The Labor Code of Azerbaijan, which is effective from July 1, 1999 (Labor Code), is the main law that governs employment matters. The Azerbaijani Cabinet of Ministers and the Ministry for Labor and Social Protection (MLSP) have issued number of regulations under the authority granted by the Labor Code. The MLSP is the principal regulator of employment. In particular, the State Labor Inspectorate, which is the department of the MLSP, is authorized to conduct employment audit in companies. Officials of the Inspectorate may impose fines and penalties on businesses that fail to comply with Azerbaijan’s employment regulations. The violations for which the Labor Inspectorate may impose penalty are set out in the Azerbaijani Code of Administrative Offenses. For instance, if a legal entity employs a person without entering into an employment agreement, the Inspectorate may fine that legal person. The amount of the fine may range from AZN 20,000 (approx. USD 12,832) to AZN 25,000 (approx. USD 16,040). It is fair to say that employment is a regulated area in Azerbaijan.
Hiring and Employment Agreement
An employment relationship is created by signing an employment agreement. The agreement must be in writing. The Labor Code set out certain requirements with respect to the content of employment agreements. In particular, the agreement must indicate, among other things, legal name and address of the employer, the employee’s place of employment, his/her position and salary, term of the agreement.
It is possible to enter into employment agreement for a term – i.e., limit the term of the agreement to certain time period. For instance, the employment agreement may be entered into for 1 year, and then the agreement can subsequently be extended for another year unless any of the parties terminate the agreement upon its expiry. If, however, the agreement has been in effect for 5 consecutive years, such agreement will be extended indefinitely. This means that an employer may not terminate the agreement due to the expiry of the term.
When hiring for the first time, an employer may set the probation period for up to 3 months. The probation period must be specified in the employment agreement. If an employer believes that the employee has not properly discharged his employment obligation during the probation period and, therefore, does not qualify for the job, the employer may terminate the agreement. Such termination must be formalized by issuing a termination order. The termination order must state the reason for the termination.
The Labor Code applies to agreements between local persons as well as employment agreements between a local employer and a foreign employee. The Labor Code does not apply to employment agreement between foreign persons, even though the foreign employee may be required to perform certain work duties in Azerbaijan. In order to hire a foreign individual, a local employer must obtain a work permit for the employee. The recently adopted Azerbaijani Migration Code40 governs the procedure for applying and obtaining work permits.
Termination of Employees
The Labor Code sets for the grounds for terminating of employment agreements. It is important for employers to follow the procedure for the termination specified in the Labor Code. A wrong termination may lead to fines and reinstatement of an employee into his/her job.
An employee is generally free to leave his place of employment by providing one month prior notice to the employer. The employee does not have to provide a notice if he/she leaves the place of employment due to, among other things, moving to another location or entering into employment agreement by another employer. An employer may unilaterally terminate the agreement on the following grounds:
(i) liquidation of an employer,
(ii) reduction of number of employees or job positions (“downsizing”),
(iii) based on a confirmation from a relevant agency that the employee does not qualify for the job,
(iv) the employee’s failure to fulfill his/her obligations under the employment agreement or commission by the employee of a serious violation,
(v) the employee’s failure to show during the probation period that he/she qualifies for the job.
The Labor Code specifies what may be considered commission of a serious violation per (iv) above. An employee commits a serious violation if, among other things, he/she does not come to work without showing any reason, uses alcohol or narcotics during work hours, commits a crime, intentionally discloses employer’s confidential information.
In case of termination due to downsizing, the employer must provide two months prior notice. The employer may terminate the agreement without providing the notice, provided the employee agrees and the employer pays the employee his/her two months’ salary. Additionally, the employer must pay termination compensation in the amount of 3 months’ average monthly salary.
The termination of an employment agreement is formalized by the employer’s issuing a termination order. The termination order must specify, among other things, name and address of the employer, reasons for the termination and specific provision of the Labor Code based on which an employee is terminated. On the last day of the employee’s employment, the employer must ensure that the employee receives his labor book (a book which contains the employment record of a person), copy of the termination order and payments due to the employee on the last day of his employment.