The Labour and Employment Disputes Review: Russia

Introduction

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.

Nevertheless, the recent trend in court practice is to support employees and prevent their dismissal even in the case of employer's compliance with the formal procedures, especially in cases related to disciplinary dismissals. In the case of employment disputes concerning disciplinary dismissal, courts are required to analyse not only the formal grounds for the particular dismissal but also the claimant's previous employment history with the employer concerned and whether they have been subject to formal disciplinary sanctions before their dismissal.

In other employment disputes, courts thoroughly consider an employer's compliance with the formal procedure and, even in the case of a small procedural violation, make decisions in favour of the employee. Nevertheless, each claim is resolved by the courts on a case-by-case basis.

Procedure

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 situations such as, for example, reinstatement at work, a transfer to another job, unlawful actions by an employer regarding the processing of employees' personal data and an employer's claims for compensation of damage caused by an employee, 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:

  1. for employees' claims for non-payment or incomplete payment of a salary or other amounts due – one year from the established payment date;
  2. for employees' claims relating to dismissal – one month from the date an employee received a termination order or work book from an employer;
  3. 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
  4. 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. The court decisions that have entered into force may challenged in the cassation courts within three months of the date of entry into force of the contested court judgment.

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.

In addition, under the Russian Civil Procedure Code, there is a specific section dedicated to using conciliation procedures that the parties to a dispute (including labour disputes) may use to resolve their case. The list of procedures 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.7

Also under Russian law companies and individuals are 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:

  1. there is a common defendant in relation to each member of the group;
  2. the subject of the dispute is the common or uniform rights and legitimate interests of members of a group;
  3. similar factual circumstances form the basis of the rights of the members of the group and the obligations of the defendant; and
  4. 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.

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 (or 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.

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:

  1. unfair dismissal and reinstatement at work;
  2. 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
  3. 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 2019 and in the first half of 2020, this type of dispute accounted for about 83 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:

  1. disputes over compensation for damage caused by employees during the performance of employment duties;
  2. disputes challenging orders and fines imposed by the state Labour Inspectorate and other state bodies in the context of employment relations;
  3. disputes over recognition of strikes as illegal and compensation for the damage caused by them; and
  4. 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).

Year in review

The past year produced quite a number of significant cases with a direct effect on law enforcement practice and procedures. During 2020, the Supreme Court addressed a number of important employment law issues and summarised them in its Review of court practice.12

A large number of important decisions of the Supreme Court related to imposing disciplinary sanctions and disciplinary dismissals of the employees. In general, Russian courts always used to be quite formalistic when considering such types of disputes. Mainly they only checked whether the employer complied with a formal procedure for imposing a disciplinary penalty. However, the Supreme Court urged the courts to not only check the employers' compliance with a formal process, but also take into account various informal factors (such as humanism and fairness). Thus, employers cannot rely only on formal circumstances of an employee's violation when taking a decision on disciplinary dismissal of the employee.

Under the Russian Labour Code, employers can dismiss employees for a repeated failure to perform job duties if an employee was already subject to a formal disciplinary penalty within one year. In one of the cases, which was subject to the Supreme Court's review, the employee committed a breach of labour discipline for which she was subject to a formal reprimand. Three days later, the employee committed another breach of her job duties and the employer dismissed her for a repeated violation. The courts of the first and second instances supported the employer and ruled that the dismissal was conducted correctly, but the Supreme Court supported the employee's appeal, cancelled the resolutions of the lower courts and ordered the court of the first instance to review the case once again. The Supreme Court ruled that the employer did not take into account the severity of the employee's misconduct, the circumstances in which it was committed, and the employee's previous behaviour and her attitude to work. The Court also noted that the very fact of a repeated failure to perform job duties is not a sufficient reason for a dismissal if the above circumstances were not taken into account.13

The Supreme Court also took this position in a number of other cases.14

In another case, the employee was absent from work for two days, after which she took official sick leave. While the employee was on an official sick leave certificate, the employer asked her to explain the reasons for her absence during the said two days not covered by sick leave. The employee provided her explanations and when the sick leave was over, the employer dismissed her for an unjustified absence from work. The employee appealed the dismissal and the court of the first instance recognised that the dismissal has been unlawful. However, the court of the second instance upheld the employer's appeal. The Supreme Court cancelled the appeal ruling and ordered the court of the second instance to reconsider the case. In particular, the Court noted that written explanations about the reasons of the violation cannot be requested from the employee during a sick leave (although formally this is not prohibited by Russian law). In addition, the Supreme Court found that before applying a disciplinary penalty (e.g., a dismissal), employers must examine a possibility of a less severe punishment based on such principles as fairness, proportionality and common humanity and, in that particular case, the employer failed to do that.15

