The distinguishing features of the Russian employment market in 2011.

18.05.2011

Chambers and Partners Europe

Step by step we are trying to overcome all the difficulties that the international financial crisis has brought us. Employment, being an integral part of business, has also come across many obstacles and problems revealing many areas that need developing.

Both 2009 and 2010 definitely attracted much attention. This was a period full of many new trends, strange and sometimes very debatable court decisions and significant personnel restructurings.

Nevertheless, we see in 2011 that business has adapted to these financial changes and now the strategy of a majority of companies is aimed at further development and no longer on a 'defence', as it was in the beginning of the crisis. Our managers have learnt to take more reasonable and considered decisions and to bear responsibility for them. Business has become more systematic in hiring and firing.

More dismissals and other changes in employment (such as salary and bonus reductions, cost savings, etc) introduced by employers resulted in a significant increase in the number of court disputes initiated by employees to protect their rights. It is not a secret that many employers attempted to save money and very often this was done at the employees’ expense. For many employers this led to unwelcome court proceedings and problems with state authorities over employment practices.

Commonly, the employees asked for reinstatement due to illegal dismissal, recovery of salaries and other payments (bonuses, grants, allowances, benefits, etc). This trend will definitely remain in 2011 and 2012. In 2010, the courts ruled in favour of 95% of employees’ claims for recovery of salaries and other payments. Moreover, we suppose that the employees will be trying more and more often to challenge any decision of the employer not only through the courts but also via the help of the state.

Nor is it a secret that the Russian courts are known for their employee-friendly approach in settling employment disputes. However, starting in 2010, we saw many court decisions taken in favour of employers, especially in disputes over reinstatement due to illegal dismissal and the legality of strikes. These changes are very significant especially for lawyers and human resource departments.

In many cases, employees acted inappropriately, abusing their rights. However, in Russia, it is still very complicated for the employers to prove that somebody was abusing his legal rights. Many courts are not very brave in making such decisions, especially in claims for protection of confidential information and commercial secrets.

In today’s world, where information and information technology are of significant value to both society and business processes, effective legal tools are indubitably vital for information holders to be able protect these 'assets' and combat unfair encroachment on them. Attempts to 'buy out' staff of a competitor in order to grab a share of the business are, unfortunately, quite common today in Russia. The Russian legislation to protect commercial secrets and non-compete regulations, however, is still very conservative and weak.

Many companies come up against unfair competition all over the world. However, when it happens in Russia, the companies are astounded that, despite the evident illegality of their competitor’s actions, they are really restricted from protecting their business through the courts.

Very often the employers have problems with former employees, now working for a competitor, disclosing trade secrets and making illegal use of insider information. Everybody understands that the actions of the former employee not only breach legislation but also constitute impermissible methods of competition that grossly contravene business ethics. But the current Russian legislation is too formalised, poorly oriented on the requirements of modern business, and fails to provide companies with the effective tools for legal protection against such unfair competition methods.

Take, as an example, by English law, which allows for the application of so-called restrictive covenants. These are contractual non-compete or contain obligations designed to protect the company’s business. As a rule, they exclude the possibility of a former employee working for competitors and of a competitor soliciting personnel for the purpose of obtaining clients, suppliers or customers. If the restrictive covenants are breached, the company can go to court for prohibitive interim measures to be taken in order to preclude a drawn out or potential violation, after which a claim is filed for recovery of losses in cash, these sometimes reaching huge sums.

Under Russian law, however, restrictive covenants conflict with the right to work, this being the main right envisaged by the Russian labour legislation, and are recognised as unlawful.

The problems of the Russian labour legislation and its poor alignment on business has become obvious during the crisis. Everybody agrees that the Russian Labour Code should be seriously amended.

The business society represented by the members of the Russian union of industrialists and entrepreneurs prepared significant amendments to the Russian Labour Code, aiming to make it more modern and business-oriented.

At the same time supporters of employees’ rights try to fight against the initiatives in modernisation of the Labour Code and to lobby their conservative employee-oriented ideas in employment, eg prohibition of out-staffing, accretion of powers of state authorities in the sphere of employment, imposing of new sanctions for violation of employees’ rights, etc.

No doubt that both this year and 2012 will see serious changes in Russian employment legislation. But what kind of Labour Code we will obtain in the end – either a modern and progressive legal instrument for business purposes or a conservative set of rules protecting the employees’ rights – is still an issue.

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