This article is an excerpt from Awara Russian Labor Law Guide written by our leading labor law lawyers. It gives a description and analysis of major legal issues that may affect those who want to conduct a business in Russia. This Guide will certainly serve as a reliable aid in going through this maze of regulative acts and decisions and help the reader to avoid gross mistakes that might result in significant but quite unnecessary losses.

Other Special Forms of Employment

In addition to the above-described situations of special types of employment (see Special Types of Labor Contracts), the Labor Code provides special regulations for particular jobs or professions. These affect:

• Drivers (Chapter 51 Labor Code);

• Employees engaged in work underground (Chapter 51.1 Labor Code);

• Teachers and public education employees (Chapter 52 Labor Code);

• Russian diplomats and employees at diplomatic missions and other Russian state missions abroad (Chapter 53 Labor Code);

• Religious employees (Chapter 54 Labor Code);

• Athletes and coaches (Chapter 54.1 Labor Code);

• Defense employees (Art 349 Labor Code);

• Employees of government corporations and government companies (Art 349.1 Labor Code);

• Employees of organizations created by the Russian Federation on the basis of the law in accordance with a special procedure (Art 349.2 Labor Code);

• Medical employees (Art 350 Labor Code);

• Staff of the film industry, theater, orchestras, circuses (Art 351 Labor Code);

• Those who work with children (Art 351.1 Labor Code);

• Employees engaged in work connected with the preparation for and conducting of the World Cup FIFA 2018 and FIFA Confederations Cup 2017 in the Russian Federation (Art 351.2 Labor Code);

• Experts in the field of special assessment of working conditions (Art 351.3 Labor Code).

Pursuant to the Labor Code, the Federal Government and relevant ministries have issued more detailed regulations affecting the work of some industries and particular professions.

Due to the special geographical and climatic conditions of the Russian Far North Regions, the Labor Code includes special provisions for work in those regions and other regions with similar conditions. Employees in these regions receive extra compensation in salary, severance pay, pension and social rights, including extended vacation, etc.

The Labor Code regulates separately situations where a natural person is an employer (Chapter 48).

Special Protection for Certain

Social Groups

Women

Certain conditions of employment of women are regulated by special provisions (Chapter 41 Labor Code). We give here an overview of these issues.

Women enjoy special protection against dismissal (Art 261 Labor Code). We refer to the section Termination of Employment with Women for details of this issue.

Women may also enjoy other special rights such as:

1. Right to reduced working hours (reduced workweek) (Art 93 Labor Code)

• Applicable to pregnant women, one of the parents of a child under 14 (invalid child under 18), and those taking care of a sick family member, among others.

2. Prohibition against nighttime work (Art 96 Labor Code)

• Applicable to pregnant women and women with children under 3 years of age), among others.

3. Overtime regulations (Art 99 Labor Code): pregnant women are exempt from overtime work. Women having children under 3 can be engaged in overtime work only by their consent, and if their health allows it.

4. Prohibition against work during holidays (Art 259 Labor Code).

5. Special privilege with regard to scheduling of annual vacation (Art 260 Labor Code): annual paid leave is granted before or after maternity leave, irrespective of the time the woman has worked for the employer.

6. Prohibition to recall a pregnant woman from maternity leave early and prohibition for annual leave to be compensated in money (Arts 125-126, Labor Code).

7. Protection from hazardous labor conditions. This comes, inter alia, in the form of setting limits on weight which a woman must lift during work: e.g., women must not lift more than 10 kilogram at once when they alternate heavy lifting with other work and more than 7 kilogram when this is their main occupation (as established by the Decree of the Government of the Russian Federation dated February 6, 1993 ).

8. Assignment of easier tasks to pregnant women (Art 254 Labor Code).

9. A break for infant’s feeding (Art 258 Labor Code). These breaks are provided to women who have children under 1.5 years of age.

10. Other special regulations detailed in the law.

A number of privileges for women with under-aged children are also extended to single fathers, tutors and guardians of minors (Art 264 Labor Code).

Maternity Leave

Maternity leave may encompass time:

• Before child delivery

o 70 days (84 days when expecting twins)

• After child delivery

o 70 days (after complications with giving birth – 86 days, after giving birth to twins or more – 110 days).

Payment for maternity leave is compensated through the Federal Social Insurance Fund (Art 255 Labor Code).

A woman may choose to prolong maternity leave until the child reaches 3 years (child-care leave – Art 256 Labor Code). Also, the father, grandparents and even other relatives may be granted child-care leave if they actually take care of the child. In practice, this rule is treated as an alternative, that is, only one parent (either of them) may be on child-care leave at the same time.

