Digest of key judgments concerning employment relations 2019/2020

Digest of key judgments concerning employment relations 2019/2020

03 June 2020

Please find, herein, the latest up-to-date digest of the most significant court decisions concerning the legal regulation in the field of labour and employment. Here are the key decisions of the Higher Courts of the Russian Federation, as well as precedents of regional judicial authorities, from the end of 2019 to May 2020.

Staff redundancy and dismissal due to liquidation

<>1. The Supreme Court of the Russian Federation reaffirmed that, in case of staff redundancy, employers are obliged to offer all vacant job roles available in the area, including those in branches

The employee was dismissed, due to staff redundancy, in the branch of a company. The employee considered the dismissal illegal and filed a claim in court. The employee insisted that the employer did not offer him vacant job roles, in all branches of the company. The first and second court levels supported the employer, who claimed that there were no vacant positions in the branch, where the employee was dismissed.

The Supreme Court of the Russian Federation did not agree with this approach and ordered a retrial, highlighting that, in the case of staff redundancy, the employer should offer all vacant job roles, in the area where the redundancy takes place, including in all branches. The court emphasized that a branch is a subdivision of the company; therefore, the obligation to offer vacancies applies to the whole company.

Source: Decision of the Supreme Court of the Russian Federation, dated January 20th, 2020 No. 5-KG19-217

2. The Moscow City Court confirmed the formal approach: a redundant employee is eligible to a third-month severance payment, even if this employee is the founder of another company

The company dismissed the employee due to staff redundancy and, following the requirements of the law, upon the employee’s request, paid him a severance payment for the third month of unemployment. Subsequently, the employer discovered that the employee was a founder of another legal entity and considered that the payment of the third severance payment was unlawful. The company filed a lawsuit to recover unjust enrichment from the former employee. The first court level supported the employer, deciding that the co-founder of a company cannot be considered unemployed, which means that he is not entitled to severance payments.

The Moscow City Court did not endorse this view, referring to the fact that the employee submitted all the documents required for receiving the severance payment, including the decision of the employment center confirming the employee’s unemployment and his right to receive the additional severance payment, which had not been challenged and not canceled. Given these documents, the employer was obliged to make payments.

Source: Appeal ruling of the Moscow City Court, dated March 12th, 2020 No. 2-4518/2018

3. The Moscow City Court explained that, if the company continues operating, the dismissal of employees due to liquidation is illegal

The company was declared bankrupt and some employees were dismissed, due to the liquidation of the company. Employees considered their dismissal unlawful and applied to the court. They enhanced their claims with the fact that the bankruptcy proceedings were extended, and the company actually hired other individuals for their positions. The Moscow City Court supported the employees, indicating that the company had not been expelled from the Unified State Register of Legal Entities and was continuing its activities. These facts meant that it did not have the right to dismiss employees due to the liquidation.

Source: Appeal ruling of the Moscow City Court, dated February 26th, 2020 No. 33-7837/2020<>

Truancy

<>1. The Supreme Court of the Russian Federation specified that problems with transport can be a good reason for an employee not appearing at work

The employee could not come to work, because the road to the office was blocked. The company did not consider the reason for the failure to appear justifiable and dismissed the employee for truancy. It considered that he could travel to the workplace in another way. The employee filed a lawsuit for reinstatement.

The first and second court levels supported the company and the employee was not reinstated. The Supreme Court did not agree with this approach and sent the case back for a new trial. The court indicated that, when deciding on the dismissal, the employer should have taken into account the employee’s previous disciplinary record, the fact that the employee was trying to travel to the office, had warned the management about the encountered problems, and did not know an alternative route.

Source: Decision of the Supreme Court of the Russian Federation, dated March 16th, 2020No. 26-KG19-13

2. The time of absence of an employee, before and after lunch, should not be aggregated, the Khabarovsk Regional Court determined

The employee was absent from the workplace one and a half hours before lunch and four hours after lunch. The company dismissed him due to truancy, based on the aggregate of time of absence.

