Legal opinion

Fixed term labour contract

by

Stefan Clauwaert

within

LO-TCO

Baltic Labour Law Project

Case 49, Russia 18

August 2001 2

Summary:

The process of acceptance of the new Labour Code takes place in Russian Federation now. The parliament has accepted the Project of the Labour Code on 5 July 2001 in the first reading. The article 75 of the consolidated project includes the norm (standard) that describes one special reason of concluding a fixed term labour contract under the initiative of the employer. The fixed term contract can be concluded if the employer is a small business (firm) with number of employees up to 50 (in organization of retail trade and consumer services - up to 30 workers) and if the employer is a private person. Thus, the norm (standard) allows concluding the fixed term contracts because of the special subject of the agreement - firm of small business concluding the fixed term contract does not depend on character of the forthcoming work or conditions of its fulfillment, or interests of employee. It is necessary for us to get an answer on forthcoming question by the time of second reading of Labour Code in Russian Parliament. Is the concluding of fixed term labour contract legal and justified, if it is done under the only reason - presence of the special subject as an employer? The second reading of Labour Code will take place at the end of autumn.

INTERNATIONAL EXPERT OPINION

As a general remark I would like to point out that there are no international instruments dealing specifically with fixed-term contracts, except for the EU Directive 1999/70/ EC of 28 June 1999 concerning the framework agreement of fixed-term work concluded by ETUC, UNICE and CEEP.

This opinion will thus be based on two main directions. Firstly, on a comparative legal overview conducted by the European Trade Union Institute and which provides an analysis of how fixed-term contracts are legally regulated in the EU member states. Secondly, by providing a short overview of the arguments used by both employers (UNICE) and workers’ organizations (ETUC) during the EU social dialogue negotiations on the issue.

1. Comparative overview

In a majority of the countries in the EU (thirteen out of fifteen), fixed term contracts are regulated by legislation (either by specific laws or by the Civil and Labour Codes), except in Nordic countries where collective agreements 3 are the basic instruments. Very often this legislation is complemented by collective agreements at a national, sectored and company level. In some countries, individual contracts play a central role in determining additional rights. Also, in some countries there is specific legislation for specific groups of workers (e.g. for seafarers, those in the maritime and harbor sector, in agriculture, and for artists). In almost all countries the legislation or collective agreements apply to both the public and private sectors (France being the exception). This means that in principle no categories of workers are excluded.

In line with the Directive, the countries which regulate the use of fixed- term contracts use one or more of the in the Directive mentioned options. Either they stipulate that fixed-term contracts can only be used for certain objective reasons, secondly, they stipulate a maximum period for the duration of a fixed term contract, and/or thirdly they limit the number of renewals of a fixed-term contract.

Concerning the objective reasons stipulated in the national legislations of the EU Member States the following can be mentioned:

The reasons for which a fixed term contract may be concluded vary greatly from country to country. They are often laid down in law and/or in collective agreements or determined by case law (e.g. Germany).

Based on the findings of a study of the European Foundation for Working and Living Conditions (Dublin –Ireland), distinction can be made between “traditional reasons” and “new reasons”. Traditional reasons concern mainly the limited and predicted length of the task to be carried out (e.g. specific tasks, temporary increase of work, seasonal work) or the replacement of temporarily absent staff (e.g. for reasons of maternity leave, military service, or illness).

The new reasons, which are not legal in all countries, are: · the company is unsure of future workload levels and hires fixed term contract workers when there is a temporary increase in workload or for emergency work or when a new activity is launched within the company · there is a need for a longer probation period · employment law makes it difficult or expensive to lay off redundant staff, in fact to do so is not lawful in several countries.

The reason often mentioned is that the work of a fixed term contract worker “is not part of the permanent and normal activity of the company” (e.g. France) 4

Other new reasons, which result from new labour market policies, are the increasing use of this type of contract to engage young persons (to combat youth unemployment), to stimulate the employment of certain other categories of unemployed (e.g. long-term unemployed), and for vocational training.

Some countries expressly prohibit the use of fixed term contracts to replace a worker on strike, to carry out dangerous work or to undertake work in a company where, within a specified period, a collective redundancy policy was implemented for restructuring purposes.

In most countries if a fixed term contract is not concluded for the reasons provided for, it is converted into an open-ended contract.

