Daniel Klein’s Legal Line
Each month Daniel Klein fields corporate legal questions posed by Passport’s readers. Do you have a Russia-related legal question you’d like Daniel to address? Tell him about it at email@example.com.
I am the director of a small Russian company that, in light of the current economic situation, must downsize by laying off employees. I have heard that the Russian labor code makes it difficult to reduce staff, necessitating closure as a route to downsizing. Is this true?
Since Russia’s labor code has provisions for laying off staff , you do not have to close your company in order to downsize. These laws make it possible to eliminate entire departments as well as individual positions in accordance with a firm’s restructuring or optimization needs. All it takes is a decision from management – no explicit economic reason is necessary for downsizing. In addition, downsized departments or positions may be reestablished at a later date in the event of an economic rebound, and there is no fixed timeline for such reestablishment. Keep in mind, though, that lower courts tend to favor the laid-off employee whose position is quickly recreated, so downsizing should not be used as a mechanism to terminate underperforming staff .
There are also ways to lay off unsatisfactory staff, a move that may become increasingly attractive as the labor market soft ens and competition for jobs increases. These approaches, of course, require documenting cause over a period of time. The paper trail may include original performance reports signed by an employee’s supervisor or other relevant manager, and the end of the year is a good time to start collecting such evidence by conducting annual reviews. The evidence must be sufficient to convince a court that the dismissed staff fell short of the company’s performance expectations. If a laid-off employee legally contests his dismissal and the court finds that the employer’s documentation falls short of the labor law requirements, the company must reinstate the employee.
Even if the documentation passes legal muster, laying off workers in Russia — either as a function of underperformance or of downsizing — is not cheap: Apart from the required two months’ notice, there is an additional month of severance to be paid. During the final two months of employment, the employee is required to show up to work unless the employer agrees otherwise. If the employee fails to do so, he may be fired immediately, in which case the month of severance salary is forfeited. The employer, however, cannot prevent the employee from coming to work during the two-month period, as the employee has the legal right to his job during this time.
If the laid-off staff er is unable to find work for two subsequent months, the employer may be liable for these extra two months’ of salary. In other words, the employer may have to provide a total of five months of an employee’s salary, and, in extreme cases, the unemployment board may award the employee an additional month of salary, bringing the total to six.
Certain types of employees, such as sole breadwinners in a family or those who have suffered work-related injuries, enjoy special protections from layoffs. While it is possible to lay off such workers, others must be laid off first. Some categories of workers — such as single mothers with children under 14, pregnant women, new mothers, and women raising disabled minors — are exempt from layoffs altogether. Here your choices are to negotiate a severance package with the employee or put your company into liquidation.
Daniel Klein is a partner at Hellevig, Klein & Usov. His column is intended as commentary and not as legal advice.