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Estonia: Employment Contracts Act – Significant amendments in 2022

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published on 12 January 2022 | reading time approx. 8 minutes

 

The year 2022 brings about significant amendments to the Employment Contracts Act in relation to the necessity to take over Directive (EU) 2019/1152 of the European Parliament and of the Council on transparent and predictable working conditions in the European Union. Draft amendments have been prepared by the Ministry of Social Affairs1.
 

  

The objective of Directive 2019/1152 is to improve working conditions by promoting a more transparent and predictable employment while ensuring labour market adaptability. Therefore, the Directive lays down minimum requirements that apply to every worker in the Union who has an employment contract or employment relationship. The Member States must adopt the Directive by 1 August 2022 at the latest. According to the draft prepared by the Ministry of Social Affairs, the amendments to the Employment Contracts Act is intended to take effect on 1 August 2022.
 
The transposition of the provisions of the Directive is largely obligatory to the Member States and thus most of the amendments of the Ministry of Social Affairs arise from the Directive. The only planned change unrelated to the Directive regards the time of holiday pay disbursement.
 
Here is an overview of the most important changes:
 

The employer’s notification obligation extends

Subsection 5 (1) of the valid Employment Contracts Act provides twelve obligatory clauses, which a written document of an employment contract must contain. The draft prepared by the Ministry of Social Affairs significantly specifies or supplements the employer’s notification obligation.
 

Information about institutions receiving taxes and payments and the protection related to their payment

According to the valid law, the taxes and payments payable and withheld by the employer must be reflected in the employment contract. The obligation to inform each employee of the institutions that receive these taxes or payments and what kind of protection these taxes and payments provide is now added. According to the explanatory memorandum to the draft, an employer must inform the employee of the following.
  
  

​Tax or payment

​Institution receiving the tax or payment

​Protection related to the tax or payment

​Protection related to the tax or payment​Tax and Customs Board​The governance activity of the state and local government unit is financed from the income tax
​Unemployment insurance premium​Tax and Customs Board​Unemployment insurance is financed from the unemployment insurance premium which, under certain conditions, guarantees protection for employees if they become unemployed (benefits, supports and services).
​Mandatory funded pension contribution​Tax and Customs Board​Mandatory funded pension is funded from the mandatory funded pension contribution.
​Social tax​Tax and Customs Board​Health insurance and the state and mandatory funded pension is funded from the social tax.

Source: Draft explanatory memorandum of the Employment Contracts Act, the Public Service Act and the Working Conditions of Employees Posted to Estonia Act.2
 
According to the draft explanatory memorandum, the Working Life, Labour Inspectorate or Eesti.ee portal is planned to be supplemented with a page which employers can refer to when submitting tax and payment related data. The respective web page addition should be ready by 1 August 2022.
 

Information on the training provided by the employer

Pursuant to the draft, an employment contract must include training provided by the employer, if there are any. This may be information on the employer’s general training organisation or the training days provided by the employer to employees.

Information on the holiday reimbursed by the employer

Pursuant to the valid Employment Contracts Act, the duration of the holiday must be stipulated in the employment contract. The obligation to inform the employee of other paid leave remunerated by the employer in addition to the duration of the annual holiday is added. This kind of holiday is, for example, study leave as well as paid additional holiday given by the employer to the employee.
 

The formal requirements of cancellation of the employment contract are supplemented

Currently an employment contract must refer to the terms for advance notice of cancellation of the employment contract. This requirement is supplemented by this draft and in the future, an employment contract must refer to a format that can be reproduced in writing, justification obligation and advance notice terms as well as all the relevant Employment Contracts Act provisions or a collective agreement.

Obligation to refer to the procedure for working overtime and the compensation of overtime work in an employment contract

In the future, each employment contract must refer to the provisions of a law or collective agreement that regulate working overtime and its compensation.
 

Obligation to refer to the duration of probationary period

Pursuant to the valid law, a four-month probationary period is applied automatically and it is agreed in the employment contract whether a shorter probationary period or no probationary period is applied. Pursuant to the draft, the duration of the probationary period must be indicated in each employment contract.
 

An employee’s right to access the data of the employment contract at any time

With the draft, the principle that is valid now will remain in force, according to which an employer must communicate the data of an employment contract in good faith, clearly and unambiguously. An employee’s right to access the data of the employment contract at any time arising from the Directive is added.
 
If an employee has not been communicated employment contract data before their commencement of work, the employee may request them at any time and the employer must submit them within two weeks from receiving the respective request.
 

Obligation to inform an employee of any changes in the data of an employment contract

The draft provides that an employer must inform an employee in writing of any changes in the data of an employment contract by the day the changes take effect at the latest.
 

Obligation to inform of the name of user undertaking in the event of temporary agency work

Pursuant to the valid law, a temporary agency worker must be informed only of the fact that they are performing their duties by way of temporary agency work. The draft introduces the obligation to inform a temporary agency worker of the name of the user undertaking.
 

