Russia has a broad set of laws regulating labour relations between employers and employees. The main piece of legislation 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 towards 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 number of documents in hard copy to formalise hiring, promoting and demoting employees, disciplining them for violating job duties and employers' 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, which 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 that exceed 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 abusing their rights and that the aim of their claims is to obtain a golden handshake rather than having anything to do with violations of their employment rights. Nevertheless, each claim is resolved by the courts on a case-by-case basis. In the case of employment disputes on disciplinary dismissal, courts are required to analyse not only the formal grounds for the particular dismissal, but also the claimants' previous employment history with the employer concerned and whether they have been subject to formal disciplinary sanctions before their dismissal.
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 through employment dispute commissions
Under the Labour Code, employment dispute commissions (the Commissions) are formed by equal numbers of representatives of the employees and the employer.
Importantly, not all employment disputes may be resolved by the Commissions. Thus, under the Labour Code, an employee's claim relating to reinstatement at work, a transfer to another job, unlawful actions by an employer with regard to the processing of employees' personal data and an employer's claims for compensation of damage caused by an employee, etc. may only be referred to a court. In addition, all disputes relating to compensation for moral damage may 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, that 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 the 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 employment disputes are considered by courts.
Resolving individual employment disputes through the 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 particular types of employment disputes, as follows:
- for employees' claims for non-payment or incomplete payment of a salary or other amounts due – one year from the established payment date;
- for employees' claims relating to dismissal – one month from the date an employee received a termination order or work book from an employer;
- for other claims by employees – three months from the date the employee learned or should have learned of the violation of his or her rights; and
- for compensation claims by employers for damage caused by an employee to the employer – one year from the day the damage was revealed.5
It is possible to extend the limitations period if the court is provided with justifiable reasons for 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 from case to 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 for moral damage to the employee or request an employee to compensate for damage caused to the employer, among other things.
For instance, if the court finds that an employer has dismissed an 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 20,000 roubles6 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 has to be approved by a judge and entails termination of consideration of the dispute. Under the recent changes to the Russian Civil Procedure Code, which came into force on 25 October 2019,7 the requirements for the conclusion of settlement agreements, the content of settlement agreements and the approval procedure have been clarified.
In addition, this amendment to the Russian Civil Procedure Code introduced a new specific section dedicated to using conciliation procedures that the parties to a dispute (including labour disputes) may use to resolve their case. Previously the law provided a conciliation procedure in the form of mediation. Now, the list of procedures has been supplemented and includes the following: (1) negotiations; (2) using an intermediary (including the mediation procedure); (3) judicial conciliation; and (4) other conciliation procedures that are consistent with the law. The parties to a dispute may choose any conciliation procedure. As a rule, the reconciliation of the parties is possible at any stage of the civil proceedings and at the stage of the execution of a judicial act. Under the law, conciliation procedures may produce the following results: (1) the execution of a settlement agreement in respect of all or part of the claim; (2) partial or complete rejection of the claim; (3) partial or full recognition of the claim; (4) partial or full waiver of the appellate claim, cassation claim or supervisory appeal; or (5) recognition of the circumstances on which the other party bases its claims or objections.
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 an employer to take into account the opinion of the employees' elected representative body when adopting internal policies.8
The procedure for resolving collective labour disputes consists of two stages: (1) conciliation; 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.9 Compliance with the decisions adopted in the course of resolving collective disputes is obligatory for the 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.10
The Labour Code provides criteria for when employees or their representatives may organise a strike, which include: (1) when conciliation procedures did not lead to the resolution of the collective labour dispute; or (2) when 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.11 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 notification to an employer of a forthcoming 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 situations (e.g., during periods of military or emergency regimes or when conducting a strike would create a threat to the security of the state and to the life or 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, inter alia, the obligation to maintain public order during such actions. Any collective action conducted in violation of established requirements may be cancelled by authorised state bodies.
III TYPES OF EMPLOYMENT DISPUTES
There are various types of employment disputes 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 employees (including non-payment or incomplete payment of salaries and other amounts due to an employee upon termination of employment); and
- all other disputes, including:
- disputes over recognition of labour relations;
- disputes challenging disciplinary penalties;
- disputes over breaches of policies and contracts (not relating to non-payment of salaries or other monetary amounts);
- disputes over discrimination; and
- disputes over protection of employees' personal data.
