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Improving Estonian Labour Legislation on Integration with Europe

It is well known today that international labour law standards are established by two institutions: the International Labour Organisation (ILO) and the European Union (EU). Since Estonia has, after its re-association with the ILO in 1992, considerably broadened its activities in the sphere of international labour law, and since the movement toward the EU has been very evident recently, improving Estonian labour legislation, in the light of international standards, is currently very topical. It is also necessary to compare Estonian labour legislation to international labour law standards because at present, the Estonian Labour Code which will include all the specific laws of the first half of the 1990s regulating employment relationships is in preparation. In drafting the Labour Code, the standards established in international instruments must be considered.

Status of international labour law standards in the Estonian legal system

On its association with the League of Nations in 1921, Estonia also automatically became a member of the ILO. In the years 1921 to 1940, Estonia ratified twenty-one ILO Conventions which are still binding on Estonia. Thus, many Conventions issued by the ILO were ratified by Estonia before 1940. A closer analysis of these Conventions shows that the majority of them are quite specific in character and mostly contain provisions concerning work performed by children, women and seamen (e.g. Convention No. 5 “Minimum Age (Industry) Convention” (1919), No. 9 “Placing of Seamen Convention” (1926), No. 20 “Night Work (Bakeries) Convention” (1925), No. 41 “Night Work (Women) Convention” (1934) etc.), and that international conventions of wider importance were not ratified in those years. Since the Conventions of this period are of a declarative character and mainly fix general principles, the denouncement of the Conventions ratified by Estonia before 1940 is not necessary, although the content of many of these international agreements have lost their relevance (e.g. Convention No.13 “White Lead (Painting) Convention” (1921), No. 14 “Weekly Rest (Industry) Convention” (1921), and No. 15 “Minimum Age (Trimmers and Stokers) Convention” (1921)).

After restoring its independence in 1991, Estonia was accepted into the United Nations Organisation on 17 September 1991 and in this way achieved wide recognition as a rightful subject of international law. This was followed by membership in several other international organisations, including the ILO in 1992. In the same year, within the Ministry of Social Affairs a tripartite ILO council was created with representatives of the Government of the Republic, employees and employers. Since rejoining the ILO in 1992, Estonia has ratified seven ILO Conventions which concern freedom of association, abolition of forced labour, equal remuneration and observance of international labour standards. As the protection of human rights is regulated in detail in the Constitution of Estonia (Constitution), it is understandable why of the many ILO Conventions to be concorded the Conventions concerning fundamental rights of employees were ratified first. Thus, at the present time, Estonia must guarantee observance of the principles established in twenty-eight ILO Conventions.

Immediately after Estonia had restored its independence in 1991, the political direction taken was that of integration into Europe. On 11 May 1992, an agreement on trade and economic co-operation was concluded between Estonia and the EU and on 19 June 1994, an agreement on free trade between Estonia and the EU was signed. However, the association agreement between Estonia and the European Communities and their Member States (the Europe Agreement) concluded on 12 June 1995 must be viewed as the most important. The Europe Agreement imposes an obligation on Estonia to adjust and harmonise its legislation with the EU, particularly in the spheres of commerce and the economy, and in related spheres, including the protection of employees [9, Articles 68-69]. Hence, Estonian labour legislation must be made consistent with European standards and this is also a precondition for Estonia joining the EU.

Correspondence of Estonian labour legislation to ILO Conventions ratified from 1992 to 1996

As mentioned, in the years 1992 to 1996, Estonia ratified seven ILO Conventions which concern protection of employees’ fundamental rights. These Conventions are:

1) No. 29 “Forced Labour Convention” (1930);

2) No. 87 “Freedom of Association and Protection of the Right to Organize Convention” (1948);

3) No. 98 “ Right to Organize and Collective Bargaining Convention” (1949);

4) No. 100 “Equal Remuneration Convention” (1951);

5) No. 105 “Abolition of Forced Labour Convention” (1957);

6) No. 135 “Workers’ Representative Convention” (1971); and

7) No. 144 “Tripartite Consultation (International Labour Standards) Convention” (1976).

