In March 2006, certain changes to the Estonian Employment Contracts Act came into force. The changes are related to the right of the employer to unilaterally terminate the employment contract with an old-age employee.

To this day, the Employment Contracts Act (“Act”) allowed the employer to unilaterally terminate the employment contract, if an employee attained the age of 65 and had a right to perceive a pension. The regulation was in essence discriminatory on the basis of age, providing persons who were entitled to old-age pension less protection against dismissal than other people of the same age.

The amendment of the Act had two main objectives. Current priority of the employment policy is to raise the age of retirement in order to mitigate economic consequences of ageing population and to lower state social security costs. The amendment also seeks to improve equality of treatment and chances.

No unilateral termination of employment contract due to age

The amendment abolished clauses which provided for the employer’s right of unilateral termination of the employment contract due to the age of the employee.  

The above-mentioned changes made the Employment Contracts Act conform to § 12 of the Constitution of the Republic of Estonia and European Council directive 2000/78/EC concerning equal treatment in employment and occupation. The employer should therefore, when deciding to dismiss an employee, consider person’s capacity for work and not just the age. If the old-age employee is not any more suitable for job, the employer has the possibility to terminate the employment contract with such employees on the ground of inadequacy (insufficient performance due to health, professional skills or knowledge).

For further information please contact:

Toomas Taube

attorney at law, partner

Law Office Tark & Co

Roosikrantsi 2, 10119 Tallinn

Estonia

tel.:  +372 611 0900

fax:  +372 611 0911

e-mail: toomas.taube@tarkco.ee