Big Moscow, October-December 2014
There are particular features in the laws of all countries, and everywhere, businessmen complain about bureaucratic difficulties. In Russia, Western entrepreneurs can expect serious unpleasantness if they do not take a timely interest in the specifics of the local laws – for example, in the field of labour rights. Maria Kalinina, head of the legal consultation department in the firm “PRIORITET” explains what it is worth paying attention to in order to avoid repeating the mistakes of others.
1 situation
A German company, a clothing manufacturer, opened an office in Moscow and engaged a local top manager to head it. A labour agreement meeting German labour standards was concluded with the head of the office. None of the obligatory provisions of Russian labour law was included in it. In particular, the dismissal procedure was described very simply: two weeks’ notice and you’re out, no compensation. In fact, the need to part company with this employee did arise. And so did a labour dispute.
Decision:
The Germans, being dissatisfied with the results of his work, decided to appoint to this position a manager from head office, who would stay in Germany and only pay visits to Moscow. Under our law, dismissal on these grounds is impermissible, since they were not closing the office and not even reducing its staff. The Russian top manager knew his rights. He refused to accept dismissal. The dispute lasted quite a long time. But all attempts to settle it on German terms were in vain. Eventually the firm had to meet all their staff member’s requirements, parting with him by agreement between the parties and paying a very considerable sum in compensation. When Western companies open theiroffices and branches in Russia, they often fail to consider that they have to draw up labour agreements with their employees in accordance with the standarts of Russian, not Western, labour laws. To avoid problems, labour agreements which meet all the local requirements must be concluded with all staff. It is best to turn to Russian law years for assistance, and have the labour agreements drawn up in two lanquages.
2 situation
A labour inspection took place in a Western pharmaceutical company with a large fleet of service vehicles, which were regularly used by staff for trips to trading points. It was revealed that the staff members using the service vehicles were not being put through a daily medical inspection before getting behind the wheel, and were leaving without a way-bill. By a decision of the Labour Inspection Service, the company was fined and all the vehicles were laid up. The business virtually came to a standstill.
Decision:
They are now urgently seeking a subcontractor, an organisation specialising in carrying out daily medical inspections. Several Western companies operating in Russia suddenly found themselves in this situation. Previously, pre-journey medical inspections had only been required for professional drivers. But from this year, the Highway Code has changed somewhat, and the interpretation of the Labour Code has also been corrected. Now, organisations with fleets of vehicles have to submit all staff members getting behind the wheels of service vehicles, not only drivers hired as such, to daily medical inspections. And they have to be provided with way-bills.
Company lawyers should attentively follow the practice of the application of the standards of labour law and take the necessary measures in advance to avoid. Problems with the regulators.
3 situation
A foreign company decided to open an office in Moscow. It applied to a Russian law firm for help. Legal assistance was provided. When the accreditation procedure had already been completed, the company was put on the tax register, registered in the pension fund – and then it came to the Social Insurance Fund (SIF). And that is where problems arose.
Decision:
It is not possible to register in the SIF without a bank account, and it takes time for foreign offices and branches to open an account – the banks take quite a while to check them. In the form to fill in for the SIF, there is the heading: “Date of obtaining assets for wage payments”. Foreigners were baffled by this. “We haven’t paid any wages yet, how can we know the date?” But under the Russian Labour Code, among other provisions, wages must be paid twice a month, and this surprised the officials of the Western company even more. So this ended up without being filledin. A few months later, when the bank account was opened, the SIF refused to issue the office with notification that it had been registered on the grounds that no date of obtaining assets for wage payments had been supplied. A whole pile of additional documents had to be acquired: letters from the bank confirming that no payments had been made, from the head of the office that he had not received any wage payment, and so on. Only after this had been done, with great difficulty, did the SIF register the company.
Even if you don’t like something in the requirements of the Russian regulators, and it seems senseless to you, do not waste time in trying to prove that you are right. It is simpler just to do through all the formalities once, and then you can work without any further complications.