Transfer of employees from the existing company to a newly established subsidiary. Termination of employment.
The legal act which prescribes the legal relationships between an employer and employee is the above mentioned Estonia Employment Contracts Act, Article 71, according to which an employment agreement may be terminated as follows:
1. With the consent of the parties;
2. If the term of the agreement expires;
3. On the initiative of an employer;
4. On the initiative of an employee;
5. On demand of a third party;
6. Due to reasons independent of the parties’ will.
In each of the aforesaid cases, the obligations of the parties are different. In the current article we provide and describe the case under number 3 set forth above: “The obligations of an employer when an employment agreement is terminated on the initiative of the employer”.
Article 88 of the Estonia Employment Contracts Act stipulates that an employment agreement may be terminated on initiative of an employer only up on an extraordinary order and in the following cases:
1. Extraordinary termination of employment agreement for reason arising from employee would be possible in the following case:
a. for a long time been unable to perform his or her duties due to his or her state of health
b. for a long time been unable to perform his or her duties due to his or her insufficient work skills;
c. in case of disregarded the employer’s reasonable instructions or breached his or her duties;
d.in case of been at work in a state of intoxication
e. the loss of the employer’s trust in the employee
f. a third party’s distrust in the employer;
g. damaged the employer’s property or caused a threat of such damage;
h. violated the obligation of maintaining confidentiality or restriction of trade.
2. Extraordinary termination of employment agreement for economic reasons where an employer may extraordinarily terminate an employment agreement if the employer cannot continue the employment relationship on the mutually agreed conditions due to:
a. a decrease in the work volume;
b. a reorganization of work;
c. upon lay-off of employees:
- upon cessation of the activities of employer;
- upon declaration of bankruptcy of employer.
In the present article we describe the obligations point 2.c. of the above, where the employer will have to lay off employees. Thus, the obligations of an employer, when the employer lays-off his employees, are:
1. The employer must give to each employee a written advance notice on the following terms:
1.1 If the employer has employed an employee less than 1 year, an employer must give not less 15 days an advance notice.
1.2 If the employer has employed an employee from 1 to 5 years, an employer must give not less than 30 days an advance notice.
1.3 If the employer has employed an employee from 5 to 10 years, an employer must give not less than 60 days an advance notice.
1.4 If the employer has employed an employee from 10 and more years, an employer must give not less than 90 days an advance notice.
1.3 If such a notice is not provided in advance within the required term (one month) by the employer, the employer is required to pay compensation to the employee in the amount of the employee’s average daily wages for each working day short of advance notice of termination of employment contract.
1.4 The employer must offer to the employee, prior to termination of an employment agreement due to lay-off, another position with the company if possible.
1.5. The employer is also required to pay a compensation to the employee upon termination the agreement due to lay off of employees,
1.5.1. If the employee has been employed by the employer, in the amount of a compensation is one month of an average salary.
According to the Estonian Unemployment Insurance Act the Unemployment Fund also pays to the employee upon termination the contract due to lay off of employees if such employee works at the company for not less than 10 years, an amount equals to 1 month of an average salary of such employee.
Also, an employee whose employment agreement was terminated due to lay off, up on a registration with the Unemployment Insurance will have rights to receive the following compensations (the amount of the compensation depends on the size of an average salary received by the former employee and depends on a number pf years such person has been employed).