Liability for Discriminatory Job Advertisements
In an effort to curb the widespread practice of placing discriminatory job advertisements, new provisions were implemented in 2013 establishing liability for employers who place job advertisements containing discriminatory conditions, e.g. indicating preferences of gender, race, nationality, age, etc. Employers placing such job advertisements are subject to administrative liability and may be fined an amount of up to RUB5,000 (approximately US$150) for company officials and up to RUB15,000 (approximately US$430) for companies themselves.
Although the provisions are currently in force, the courts are still interpreting the extent of the rules and their application. On September 4, 2013, for example, the Moscow City Court ruled in a case that it did not consider indicating a preferred gender in a job advertisement as a form of discrimination.
Regulation of Remote Employment
On April 19, 2013 the RF Labor Code was amended by Chapter 49.1, which introduced provisions regulating remote employment. Remote employment is defined in Chapter 49.1 as employment that involves employees working outside of a location under the employer’s control. Until now, despite widespread use of remote employment in Russia, issues arising from remote employment had never been addressed by Russian legislation. The new provisions include:
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It is unclear, however, how this new chapter in the RF Labor Code will operate simultaneously with provisions in the RF Tax Code, which require Russian companies to register separate subdivisions if they have employees operating in fixed locations other than the employer’s registered office. This issue will need to be clarified by lawmakers in the near future.
As of May 19, 2013 employers have the right to establish production councils. A production council is a consultative body, composed of the company’s employees participating on a voluntary basis, which advises on the means to improve production activity and processes, install new technologies, and increase labor productivity. The procedure for forming a production council and defining the scope of its authority must be established in the employer’s internal regulations. A production council cannot have powers overlapping with those of labor unions.
Additional Rules for State Employees and Employees of Non-Budgetary Funds and CEOs of Public Institutions
Following the passage of recent anti-corruption legislation, the RF Labor Code has been amended to include a number of provisions imposing restrictions on state employees (including employees of non-budgetary funds) and CEOs of public institutions. These new amendments mandate that:
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The RF Labor Code has also been amended to include new grounds for terminating the employment of the above-listed employees. Employment can now be terminated by the employer for breaching requirements (ii) and
(iii) above and/or for failing to take measures to prevent or settle any conflict of interests to which the employee is a party.
Conclusion of Civil Law Contracts with Employees Is Prohibited
The RF Labor Code was amended in late December 2013 to include provisions that directly prohibit employers from concluding civil law contracts (e.g. services contracts, work contracts, etc.) – as opposed to employment contracts – for the purpose of establishing employment relations with their employees. Furthermore, employers engaging in this practice are now subject to administrative liability.
These provisions were introduced as part of an effort to curb the practice in which employers conclude civil law contracts with their employees in order to avoid the responsibility of providing them with federally-mandated employment requirements such as paid sick leave, paid vacations, redundancy payments, work safety rules, etc. In cases where this practice may occur, an employee is now entitled to demand that his employer recognize the employee’s rightful legal status in the company through means of an employment contract. Moreover, recognition of employment status may also be obtained by an authorized state employment body and/or through the court. Although the courts have been active in recognizing employment status in relations established under civil law contracts, these provisions mark the first time in which an actual prohibition of the practice is established by law.
The Federal law that introduced these provisions entered into force on January 1, 2014, save for the provisions on administrative liability, which will enter into force on January 1, 2015. An administrative fine of up to RUB100,000 (approximately US$2900) will be imposed on companies declining to conclude, or that have improperly concluded, an employment agreement, or for concluding a civil contract regulating labor relations between employer and employee.
The RF Central Bank to Control the Remuneration System of Bank Employees
The RF Central Bank has issued a Draft Regulation1 in which it proposes to amend the remuneration system for bank employees. The Draft Regulation, which was first published on December 11, 2013 and further amended in
1 Draft Regulation "On the Order for Assessment of the Remuneration System in Credit Organizations and the Order for Filing to the Bank of Prescriptions for Rectifying Breaches in Its Remuneration System" (the "Draft Regulation")
April 2014, is consistent with Russia’s commitments as a member of the G20 to implement a remuneration system that adequately reflects the nature and scale of bank operations and the risks assumed by the banks.
