Estonia: New law to upgrade individual labour dispute mechanism

New regulations on resolving individual labour disputes were approved by parliament in June 2017. The changes, to take effect from 2018, are expected to make the out-of-court dispute resolution process simpler and clearer, while also giving labour dispute committees more authority. 

Background

In Estonia, there are several ways to resolve an individual labour dispute between an employee and an employer. It can be resolved by an agreement between the employee and employer through the mediation of an employees’ trustee (an elected employees’ representative at the workplace) or a trade union. The parties can also turn to court, which is mandatory in cases of monetary claims exceeding €10,000.

A third option is that the parties could turn to their local dispute committee (LDC), established within the local branches of the Labour Inspectorate. LDCs are independent, extra-judicial individual labour dispute resolution bodies with three members – the chair of the labour dispute committee, and representatives of employees and employers. The introduction of LDCs was motivated by the courts’ slow handling of cases.

The out-of-court dispute resolution mechanism is regulated by the Individual Labour Dispute Resolution Act. This has been in force since 1996 and, in the past 20 years, has experienced only some technical changes. However, the regulation has become outdated as it does not take into account the current socioeconomic situation and has proved to have several shortcomings in the way it is implemented. The need for more modern regulation was apparent. At the end of 2016, the draft act for amending the current regulation was finalised and was approved by the Estonian Parliament on 14 June 2017. The changes will take effect from the start of 2018.

Overview of changes

The aim of the changes was to create a simple out-of-court dispute resolution system with fast and efficient proceedings, legal clarity, high-quality resolutions and alternative ways of arriving at resolution.

Definition of a labour dispute

Perhaps one of the most significant changes is to the fundamental definition of the individual labour dispute. Currently, it is considered as a dispute arising over an employment contract. The new regulation widens the definition and covers the entire employment relationship, including aspects regulated by employment-related legislation, but not necessarily concerning employment contracts. This means that it will now be possible to turn to the LDC on issues related to working conditions (for example, health and safety at work) or discrimination at work, and on issues arising from the way conditions set out in a collective agreement are applied to the individual worker. Currently, these issues belong to the jurisdiction of the court or the national conciliator. However, the regulation excludes LDCs from resolving disputes related to occupational diseases and accidents, due to their more complicated nature.

Additional resolution mechanisms

Another important development is the introduction of some new resolution mechanisms.

Firstly, it will be possible to use conciliation procedures. The conciliator will be the chair of the committee. If the parties cannot reach a conciliation agreement, they have the right to file an application to the LDC to use other resolution mechanisms.

Secondly, a hearing at a meeting of a LDC will no longer be necessary for reaching a resolution. The new regulation allows written proceedings where one of the parties admits the other’s claims to the full extent, and in the case of monetary claims not exceeding €6,400.

Thirdly, an agreement procedure has been formally introduced. It is currently used in practice, but does not result in a formal enforcement instrument. In practice, it means that the dispute is ended by an application being withdrawn. With the new regulation, such a procedure will result in a formal compromise resolution.

Several additional changes

Additional changes include the possibility of turning to the LDC with monetary claims exceeding €10,000, which are currently accepted only by the court. The term for reaching the hearing from receiving the application is extended from 30 calendar days to 45 calendar days since, in recent years, the average duration of reviewing the application has been 36 days. To increase the quality of the service, it will be possible to resolve any deficiencies in an application within 15 calendar days, which currently is not possible.

To make the procedures faster and cheaper, the chair of the LDC will have more authority; for example having sole responsibility in the case of written proceedings or conciliation procedures.

Overall, the new regulation creates a comprehensive set of procedural rules and norms, and specifies several technical aspects, which currently are fragmented and regulated by different legislative acts or practices.

Social partners’ reactions

The need to modernise the regulations was apparent to all parties and the process of updating them went smoothly with no heated debates or arguments from the social partners. They expressed their opinions within the framework of good engagement practice according to which interest groups must invited to take part in the decision-making process by the government. Most of their comments were technical specifications or queries for clarification.

However, the Confederation of Estonian Trade Unions (EAKL) and the Estonian Employees’ Unions’ Confederation (TALO) proposed the creation of independent labour courts instead of LDCs. These would have the same basic function as the current LDCs, but would also be able to resolve disputes arising from occupational diseases and accidents at work. Moreover, they argued this would ensure independence, as the chair of a LDC is appointed by the Ministry of Social Affairs, on the recommendation of the Director of the Labour Inspectorate.

The authors of the draft act said this possibility was considered during its preparation, but it was decided that, as the number of labour disputes is not that high and because they are rather similar, it would not be reasonable to tie them to the court system. Moreover, it was reasoned that courts would not be able to resolve cases in a fast and simple way.

Commentary

Figures from the Labour Inspectorate show that, since 2006, LDCs have received around 2,000–6,000 applications per year. The number was the highest in 2009 (6,371) and the lowest in 2014 (2,364). It been relatively stable in recent years, staying at a similar level to that in 2006–2007 (that is, around 2,600).

Two important studies were also taken into account when preparing the changes to the regulations:

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