5 Proposals to Make the Employment Contracts Act More Flexible

The Estonian Chamber of Commerce and Industry has approached the Ministry of Social Affairs and the social partners with proposals to make the Employment Contracts Act more flexible, highlighting the bottlenecks in the current regulation and proposals to amend the Act.  
Today, where our labour market and work culture have changed and will change even more in the near future; where teleworking, short-term work is common, the proportion of project work is increasing or the employee does not want to be employed by a single employer for a long time; it shows clearly the need for more flexibility. 

In addition, in recent years the Chamber of Commerce has received feedback from many companies of different sizes and activities, as well as their employees, that the Employment Contracts Act should allow greater freedom of contract for the parties of the employment relationship. In its letter, the Chamber pointed out that if the Employment Contracts Act does not become more flexible for the parties, there is a real risk that, for example, authorization agreement or contract for services will be preferred to an employment contract, thus weakening the protection of employees. 

Fixed-term employment contracts
According to the Chamber of Commerce, the current regulation on concluding a fixed-term employment contract is too rigid. Excessive rigidity means that the parties are not allowed to conclude a fixed-term employment contract without a good reason, which is why it is often preferable to conclude an authorization agreement or contract for services. Therefore, we proposed to amend the law so that it is also allowed to conclude a fixed-term employment contract without a good reason.  

According to the Chamber of Commerce, both employees and employers expect the change in flexibility for the following reasons: 

• Employers can react more quickly and flexibly to changes in workload. 
• Employers can offer jobs to employees who want to do short-term, non-temporary work. As a result, the number of fixed-term contracts may increase for those who are not working today. 
• The use of contracts under the Law of Obligations Act will decrease and the use of fixed-term employment contracts will increase, which ensures better protection for the employee. 

Restriction on successive conclusion and extension of a fixed-term employment contract
The Chamber proposed to make the restriction on the successive conclusion and extension of a fixed-term employment contract more flexible. For example, the law could allow an employee and an employer to enter into unlimited number of fixed-term employment contracts within one year. The restriction on the successive conclusion and extension of a fixed-term employment contract would apply after one year. 

In addition, a special provision could be added to the law that if the duration of fixed-term employment contracts concluded between an employer and an employee in one year is less than, for example, 60 days, then in that case it is permitted to enter into unlimited number of fixed-term employment contracts. According to the proposal, it would also be possible to enter into a fixed-term employment contract in a situation where an employee works for the same employer for five days each month and for various consecutive years without the employment contract becoming indefinite.  

Variable hour arrangements
Feedback from companies and their employees shows that the legal requirement that the parties precisely agree on the workload reduces the flexibility of the parties to reach a mutually satisfactory agreement on working time. For example, the law does not allow the workload to be agreed over a certain range, such as 20-30 hours per week. In particular, current regulation prevents agreement on working time for jobs whose volume cannot be accurately predicted and whose volume may vary significantly.  

Allowing a variable hour agreement would allow employers to react faster and more flexibly to changes in workload. At the same time, the change would also benefit an employee who does not want to work with the same workload all the time. However, the law must ensure that an employee has some income security even in the case of a variable hour arrangement, and that a variable hour arrangement does not prevent the employee from planning his or her private life.

Specifications for employees with independent decision-making competence
The bottleneck of the current regulation is that when an employee works remotely, it is difficult for the employer to ensure in practice that the employee complies with the rules on working and rest time provided in the Employment Contracts Act. Employees are also not interested in following the legal restrictions in such situations. Therefore, in order to ensure flexible work arrangements, it would be necessary for certain employees not to be subject to the rules on working time and rest periods if the employer and the employee have so agreed, and for the employee to be able to choose the working time. 

The European Union directive also enables such a solution. For example, the directive allows an amendment to exclude an employee with independent decision-making competence from daily rest, breaks within a working day, weekly rest period and maximum weekly working time. 

According to the Chamber of Commerce, the law should provide for the concept of an employee with independent decision-making competence. An employee who does not have to work at certain times, but who can choose the working hours that suit him/her, could be considered an employee with independent decision-making competence. In addition, an employee with independent decision-making competence should only be allowed to differentiate between working and rest time if the employer and the employee have agreed in writing form. However, both parties must be able to cancel the agreement with prior notice.  

On-call time
The Employment Contracts Act stipulates that if the employee and the employer have agreed that the employee is available to the employer to perform work outside working hours (on-call time), the employee must be paid a salary that may not be less than 1/10 of the agreed salary. In addition, it follows from the law that an agreement on the application of on-call time, which does not guarantee an employee the opportunity to take daily and weekly rest periods, is void. The requirement to allow a daily rest period states that the worker must have at least 11 consecutive hours of rest in a 24-hour period and at least 48 hours of consecutive rest in a seven-day period. 

The feedback from companies is that the current on-call time regulation is strict and does not allow the parties to enter into more flexible on-call time arrangements. The main bottleneck is that, in practice, it can be difficult to ensure that, when using on-call time, an employee is guaranteed the use of the daily or weekly rest period required by law in all circumstances. 

To solve this problem, the Employment Contracts Act should provide that, in certain cases, the use of on-call time may derogate from the daily and weekly rest periods and that the exception can only be used for certain employees, such as employees of a vital service provider.  

Such a distinction could be permitted if the parties have agreed to that effect in writing form, i.e the employee's consent is required in any case. In addition, it must be ensured that such an agreement does not endanger the health or safety of the employee. The law may also prescribe a certain maximum number of hours during which an employee is allowed to be on-call in one month (for example, the duration of on-call time does not exceed 130 hours per 28-calendar-day period). 

Increasing the flexibility of on-call time has a positive effect on employers, as it enables the company to better respond to exceptional cases where the company's operations are disrupted (e g accident, cyber incident). At the same time, changing the regulation is also beneficial for the employee, since if necessary and desired, he/she can earn a bonus with it.