1.1 In what circumstances does the employee transfer law apply?
Under Russian law a transfer implies a change of ownership of the company’s assets, for example, by:
- transfer of assets from private to state ownership;
- transfer of a state enterprise to ownership by a municipality or vice versa;
- transfer of a state-owned organisation to a constituent territory of the Russian Federation or vice versa.
Similar rules apply where an organisation is to report to a different state or municipal authority or will be reorganised (e.g. by merger, accession, transformation to another legal form or spin-off.)
The law protects the employees in all these cases.
1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?
(a) Sale of a business
Employee transfer law applies, for example, to sale of a state-owned enterprise (i.e. privatisation) and the reorganisation of a state-owned enterprise into a joint stock company.
In the case of reorganisation (e.g. merger, accession, transformation to another legal form or spin-off), employee transfer protection applies, and the reorganisation cannot be grounds for termination of employment contracts.
Changes to shareholders or participants in a legal entity do not constitute transfers of assets, as the assets remain in the ownership of the legal entity.
The employee transfer rules do not apply to sales of assets, such as premises, equipment, customers, staff and goodwill.
Employee transfer law does not apply to outsourcing. Outsourcing is not specifically regulated by law.
1.3 In outline, what are the implications of the employee transfer law?
If the employee transfer rules apply:
- The transfer does not constitute grounds to change the terms of employment contracts. If a transfer occurs, the existing terms of employment remain in place. In the case of a change of the form of ownership, the collective agreement at the transferor must be applied for three months after the transfer. Thereafter, either the employees or the employer can suggest concluding a new agreement or decide to extend the previous one.
- There are no union recognition arrangements under Russian law.
- Employees are entitled to receive information about a reorganisation of the organisation.
- If an employee is dismissed by the employer because of a transfer, the dismissal will be unlawful.
The law protects all employees apart from the chief executive, his or her deputy and the chief accountant in cases of transfers related to a change in the ownership of assets. The transferee can terminate the contracts of these executives within three months of the transfer. In cases of changes to which body the organisation reports to, the chief executive, his or her deputies and chief accountant cannot be dismissed unless there is a simultaneous change to the owner of the assets.
However neither type of transfer may be a reason to terminate other employees’ contracts. An employee is anyone engaged under an employment contract, even if training or on leave.
With transfers for a change of ownership of assets, it is assumed that all the organisation’s assets transfer. Therefore, even if the employer works only partly with the transferring organisation, his or her entire role transfers. The same applies to mergers and accessions.
2.2 Can employees object to transferring?
In cases of transfer the employee has the right to resign. Russian law does not entitle employees who resign in this way to any compensation (severance pay) but compensation may be provided, for example, under company policies, collective bargaining agreements or employment contracts. Such employees are not treated as having been dismissed Thus, if an employee refuses to continue work following a transfer (and his or her rights have not been breached in any other way), he or she will have no right to dispute the matter if the employer treats the employment relationship as terminated as a result.
2.3 What happens to terms of employment contracts?
The terms of employment transfer and all rights and obligations under the employment contract transfer to the transferee.
The transfer does not constitute grounds to change the terms of the employment contract. Employment terms can only be changed in accordance with the procedures set out in law, which in almost every case require the mutual agreement of the parties.
2.4 What about other employee benefits?
All statutory minimum benefits are guaranteed by the transferee. For any additional benefits the following apply:
- Benefits agreed in the employment contract can only be changed with the agreement of both parties.
- Benefits provided by a collective agreement remain in force for three months after transfer.
- Benefits provided by the organisation’s policy can be changed by the new owner. The opinion of the trade union or other employee representative body must be requested, but is not binding on the organisation.
Past employment with the transferor does not count as ‘continuous employment’ with the transferee, as no such concept applies in Russia.
2.5 What happens to pension rights?
All statutory pension rights remain in force, and the new owner must make statutory payments to the state pension fund for each employee. Any additional pension rights that were provided by the former owner are treated in the same way as benefits. Therefore, private pension schemes are treated in accordance with their terms.
2.6 What liabilities transfer?
All liabilities transfer together with other provisions of the employment contracts. Where the transfer is the sale of a state-owned enterprise the state may make it a condition of sale that certain jobs are preserved, that retraining is provided, and other benefits are given to the employees over a certain period of time.
However, note that corporations cannot be subject to criminal liability under Russian law and therefore criminal liability does not transfer.
