Due to the COVID-19 virus, an emergency situation has been declared in the Republic of Estonia and as a result thereof many employers are required to make changes in work organisation and many employers also are forced to consider whether to reduce their employees’ salaries or lay people off. In the changed economic environment, each employer should assess the risks and economic consequences for their business. In Estonia, no mandatory rules have been imposed on employers regarding the corona virus but the employer does have statutory means for mitigating the risks.
The employer’s general obligations are listed in the Employment Contracts Act and the emergency situation established in the country does not alter or narrow these. Given the business restrictions imposed on companies in the Republic of Estonia, we have listed the questions most frequently asked from us these days and our general answers to them below.1. What does the employer have to take into account when it wishes to use teleworking in the emergency situation?
Teleworking, i.e. working from a home office can be used regarding employees whose job characteristics allow for it. The employer cannot force an employee to telework and the employee cannot demand telework. Teleworking can be used only by agreement of the parties (made at least in a form reproducible in writing). However, the employee cannot remain at their home office without the employer’s consent. In the case of telework, the salary is paid normally. In other words, the terms of remuneration for work should not worsen due to telework. In the case of telework, the employer is still responsible for the occupational health and safety of the employee.
Here, it is also important to add that all the data protection rules should be complied with because the risk of a data leak is higher than usual. In the case of telework, secure environments should be used and the employer is required to make certain that only authorised persons have access to the data.2. Can the employer force employees to go on their annual holiday or on an unpaid leave of absence in the emergency situation?
The paid annual holiday and an unpaid leave of absence can be applied only by agreement of the parties. If an employee does not wish to go on their annual holiday or take an unpaid leave of absence, the employee cannot be forced to do that.3. Can an employee refuse to perform work and use the excuse of their temporary incapacity for work in an emergency situation?
If an employee is ill, the employee has the right to refuse to perform the employment duties (clause 2 of § 19 of the ECA) and has the right to be temporarily incapacitated for work in accordance with the procedure laid down in the Health Insurance Act. In such a situation, the employer does not have the right to demand that the employee perform the employment duties. The employer cannot demand that an ill person come to work and the employer has the right to send an ill employee home. The employee should contact their family doctor and be discharged of their employment duties for at least 14 days. In a special situation, it is possible that the employee registers their temporary incapacity for work on their own via www.digilugu.ee
It follows from the explanatory memorandum of the Health Insurance Act Amendment Act initiated on 12 March 2020 that the Government has instructed family doctors that a healthy employee who stays at home for the purpose of stopping the spread of the COVID-19 virus can register their temporary incapacity for work only in a situation where the person does not have any symptoms characteristic of the virus but the person has been in a close contact with a person who has contracted the virus or returned from a risk area. The aforementioned legislative amendment has not been adopted yet but since it is an urgent and serious issue, the Act will probably be amended as soon as possible.4. What rights and obligations does the employer have when the emergency situation affects the employer’s economic situation?
The employer must pay average wages to an employee who is capable of working and ready to do work even where the employee does not work because the employer has not provided them with work, has not performed an act required for doing work or has otherwise delayed acceptance of work, unless the employee is at fault of failing to be provided with work (§ 35 of the ECA).
Under § 37 of the ECA, the employer may, without the employee’s consent, unilaterally and temporarily reduce the salary to a reasonable extent
. To exercise such right, three conditions must be met:
1) The employer cannot provide the employee with work to the agreed extent due to unforeseeable economic circumstances that are beyond the employer’s control (this does not include seasonal changes in the workload). In this regard it should be kept in mind that the employer cannot reduce the employee’s salary for the purpose of mitigating the employer’s business risk which is dependent on economic circumstances controlled by the employer itself. The situation is not unforeseeable to the employer where the employer, upon conclusion of the employment contract, knew that the workload would considerably decrease during a certain period of the year due to the characteristics of the employer’s business. These should be circumstances which are beyond the employer’s control and which the employer could not reasonably have been expected to take into account or avoid or overcome the impediment or the consequences thereof. Without doubt, the current situation is one of those situations.
2) Where the payment of the salary is unreasonably cumbersome upon the employer. In this regard it should be kept in mind that if the employer cannot provide the employee with work to the agreed extent but has sufficient funds to overcome the crisis, the payment of the salary is not unreasonably cumbersome upon the employer and the employer is required to pay the agreed salary to the employees. In the event of a dispute, the employer must prove the objective circumstances which the employer relied on upon reducing the salary.
3) The employer notified of the reduction of the salary at least 14 calendar days in advance. In such a situation, the employee must render their opinion within seven calendar days as of the receipt of a notice from the employer.
All in all, where the aforementioned conditions are met, the employer essentially has the right to temporarily reduce the employee’s salary (for up to three months
). In this regard, it should be kept in mind that before the reduction of the salary the employer must provide the employee with other work where possible and the employee has the right to refuse to perform the work in proportion to the reduction of the salary. The salary may be reduced up to the minimum salary established by the Government of the Republic (584 euros per month or 3.48 euros per hour).
Upon reducing the salary where work is not provided, the employer must take into account the fact that the employee has the right to terminate the employment contract, informing the employer thereof five days in advance. In such a situation, the employee is compensated for to the extent and in accordance with the procedure provided for in subsections 1 and 2 of § 100 of the ECA.
Where it is clear to the employer that its economic situation will not improve and the employer is unable to provide the employee with work or pay a reduced salary to the employee, the employee may be laid off
(§ 89 of the ECA). In the event of a lay-off, the employer is required to follow the time limits of advance notification of the termination of the employment contract, which are provided for in subsection 2 of § 97 of the ECA.A lay-off is extraordinary termination of the employment contract by the employer for economic reasons
. A lay-off means a situation where the continuance of the employment relationship on the agreed conditions becomes impossible due to a decrease of the volume of work or reorganisation of work or in another event of cessation of work. In order to lay off employees, the employer must submit a termination declaration of the employees in a form reproducible in writing and state the reasons for which the employment contract is terminated.
Where the employment contract is terminated due to a lay-off, the employer has the obligation
to, in addition to the final settlement, pay the employee lay-off benefits that correspond to the
average monthly salary of the employee.5. Where the emergency situation may lead to the termination of employment contracts, does the state support employers in paying salaries for the purpose of not resorting to a lay-off as the first solution?
On 17 March 2020, the Minister of Social Affairs of the Republic of Estonia declared that all the employees who lose their job directly or indirectly due to the corona virus, will get 70% of their salary. Employees will get such remuneration as of the first day. The salary support is meant for companies that are in economic difficulties. The detailed conditions of receipt of the salary support have not been published yet.
If you have any further questions, do not hesitate to contact Leinonen. The contact details are given below.Kaire Rebane
Head of Tax & Legal