The court found the dismissal unlawful, indicating that, during the lunch break, the employee was lawfully absent from work. Thus, excluding lunchtime, the employee was not absent from the workplace for more than four consecutive hours, which means he did not commit truancy.

Please note that earlier the courts considered similar situations differently.

Source: Appeal ruling of the Khabarovsk Regional Court, dated April 24th ,2020 in the case No. 33-2181/2020

3. The Moscow City Court once again affirmed that dismissing a pregnant employee, for absence from work, is illegal

The company dismissed an employee for truancy. Subsequently, the employee informed that she was pregnant and applied to the court for reinstatement at work. The employer insisted that, on the date of dismissal, the company did not have information that the employee was pregnant. The Moscow City Court supported the employee and reaffirmed that the ban, on the dismissal of a pregnant woman on the initiative of the employer, is valid in any case.

Source: Appeal ruling of the Moscow City Court of November 26th, 2019 in case No. 33-48834/2019

4. The Supreme Court of the Russian Federation did not confirm that the remote employee committed truancy

De-facto, the employee worked at his residence (remotely) for a long time. At the same time, his employment contract provided for an office-working regime. The company did not formalize the employee’s transfer to remote employment. The company terminated the employment relations with the employee for gross misconduct – truancy, as the employee did not appear in the office.

The employee challenged the dismissal, but the first and second court levels supported the company: formally, the employment contract did not provide for a remote-working regime. The place of work was specified to be at the address of the company: the employee did not submit any documents evidencing the transfer to remote work.

The Supreme Court rejected the judgment of the lower courts and ordered a retrial. It highlighted the importance of indirect evidence (for example, remote access to the work system, etc.) which showed that the company violated the law as it had not formalized the actual remote employment. Moreover, the employee actually worked according to the new conditions (remotely) with the knowledge, or on behalf, of the employer, which meant that the parties had, de facto, agreed to amend the employment contract.

Source: Decision of the Supreme Court of the Russian Federation, dated September 16th, 2019 No. 5-KG19-106<>

Fixed-term employment contracts

<>1. The Constitutional Court of the Russian Federation explained the connection between the services agreement with the customer and the term of the employment contract

A fixed-term employment contract was annually renewed, based on the duration of the services agreement with the company’s customer. The employee considered this unlawful and filed a claim with the court. The lower courts supported the company and did not reclassify the fixed-term employment contract as being open-ended. The employee filed a complaint with the Constitutional Court of the Russian Federation.

The Constitutional Court examined the complaint. It pointed out that a fixed-term of the employment contract cannot be determined by the execution of the agreement with third parties for the provision of services that comprise the main registered type of activity of the company.

This rule applies even if the employee’s activities are required only for the period of the specific civil contract with the counterparty of the company.

In addition, the court also emphasized that prolongation of a fixed-term employment contract, with the same employee, for the same job position, several times, actually shows the absence of obstacles to entering into an open-ended employment contract.

Source: Resolution of the Constitutional Court of the Russian Federation, dated May 19th, 2020 No. 25-P

2. The duration of a fixed-term employment contract is not always limited to five years, the Kemerovo Regional Court explained

An employee was hired to carry out defined work for a client of the company. A fixed-term employment contract was concluded with him, with an uncertain end date, since the term of the employment contract directly depended on the period of cooperation with the client. Relations with the client terminated after six years and the employee was dismissed due to the expiration of the company’s service contract. The employee considered the dismissal unlawful, because, in his opinion, after five years, according to the law, his employment contract had become open-ended.

The court confirmed that the company's actions were legal. The end date of the employment contract was not determined and was tied to when the provision of services to the client ended. In this case, the duration of the employment contract may not be limited to five years.

Source: Appeal ruling of the Kemerovo Regional Court, dated October 31st, 2019 in case No. 33-10856/2019

3. The Saratov Regional Court did not recognize a relationship as concluded for an indefinite term, although an employment contract was renewed seven times

The Deputy General Director worked for a long time on the basis of renegotiable fixed-term employment contracts. When the company decided not to enter into another employment contract for a new term, the employee applied to court.

