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Amendment of employment contract

Last updated: 28.02.2023
  • The terms of an employment contract may be amended only by agreement between the parties.
  • An employment contract may be transferred to a legal successor in the event of the death of the employer if the employer is a natural person or in the
  • Pregnant employees and employees who are entitled to pregnancy or maternity leave may request that the employer temporarily provide them with work tha
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Amendment of employment contract

An employment contract may be amended only by agreement between the parties. If the parties reach an agreement on amending the terms of the employment contract, this should be recorded in writing, for example as an annex to the employment contract.

An employer may unilaterally amend the terms of an employment contract only in the cases provided by law:

  1. reduction of wages upon failure to provide work (section 37 of the Employment Contracts Act);
  2. changing of the organisation of working time, if the changes arise from the needs of the employer’s enterprise and are reasonable, considering mutual interests (subsection 47 (4) of the Employment Contracts Act);
  3. reduction of wages (section 73 of the Employment Contracts Act).

It is important to distinguish between the amendment of the terms agreed in the employment contract, which may only be done by the agreement of the parties, and the changing of the details and terms unilaterally communicated to the employee, which does not require that the parties reach an agreement. The information on the working conditions must be submitted no later than on the day the changes take effect.

Details reported to an employee that the employer may change unilaterally include, for example:

  • rules regarding the organisation of work, if they are not part of an agreement between the parties;
  • the business name and location of the employer (not the place where the work is performed);
  • references to periods for advance notice of the cancellation of the employment contract.

Transfer of employment contract

An employment contract may be transferred to a successor in two cases:

  • in the event of the death of an employer who is a natural person;
  • upon transfer of the enterprise.

In the event of the death of an employer who is a natural person, their employment contracts will remain in force and will be transferred to their successors, unless the employment contract has been concluded to a significant degree in consideration of the person of the employer. Employment contracts concluded to a significant degree in consideration of the person of the employer include, for example, contracts for provision of personal services to the employer. Such employment contracts expire automatically upon the death of the employer.

In the event of the transfer of an employment contract to successors, the successors, acting as the employer, may cancel the contract pursuant to a simplified procedure within two weeks after becoming aware or after they should have become aware of the transfer of the employment contract to the successors. For cancellation, the successor of an employer must comply with the general periods for advance notice. Employees must give 30 calendar days’ notice of cancellation. The basis for cancellation would be the death of the employer; however, the law does not set restrictions on the cancellation of an employment contract on other grounds.

Pursuant to section 112 of the Employment Contracts Act, upon the transfer of an enterprise, its employment contracts and collective agreements must also be transferred unchanged. This means that instead of the new enterprise entering into new employment contracts with the employees, their employment contracts must be transferred unchanged. Only the name of the employer may change, but the employees’ duties, wages, workload, place of work, and other agreements must remain the same.

In addition, the new enterprise will assume any other rights and obligations arising from the employment relationships. Upon the transfer of an enterprise, any claims of the employees are protected through both employers. For any obligations which have arisen before the transfer of the enterprise and which have become collectible by the time of transfer or which become collectible within five years after the transfer, the transferor and transferee will be jointly and severally liable to the creditors (subsection 183 (1) of the Law of Obligations Act).

For example, if a wage claim becomes collectible after the transfer of the enterprise, both employers will be responsible for satisfying it. This means that the transferrer and transferee are jointly and severally liable to the employees.

In addition to employment contracts, any earned but not expired holiday entitlements are also transferred, and periods of service are not interrupted.

The transfer of enterprises is regulated by sections 180–185 of the Law of Obligations Act. The definition of an enterprise derives from the General Part of the Civil Code Act, according to which an enterprise is an economic entity through which a person operates (section 66 1).

Enterprises may be transferred on any legal ground (e.g., merger, division, or transformation of legal persons; contract of sale, lease contract, etc.).

To judge whether a transfer is taking place, try to answer the following questions:

  1. Will the property, rights, and obligations related to the management of the enterprise be transferred from the current employer to another enterprise?
  2. Will the economic entity continue its operations after the transfer?
  3. Will the operations continue in the same location and in a similar field of activity?

