Awara Russian Labor Law Guide: Different Forms of Employment (Chapter 3. Part 1)

Awara Russian Labor Law Guide: Different Forms of Employment (Chapter 3. Part 1)

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This article is an excerpt from Awara Russian Labor Law Guide written by our leading labor law lawyers. It gives a description and analysis of major legal issues that may affect those who want to conduct a business in Russia. This Guide will certainly serve as a reliable aid in going through this maze of regulative acts and decisions and help the reader to avoid gross mistakes that might result in significant but quite unnecessary losses.

 

Employee or Civil Contractor

The services or work of an individual in Russia can be legally hired either by entering into a labor contract according to the labor law or a contract under the civil law, referred to as a civil law contract. A labor contract is regulated by the Labor Code. Civil law contracts are regulated by the Civil Code and thus fall beyond the scope of the labor law regulations. Civil law contracts are not the main subject of this Guide and we will only briefly discuss this type of work arrangement.

The concept of a civil law contract refers to an agreement whereby a company hires the services of an individual without the intention to enter into a labor contract. The main distinction between a labor contract and a civil law contract is that the hired person does not under the latter construction enjoy the safety guarantees envisioned by the labor law (such as protection against termination at will, overtime and sick leave compensation, and vacations), and is not subordinated to the staff management rules of the contracting organization.

Civil law contract arrangements are used when engaging a freelancer for temporary projects or auxiliary work which is performed from time to time and is of a nature usually performed by contractors instead of staff. A typical situation is when using the services of non-staff translators.

Under these types of contracts, the parties are subject to civil law rules, which provide for equality of the contracting parties and freedom of agreement. The Civil Code imposes, however, certain mandatory conditions that such agreements must meet (Chapters 37 and 39 Civil Code). In particular, the parties must agree upon a specific subject matter of the contract, which must be described in detail in the contract, specifying its scope and quality. The date of completion of work must also be specified, as well as the starting and ending dates for performance of the work. And the price of the contract and the settlement terms must also be provided for. Often the main motivation to use such civil law contracts is the intention of the contracting company to avoid the regulations of labor law. But it should be noted that a court may requalify a civil law contract into a labor contract when the real circumstances of the work relationship meet the criteria of the labor law (Art 11 Labor Code). Court practice has shown that, when actual labor relations are those of employer-employee (an employment relationship governed by the Labor Code, which provides greater protection for workers) rather than customer-independent contractor (a civil contract relationship governed by the Civil Code, which provides fewer protections for workers), courts are apt to rule in favor of the worker in disputes.

Court practice reveals that courts stress the following kind of criteria:

1) Such a contract has been systematically renewed or extended^[1].

2) The contractor is de facto managed as an employee subject to the company’s internal regulations^[2].

3) A pattern of regular payments for staff members is detected^[3].

4) When the terms of compensation de facto point to the nature of employment, for example, when no term has been agreed for completion of work and a connection between completion of work and payment is not set^[4].

Naturally, civil law contracts may also be entered into with persons registered as individual entrepreneurs. When such entrepreneurs in reality are engaged in the given line of business, there is less risk of such requalification.

An agreement with an individual who conducts business as an individual entrepreneur is viewed as a business-to-business relation regulated by civil law. This, however, does not preclude such individual entrepreneur from entering a labor contract as an employee.

Agency Work

In Russia, there has long been a common business practice in the labor market of companies providing their employees for permanent work under the control and management of their clients. The employee would be hired at the company provider, receiving wages there, but actually was subordinate to and under the control of another company – the client of the service provider. This scheme allowed customers to significantly minimize any risks associated with the demands of government officials and employees with respect to the labor of the employee for a fee to the provider.

However, this practice has been recognized by the legislature as flawed. It considered unacceptable the division of the figure of employer into two companies (provider and client), because the employee was not protected from failure by the client and the provider to fulfill all the obligations of an employer provided by the Labor Code of Russia.

Indeed, the Russian Labor Code did not provide for such an employment arrangement previously, although it did not directly prohibit it either.

On May 5, 2014, the President of Russia signed a law that comes into force on January 1, 2016^[5]. This law introduces a direct ban on agency work, which refers to work performed by an employee on the orders of the employer but in the interests, and under the direction and control of another entity (the client of the provider). The same law introduced the concept of private employment agencies, which are subject to accreditation and the right to conduct activities for the provision of temporary workers to perform work for the benefit of, and under the management and control of, another entity.

