Amendments to the Employment Contracts Act as of August 1 2022
- The European Union Directive on transparent and predictable working conditions was transposed into The Employment Contracts Act.
- The amendments will come into force on August 1 2022, but it would be wise for employers to already start preparing for that date.
- For example, from August 1, the employee must always be informed of the duration of the probationary period.
Notification of working conditions
An employment contract is deemed to have been entered into if the employee and the employer have reached an agreement on all relevant terms and conditions. Essential conditions are determined by mutual agreement between the employee and the employer, taking into account the specific employment relationship.
As a general rule, the essential conditions to be agreed in the employment contract are wages, working time, duties to be performed, place of work, etc. (see Employment Contracts Act § 5). The Act prescribes the conditions of which the employer must notify the employee about in writing before the employee starts working.
Starting from August 1, the employee must be provided with more information about their working conditions than they are now. If an employee enters into employment relations with the employer after the amendments have come into force, i.e. from August 1 2022, the employer is obliged to inform the employee of all the information provided in the Act, including the new terms and conditions of the Employment Contracts Act.
However, if the employee has been working with the employer for a longer period of time, including the time when the amendments come into force, the employee has the right to ask for new data. If the employee asks for information, the employer is obliged to provide it. The employer can always inform the employee of new data, even if the employee does not ask for it (e.g. by changing the rules of the organisation of work and introducing them to all employees).
It is important to distinguish the terms and conditions agreed upon the signing of an employment contract (e.g. wages, working time, place of work) from the information that the employer further communicates to the employee and which essentially relates equally to all employees (for example, reference to the institutions receiving taxes and payments and the protection accompanying the payment of them, duration of leave, rules for the organisation of work, reference to the collective agreement). The latter can be included in the employer's general organisational documents. At the same time, individually negotiated conditions such as the duration of the probationary period, agreement to conduct specific training, etc., should be reflected in the employment contract.
Upon the entry into force of the amendments, the employer is additionally obliged to inform the employee of the following circumstances:
The organisation of training can vary greatly from employer to employer. Therefore, the final notification depends on the means of a particular employer and on the agreements with the employee. For example, an employer may require new employees to undergo certain training sessions. The employer may also organise training plans periodically or provide regular information on the training courses that will take place in the near future by e-mail or on the company's website. It is important that the employee knows what training opportunities they have and what the employer expects from them regarding the training. In case the employer does not provide training, the employer does not need to inform the employee about training.
Example: “When an employee starts to work, the employee must undergo first aid training and information security training. Other training opportunities offered by the employer can be found in the training calendar located on the employer's internal web page at www.intranet.ee, which is regularly updated by the employer and where the employee can register in agreement with their direct manager if there are vacant training places.”
Example: “The employer shall approve the annual training plan in the first quarter of the year and submit it to employees in a format which can be reproduced in writing. Information regarding training opportunities outside the training plan shall be provided to the employee by the employer via e-mail.
Example: "During the probationary period, employees must undergo food safety training. The employer regularly provides additional and more detailed information about the training and participation in it to the employee by e-mail."
The probationary period lasts a maximum of four months starting from the date of the employee's factual entry into employment. According to the current act, the employer must notify the employee of the probationary period in writing only if the parties agree on a probationary period of less than four months. Starting from August 1, the employee must always be notified of the duration of the probationary period. For example, if the employee will enter into employment with a probationary period of four months, then it must be reflected in the employment contract.
The probationary period does not include a time when the performance of the employee’s duties is hindered, in particular, when the employee is temporarily incapacitated for work or on holiday, but other reasons that prevent the employer from assessing the employee's suitability for work are not excluded. For example, if a new employee's employment contract states that the duration of their probationary period is four months, with no end date specified, and the employee falls ill due to which they are absent from work for a month, their probationary period will be extended by one month.
If both parties wish that the probationary period would not extend then this must be explicitly spelled out in the employment contract. For example, it may be written in the employment contract that the employee starts work with a four-month probationary period, and the probationary period includes the time when the employee was temporarily incapacitated for work, used their holiday or other grounds for refusing to perform work provided for in Section 19 of the Employment Contracts Act.
Example: A new employee's contract states that the duration of their probationary period is four months, with no end date specified. The employee falls ill and is away from work for a month. Therefore, their probationary period will be extended by one month.
