Estonia - Employment Contracts Act Adopted
- Estonia
- 04/27/2009
- Raidla Lejins & Norcous
On 17 December 2008, the Estonian Parliament (Riigikogu) adopted the Employment Contracts Act, whose aim is to make the regulation of employment relations more modern and flexible. A key change is that the provisions of the Law of Obligations Act now shall be applicable to employment relations. An employment contract is deemed an authorization agreement unless otherwise provided by law.
The scope of the act has been expanded considerably. In addition to the creation, amendment and termination of employment contracts, the new act also regulates working and rest time, holidays, wages and proprietary liability. The latter provisions had been found in other laws. The new act also brings sweeping changes to the provisions concerning the rights, obligations and liability of both employers and employees. The law specifies the conditions that must be included in written employment contract documents. Moreover, provisions relating to restraint of trade clauses and the confidentiality clauses are now more nuanced. Under the new rules a contractual penalty agreement can be concluded in order to ensure compliance with these obligations. The bases and procedure for cancellation of the employment contract by the employer are also changed.
The changes give employers more flexibility in rearranging employment relations and maintaining their competitiveness by doing so. In order to achieve this goal the deadlines for giving notice and the amounts payable by the employers as compensation upon cancellation have been reduced. In certain exceptional cases the law allows the employers reduce the employees’ wages temporarily during employment. To make up for the reduction of compensation, insurance benefits payable by the Unemployment Insurance Fund have been increased. Under the new provisions employers must focus more on training their employees. The law also reduces the number of documents employers must keep by reason of their contractual relationship with employees.
The new act shall enter into force on 1 July 2009, except for the provisions that have state budgetary implications. These shall enter into force on 1 January 2010. The current Republic of Estonia Employment Contracts Act which was first adopted in 1992 is repealed.
