Labor Contracts and Civil Law Contracts (CLC): Conflicts and Definitions

Labor law in Russia, inherited from the Soviet Union, is highly regulated and well-developed. Russian labor law is undoubtedly one of the most advanced in terms of elaboration compared to many other jurisdictions that have focused more on civil law.

The key issue lies in the significant gap between labor law and civil law, a gap that both workers and employers often find themselves falling into. The Civil Law Contract (CLC) and the labor contract are as different as night and day, ice and fire. It is crucial to choose one; both cannot be used simultaneously.

Civil law is based on the freedom of contract and equality of the parties. In this case, the employer has the option to accept or reject the contractor’s services. On the other hand, labor law is based on the "right to work," providing the employee with additional protection, and the labor contract is governed by public law. For employers, a CLC is more beneficial, while employees prefer the labor contract.

The reason for disputes between employers and employees lies in the inconsistency and the desire to sit on two chairs. One cannot use a CLC that essentially meets the criteria of a labor contract, or sign a labor contract that is akin to a CLC. The goal should be to eliminate any ambiguities.

If it’s a CLC, it refers to a paid services agreement (less commonly, a contract for works), which means the employer needs to clearly define what services are being provided. The more specific this is, the better. It might be necessary to prepare technical specifications for the month. The employer pays for the volume of services rendered, which is not a salary but payment for specific services.

If it’s a labor contract, a certain job function is assigned, which the employee performs regularly. Employment relations can be recognized either in the absence of a contract or if a CLC is signed, as long as there are actual labor relations and not civil law relations. It’s also important for the employee to behave as though they consider the relationship to be labor-based.

Thus, if a contract with the characteristics of a labor contract is terminated improperly, not in accordance with the Labor Code (e.g., through a notification of refusal from a paid services contract instead of the established termination procedure), the termination of the labor relations may be deemed invalid by the court. The court may recognize the labor contract as still in effect, and all wages during the court proceedings must be paid.

In other words, if the employer mistakenly signs a service contract, they will be forced to pay for several months of the employee’s work and make mandatory social payments for the entire duration of employment.

It is also important to note that self-employment is a very effective mechanism for preventing the recognition of labor relations. It has become increasingly common to avoid paying "black" salaries and instead enter into CLCs with contractors, so they pay their taxes legally. This does not, of course, mean that the employer is protected from the recognition of a labor contract, nor that the employee is protected from employer abuses. However, it does push the employee to act as a self-employed person rather than an employee.

Based on this, the general advice to both employers (clients) and employees (contractors) is to act consistently. A labor lawyer, in turn, will teach you what this means in practice.

From my perspective, labor law should be subordinated to civil law so that within the civil framework, mechanisms can be developed to protect against abuses in the specific category of labor contracts. This can be achieved by the law enforcer even within the existing regulatory framework. But of course, we must proceed from the legal reality.