The Constitutional Court of the Republic of Armenia, by its decision of 18 July 2012, addressed the issue of conformity of Article 14 of the Labor Code with the Constitution of the Republic of Armenia.

2017-09-22

The background of the case.

The plaintiff filed a lawsuit against “Sirkap Armenia” CJSC claiming his unpaid salary.

The Court of First Instance of Kentron and Nork-Marash established the fact that the claimant had been employed by the respondent without an employment contract and granted the claim. The court took into consideration other documentary evidence (such as account statements showing wire transfers of salary and other documents issued by the employer) proving the employee status of the applicant.

The respondent appealed the decision of the first instance court. The Civil Court of Appeal came to the conclusion that without an employment contract the employee was not entitled to the payment of salary. The court concluded that employment relations between an employee and employer could arise only on the basis of a written employment contract.

The Court of Cassation returned the appeal brought by the plaintiff.

An application was submitted to the Constitutional Court on behalf of the plaintiff. The applicant /plaintiff/ argued that Article 14 of the Labor Code, in practice, prevented employees who worked without written employment contracts from defending their rights in the court. The reason being that the courts ignored any kind of documentary evidence proving the existence of labor relations between the parties in cases where there was no written employment contract.

In reviewing the claims brought by the applicant, the Constitutional Court addressed the following issues:

-does Article 14 of the Labor Code rule out the possibility of protecting the rights of employees working without written employment contracts, including their right to a fair trial?

-does the labor legislation of the Republic of Armenia afford protection to employees who work without a written employment contract, including the protection of their right to be paid for their work?

In addressing the questions outlined above, the Constitutional Court provided the following reasoning:

The article of the Labor Code that was being challenged recognized an employment contract to be the basis for employment relations. According to that article, an employment contract is a “legal fact” that is both necessary and sufficient for the emergence of employment relations.

The study of international best practice in the area of employment relations reveals that parties usually have a freedom to choose the form of employment contract, although there is a tendency in favor of a written employment contract.

The study of the Labor Code, in particular, its Articles 14 and 85 both before and after the adoption of the law on “Making changes and amendments in the Labor Code of the RA” of 24 June 2010, shows that the labor code mandates the conclusion of a written employment contract. Furthermore, the work being done without a written employment contract is considered illegal. Additionally, the employers who have given permission for illegal work can be held responsible in accordance with the Armenian legislation.

The labor legislation does not provide for specific rules governing the situations where employees are in fact engaged in employment relations without a written employment contract. With this regard, the constitutional court concluded that in these kinds of situations the rules on “Transactions” of the Civil Code shall apply pursuant to Article 1 §4 of the Civil Code.

Thus, according to Article 298 §1 of the Civil Code, nonobservance of the simple written form of a transaction shall deprive the parties of the right, in case of a dispute, to rely for confirmation of the transaction and its terms upon the testimony of witnesses, but shall not deprive them of the right to adduce written and other evidence.

The purpose of this rule is the simplification of the process of proving the existence of a particular agreement and its terms between the parties. Therefore, taking into account the principle of the freedom to contract, the failure to comply with the technical requirement to conclude a contract in a particular form, does not automatically deprive the party to a contract of the right to prove the existence of the transaction and its terms, but makes it difficult to prove certain facts which is the negative consequence for not complying with the requirement set forth in the law.

The combined analysis of the Armenian legislation with the international practice confirms that in particular circumstances where sufficient evidence exists proving that the person performed duties of an employee, that person shall be entitled to the payment proportionate to his or her work.

Deviation from this approach would result in ignorance of the obligation of employers to conclude written employment contracts and would violate the rights of employees.

The position taken by the Civil Court of Appeal, according to which the absence of an employment contract deprives the employee of the right to prove the existence of employment relations with other evidence, contradicts the reasoning provided above.

Based on the aforementioned reasoning, the Constitutional Court came to the following conclusions:

Article 14 of the Labor Code is compatible with the Constitution of the Republic of Armenia,
Article 14 of the Labor Code did not, in cases where no written employment contract was concluded, rule out the possibility of proving the existence of employment relations and its terms, provided other sufficient evidence exists.
The final decision delivered in the case of Galust Shirinyan /the applicant/ is subject to revision under a new circumstance.