According to the Draft Regulation, the remuneration of CEOs, senior executive and other "risk-takers", whose decisions influence the actions taken by a bank, shall consist of "fixed" (not less than 50% of their the total remuneration) and "non-fixed" parts, provided that not less than 40% of the "non-fixed" part is paid in installments during a period of at least 3 (three) years and depends on the actual results of the relevant employee’s output. For the employees of risk management and control divisions, at least 50% of their total remuneration must constitute a fixed part.
Pursuant to the Draft Regulation, banks will have to disclose to the RF Central Bank the whole amount and structure of remuneration, including fixed and non-fixed parts. Moreover, all payments paid to bank employees by other persons related to the bank are subject to the CBR disclosure as well.
Liability for failing to comply with the requirements or for presenting incorrect information, include: (1) fines from RUB300,000 (approximately US$8700) up to RUB 3 million (approximately US$87000); or (2) imposition of other sanctions (e.g. suspension of certain operations of the bank, etc.)
The Draft Regulation is slated to be adopted in summer 2014, coming into force by January 1, 2015. Should it be the case, it is necessary for the banks to bring their internal compensation policies into compliance with the Draft Regulation and familiarize employees with these documents very shortly, i.e. two months in advance of a year to be used for calculation of Bonus.
Special Assessment of Workplace Conditions Replaces Workplaces Attestation
In an effort to improve worksite safety conditions, a new procedure for assessing labor conditions has been established by Federal Law No. 426-FZ "On Special Assessment of Workplace Conditions", dated December 28, 2013, which became effective on January 1, 2014. Russian legislation previously provided for three different assessment procedures that should have been performed by the employer: (i) special assessment of labor conditions; (ii) state expertise of labor conditions; and (iii) attestation of workplaces. Until now, organizations often failed to assess labor conditions due to either a lack of knowledge of the law, the general ambiguous language of the law or just simply due to unwillingness to comply with the law because of the non-severe liability it entails.
The special assessment procedure applies to all employers, regardless of their legal form, and all employees as well, except for employees working from home or remote employees and employees working for employers who are not individual entrepreneurs. Moreover, the new special assessment procedure applies to all workplaces without any exceptions, including workplaces with computers, and shall be conducted once every 5 years. The law expressly provides that if a workplace attestation was performed before January 1, 2014, workplace conditions do not have to be assessed for five years from the date of the completion of the last workplace attestation (but until December 31, 2018 at the latest). This provision was further confirmed in the recently issued clarification from the RF Ministry of Labor.
In order to simplify the attestation process, an employer now has the right to declare that the labor conditions of the relevant workplace are in compliance with all norms and requirements, rather than conduct a special assessment every 5 years. However, this shortcut is only permissible in cases where the previous attestation revealed no violations or hazardous conditions in the workplace.
Furthermore, the RF Administrative Code has been amended to include increased liability for violating the procedure for assessing work conditions. In particular, companies are now subject to a fine of up to RUB80,000 (approximately US$2,320), and, for repeat violations, of up to RUB200,000 (approximately US$5,700) or
suspension of the company’s activity for of up to 90 days. Moreover, company officers are subject to a fine of up to RUB50,000 (approximately US$,1450) or disqualification for up to 3 years.
The Federal laws that introduced the above provisions have been in force since January 1, 2014, with the provisions on administrative liabilities slated to enter into force on January 1, 2015.
In addition, on February 14, 2014 the RF Ministry of Labor published Order No.80-n establishing the procedure for submitting declarations on compliance with state regulations on labor safety (only with respect to workplaces where no hazardous or dangerous industrial elements are discovered).
Pursuant to this order, the employer shall submit a declaration to the territorial body of the Federal Service for Labor and Employment, stating that the workplace environment is in compliance with state occupational workplace safety requirements. This declaration must be submitted (via post service or email application on the web-site of Federal Service for Labor and Employment) not later than 30 working days after the approval of the work assessment report.
Amendments to the Law on Commercial Secrets to Protect Employers against the Disclosure of Confidential Information by Employees
On March 12, 2014 the RF President signed the Federal Law "On Amending the First, Third and Fourth Parts of the RF Civil Code and Other Legislative Acts", effective from October 1, 2014.
