There are five ways of ending an employment relationship:
Employers must have a reason to dismiss employees and present the employee with a written declaration of termination (e-mail, scanned or pdf copies are accepted) stating the reasons for termination and respect the notice period according to the employment duration. The following reasons are considered acceptable:
In the event of gross misconduct, the employer may terminate the employment immediately.
Upon termination, all the employer's items under the employee's possessions must be returned on the last day of employment at the latest. The employer must deregister the employee from the Working Register administered by the Estonian Tax and Customs Board within ten days of termination.
If the employee has taken more holidays than their accrued holiday entitlement, the employer can deduct the excess holiday from their final pay.
Employees dismissed unfairly shall be deemed that the employment contract has not been terminated and are entitled to compensation by the employer equal to 3 months of their average wage. Even if the Labour Dispute Committee /court finds that the employment termination was unjustified, the employer can nevertheless request that the employment relationship be considered terminated from the same date (i.e. the employee cannot require to be reinstated to work).
Employers must warn employees before dismissing them because of a breach of their obligations or a decrease in their work capacity. The law does not specify the form of the warning; however, a general recommendation is to issue a written warning. Employees do not have a statutory right to appeal a notification they have received. However, employees can refer to an unjustified warning in the employment dispute.
Employers are not bound by any specific rules when responding to a grievance. It's uncommon to agree to such procedures in the employment contract; however, it is good practice for employers to show they have acted reasonably and given a written warning before dismissal.
Employers are not allowed to dismiss the following classes of employees merely for the below reasons:
Employees can challenge the termination grounds with the Labour Dispute Committee or at a court of law within 30 days of receiving the termination notice. Employees have the right to claim compensation for unlawful termination and to continue the employment relationship. If the court or the Labour Dispute Committee find that dismissal was illegal, the employment contract is deemed not to have been terminated.
The court or Labour Dispute Committee can, alternatively, deem the employment terminated as of the unlawful termination date and instead order an up to three-month average salary compensation. The compensation may increase up to six months if the employee is pregnant or entitled to maternity leave. The courts and Labor Dispute Committee can change the amount of compensation (i.e. increase or decrease it), taking the dispute's circumstances into account.
The employer has the right to terminate the employment contract for economic reasons /due to redundancy in case of any cessation of work (e.g. due to decrease in the work volume or reorganisation of work; in case of liquidation or bankruptcy of the employer). Employers must consult with their employees before any collective dismissals take effect, intending to find ways of avoiding or reducing the number of dismissals.
A redundancy is regarded as collective when five to 30 employees (depending on the company size) are dismissed within 30 days for economic reasons.
Collective redundancy rules would apply if, within 30 calendar days, the employer terminated the employment contract due to redundancy of at least:
The term "within 30 calendar days" means the end date of the employment relationships, i.e. it does not depend on when the termination letters are given to the employees – as the notice period may vary from employee to employee. Consultation includes providing relevant information on the potential dismissals to employees or employee representatives (where the affected employees are absent) and the Unemployment Insurance Fund.
In such an event, the employer must comply with information and consultation obligations, which include:
Pregnant employees, employees raising children under three years old and employee representatives (incl. elected employees' trustees, elected trade union trustees, work environment specialists, etc.) have preferential right to remain at work in case of redundancy. The employer will have to justify the employment termination (i.e. it is presumed that the employment termination was done for these reasons if the employer does not show other reasons).
Employees made redundant are entitled to one month's average salary severance payment paid by their employer. They may also be eligible for state (Unemployment Insurance Fund) payment of 1-2 months' salary. The payments are an average of the last six month average earnings.
If a fixed-term contract is terminated early due to redundancy (except in case of bankruptcy), the employer must pay what the employee would have been entitled to until the fixed-term contract's initial end date.
Employees have the right to resign at any time, regardless of the reason. The employee must present the employer with written notice of their resignation and give a 30 calendar days' advance notice.
In case of severe breach by the employer, the resignation does not require any advance notice. The employer will need to pay compensation to the employee of up to three months salary.
The employer must give an employee notice according to the duration of employment:
It is possible to pay in lieu of notice. The notice begins on the day following the calendar day when the declaration of termination was delivered.
If the employer does not notify an employee of termination within the time frames provided, they must compensate the employee for the appropriate number of days.