It is worth reviewing employment contracts in new year
At the beginning of 2023, it is worth to review employment contracts in the company. On Christmas Eve 2022 and January 1st of this year, several changes in legislation entered into force that the employer and various employees could be interested in. In this article, we will give a brief overview only of the agreement concluded with an employee with independent decision-making capacity.
Employee with independent decision-making capacity
On 24.12.2022, amendments entered into force, where art 432 was added to the Employment Contracts Act (ECA) and created the concept of an employee with independent decision-making capacity in Estonian law and the terms and conditions concluded with them. European Union recognised this kind of opportunity in 2003. Almost 20 years later, the Estonian legislator came to conclusion that it is not reasonable for employees working in certain positions, it is not reasonable to strictly adhere to the rules of working and rest time and decided to establish an exception.
In an employment relationship, the employee must be subject to the management and control of the employer. This principle also applies to an employee with independent decision-making capacity. So, who is an employee with independent decision-making capacity? Unlike the EU directives, the ECA does not contain an illustrative list of positions where an employee could have independent decision-making capacity. This means that in Estonia, it is possible to conclude an agreement with an employee with independent decision-making capacity with any employee who, due to the nature of their work, is free to organise their working time. Therefore, the employer has to assess each case individually, whether or not the employee has independent decision-making capacity.
The employer cannot calculate the employee’s working time
Employees with independent decision-making capacity are employees whose working time is not calculated by the employer and who can decide when will they perform a work task. According to the explanatory memorandum of the legislator, such employees may be for example senior executive, lawyers, bailiffs, translators, religious workers, judges, etc. The fact that working time is not measured means that the employee is not (and must not be) obliged to be available to the employer between 8 and 17 or any other specific period. The explanatory memorandum to the act specifies that although the employee may not be obliged to be available for a certain period of time or to respond to e-mails, the foregoing does not mean that the employer cannot require the employee to attend specific meetings if this is necessary for the performance of the employee’s duties.
According to art 432 (4) of the Employment Contracts Act, the period for calculating the working time of an employee with independent decision-making capacity is one calendar month. That means, if the employee is employed full-time, then it is necessary to proceed from the standard hours of one calendar month. However, working hours exceeding these hours are already considered as overtime. Thus, if the possibility of working overtime is foreseeable for the employer, then it may already be defined in a written agreement with the employee – how the overtime is performed, how it is notified and paid.
The agreement cannot be concluded with an employee who does not earn the average gross salary in Estonia or with a minor
In addition, the legislator has put a restriction that an agreement concluded with an employee with independent decision-making capacity is allowed only with an employee whose salary per month is at least the average gross monthly salary in Estonia and it is not allowed to enter into such an agreement with a minor. Here, if necessary, the employer must document and retain evidence showing that the gross monthly salary requirement has been met. For this, the employer before concluding an agreement, should make a printout of the gross salary data of Statistics Estonia and, if necessary, store it either in the employee’s paper file or in an electronic file (depending on the employer’s internal work organisation).
If, however, after an agreement concluded with an employee with independent decision-making capacity, it appears that the working time or working hours chosen by the employee are not suitable for the employer, then either party can at any given time by giving 14 calendar days’ advance notice thereof.
To sum up the above mentioned, for each individual employee, it is necessary to make sure that legal requirements are met, collect the necessary evidence, and formalize the agreement in written form. In summary, art 432 of the Employment Contracts Act should help reducing the use of other types of contracts, including authorisation agreements, concluded in practice instead of entering into an employment contract.
Epp Lumiste/ Attorney-at-Law at LEADELL Pilv Law Office