According to the law, the employer may claim for compensation the damages caused by the employee (including former employee) for disclosing confidential information during his or her employment. According to Article 238 of the RF Labor Code, an employee is responsible for compensating his/her employer for only direct, actual damage, and not for loss of profit. The law expressly states that damages caused by CEOs will be determined according to Article 15 of the RF Civil Code, thereby widening the scope of liability of CEOs for disclosing confidential information.
It should be noted that only employers who implement a special regime for safeguarding confidential information and take measures to protect such confidential information will have the right to recover damages from its employees.
The law also expressly stipulates that access to confidential information may only be given if the employee gives his/her due consent, unless such access is provided for in the employment agreement. Moreover, an employee may appeal to a court against the illegal implementation of a confidential information regime by the employer.
Additional Guarantees for Office Staff
The ambiguity surrounding whether employees working with computers are subject to medical checks was addressed by the RF Ministry of Labor in March 2014. According to the RF Ministry of Labor, employers should organize obligatory preliminary and periodic medical checks for employees who are with computers more than 50% of their time at work. Such medical checks should be carried out by neurologists and ophthalmologists once the employee has been employed, and then once every two years (without exception). Violations of this requirement entail an administrative fine for the employer in the amount of RUB30,000 – RUB50,000 (approximately US$870 – US$1,450) or suspension of operations for 90 days. Unfortunately, the RF Ministry of Labor has not clarified as to whether these medical checks should be conducted at the workplace or at a medical organization (hospital, clinic, etc.).
Reining in the "Golden Parachute"
The "Golden Parachute" is a term that refers to a frequent condition in the employment contracts of CEOs and top-managers of Russian state companies that provides for unreasonably large severance payments after such officers are fired or released from duty.
Beginning from April 2014, severance payments in state-owned companies (companies in which the government holds a 50%+ share) and state agencies are limited to a sum equal to three months’ average salary for CEOs, deputy CEOs, chief accounts, and members of collegiate executive bodies. It is important to note that the amendment has a retroactive effect; therefore, employers must pay special attention to any provisions of employment agreements concluded before April 13, 2014 (the day on which this amendment entered into force) that may contradict the new amendment.
Compensation for the Termination of Employment is Prohibited in Cases of Misconduct or Imposition of Disciplinary Sanctions
Beginning from April 13, 2014 all categories of employees are prohibited from receiving compensation in cases where his/her employment agreement was terminated due to misconduct or the imposition of disciplinary sanctions.
"Loaned" Labor to be Prohibited from January 1, 2016, Secondment Is Possible with Exceptions
On May 5, 2014 the RF President signed the law amending a number of other laws, including the RF Labor Code. The law which comes into force from January 1, 2016 prohibits "loaned labor" ("zaemnyi trud"), but finally recognizes secondment arrangements which are allowed in certain exceptions.
Prior to 2014, secondment arrangements had not been clearly defined by either Russian labor or civil law, with many Russian companies operating under the pretense that if it as long as it is not forbidden, it might as well be considered legal. However, this thinking caused many problems as the Russian state bodies generally do not recognize secondment agreements as valid documents (except in a number of cases for tax and payment purposes).
Pursuant to the law, secondment is allowed within the RF only in the following cases: (1) employees are seconded by accredited agencies (accredited agencies will need to increase their charter capital to RUB1,000,000); and (2) employees are seconded between related companies (e.g. affiliated companies or companies that have entered into a shareholder’s agreement with each other). In these cases, secondment is only possible with the relevant employee’s written consent. Seconding employees to perform work in an area requiring a license, permit, or membership in a self-regulated organization is expressly prohibited by the law.
The RF Government Determined Remuneration Rates for Employee Inventions, Utility Models, and Industrial Designs
In accordance with the passage of the recent amendments to the Part Four of the RF Civil Code (coming into force in October 1, 2014), the RF Government established a remuneration system for employees who create service inventions, utility models, industrial designs during their employment.
Beginning from October 1, 2014 employees (authors of the results of intellectual activities) will have a right to receive remuneration in the amount of 20 (for an invention) or 30 (for a utility model/industrial design) percent of
12 months’ average salary. Importantly, employees will keep the right to receive remuneration even after a termination of labor relations with their employer or in cases of alienation of an exclusive right to another party.
