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Frequent
Legal Issues for Contractors on
Sakhalin Oil and Gas Projects
(Appearing soon in the Russian Energy Law Journal)
VI.
Labor Contracts: Dos and Don'ts
Presented by Natalia Prisekina, senior associate attorney and Director
of the Vladivostok branch office of Russin & Vecchi. Ms. Prisekina
has been advising clients on various issues of International and Russian
law since 1995. She specializes in admiralty, labor, and international
commercial and investment matters. Together with other Russin & Vecchi
attorneys, Ms. Prisekina issued a legal opinion on the oil spill
prevention and liquidation responsibilities of Exxon Neftegas Limited
in connection
with transportation of oil through the De Kastri and Tatar straight
to foreign ports. She has also provided legal advice on the issues
of cabotage conducted by foreign flag vessels in the Russian Federation.
Ms. Prisekina is a graduate and PhD recipient of the Law Institute
of the Far Eastern National University (Vladivostok, Russia) and
has an LL.M. degree in Transnational Business Practice (McGeorge
School
of Law, University of the Pacific, Sacramento, California, USA).
What to Include in Employment Agreements
The most recent
Russian Federation Labor Code (“Labor Code”)
came into effect on February 1, 2002. (57) The
Labor Code continues many of the pro-employee protections that were
developed during the
Soviet
period,
albeit with at least two significant changes reflective of the new
market economy. First, the list of grounds for dismissal of employees
at the
employers’ initiative has been greatly extended. Previously employees
could be fired for only the most egregious violations of company rules.
(58) Second, the company general director may
now be dismissed before the expiration of his term, without cause,
by the board or the shareholders.
(59) Until this recent change to the Labor Code,
there was a conflict of authority as to whether a general director
may be dismissed without
cause or only
for the limited reasons set forth in the Labor Code.
The Labor Code establishes
the following mandatory provisions for inclusion in employment agreements (60):
1. Place of work (indicating the structural subdivision, if any);
2. Starting date (term and reason must be specified if it is a fixed-term
agreement);
3. Title of the position, specialty, profession, indicating the qualification;
4. Rights and duties of the employee;
5. Rights and duties of the employer;
6. Description of work conditions, compensation and benefits for work
in hard, harmful or dangerous conditions;
7. Labor and rest regime (if it differs for this employee from the general
rules established by the organization);
8. Remuneration (including the size of tariff scale or wage rate, additional
payments and bonuses);
9. Social insurance provisions (types and conditions of social insurance
that are directly connected with the labor activity).
The terms and conditions contained in employment agreements may be amended
only as agreed by the parties and in written form.
Discretionary provisions of employment agreements, pursuant to the Labor
Code, may include: a probationary period, the non-disclosure of secrets
protected by law (state, official, commercial and other), the duty of
an employee to work a specific term after completing employer-paid education,
and other terms at least as beneficial to the employee as provided by
the Labor Code, laws, normative legal acts, collective contract, and
agreements.
Workday and Workweek
The standard duration
of a workweek consists of five workdays and two days off, six workdays
and one day off, or a workweek with days off to
be allotted on a sliding scale. (61) As a rule,
working hours may not exceed 40 hours per week (62),
and eight hours per day. However, the Labor Code allows
these norms to be exceeded for overtime work (63),
as a result of combining jobs (64), and where
employer and employee have agreed to a non-fixed workday (65).
For employees working under harmful or dangerous working conditions,
the normal workweek is reduced by four or more hours, and therefore may
not exceed 36 hours per week (66). Employers are
obligated to keep track of time actually worked by each employee.
Permissible Purposes for Overtime Work
An employer may enlist
an employee for overtime work with the employee’s
written consent, under a limited number of circumstances, related to
national defense, the avoidance of industrial accidents, and other situations
involving a threat to public health and safety. (67) In
other cases, enlisting employees to overtime work is permitted with the
employee's written consent
and in view of opinion of the company’s trade union. Each time
an employer instructs an employee to work overtime, the Labor Code requires
the employer to record its justification, which must be based on a permissible
reason under the Labor Code. The use of overtime for purposes other than
those indicated is a violation of Russian labor law.
The duration of overtime work is limited to a maximum of four hours
in two consecutive days, and 120 hours per year. Certain employees
are not eligible for overtime work due to their age, gender, family
circumstances, and physical condition.
Employers must pay
increased rates for overtime work; time and one half for the first
two hours and not less than double time thereafter. Employees
may request to substitute additional time off for overtime payment. Additional
time off may not be less than the amount of overtime worked. (68)
Non-fixed Workday
The non-fixed workday is a special work regime that employers may utilize
for some of their employees, on an occasional basis, when necessary to
permit such employees to work beyond the limits of normal working hours.