The correspondence of Estonian labour legislation with these Conventions is analysed in greater detail below.

Estonian laws are in harmony with the standards established in ILO Convention No. 29 “Forced Labour Convention” and No. 105 “Abolition of Forced Labour Convention” which prohibit the use of forced or compulsory labour. The Constitution guarantees the right of free choice of one’s sphere of activity, profession and place of employment. Pursuant to the Constitution, one may be compelled to perform work or service against one’s free will only on the grounds provided in §§ 29 and 130 (service in the Defence Forces or alternative service; work to prevent the spread of an infectious disease; work in the event of a natural disaster or catastrophe; work which a convict must perform on the basis of and pursuant to procedure established by law; and work during a state of war or a state of emergency) [4]. Pursuant to ILO Convention No. 29, the types of work listed in the Constitution are not considered forced or compulsory labour. Hence, the provisions of the Constitution allowing the use of compulsory work under certain conditions are lawful.

At the present time, Estonian legislation fully complies also with ILO Conventions No. 87, 98 and 135 which deal with freedom of association. Convention No. 87 “Freedom of Association and Protection of the Right to Organise Convention” guarantees employees and employers the right to organise peaceful unions and associations. Convention No. 98 “Right to Organise and Collective Bargaining Convention” provides for prohibition of discrimination of employees due to their membership in a representative organisation and establishes the basic principles for communication between employees and employers [2]. Convention No. 135 “Workers’ representatives Convention” guarantees wide protection to employees’ representatives in enterprises and the creation of conditions necessary for their activities [3]. Observance of the rules provided in the above-mentioned Conventions is guaranteed in Estonia by the Constitution, the Employment Contracts Act (ECA), the Collective Agreements Act, the Collective Labour Disputes Settlement Act, the Employees Representation Act, and other legislation. However, several principles contained in the Conventions should be further elaborated in Estonian legislation, particularly the principles which concern the legal status of employees’ organisations. The drafting and adoption of relevant legislation in this area is imperative because Estonian trade unions are still in the formation stages and the establishment of state guarantees is indispensable for their effective activity.

The situation is more complicated in the sphere of equal pay for men and women. The principle of equal treatment for all employees is established in the Constitution, the ECA and the Salary Act. Indeed, Estonian labour legislation is consistent with ILO Convention No. 100 “Equal Remuneration Convention”, but there is no mechanism for assessment of what constitutes equal work, Estonian ratification of ILO Convention No. 100 has not guaranteed equal pay for equal work in practice in Estonia. Although the Salary Act establishes a long list of grounds for discrimination which make preferences and the restriction of rights illegal (e.g. sex, nationality, colour, race, mother tongue, social origin, social status, political or other views of an employee etc.) [8], the regulation of issues connected with discrimination of employees remains insufficient. Since the right of recourse to a court does not guarantee equal treatment in employment relationships, the rights of employees need to be broadened in Estonia by passing corresponding legislation. Such special legislation should specify an exact definition for discrimination in employment relationships, the sanctions for violations of the prohibition on discrimination, and the bodies which are responsible for the implementation of the legislation. Since the EU has paid much attention to equal treatment of men and women and to the prevention of discrimination, it is necessary that corresponding special legislation be adopted in Estonia.

As mentioned, after Estonia rejoined the ILO in 1992, a tripartite ILO council was created consisting of representatives of the Government of the Republic, employees and employers. Thus, Estonia has created the procedure for regulation of employment relationships through tripartite consultation as prescribed in ILO Convention No. 144 “Tripartite Consultation (International Labour Standards) Convention”. To date, negotiations between the Government, employees and employers have become a regular occurrence. Evidence of the active work performed by the ILO council is the fact that seven ILO Conventions have been ratified through mediation of the council after Estonia rejoined the ILO.

