The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

Labor and employment law challenges in business transformations

Russia

Workforce restructuring

The key practical issues in workforce restructuring include:

  • Legal justification
  • Works council and employee representatives’ process
  • Labor administration process
  • Costs and timing
  • Litigation risk

Applicable legislation

Workforce restructuring, also referred to as redundancy is governed by the Russian Labor Code (Articles 81, 82, 178, 179, 180 and some others). Russian Labor Code differentiates between “redundancy” and “collective redundancy” (also referred to as mass redundancy). Collective redundancy is subject to stricter rules and imposes certain additional obligations on the employer.

The legal criteria for a collective redundancy are set out in the Government Resolution of 05.02.1993 No. 99 “On Organizing the Promotion of Employment under Mass Release of Work Force.” A redundancy qualifies as a collective redundancy if it meets one of the following criteria:

  • Liquidation of an enterprise having 15 or more employees
  • Staff redundancy of:
    • 50 or more employees within 30 calendar days
    • 200 or more employees within 60 calendar days
    • 500 or more employees within 90 calendar days
  • Termination of 1% of employees due to liquidation or redundancy within 30 calendar days in regions with the total number of employed are less than 5,000

The regional legislation stipulates additional rules for the protection of employee’s rights.

Required legal justification

Formally, there is no requirement to provide justification for redundancy. However, the employer must indicate the reason for collective redundancy in the notice provided to the employee representative body and State Unemployment Service.

In practice, collective redundancies may not be perceived favorably by local authorities, specifically in regions with the presence of a large enterprise that is a significant employer. In such cases, the company management may have to conduct consultations with regional administration and/or trade unions and must justify the redundancy by economic reasons.

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Employer must notify the trade union at least three months prior to employees’ termination date. The notice should include:

  • Employer details
  • Total number of employees
  • Number of impacted employees
  • Reason for redundancy
  • General information on impacted employees such as position, titles, number of employees for each redundant position
  • Planned termination date for each position
  • First and last planned dates of redundancy procedures (employees’ termination dates)

In practice, collective redundancies may not be perceived favorably by local authorities, specifically in regions with the presence of a large enterprise that is a significant employer. In such cases, the company management may have to conduct consultations with regional administration and/or trade unions and must justify the redundancy by economic reasons.

Consultation requirements with other employee representatives

No consultation is required with other employee representatives except for the requirements mentioned under the “Consultation requirements with works council/unions”.

Consultation requirements with employees

There is no legal requirement to consult with employees prior to execute collective redundancies. However, the employer must notify each impacted employee at least two months prior to the redundancy against signed acknowledgement. Employee may be made redundant before expiration of the notice period subject to his or her consent in writing and payment in lieu of the notice.

Approval/notification of the labor authorities or other government authorities

No approval of the labor authorities is required to implement a collective redundancy. However, the employer is required to file two notices with the State Unemployment Service.

The first notice must be filed at least three months prior to the planned termination date of the employees. The notice should indicate:

  • Employer details
  • Total number of employees
  • Number of impacted employees
  • Reason for redundancy
  • General information on impacted employees such as position, titles, number of employees for each redundant position
  • Planned termination date for each position
  • First and last dates of redundancy procedures (employees’ termination dates)

The second notice must be filed at least two months prior to the planned termination date of the employees. The notice should indicate with respect to each redundant employee:

  • Name
  • Education
  • Profession or specialization
  • Qualification
  • Average salary

In practice, collective redundancies may not be perceived favorably by local authorities, specifically in regions with the presence of a large enterprise that is a significant employer. In such cases, the company management may have to conduct consultations with regional administration and/or trade unions and must justify the redundancy by economic reasons.

Employee selection criteria

Employer cannot freely choose the employees to be made redundant.

Employees with a higher productivity and skill have a preferential right to remain employed. In case of equal productivity and skill, preference is given to employees:

  • With two or more dependents
  • Whose family has no other workers with independent earnings
  • Who sustained a labor injury or occupational illness while working for this employer
  • Who are invalids of the Great Patriotic War or certain other combat operations
  • Raising their skill without ceasing work

A collective bargaining agreement may grant a preferential right to other categories of employees to remain at work in case of equal productivity and skill.

Certain employees are afforded special protection during the redundancy process, particularly pregnant women or women with young children, single parent and trade union members or members and former members of a union’s collegial bodies.