Many private firms and governmental organizations have adopted the concept
of a non-fixed workday to provide the flexibility necessary to meet deadlines
and work loads.
Employees working a non-fixed workday are not bound to the 8 hour/day,
40 hour/week standard maximums. They may be required to stay at work
beyond the close of the standard workday, or called to start work earlier
than the usual opening hour. For construction work, the use of a non-fixed
workday allows the employer to set work hours in accordance with actual
construction needs. Extra hours worked are not considered overtime work,
as the non-fixed workday is established by the employment agreement.
Employers may require employees to work based on the demand of the tasks
at hand, subject to the requirement to provide the employee with reasonable
rest and recuperation.
Utilization of the non-fixed
workday regime is appropriate only under certain circumstances and
following certain guidelines. The regime is
appropriate when in the company's interests and when required by the
employee's labor function. It may only be applied on an occasional basis;
employees generally work normal schedules but occasionally may be called
on to work under the non-fixed workday regime. Employers must issue an
express order to implement the non-fixed workday. However, employees
need not agree to the order to be bound to work, assuming the non-fixed
workday is provided for in the employment agreement. In order to call
on a specific employee, that employee’s position must be on the
company’s list of positions subject to the non-fixed workday regime,
established by collective contract, agreement, or the internal labor
schedule of the company. Work performed must be within the scope of the
employee's job description.
Employees subject
to the non-fixed workday regime must be provided with additional annual
paid vacation
(69) (duration determined by collective agreement
or internal labor schedule of the organization, but not less than 3 calendar
days) or, upon written consent of the employee, this additional paid
vacation time may be paid out instead of taken. (70) Employers
must keep track of their employees’ time.
Shift work
Shift work is another
option available under the Labor Code when industrial processes exceed
the permissible duration of a workday, or when employers
seek to make the most efficient use of equipment or to increase output
or services rendered. (71) In such instances,
work in two, three, or four shifts is permissible.
Employees perform their work during established working hours according
to a shift schedule. Two consecutive shifts are not permissible. Shift
duration is limited in the presence of harmful or dangerous conditions;
eight hours is the maximum shift length for employees with a 36-hour
workweek, and six hours is the maximum shift
for employees with a maximum 30-hour workweek. (72) Employers must consider the opinion of the employees’ representative
body when drafting shift schedules, which, as a rule, supplements the
collective contract. Shift schedules must be brought to the employees’ notice
one month prior to their implementation.
Vacations
Employees must be
provided with annual vacations subject to preservation of their position
and average earnings. The duration of annual basic
paid vacation in Russia is 28 calendar days. (73)
Additional annual
paid vacation is afforded to employees engaged in harmful or dangerous
work, non-fixed workdays, (74) employment in
the Extreme North regions and other hardship districts, as well as
in other cases
stipulated by federal laws. (75)
Companies may, depending on their industrial and financial opportunities,
establish additional vacation time for their employees on an independent
basis, unless otherwise stipulated by federal laws. The procedure and
conditions for granting such vacation must be determined by collective
agreements or local normative acts.
Employees are eligible to use leave after six months of employment,
unless the parties agree to earlier eligibility. Certain groups must
be granted earlier leave upon request. These include women, before
or directly after maternity leave, employees under eighteen years old,
employees with an adopted child (or children) under three months of
age, and in other cases stipulated by federal laws. After the first
year, leave may be taken at any time, pursuant to the company’s
established schedule. (76) The leave schedule
is determined annually and must be approved by the employer at least
two weeks before the start
of the year for which the schedule applies. The leave schedule is obligatory
for both the employer and the employee. Employees must be notified
of their vacation time at least two weeks prior to its beginning. (77) In
calculating vacation time, non-working holidays that fall within the
period of leave are not included and are not paid. (78)
Annual paid vacation must be prolonged due to the temporary disability
of an employee, the performance of state duties during leave, and in
other cases stipulated by laws, or the local normative acts of the
organization. An employee may postpone vacation if not duly paid or
if the employee is not duly notified (at least two weeks prior). An
employer may postpone an employee’s vacation, with the employee’s
consent, if the timing would negatively impact the company’s
operations. Postponed leave must be taken by the end of the year following
year in which it was granted.
The Labor Code prohibits employers from refusing to grant employees
annual paid vacation two years in succession and from refusing to grant
annual paid vacation to employees under eighteen years old and those
involved with harmful and/or dangerous work. (79)The
parties may agree to divide annual paid vacation into parts, with at
least one part that
is 14 calendar days or longer. Remaining parts may be shorter in duration,
however, multiple vacations of short duration should be avoided, as
the length of vacations should be long enough for an employee to adequately
recuperate.
