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Contract of Employment and Its’ Characteristics

Viimati uuendatud: 16.02.2017


Based on the employment contract, the employee performs work to the employer, obeying the employer’s leadership and control, and the employer is obliged to pay the employee for the work done.

In general, work is performed under the employment contract, but it could also be governed by other contracts under the Law of Obligations, such as authorisation agreement, contract for services, etc. In essence, employment contract is a contract under the Law of Obligations, classified under the service provision contracts, but is simultaneously distinguishable from other contracts under the Law of Obligations.

When talking about the employment contract, it is important to distinguish it from other service provision contracts as a person employed under the employment contract has greater rights and better protection than persons employed under alternative contracts. To determine whether the specific case is related to the employment contract or not, we must take a look at the contract characteristics.

The following list provides an overview of employment contract characteristics, distinguishing it from other contracts:

  • Employee is subordinate to the employer’s management and control; i.e. the employer determines the place, time and manner of working;
  • Employer pays a periodic remuneration to the employee for working;
  • Employer and employee are bound with an employment contract and an expectation arises for long-term existence of work;
  • Work is, in general, performed in person;
  • For working, the employee uses the employer’s tools, materials and devices;

Employee participates in the employer’s company activities (working at the employer’s premises, adherence to administrative rules, joint events with colleagues, etc.);

The employer obliges to guarantee legally prescribed benefits to the employee (e.g. vacation, resting time, at least minimum remuneration);

To the employee, the business risk is grounded, for instance with the termination notification term and in other cases also with accompanying benefits;

Contractual obligations limit or oblige one party of the contract also outside the employment relationship (e.g. restriction on competition, confidentiality obligation).

In a situation when distinguishing the employment contract from other service provision contracts could prove to be complicated, the Employment Contracts Act comes in handy. According to this act, a contract based on which one person performs work to the other for a remuneration is treated as an employment contract until it has not been proven otherwise. It means that in the case of disputes, the employer must prove that the contract is some other contract under the Law of Obligations Act, not an employment contract. For instance, an employment contract might bear the title of “Contract for Services” if the content corresponds to characteristics specific to the employment relationship.

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