Correspondence of Estonian labour laws to international standards

The degree of harmony between Estonian labour legislation and the international labour standards which are not binding on Estonia at the present time but with which Estonian labour laws should be concorded in light of the future is considered below. At the international level, both the ILO and the EU have adopted a number of instruments concerning different social issues. Below, only the correspondence of Estonian labour legislation to international standards governing entry into an employment contract, working hours and rest time, remuneration for work, and termination of an employment contract is analysed.

In the EU, conclusion of an employment contract is regulated by the EC Council Directive 91/533/EEC on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship. In comparing the material conditions of an employment contract or employment relationship fixed in the Directive to those prescribed by the ECA, the compulsory conditions for an employment contract of the ECA coincide exactly with the material conditions provided in the Directive. Pursuant to § 28 of the ECA, written agreement must be reached on the compulsory conditions of an employment contract upon conclusion of an employment contract [5]. The ECA however, does not permit the written formulation of such conditions two months after creation of the employment relationship, as prescribed by the Directive. Also, the Directive provides an employer with a possibility to present, within two months after creation of the employment relationship, a unilateral declaration in which all the material conditions of the employment contract are fixed [13]. In Estonia, since a reliable collective agreements system regulating employment relationships does not yet exist, an employer cannot be allowed to determine the conditions of an employment contract unilaterally. In sum, with respect to conclusion of an employment contract, Estonian labour legislation guarantees greater protection of the employee than the above-mentioned Directive.

Numerous instruments concerning working hours and rest time have been adopted at the international level. Only the general standards which concern working hours and rest time are analysed in this article. The international standards concerning working hours of different categories of workers are not dealt with. Comparing Estonian labour legislation to ILO Conventions No. 47 “Forty-Hour Week Convention”, No.106 “Weekly Rest (Commerce and Offices) Convention”, No.132 “Holidays with Pay Convention”, No.171 “Night Work Convention”, No.174 “Part-time Work Convention” etc., which generally concern working hours and rest time, and to EC Council Directive 93/104/EEC concerning certain aspects of the organisation of working time, Estonian laws regulating working hours and rest time are generally in harmony with international standards. However, Estonian legislation needs to be further elaborated. This is so particularly with overtime work, double employment, night work and part-time work which are regulated in much greater detail at the international level than in Estonia.

At the present time, the most problematic issue is compliance with the rules established in article 6 of EC Council Directive 93/104/EEC. According to this article, the average working time, including overtime work, during each seven-day period must not exceed 48 hours [15]. Section 15 of the Estonian Working Hours and Rest Time Act allows 4 hours of overtime work per day and establishes 12 hours as the maximum duration of a shift [7]. Therefore, in theory, the maximum working time in a week in Estonia may be far more than 48 hours (5 x 12 = 60 hours per week). Besides, in addition to an employee’s principal employment, double employment is allowed in Estonia. Pursuant to § 17 of the ECA, the additional working time of a person working under two employment contracts must not be more than 20 hours per week. If a person working under two employment contracts works part-time at his or her principal place of work, the total working time at the principal and secondary places of work must not exceed 60 hours per week [7]. A conflict with the Directive above is obvious; working more than 48 hours a week is lawful in Estonia. Therefore, double employment and overtime work should be considerably restricted, if Estonian labour laws are to comply with international standards.

Another problematic sphere relating to working hours and rest time is the need for greater legal guarantees for night workers. According to international standards, such workers must be guaranteed:

1) free health examinations before assumption of work and also after regular intervals;

2) a transfer to daytime work if possible and if a worker is unsuitable for night work because of his or her health; and

3) work safety and health protection corresponding to the type of work where the night work may be hazardous to the safety or health of the worker.

Also, at the request of competent body, the compliance with the above-mentioned guarantees must be regularly reported [15]. Estonian labour laws do not prescribe such wide protection to night workers and need considerable amendment in this respect.