The principle of extending the probationary period will apply to all employment contracts from 1 August. This means that, in the event of obstacles to work, the probationary period is presumably extended for employment contracts that enter into force after 1 August as well as employment contracts with an ongoing probationary period entered into prior to 1 August. Example: the employee started working for the employer on 1 June with a four-month probationary period. They have a temporary certificate of incapacity for work from 10-15 August. In this case, the employee’s probationary period is extended by the duration of their leave (unless the parties have clearly agreed otherwise).
Although the law requires the application of a four-month probationary period, the employee must still be informed about it, for example like this: "The employee is subject to a probationary period of four months." For the sake of clarity, it is recommended that the employer note the start and end dates of the probationary period. If desired, the employer may also inform the employee that the probationary period does not include the time when the employee is prevented from carrying out their duties (for example, illness or use of holiday). However, it is not mandatory to inform the employee of the latter.
On the other hand, if it has been agreed in the employment contract that the probationary period will not be extended even if the employee has claimed incapacity for work, then such an agreement must be explicitly spelled out in the employment contract. For example, it may be written in the employment contract that the employee enters employment on a four-month probationary period, and the probationary period includes the time when the employee was temporarily incapable for work or used their holiday.
Additionally, the difference in the application of probationary periods in the case of fixed-term employment contracts will be specified. The probationary period no longer applies if the employee and the employer extend the fixed-term employment contract between them. In addition, the probationary period does not apply when the parties enter into fixed-term contracts for consecutive performances of similar work. Fixed-term employment contracts are deemed consecutive if the time between the expiry of one employment contract and the entry into the next employment contract does not exceed two months. Similar work means work that is identical to work performed under a previous contract, and work where the duties are similar to previous ones.
As a rule, amending the terms of an employment contract during the employment relationship does not justify agreeing on a new probationary period. Application of a new probationary period may be justified in exceptional cases if an employee takes up another position with the employer which differs significantly from the job they have done so far and requires other knowledge and skills compared to their previous position.
The employer must provide information about leave that the employer compensates, for example: "The annual holiday of an employee is 28 calendar days. Other holidays the employee is entitled to are set out in Chapter 3, Subchapter IV of the Employment Contracts Act. The employer compensates holidays for the employee according to the Employment Contracts Act, compensating annual holiday, study leave and leave for caring for adult with profound disability. ”The employer may also provide information regarding holidays by referring to the law, in particular § 55, 651 and 67 of the Employment Contracts Act, and additionally § 13 of the Adult Education Act, regarding study leave.
If the employer offers the employee additional paid leave (e.g. additional vacation days), the employee must also be informed of this, for example: “The employee has three additional holiday days per calendar year, during which the employee's average wages are maintained. The employee must notify the employer of the use of additional holiday days at least ten working days in advance.”
Overtime work is working more than the agreed working hours. Overtime work is compensated by providing remunerated free time, unless monetary compensation has been agreed upon. In the case of monetary compensation, overtime work is paid for at a rate of 1.5 times the wage.
The employer must provide the employee with information about the procedure for overtime work and compensation, for example: “The employee and the employer may agree upon overtime work. Overtime work shall be compensated to the employee in free time or by agreement in monetary compensation, in accordance with the procedure set out in the Employment Contracts Act." The employer may also provide information related to overtime work by referring to the Employment Contracts Act, in particular § 44 subsections 1, 6 and 7.
In addition to the minimal notification mentioned above, the employer can also inform the employee about the more precise procedure of how overtime work is agreed upon (e.g. between whom and in what format does the overtime work agreement need to be) or how overtime work is compensated (e.g. if the employer offers monetary compensation for overtime and at a more favorable rate than the law), for example: “The employee and the employer may agree upon overtime work. The overtime work agreement is agreed upon between the employee and the head of department or their authorized representative, and is fixed in a format which can be reproduced in writing. If the parties agree that overtime work will be compensated in money, then overtime work will be compensated at double the wage rate."
Up until now, the employer has had the obligation to inform the employee about the deadlines for giving notice of termination of the employment contract, but in the future, the employee must also be informed about the formal requirements of the termination and about the obligation to state reasons. The employee must know that the declaration of cancellation must be submitted in a format which can be reproduced in writing and reasons need to be stated. It is important to know that the employee must also be informed about the procedure for terminating the employment contract during the probationary period.