At the first court level, the court upheld the employee’s case and ruled that the multiple renewals of an employment contract, with the employee, to perform the same function indicated the indefinite nature of the relationship.

The Court of Appeal overturned the decision, referring to the fact that a fixed-term employment contract was concluded by the mutual consent of the parties. This is expressly provided for by the Labour Code of the Russian Federation for employees of similar positions. The court directed that the parties might conclude a fixed-term employment contract, by their mutual consent, several times (where possible, in accordance with the provisions of the Labour Code of the Russian Federation). Thus, by signing such an employment contract, the employee agreed to all its conditions, including the fixed term.

Source: Appeal ruling of the Saratov Regional Court, dated October 17th, 2019 in case No. 33-8580/2019<>

Probationary period and liability

<>1. The Moscow City Court approved the dismissal for not passing the probationary period, which was not included in the employment contract

The company dismissed the employee for failure to pass the probationary period. At the same time, there were no probationary provisions in the employment contract. The employee decided to challenge the dismissal and applied to the court. The first court level reinstated the employee at work. However, the Moscow City Court overturned the decision.

The Court of Appeal decided to overturn the decision, of the first court level, based on the fact that the employee had agreed to undergo a review, as indicated in the hiring application. In addition, the employee was acquainted with the individual plan, and the hiring order, in which the condition for the probation was indicated. The employer also proved that the lack of a probation-period condition, in the employment contract, was a technical error.

Source: Appeal ruling of the Moscow City Court in case No. 33-8165 / 2020

2. The Supreme Court of the Russian Federation confirmed – it is impossible to recover unjust enrichment from an employee

The company discovered that the employee had secretly transferred corporate money to a personal bankcard. It filed a claim with the court to recover unjust enrichment. The first court level rejected the company’s lawsuit. The Court of Appeal reversed the decision, but the Supreme Court of the Russian Federation returned the case for further consideration. It specifed that it is impossible to apply the provisions of the Civil Code of the Russian Federation, on the return of unjust enrichment, to labour relations. An employer may only recover direct actual damages from an employee, in accordance with labour law.

Source: Decision of the Supreme Court of the Russian Federation, dated February 17th, 2020 No. 85-KG19-12

3. The court highlighted that it is important to invoke the violated obligations in the order on disciplinary sanction

The employee was disciplined, in the form of a reprimand, for refusing to perform employment duties. The employee did not agree with the sanction and applied to court. The court upheld the employee’s claim, citing that the order, to bring the employee to disciplinary liability, did not contain a clear statement of his guilt. In addition, it did not indicate which misconduct was committed, nor which employment duties were violated. Separately, the court noted that the order did not contain references to specific points of the job description, violated by the employee.

Source: Appeal ruling of the Nizhny Novgorod Regional Court, dated March 3rd, 2020 No. 33-2262/2020

4. The St. Petersburg City Court confirmed that holding an employee liable for failure to fulfill company plans is illegal

The employee was a regional sales manager. Due to the facts that the employee failed to discharge his objectives regarding bringing new clients, nor did he meet sales targets, he was brought to disciplinary proceedings several times. The employment relationship with the employee was terminated, for repeated failure to perform employment duties. The employee considered the dismissal illegal and applied to court.

Given that the employee was acquainted with the individual goals plan, but did not fulfill it, the court of the first court level supported the company. However, in the appeal court, the decision was reversed. The court cited, in particular, that the employee was required to achieve a certain result, which is typical for civil-law relations, but not labour relations. In addition, none of the company's employees could achieve the goals’ plan. The court also emphasized that the implementation of the employee’s plan depended on the will of third parties, the financial situation in general, pricing, and other reasons not directly related to the employee and his labour discipline.

Please note that the approaches of the courts on this issue vary.

