employers’ compliance with labour legislation and may issue obligatory prescriptions for employers on the elimination of violations of labour legislation, and consider cases on administrative violations, etc. On the other hand, the Labour Inspectorate may not apply to a court in the interests of employees. Under the bill, the Labour Inspectorate will be able to file lawsuits with courts in protection of an employee’s violated rights and to represent employees in the proceedings. This will relate to any employee disputes, including those related to payment of salary and other sums due to employees.20
The third bill sets out an alternative way of considering individual employment disputes, in addition to their referral to the Commissions and courts.
Under the bill, individual employment disputes may be resolved through mediation procedures. While such procedures have been provided for by Russian legislation since 2010, they have not been applicable to employment disputes, and this approach changes under the draft bill. Importantly, the bill provides that if an employee or employer refers a claim to a mediator, the running of the relevant limitations period for submission of a claim to a Commission or court will be interrupted for the whole period the mediation procedure is conducted.21
Regardless, the above draft bills are currently only being considered by the State Duma and, if adopted, their final versions may substantially change during consideration.
ii Foreseeable developments of resolving employment disputes
The current practice of consideration of employment disputes shows particular tendencies, some of which are favourable to employers and some to employees.
First of all, employees in Russia are currently actively applying recent legislative changes on resolving employment disputes that are more favourable to them (in particular, those related to the venue for hearing employment disputes and extension of the statute of limitations). We believe that the number of employment disputes over payment of salary and other sums due to employees might increase further because of the increased limitations period in such cases. In addition, employees have already been using their right to submit lawsuits at the place of their residence and will continue doing so, which might in turn increase employers’ expenses related to representation in courts (e.g., if an employee lives in a different, remote region).
Also, Russian courts currently have a unified approach with regard to protection of employees in ‘protected categories’, especially pregnant women. Following the recent ruling of the Russian Supreme Court,22 the courts of general jurisdiction often reinstate such women at work even if they were terminated by mutual consent or voluntary resignation.
At the same time, there are also some positive tendencies for employers. Increasingly, the courts are not content merely to adopt a formal approach when resolving employment disputes, but rather are deeply analysing the actual circumstances of cases. This is evident in particular in disputes with white-collar employees, whose salaries are usually quite high, so claims that their labour rights were violated by the employer (e.g., with regard to the provision of some additional, usually non-guaranteed, benefit or bonus) are most likely to be considered unfounded by courts. In the same way, courts are increasingly tending to take the employer’s side in cases when employees abuse their labour rights. This relates, for example, to cases when employees try to use (and sometimes artificially create) a ‘protected’ status to impede a termination procedure against the employees (e.g., create trade unions when the termination procedure against them has been already launched, or take long-term sick leave).
We believe these tendencies will develop further in the near future.
Finally, Russia is in the process of implementing an ‘electronic justice’ system in courts of general jurisdiction, which is intended to reduce paperwork in overburdened courts by enabling court documents to be exchanged online. The system has not yet been fully implemented and we expect it might take several years to become standard practice.
1 Elena Kukushkina is a counsel and Georgy Mzhavanadze and Nina Mogutova are associates at Baker McKenzie – CIS, Limited.
2 Article 394 of the Labour Code.
3 Ibid., Article 386.
4 Ibid., Article 390.
5 Article 392 of the Labour Code.
6 Article 398 of the Labour Code.
7 Ibid., Articles 399–404.
8 Article 37 of the Russian Constitution, Article 409 of the Labour Code.
9 Article 409 of the Labour Code.
10 Federal law No. 272-FZ of 3 July 2016 on changes to various legislative acts of the Russian Federation increasing employer liability for violations of laws on employee salaries.
11 Resolution of the Supreme Court of the Russian Federation No. 75-KG17-4 of 14 August 2017.
12 Article 134 of the Labour Code.
13 Resolution of the Supreme Court of the Russian Federation No. 18-KG17-10 of 24 April 2017.
14 Article 318 of the Labour Code.
15 Resolution of the Supreme Court of the Russian Federation No. 69-KG17-12 of 17 July 2017.
16 Resolution of the Supreme Court of the Russian Federation No. 66-KG17-10 of 25 September 2017.
17 Article 261 of the Labour Code.
18 Appeal Ruling of the Moscow City Court of 7 June 2017, Case No. 4g/10-6037/17; Appeal Ruling of the Moscow City Court of 8 June 2017, Case No. 3318213/2017.
19 Draft bill No. 140464-7 (http://asozd2.duma.gov.ru/main.nsf/(Spravka)?OpenAgent&RN=140464-7).
20 Draft bill No. 269898-7 (http://asozd.duma.gov.ru/main.nsf/(Spravka)?OpenAgent&RN=269898-7).
21 Draft bill No. 323191-7 (http://sozd.parlament.gov.ru/bill/323191-7).
22 Clause 25 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of 28 January 2014 No. 1 ‘On the application of legislation governing the work of women, persons with family responsibilities and minors’.