Reduction in labour dispute claims due to financial cap

Recent findings indicate that the number of claims brought before labour dispute committees in 2006 fell by 11.2% compared with the previous year. The reduced number of claims is attributed to the setting of a financial ceiling of EEK 50,000 (approximately €3,196) on labour dispute claims.

The continually increasing national average wage has placed the media spotlight on the issue of financial limits on claims made to labour dispute committees. At the beginning of 2006, the Individual Labour Dispute Resolution Act (EE0402102F) set the ceiling at EEK 50,000 (about €3,196 as at 19 April 2007). The average monthly gross wage in the fourth quarter of 2006 amounted to EEK 10,212 (around €653). In the event of the unlawful termination of an employment contract, an employee has the right to claim compensation of a maximum of six months’ average wages. Thus, even employees who earn the average wage cannot apply to a labour dispute committee to settle a disagreement concerning the unlawful termination of a contract, as the sum of six months’ average wages would exceed the EEK 50,000 limit. The claims of unlawful termination of contract that exceed this amount have to be settled in the Labour Court.

Position of employees

In labour dispute committees, expenses for legal protection or state fees are not provided for. Conversely, in some Labour Court cases, state fees have to be paid, a spokesperson has to be hired, while cases usually last twice or three times longer than those lodged with labour dispute committees. Therefore, Labour Court cases tend to be more expensive and time-consuming, compared with labour dispute committee cases. The amendment made to the labour dispute resolution act may result in situations where claimants divide their claim and bring more than one similar case before a labour dispute committee. Cases have also emerged where people leave the part of the claim that exceeds EEK 50,000 and lower the claim in order to meet the limit stipulated.

In September 2006, the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL) overtly criticised the financial limit set for disputes brought before labour dispute committees, claiming that it represented an infringement of workers’ rights. EAKL also requested that increased funding be allocated to labour dispute committees by the Ministry of Social Affairs (Sotsiaalministeerium).

Views of government

Director of the Private Law Division in the Ministry of Justice (Justiitsministeerium), Kaupo Paal, explained in the daily newspaper Äripäev that the financial limit of EEK 50,000 was introduced to protect people and that it would not be increased. The limit is necessary as the labour dispute committee is a ‘pre-court instance’, where all of the necessary protection measures are not in force as they are in the Labour Court.

In accordance with the Constitution of the Republic of Estonia (in Estonian), justice must be administered solely by the courts. Labour dispute committees essentially perform the courts’ tasks, as their decisions, if not brought before a court, will become binding in such a way that a bailiff can be addressed for execution. In addition, the Estonian Constitution prescribes the independence of the courts, for example, their legality, neutrality, being sufficiently knowledgeable, and carrying out legal proceedings in accordance with the law. While these requirements are guaranteed in the courts, they may not be guaranteed in pre-court dispute-resolution bodies. Therefore, claims that exceed the specified limit must be brought before the courts.

The financial limit of EEK 50,000 has not been based on the monthly average gross wage in Estonia or on any other statistical indicator. One of the reasons for the relatively low limit, according to the Estonian parliament, is the need to ensure that higher-value cases go straight to the courts, implying that most of these cases will eventually reach the courts anyway due to disagreement over the settlement in the pre-court dispute-resolution body.

Labour dispute committee cases

In 2006, some 2,671 cases were brought before labour dispute committees; this figure represented an 11.2% drop in the number of cases compared with 2005, which is mainly attributed to the monetary restriction. As many as 96% of the claims were monetary-related. In 2006, the majority of labour dispute committee claims concerned the receipt of employment record books from employers (29% of all claims in 2006); these were followed by claims that wages had not been paid during working time (26.5%), after which came claims concerning the unlawful termination of an employment contract (11.7%).

Commentary

Labour dispute committees were established in 1996 in order to facilitate the resolution of labour disputes, given that cases brought before the courts tended to be time-consuming and costly. As a result, the number of labour dispute cases brought before the courts has been much smaller than the proportion of cases lodged with labour dispute committees. However, given the recent administrative restrictions, it is likely that more cases will be redirected to the courts once again.

Epp Kallaste and Liis Roosaar, PRAXIS Centre for Policy Studies

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