Recession leads to increase in individual labour dispute claims

According to the Labour Inspectorate, the number of labour dispute applications has doubled in Estonia compared with the first quarter in 2008. Most of the disputes are related to unpaid wages or benefits. From 1 July 2009, the number of disputes may increase even further as the financial limit of claims in the labour dispute committees will be increased, therefore making higher-paid workers more motivated to register individual labour dispute applications.

Background

In case of disagreement between the employer and employee on the application of legislative or administrative rules laid down by the employer to regulate employment relations, parties can turn to labour dispute committees or the court. Labour dispute committees are established within the local branches of Estonia’s Labour Inspectorate (Tööinspektsioon) and have three members: the chairperson of the labour dispute committee and representatives of employees and employers, who are appointed by the Estonian Trade Union Confederation (Eesti Ametiühingute Keskliit, EAKL) and the Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETK).

Number of individual labour dispute applications

The number of applications to labour dispute committees amounted to about 3,100–3,500 applications in the period 2001–2004. Since then, the number of applications declined, down to 2,600 by 2007. This decline was probably a result of improved working conditions and Estonia’s economic growth. Another factor contributing to the decrease in individual labour disputes is the legislative change, introduced in January 2006, which set a maximum ceiling of EEK 50,000 (about €3,196 as at 8 July 2009) on claims brought before the labour dispute committees (EE0702069I).

In 2008, when the Estonian economy registered a decrease in its gross domestic product (GDP) of 3.6%, the number of individual labour disputes started to increase considerably. During 2008, a total of 4,102 individual labour dispute applications were submitted to the Labour Inspectorate. The number of applications in the first quarter of 2009 has doubled compared with the first quarter in 2008 (Figure 1). As a result, in the spring of 2009, an additional labour dispute committee was set up in Estonia’s capital Tallinn. There are 11 labour dispute committees altogether in Estonia, four of which are located in the capital.

Figure 1: Number of labour dispute applications, by yearly quarter, 2007–2009

Source: Labour Inspectorate

According to the Labour Inspectorate, financial claims were the main reasons for lodging individual labour disputes, constituting about 75%–80% of all claims. These include claims for unpaid wages and salaries, benefits, final settlements and holiday pay. The next most frequent type of claim concerned the unlawful termination of employment contracts.

Restrictions on labour dispute claims

According to the Chair of the labour dispute committees in Tallinn and Harju county, Enn Reinsalu – taking into account that in cases of the unlawful termination of employment contracts workers are entitled to a benefit amounting to six months of their average wage – the maximum threshold of EEK 50,000 on claims limits the possibilities to make a full claim. The average wage in 2008 was about EEK 12,800 (€818). According to a representative of the Labour Inspectorate, Niina Siitam, the average size of financial claims are between EEK 12,000 and EEK 15,000 (€767–€959).

In the case of an employee’s claim being higher than EEK 50,000, the options are to turn to the courts or to settle for a smaller claim in the labour dispute committee. In the latter case, no additional costs are incurred for legal assistance or state fees in the labour dispute committees; however, such costs are all applicable when recourse is made to the courts. Moreover, the court proceedings take twice as long as the labour dispute committees; as a result, the number of disputes brought to the courts has declined. It seems that workers prefer to turn to the labour dispute committees rather than the court, even if this means that they have to reduce their claim.

When the financial ceiling was first introduced in 2006, it was opposed by EAKL, which claimed that it represented an infringement of workers’ rights.

Increase in financial limit

From 1 July 2009, the new Employment Contracts Act will come into effect (EE0902029I, EE0901019I, EE0805029I, EE0802019I). This act also introduces changes to the regulations for individual labour disputes. Under the new act, the financial ceiling for labour dispute claims will be raised to EEK 150,000 (€9,587), thus tripling the current financial limit.

Kirsti Nurmela, PRAXIS Centre for Policy Studies