As of January 1, 2016, only the following entities will be entitled to provide exclusively temporary staffing:

– Private employment agencies with a special state accreditation;

– Other companies, including foreign ones, when employees are sent temporarily to:

– a legal entity affiliated with the party sending employees (so-called secondment);

– a joint stock company, if the sending party is a party to a shareholder agreement for exercising the rights certified by the shares of such joint stock company;

– a legal entity which is a party to a shareholder agreement with the sending party.

Other entities are not entitled to send their staff to work at third parties. The maximum period for which temporary staff can be provided by a private agency in a number of cases is 9 months. Because the law is worded rather imprecisely, in practice there is a risk that the period for secondment may be limited to 9 months also.

Private employment agency

Private employment agencies are understood to mean legal entities registered in Russia that are accredited to conduct staffing. Such agencies must have charter capital in excess of 1,000,000 rubles and a qualified head with experience in that sphere of work.

A private employment agency may send its employees to work temporarily for another party only in the following cases:

–  If employees are sent to an individual for personal care and provision of domestic services;

– If employees are sent to an individual entrepreneur or a legal entity for temporary performance of duties which are usually performed by employees who are currently absent, but for whom their jobs are held open to them while they are absent;

– If employees are sent to an individual entrepreneur or a legal entity to perform work related to the  temporary (up to 9 months) expansion of production or services rendered.

Cases where use of staffing is not allowed

The law provides for cases where the use of staffing is prohibited. Among such cases is the use of staff to replace employees taking part in a strike.

Negative consequences for companies using staffing

The law envisages that the receiving party bears subsidiary (additional) liability for the obligations of the sending party arising from the employment relationship with the provided staff, including the obligation to pay wages, vacation pay, severance pay and other amounts due to employees. This means that if the party providing staff fails to pay salaries to the employees sent to work at a receiving party, the receiving party may be required to pay the unpaid salaries.

The law also establishes additional obligations for the parties providing staff. For example, the law requires that companies providing staff pay the social contributions for the staff provided based on the rates applicable to the operations of the receiving party. This obligation is likely to result in an increase in agency expenses, and, consequently, an increase in the cost of their services.

The law states that, for the obligations of the employer arising from employment relationships with employees sent to work temporarily in the host company under an agreement for the provision of employees, including the obligations to pay wages and other sums due to the employee, the payment of monetary compensation for violation by the employer of deadlines in respect to wage payments wages, vacation pay, severance pay, and (or) other payments due to the employee, the client of the provider bears subsidiary liability. This means that if the provider fails to pay wages or make other payments to employees, this obligation can be attributed to its client.

Special Types of Labor Contracts

The typical labor contract presumes that the employee comes daily to an office or other premises of the employer, and that work is performed in or on such premises as the sole employment of the employee. However, there are various situations where work is conducted in a different setting or under different circumstances. Such circumstances are, for example:

1. Domestic work;
2. Remote Work;
3. Apprenticeship agreement;
4. Work at remote places in long-term shifts;
5. Combining jobs;
6. Seasonal jobs;
7. Other special forms of employment.

Domestic Work

The Russian Labor Code contains special provisions regarding domestic workers, i.e., persons who are employed by a company, but perform the work at home (Chapter 49 Labor Code).The rules of “domestic work” regulate a quite peculiar labor relationship with a person who works in the capacity of a contractor-manufacturer producing light consumer and artisan goods from materials and instruments provided by the employer or purchased by the domestic worker at his own expense. Thus, those provisions have not been applicable to organizing remote work for a broad category of workers.

Domestic work is regulated by the general rules of the law, but a certain amount of flexibility is allowed. The domestic worker can involve his family members in the work, but no labor relationships emerge between them and the employer (Art 310 Labor Code).

In the case of domestic work, the employer and the employee agree separately on which party will provide the equipment and supplies (materials) needed for the work. If the domestic worker uses his own materials or equipment, then the employer has an obligation to pay for such use.

Health and safety rules must be followed even if work is organized as domestic work.

The provisions regarding domestic work call for determining separately in the labor contract the grounds for termination of the contract (Art 312 Labor Code). Here, it seems that the parties may go beyond the general provisions of the law by agreeing individually on the grounds for termination.

Remote Work

On April 8, 2013, the president of Russia signed into law amendments to the Labor Code introducing a new Chapter No. 49.1 “On Remote Work”.

