The main law regulating employment relations is the Employment Contracts Act. This law regulates the rights and obligations of employees and employers, including concluding and transfer of employment contracts, working and rest time, holidays (including parental leave), wages, termination of employment contracts, and possible claims and liability.
There is a minimum wage in Estonia, which is 820 euros (gross) in 2024 and which usually rises at the start of every new calendar year. A full-time employee works 40 hours a week, has the right to 28 calendar days of annual holiday and the right to receive holiday pay. An employer can only cancel the contract extraordinarily and must always justify the cancellation, giving no less than 15-90 days of notice, depending on the employee’s duration of employment.
The provisions of the Employment Contracts Act are of a mandatory nature. This means that an agreement between the employee and employer that deviates from the provisions of that act or the Law of Obligations Act regarding the rights, obligations, and liability of the parties, and does so to the detriment of the employee, is invalid, unless such an agreement is specifically permitted by the act itself.
The Labor Dispute Resolution Act governs the establishment and the rules of procedure of labor dispute committees and the procedure for the resolution of a labor dispute. This is a voluntary specialized committee without any state fees and a simplified procedure compared to courts. The committee's decision, however, has the same power as a court decision.
When an enterprise (a business unit) is transferred under whichever legal basis (merger, division, purchase agreement etc.), employment contracts are transferred unchanged to the acquiring company and in accordance with the Law of Obligations Act’s rules on transfer of enterprise. It is prohibited for the transferor and the acquirer to terminate the employment contract due to the transfer of the enterprise. This is only true if the company continues the same or similar economic activities. The employee can still be laid off in a situation where, as a result of restructuring, it is no longer possible to offer work to the employee. The lay-off must be carried out in accordance with the requirements of the Employment Contracts Act. The above does not apply in the case of transfer due to bankruptcy.
Before the transfer of the enterprise, the transferor and the acquirer must submit a notice to the employees’ representative or, in their absence, to the employees. The notice must contain information about the transfer, including the transfer date, reasons for the transfer, consequences for employees, and planned measures. If the transferor or acquirer plans to make changes affecting the employees’ situations (e.g., changing the location or working hours), they must consult with the representative or employees in advance. If there is a need to change any conditions agreed upon in the employment contract, consultation alone is not sufficient, and the employee's consent is also required. Failure to perform the obligation to inform and consult upon the transfer of the enterprise is punishable by a fine of up to 32,000 euros.
Cross-border transformations, divisions, or mergers are governed by the Community-scale Involvement of Employees Act, which outlines regulations for informing and consulting employees and their participation in the management of the enterprise.