The employee must be informed about the form of termination and the obligation to justify it, by providing, for example, the following information: “The employment contract can be terminated by a declaration of cancellation in a format which can be reproduced in writing (for example by e-mail). The employer must justify the termination in the declaration of cancellation. In the declaration of cancellation, the employee must justify the extraordinary termination (e.g. termination of the employment contract due to a significant violation by the employer or due to fulfillment of family obligations).”The employer can also provide, for example, the following information: “Declaration of cancellation of the employment contract must be provided in a format which can be reproduced in writing. The party that has submitted the declaration of cancellation must justify the cancellation of the employment contract, unless the employee cancels the employment contract ordinarily.”The employer may also provide the described information by referring to the Employment Contracts Act, in particular § 95 subsections 1 and 2.
Currently, the employer must provide the employee with information about the taxes and payments that the employer pays and withholds. In the future, the employee must also be informed about the institution the taxes and payments are paid to and what protection the employee receives when they are paid.
The employer can inform the employee about the institution that is receiving taxes and payments, and about the protection accompanying their payment, for example as follows: "From the employee’s salary, the employer pays income tax, unemployment insurance premium, mandatory funded pension tax and social tax to the Tax and Customs Board. Income tax is used to finance governance activities of the state and the local self-government. Unemployment insurance premium is used to finance unemployment insurance, which provides protection (compensation, subsidies and services) to the employee in the event of unemployment under certain conditions. Mandatory funded pension tax is used to finance the second pension pillar. Social tax is used to finance health insurance and first and second pension pillars.
The notification can also be made by referring to the law, explaining that the protection associated with the payment of taxes and payments is primarily provided in § 5 subsection 1 of the Income Tax Act, § 6 and § 36 of the Unemployment Insurance Act, § 2 subsection 2 of the Funded Pensions Act and § 10 subsection 2 of the Social Tax Act. In addition, the employer can provide with the notification document an exemplary table on the protection accompanying taxes and payments, which can be found on the website of the Tax and Customs Board.
If the employer makes additional voluntary contributions to, for example, the third pension pillar, health insurance or occupational disease insurance, the employee must also be informed of this.
Instead of a reference, the employer can also inform the employee about data on taxes and payments with the following exemplary information (e.g. by providing the employee with the data described in the table in a written document):
Tax or payment
Institution receiving the tax or payment
Protection that may accompany a tax or a payment
Tax and Customs Board
Income tax is used to finance governance activities of the state and the local self-government
Unemployment insurance premium
Tax and Customs Board
Unemployment insurance premium is used to finance unemployment insurance, which provides protection (compensation, subsidies and services) to the employee in the event of unemployment
Mandatory funded pension tax
Tax and Customs Board
Mandatory funded pension tax is used to finance the second pension pillar
Tax and Customs Board
Social tax is used to finance health insurance and first and second pension pillars
Please note! This is an exemplary list of notifications. Depending on the employer's organisation of work and on the agreements with the employee, there may be a need to adjust the exemplary notifications given above.
Notification of changes in working conditions
According to the current procedure, in a situation where the information on the working conditions of the employee changes, these changes must be submitted to the employee in writing within one month from the date of making the changes. From August 1, changes to the information on the working conditions must be submitted no later than on the day the changes take effect. As before, a distinction must be made between the information that the parties have agreed on (information that can be changed by agreement) and the information that has been made known to the employee on the basis of the law (information of which the employee needs to be notified of on the day the changes take effect). Additional information regarding the procedure for notification of working conditions can be foundin the explanations of § 5 of the Employment Contracts Act.
Preservation of information regarding transmission or reception of working conditions
The employer must preserve the working conditions document during the validity of the employment contract and for ten years after the termination of the contract. The amendments add the principle that the employer must also preserve information about the transmission or reception of information about working conditions. In the same way, this information must be preserved during the validity of the employment contract and for ten years from the end of the contract. This piece of evidence must be maintained both for employees who start working after the amendments take effect and for existing employees who request new information.