No country has thus an experience by stipulating that fixed-term contracts can be concluded in the interest of one or both parties. However we must take into account here the basic rules of civil and labour law, i.e. that parties can conclude whatever kind of contract in their (both) interest if the conclusion stays within the limits set by law and public order. This general principle would thus allow the conclusion of a fixed-term contract as stipulated in this Russian case, in particular if the option of “in the interest of the employee” is foreseen by national law. On the other hand, it is my personal opinion, that no country in the EU foresaw a similar reason in its national law as in the Russian case (i.e. in the interest of the employee), in particular because of the distortion in the power balance between employers and employees. It would then be easily to argue that every fixed- term contract would be in the interest of the employee because he/she would have the choice between a fixed-term contract and no contract at all. In that regard we also have to consider the economic and organizational aspects of labour market policies, namely that employers want always the cheapest and most flexible (i.e. less restrictive) form of contract. An additional argument is that the EU Member States which limit the use of fixed-term contracts via demanding objective reasons for the conclusion of the contract, indeed only stipulate objective reasons whereas the reason of the “interest of the employee” can and must be considered as a subjective reason. Without radicalizing the case, it could as well be argued that it is of course in the interest of an illegal worker to accept illegal work rather than not to work at all.

2. Some arguments from the EU social dialogue

Firstly, and very important, it must be mentioned that this EU directive only regulates the successive use of fixed-term contracts. It does thus not lay down any limitations on the use of the first fixed-term contract. 5

However, in the 7th General Consideration it is affirmed in a general way that “the use of fixed-term contracts based on objective reasons is a way to prevent abuse”. It can thus be argued together with Prof. Brian Bercusson that absence of an objective reason to conclude a first fixed-term contract would constitute an abuse contrary to the objective, structure and wording of the agreement and the legal reality in a large majority of the EU Member States. In this light it is my personal opinion, as having followed the whole negotiations on this Fixed-term work Directive, that, even how minimalistic the conditions of use of fixed-term contracts laid down by the Russian law are, they are in line with the Directive obligations, except for the reason linked to the interest of the employee because this cannot be considered as an objective reason but rather a subjective reason.

During the whole discussion on the Fixed-term work Directive, the ETUC refused to discuss fixed-term contracts as elements in the promotion and creation of employment. The initial and final position was and is that fixed-term contracts are a perverse aspect of labour market policy. It was therefore never the intention of the ETUC to promote the use of fixed-term contracts, irrespective of the reason for it. The mandate of the employers (UNICE and CEEP) on the other hand was to improve through the negotiations “employment perspectives by the promotion of labour market flexibility and the reduction of obstacles to the development of fixed-term work”. The position taken by the ETUC prevailed and it strongly features in the agreement/Directive through the second paragraph of the preamble, in numbers 6 and 7 of the General Considerations and in Clause 1. (see Directive in annex) Basic guideline is thereby still, and this can be considered a victory of the trade unions, that open-ended or permanent contracts are and remain to be the general form of employment relationship. This thus marginalized the use of fixed-term contracts and considers them less good for workers and the economy in general.

However, the Directive recognizes that fixed-term contracts are “a feature of employment in certain sectors, occupations and activities which can suit both employers and workers” (see the paragraph 8 of the General Considerations of the Agreement annexed to the Directive). How does this statement now come about?

Already during the first plenary session of the negotiations in March 1998, UNICE referred to the situation that a fixed-term contract can suit both workers and employers without however giving any reasons or examples of this. It also argued that in some cases there should be flexibility allowed for economical reasons. ETUC accepted that fixed-term work could be a feature of labour market policy to reduce unemployment but that this also raised serious questions regarding the quality of such work, which 6 according to the ETUC must at all times be guaranteed. In addition, the ETUC refused to accept that workers have to build up their professional career by concluding one fixed-term contract after the other. It was thus the intention of the ETUC –via this Directive- to reduce the precaution of fixed-term contracts by regulating and limiting the use of fixed-term contracts thereby taking into account the different ways used in the EU Member States.

During the plenary meeting in April 1998, the ETUC repeated its stand that it did not want to promote the use of fixed-term contracts as was the case when they were negotiating the Part-time Work Directive.

In the plenary session of May 1998, UNICE repeated that in some situations the conclusion of a fixed-term contract can be in the interest of the employee without giving again any examples of such situations. This reasoning was integrated in the UNICE text proposal of July 1998 which stipulated that “employment should be promoted in a manner which takes into account the needs of employers and employees”. The counter proposal of the ETUC mentioned however “that it should be recognized that permanent contracts are and remain the general form of employment contract for all workers and that the precaution in the labour market had to be reduced by regulating and limiting the use of fixed-term contracts.” ETUC was at that moment however ready to accept that in certain specific sectors fixed-term contracts contributed to the normal functioning of the labour market. In a subsequent joint ETUC-UNICE drafting group meeting, the UNICE spokesmen accepted that permanent contracts are and should remain the general form of employment contract and –very importantly for this Russian case- that fixed-term contracts should not be used solely for the purpose to avoid the protection attached to permanent contracts.

