International Employment Law Review: August 2013 - Issue 4: Recent Employment Law Developments in Russia

by Dechert LLP


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, and certain categories of employees of the state, of non-budgetary funds, and of 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 remote employment had never been addressed by Russian legislation. The new provisions include:

  1. definitions for “remote employment” and “remote employees;”
  2. 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;
  3. regulations on the organization of labor and on occupational safety; and
  4. 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 have the right 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 the means to improve production activity and processes, install new technologies, and increase labor productivity. 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 labor unions.

Additional Rules for State Employees and Employees of Non-Budgetary Funds (i.e. non-budget financed state funds) and CEOs 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 CEOs of public institutions. These new amendments mandate that:

  1. the employment contract with a CEO of a public institution must be concluded in the standard form provided for by Russian law;
  2. any applicant for the position of CEO 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;
  3. 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 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. The result places workers with temporary residency on the same footing as workers with permanent residency in this respect.

Discriminatory Conditions in Job Advertisements May Lead to Administrative Liability

Russian legislation previously did not address job advertisements that contain 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 the 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 (coming into force on August 3, 2013), the rules on the entry of foreign citizens into Russia have been amended. The Federal Law aims to mitigate illegal migration into Russia and provides for the peremptory 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 Work Passes Second Reading

Agency work is currently unregulated by Russian law despite its widespread use by employers (such as in the context of secondment/outstaffing 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 will allow for secondments, provided that they are performed within a parent or subsidiary company or its subsidiary, or as arranged by private employment agencies under certain conditions.

Draft Law: Increased Statute of Limitations for Employment Disputes

Current Russian legislation provides for a 3-month statute of limitations for employment disputes, except in disputes related to the dismissal of an employee, in which a one month statute of limitations applies. However, since employees often prefer initially to bring their claims to a prosecutor’s office or to 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. In response, 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 an employee’s dismal) 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

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

Under Article 80 of the Russian Labor Code, an employee who rescinds his 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) should be dismissed if another person has already 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 Russian courts. In the January 20, 2012 Ruling No. 5-?11-199?, the RF Supreme ?ourt held that a resignation letter may be rescinded, 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 CEO Does Not Require That Grounds for Dismissal Be Revealed

Russian labor legislation contains special rules about the employment and dismissal of the CEO of a company. Article 278 of the Russian Labor Code, for example, provides for the dismissal of a CEO based on a decision of the company’s authorized body or the company’s owner. Many CEOs 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 CEO’s employment at the employer’s discretion does not require the employer to reveal the reasoning behind its decision because it is not deemed as a measure of legal liability. This means that a CEOs in Russia can be dismissed at any time. However, if the CEO is dismissed under Article 278 of the Russian Labor Code, the employer has to pay a severance payment in the amount not less than three months of 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 equal positions for the period of one (1) to three (3) years for committing a “similar offense” in the area of 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 confirmed its previous position, stating that the term refers to a similar offense committed by the company’s official, rather than any other breach of employment legislation. In the case under discussion, the RF Supreme Court upheld the disqualification of a CEO who repeatedly failed to pay a salary in a timely manner.

Written by:

Dechert LLP

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