The employment agreement may be considered by some as a too tight pre-fabricated arrangement. Originated in the nineteenth (in Europe) and twentieth (in Russia) century, the employment agreement granted some level of protection to the proletariat.
This has resulted in a not-so-flexible labour law system: in Russia, it is not possible to conclude contracts for a fixed period of time, only if the work to be carried out has a project or seasonal character. And there are no clear guidelines with regard to compensations to be paid in case of dismissal. The notion that an employment relationship may , at some point, terminate is simply ignored in Russian law. Maintaining an employment relationship requires a lot of paperwork which, if not meticulously filled out and filed, will result in audits and penalties from a state organ called the Labour Inspectorate (трудовая инспекция). If the employee is a foreigner, the administrative burden increases even more with work permits, work visa registrations and notifications and absolutely draconic penalties.
In the post-industrial economy, the knowledge worker who is willing to give up job security can be hired on a consultancy contract and get a high but irregular fee instead of lower but steady salary.
Russia is a bit of everything and large parts of its economy are built on outright exploitation and shameless evasion of even the most elementary safety precautions. Journalist Yulia Latynina has described today’s Russia as a feudal system ruled by a small elite, administered by a bureaucratic proletariat holding all the desk jobs and an underclass of migrant slave workers who do all the manual work. When it comes to the lower paid workers, one will find out that many are “on a contract”: meaning it can be terminated whenever the customer (read: employer) wants and the worker is responsible for his own labour conditions. This has all gotten a bit out of hand. Large classes of migrant workers living on the brink of poverty are now considered a risk for the stability of Russian society. The not so obvious but inevitable solution is that this class of slave jobs should be liquidated altogether.
In this light, the new law “On the special evaluation of labour conditions” (Federal Law of 28 December 2013, No. 426 FZ) should be seen. It targets the “actual” (фактический) employer as the one responsible for compliance with health and safety regulations. Those “actual” employers are the construction companies, hotels, restaurants and factories and with this new law it is no longer possible to hide behind sham companies operated by shady labour brokers.
Simply changing the name of an employment agreement into a consultancy or a service agreement will therefore no longer work: the new law simply determines that such agreements “are not allowed”. In other words, the higher paid consultant may now take the position that he is actually employed. Meaning: my customer must pay me even if he has no work for me.
Flexible labour contracts are a nevertheless a necessary element of the new economy. A “consultant” is perceived as more focused to the business needs of his customer than an employee, exactly because he can be dismissed more easily. In order to be able to focus on getting the work done, many foreign and Russian companies working in the “new” economy have resorted to the services of companies making staff available (“аутстаффинг” (outstaffing)). It remains to be seen how the new law affects outstaffing companies and their employees. Any arrangement in which the burden of an employment agreement is avoided or shifted to another party will have to be reviewed carefully.