Source: Appeal ruling of the St. Petersburg City Court, dated February 13th, 2020 in the case No. 2-3991/2019

5. The Supreme Court of the Russian Federation explained that dismissal, resulting from a disability hidden by an employee, may be discriminatory

A company, with fewer than 100 employees, entered into an employment contract with an employee who, a few days after the hiring, informed the employer about his disability. Three years later, the company decided to terminate the employment relationship with the employee, due to the fact that he violated the rules for concluding an employment contract. Namely, the company specified that the employee did not inform it about his disability, when applying for a job. The employee decided to challenge the dismissal and applied to court.

The first and second court levels did not see violations in the company's actions and rejected the employee claim. The Supreme Court of the Russian Federation did not support the lower courts and ordered a retrial, indicating that the employer's actions showed signs of discrimination. The employer had reliable information about the state of health of the employee during three years of his employment, and, during that time, the company did not express complaints about employee’s professional, business, and moral qualities.

In addition, the Supreme Court drew attention to the fact that, as a general rule, a disability certificate, and an individual rehabilitation program, are not included in the list of required documents for employment. The court also emphasized that, although a company, with an average number of employees not exceeding 100 people, is not obliged to create jobs for people with disabilities, in relation to employees already hired, the employer is obliged to organize working conditions suitable for them, due to their health conditions.

Source: Decision of the Supreme Court of the Russian Federation, dated December 9th, 2019 No. 78-KG19-46

6. A fine cannot be included in the confidentiality agreement concluded with an employee, the St. Petersburg City Court explained

The company concluded a confidentiality agreement with the employee. The agreement contained the employee’s obligation not to work with clients of the company, after the end of employment in the company. The agreement also provided for a fine, applicable to the employee, in case of breach of this clause. The employee violated the agreement, but refused to pay the fine. The company applied to court.

The court rejected the employer's arguments and did not enforce the claim. The decision was justified by the fact that the agreement was concluded within the framework of labour relations. In this regard, the fine clause is not applicable. Only direct actual damages can be recovered from the employee, the evidence of which the employer had not provided.

Source: Appeal ruling of the St. Petersburg City Court, dated September 12th, 2019 No. 33-19819/2019 in the case No. 2-4012/2019<>

Overtime work

<>1. The Constitutional Court of the Russian Federation indicated that the employer must pay all overtime hours, even if they exceed 120 hours per year

The Constitutional Court of the Russian Federation, having examined the employee’s complaint, confirmed that, even though the maximum number of overtime hours cannot exceed 120 hours per year, this does not mean that the employer is not required to pay for overtime hours actually worked, above this maximum.

Source: Decision of the Constitutional Court of the Russian Federation, dated December 19th, 2019 No. 3363-O

2. If the employee decides to work on vacation in his sole discretion, the company is not required to pay, determined the St. Petersburg City Court

After the dismissal, the employee filed a lawsuit to recover payment of days worked during his vacation. The employee substantiated the claim by the fact that the employer did not notify him of the vacation, nor did it issue an order. The company claimed that the employee went on vacation, according to the vacation schedule, with which he was acquainted, received vacation pay on time, and no one recalled him from vacation.

The court upheld the company’s legal position.

Source: Appeal ruling of the St. Petersburg City Court, dated March 18th, 2020 in case No.2-5036/2019<>

Foreign nationals

<>1. The Constitutional Court of the Russian Federation confirmed that the employer is not obliged to notify the Ministry of Internal Affairs, when changing the working conditions of a foreign national employee

The company hired a foreign national employee and notified the Ministry of Internal Affairs, as prescribed by the law. In fact, the employee was allowed to work in another employer’s location. At the same time, the company did not amend the employment contract with the employee, and therefore did not notify the Ministry of Internal Affairs about this change. However, the company was fined for not reporting on the changed working conditions of a foreign employee.

The company tried to challenge the fine, but the courts dismissed the claim, highlighting the fact that any employer is obliged to notify the Ministry of Internal Affairs about each time it engages a foreign national at work.

The case came to the Constitutional Court of the Russian Federation. It confirmed that a foreign national employee can be engaged at work not provided for by the employment contract, when it is possible to formalize relevant changes, by amending the employment contract. In this regard, it is not required to send notifications to the Ministry of Internal Affairs about events such as the transfer of a foreign employee, a combination of positions, nor other changes in working conditions.