Disputes over the non-payment or incomplete payment of salaries or other amounts due to employees have been the most common in past years. For instance, in 2018 and in the first half of 2019, this type of dispute accounted for about 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 for damage caused by employees during the performance of employment duties;
- disputes challenging orders and fines imposed by the state Labour Inspectorate and other state bodies in the context of employment relations;
- disputes over recognition of strikes as illegal and compensation for the damage caused by them; and
- disputes over contesting the actions of a trade union (e.g., refusal to consent to the dismissal of a trade union leader in certain instances).
IV YEAR IN REVIEW
The past year produced quite a number of significant cases with a direct effect on law enforcement practice and procedures. During 2019, the Supreme Court addressed a number of important employment law issues.
One of the most important decisions of the Supreme Court related to the rules of salary indexation.
Under the Russian Labour Code, companies should arrange for salary indexation in accordance with the procedure prescribed in an applicable collective bargaining agreement, in accords or in local policies. Indexing of salaries should reflect increases in consumer prices for goods and services.
In accordance with the previous position of the Supreme Court, the Russian Labour Code does not stipulate any requirements for the indexation mechanism. Therefore employers have the right to choose how to establish the conditions of the indexation and how to conduct it (including its frequency, the procedure for determining the value of the indexation and the list of payments subject to indexation) according to the specific circumstances of their activities and level of solvency. To calculate salary indexation accurately, it is necessary to take into account other factors that increase employee income (e.g., bonuses, merit increases and medical insurance),12 but previously it did not matter whether such other factors were specifically included in a company's policy on salary indexation.
However, in April 2019, the Supreme Court clarified that other factors or benefits that increase employee income (e.g., bonuses, merit increases and medical insurance) must be specifically included in a company's internal policy on the calculation of salary indexation.13 Otherwise, the company cannot be regarded as having implemented salary indexation and, accordingly, the employer can be required to increase salary even irrespective of having provided its employees with such additional benefits.
In another Resolution,14 the Supreme Court found that the Labour Inspectorate cannot impose a fine on an employer for violation of a procedure for imposing disciplinary sanctions on its employees. The Labour Inspectorate fined a company for violations made in the procedure of a disciplinary dismissal of an employee for absenteeism. The employer appealed the fine. The courts of the first and second instances supported the Labour Inspectorate and ruled that the fine was imposed correctly, but the Supreme Court upheld the company's appeal, ruling that the dispute over the employee's liability for disciplinary dismissal related to individual labour disputes, and could therefore be resolved only by labour dispute commissions or courts; the Court found that the Labour Inspectorate cannot impose administrative liability on an employer for the misapplication of a disciplinary sanction.
The Supreme Court also took this position in one of its later cases.15
The Supreme Court also addressed the issue of recovering damages from employees. An employer revealed that an employee had performed services for several former clients of the company, during the employee's working hours and using company software. The employee performed these services unofficially, for her own benefit and not for the benefit of her employer. As the company was not paid for the services, it went to court and tried to recover the money paid to the employee for these services. The first and second court instances supported the company, but the Supreme Court did not agree with their position. An employee can be held liable only if he or she has caused direct actual damage. Amounts that the employer did not receive from potential customers constitute lost profits. They cannot be recovered from the employee.16
In another case, the Supreme Court ruled that it is not permitted to recover damages from an employee if the terms of a financial liability agreement with an employee are not legally compliant.17
In another resolution, the Supreme Court found that an employee's childcare leave can be considered a due reason for missing a statute of limitations deadline. In 2014, an employee failed to receive a bonus but only went to court in 2017, after the expiry of the statute of limitations for this type of dispute (one year). The employee justified bringing the action after the expiry of the limit by the fact that she had been on maternity and childcare leave, and she filed relevant claims against the employer with the Labour Inspectorate and the Prosecutor's office. The lower courts did not accept this explanation and found that those circumstances could not serve as a due reason for missing the statute of limitations deadline. The employee had been aware of the violation of her rights for several years. Maternity and childcare leave did not prevent her from going to court, including through a representative. The Supreme Court did not support this approach and restored the statute of limitations. The employee's main responsibilities during maternity and childcare leave were to protect her health during pregnancy and to take care of her children. Furthermore, the Supreme Court did not agree that the employee could simply have sent a representative to court. The employee can choose whether to participate in the process in person or through a representative. It is not possible for this choice to be limited.18
The Supreme Court also extended the statute of limitations in a situation where an employee missed the deadline because he had applied to the Labour Inspectorate in a timely manner, expecting that the dispute would be settled out of court.19
As we noted in last year's edition, according to previous court practice, these circumstances were not usually accepted by the courts as grounds for extending the statute of limitations. This situation changed when the Supreme Court issued its Resolution No. 15 of 29 May 2018 'on the application by courts of legislation regulating the work of employees working for individual entrepreneurs and for small-sized enterprises that are classified as micro-enterprises'. Although the above clarifications were issued in relation to individual entrepreneurs and micro-enterprises, they have affected court practice in relation to all types of employers.