Actions required to limit the negative impact and social plan

Internal alternative employment/redeployment
The employer is required to offer to impacted employees all vacant positions in the given region, which correspond to the employee’s qualification or require a lower qualification.

The applicable collective bargaining agreement may stipulate additional conditions such as an employer’s undertaking to offer vacancies in other regions.

Other measures
The impacted employees are entitled to a severance payment as mentioned under “Estimated costs.”

A collective bargaining agreement (CBA) may provide for a list of actions for the prevention of a collective redundancy or for mitigating its consequences on the impacted employees. If there is no such agreement or it does not cover redundancy issues, the employee representative body may initiate the process of discussion on such actions, which, after agreement by the parties, become part of the CBA. The employee representative body may also involve regional authorities into the discussion.

The Government Resolution of 05.02.1993 No. 99 “On Organizing the Promotion of Employment under Mass Release of Work Force” provides a list of sample “anti-redundancy” actions as given below that could be incorporated in a CBA:

  • Reduction of working time without decrease of headcount
  • Benefits and compensations to impacted employees in addition to those established by law
  • Professional training and education of released employees prior to termination
  • Assistance to certain categories of impacted employees with new employment
  • Insurance against unemployment
  • Suspension of new hires to vacant positions
  • Granting of unpaid leave

Estimated timeline

There is no specific timeline. Usually, if redundancy qualifies as collective redundancy, the process may take four to six months.

Estimated costs

Mandatory costs

The key components of mandatory HR legal costs are as follows:

  • Salary during two months’ notice period or payment in lieu of notice
  • Severance payment of salary for up to three months (this amount is up to six months in regions of Far North and similar regions) as given below:
    • First monthly salary on the termination date
    • Second monthly salary, if the employee fails to find new employment within two months after termination
    • Third monthly salary, if the employee was registered with the unemployment service within two weeks after termination and failed to find new employment for three months after termination.
  • Payment of accrued vacation

Customary additional costs

Additional costs could be triggered by additional anti-redundancy actions as may be agreed in a collective bargaining agreement.

Hiring restrictions post-redundancy

Formally, there are no hiring restrictions. In practice, however, it is not recommended to hire new employees to the terminated positions within a reasonable time. If an employer hires employees following a redundancy, it may face litigation risk as the terminated employees could claim that redundancy was not justified and claim reinstatement.

Litigation risk

Interested parties

The impacted employees may file a claim for reinstatement in court. Employee representatives may file court claims only if requested by an employee or a group of employees, but not at their own initiative.

The statute of limitation is one month following the last working day. However, the court may extend the period if the employee can provide a justification for the delay.

Litigation is unlikely to slow down the collective redundancy process.

Damages and other remedies

The only remedy available to an employee is a claim for reinstatement.

The employer and/or its officers, usually the Chief Executive Officer or the Head of HR, could be subject to an administrative fine.

Damages for unfair dismissal
No damages for unfair dismissal are applicable. However, employee may claim for moral damages.

Reinstatement
An employee may file a claim for reinstatement at work if he or she believes that the termination due to redundancy was not justified or the respective procedure was not duly observed by the employer.

If the court decides in favor of employee, he or she may be

  • Reinstated at work
  • Awarded compensation for the period of absence at work based on previous average monthly salary
  • Awarded compensation of moral damage, usually significantly smaller than requested
    And
  • Awarded compensation of attorney’s fees, usually smaller than those invoiced by the employee’s attorney

If the employee’s claim is rejected, he or she cannot be required to pay court fees or compensate litigation expenses.

Criminal sanctions
Criminal sanctions are imposed only in the following cases:

  • Deliberate termination of employment of a pregnant woman or a woman with a child under the age of three
    Or
  • Deliberate nonpayment of amount due by employer to employee

Country-specific issues

It is very important to complete all these procedures by the last day of employment, since any procedural drawbacks may compromise the whole redundancy process. To avoid any legal risks, the employer must comply with the redundancy procedure, which must be duly documented.

The same applies to standard termination process. The employer must follow a set of standardized procedures applicable to termination of employment. The employer must:

  • Pay the outstanding amounts (unused vacation, salary, etc.)
  • Issue a calculation memo according to a standard form
  • Issue an HR order on termination according to a standard form
  • Complete each employee’s workbook (a special document held by each Russian employee reflecting employment history)

Contact

Primary Contact for Russia Labor and Employment Law

Daria A Zakharova
Ernst & Young (CIS) B.V. Branch in Moscow
+7 495 648 9661

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Russia
RU

Contacts