CIS Legal Update - September 2013: Notable Developments in Russian Employment Law

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Significant New Amendments to the Russian Labor Code

During the first half of 2013, a number of amendments were introduced into the Russian Labor Code. These amendments relate to remote employment, production councils (described below), and certain categories of employees of the state, non-budgetary funds, and public institutions.

Rules for Remote Employment

On April 19, 2013, the Russian Labor Code was amended by Chapter 49.1, which introduced provisions regulating remote employment. Remote employment is defined in Chapter 49.1 as employment that involves employees working outside of a location under the employer’s control. Until now, despite widespread use of remote employment in Russia, issues arising from such employment had never been addressed by Russian legislation. The new provisions include:

a) definitions for “remote employment” and “remote employees”;

b) specific provisions concerning the conclusion, amendment, and termination of employment contracts with remote workers. For example, employment contracts may be entered into, amended, and terminated via the Internet. Moreover, additional grounds for termination comparable to those provided under the law may be included in the employment contract;

c) regulations on the organization of labor and on occupational safety; and

d) regulations on remote employees’ working hours and holiday entitlements.

It is unclear, however, how this new chapter in the Russian Labor Code will operate simultaneously with provisions in the Russian Tax Code that require Russian companies to register separate subdivisions if they have employees operating in fixed locations other than the employer’s registered office. This issue will need to be clarified by lawmakers in the near future.

Production Councils

As of May 19, 2013, employers may choose to establish production councils. A production council is a consultative body, composed of the company’s employees participating on a voluntary basis, which advises on ways to improve productivity and processes, and install new technologies. The procedure for forming a production council and defining the scope of its authority must be established in the employer’s internal regulations. A production council cannot have powers overlapping with those of a labor union.

Additional Rules for State Employees and Employees of Non-Budgetary Funds (i.e. non-budget financed state funds) and general directors of Public Institutions (i.e. state-financed institutions)

As a result of recent anti-corruption legislation, the Labor Code has been amended to include a number of provisions imposing restrictions on state employees (including employees of non-budgetary funds) and general directors of public institutions. These new amendments mandate that:

a) the employment contract with a general director of a public institution must be concluded in the standard form provided for by Russian law;

b) any applicant for the position of general director at a public institution must provide information about the applicant’s income, property, and liabilities and those of the applicant’s spouse and children( moreover, if hired, the applicant must continue to make these disclosures on an annual basis); and  

c) state employees and employees of non-budgetary funds – along with their spouses and children – are prohibited from opening accounts with and depositing money or valuables in foreign banks.

The Labor Code has also been amended to include a new basis for terminating employment of the above-listed employees. Employment can now be terminated by the employer for breach of requirements (b) and (c) above and/ or for failing to take measures to prevent or settle any conflict of interests to which the employee is a party.

Foreign Employees Qualifying for Temporary Residency No Longer Need a Work Permit

Federal Law No. 320-FZ dated December 30, 2012, removed the requirement that foreign nationals qualifying for temporary residency (i.e. holding a special permit for temporary residence) obtain a work permit in Russia. This was generally viewed as an unnecessary administrative barrier for foreign employees and has now been eliminated.  Thus, workers with temporary residency are now on the same footing as workers with permanent residency, and are not required to obtain a work permit.

Discriminatory Conditions in Job Advertisements May Lead to Administrative Liability

Russian legislation previously did not address job advertisements that contained discriminatory conditions.  As of July 14, 2013, Federal Law No. 162-FZ, dated July 2, 2013, confers administrative liability in the amount of up to USD 300 on an employer for job advertisements that contain discriminatory conditions (relating to gender, race, color, nationality, language, etc.).

Rules on Entry of Foreign Citizens into Russia Become Stricter

By Federal Law No. 224-FZ, dated July 23, 2013 (which came into force on August 3, 2013), the rules on the entry of foreign citizens into Russia have been amended. The Federal Law aims to reduce illegal immigration into Russia and provides for the preemptory denial of entry to foreign citizens who have been repeatedly held liable for administrative offences and who have a record of public order offenses or of violating residency and employment requirements for foreign citizens in Russia. In addition, the length of time for which entry may be denied has been increased. Foreign citizens who are evicted, deported or readmitted to their original country from Russia will be denied entry for a period of 5 years. Denial of entry for 10 years will be considered for foreign citizens who are repeatedly evicted, deported, or readmitted (up from 5 years previously).