This new law represents a significant change and modernization of the Russian labor laws, for it will now for the first time be legal to arrange work on a remote basis at an employee’s home. There remain in the Labor Code prior provisions about so-called “domestic work”, but these provisions have had limited effect and have not in fact regulated the situation where employers hire people to work at their homes or otherwise remotely outside the office. The old rules of domestic work, which will stay in force, regulate a quite peculiar labor relation with a person that works in a capacity of a contracting manufacturer producing light consumer and artisan goods from materials and instruments provided by the employer or purchased by the domestic worker at own expense. Those provisions have not been applicable to organizing remote work for a broad category of employees. There has been a great need in Russia to apply a regime of remote working for categories of employees like IT specialists, sales representatives, consultants, translators, etc. Now, with the change, it finally becomes possible to properly regulate such work practices.

Under the new law, remote work (referred to in Russian as distance work) is understood to be work outside the employer’s place of business, its branch office, representative office, or other site beyond the employer’s control. The new law stresses the need to organize communication through means of modern IT telecommunication facilities by making it a necessary condition for remote work to use the facilities of various channels of IT telecommunication networks, including the Internet, to perform the work and to interact with the employer.

The provisions on remote work introduce a lot of possibilities for flexibility in the labor contract; most importantly it allows setting the conditions for termination of employment more freely without being restricted by the closed list of grounds for termination as per the general provisions of law.

Below we will discuss in more detail the new provisions on remote work.

Remote work is understood to be work outside the employer’s place of business, its branch office, representative office, or other site beyond the employer’s control. A necessary condition for distance work is the use of IT telecommunications networks, including the Internet, to perform the work and to interact with the employer (Art 312.1 Labor Code).

An important provision of the law is that it is explicitly stated that the hiring of a person for distance work does not constitute an obligation for the employer to register a branch or any kind of subdivision (no tax registration necessary). This conclusion can be drawn from the fact that according to the law a separate structural subdivision must be registered with the tax authorities if the employer organizes a stationary workspace at a separate geographical location (Tax Code Art 83(1) and 11(2)), whereas a remote worker’s workplace is by definition not stationary for the employer. The law on remote work contains a number of provisions that are specific to this kind of a working regime. According to the law, the remote worker (or a candidate for a vacancy) and the employer shall exchange electronic documents by means of enhanced qualified electronic signatures. But this is necessary only when so agreed between the parties. If there is no such agreement, then the parties need to ensure physical signature when such signature is required by law (Art 312.1 Labor Code).

The contract with the remote worker must explicitly stipulate the condition that the working regime is that of remote work. The contract may stipulate that the remote worker must utilize for the performance of the agreed work equipment, hardware and software, means of protecting information, and other technical means provided by or recommended by the employer.

The employment contract must foresee conditions regarding the following:

– procedures and terms for providing equipment, hardware and software, means of protecting information, and other such technological means delivered by or recommended by the employer;

– procedures and terms for reporting on work performed;

– terms of compensation for use of the equipment, hardware and software (etc.) belonging to (or rented by) the distant worker;

– the procedure for reimbursing other costs connected with the performance of remote work.

The employer’s duties to guarantee labor protection and workplace safety apply to remote workers only if applicable to the nature of the working arrangement. If otherwise not specified by the employment contract, the remote worker decides at his own discretion on the daily working regime and time of rest.

A labor contract and addenda to it may be entered into via exchange of electronic documents. In that case, the employer’s location is indicated as the location where the employment contract was entered into. No later than three calendar days after the conclusion of the labor contract, the employer must send to the remote worker a duly executed hard copy of the labor contract by registered mail with delivery confirmation. The dispatch of the documents required to be submitted in connection with entering into a labor contract (Art 65 Labor Code) must be carried out by sending copies of them as electronic documents. However, when required by the employer, the job seeker must send such documents as notarized copies by registered mail with delivery confirmation.

An employee may be familiarized with work-related documents, including local normative acts and orders of the employer specified by the Labor Code, through exchange of electronic documents. In cases when the employee, in accordance with the Labor Code, is entitled or obligated to file an official request or provide the employer with an official explanation, etc., the remote worker may do so in the form of an electronic document. When so agreed between the parties, data on the remote worker are not entered into the labor book, and a labor book is not issued to a first-time worker.

Likewise, the parties are entitled to enter into a labor contract for remote work without using electronic documents in the traditional manner. In that case, the contract indicates the place where the contract was actually entered into. The job seeker submits original documents to be presented when entering into a labor contract. Furthermore, in that case the employer must provide for the certificate of state pension insurance for a remote worker who is taking up a job for the first time in his life. In this case, the worker is also entitled to demand that a labor book be properly issued.