In Estonia, since the employment relationships of part-time workers are not regulated as specifically as prescribed in ILO Convention No. 174 “Part-time Work Convention”, Estonian laws need more precision in this area. According to international standards, the rates for remuneration and working time of part-time employees should be determined only after consultation with the representatives of employees and employers. Following the practice of foreign countries, the minimum rate of remuneration in Estonia could be an amount exceeding the tax-fee minimum and the working hours for part-time workers should be at least 15 to 20 hours per week. Also it should be established by law that if the working time or remuneration of a worker is less than the established rates, the worker loses the right to certain benefits arising from the employment relationship.

At the international level, only the ILO has dealt with work remuneration. According to the Treaty establishing the European Community (Treaty), the Council of the EU has no competence to adopt resolutions in matters concerning remuneration. The additional protocol on social policy to the Treaty also expressly excludes issues of remuneration from its scope [1]. The primary ILO Conventions regulating remuneration are No. 26 “Minimum Wage-Fixing Machinery Convention”, No. 131 “Minimum Wage-Fixing Convention” and No. 95 “Protection of Wages Convention”. Generally, Estonian laws on work remuneration are in harmony with the above-mentioned Conventions but need to be elaborated. ILO Convention No. 95 provides that workers must be paid regularly [2]. The Estonian Salary Act does not expressly prescribe such requirement. Since Estonia still lacks a reliable collective agreements system that would, among other things, guarantee regular payment of wages to employees, the Salary Act should provide the obligation on employers to pay wages at least once per month.

The main ILO Convention dealing with protection of wages, ILO Convention No. 95, was adopted in 1949 and has become somewhat outdated. Estonian labour laws regulate issues of remuneration much more specifically, providing also for work remuneration under special conditions, the establishment of salary systems and salary rates, and guarantees and benefits related to remuneration [8]. The procedure for establishing the minimum salary where representatives of employees, employers and the Government participate has been created in Estonia, as prescribed by international standards. At the same time, the minimum wage rate in Estonia does not comply with the principle established in international instruments according to which the minimum salary must ensure satisfaction of the needs of an employee and the employee’s family at a level suitable for human dignity.

Internationally, termination of an employment contract at the initiative of an employer is regulated in great detail. The major international instruments dealing with termination of an employment contract are ILO Conventions No. 158 “Termination of the Employment Convention” and No. 173 “Protection of Workers’ Claims (Employer Insolvency) Convention”, and the EC Council directives 75/129/EEC on the approximation of the laws of the Member States relating to collective redundancies, 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses and 80/987/EEC on the approximation of the laws of the Member States relating to protection of employees in the event of insolvency of their employer. Thus, at the international level special attention is given to protection of employees in the event the employer desires to terminate employment contracts with a large number of employees. The protection of rights of employees in collective redundancies, a transfer of an undertaking or a part of an undertaking and in insolvency of the employer is considered below.

According to international standards, an employer must inform the representatives of employees and consult with them before initiating a programme of collective redundancies. Also, the employer must notify the body responsible for employment matters about the intended redundancies [12]. Pursuant to subsection 87 (3) of the ECA however, although an employer is obligated to inform the employees’ representative of termination of an employment contract, the opinion of the representative, in so far as the dismissal is concerned, is of no importance [5]. The powers of employees’ representatives should be made much wider in Estonian legislation. The ECA should specify exactly the circumstances (e.g. the total number of employees at the enterprise, the number and qualifications of the employees to be dismissed, dismissal criteria etc.) of which an employer must inform the representative of employees and the employment body before collective redundancies may be effected. Consultations between the employees’ representative and the employer should also be made compulsory in order to find possibilities and means for avoiding the dismissals or reducing the number of workers to be dismissed, and for mitigating the consequences accompanying the dismissals. Therefore, Estonian legislation governing issues relating to collective redundancies needs considerable amendment.

