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Labor Relations if an Employee is Caught Causing Wilful Damage to the Employer

Baker & McKenzie teamed up with IBLF to hold a seminar “When Confidence is Lost: Labor Relations if an Employee is Caught Causing Wilful Damage to the Employer”.

The seminar was moderated by Evgeny Reyzman, counsel to Baker & McKenzie, a highly regarded Russian labor law practitioner. Among the speakers were in-house lawyers working for leading companies who frequently face compliance response issues in relation to various damage caused by employees.

As Evgeny Reyzman stressed in his opening speech, “the key issues of employers’ response in relation to wilful damage to the employer are:

  1. Collection of evidence;
  2. Insufficiency of legal instruments available to employers to react to such cases and to recover damages;
  3. Problems with criminal prosecution of employees”.

“Usually, these problems can’t be resolved by a “frontal attack”, he stressed, and shall be considered individually. Moreover, too many aspects can be unclear at times to foreign managers working in Russia.”

Indeed, despite compliance practice makes its way gradually in Russia and employees do not perceive corporate investigations as an emergency any more, but as a regular method to prevent dishonest actions of employees, in Russia, companies face a rather complicated situation right after investigation has been completed: notwithstanding direct evidence of employee’s dishonest actions, it is very difficult to fire him/her for that relevant offense or to recover damages to company from the employee.

“We are forced to accept the fact of business defrauders’ “qualitative jump”, unfortunately, said Olga Samoilenko, Head of Legal at Emerson, adding “As a rule, such people are rather high-ranking and well-educated managers, so their crimes become more and more sophisticated”. Therefore, to oppose such crimes, it is important to set up a complex approach, which should include the introduction of preventive measures and the establishment of internal compliance control. As they say, “an ounce of prevention is worth a pound of cure”.

In particular cases, employment termination upon a mutual agreement of the parties is unacceptable for companies as a matter of principle, while the Russian Labour Code provides no other alternative.

Is there a way out? The other speakers also tried to find an answer, including Baker & McKenzie’s own Elena Kukushkina and Arthur Abouzov, representative of Control Risks Rosie Hawes, and MTS Projects Director Dmitry Nikitin.

Evgeny Reyzman commented on Dmitry Nikitin’s report “Choke off covering up traces. Organisation and implementation of internal investigation: legal and practical aspects”:

  1. The documents on corporate investigations shall be very carefully worded in order to correctly document collected evidence, and at the same time, to maintain a 1-month deadline in which to impose a disciplinary sanction over an employee, determined by item 193 of the Russian Labour Code;
  2. And to correctly document the scope of authorities of an external expert retained by the employer to carry out an internal investigation, in order to ensure that his/her instructions become obligatory for employees.

“In fact, we apply traditional “soviet” regulatory tools trying to combine them with modern methods of conducting investigations, - E. Reyzman said. – We have to be inventive in dealing with emerging problems.”

The speakers’ reports prompted active discussion among the professionals attending the seminar. Several individual cases were analyzed during the discussion.

The seminar was held as part of the Siemens Integrity Initiative.

Improving Business Standards in Russia

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