However, the abovementioned rules would not apply if the employer and the employee have specifically regulated remuneration provisions in an agreement (including employment agreement).
Changes Regarding Foreigners – Highly Qualified Specialists
Beginning on January 1, 2014 an employer is required to notify the migration authorities within three business days after dismissing a foreign citizen who occupies position of a highly qualified specialist (HQS) or providing him/her with unpaid vacation for more than one month in a year. Although such obligation of notifying migration authorities existed prior to January 1, 2014, the term in which the employer must notify the migration authority had never been envisaged until now.
Furthermore, it has now been established that the notification may be submitted to the migration authority in person, by post or via the internet. Failure to submit the notification within the 3-day window may result in the employer of the HQS incurring a fine of up to RUB1 million (approximately US$30,000) and/or its official in the amount of up to RUB70,000 (approximately US$2,000).
In addition, on June 23, 2014 the RF President signed a law, decreasing the annual gross salary paid to HQS from RUB2 million (approximately US$60,000) to RUB1 million (approximately US$30,000), thus simplifying the procedure of hiring HQS by Russian IT-companies. Taking into account lack of qualified IT-specialists in Russia, the amendments can be deemed as a step forward.
Foreigners Applying for Work and Residence Permits to Prove Knowledge of Russian Language, History and Culture
Federal Law No. 74-FZ "On Amending the Federal Law On the Legal Status of Foreign Citizens in the Russian Federation" dated April 20, 2014 provides that from January 1, 2015 foreign citizens applying for a work permit, patent, temporary residence permit or residence permit in Russia will be required to prove their knowledge of Russian language, Russian history and Russian legal framework. The new requirements would not apply to HQS’ and their relatives.
To meet the new requirements, one must provide the following documents: (1) a certificate of proficiency in Russian, knowledge of the history of Russia and the legal framework of the RF;(2) state documents on education (at least to the level of a basic general education), issued by an educational institution of a state that was part of the USSR before September 1, 1991; (3) a document on education and (or) on qualifications issued to individuals who have successfully passed the final state examination in the RF, dated after September 1, 1991.
New Law Introduces Criminal Liability for Hiding of Dual Citizenship
On June 4, 2014 the RF President signed the Federal Law "On Amending the RF Federal Law "On Citizenship" and Other Legislative Acts" (effective from August 3, 2014). The law obliges the RF citizens obtained for citizenship or residence permit and residing in Russia to notify the RF Federal Migration Service within 60 days after acquiring a foreign citizenship or residence permit. The law would not apply to the RF citizens who permanently live abroad.
Failure to perform this obligation would result in a criminal liability in the form of a fine of up to RUB200,000 (approximately US$5,800) or up to 400 hours of compulsory community service. Moreover, violation of the
notification procedure or representation of incorrect or incomplete information in the notification would result in an administrative fine of up to RUB1000 (approximately US$29).
The RF Supreme Court Clarified Issues Connected With Labor of Women, Persons with Family Duties, and Minors
On January 28, 2014 the Plenum of the RF Supreme Court (the "Plenum") issued Resolution
No. 1 "On the labor of women, persons with family duties, and minors" (the "Resolution"). The Resolution clarified several issues regarding dismissing the abovementioned categories of workers, the legality of which had never been entirely clarified by court practice.
In particular, the Plenum clarified that the term a single mother includes, inter alia, a woman who solely performs parental duties in respect of her child even if a child has a father (e.g. the father of a child has died, was declared missing). In practice, it means that a woman raising a child (her own or adopted) without a father cannot be dismissed upon the initiative of her employer.
Employers are Obliged to Compensate Employees for All Unused Vacation Time at the Moment that Employment is Terminated
The RF Constitutional Court recently examined the constitutionality of the provisions of the RF Labor Code regarding the compensation of an employees’ unused vacation at the termination of his or her employment (Ruling of the RF Constitutional Court No. 1030-O dated May 29, 2014). Refusing to consider the application, the Court stated that the employer is still obliged to compensate the employee – who did not use any vacation time for more than two consecutive years during his or her employment – for all unused vacation time at the moment upon which the employment contract is terminated.