Obligation to inform an employee with summarised working time of the conditions for changing the working time schedule

If an employee is working with summarised working time, an employer is henceforth obliged to inform an employee of the conditions for changing the working time schedule. The procedure for changing the working time schedule depends on the company’s work organisation or agreement with the employees or collective agreement. The procedure for changing the working time schedule may, for example, include the information on whether and under what conditions it is possible to change the working time schedule, what is the specific procedure for changing the working time schedule (who the change must be agreed with), etc.
 

Obligation to retain data and information on providing or receiving employment contract data

The draft provides an obligation to retain employment contract data and information on transmitting or receiving data during the validity of the employment contract and ten years after its termination. With this amendment, Article 3 of Directive (EU) 2019/1152 of the European Parliament and of the Council is transposed pursuant to which “the employer shall provide each worker with the information required pursuant to this Directive in writing. The information shall be provided and transmitted on paper or, provided that the information is accessible to the worker, that it can be stored and printed, and that the employer retains proof of transmission or receipt, in electronic form.” The employer can choose whether they retain proof of transmission or receipt of data, or for both. The obligation to retain proof is valid for employment contract data sent electronically as well as transmitted on paper.
 

An exception to the obligation to provide information regarding an employee, whose working time is on average less than three hours per week

The draft provides an exception to the obligation to provide information regarding an employee, whose working time is on average fewer than three hours per week within four consecutive weeks. In the event of such an employee, the employer does not have to inform the employee of the employment contract data in writing. It is important to note, however, that subsections 4 (2) and (5) of the Employment Contracts Act shall remain in force, pursuant to which a written employment contract has to be entered if the working relation lasts at least two weeks.
 

Changes to the probationary period regulation

The draft introduces a separate paragraph on the probationary period that regulates the definition, length, application and shortening of the probationary period and specifications for an employment contract for a specified term. The new paragraph partially includes the current regulation of the probationary period (definition and objective, the right to agree on non-application or shortening of probationary period, the length of the probationary period in the event of an employment contract entered into for up to eight months).
 
As mentioned above, the draft provides that an employment contract must specify the duration of the probationary period, even if the four-month probationary period is applied.

Suspending the probationary period is a new regulation. Pursuant to the current law, the probationary period is not suspended when a certificate of incapacity for work has been filed. According to the draft, the time when the performance of work duties is hindered, primarily the time when the employee is temporary incapacitated for work or on holiday, is not included in the probationary period.
 
The draft provides restrictions on the application of the probationary period: no new probationary period is applied if an employment contract for a specified term is extended or entered into for performing similar work.
 

The right of the employee to apply for flexible and suitable working conditions

Employees will have the right to apply for flexible and suitable working conditions. An employee who has been working for an employer for at least 6 months and undergone a probationary period, if this has been used, had the right to apply for flexible and suitable working conditions, primarily working under an employment contract of indefinite duration or working full-time.
 
The employer has the obligation to respond to the employee’s request within 14 calendar days as of sending the request. Upon reviewing the request, the employer must consider the employee’s needs that can be reasonably matched to the interests of the employer’s company, and upon refusal, the employer must justify this in writing (or electronically).
 
It is important to note that pursuant to the draft, an employer cannot cancel an employment contract extraordinarily due to the fact that an employee has submitted a request for applying flexible and suitable working conditions.
 

An employer cannot prohibit an employee from working for another employer outside working time

The draft introduces restrictions on the right of the employer to prohibit an employee from working for another employer. The draft supplements section 23 of the Employment Contracts Act (restraint of trade clause) and pursuant to the draft, an employer cannot prohibit an employee from working for another employer, except when the parties have entered into an agreement on restraint of trade clause.

Specification of procedure of payment of holiday pay

The only amendment unrelated to Directive (EU) 2019/1152 of the European Parliament and of the Council concerns the payment of the holiday pay. The amendment is necessary for ensuring legal clarity with regard to the calculation as well as payment of the holiday pay.
 
Pursuant to the draft, the penultimate calendar working day of the employee must be taken as the basis when calculating and remunerating the holiday pay, whereas the definition “calendar working day” is used in Government Regulation No. 91 of 11 June 2009 on average wage payment conditions and procedures.
 

Summary

The draft significantly extends the amount of the data of which and of the changes of which an employer must inform an employee in writing when an employee commences work. The procedure for submitting and retaining this data is also supplemented. As the changes made with this draft extend to already concluded employment contracts, it is recommended to start the preparations of necessary documentation as soon as possible.
The attorneys of Rödl & Partner Law Office are ready to help you with the preparation of the necessary changes. 
 
1 Employment Contracts Act, Public Service Act and Working Conditions of Employees Posted to Estonia Act. Draft and explanatory memorandum: https://eelnoud.valitsus.ee/main#I8SdVw8d.
2  https://eelnoud.valitsus.ee/main#I8SdVw8d

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