Supreme Court rulings on fixed term and overtime work

In its recent rulings, the Supreme Court of Estonia has clarified appropriate compensation for the early termination of a fixed term employment contract and also how to determine overtime work where this is rolled up in a summarised working time calculation.

Compensation for premature termination of a fixed term employment contract (Supreme Court case No 3-2-1-120-15)

According to the Estonian Employment Contracts Act (ECA), the early termination of an employment contract entered into for a specified term for economic reasons, gives rise to compensation unless the reason for termination is the employer´s bankruptcy or a force majeure. Compensation for the affected employee is normally based upon the wages to which he or she would have been entitled until expiry of the contract term, a sum which the lower courts have found may not be reduced.

The Supreme Court has overruled the restrictive decision of lower courts when it comes to fixing minimum compensation in this way and has found that the amount of compensation can be reduced if this is necessary as an issue of good faith and/or upon general principles of damages calculation, in particular that the amount of compensation must be reflective of actual loss and of any mitigating steps by the offending party. In this particular case, the Supreme Court was prepared to accept that, having cancelled the employment contract, the employer actively assisted the employee with finding a new job, a factor which the court agreed was appropriate grounds for reducing the amount of compensation.

Determining overtime work in case of summarised working time calculation (Supreme Court case No 3-2-1-143-15)

The case concerned the calculation of overtime working hours where the parties to the employment contract have agreed to a summarised calculation of working time (i.e. where the employee has no fixed hours and working time accumulated over a period is compared against statutory minimums). According to ECA, time that exceeds “normal working hours” in the calculation period is classified as overtime and paid at preferential rate.

In this case before the Supreme Court, during the calculation period the employee was absent on sick leave for several days, time which would need to be deducted from his normal working time in order to calculate his pay. However, because the employee worked shifts, a dispute arose between the parties as to which days should be deducted –all days on which he was absent due to sickness or only those days on which his shifts actually fell and he was unable to work. For the employee it was more favourable for all days of sick leave to be deducted from “normal working time” as this would mean more of the hours he actually worked during the calculation period would be regarded as overtime hours and paid accordingly.

The Supreme Court ruled that only those days of sick leave when the employee was actually supposed to be at work should be deducted from normal working hours. Time when he was not scheduled to work could not be regarded as normal working time. Otherwise, the employee would be paid for time when he was not actually supposed to be working.