During the whole period of child-care leave the employee retains the right to his/her work (keeps the job) according to the Labor Code. Employees who receive the right to child-care leave also have the right to work on part-time terms or from home during this period. The law is unspecific as to the extent of this right. It seems that the employer cannot refuse arrangements proposed by the employee having this right, however inconvenient a particular arrangement might be for the employer. Moreover, when working part-time or from home such employee cannot be dismissed for any fault because Art 81 of the Labor Code forbids dismissing workers who are on leave, except in cases of liquidation of the company. So the employer is in fact at the mercy of the employee – the latter can do a very poor job without the risk of dismissal. These theoretical conclusions, unfortunately, are confirmed by court practice that recognizes the illegality of dismissal during the period of child-care leave . This issue was investigated separately by the Constitutional Court, but it remained unresolved .

Maternity leave is also extended to women adopting a child (70 days from birth of adopted child, adoption of twins – 110 days – Art 257 Labor Code).

One of the parents adopting a child also receives the right to extended child-care leave until the child turns 3 years old.

Youth Labor

At the age of 16, a person may legally enter into a labor contract. Foreign nationals in the territory of Russia are entitled to enter into a labor contract only at the age of 18.

A 15-year-old may enter into a labor contract if he received or is receiving a general education and enters into a contract to perform light work which is not harmful to health

A 14-year-old may enter into a labor contract with the consent of one of the parents and relevant authorities on the condition that the employment will not affect his attendance and good performance in school. Such employees may perform light work which is not harmful to their health.

A minor under 14 can be involved in cultural and artistic work (cinema, theater, circus) with the consent of parents and relevant authorities.

Underage employees are subject to mandatory medical examination on entering into a labor contract (Art 69 Labor Code). Such an employee may not be given a trial period (Art 70 Labor Code).

Employees under 18 can bear full material liability only in exceptional cases (for intentional damage, damage caused in a state of alcoholic, narcotic or another intoxicated state, and as a result of committing a crime or an administrative offence (Art 242, Art 243 Labor Code).

There are restrictions for employment of minors for hazardous or harmful work and in certain industries such as gambling, tobacco and alcohol. Minors may not be sent on business trips, and they are exempt from overtime, nighttime and holiday work. The law also establishes other restrictions on child labor.

Minors are granted 31 days of vacation at any time suitable for the employer.

If an employer initiates the termination of a labor contract with a minor, consent must be obtained beforehand from the State Labor Inspectorate and the Commission for Protection of Minors’ Rights (Art 269 Labor Code). The only exception is the case of liquidation of the company or termination of activities by an individual entrepreneur.

Reduced Working Hours for Minors

The weekly working hours are reduced to 24 hours for minors under 16 and to 35 hours a week for minors under 18. For students under 18 years the working hours are further reduced to half the above-mentioned norms (Art 92 Labor Code).

In addition to the restrictions in weekly working time there are restrictions in the daily working hours. For minors at the age of 15 and 16 the maximum workday is 5 hours, for 16- to 18-year-olds the maximum working hours during a day is 7 (Art 94 Labor Code).

For 14 to 16 year-old students in elementary and intermediary vocational schools the workday is restricted to 2.5 hours, and to 4 hours for students between 16 and 18.

Students

Employees who study at state-accredited schools have the right to paid and unpaid leaves as detailed in the Labor Code (Art 173). The duration of the leave and the amount of compensation from the employer vary in accordance with the level of education received and the form of study (day-time school or evening school). The law differentiates between the following levels of education:

• Higher professional education for educational programs for bachelors, specialist, masters and other special types of postgraduate degrees;

• Intermediate level of professional education;

• Starting level of professional education;

• Evening schools of secondary education.

These benefits are available to those employees who do not yet have a degree of the relevant level (first-time students) (Art 177 Labor Code).

The benefits are available only for studies for one degree at a time.

The example below is for benefits in regard to employees studying for higher professional education. This level of studies carries the maximum benefits. Each level downward gives fewer of these benefits (we advise consulting the law for details).

Students in evening schools for higher education:

• Students successfully conducting their studies receive the right to paid leave and unpaid leave for studies between 15 days to 4 months a year according to detailed provisions in the law.

• Students also have the right to a weekly working schedule reduced by 7 hours for a period up to 10 months prior to taking the state final attestation (with partial payment for the non-worked hours).

Top Management

In the Labor Code top management of a company is legally distinct from other employees in relation to many rights and obligations.

For management, this means that rewards of a management position will correlate more clearly with the extended responsibilities. It is now possible to enter into contracts with top management, whereby top management will be legally dependent on enjoying the trust of the board of directors and the shareholders (Art 278 Labor Code).

DEFINITION OF TOP MANAGEMENT

The Labor Code does not give a clear definition of which positions are to be included in the concept of top management. At the same time, the law expressly confined the application of special provisions regarding management to a fairly limited number of positions (Arts 273, 281 Labor Code). The employer may not widen the applicability by a liberal interpretation of the law. In order to clearly make the point that the applicability is restricted to the top management of the entity, we have decided to employ the concept of top management in this Guide.

