Can Employment Contracts Stipulate Dispute Jurisdiction?
Legal update No 613
Goltsblat BLP advises that, on 14 August 2017, Ruling No.75-KG17-4 of the Supreme Court of the Russian Federation (the “Ruling”) held that employment contract clauses may not restrict employees’ rights to go to court at their place of registration.
3 October 2016 saw enactment of significant amendments to the labour legislation (for more detail see our Legal Update No.579 dated 19 September 2016), including crucial new provisions of the Russian Civil Procedure Code regarding jurisdiction over labour disputes. Labour disputes used to be referred to a court at the defendant’s location (including that of a company branch or representative office for disputes arising from their operations) or at the place specified for employment contract performance. Under the new rules, employees may also file employment rights reinstatement claims at their place of registration.
This is most inconvenient for employers of a considerable number of staff registered far from central districts. For instance, if employees go to court at their place of registration rather than at the company’s location, employers will have to keep sending representatives to court hearings in the regions and pay the relevant costs or give up participating in person (just send documents and evidence to court and not attend court sessions), which is clearly less effective.
This is why, since the new developments came in, employers have frequently attempted to resolve the labour dispute jurisdiction issue by stipulating in employment contracts that such disputes are to be considered at the employer’s location.
The rationale behind this restriction appeared quite strong: given that labour disputes fall beyond the scope of the exclusive jurisdiction rules (i.e., are not covered by cases when the forum may not be changed by agreement), the parties applied article 32 of the Russian Civil Procedure Code specifying that the jurisdiction may be agreed by the parties, by adding employment contract clauses stipulating that any disputes between the parties were to be referred to a court at the employer’s location.
Courts viewed this new development ambiguously. In certain cases, they refused to apply jurisdiction at the employer’s location as specified by employment contracts and the disputes were considered by the court with which the employee’s lawsuit was lodged (at the latter’s place of registration or at the place of employment contract performance). As a rule, the rationale behind this was that the employee was the weaker party in the employment relations and any restriction on their lawful right to file a lawsuit with a court of their choosing aggravated their position, so was inapplicable1. Yet there have also been cases when, on the contrary, courts refused to accept claims at the employee’s place of registration, referring to the employment contract clause in which the parties voluntarily agreed to a different forum2.
The recent Ruling clarified the issue. After reconsidering lower court judgements, the Russian Supreme Court concluded that the right of employees to go to any court they choose may not be limited, whatever special jurisdiction clauses might be specified by the employment contract. The court noted that the jurisdiction clauses in an employment contract diminish the employee’s guarantees compared to those set under the legislation, so should not be applied.
Please note that the above Ruling was rendered by the Russian Supreme Court on a specific case. Consequently, this position is not formally binding on lower courts. Even so, given the level of the court and the fact that, in general, lower courts keep track of higher court positions, this Ruling might exert a significant impact on subsequent law enforcement practice.
Goltsblat BLP will continue to monitor law enforcement trends in this area and will be updating you on all major developments.
1 See, for instance, Appeal Ruling of the Moscow City Court dated 16 February 2017 on case No. 33-6350/2017
2 See, for instance, Appeal Ruling of the Belgorod Region Court of 22 December 2016 on case No. 33-6190/2016
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