In a range of cases, remote work requires due execution of written documents which are sent through the postal service as registered letters with delivery confirmation. An employer, even in a case where a labor contract has been entered into via exchange of electronic documents, is obliged to send the remote worker a duly executed hard copy of the labor contract. For provision of mandatory insurance, coverage for mandatory social insurance in the event of temporary incapability, and in connection with maternity leave, the remote worker sends the employer the originals of required documents. In the event of termination of the labor contract, even if it is specified that one should become familiar with the dismissal order in the form of an electronic document, the employer must, on the termination day of that labor contract, send the remote worker a duly executed hard copy of that order. In other cases, the use of hard copies is not mandatory.

The parties may in a remote work labor contract (as with domestic workers) set the terms of termination of employment more freely, without being restricted by the closed list of grounds for termination as per the general provisions of law.

Apprenticeship Agreement

An Apprenticeship Agreement for professional on-the-job training may be entered into with job candidates and current employees (Chapter 32 Labor Code).

The mandatory provisions to be included in an apprenticeship agreement are:

• Names of the parties;
• Specialization and the qualifications received;
• Obligation on the part of the employer to provide the agreed training;
• Time of apprenticeship;
• Employee’s salary during the apprenticeship;
• Obligation of the apprentice to participate in the training;
• Obligation of the apprentice to work for an agreed time period with the employer upon completion of the training.

The apprenticeship can take the form of individual or group training, and it can be organized either on a full-time or part-time basis.

Through the agreement apprentices may be fully exempt from their main job or they may perform their main job on the basis of reduced working hours (Art 203 Labor Code). During the apprenticeship an apprentice cannot be asked to work overtime or be sent on business trips which are not connected with the subject of the training (Art 203 Labor Code).

Upon successful conclusion of the training, an apprentice shall join the company as an employee without undergoing a trial period (Art 207 Labor Code).

If the apprentice does not accept the agreed job without a legitimate reason after the apprenticeship agreement is over, he will be liable to return the compensation received during the apprenticeship as well as other expenses incurred by the employer. In light of Russian court practice, we would want to raise doubt regarding the possibility of enforcing this provision.

Long-Term Shifts at Remote Places

Long-term shifts at remote places is a form of employment under which the employee is sent to work at a place distant from his usual place of residence so that he cannot return every day to his home (Chapter 47 Labor Code).

This form of employment is meant for situations where work has to be done in scarcely populated places or areas with extraordinary constraints set by nature.

Workers under the regime of long-term shifts at remote places have to be returned home at least once a month or in exceptional cases once every three months (Art 299 Labor Code).

Working time under this form of employment is calculated according to special rules relating to recording of work time on a summarized basis. Thereby, the whole time spent at the location of the remote work and for traveling thereto is taken into consideration in calculating the working time (Art 300 Labor Code). At any rate, the working time has to fall within the general rules set out in the Labor Code.

An employer who organizes work under this regime is advised to clarify the details in advance. The procedure for implementation of the long-term shifts at remote places regime is defined by the local regulations of the employer (Art 299 Labor Code).

Combining Jobs and Professions (Offices)

In Russia, employees are permitted to take an additional job(s) with the same or another employer. The Labor Code contains special and detailed provisions regulating the situation where an employee is performing regularly paid work when he is free from his main occupation.

This situation is that of combining jobs. It is regulated by Article 60.1 and Chapter 44 of the Labor Code.

The law draws a clear line between the main job and the supplementary job. The supplementary job must not interfere with the duties at the main job. Moreover, it should be separate from the main one (in another profession or office). The practicability of the latter requirement is dubious.

There can be two sorts of combining jobs: if the employee simultaneously takes another job with the same employer, exceeding the limits of his regular working time, it is considered as an internal combining of jobs. External combining of jobs means working for another employer outside the work hours devoted to the main job. Any combining of jobs requires entering into a special labor contract.

An employee in Russia is now allowed to take employment with as many employers as he wishes. It should be noted that this freedom makes the restrictions regarding the maximum duration of working time (per day or per week) virtually useless. Now such restrictions look like mere lip-service to trade unionism and the “social state”.

It is mandatory to include in the labor contract a provision confirming that the supplementary job is conducted under the rules of combining jobs (Art 282 Labor Code).

Other issues regulated separately in regard to combining jobs are:

• Regular working hours for a person combining jobs may not exceed 4 hours a day (Art 284 Labor Code). This restriction does not apply to the days when worker is not busy with his main job. The length of time at the supplementary job for the month should not exceed half of the monthly norm of working time. Working hours in excess of these limits are compensated separately.
• Salary for combining jobs is paid in proportion to the salary for a full-time job (Art 285 Labor Code).
• The employer at the supplementary job has an obligation to grant annual leave at the same time as the leave is granted at the main job. Such annual leave, if needed, will have to be granted before fulfilling the first six months which would give the vacation right under normal conditions (Art 286 Labor Code).
• The employee also has a right to extra vacation days without compensation in order to match the leave at the supplementary job with the leave at the main job.