We advise that the employer define the group of positions included in top management separately for each issue, keeping in mind the provisions of the law regarding top management.

The positions that may be included in the definition of top management (depending on the actual situation) are:

• Head of entity;

• Deputy head of entity;

• Chief accountant;

• Other executive directors (who in Russian corporate law are among the members of the collegial executive body).

Head of Entity

The determination of positions that fall under the definition of head of entity in Russian law is restricted to formal criteria. The Labor Code defines a head of entity as a person who manages the organization (including the fulfillment of the functions of the chief executive officer, or CEO) in accordance with the laws, regulations, founding documents, internal policies and instructions of the entity. In some cases, the Labor Code extends the regulation of the labor of a head of an organization to the heads of branches and representative offices of the organization (e.g., special grounds for dismissal under Art 81 Labor Code). However, the Labor Code considers the head of an organization to be the sole head of the organization, the position of which can have different names depending on how they are specified in the founding documents of the organization (e.g., President, General Director, Managing Director). Court practice also adheres to a literal interpretation of the provision of the Labor Code and does not recognize the application of the rules regarding the head of an organization in relation to the heads of branches and representative offices . Rules on the regulation of the labor of heads of organizations are spread throughout the text of the Labor Code and are also concentrated in a separate chapter, Chapter 43.

Deputy Heads of Entity

A deputy head of an entity (deputy) may fall under the definition in regard to certain concrete provisions. In order to enjoy the same legal status as the head of entity, the deputy head who fulfils the head’s functions must occupy a position clearly named as “deputy head” or “zamestitel” (no free interpretation is allowed). such deputies would have to occupy positions that are officially registered under the procedures set forth in the Russian law as deputies (again, a loose interpretation is not possible). Judicial practice holds to the opinion that the actual performance of the functions of the deputy head of an organization without documenting employment in the position of deputy head does not invoke the application of guarantees provided by the Labor Code for the deputy head of an organization . In order to subject a deputy to all the same provisions as a head of entity, we recommend that a deputy be appointed to the position of other executive director (see below).

Chief Accountant

A chief accountant can be the chief of the accounting department of the main entity as well as the chief of the accounting department of a branch or subdivision. Sometimes even deputy chief accountants are included.

Other Executive Directors

Other executive directors are those who hold a position in a company executive body in accordance with the company’s charter (statute) and the law. These are, for example, the members of the directorate in accordance with the laws on joint stock companies and limited liability companies.  Since, in practice, employees are often appointed to positions which for prestige are given titles of foreign analogues, for example, “Executive Director”, we would like to point out that such a title without an official inclusion of the position in the founding documents by members of the collegial management body does not entail the application to them of norms for the head of an organization . In addition, most of the rules for heads of organizations do not automatically apply to his deputies, even if all the above conditions are met. Appropriate provision for their application must be made in the founding documents of the company (Art 281 Labor Code).

For all these positions it is necessary to properly record the titles and their definition in the staff list and the corresponding job descriptions.

Below we list some of the issues in which the position of top management is distinct from other employees.

Fixed-Term Labor Contract

A fixed term labor contract is allowed in regard to top management, including (Art 59 Labor Code):

• Head of Entity;

• Deputies;

• Chief Accountant.

Trial Period

The trial (probationary) period can be extended up to 6 months for top management, including (Art 70 Labor Code):

• Head of Entity;

• Deputies;

• Chief Accountant;

• Deputy Chief Accountant;

• The Heads of branches, representative offices and other subdivisions.

Termination of Labor Contract

Grounds for dismissal: Miscalculation leading to losses (making an unsubstantiated decision) (Art 81(1(9)) Labor Code). The following persons included in the definition of top management are dismissible on this basis:

• Head of Entity;

• Deputies;

• Chief Accountant;

• The Heads of branches and representative offices (does not apply to heads of other structural subdivisions);

• Deputies of Heads of branches and representative offices (although the Labor Code does not explicitly name these entities, court practice includes them among those who can be dismissed on this basis ).

Grounds for Dismissal: Single serious violation of responsibilities by a top manager (Art 81(1(10)) Labor Code).

The following employees may be dismissed based on this ground:

• Head of Entity;

• Deputies;

• The Heads of branches and representative offices (does not apply to heads of other structural subdivisions);

• Deputies of Heads of branches and representative offices.

Grounds for Dismissal: Change of the owner of the entity’s property (Arts 75(4) and 81(1(4)) Labor Code).

The Supreme Court has decreed that, even though 100% of shares in a company have been sold to different persons (or person) it does not fall within the scope of Art 75(4) because the owner of the property remains the same, that is, the organization itself (Item 32 of the decree of the Plenum of the Supreme Court dated 17.03.04). This is because under Russian law shareholders do not have a right to an organization’s property. They only have a right to demand from the company the discharge of obligations based on the fact of their having shares in the company (paying dividends, for example).