The Supreme Court also stressed the importance of employers properly formalising the disciplinary penalties. An employee was dismissed for a repeated breach of his job duties. When formalising the dismissal, the employer failed to reflect in the human resources (HR) order on dismissal a particular violation committed by the employee that was a reason for the dismissal. Based on that, the court of the first instance recognised the dismissal as being unlawful and reinstated the employee. However, the court of the second instance upheld the employer's appeal. According to the court's ruling, the employer managed to show the court that the employee had in fact breached his job duties and thus there were grounds for his dismissal, while the mere fact of an absence of a description of the violation in the HR order on dismissal could not serve as grounds for recognising the dismissal as being unlawful. However, the Supreme Court cancelled the appeal ruling and ordered the court of the second instance to reconsider the case. The dismissal order does not allow to understand for what particular violation the employee was dismissed. The court cannot independently determine this even if the employer provides its explanations and relevant evidence in the hearings. The employer must reflect in the HR order on a disciplinary penalty the following information: misconduct for which the employee was punished, circumstances of the misconduct, the period when the misconduct was committed, documents that served as the basis for a disciplinary penalty.16

The Supreme Court also addressed the issue of staff redundancy. Under Russian law, before dismissing employees because of staff redundancy, the employer must offer them any vacancies available in a particular location and suitable for the employees based on their qualifications and health. According to the Supreme Court, if several employees apply for a vacancy, the employer cannot arbitrarily choose which employee can be offered a vacancy. The choice must be made taking into account the employee's pre-emptive right to remain employed. The choice must be made in favour of those employees who have higher productivity and skills. If those indicators are equal for several employees, the employer must take into account their family status and other similar criteria.17

Finally, the Constitutional Court took an important decision that addressed a widespread practice of concluding fixed-term employment agreements. Under Russian law, there are a limited number of grounds for concluding a fixed-term employment agreement instead of an indefinite-term agreement. One of these is that a fixed-term agreement can be concluded when an employee is hired for a particular project that will take place within a fixed period. This basis is widely used by employers (especially by manpower agencies) to cover de facto staff leasing, which is subject to strict limitations in Russia. In particular, the manpower agencies enter into services contracts with their clients under which the employees, formally hired by a manpower agency, perform work for the agency's client. The employment agreements are concluded for a fixed term linked to the duration of the relevant services contracts between the agency and the client. The Constitutional Court ruled that the employer cannot enter into a fixed-term employment agreement in connection with the performance by the company of a civil law contract for the provision of services, if the provision of such services relates to the usual activities of the formal employer. The limited duration of a civil law contract concluded by the formal employer with its clients is not a sufficient basis for concluding fixed-term employment agreements with the employees.18

Outlook and conclusions

i Foreseeable developments in resolving employment disputes

The current practice of regarding resolution of employment disputes shows particular tendencies, some of which are favourable to employers and some to employees.

Russian courts still have a unified approach regarding protection of employees in the 'protected categories', especially pregnant women. Following a ruling by the Russian Supreme Court in 2014,19 the courts of general jurisdiction often reinstate pregnant women at work even if they were dismissed by mutual consent or voluntary resignation.

Also, as noted above, in disputes over illegal dismissals of employees on disciplinary grounds (or imposing disciplinary sanctions on employees) courts tend to analyse in detail whether the employers took into account all the circumstances (including the employee's previous behaviour and attitude to work, possibility to apply less severe sanctions, etc.).

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., regarding 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, take long-term sick leave or do not provide the employer with a sick leave certificate on the termination date and later claim that their termination during a sick leave was illegal, etc.). Should these facts be established by a court, most likely, the court would support the employer.

We believe these tendencies will develop further in the near future.

As regards anticipated legal developments, the Russian parliament is currently considering a draft bill changing the procedure for claiming compensation for moral harm within labour disputes. Under the bill, a claim for compensation of moral harm in cases of violations of labour rights may be filed not only simultaneously with the main claim regarding the rights, but also within three months of the entry into force of the court decision by which these rights were fully or partially restored.20

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 and also to allow participants of court proceedings to attend by videoconference. The system has not yet been fully implemented, however, as there are currently certain legal developments on the issue. The draft bill regulating the electronic justice procedure is undergoing public hearings.21

Footnotes

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 Approximately US$270 (as at March 2021).

7 Article 153.7 of the Civil Procedure Code.

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 Review of the court practice on disputes related to the termination of employment at the initiative of the employer, approved by the Resolution of the Presidium of the Supreme Court of the Russian Federation on 9 December 2020.

13 id., Section 5.

14 id., Sections 6, 10, 11, 15, 16, 17.

15 id., Section 7.

16 id., Section 10.

17 id., Section 4.

18 Resolution of the Constitutional Court of the Russian Federation No. 25-P of 19 May 2020.

19 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'.

20 Draft of Federal Law On amendments to Articles 391 and 392 of the Labor Code of the Russian Federation (https://sozd.duma.gov.ru/bill/1075006-7).

21 Draft Federal Law On amendments to the Arbitration Procedure Code of the Russian Federation, the Civil Procedure Code of the Russian Federation, the Code of Administrative Procedure of the Russian Federation and other legislative acts of the Russian Federation (https://regulation.gov.ru/projects#npa=109498).

Get unlimited access to all The Law Reviews content