Россия – Questions and Answers on Labor and Employment Law in Russia

Author:
Mariana Villa da Costa – Littler Mendelson

Are you doing business in Russia?  Need help to understand the basics of Russian Labor and Employment Law?  This post will provide you with a basic understanding of how to employee staff and operate your business in Russia.  I will also highlight some key requirements that every employer needs to know.

Russia has a labor code that is extremely employee-friendly, as compared to other countries, such as the U.S.  For example, did you know:

• Almost everything in Russia must be done formally and on paper;
• Contracts are normally for an indeterminate term – fixed-duration employment contracts are almost unheard-of;
• It is very difficult to terminate an employee; and
• Any employee, without regard to seniority or nationality, is free to leave the company after just two weeks’ notice and has the right to work for a competitor immediately.

What is the main source of labor and employment law in Russia?

The Labor Code is the main codified statutory act and it governs the relationship between employees and employers of all types.

The parties to an employment relationship cannot contract differently from what is imposed by Russian labor law.  Therefore, if any provision of the employment agreement harms or makes the employee’s situation worse it will be considered invalid under the Labor Code.

Employees are entitled to minimum guarantees and protections that are mandatory and cannot be altered, even if the employee allows the employer to do so.  This allows the employees to have a bargaining power normally not found in the many countries.

Who is an employee? And an employer?

An employee is a natural person who enters into an employment relationship with a an entity/natural person for the personal execution of work, with an specific remuneration and under the employer’s subordination.

An employer is a natural person or a legal entity that is an employment relationship with an individual.  It must provide the employee with work specified in an agreement and it must ensure that the labor conditions are adequate and legal.  Furthermore, the employer pays remuneration on a regular basis.

Does a foreign employer need to have a local entity in Russia to employ local workers?

Russian law does not require a foreign employer to set up a local entity in order to employ workers in Russia.  Individuals can be employed by a company which is incorporated in a country other than Russia and has no representation in Russia. However, a signed employment contract between a local worker and an entity having no representation in Russia still will be guided by Russian law as the main place of work is Russia.  And, a foreign entity might be considered to have a Permanent Establishment (PE) in Russia, which could have profound corporate tax consequences.

Are employment contracts necessary in Russia?

Yes. Under Russian law, an employment contract is necessary and should be executed in writing.

However, if the company fails to have a contract, the employment relationship will still exist and be valid, and it will be considered to have existed upon the actual commencement of work.

In this case, the employer is obliged to conclude an employment agreement within three days of the employee’s actual commencement of work.  Therefore, an employment contract not executed in writing still is considered concluded and thus binding, effective and enforceable if the employee has commenced work with the employer’s knowledge.

In general, employment agreements in Russia are for an indefinite term.  A fixed-term employment agreement (for up to five years) may be concluded only in limited circumstances (for example, temporary positions, or temporary replacement of an employee).

Are there specific terms that every employment agreement should have?

Absolutely!

Besides basic information for employee and employer, such as name and taxpayer identification number, every Russian employment agreement should include:

• Employee job title; occupation; the specific type of work the employee is to perform;
• The place of work, and whether the employee is hired to work in the organization’s branch, representative office or another detached structural unit located in another area;
• Start date and, if the agreement is for a fixed-term, the effective term of the agreement and the circumstances serving as grounds for why having a fixed-term employment contract under the Labor Code or other federal law;
• Compensation and benefits;
• Working hours and leisure hours;
• If necessary, the terms and conditions defining the nature of work (mobile, traveling, en route, or other kind of work); etc.

Can we prepare the contract in a different language than Russian?

Russian, as the official language of the Russian Federation, must be used by all companies in their employment agreements, regardless of their ownership structure.

However, if you are sending foreign employees to work in Russia,  in practice, the employment contract will also be signed in the fluent language of the foreign employee. That will guarantee that the individual has a clear understanding of rights and responsibilities under the agreement.

How must salary payments be made in Russia?

Salary in Russia must always be paid in Russian currency (rubles).  Employees should be paid not less than twice per month, and must receive at least the minimum monthly wage established by law.

Many foreign companies tend to pay the employees in a currency different than the Rubles.  This is considered a violation of Russian law which the authorities deem discriminatory.

What else do I need to know about employment regulations in Russia?

In addition to the specifics I mentioned above, you also should know about the following if you have employees in Russia:

• Employment contracts may be terminated only for certain reasons. Dismissal should be effected in strict compliance with the procedures established by law; failure to follow these procedures may serve as grounds to prove the dismissal to be unfair.
• Russian labor law is bureaucratic, and thus employers are required to keep a large amount of internal documents and closely follow the procedures stipulated by law which also require execution of various documents.
• Background checks and medical examinations are mandatory for certain jobs, while for other jobs, requesting such information on the applicant or employee might constitute invasion of privacy.
• Noncompetition agreements, and customer and employee nonsolicitation agreements, are generally not enforceable in Russia.
• Discriminatory conduct may constitute a criminal offense;
• The employer in most cases acts as taxpayer or a tax agent.
• To obtain certain (extended) rights to the intellectual property created by the employee, the employer should undertake certain actions within a limited time span.
• The employer should not impede employees meetings and strikes, and lockout is prohibited.
• Workplace safety regulations require special training of employees, certification of workplaces, investigation of workplace accidents, etc.
• The employer should not impede employees meetings and strikes, and lockout is prohibited.
• Sale of business (shares, assets of the company) does not generally constitute ground for dismissal.
• Maintain an ongoing dialogue with employees to build loyalty. The ethical and moral aspects of employment are considered very important in Russia.
• Be aware that the Russian labor code applies to all types of employees from all nationalities.
• Initial recruiting processes are crucial, since it is very complicated to dismiss an employee.

This posting is intended to provide a brief overview of labor and employment law in Russia.  It is not intended as a substitute for professional legal advice and counsel.  Please post your questions and comments!