Draft Law: Rules for Agency Labour (Rus. ??????? ????) Passes Second Reading

Agency labour is currently unregulated by Russian law despite its widespread use by employers (such as in the context of secondment/outsourcing arrangements). The relevant provisions regulating agency work, which are to be introduced by Draft Law No. 451173-5, passed their second reading in the Russian State Duma on April 26, 2013 (the third reading of the Draft Law is scheduled for September 20, 2013). Most notably, the Draft Law would allow for secondments, provided that they are performed within a parent or its subsidiary company, or arranged by private employment agencies under certain conditions. If adopted, this would be a significant change in labour legislation as it would clarify the legal requirements for arranging secondments/outsourcing.

Draft Law: Increased Statute of Limitations for Employment Disputes

Current Russian legislation provides for a three-month statute of limitations during which an employee has the right to bring a claim with respect to an employment dispute, except in a dispute related to the dismissal of an employee in which a one month statute of limitations applies.  For example, in cases involving a non-payment of salary, an employee is given three months from the date when he knew or should have known of the breach of his rights during which he has the right to challenge the salary non-payment in court. However, in cases where an employee challenges the grounds for the termination of his employment, the statute of limitations is limited to one month.

However, since employees often initially prefer to bring their claims to a prosecutor’s office or to the state labor inspectorates rather than before a court, many employees miss the statute of limitations and are unable to present their claim in their preferred forum. As a potential remedy to this, the Russian State Duma is now considering a draft law to increase the three month period to six months, and the one month period (in the case of certain employees) to three months. This draft law is now at the initial stage in the Russian State Duma and will likely be considered in October 2013.


CASE LAW

Revoking Resignation Letter is Possible if Replacement Has Not Accessed State Secrets

Under Article 80 of the Russian Labor Code, an employee cannot revoke his/her resignation letter (in Russia a resignation letter may be filed by an employee two (2) weeks in advance of the final day of work and may be recalled within that term) if another person has already been hired to hold the soon to be vacant position. The question of whether the old or new employee should be denied employment in the above scenario has been repeatedly considered by the Russian courts. In Ruling No. 5-?11-199? of 20 January, 2012, the RF Supreme ?ourt eventually clarified this issue and held that a resignation letter may be revoked, regardless of whether the new employee was offered the position, if the new employee did not access any state secrets when such access was required as part of the job on his new position.

Dismissing a General Director Does Not Require That Grounds for Dismissal Be Revealed

Russian labor legislation contains special rules about the employment and dismissal of the general director of a company. Article 278 of the Russian Labor Code, for example, provides for the dismissal of a general director based on a decision of the company’s authorized body or the company’s owner. Many general directors dismissed in this manner seek reinstatement, arguing that the employer revealed no justifiable grounds for the dismissal. In Appellate Ruling No. 33 – ???13-1, dated February 22, 2013, the RF Supreme Court confirmed that the termination of a general director’s employment at the employer’s discretion does not require the employer to reveal the reasoning behind its decision because this Article does not require a breach of duty to have been committed. Thus, general directors in Russia can be dismissed at any time. However, if the general director is dismissed under Article 278 of the Russian Labor Code, the employer must pay severance in an amount of no less than three months’ salary (Article 279 of the Russian Labor Code).

Definition of “Similar Offenses” Provisionally Clarified

Article 5.27 of the Russian Code on Administrative Offenses provides for the disqualification of a company official from holding equivalent positions for a period of one (1) to three (3) years for committing a “similar offense” under Russian employment law. The term “similar offense” and its practical definition have been widely disputed. In Resolution No. 70-??12-1 dated September 19, 2012, the RF Supreme Court clarified this issue by confirming that a company official (such as a general director) must be held liable for the exact same offense at least twice for the offense to be considered a “similar” offense, thereby entailing a punishment in the form of disqualification for 1-3 years. In this respect a company official that commits two non-identical offenses, for example, would not be subject to disqualification as the offenses are not similar. In the above Resolution, the RF Supreme Court upheld the disqualification of a general director who had already been held liable for failure to pay salary to his employees in a timely manner (the repeated failure to issue salary payments constituted a “similar offense” in the opinion of the court).

Topics:  International Labor Laws, Russia

Published In: Civil Procedure Updates, Civil Rights Updates, Immigration Updates, International Trade Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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