What then followed in the next months was a very hard and long debate on the regulation of the conditions of use of fixed-term contracts which was finally laid down in the clause 5 of the agreement. In the first text proposals by UNICE featured the fact to accept exceptions to the limiting of use of fixed-term contracts in certain sectors. They finally accepted to have this statement in the General considerations when ETUC accepted to limit the regulation of fixed-term contracts to the regulation of successive fixed-term contracts and not as from the first fixed-term contract. To clarify it, a further reference was integrated in consideration 10 referring to the specific features of certain sectors, in particular to occupations of a seasonal nature (tourism, agriculture, etc.). So this consideration 8 is thus a trade off whereby it must be mentioned that the initial point of view of 7

UNICE that fixed-term contracts can be in the interest of the employee was thus never accepted by ETUC and therefore not integrated in the text.

Next to the argumentation about which reasons are acceptable to conclude a fixed-term contract (and I stress that only objective reasons where discussed in this process), one could also refer to the objective of another clause of the agreement/Directive, namely clause 5 on the regulation of successive fixed-term contracts. The main objective was thus to prevent workers to build up their professional career based on successive fixed- term contracts, a feature which would become reality if the Russian trade unions would accept the exploitative use of the reason of “the interest of the employee”. The idea was thus always to come at a certain point to a conversion of a fixed-term contract into a permanent contract and not the other way around.

Furthermore the agreement/Directive contains several obligations which have as an objective to improve the quality of fixed-term work mainly with the idea to make fixed-term work more expensive – and thus less attractive- for employers. Reference can be made clause 1 on the purpose of the agreement and clause 6 which opens up possibilities of continuing vocational training, career development and access by fixed-term workers to permanent positions. The latter is again an argument to prove that it was the intention of the agreement to promote the conversion of fixed-term contracts into permanent contracts and not the other way around as in this Russian case.

3. Non-discrimination

The argumentation can thus be built on the reason of the fixed-term contract but more important, the argumentation can to my opinion also be based on the article 37 of the Russian Constitution which stipulates in Paragraph 3 that each person has the right to “receive remuneration for labour without any discrimination (…)”.

It is clear that by offering permanent workers a higher pay raise if they want to convert their contract into fixed-term contract discrimination is put in place between those who accept to do it and those who do not accept to do it. The main discrimination lays in the fact that colleagues doing the same work on a permanent contract and others on a fixed-term contract do not receive the same compensation for that same work.

Next to the ILO Convention 111 on Non-Discrimination at Work (but of which I could not find the applicable case law), there is also the recently 8 adopted EU Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation. This directive confirms the fundamental nature of the right of all persons to equality as laid down in all the international instruments, including ILO Convention 111, and the EU instruments, such as the Community Charter of Fundamental Rights of Workers. This Directive calls on the Member States to promote the dialogue of national social partners to address different forms of discrimination at the workplace and to combat them. This Directive which applies to both public and private sector prohibits discrimination in employment and working conditions including dismissals and payment (except payments of any kind made by state schemes or similar, including state social security or social protection schemes).

4. Conclusion:

There are several reasons not to accept this deregulatory approach by the Russian employer. To list some:

· No EU Member State has the reason of “the interest of the employee” embedded in it legislation on the use of fixed-term contracts · Despite attempts of the European employers, this reason also not figures in the EU directive on fixed-term work · Several Member States do not accept that work of a permanent nature is done by workers with a fixed-term contract

It should be noted that since this directive forms part of the so-called “social acquis communautaire” it has to be implemented in all EU applicant countries (i.e. all former Soviet countries which are now applying for EU membership). Also to note is that a firm protection of the fixed-term contract workers relies not only on the rules concerning the use of (successive) fixed-term contracts but also and very importantly on the accompanying protection against dismissal of fixed-term workers. The already mentioned study of the Dublin Foundation revealed that, if both the legislation against unfair dismissal and the legal regulation of fixed term contracts are taken into account, a rough distinction can be made between 3 types of countries: · countries with comparatively little protection against unfair dismissal and few restrictions with regard to fixed term contracts (e.g. the UK, Ireland and Denmark) · countries with a relatively high degree of protection against unfair dismissal and few restrictions concerning the use of fixed term contracts (e.g. Germany and the Netherlands) 9

· countries with a high degree of protection against unfair dismissal and rather restrictive legislation with regard to fixed term contracts (e.g. Belgium and Italy).