According to international standards, a transfer of an undertaking, company or a part of a company does not serve as a ground for termination of an employment contract. In such cases, termination of the employment relationship with an employee is possible only where it is due to economic, technological or structural reasons which bring about a redundancy of employees [11]. In principle, the continuation of an employment relationship upon a transfer of a company or a part of a company is guaranteed in Estonia. Pursuant to § 6 of the ECA, an employment contract is not terminated by a reorganisation or change of subordination, owner or form of ownership of an enterprise, establishment or other organisation [5]. This wording has been effective since the entry into force of the ECA in 1992. Since then however, several legal instruments have been passed whose entry into force have made the ECA terminologically incorrect. Due to the fact that the terms reorganisation and enterprise have lost their former meaning since the entry into force of the Commercial Code and the General Principles of the Civil Code Act, all legal instruments dealing with these matters must be brought into terminological harmony.

Pursuant to international standards, both the former and the new employer must inform the representatives of employees about a transfer of the company or a part of it. If an employer is forced to make workers redundant for economic, technological or structural reasons, the employer must hold earlier consultations with the representatives of employees in these matters [11]. As Estonian legislation is not so specific, the powers of employees’ representatives must be widened in this respect.

Another problematic area is the implementation of the international standards governing the protection of workers’ rights in the case of insolvency of the employer. Specifically, according to ILO Convention No. 173, in the case of an employer’s insolvency, the satisfaction of workers’ claims relating to their wages, holiday compensation, other types of paid absence and dismissal compensation must be guaranteed either by way of preference claims or by an appropriate guaranteeing organisation. Estonian laws do not prescribe such a wide protection for employees. Pursuant to the Estonian Bankruptcy Act, workers’ claims are not immediately preference claims. In the case of an employer’s bankruptcy, the state is responsible for satisfaction of workers’ claims concerning their remuneration and dismissal compensation to the extent of two months’ average salary [6]. As the state does not guarantee employees the same protection as prescribed by international standards, Estonia could also follow the model of several foreign countries and create an employer-financed salary guarantee fund for the satisfaction of claims of employees.

A comparison of Estonian legislation with the ILO and EU instruments governing conclusion and termination of employment contract, working hours and rest time and remuneration for work indicates in summary that generally Estonian labour laws are in harmony with international standards. The labour legislation passed in the 1990s mostly guarantees employees the protection provided in international instruments and thus, substantial amendments to them are not necessary. At the same time, proceeding from international standards, Estonia must regulate several areas of the employment relationship much more specifically and in certain areas, representatives of employees must be granted considerably wider powers than they possess at the present time.

Legislation and Bibliography:

1. European Union. Selected Instruments Taken from Treaties. Book I. Volume I. Luxembourg: Office for Official Publications of the European Communities, 1995
2. International Labour Conventions and Recommendations 1919-1991. Volume I (1919-1962). Geneva: International Labour Office, 1992
3. International Labour Conventions and Recommendations 1919-1991. Volume II (1963-1991). Geneva: International Labour Office, 1992
4. Constitution of the Republic of Estonia. Tallinn: Olion, 1992
5. Employment Contracts Act of the Republic of Estonia (RT 1992, 15/16, 241)
6. Bankruptcy Act of the Republic of Estonia (RT 1992, 31, 403)
7. Working Hours and Rest Time Salary Act (RT I 1994, 7, 70)
8. Salary Act (RT I 1994, 11, 154)
9. Association Agreement between the European Communities and their Member States and the Republic of Estonia (Europe Agreement) (RT II 1995, 22-27, 120)
10. Official Journal of the European Communities. No L 48/29 of 22 Feb 1975
11. Official Journal of the European Communities. No L 61/26 of 5 March 1977
12. Official Journal of the European Communities. No L 283/23 of 28 Oct 1980
13. Official Journal of the European Communities. No L288/32 of 18 Oct 1991
14. Official Journal of the European Communities. No L 245/3 of 26 Aug 1992
15. Official Journal of the European Communities. No L 307/19 of 13 Dec 1993