2.7 Do collective agreements transfer?
In the case of a change of ownership the collective agreement of the transferor must be applied for three months after the transfer. Either the employees or the employer can suggest concluding a new agreement or extending the previous one.
In cases of reorganisation in the form of mergers, accessions, spin offs or divisions, the collective agreement remains in force during the period of reorganisation. Following that, either party can suggest concluding a new agreement or reissuing the previous one.
2.8 How does the transferee obtain information on transferring employees?
There are no specific statutory rules about how the transferee obtains information about employees. However, it can be assumed that in the case of change of owner of the assets, all employees will transfer.
3.1 Can employers make changes to employment contracts?
The general rule is that the terms of the employment contracts should remain unchanged, unless amendments are agreed with each employee individually in writing. However, the employer can unilaterally change terms and conditions of employment contract for reasons connected with organisational or technical changes to work, if it is not possible to keep to the terms of the employment contract. Even in such cases, the job function of the employee cannot be changed.
Employees must be notified about forthcoming changes to the terms of employment contracts and the reasons for the changes two months in advance.
Note that unilateral changes can be prohibited by the terms of sale of a state-owned asset or enterprise.
The terms of transferred employees and existing employees at the transferee can be harmonised subject to agreement with each employee or, unilaterally by the employer in case concerning organisational or technical changes.
3.2 When can employers safely dismiss employees before or after a transfer?
Generally, there is no statutory term (apart from the notice period) within which the old or the new owner cannot carry out dismissals by reason of redundancy. Thus, the new owner could carry out dismissals once the transfer is completed. However, in the case of a change of ownership of assets, redundancies can only be carried out after state registration of the transfer of ownership of the assets.
In some cases, the terms of sale of a state-owned enterprise oblige the new owner to keep (and, possibly, also to retrain) a certain percentage of the existing employees for a certain term after the transfer.
The new owner of the assets can dismiss the head of the organisation, his deputy(s) and chief accountant. These dismissals can be effected without notice but severance pay is due in the amount of at least three months’ average salary.
Other employees may only be dismissed if the correct legal procedures are followed. The procedure for staff reduction requires the employer to notify the employees, trade union (if any) and the relevant state body at least two months before the dismissal date (at least three months notice to the relevant state body and trade union is required in the case of a collective redundancy) and make a severance payment of one average month’s earnings plus average earnings for the period of job search for a maximum of two months (the severance pay counts as part of the latter payment).
4.1 Who must employers consult?
The law does not provide an express obligation for employers to inform and/or consult with regard to the transfer, although an obligation of this kind may be provided for in the collective agreement or other internal rules of the organisation.
4.2 What information must they provide?
As there is no statutory obligation to consult, there are no statutory requirements on the information to be provided.
4.3 What does consultation involve?
As there is no statutory obligation to consult, there are no statutory requirements on what consultations should involve.
4.4 How long does consultation last?
As there is no statutory obligation to consult, there are no statutory requirements on how long it should last.
4.5 What happens if an employer fails properly to inform or consult?
There is no statutory requirement to consult. Where such requirement is provided for by collective agreement, company policy, employment contracts, etc, and this is breached, the dismissal may be claimed to be unfair and the employee may be reinstated in the job by the court and compensated for time off work.
5.1 Identify up to three issues in this country of which employers should be aware?
Where a state enterprise is being sold (and privatisation is the most common case of transfers of undertakings in Russia) it may be necessary to avoid dismissals for a certain period of time because, in some cases, the terms of sale of a state-owned enterprise oblige the new owner to keep (and, possibly, also to retrain) a certain percentage of the existing employees for a period of time after the transfer. If the purchaser fails to meet this requirement, the transaction may be annulled.
Currently, there is no well-established case law on how the transfer rules apply to the sale of assets by a private (non-state) company. It is implied that the rules should apply to sales of all assets of the company, but case law is limited and therefore it is uncertain when and how the transfer rules should be applied in practice.
5.2 Would the employee transfer law apply on a cross-border transfer into or out of this country?
If the shares in, e.g. a state-owned company, are purchased by a foreign investor, the employees will remain within the same legal entity – the Russian company. This will not be regarded as a transfer outside of Russia merely because of the change of ownership. If the transfer occurs for specific business reasons (e.g. for training) it should be done in compliance with Russian law. Conversely, if employees of a foreign legal entity are relocated into Russia, this should be done in compliance with the law which regulates the employment contract under which the relocation is carried out.
6.1 What are the main national laws protecting employees upon transfers of businesses?
The rules relating to transfers are contained in the Labour Code.