Employers may call employees back to work prematurely from their vacation
only with their consent. The Labor Code does not stipulate the form
of such consent, however, it is advisable to obtain the employee’s
written consent. In such an instance, the remaining leave should be
granted at the employee’s time preference, within the current
working year or joined to vacation to be taken during the next working
year. Employees under eighteen years old, pregnant women, and employees
involved with harmful and/or dangerous working conditions may not be
called back to work from their vacation. (80)
By written application, employees may request that their vacation days
in excess of 28 calendar days be paid out. The Labor Code does not
permit this practice, however, for pregnant women, employees under
eighteen years old, or those engaged in hard labor or work with harmful
and/or dangerous working conditions. (81)
Upon dismissal, employees must be compensated for all unused vacation
time. Employees may request in writing that they be provided with the
unused vacation before their dismissal, except for cases of dismissal
for guilty actions. In such cases, the last day of vacation is considered
the day of dismissal. This is also possible when an employee is dismissed
in connection with an expired employment agreement. In such cases,
when the vacation completely or partially falls beyond the limits of
the agreement, the last day of vacation is considered the day of dismissal.
An employee taking leave followed by dismissal upon cancellation of
an employment agreement on his/her own initiative has the right to
withdraw his/her application for cancellation before the first day
of leave, unless another employee has been transferred to his/her place. (82)
Unpaid leave is available
for family and other valid reasons, pursuant to an employee’s
written application. The duration for such leave is determined by agreement
of the parties. (83)
Termination
There are three ways
to terminate an employment agreement: 1) by agreement of the parties
at any time;
(84) 2) at the initiative of one of the parties
to the employment agreement, i.e. employee (85) or
employer;(86) or 3) due to the impossibility to
continue the labor relationship as a result of various
changes in circumstance, including the following: expiration of a definite
term employment agreement (87), employee’s
consent to move to a new employer or to an elective post (88),
an employee's refusal to continue work
due to change of owner of the organization's property, or its reorganization
(89), change of essential conditions of the labor
contract (90), refusal to transfer to another position
based on health conditions that are supported by
a medical certificate, refusal to transfer due to relocation of the employer
(91), force majeure (92),
violation of the law in concluding the agreement, and where continued
work is impossible. (93)
Termination: Employee’s Initiative
An employee has the right
to cancel an employment agreement by providing two weeks’ written
notice to the employer. The notice period may be shortened if termination
is conducted by agreement of the parties.
If the employee’s application
to terminate at his/her own initiative is due to the impossibility
to continue work for various reasons such
as entering an educational institution, retirement, or in the event of
proved infringement by the employer of laws and other normative legal
acts, the employer must terminate the employment agreement within the
period specified in the employee's application.
Until the notice period expires, the employee has the right to recall
his/her application for termination. If this occurs, the employee will
not be dismissed, unless another employee has received a written offer
to take the position, and such new employee can not be refused employment
pursuant to the Labor Code and other federal laws (i.e. transfer of
the employee from another company).
Upon expiration of the notice period, the employee has the right to
stop working. On the employee’s last working day, the employer
must return the employee’s labor book, other documents related
to work, if requested in writing by the employee, and conclude final
settlements with him/her. If the employee does not insist upon termination
and the agreement is not terminated upon expiration of the notice period,
it is considered still valid.
Termination:
Employer’s
Initiative
Termination at the employer’s initiative is generally prohibited
during an employee’s temporary disability or leave. The Labor Code
establishes the following grounds for termination at other times at the
employer’s initiative:
1) Liquidation
of the organization or termination of the activity of a physical
person/employer; (94)
2) Reduction in number or staff;
3) Unfitness of the employee due to:
a. Health conditions, supported by a medical certificate,
b. Inadequate qualification, proven by test results;
4) Change of the owner of the organization's property (with respect
to the head of the organization, his deputies and chief accountant);
5) Employee’s repeated non-performance of labor duties despite
disciplinary sanctions (warning and reprimand);
6) Employee’s single gross violation involving:
a. Absence from work (unexcused for more than 4 consecutive
hours during a work day),
b. Alcoholic, narcotic or other intoxication
at work (including coming to work in such state),
c. Divulgence of a legally protected secret (state,
commercial, official or other), which became
known to the employee
through his/her labor duties,
d. Workplace theft, misappropriation, intentional
destruction or damage to property subject to
an enforced court judgment,
or
e. Breach of safety requirements with severe,
or threat of severe, consequences (industrial
accident,
emergency
or catastrophe);
7) Employee’s illegal actions affecting material or commodity values,
provided that such actions lead to losing employer's trust
8) Immoral acts of an employee working as
a tutor;
9) When the company director (branch, representation),
deputies or chief accountant adopts a decision
threatening the safety of the company’s
property, requiring its illegal use, or resulting in other damage to
company property;
10) For a single gross violation of the official
duties of the head of an organization (branch,
representative office) or his deputies;
11) Employee’s submission of false documents or false information
in concluding employment agreement;
12) Termination of employee’s access to state secrets, if work
performed demands such access;
13) Reasons stipulated by the labor contract
signed by the head of the organization, members
of its collegial
executive body;
14) In other cases, stipulated by the Labor
Code and other federal laws.