It could thus be advised that if the Russian trade unions cannot overcome to delete the reason concerning “the interest of the employee” from the national law then they demand for a firmer legislation on the protection of dismissal as is the case in most EU Member States.

In addition this case does not only deal with the regulation of fixed-term contracts but also with the fundamental principle of equal treatment in particular regarding payment for equal work whereby an unacceptable distinction in the level of payment is made based on the type of contract the worker has.

NATIONAL EXPERT OPINION

Undoubtedly interesting for Russian specialists are the materials of the legal evaluation of the way this problem is addressed by the EU Member States conducted by the European Trade Unions Institute as well as the brief review of the arguments used both by employers organizations (UNICE) and by workers’ organizations (ETUC) in the course of social dialogue during negotiations concerning this issue.

The general conclusion one can draw after studying the materials of the comparative analysis of legislations of a number of European countries is that the nature and contents of the legal regulation in the field of conclusion of fixed-term contracts are basically similar to the proposed solution of this problem as provided by the legislation of the Russian Federation. Typically in Russia just like in most European countries (13 out of 15) the issue of fixed-term contracts is regulated by legislation (Article 17 of the RF Labour Laws Code). The Russian labour legislation similarly to the European law is based on the recognition of the fact that these contracts, firstly, may be used only for certain objective reasons (Part 2, Article 17 of the RF Labour Laws Code); secondly, the national legislation should provide for a maximum term for signing such a contract (Part 1, Article 17 of the RF Labour Laws Code).

However the Russian labour legislation does not address a number of issues that have already been resolved in the law of European countries. In particular the Russian labour law limits the regulation of fixed-term contracts mainly by traditional reasons, including temporary or seasonal work nature leaving behind the reasons which are new to the Russian 10 reality such as the temporary growth of load at work, the necessity to fulfill urgent work, companies operating along new lines etc.

Unlike the European law the Russian labour legislation does not provide for direct bans on concluding fixed-term contracts in specific cases. However a number of EU countries, as noted by Stefan Clauwaert, has clearly defined bans on the application of fixed-term contracts, e.g. for the purpose of replacing workers on strike or for doing work for a company that for a certain period has been pursuing a policy of redundancies aiming at restructuring. There are no provisions like this in the Russian labour law today.

One of the most essential distinctions between the Russian and the European legislations is that the Russian legislation provides for a possibility (Part 2, Article 17 of the RF Labour Laws Code) to conclude fixed-term contracts in the cases when employment relationships may not be established for an indefinite term considering the interests of the employees. It should be noted that the Russian legislation has not yet provided for a list of any specific cases of the worker’s interest in entering into exactly a fixed-term contract, accordingly there are no provisions to the effect in place on the regulatory level, so different version of interpretation of the worker’s interests are possible.

To my mind, considering today’s state of the Russian labour legislation, it would be practically impossible to formulate the cases when the worker could be interested in signing such a contract. So I’ll try to explain why it happens.

To start with, this is due to the fact that the conclusion of a fixed-term contract basically is detrimental for the worker’s position as opposed to the situation when he signs a contract of unlimited duration. The deterioration of the worker’s position is manifested in two aspects: firstly, the employer obtains an additional possibility to terminate the contract using a simplified procedure due to the expiry of the contract term and, secondly, in this case the worker loses his right to terminate the contract (before its validity is over) without sound grounds.

Russian employers as well as their foreign colleagues are certainly keen on concluding fixed-term and even short-term labour agreements (contracts) that allows them to get rid of an employee they do not need any more. Based on this keenness, during the late 1980’s – early 1990’s a concept was elaborated and actively implemented dealing with the so called “contract form” of labour employment. It typically granted the worker who concluded a fixed-term contract various additional benefits and privileges in labour 11 rights that the employees working under indefinite-term contracts did not enjoy.

