The Supreme Court of Estonia has recently made several rulings which are of significance for the interpretation of the Employment Contracts Act (ECA) and the Individual Labour Dispute Resolution Act (ILDRA).

Resignations and relevant notice periods (Supreme Court cases No 3-2-1-126-14 and 3-2-1-111-14)

Employees can terminate their employment by serving 30 days’ notice upon their employer (except those on fixed term contracts) or, in certain circumstances where the employer has breached the contract, may do so without adhering to notice terms. In the latter event of forced resignation, the employer is usually required to pay compensation to the employee of three months’ average pay unless it successfully contests the validity of the resignation in the court of labour dispute resolution committee (LDC). By its rulings of 15th and 22nd of April 2015, the Supreme Court has substantially changed previous understanding of the ECA with regard to forced resignations.

If an employee seeks to terminate their employment on the grounds of forced resignation but this is found not to comply with the requirements of ECA, then the resignation will be regarded as an ordinary resignation to which 30 days’ notice applies. In such circumstances, the employment will end 30 days from communication of the resignation and the understanding has been that the LDC has no authority to interfere with the termination date (in contrast to its ability to do so in the event of unfair dismissal). However, the Supreme Court has now clarified that there is an exception to this and that the LDC may determine the termination date in limited circumstances. These circumstances are where, upon receipt of resignation without notice which it believes to be invalid, the employer issues notice of dismissal. Where such dismissal notice purports to terminate the contract within 30 days of the initial resignation, the LDC may then intervene to determine the appropriate date of termination.

A further clarification arising from the Supreme Court in circumstances involving allegedly forced resignation is that, if the employee leaves employment upon resigning without notice but the resignation is invalid under ECA, the employer can only claim damages caused directly by the employee’s early departure and not (as was previously believed) for the full 30 day notice period.

Justifying fixed term employment (Supreme Court case No 3-2-1-28-15)

Entering into an employment contract for a specified term can only be justified where the relevant work is of a genuinely temporary, fixed-term nature. It is now clear that this is not a matter of agreement for the parties but is one of fact. For example, a party may not choose to rent work facilities only temporarily to support the issuing of fixed term contracts.

Employment litigation procedure explained (Supreme Court case No 3-2-1-176-14)

According to ILDRA, employment litigation may be initiated in the LDC for more straight-forward, lower value claims, or in the court, for more complex and time-consuming matters. Most employment litigation takes place and is resolved within the LDC. However, parties unhappy with the decision of the LDC have the right to bring their case before the court. Eversheds’ Rando Maisvee successfully represented an employer in a case where the Supreme Court reversed the ruling of the lower court and found this right to pursue a case before the court after a ruling by the LDC is not unlimited. The basis of referral to the court is limited to those aspects of the LDC’s decision which are contested only.