What can be done if an employer does not pay wages?

Unfortunately, many employees have been in a situation where the work is done, but the expected pay is not received in their bank account on payday – the employer does not pay the wages. In this article, we want to remind employees of their rights because nobody who has worked hard should remain unpaid.

Wages not received in the absence of a written contract

First of all, it is important to remember that a company must always pay the employee for the work done. The absence of a written employment contract, a probationary period or short-term work does not entitle the employer to refuse to pay for work. Although subsection 4 (2) and section 5 of the Employment Contracts Act stipulate that an employment contract must always be made in writing and specify the details of the parties, the time of commencement of work, the remuneration paid and other important information, employment is still valid even if the employer has not given the employee a written contract and the employer must remunerate the employee (subsection 4 (4) of the TLS).

Deductions from wages

Sometimes employers make various excuses to avoid paying wages or try to pay smaller amounts than originally agreed. Again, it is important to know your rights – for example, some employers try to make deductions from wages, claiming that the employee has caused costs to the employer, has made mistakes or is liable for damage caused to the employer.

Although the Employment Contracts Act provides that the employee is liable for damage intentionally caused to the employer (subsection 74 (1) of the TLS), if the damage is caused by the employee’s negligence, the law sets out a number of criteria that must be taken into account when assessing the amount of damage (subsection 74 (2) of the TLS). There is also a separate agreement on the proprietary liability of the employee that must be made in writing, following the rules provided by law, and it is impossible to apply proprietary liability to an employee in the absence of a specific agreement to that effect. Therefore, it is not so easy to deduct various amounts from remuneration.

Even if the employer has the right to claim damages from the employee in certain cases, such damages cannot be offset against the wages according to subsections 78 (1) and (2) of the Employment Contracts Act, unless the employee agrees to the particular offset. Therefore, employees should be cautious about any e-mails from the employer containing a pay slip and a consent request. Before answering, you should check whether the employer has not deducted any amounts from your salary, otherwise the employer can later claim that the employee agreed to the offset and to the lower salary.In the case of doubt, an attorney with labour law expertise can advise on how to respond correctly in such a situation and defend your rights.

Termination disputes

Disputes are common when employment contracts are terminated. On the date of termination of the employment contract, the employer must pay all amounts owed to the employee – including compensation for untaken annual holiday, business trip allowances not paid and any other compensation provided for in the employment contract (subsection 84 (1) of the TLS). If the employer does not make a final calculation on the date of termination of the employment contract and pay the employee’s salary and other compensations immediately, the employee has the right to appeal to a labour dispute committee. In such a situation, it is advisable to immediately consult a labour law specialist, as the terms for contesting the termination of the contract will also begin at the end of the employment contract and timely action is important.

A bankruptcy petition helps receive unpaid wages

Unfortunately, there are situations where employers do not pay the employees or pay less than originally agreed. In such a case, the employee has to stand their ground, write a letter to the employer claiming their remuneration and, if that doesn’t help, refer to a labour dispute committee. If it turns out that the company really doesn’t have the money to pay the wages, filing a bankruptcy petition against the employer can help. Fortunately, the Unemployment Insurance Fund ensures that workers receive their wages in the event of the employer’s bankruptcy. We have written about this before here.

However, depending on the circumstances, a bankruptcy petition may not always be the right solution – for example, if the employer has the money but is not willing to pay. In such a case, a labour dispute committee will claim the wages from the employer. An attorney specialising in labour law can advise on the course of action that will lead to the receipt of pay in the particular case.

In summary, it can be said that the rights of employees are well protected in Estonia and employees who feel that their employer wants to deceive them should certainly refer to a labour dispute committee.

An abbreviated version of the article was published in Maaleht, Postimees, personaliuudised.ee and Finantsuudised.ee.

We also talked about the same topic on the ETV+ programme Kofe.