For a while this conceptual approach to the grounds for entering into a fixed-term contract was even supported by the court practice. To prove that it was legitimate to refer to the “employees’ interests” as a reason for concluding a fixed-term contract the following argument was used: to enter into a labour agreement (contract) it is necessary that the employee should be real and reflect his existing willingness to sign a labour agreement (contract) for a fixed term. It was this logic that was applied, in particular, in the decision of the Full Court for Civil Cases of the Supreme Court of the Russian Federation of December 1, 1992 adopted regarding the Moiseyenko case. That decision recognized that the fixed-term contract signed with Moiseyenko was to his interests because: a) he voluntarily expressed his will to sign a fixed-term contract; b) the terms and conditions of the contract did not damage his labour rights but rather provided for additional labour privileges compared to the existing legislation (higher wages compared to the established minimum size, a supplementary remuneration at the granting of paid holidays and other benefits); all the additional benefits provided in the contract had been fully used.

To my mind such court practice may not be deemed as based on the legislation. This stand is due above all to the fact that the granting of benefits and privileges to those signing fixed-term contracts may and should be considered as unaccountable discrimination with respect to the employees working on the basis of uncertain-term contracts. A good foundation for proper qualification of this practice could be provided by the ILO Convention 111 on Discrimination in the Sphere of Employment and Occupation. In particular para. b), Article 1 of this convention considers as discriminatory any distinction or preference resulting in the elimination or violation of equality of opportunities or treatment in the sphere of employment and occupation.

During the late 1980’s – early 1990’s Russian employers tried to eliminate this contradiction through concluding labour contracts of somewhat different contents. Those workers who signed fixed-term contracts were losing certain labour rights or guarantees while getting in compensation other benefits they were not entitled to initially. This practice should be considered illegal too because in accordance with Part 1, Article 5 of the Labour Laws Code of the Russian Federation all terms and conditions of employment contracts that worsen the workers’ standing with regard to the labour legislation shall be declared invalid (i.e. legally insignificant). 12

In general the introduction of a reference to the worker’s interests into the Russian legislation as a reason for concluding a fixed-term labour contract is not deemed to a good solution. Its practical implementation supplemented with a number of deficiencies existing in the national legal system only encourages Russian employers to refrain from executing proper legal documents to formalize their relationships with the workers who in this case are in fact left beyond the legal framework and in principle lose all labour rights and guarantees. This assertion can be proved using just one example: during the negotiations with the employer the worker may demonstrate the “real interests and actual willingness to enter into a fixed-term contract” based on which a fixed-term labour contract will be concluded, however at the time of terminating the contract on the grounds of its expiry the worker may lose such an interest and accordingly show his actual willingness to continue labour relationships with the employer substantiating it by lodging a claim with the court on reinstatement at work. It is quite typical in such a situation that the court may well reinstate the worker based on Para. 10 of the Disposition of the Plenum of the Supreme Court of the Russian Federation of December 22, 1992 No.16 “On Certain Questions Related to the Application by Russian Federation Courts of the Legislation for Settling Labour Disputes” unless the court finds proof of the existence of worker’s interests as of the signing of the contract.

To a certain extent the Russian legislator who created such a clumsy regulation could be justified by the fact that the formulations contained in Part 2, Article 17 of the Labour Laws Code of the Russian Federation are not strictly speaking a Russian invention because they were practically without any changes borrowed from the ILO Recommendation No.166 “On Terminating Employment Relationships at the Employer’s Initiative”. Article 3 of the above Recommendations provides for the necessity to stipulate corresponding guarantees against the abuse of fixed-term contracts the aim of which the authors of the above Recommendations can see as an attempt to avoid offering the protection provided by the ILO Convention of 1982 on the termination of employment relations.

In view of the above indicated the Recommendations mention the necessity to include one or more of the following measures: “a) to limit the use of fixed-term labour contracts to the cases when given the nature of the work to be done or conditions of its execution or working people’s interests (the italics by the undersigned – S.M.) these relations may not be established for an indefinite period of time; b) to consider the fixed-term employment contracts except for the cases indicated in 2a) of this paragraph as uncertain-term employment contracts; 13 c) to consider the uncertain-term employment contracts that have been renewed one or more times except for the cases indicated in 2a) of this paragraph, as uncertain-term employment contracts.”

Consequently in the case of Article 17 of the Labour Laws Code of the Russian Federation we are actually facing the phenomenon of non-critical implementation by the Russian legislation of ILO recommendations that are not compulsory for application.

National Trade Union Contact Federation of Trade Unions of St.Petersburg and Leningrad region, FNPR Russia 190098 Saint Petersburg Truda Square 4, office 89 Russia

Valery Safonov Legal Responsible Tel: +7-812-117 7267 Tel: +7 812 117 72 67 Fax: +7-812-311 44 01 [email protected] [email protected]

EXPERTS Stefan Clauwaert [email protected] S.P. Mavrin National Expert Professor, Head of the Labour Law Chair

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