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Labor law

What can employers do to minimize losses from coronavirus?

Kristel Tiits Kristel Tiits

Co-author: Lee Laanemäe, legal adviser, Grant Thornton Baltic

Estonia declared a state of emergency (defined in national law as “emergency situation”) on 12 March 2020 and this affects the rights and responsibilities arising from employment relationships. What steps can an employer take to slow the spread of the virus while keeping the work processes flowing, and what are an employee’s rights to refuse to come to work?

In what cases can an employer lay off workers, send all employees home for unpaid leave, or declare some other emergency situation where employees are home without pay?

In a situation where an employee has returned from a high-risk area, the parties will have to agree on the format in which the work will take place. The best solution for both employer and employee is to allow employees to work from home. If this is not possible, it is important to reach a mutual agreement.

The Employment Contracts Act currently in force does not govern compulsory leaves i.e. there is no provision in legislation employers can invoke to send employees on unpaid leave. If an employer does so, Section 35 of the Employment Contracts Act comes into play, which requires employers to pay the average wage or salary if the employee is not provided with work or is not allowed to come to work.

The employer must take into consideration that in order to place employees on leave, the employer must reach agreement with the employee and this agreement must be made in writing in order to avoid any disputes.

Alternatively, the possibility of using annual holiday should be considered. This is a softer solution for both parties but also requires mutual agreement.

Can an employer reduce the pay?

Above, it should be examined whether the spread of the coronavirus can be considered grounds for a reduction of wages for the purposes of Section 37 of the Employment Contracts Act. We believe that the coronavirus pandemic qualifies as an unforeseen economic circumstance, beyond the control of an employer and its occurrence does indeed make it possible for an employer to unilaterally reduce the employee’s workload and pay for up to three months. We should draw attention to the fact that pay can be reduced to the minimum wage established by the Estonian government (584 euros per month – 3.48 euros an hour).

The employer should follow the procedure set forth in the Employment Contracts Act as regards reducing pay. It should be borne in mind that remuneration may not be reduced without advance notice. The employer cannot unilaterally decide on reducing pay; rather, there must be an agreement, but in effect, the employee must be given a reasonable amount of time to familiarize him or herself with the proposal regarding the new pay level. By law, the employer must give employees 14 days advance notice regarding reduction of pay. If employees do not consent to the decreased pay, they have the option of cancelling the employment contract with five days’ advance notice.

If employees come from a high-risk area, what options do they have?

If an employee returns to Estonia from a high-risk part of the world, the family doctor and Health Board above all must be consulted. If the employee is placed in quarantine or self-isolation – a restriction on freedom of movement for the purposes of law – they must abide by the requirements set forth in Section 31 of the Emergency Situation Act. In such a case, the employee should consult the employer as well – is it possible to work from home or not. If it is not possible, it is wise for the employee to take a sick leave certificate ensuring compensation starting from the fourth day of illness. If it is possible to work from home, there is no need to go on sick leave and they can continue to work.

If an employee wishes at its own initiative to stay home for two weeks, most of the same rules apply. If the employer is amenable to the employee working from home, there is no need to apply for a sick leave certificate and the work continues at home. But if the employer does not allow working from home, the employee should consult their GP and file for a sick leave certificate.

A last resort – layoff?

If the situation deteriorates dramatically and the employer has no work to offer its employees and a temporary pay cut does not offer enough of a cushion, layoffs are a possibility.

A layoff is indicated if it becomes impossible to continue the employment relationship due to a decrease in the volume of work or reorganization of work or other reason involving cessation of work. A layoff can also be a situation where the employer winds down its activity, is declared bankrupt or bankruptcy proceedings are closed due to abatement without a bankruptcy being declared. To effect the layoff, the employer must present a declaration of cancellation in a form reproducible in writing and provide reasoning for the termination of the employment contract. Among other things, it must pay severance compensation and observe the time limits for advance notification set forth in legislation.

If you have any questions about what action to take in employment relations in the new situation, please contact us!

Nothing in this alert should be construed as expert advice. This alert is a generalized summary. Professional counselling should therefore be sought before any action is undertaken.

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