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Global employment briefing: Estonia, June 2017

  • Estonia
  • Employment law


Management Board members became eligible for unemployment insurance benefit

The Supreme Court has ruled that unpaid members of management boards are eligible for unemployment insurance benefit provided certain conditions are met, notwithstanding that the relevant legislation purports to exempt them from receiving such benefit. In so doing, the court has resolved an issue that has been under discussion for some years.

Unemployment insurance is designed to provide benefits, such as a substitute income and assistance in finding new work, to those whose employment is terminated in certain circumstances, including lay-offs and insolvency. It is funded via compulsory premiums payable by employers and employees.

One of the conditions for qualifying for unemployment insurance benefit is that the recipient is registered as unemployed. Due to a statutory limitation, however, management board members were unable to register as unemployed if they were not paid for that work.

The position has now changed after the Supreme Court, in a judgment dated 11 May 2017 declared the restriction unconstitutional and revoked it. The Supreme Court ruled that the denial of unemployment insurance benefit to affected persons was a severe infringement of ownership rights as well as such fundamental rights as the right to engage in entrepreneurial activity and the right to freely choose an area of activity, profession or employment.

As a result of this decision, unpaid members of company management boards will now qualify for unemployment insurance benefits if they also held some other paid employment with the company and so have lost income and provided they satisfy the other conditions for receipt of benefits, including in relation to the circumstances of termination and the period over which insurance premiums were paid. Benefit payments are equivalent to 50% of calculated average daily remuneration of the person for the first 100 calendar days during which the benefit is received, and 40% for the subsequent days. The maximum benefit payment period is:

  • 180 days where the insurance period lasted less than 56 months
  • 270 days where the insurance period lasted more than 56 months and less than 111 months
  • 360 days where the insurance period was 111 months or more