Supreme Court emphasises the importance of following a fair dismissal procedure

Article 104 (1) of the Estonian Employment Act (EEA) provides that the termination of an employment contract without legal basis or in conflict with the law, is void. Recent decisions by the Supreme Court (rulings 3-2-1-52-14 and 3-2-1-21-14) have clarified the circumstances in which dismissals may breach Article 104(1) and be invalidated. These court rulings stress the importance of dismissals being procedurally and materially (i.e. substantively reasoned) fair.

Procedural fairness has been found to require that communication of dismissal is in a form which can be reproduced in writing and is handed to the employee. The Supreme Court has found that until these conditions are satisfied, the employment contract continues, the employee can assume that is the case (ie is not obliged to challenge any purported dismissal) and retains the right to payment of salary.

The case of dispute nr 3-2-1-52-14 confirmed that employers need to be cautious of engaging in prolonged disputes with employees over whether or not a dismissal is properly communicated. If a court rules subsequently that notice of dismissal was never properly received by the employee, then the employer is obliged to pay salary for the entire intervening period and neither party can claim the employment was legitimately terminated. If dismissal is invalid on such procedural grounds then the court need not examine the substantive reasons or merits. As a result, to minimise the risk of these consequences, it is crucial that employers follow the requirements of a lawful dismissal process.

In contrast, case nr 3-2-1-21-14, considered the content of a valid dismissal notice. The Supreme Court has highlighted the importance of the employer explaining the reasons for dismissal. The Court found that, whilst a lack of such explanation does not invalidate the dismissal, it clearly causes disadvantage to the employee who will not know if it arose for genuine reasons or be in a position to challenge its fairness. Accordingly, the Supreme Court found that courts addressing such issues must first establish the alleged substantive reasons for dismissal (and force parties to bring corresponding evidence) This is likely to prove more onerous for employers than justifying reasons stated in a dismissal notice.

Finally, the Supreme Court has clarified that legitimate grounds for dismissal are restricted to those provided within the EEA. For example, termination of employment during a probationary period is only permitted on the grounds related to the probation, such as on the basis of the employee´s personal, social and working skills. During that initial period, the employer is not obliged to try to improve the employee’s skills by providing any training or offering more suitable job.