Work under the rules of combining jobs entitles the employee to full vacation rights.

Combining of jobs is not permitted in respect of minors or work in harmful or hazardous conditions, provided that the main job is connected with the same conditions.

The employee combining jobs may ask his main job employer to make all necessary records concerning his supplementary job in the labor book (Art 66 Labor Code).

Hiring of a new person on conditions of a main job may serve as a reason to dismiss the employee for whom this position is a supplementary job (Art 288 Labor Code). The employer must notify the employee of the termination of the labor contract not later than 2 weeks in advance (Art 288 Labor Code).

The employer may not legally forbid an employee to take a supplementary job. However, in relation to top management the law sets an obligation to require permission from the employer for the right to have a supplementary job (Art 276 Labor Code).

Combining of professions (offices) is envisaged by Arts 60.2 and 151 of the Labor Code. This means additional work for the same employer in another position within the limits of usual working hours. Unlike the case of combining jobs, a new labor contract is not required, but employee’s consent in writing is necessary.

Apart from combining professions (offices), an employee can be assigned additional work of the same nature as his regular work (that is, the office and working time is the same, but the volume of work is increased). Such situations are defined by the Labor Code as 1) an expansion of zones of service, 2) increase of the workload, or 3) the performance of job duties of an absent employee without release from the work envisaged by the labor contract (Art 60.2 Labor Code).

Any kind of additional work entails additional remuneration which amount is to be defined by the employer and employee (Art 151 Labor Code).

Casual and Seasonal Jobs

Casual jobs are those that last no longer than two months (Art 59 Labor Code). They are regulated by Chapter 45 of the Labor Code. A probationary period is not set for employees in such contracts (Art 289 Labor Code). The holiday entitlement under this form of work is two days of paid leave for each month of work (Art 291 Labor Code). As a rule, casual workers are not entitled to severance pay. A labor contract entered into to fulfil a particular job is terminated upon the completion of that work (Art 79 Labor Code). Employees may terminate the labor contract early by giving 3-day notice (Part 1 Art 79 Labor Code). The employer may terminate the labor contract early only in those cases specified in the law, and must give the employee notice of not less than 3 days.

Seasonal jobs may comprise only jobs which, as a rule, last for a period of up to 6 months and which can be performed only during a certain time of the year due to the conditions of the climate or other special conditions of nature (Art 293 Labor Code). The work of seasonal employees is regulated by Chapter 46 of the Labor Code.

The Labor Code has delegated the right to specify the nomenclature of such seasonal jobs which may exceed this 6-month limit, as well as their maximum duration, to the level of the federal industrial agreements entered into between employers and employees (or, usually, their representatives).

The labor contract must spell out the seasonal nature of the work (Art 294 Labor Code).

In the event of liquidation of the entity or downsizing, the employer has to give notice seven calendar days in advance for dismissal of employees doing seasonal jobs.

In the event of liquidation of the entity or downsizing, the severance pay will be equal to two-weeks of salary for an employee who is doing a seasonal job (Art 296 Labor Code).

If the labor contract is terminated before its expiration at the initiative of an employee who was doing a seasonal job, the employee must notify the employer not later than 3 calendar days in advance.

An employee doing a seasonal job is granted 2 vacation days for each month of work.

 

[1] Ruling of the Territorial Commercial Court of Moscow Region No. KА-А40/7019-08 dated 28.08.2008 // ATP ConsultantPlus.2014

[2] Ruling of the Territorial Commercial Court of Moscow Region No. KА-А40/5330-09 dated 19.06.2009 // ATP ConsultantPlus.2014; Ruling of the Territorial Commercial Court of the Moscow Region 13.11.2008 No. KА-А40/10488-08 // ATP ConsultantPlus.2014

[3] Ruling of the Territorial Commercial Court of the Moscow Region No. KА-А40/5330-09 dated 19.06.2009 // ATP ConsultantPlus.2014

[4] Ruling of the Federal Arbitration Court in the Moscow Region No. KА-А40/5330-09 dated 19.06.2009 on case N А40-66166/08-76-271 // ATP ConsultantPlus.2014

[5] Federal Law dated 05.05.2014 No. 116- FZ “On Amending Certain Legislative Acts of the Russian Federation” // Collected Legislation of the Russian Federation. 12.05.2014, No. 19, Art 2321.