Docent of Social Security Law, University of Tartu
Indispensability of the Law of Obligations in Employment Relationships: Problems in Application of the Law of Obligations to Employment Relationships in Estonia
Discussions about whether the legal regulation of employment relationships should take place within the framework of civil law or outside it have been occurring from the moment of first enforcing different laws to regulate employment relationships1. The discussion continues to be topical in the 21st century, since the problems have remained the same. There are still countries in Europe where the main rules concerning employment contracts have been derived from civil codes. Although experts on labour law try to claim that labour law has a distinct status and has nothing in common with general contract law, they admit that general private law is also relevant to the legal regulation of employment contracts2.
Even though one of the first underlying investigations into the nature and peculiarities of the employment contract within the framework of the law of obligations was published in 19023, the problem of the relationship between labour law and the law of obligations is still acute in both the old and new member states of the European Union. Examples can be cited of how the main rules of employment contracts have been provided in civil codes in the old European Union member states4. The new EU member states, however, have abandoned the principle that the general rules governing employment relationships and employment contracts should be dealt with by regulations in the law of obligations. The majority of the new European Union member states have adopted separate labour codes striving to provide exhaustive regulation of employment relationships, while providing for a conscious withdrawal clause according to which the general principles of the law of obligations are applicable in situations in which labour codes do not provide for a separate regulation5. Here we must point out that Estonia is the only one of the new European Union member states that has so far been unable to take a clear position as to whether and to what extent the provisions of the law of obligations should be used in employment relationships and how the legal regulation of employment relationships should be organised.
This article aims at analysing the impact of the regulation of the law of obligations on the legal regulation of employment relationships. The main hypothesis in this article is the thesis that several of the principles applied in labour law to date have to be reassessed in the application of the provisions of the general part of the law of obligations. This, however, will not undermine the position of an employee in employment relationships.
The thesis that an employment contract is one of many contracts under the law of obligations is by nature self-evident, yet, as a rule, experts on labour law are often unwilling to agree with this idea, as they tend to fear that this may lead to the extinction of labour law and thus to the disappearance of an important matter of law. Nevertheless, it is a fact that almost the majority of the European Union member states recognise at least that the employment contract is one of many civil law contracts usually requiring a distinct status or separate and distinct regulation at least in certain respects6. Above all, emphasis is placed on the social function of employment contracts and the status of an employee as a weaker party to the employment relationship who should benefit from differentiated treatment and greater social protection as would balance the legal status of the parties to the employment contract. Yet people in the Estonian legal context are unwilling to accept that the application of the provisions that stem from the law of obligations by their nature may be much more beneficial for both the employee and the employer than could be ensured through separate regulation of employment contracts.
Here we must clearly stress that no matter how hard people try to get around the regulation, dogmatics, and principles of the law of obligations, employment contracts will always be related to the general principles of the law of obligations. Nevertheless, such a situation does not always mean that the disputable questions of whether and to what extent such regulation should take place would disappear.
One must realise that discussions about labour law to a great extent emphasise that it is characteristic of labour law that the employee is a weaker party to an employment relationship, which in turn causes a situation in which application of the law of obligations provisions to an employment relationship does not produce a significant effect, but it is necessary to enforce several new rules supplanting the possibility of applying the law of obligations provisions as much as possible. It is necessary to apply to a greater extent a separate labour law regulation precluding the enforcement of law of obligations provisions. Yet we have to underscore that it may not always be wise to enforce separate regulation in labour law, as the regulation enforced under the law of obligations is in large part sufficient.
Various theories have been used to describe and characterise individual employment relationships over different periods of time. Thus, an individual employment relationship has been variously considered to be an individual-legal partnership relationship7, characterised as a special relationship of loyalty and care8, and characterised as a contractual relationship that differs from any other relationship under the law of obligations9.
The principle prevailing in the law of obligations - the principle of freedom of contract of the parties - has been significantly restricted in its application to employment relationships. It is true that the limitation is mainly applied in individual labour law, but the principle has also established itself in collective labour law. Collective labour law proceeds from the parity of the expedients of the parties, and thus the principles of equality and balance are fully acceptable here10.
Nevertheless, in individual employment relationships people have contributed significantly to the limitation of freedom of contract as applied to employment relationships also on the level of the European Union. Experts on labour law increasingly emphasise that the further development of labour law is largely determined by what provisions the European Union decides to enforce11. However, since the legal acts of the European Union are generated in co-operation among various member states, the member states consequently assume responsibility for the extent to which restrictions are imposed on employment relationships and to what extent the member states' freedom of choice is limited in deciding how to legally shape employment relationships. The European Union with its various labour law directives has significantly restricted freedom of contract in different areas of employment relationships recently. Here we must stress that it has not always been the case that the transposition of relevant directives into national legislation has been as liberal as the directives would allow12. Although the European Union with its directives has considerably restricted the principle of freedom of contract and is likely to continue to do so in the near future, this does not by its nature change the fact that the employment contract is one of the contracts falling under the law of obligations, and application of the principles contained in the law of obligations to employment relationships is inevitable and inescapable, regardless of the resistance of a considerable number of labour law experts.
In the Estonian legal system, the employment contract has unambiguously established itself in the law of obligations system, although in many cases lawyers, theorists, or practitioners are unwilling to admit to the fact13. In Estonian labour law, different labour law institutes have been regulated in separate legal acts, and thus there is no comprehensive labour code as it is the case in the majority of the older European Union member states. The main legislative act governing the legal aspect of individual employment relationships is the Republic of Estonia Employment Contracts Act (ECA), adopted already in 199214. Although this act has undergone several changes because of the need to harmonise Estonian legislation with various European Union directives, the changes occurring in Estonian private law as a whole have not been taken into account in the Employment Contracts Act.
However, in 2002, Estonia adopted a new Law of Obligations Act15 that is modern in the European Union context, and, according to § 1 of that act, its provisions apply also to employment contracts. This general clause does not include a reservation that the principles provided in the Law of Obligations Act are applicable only insofar as they are compatible with the peculiarities of labour law. Thus, in the Estonian legal system, the...