Taking counsel

  • 2004-10-20
  • By Katrin Sarap, Sorainen Law Offices in Tallinn
Should the employer amend current employment contracts in Estonia?

Due to Estonia's accession to the EU, the relevant amendments to the employment law have been made. On April 22, 2004, Parliament amended the Employment Contracts Act, and the amendments entered into force on May 1, 2004. New employment contracts signed since May 2004 should be in line with the requirements of the law, and previous employment contracts should also be amended before Jan. 1, 2005.

Since May 1, the law requires 10 mandatory provisions in any Estonian employment contract. Previously the employer had to state the official title or the qualification requirements and the employee's description of duties, working hours, salary conditions, the location or area of employment, as well as the length and grounds of employment contract concluded for a specified term.

Several new enactments have been added to the list of mandatory provisions. For example, an employment contract should now clearly set the date of concluding the contract and the date of commencement of employment, prescribe the length of annual and additional holidays, the terms of advance notice of termination of contract and also the data of parties and other relevant information.

In cases when the employee is working abroad for a period longer than one month, the employer is required to give the employee before the employee's departure a contract with the following additional provisions: duration of the employment abroad, currency to be used for the payment of salaries, benefits and conditions governing employee's repatriation.

How should the existing employment contracts be updated due to the required provisions in the law? There are at least two options. The first is to draft an annex to the current employment contract. The second is to draft a new employment contract that will replace the existing one. The employer can also use the second option for drafting an entirely new employment contract for the employee if there are other amendments in the employment relationship agreed upon orally between the employer and the employee - e.g., the prohibition of competition and the remuneration thereof, inventions and copyrights, training. etc.

According to our practice, employers tend to choose the second option, as it gives them the possibility to renew the existing contracts with employees. For some employers the changes in the law do not bring about any amendments to existing employment contracts, as these are already in line with the new requirements of the law. But in order to be certain that your company's employment contracts are in line with the new requirements and to avoid any possible penalties thereof, it is recommended to contact your lawyer, who can check the existing contracts or draft a new contract for the company that will consider all the necessary amendments.

We have found that employers do refer to internal work procedure rules in employment contracts. I would like to point out the fact that employers with at least five employees must adopt internal procedures in the form of rules. Although this is not a new regulation we have noticed that many Estonian companies still fail to duly adopt the rules. The rules must be drafted according to the requirements set in the legislative acts and presented to the employees at least one week prior to sending them to the local labor inspector. If the approval has not been received from the labor inspector, the employment contract should not contain a referral to the rules, and respectively the rules are not obligatory to the employees.

Remember that upon failure to perform obligations under the respective legislation, penalty payments may be imposed upon the employer.