Finally, the Supreme Court also addressed a widespread practice of reducing employees' salaries while they are on a probationary period. An employee's employment agreement established that during the probation period, the employee received 60 per cent of the base salary. The employee filed a lawsuit against the company. The lower courts did not support the employee and held that if an employee has signed an employment agreement, the employee has agreed to its terms. The Supreme Court ruled that the employer must ensure equal pay to all employees for work of equal value, including those who are on probation. A condition that decreases the base salary during a probation period diminishes the employee's rights therefore it cannot be applied.20
V OUTLOOK AND CONCLUSIONS
i Developments to the procedure of consideration of employment disputes
In 2019, a couple of new laws21 came into force that introduced substantial changes to the judicial system and the consideration of labour disputes.
Under these laws, which were adopted back in 2018 but came into force last year, new independent cassation and appellate courts were created. As a result, the consideration of cases (including employment disputes) in appellate and cassation instances has changed.
Regarding complaints at the appellate level (i.e., complaints about court decisions that have not entered into force), under the new law, first instance decisions rendered by regional courts are now considered by the newly established appellate courts. The decisions of all other courts are considered at appellate level by the same courts as they were previously. The appellate instance reform is not significant for employment disputes as they are rarely considered by first instance regional courts (particularly decisions to render a strike illegal).
Regarding complaints at the cassation level (i.e., complaints about court decisions that have entered into force), this reform has affected employment disputes. Under the new law, all cases at the cassation level are now considered by the newly established cassation courts. The new law also sets out changes to the procedure for filing cassation claims. For example, a complaint to a cassation court needs to be filed within three months of the date of entry into force of the contested court judgment (this was previously a six-month term). The complaint must now be submitted to the cassation court through the court of first instance, whereas previously the complaint was submitted directly to the court considering the cassation claim.
With regard to both the appellate and cassation instances, all Russian regions have been divided into relevant court districts, so that each court is assigned to a particular district, and the decisions of that court should be considered by the relevant appellate and cassation courts of that district, subject to the above rules. In most cases, the appellate and cassation courts are not located in the same city as the court that rendered the contested decision. The aim of this is to ensure the impartiality of judicial decisions in appellate and cassation instances. Again, the division into court districts will not apply to the reconsideration of the majority of employment disputes in the appellate instance, except for cases considering strikes, etc. (see above). The majority of cases will be reconsidered in the same manner as they are now. However, reconsideration of employment cases in the cassation instance will follow the new procedure.
Pursuant to Resolution No. 3022 of the Supreme Court, the appellate and cassation courts commenced operation on 1 October 2019.
Pursuant to another federal law,23 which came into force on 1 October 2019, companies and individuals are now entitled to submit collective lawsuits to the courts to defend the rights and legitimate interests of a group of persons or companies, and this also applies to labour disputes.
A collective lawsuit may be submitted subject to the following conditions:
- there is a common defendant in relation to each member of the group;
- the subject of the dispute is the common or uniform rights and legitimate interests of members of a group;
- similar factual circumstances form the basis of the rights of the members of the group and the obligations of the defendant; and
- all members of a group use the same way of protecting their rights.
