The Supreme Court of the Russian Federation clarified specifics of employment by individuals and small and medium-sized businesses

On 29 May 2018, the Supreme Court of the Russian Federation issued the Decree of the Plenum N 15 where clarified issues concerning regulation of labor relations with employers — individuals both with and without sole proprietors’ status, as well as with employers — small business entity. The Decree clarifies provisions of Chapter 48 and Chapter 48.1 of the Labor Code of the Russian Federation dedicated to issues regarding regulation of labor between the abovementioned parties.

The Decree clarifies procedural issues of all labor disputes, which are already explicitly described in the Labor Code. However, it is important that many questions indicated by the Supreme Court could be applied to all participants of labor relations, not only individuals and small business entities.

The Supreme Court provides the list of labor disputes, which are exempted from the universality principle of insolvency proceedings. It means that all disputes between employers that are subject to insolvency proceedings and employees are subject to resolution in a civil procedure.

The Supreme Court clarified the employee’s right to choose the court in which to file the action. A plaintiff has two options: to file a suit with the court at the place of residence or with the court at the location of an employer. The Supreme Court outlined that alternative jurisdiction rule applies also to suits on recognition of labor relations associated with the use of personal services but emerged on the basis of a civil contract.

Herewith, the Supreme Court explained an important procedural issue the courts had had trouble with — pre-trial settlement of a dispute. Para. 11 of the Decree stated that there is no requirement for an employee to comply with pre-trial settlement of a dispute procedure while filing a suit in an individual labor dispute. A court has no right to return the statement of claim on this ground.

In accordance with the clarifications contained in the Decree, courts must determine the existence or the absence of labor relations while resolving disputes between employees and employers.

The fact that relations between the parties are labor ones and subject to labor legislation can be evidenced by: 1) formalized acts (a contract, an organization chart); 2) the signs of labor relations (for example, subordination to the employer’s instructions, the right to weekly holidays and vacation, receiving periodic payments); 3) actual permission to work.

The Supreme Court explained that a security card, a register for entrances and exits, a correspondence of parties to the dispute, a register for briefing at the workplace, information on transfer or issue of money to an employee may be admitted as documentary evidence confirming the existence of labor relations.

The employer can in any suitable way authorize his representative who is in charge of involving of employees. Herewith, it is presumed that an employer is aware of his employees and representative’s powers are unlimited. Thus, as a general rule, an employer would not be able to deny the existence of his employee, referring to his unawareness about hiring an employee by his representative without employer’s permission.

If an employee proves the existence of actual labor relations but does not present documentary evidence proving his salary rate to the court, the court has the right to determine its rate based on the usual compensation of an employee of the same residence and qualification.

The existence of labor relation is presumed when the employee work with the consent or on instructions from the employer or his representative under the supervision and guidance and in the interests of an employer. Herewith, the Supreme Court stimulates employer to prove that the contract concluded with an employee is a civil one, because any irremediable doubt in such disputes shall be interpreted in favor of existence of labor relations.

The Supreme Court provided criteria for distinction between an employment and a service contracts, which may be used as a test in all similar disputes regardless of an employer’s status:

  • not a specific one-time work is performed but certain labor functions that are part of an individual employee’s duties;
  • the very process of fulfilling the labor function is important, and not the rendered service;
  • under a service contract, a contractor retains the position of an independent economic entity, while under an employment contract the employee assumes a responsibility to perform work for a certain work function;
  • an employee is included in the staff of an employer, is subject to the established labor regime and works under the supervision and guidance of an employer;
  • a contractor under a service contract works at his own risk, and a person working under an employment contract does not bear the risk associated with the performance of his labor.

An employer — an individual who is not sole proprietor has the right to change the system and amount of compensation, benefits, mode of operation (except of changing the labor function of an employee) unilaterally without justifying the changes by technological and organizational reasons.

It is illegal to include additional grounds for termination in the employment contract which are discriminatory, such as joining a union, pregnancy, an attainment of retirement age.