DOING BUSINESS IN EUROPE


Doing business in the EU

Estonian Labour Law: Compensating for damages caused by an employee

The recent judicial decision demonstrates that conclusion of an agreement on compensation for damages, caused by an employee, involves risks because the employee may subsequently be released from this commitment. A more secure way of getting compensation for damages is to submit a respective claim to the labour dispute committee or a court of law.

Eversheds Sutherland (International) LLP

In the opinion of Rando Maisvee the recent decision of the Supreme Court is yet another example of how the currently effective Employment Contracts Act affords employees better protection than the previous more formal Act. Thus, for instance, the judgment of the Supreme Court passed on 30.11.2010 based on the previous Act leads to conclude that an agreement entered into upon the termination of the employment contract does not constitute a part of the employment contract, and that the limitations stemming from the Employment Contracts Act do not apply to such agreement; essentially this means that under the previous Act it was possible to agree on compensation for damages, while the new Act does not provide this option.

Employers should take into consideration that

  • The possibility to claim compensation for damages under an agreement is limited.
  • Damages can be compensated under an agreement if the agreement is signed after the employment contract has terminated; however, in real life, it is very difficult to conclude such agreement with the employee.
  • Damages can be compensated under an agreement if before the damage was caused the parties have signed a proprietary liability agreement, which includes, inter alia, the obligation to pay the employee a compensation.
  • An employee may be charged interest on arrears only at the rate set forth by law, which currently stands at 8% per annum.
  • In the opinion of the Supreme Court, the Employment Contract does not give the employer a possibility to claim compensation for collection costs, and therefore the employers are in a disadvantaged situation in this respect as well.
Andre Beukes LLM

Andre Beukes LLM

André Beukes is an EU Management Consultant to international companies doing business in Europe.

He provides clients with practical business support that makes a real difference doing business in the EU.

“Put simply, I am here to help you meet your challenges. I believe in the importance of doing things correctly, meaning risks are reduced and problems are avoided.”

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