The collective lawsuit may be filed if the group consists of a minimum of 20 members. The new law regulates the peculiarities of the consideration of collective lawsuits as compared to lawsuits submitted by individual employees.
ii Foreseeable developments in resolving employment disputes
The current practice of considering employment disputes shows particular tendencies, some of which are favourable to employers and some to employees.
First, 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 disputes regarding payment of salary and other sums due to employees might increase further because of the increased limitations period in cases of this kind. 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 the expenses incurred by employers for representation in courts (e.g., if an employee lives in a different, remote region).
Russian courts currently have a unified approach with regard to protection of employees in the 'protected categories', especially pregnant women. Following a ruling by the Russian Supreme Court in 2014,24 the courts of general jurisdiction often reinstate pregnant women at work even if they were dismissed by mutual consent or voluntary resignation.
There are also some positive tendencies for employers. Increasingly, the courts are not content merely to adopt a formal approach when resolving disputes, but are deeply analysing the circumstances. This is particularly evident in disputes involving white-collar employees, whose salaries are usually quite high, so claims that their labour rights have been violated by an employer (e.g., with regard to the provision of an 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 when employees abuse their labour rights; for example, when employees try to use (and sometimes artificially create) a 'protected' status to impede a termination procedure against them (e.g., create trade unions when the dismissal 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 be several years before it becomes standard practice.
1 Elena Kukushkina is an of counsel and Georgy Mzhavanadze and Nina Mogutova are associates at Baker McKenzie CIS, Limited.
2 Article 394 of the Labour Code.
3 id., at Article 386.
4 id., at Article 390.
5 Article 392 of the Labour Code.
6 Roughly US$310.
7 Federal Law of 26 July 2019 No. 197-FZ 'On Amending Certain Legislative Acts of the Russian Federation' (see http://publication.pravo.gov.ru/Document/View/0001201907260004).
8 Article 398 of the Labour Code.
9 id., at Articles 399 to 404.
10 Article 37 of the Russian Constitution; Article 409 of the Labour Code.
11 Article 409 of the Labour Code.
12 Resolution of the Supreme Court of the Russian Federation No. 18-KG17-10 of 24 April 2017.
13 Resolution of the Supreme Court of the Russian Federation No. 89-KG18-14 of 8 April 2019.
14 Resolution of the Supreme Court of the Russian Federation No. 19-AD18-32 of 18 January 2019.
15 Resolution of the Supreme Court of the Russian Federation No. 19-AD19-6 of 13 September 2019.
16 Resolution of the Supreme Court of the Russian Federation No. 18-KG18-225 of 28 January 2019.
17 Resolution of the Supreme Court of the Russian Federation No. 69-KG18-23 of 25 March 2019.
18 Resolution of the Supreme Court of the Russian Federation No. 78-KG18-74 of 28 January 2019.
19 Para. 10 of 'Review of court practice of the Supreme Court of the Russian Federation No. 2 (2019)' (approved by the Presidium of the Supreme Court of the Russian Federation on 17 July 2019).
20 Resolution of the Supreme Court of the Russian Federation No. 18-KG19-77 of 19 August 2019.
21 Federal Law of 28 November 2018 No. 451-FZ 'On Amendments to Certain Legislative Acts of the Russian Federation' (see http://publication.pravo.gov.ru/Document/View/0001201811280063); Federal Constitutional Law of 29 July 2018 No. 1-FZ 'On Changes to the Federal Constitutional Law on the Judicial System of the Russian Federation and Separate Federal Constitutional Laws in Connection with the Creation of Cassation Courts of General Jurisdiction and Appellate Courts of General Jurisdiction' (see http://publication.pravo.gov.ru/Document/View/0001201807300021).
22 Resolution of the Supreme Court of the Russian Federation No. 30 of 12 September 2019 'On the Day the Cassation and Appeal Courts of General Jurisdiction and the Central District Military Court Begin to Operate'.
23 Federal Law No. 191-FZ of 18 July 2019 'On Amendments to Certain Legislative Acts of the Russian Federation' (see http://publication.pravo.gov.ru/Document/View/0001201907180055?index=0&rangeSize=1).
24 Clause 25 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 1 of 28 January 2014 'On the Application of Legislation Governing the Work of Women, Persons with Family Responsibilities and Minors'.