If the answer to these questions is ‘Yes’, then it is most likely a case of transfer of enterprise.

Within the meaning of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses, or parts of undertakings or businesses, a case of transfer of enterprise involves the transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary (Article 1 (1) of the Directive).

The Supreme Court of Estonia has clarified (with judgment No. 3-2-1-41-11) that the transfer of an enterprise requires the transfer of assets in a certain set, but not necessarily at once and in one transaction. Thus, an enterprise or part of an enterprise may be transferred to the transferee through a number of transactions made at different times.

In the event of the transfer of an enterprise, both the transferor and the transferee are required to inform and consult the employees’ representative or, where there is none, the employees themselves, by submitting a notice containing the following information on the transfer:

  1. the planned date of transfer of the enterprise;
  2. the reasons for the transfer of the enterprise;
  3. the legal, economic, and social consequences of the transfer of the enterprise for the employees;
  4. the measures planned with regard to the employees.

The information must be provided in a format which can be reproduced in writing (e.g., by e-mail or via the intranet) and no later than one month before the transfer of the enterprise.

The employees’ representative or, where there is none, the employees must submit any proposals of their own within 15 days after receipt of the notice, unless the parties have agreed on a longer period.

In the event that the transfer necessitates changes that affect the situation of the employees, the employees’ representative or, where there is none, the employees must be consulted beforehand, but employment contracts may only be amended with prior agreement between the parties.

The transferrer and the transferee of the enterprise are obligated to justify disregard for the proposals.

A transferrer and transferee of an enterprise are prohibited from cancelling an employment contract due to the transfer of the enterprise. Cancellation of an employment contract for other reasons provided by law is still permitted.

If an employee is unhappy with the new owner or management board, the employee may not demand to be laid off. In such a case, the employee may cancel the employment relationship ordinarily.

In some cases transferring all employees to the new enterprise may not be possible. This can happen if two enterprises operating in the same field merge and both have employees performing similar duties. If the new enterprise does not need that many employees, some employees may be laid off.

Cancellation of employment contracts due to lay-off upon transfer of enterprise is possible if:

  1. the transfer entails significant structural changes, i.e. if the employment contracts need to be cancelled for economic, technical, or organisational reasons;
  2. the transfer results in a significant change in working conditions to the detriment of the employee, which the employee cannot consider reasonable. This can happen if, for example, there is a significant change in the place of work, which entails additional costs for the employees.


Transfer to lighter work and easing of working conditions

Work that is appropriate for the employee’s state of health may be requested by employees who are:

  • pregnant;
  • entitled to maternity leave.

If a woman who is entitled to maternity leave by law does not take this leave, she is still entitled to request work that is appropriate for her state of health on the basis of a doctor’s recommendation.

The employee shall submit to the employer a certificate from a doctor or midwife indicating the restrictions on work due to their state of health and, where possible, proposals regarding duties and working conditions that are appropriate for their state of health. Compliance with a doctor’s or midwife's certificate is mandatory for employers.

For example, a doctor or midwife may prohibit a pregnant woman from handling loads or working in a forced posture or at night.

If the employer cannot provide the employee with work that is appropriate to their state of health, the employee may temporarily refuse to perform their duties. Only pregnant women who are employed on the basis of an employment contract and who have health insurance may be transferred to lighter work if they have a certificate for sick leave due to their state of health. For this purpose, a doctor or midwife will issue a certificate for sick leave to the pregnant woman on the grounds of ‘provision of work that is appropriate for the employee’s state of health or transferring of the employee to lighter work’. A doctor will issue a new certificate of incapacity for work to a pregnant woman every 30 calendar days until the beginning of maternity leave. The first day of validity of a certificate for sick leave is not reimbursed; the Estonian Health Insurance Fund pays sickness benefit from the 2nd day onwards. The benefit rate is 70% of the individual’s average income per one calendar day in the previous calendar year.

If the employer has lighter work available for the employee, the employee must be temporarily assigned to lighter work. The Health Insurance Fund will reimburse the amount by which the wages of an individual assigned to lighter work are lower than their average income per calendar day of the previous calendar year. The reimbursement rate is 100% and it is paid starting from the first day.