On 13 June 2017, the Milli Mejlis of the Republic of Azerbaijan passed a law (the "Law") approving amendments to the Labor Code of the Republic of Azerbaijan, dated 1 July 1999 (the "Amendments"). The Amendments will come into force from 1 January 2018.

Pursuant to the first Amendment, employment contracts can be limitless or fixed-term. Fixed-term employment contracts last for the duration agreed upon by the parties to the contract. Previously, the term of fixed-term contracts could not exceed five years.

According to the second Amendment, the official notification period for employees, dismissed as a result of downsizing, will depend on their work experience history, which is set as follows:

  • employees with work experience of up to one year — at least two calendar weeks' prior dismissal notification
  • employees with work experience from one to five years — at least four calendar weeks' prior dismissal notification
  • employees with work experience from five to 10 years — at least six weeks' prior dismissal notification
  • employees with work experience of more than 10 years — at least nine weeks' prior dismissal notification

According to the third Amendment, the amount of compensation paid to employees dismissed on the grounds of the liquidation of an entity or downsizing will depend on the work experience of the dismissed employee, as follows:

  • employees with work experience of up to one year will receive compensation in the amount of the average monthly salary
  • employees with work experience from one to five years will receive compensation in the amount of at least 1.4 times the average salary
  • employees with work experience from five to 10 years will receive compensation in the amount of at least 1.7 times the average salary
  • employees with work experience more than 10 years will receive compensation in the amount of at least two times the average salary

Furthermore, on the basis of the employee's consent, the employee can be compensated instead of receiving the above-mentioned notification period as follows:

  • notification period of at least two weeks can be replaced with compensation in the amount of 0.5 times the average salary
  • notification period of at least four weeks can be replaced with compensation in the amount of 0.9 times the average salary
  • notification period of at least six weeks can be replaced with compensation in the amount of 1.4 times the average salary
  • notification period of at least nine weeks can be replaced with compensation in the amount of two times the average salary

Finally, in case of the termination of an employment contract on the ground of changes to the labor conditions, the statutory one-month notification period to the employee can be eliminated and instead the employee can be granted a lump sum compensation in the amount not less than the average monthly salary. Such lump sum payment shall be reduced in proportion to the part of the notification period that has passed.