OUTLINE
Notice periods in Estonia
Termination of employment in Estonia
Post-termination restraints in Estonia
Waivers in Estonia
Transfer of undertakings in Estonia
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End of employment in Estonia
At some stage, every employment relationship comes to an end — and Estonia has clear rules in place to govern how that process should unfold. The end of employment in Estonia may occur through resignation, mutual agreement, expiry of a fixed-term contract, or dismissal by the employer. Each route comes with its own procedures, notice requirements, and legal considerations.
In this section, we’ll take you through the essentials: notice periods for employers and employees, the legal grounds for termination, and when severance pay is required. We’ll also cover probationary periods, post-termination restraints, waivers, and what happens to employment contracts during a transfer of undertaking. Whether you’re winding down an employment contract or restructuring your business, understanding the rules around the end of employment in Estonia is key to staying compliant.
Notice periods in Estonia
Both employers and employees in Estonia must give the other party notice to end their employment agreement. Statutory notice periods are defined by the Employment Contracts Act. Employers can specify a different notice period in their employment contracts or policies, as long as they are at least as long as the statutory minimum. Read on to learn what you need to know about notice periods in Estonia as an employer.
Notice periods in Estonia for employers
Notice periods for employers in Estonia are based on the employee’s length of service, as follows:
- Less than one year of employment: 15 calendar days.
- 1–5 years of employment: 30 calendar days.
- 5–10 years of employment: 60 calendar days.
- More than 10 years of employment: 90 calendar days.
Employers may choose to pay in lieu of notice, giving the equivalent salary instead of notice time. Notice starts the day after an employee receives a termination letter.
Notice periods in Estonia for employees
If an employee in Estonia wants to terminate their employment contract, they must provide their employer with at least 30 days of notice. They do not need a reason for termination. If an employee fails to give at least the minimum amount of notice, they may owe compensation to their employer.
Severance pay in Estonia
Employers in Estonia must pay severance pay in the case of termination of the employment contract due to redundancy. This must be at least one month’s pay. Employees with 5–10 years of service are entitled to an additional one month’s pay from the unemployment insurance fund, and those with 10 or more years of service are entitled to an additional two months’ pay.
Probationary periods in Estonia
Probationary periods are permissible in Estonia as long as they don’t exceed the statutory limit of four months. During the probationary period, termination by either party requires 15 calendar days’ notice. If the employer terminates the employment contract, they must give a reason for termination.
Termination of employment in Estonia
There are several different types of employment termination in Estonia that employers need to be aware of. Read on for what you need to know as an employer.
Termination by mutual agreement in Estonia
An employer and employee in Estonia may mutually agree to terminate their employment agreement at any time. This agreement should be documented in writing.
Termination by the employee in Estonia (ordinary termination)
An employment contract in Estonia can be terminated by the employee at any time. This is known as ordinary cancellation. Employers don’t usually need to provide a reason for termination but must give their employer at least 30 days’ written notice (15 days during the probationary period). Employers can also resign without notice in extraordinary circumstances, such as delayed payment of wages or degradation of the employee by the employer.
Termination by the employer in Estonia (extraordinary termination)
While employees in Estonia can terminate their employment agreement at any time, employers may only terminate an employment contract if they have a good reason for doing so. This is known as ‘extraordinary cancellation’ of the contract. For example, an employer may terminate an employee’s contract if:
- The employee has committed theft or fraud.
- The employee has been unable to perform their duties for an extended period.
- The employee has breached his or her duties or ignored reasonable instructions.
- The employee has violated a confidentiality agreement.
- The employee has been at work in a state of intoxication.
In most cases, the employer must give the employee a warning before proceeding with termination. For termination to be permissible, it must happen within a reasonable period after the employer learns of the events leading to the termination.
Termination for economic reasons in Estonia
Employers in Estonia can also terminate an employee’s contract for economic reasons, such as a decrease in work volume, reorganisation of work, or bankruptcy. The employer must first offer the employee alternative employment if this is available. If laying off the employee is the only option, they must pay severance pay of at least one month’s salary.
Restrictions on terminating an employment contract in Estonia
There are certain circumstances under which employers in Estonia are not permitted to end the employment relationship. For example, it • is not permissible to dismiss an employee who:
- Is pregnant or on maternity leave.
- Is performing important family duties.
- Is temporarily unable to perform their duties due to health reasons.
- Is in military service, alternative service, or reserve service.
Post-termination restraints in Estonia
Post-termination restraints are restrictions that employers can impose on their employees after the end of the employment contract. The idea is to protect the employer’s legitimate interests, without unnecessarily limiting the former employee’s ability to make a living.
Types of post-termination restraints in Estonia
The following types of post-termination restraints are generally permissible in Estonia, as long as they are reasonable in scope and duration:
- Non-compete agreements: These prevent employees from establishing or working for companies that directly compete with their former employer, usually within a certain geographic area.
- Employee non-solicit agreements: These prohibit employees from soliciting (or ‘poaching’ employees from their former employer.
- Customer non-solicit agreements: Similarly, these prevent employees from poaching customers from their former employer.
- Confidentiality agreements: These require employees to protect business secrets even after the end of the employment relationship.
Limitations on post-termination restraints in Estonia
Non-compete agreements and confidentiality agreements are the only post-termination restraints in Estonia that are specifically regulated by the Employment Contracts Act. They are both limited to one year after the end of the employment relationship and must be agreed in writing. While customer non-solicit and employee non-solicit agreements are not specifically regulated in the Employment Contracts Act, they are permissible under civil law.
To be legally valid, all of the above types of post-termination restraints in Estonia must:
- Be agreed in writing.
- Be reasonable in terms of scope and duration.
- Include reasonable compensation for the employee.
Waivers in Estonia
In many countries, it is possible for employees to waive certain employment rights in the context of a settlement agreement. While this isn’t specifically regulated by the Estonian Employment Contracts Act, it is generally permissible under contract law. Employers should ensure any waiver is made knowingly and voluntarily and keep thorough documentation. It is generally not possible for employees to waive their statutory rig
Transfer of undertakings in Estonia
When a business (or part of it) is transferred to a new owner in Estonia, specific rules safeguard employees’ rights and employment terms. These rules reflect Estonia’s implementation of the EU Transfers of Undertakings Directive through national law. Read on to learn what you need to know as an employer.
What counts as a transfer of undertakings in Estonia?
In Estonia, a transfer of undertaking occurs when there is a transfer of an enterprise or part of one, meaning an economic unit that retains its identity. An example would be a department or branch continuing similar activity under new ownership.
What rights do employees have after a transfer of undertakings in Estonia?
When a business is transferred to another entity, employment contracts transfer automatically to the new business with their terms and conditions intact. This includes both fixed-term and permanent contracts. Any collective agreement that applies is also still applicable after the transfer.
For up to five years after the transfer takes place, both the former and the new employer are jointly responsible for pre-transfer obligations such as unpaid wages. A transfer of undertakings is not a legally valid reason for dismissing an employee in Estonia.
Information and consulting rights preceding a transfer of undertakings in Estonia
At least one month in advance, both the transferor and the transferee must inform employees or their representatives in writing about:
- The planned transfer date.
- The reasons, legal, economic, and social implications.
- Any planned measures affecting employees.
Avoid risk and missed opportunities with our end-to-end employment solutions
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Estonia — or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
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