The employer has the right to choose whether to preserve a piece of evidence of information transmission, reception, or both. For example, if the information is provided to the employee by e-mail, the employer should keep a piece of evidence regarding data transmission (for example, a copy of the e-mail transmitting the data, or an extract from the document management system regarding transmitting information to the employee) or data reception (for example, a handwritten or a digital signature of the employee, or the employee’s coordination to the documents in the document management system). The employer chooses how to store the piece of evidence (whether it is for example on paper or in a document management program).
Protection against adverse treatment
With the amendment, the principle of the directive is transposed that an employee must not be treated adversely for relying on their rights, drawing attention to infringements of these rights or supporting another employee in protecting their rights (including trustees and working environment representatives). For example, if an employee requires a statutory payment for overtime work, but instead of paying the remuneration, the employer cancels the employment contract with the employee.
In order to identify adverse treatment, the employee is not compared with other comparable people or groups of people, rather the employee's current situation is compared with the employee’s previous situation. It is not important to have a specific trait to be protected (e.g. gender, age, convictions, etc.) – protection is guaranteed for each employee even in the absence of a specific common trait. These two factors distinguish the prohibition on adverse treatment from the already existing prohibition on discrimination on the basis of gender and ethnicity.
Right to apply for suitable working conditions
According to the Directive, the employee has the right to apply for suitable working conditions and to receive a reasoned written reply to the application from the employer within two weeks. Applying for suitable working conditions means, in particular, agreeing on working full time instead of part time and amending a fixed-term contract into an indefinite contract, but other working conditions arising from the specificity of the employment relationship are not excluded.
The employer must respond to the employee within 14 calendar days from the reception of the application. If an employee submits more than one application within a four-month period, the employer is not obliged to respond to more than one of them. For example, if an employee applies to work with an indefinite employment contract instead of working under a fixed-term employment contract, but the employer is not able to carry out such restructuring of work, it must be explained to the employee in a format which can be reproduced in writing (e.g. by e-mail).
In the case of refusal, the employer's justification must show why it is not possible to grant the request due to the organisation of work. The employer has no obligation to provide suitable working conditions, but the employee and the employer could seek a solution together that is suitable and satisfactory for both sides.
Restrictions applicable to employers
Amendments to the act specify that an employer may not prohibit an employee from working with another employer outside working time. The parties can still agree on a restraint of trade clause, but if there is no agreement on this, the employee may work for several employers.
However, when working in several places, the employee must ensure that the employment or provision of services for another employment-providing person does not endanger their own or other people’s life or health. For example, in a situation where an employee performs full-time office work and, in addition, provides a taxi service at night, the employee must ensure that working in several places does not put them or others at hazard, for example because of overstrain. The employer can only be liable for ensuring that the requirements for work and rest time are met when working under them. Therefore, it is important that the employee pays attention to this detail as well. It is important to adhere to the requirements for work and rest time in order to avoid overworking and prevent occupational diseases and accidents.
Payment of holiday leave
According to the current act, holiday leave is paid to the employee no later than the penultimate working day before the start of the holiday. The amendment specifies that holiday leave must be paid on the penultimate calendar working day before the start of the holiday. The term ‘calendar working day’ signifies the days from Monday to Friday. For example, if the first day of the employee's holiday is on Wednesday, the payment of holiday pay to them must be made on Monday, unless otherwise agreed by the parties.
Notifying employees posted to Estonia of working conditions
In the future, written information on working conditions must also be submitted to workers posted to Estonia. If an employee is posted to Estonia for a longer period than one month, they must be provided with information on how long the posting lasts in Estonia, how much their wages are and in what currency the wages are paid. Information must also be provided on the benefits associated with the posting and the procedure for reimbursement of travel, meals and accommodation expenses. The posted employee must also be aware of the conditions of returning from the country. The posted worker must be provided with a link to the website of the Labour Inspectorate, where they can find information about the working conditions of an employee posted to Estonia, applicable collective agreements and other important information concerning posting.
- Which working conditions should the employee be informed of starting from August 1?
- Reader asks: From August 1, the requirement that the employee must be informed of working conditions will come into force. Do employees who were employed before August 1 need to be informed as well, or does this only apply to new employees?
- Reader asks: In August, two new employees will be recruited and both of them will have a probationary period at first. We heard that from August 1, probationary period no longer includes sick leave. In case both of the employees fall ill, will their probationary periods be extended?