|                                                                                                                                                             |  | COMPLYING WITH RUSSIA'S LABOR CODE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | December 1997/January 1998by John KnabComplying with Russia's labor law is increasingly important for foreign firms there.  The Russian
Labor Code (the "KZOT") remains substantially unchanged since the Soviet period, but retains its
force and influence.  Russian employees ranging from general directors to hotel chambermaids
have made employers pay for violating the KZOT.  In spite of its Soviet-era anachronisms, the
KZOT provides clear rules for hiring, compensating, and terminating Russian employees.  In using
the KZOT, the most important considerations are: respect for Russian workers' numerous rights
under the KZOT; recognition of opportunities to assert employers' rights; creation of a proper
paper trail; and working with employees, even when terminating them.Hiring
Under the KZOT and the quasi-official "KZOT Commentary," an employer hires an employee
using three documents: a written labor contract; an administrative order, or "Akt," and the
employee's labor book.   The labor contract specifies the essential clauses of the working
relationship, and may not provide less protection than the KZOT.  Upon the contract's execution,
the employer formalizes the hiring by issuing the Akt, which the  new employee signs and returns. 
The employee then gives the employer his or her labor book.  The employer records in the labor
book the hiring date, job title, and beginning pay, and holds the labor book for the duration of the
employee's employment.  A worker employed by multiple employers must provide his labor book
to his place of primary employment.   Employers of "second job" workers need not obtain the
labor book, but should remember that such workers face certain limitations on time and pay.A labor contract must be executed with permanent, temporary and part-time employees. A valid
contract contains a job description, the location of the workplace, the worker's specialty and
qualifications, the requirements of the position, the amount of compensation (equivalent to at least
the minimum wage), the compensation regime, and the work schedule.  The contract must state
its duration: indefinite, fixed-term (less than five years), or job-specific.   When in doubt, labor 
contracts are generally considered indefinite.  Moreover, if an employer requires a fixed-term
contract, the term must relate to the natural duration of the employee's duties.  As a prominent
hotel learned in a much-publicized court case, there is nothing inherent in a chambermaid's job
which justifies a one-year term contract; such a contract should be for an indefinite term.The KZOT has optional provisions.  An employer may require a probationary period (to be stated
in the Akt) of up to three months.  An employer may compensate for the use of the employee's
car for business, provide medical insurance and other incentives, and may require employees to
take business trips.  The labor contract may contain a confidentiality clause.  Finally, an employer
should list a position's necessary qualifications and skills.  Such a list can be used as criteria for
evaluating the employee's qualifications and performance, an important step in terminating a
poorly-performing worker.Termination
The KZOT provides broad grounds for terminating a labor agreement, generally favoring the
employee. The primary grounds are: by agreement between the parties, expiration of a fixed-term
contract, on the employee's initiative, and on the employer's initiative.Employees are generally free to quit their jobs upon two weeks' notice.  They may withdraw the
notice within the two weeks and continue working, unless the position has been offered to
another person with stronger statutory labor rights.  Workers on temporary disability or annual
leave may not be terminated except when an organization is being liquidated.  Expectant mothers,
women with children, and those under age eighteen enjoy preferential hiring, transfer, and firing
rights.  Finally, where collective bargaining agreements exist, consent of the labor union is often
required before termination.Termination by the employer is limited under the KZOT to: company liquidation or reduction in
work force; the employee's lack of qualification for his position because of insufficient skills or
poor health; the employee's systematic failure to perform under the labor agreement or to comply
with the employer's internal rules, after prior disciplinary actions were taken; unauthorized
absence from work (including absence for more than three hours during a working day); failure to
report to work for more than four months due to a temporary disability (with certain exceptions);
return of a previous employee formerly holding a current employee's position; drunkenness at
work; and theft, documented by a ruling from a court or other competent body.  In some cases, a
terminated employee must receive at least two weeks' severance pay.Additional grounds for termination exist for senior officers and their deputies, and for employees
with fiduciary responsibilities.  A single serious violation of professional duties by an enterprise
head or deputy is grounds for dismissal.  An enterprise head or deputy may also be dismissed for
grounds expressly stated in their contract.  Finally, an employee with fiduciary responsibilities may
be terminated for a breach of trust.Termination must be supported with documentation, such as records of  missed workdays,
unperformed assignments, and repeated failures to follow company rules.   For an unqualified
employee, an evaluation against the position's required qualifications and skills is important. 
Employees who feel their labor rights are violated may bring a civil suit seeking damages.  Even if
such suit is unsuccessful, defending it will cost time and money, and may cause ill feeling among
the remaining staff.Given the difficulty of creating a paper trail, a judiciary generally favoring employees, and the
possible disruption to the workplace, many foreign employers choose to discharge unwanted
employees by "agreement of the parties."  Typically, employees will agree to a termination and a
release of any claims in exchange for their unused leave payments and related compensation, and
perhaps a month or two in salary.   For Russian employees, grounds for termination are listed in
their labor books, and their future employment prospects are better if they are terminted "by
mutual agreement," instead of for cause, or at the employee's initiative.  Generally, as with much
else in Russia, a negotiated settlement may provide closure to an otherwise potentially difficult
dispute.For a list of U.S. law firms with representation in the NIS, visit BISNIS Online at:
www.mac.doc.gov/bisnis/country/9712law.htm.John Knab is an attorney with Ludwig & Doumar, in Washington, D.C.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)