Source: Resolution of the Constitutional Court of the Russian Federation, dated February 4th, 2020 No. 7-P

2. The Supreme Court of the Russian Federation indicated that, if a foreigner changes his place of residence in the Russian Federation, by his own decision, his employer will not be held liable

The company was held liable, because a foreign national employee actually resided at a different address than the one that was registered with the migration authorities. The company decided to challenge the fine in court, providing evidence of the fulfillment of its obligations to provide housing.

The Supreme Court concluded that the fact of foreign national's refusal to reside in the premises, provided by the company, does not indicate the presence of an offense in the actions of the inviting party.

Source: Decision of the Supreme Court of the Russian Federation, dated January 27th, 2020 No. 303-ES19-25973<>

Labour litigation

<>1. The Supreme Court of the Russian Federation reaffirmed the standard approach: an employee’s appeal to a state body is a good reason for missing the limitation period

Earlier, the Supreme Court of the Russian Federation had already expressed that, due to a combination of circumstances, an employee’s appeal, for the protection of the labour rights, to State Labour Inspectorate, can be considered a justifiable reason for being late and missing the limitation period. In this particular case, a similar conclusion was made in connection with the appeal of the employee, for the protection of labour rights, to the prosecution authorities.

Based on the results of the consideration of employee’s applications for illegal dismissal, the prosecutor brought a protest to the employer about the cancellation of the dismissal orders. The employer had not fulfilled the requirements. The prosecutor, in the interests of the employee, applied to court. The employer stated that the limitation period had been missed. The lower courts upheld the employer and did not restore the term.

The Supreme Court sent the case for a new trial. The court considered that, by applying to the prosecutor’s office, employees had legitimate expectations that their rights would be restored without necessity to go to the court.

Source: Decision of the Judicial Chamber on Civil Cases of the Supreme Court of the Russian Federation, dated January 20th , 2020 No. 20-KG19-11 in case No. 2-329/2018

2. The Supreme Court of the Russian Federation clarified: filing a claim on unlawful dismissal, and/or other violation of rights, may become a good reason for missing the limitation period for applying to the court, for reinstatement at work

The employee filed a claim to challenge the order on the staff redundancy and notification of forthcoming dismissal. The notice period had expired and the employee was dismissed, during the consideration of this case in court. By a court decision, the employee’s claim was dismissed. Further – the employee filed another claim to the employer demanding reinstatement at work, however, with a missed limitation period. The lower courts refused to consider the case on procedural grounds (they did not restore the term).

The Supreme Court did not agree with lower courts, referring to the fact that the employee, hoping for the restoration of violated labour rights, without re-applying to the court, initially challenged the documents that served as the basis for dismissal. As a result, the Supreme Court of the Russian Federation restored the missed limitation period and sent the case back for consideration on its merits, at the lower court level.

In another similar case, the Supreme Court of the Russian Federation admitted that if an employee, after filing a claim to recognize the dismissal as unlawful, applies to the court with a statement of claim for reinstatement at work, the reason for missing the limitation period, for applying to court, is good.

The employee filed a claim to challenge the dismissal order. After the court upheld his claim, the employee filed another claim, requesting reinstatement at work. The lower courts indicated that the employee filed such a claim, but after the limitation period, and did not restore the term.

The Supreme Court of the Russian Federation did not agree with this position and ordered a retrial, highlighting that the employee had initially applied to the court within the period prescribed by law, while he rightfully expected that his labour rights would be restored in full.

Source: Decision of the Supreme Court of the Russian Federation dated March16, 2020 No. 25-KG19-15, Decision of the Judicial Chamber on Civil Cases of the Supreme Court of the Russian Federation, dated October 7th, 2019 No. 49-KG19-33<>


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Practice: Labour and Employment

Note: Please be aware that all information provided in this letter was taken from open sources. Neither ALRUD Law Firm, nor the author of this letter bear any liability for consequences of any decisions made in reliance upon this information.

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