What amounts to a change of ownership then? The Supreme Court opined that it is cases of privatization or nationalization of the property of the organization in question or the transfer of property (for instance, an enterprise) among federal and regional or local governments. So, investors should be aware that the acquisition of the majority of stocks or even the entire shareholding does not enable them to dismiss top managers on this basis.

The following persons may be dismissed on this basis:

• Head of Entity;

• Deputies;

• Chief Accountants.

Such a termination has to be made within 3 months from receipt of right of ownership. The minimum amount of severance pay in connection with such dismissal is the equivalent of 3 average monthly salaries (Art 181 Labor Code). As the law defines only the minimum amount of compensation, the parties are advised to spell out this provision in more detail in the labor contract.

Grounds for Dismissal: Other grounds set out in the labor contract.

Applies to:

• Head of Entity.

Grounds for Dismissal: Bankruptcy proceedings.

A head of entity may be dismissed in connection with bankruptcy procedures (Art 278(1) Labor Code).

Grounds for Dismissal: Shareholders’ (owners’) decision.

In addition to all the specific provisions regarding dismissal of the head of entity, the Labor Code (Art 278) states as a ground for termination simply a decision taken by the shareholder (owner, its proper management bodies or other legal representative). If this power is assigned by law to the board of directors, it is this body that may terminate the contract with the head of entity (Art 69(4) of the Federal Law on Joint-Stock Companies , Art 32(2.1(2)) Federal Law on Limited Liability Companies ). Otherwise, the decision must be taken by the general meeting.

As to the compensation for the head of entity in case of dismissal, it can be provided for in the contract. The minimum amount of the severance pay is three times the average monthly salary (Art 279 Labor Code).

Special Regulations Concerning Salary Payments

Special regulations concerning salary payments are allowed in regard to top management, including:

• Head of Entity;

• Deputies;

• Chief Accountant.

The law does not clearly spell out the meaning of Article 145 of the Labor Code which says that the amount of payments for heads of entities, their deputies and chief accountants shall be determined by agreement of the parties to the labor contract, i.e., between these managers and the employer.

Full Material Liability

Top management may be subjected to full material liability for damage if this is provided for in their labor contracts (Art 243 Labor Code). For these purposes, top management includes:

• Deputies of Head of Entity;

• Chief Accountant.

A head of an entity, by virtue of his office, and regardless of the terms of the labor contract, bears full material liability for any direct real damage caused to the entity (Art 277 Labor Code). In certain cases provided in the legislation, he must indemnify the entity for the losses caused by his actions.

Non-Competition and Supplementary Jobs

A head of entity may take a supplementary (or second) job only upon due authorization by the employer. Previously, consent was required only for part-time work in other paid positions, but since October 6, 2006, the rule applies to work in any position. It is recommended to indicate the prohibition of supplementary work in the labor contract with the employee.

The head of entity has the right to terminate the labor contract by giving 1-month notice.

A Natural Person As an Employer

Special provisions apply to labor contracts when the employer is a natural person. Until October 6, 2006, this chapter was devoted exclusively to the employment circumstances of individual entrepreneurs. Currently, however, a natural person employer might not be an individual entrepreneur .

A natural person employer must: pay insurance premiums and other mandatory payments, and process insurance certificates of state pension insurance for people coming to work for the first time. If the employer is not an individual entrepreneur, the contract must be registered with the appropriate local authorities (Art 303 Labor Code). Termination of the contract must also be registered (Art 307(3) Labor Code).

A contract with a natural person who is not an individual entrepreneur may be entered into either for a fixed term or for an indefinite term (as a permanent contract) (Art 304 Labor Code).

The employer (a natural person) and the employee may agree on the working hours, holidays, vacation and other provisions of the working regime individually without consideration to the general provisions of the law. However, the total hours worked, as well as the length of vacation, will have to follow the general rules (Art 305).

An individual employer must give written notice to the employee of any change in the essential conditions of the labor contract not later than 14 calendar days in advance (Art 306 Labor Code). In the event an employer is a natural person and is an individual entrepreneur, the contract can only be changed when these conditions cannot be preserved for reasons related to a change in the organizational or technological conditions of the work.

The provisions regarding employment with a natural person call for agreeing separately in the labor contract on the grounds for termination of the contract. That way, the parties can go beyond the general provisions of the law by agreeing individually on the grounds for termination (Art 307 Labor Code).

An employer having the status of an individual entrepreneur must make appropriate entries in the employee’s labor book (Art 309 Labor Code). Other natural persons do not have such a right. (Prior to October 6, 2006, only legal entities had a duty to keep labor books).