Fixed Term Employment Agreements
Employment agreements may be concluded for
an indefinite period or for a fixed term not
exceeding
five years,
unless another term is established
by the Labor Code or other federal laws.
Fixed term employment agreements are permissible
only under specific circumstances, some of
which follow below. When
such circumstances are
not present, the result is an indefinite term
agreement.
1. When an indefinite term employment agreement is impossible due to
the type of work or performance conditions, unless otherwise provided
by the Labor Code or other federal laws;
2. To replace an employee who is absent for specific period of time in
order to retain his/her place of work in accordance with the law;
3. For temporary (up to two months) or seasonal employment;
4. For transfer to Extreme North regions and similar hardship regions;
5. For seasonal work to prevent and rectify accidents, catastrophes,
epidemics, epizootics;
6. In small businesses of up to 40 employees (up to 25 for retail trade
and service organizations) as well as where employer is a physical person;
7. For employees sent to work abroad;
8. For extraordinary activity of the organization (reconstruction, erection,
start-up and adjustment and other operations), and temporary (up to one
year) increased production or volume of services;
9. In organizations created for a specific period of time or for performance
of a specific task, which is known in advance;
10. For employees hired for performance of a specific task, when completion
is not determinable in advance;
11. For work directly connected with the employee’s practice and
professional training;
12. For managers, deputy managers and chief accountants of organizations
regardless of their legal form of organization or form of ownership;
13. For employees directed to temporary work by employment services,
as well as for the performance of public works;
14. In other cases provided by federal laws. (95)
Indefinite Term Employment Agreements
Employment agreements are indefinite: 1) where their term is not stipulated,
2) where a fixed term agreement is not terminated by the parties due
to expiration of its term and work continues, and 3) as stated above,
where an agreement is concluded for a fixed term without appropriate
justification. Russian labor legislation prohibits the conclusion of
fixed term agreements for the purpose of avoiding the provision of benefits
afforded to indefinite term employees.
(57) Russian
Federation Labor Code No. 197-FZ, dated December 30, 2001.
(58) Labor
Code, Article 81.
(59 )Labor
Code, Article 278, para.2.
(60) Labor
Code, Article 57.
(61) Labor
Code, Article 100.
(62) Labor
Code, Article 91.
(63) Labor
Code, Article 99.
(64) Labor
Code, Article 98.
(65) Labor
Code, Article 101.
(66) Labor
Code, Article 92.
(67) Circumstances
where overtime work is permissible include: 1) to perform work necessary for
national defense, for the prevention of industrial accidents or
the elimination of consequences of an industrial accident or natural disaster;
2) to perform publicly necessary works related to water supply, gas supply, heating,
illumination, drainage, transport, or communication in order to rectify unforeseen
problems that prohibit normal function; 3) when necessary to complete work, delayed
by unforeseen industrial reasons, if non-completion of such work could damage
or destroy the employer's or state or municipal property, or threaten human life
and health; 4) where temporary work is required to repair or restore equipment
or structures in order to avoid substantial interruption of other employees’ work;
5) where continuity of relief work is essential and the relief worker is absent.
Labor Code, Article 99.
(68) Labor
Code, Article 152.
(69) Labor
Code, Article 119.
(70) Labor
Code, Article 152.
(71) Labor
Code, Article 103.
(72) Labor
Code, Article 94.
(73) Labor
Code, Article 115.
(74) Such
work includes: underground mining and open mining in cut- and open-cast mines,
in zones of radioactive contamination, other work involving the unavoidable
influence of harmful physical, chemical, biological, or other factors. Labor
Code, Article 117.
(75) Labor
Code, Article 116.
(76) Labor
Code, Article 122.
(77) Labor
Code, Article 123.
(78) Labor
Code, Article 120.
(79) Labor
Code, Article 124.
(80) Labor
Code, Article 125.
(81) Labor
Code, Article 126.
(82) Labor
Code, Article 127.
(83) Labor
Code, Article 128.
(84) Labor
Code, Article 78.
(85) Labor
Code, Article 80.
(86) Labor
Code, Article 81.
(87) Labor
Code, Article 79.
(88) Labor
Code, Article 72.
(89) Labor
Code, Article 75.
(90) Labor
Code, Article 73.
(91) Labor
Code, Article 72.
(92) Labor
Code, Article 83.
(93) Labor
Code, Article 84.
(94) Employees
may be terminated on this basis even during disability or leave.
(95) Labor
Code, Article 59.
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