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Transactions

1 Jul 2017

On 1 July 2017, a new Labour Code came into force. Here is an overview of the main novelties of the code.

New Types of Employment Contracts

New types of employment contract are now available: Apprenticeship Employment Contract, Project Employment Contract, Work-Linked Training Employment Contract.

Liberal Approach on Fixed-Term Contracts

The new Labour Code provides that the maximum term of one Fixed-Term Contract shall be 2 years and in case the Fixed-Term Contract with an employee is concluded for performance of several different functions, the maximum term shall be 5 years. It is now possible to conclude Fixed-Term Contracts for regular work, but the number of Fixed-Term Contracts in the company shall not exceed 20% of the total amount of employment contracts at such company. 

Employer’s Obligation to Improve the Qualification of its Employees

The employer shall improve the employees’ qualification as much as it is needed for due execution of employee’s functions. The employers will have to take up measures to improve the qualification of their employees and improve the employees’ abilities to accommodate to the changing business, work and profession conditions.

Minimal Monthly Wage for Unqualified Work Only

It will be legal for an employer to pay the minimal monthly wage only for unqualified work. A work is considered unqualified if it requires no specific qualification or professional skills. There was no similar provision in the previous Labour Code.

Right of the Employer to Change the Employment Contract

The employer will have a right to change the main and additional terms of the work contract, change the work hour regime, transfer employees to another area, but only upon receipt of a written consent from the employee. The main contract terms include: work functions, remuneration, workplace. An employee’s refusal can serve as a legal reason for his/her dismissal, but only if the procedures set by the Labour Code are complied with.

Increased Overtime Limit

According to the new Labour Code, the maximum overtime limit will be increased to 180 hours per year. As of today, the limit was set to 120 hours per year. 

Personalization of the Work Schedule

It will be possible for the employer to personalize the standard five-day or six-day work week by taking into consideration the personal and family needs of each employee.

No Shortened Workdays

Under the new Labour Code workdays before holidays will no longer be shortened by one hour. 

Changes in the Calculation of the Minimal Vacation Period

The vacation period will now be calculated by workdays and not by calendar days. Therefore, the minimal period of employee’s vacation shall be 20 workdays instead of the 28 calendar days.

Shorter Dismissal Notification Terms

When an employee is dismissed on the employers’ initiative without the fault of the employee, he/she will be served with a one-month prior notification if the employee has been employed for more than one year. If the employee has been employed for less than one year, he/she shall receive a two-weeks prior notification on the dismissal. The notification term is double for those raising a child under 14-year-old and those who are to retire in is less than in 5 years. The notification term is triple for disabled employees and those who have less than 2 years until their retirement. 

New Ground for Dismissal

A new ground for dismisszing an employee will take effect – at the employers’ will. The employer will be able to dismiss an employee upon notifying him/her about the dismissal 3 days in advance and paying him/her 6-month severance pay.

Termination of the Employment Contract at Employees’ Will

The employee will have the right to terminate both, regular and fixed-term employment contracts concluded for the term exceeding one month. The contract can be terminated on the basis of an employees’ written statement upon notifying the employer at least 20 calendar days in advance.

New Rules of Paying the Severance Pay

When an employee terminates the employment contract on his/her own initiative without any substantial reasons, the severance pay of two average wages shall be paid. When an employee has worked less than one year, a severance pay of one average wage shall be paid.

When the employment contract is terminated on employers’ initiative without the employee’s fault, the severance pay of two average wages shall be paid notwithstanding the employee’s employment term. If the employee has worked in the company for less than one year, a severance pay of half of the average wage shall be paid.

Amendments to Rules of Terminating Employment Contracts with Pregnant Women

During the time of pregnancy and until the child reaches four months of age, an employment contract with a pregnant woman can be terminated by a mutual agreement of parties, on employees’ initiative, on employee’s initiative during the probationary period, without the will of the parties or when the fixed-term contract expires. The former Labour Code did not provide for a possibility to terminate the employment contract with a pregnant woman during the period from the day of notification of the employer about the pregnancy until one month after the pregnancy and maternity leave period.

Education Costs

The expenses of covering the employee’s costs of studies will be compensated to the employer only for the term of the last two years prior to the termination of the employment contract. An exception applies in case a Collective Bargaining Agreement sets a different term, which cannot exceed three years. 

If the employee is studying on its own initiative with an intention to acquire bachelor’s degree, master’s degree or professional education under a formal vocational training program and all costs or at least half of the education costs are covered by the employer, the parties may additionally agree that as long as the employee continues his/her studies covered by the employer, an employee may terminate the employment contract without a substantial reason only after reimbursing the employers’ costs of paying for the studies during the 3-years after graduation period.

New Rules for Non-Competition Agreements

The Non-Competition Agreements will only be concluded with employees having special knowledge or skills that can be applied in a company competing with the employer or in pursuing self-employed activity, thereby causing damage to the employer. The Non-Competition Agreement would be valid for no more than two years upon expiry of the employment contract. During the entire period of non-competition, the employer shall pay to the employee at least 40% of his/her former average wage.

Amendments in Damages Compensation Mechanism

The new Labour Code has no concept of material liability or the Agreement on Material Liability. The employee’s liability for damages will be limited to 3 average wages, but if the damage is caused due to the employee’s negligence, the liability shall be limited to 6 average wages.

Mandatory Work Councils

The employer employing 20 or more employees will need to initiate the formation of the Work Council at the company having certain rights prescribed in the new Labour Code.

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