Federal Law No.188-FZ “On introducing changes to Article 261 of the Labor Code of the Russian Federation” dated 12.11.2012 came into effect on November 24, 2012. This law expanded the list of those with family obligations whose employment contract can not be terminated on an employer’s instigation.

Previously, a similar ban only considered women raising children under the age of three, single mothers raising a child under the age of fourteen (or a disabled child under the age of eighteen), and others raising such children without the mother. The new law adds the parent (mother or father) or an other legal guardian to this list provided the following conditions are met:

  • the parent (or legal guardian) is the sole breadwinner for the child under the age of three or of a disabled child under the age of eighteen;
  • three or more minors are being raised in a family (aged up to 14);
  • the other parent (or other legal guardian) is unemployed.

Termination of an employment contract with a sole breadwinner on an employer’s instigation is allowed only if the entity is being liquidated or if the employee commits culpable actions.

Changes were introduced to the Labor Code of the Russian Federation to implement Decree No.28-P of the Constitutional Court of the Russian Federation dated 15.12.2011 and are aimed, primarily, at providing guarantees of employment contracts to fathers who are the sole breadwinner for their families.

Generally, under Russian labor legislation, an employment contact can only be terminated on grounds outlined in the Labor Code of the Russian Federation which rules out arbitrary and unsubstantiated dismissal of employees on an employer’s instigation. However, applying this ban to all employees, irrespective of their status, does give rise to certain difficulties for employers from a corporate management perspective.

Contracts with a company’s CEO, for example, can include additional grounds for termination of employment such as the adoption of a decision by an authorized person (corporate body or owner) to terminate an employment contract without stating grounds for dismissal. Including such grounds is tied to the special status of company CEOs which is determined by their position, their role in the company’s management mechanism, and the principle of freedom of business activities.

Now, however, in the event the company CEO is classified as sole breadwinner for his family, an employment contract with him, the same as with any other employee, may be terminated only if the company is being liquidated or due to his culpable actions.

The rules established by Russian labor law also cover employment relations involving foreigners and foreign legal entities in the Russian Federation so any employer must take the existence of these limitations into consideration - especially when forming employment relations with the company’s top management. Even if a company CEO is an expat who is the sole breadwinner for his family and whose employment relations may be executed using two employment contracts (with the foreign parent company and the Russian subsidiary), in the event the contract with the parent company is lawfully terminated, the contract with the Russian company may not be while the above listed conditions apply.

Extending this ban to include company CEOs does limit the principle of economic freedom and the powers of the company’s owner to a certain extent. It appears that the issue of removing company CEOs from the scope of this ban will, sooner or later, become the subject of an examination by lawmakers or the Constitutional Court of the Russian Federation and will be resolved subject to a balance between the interests of the parties. However, until then employers must take into account the existence of such ban when forming employment relations with their top management.

Vladislav Zabrodin Capital Legal Services in Russia