GILS Employment Law: Azerbaijan

AZERBAIJAN

(1) Maternity and Family Leave Rights

1.1. How long is the duration of maternity leave?

Maternity leave lasts 126 days: seventy (70) calendar days prior to the anticipated date of childbirth and concluding fifty-six (56) calendar days following childbirth. In cases of complicated or multiple births, women are entitled to an additional seventy (70) days of maternity leave following childbirth.

1.2. What are the rights of a parent when returning to work after parental leave?

As per the general rule, while on leave, the employee is entitled to retain their workplace, position, and average salary in accordance with the Labor Code. Consequently, upon the completion of the leave, the employee maintains the right to resume their previous job duties in their former position.

Moreover, the employer is forbidden from initiating termination of the employment contract or imposing disciplinary measures.

Additionally, an employee caring for a child has the option to use partially-paid social leave either in full or partially at their own discretion.

Women with children under the age of one and a half years shall receive additional breaks for breastfeeding, in addition to the standard breaks for rest and meals during working hours. Each such break must occur at least every 3 hours and last for a minimum of 30 minutes. If a woman has two or more children under the age of one and a half years, each break must be at least one hour long.

Breaks for breastfeeding are considered part of the working time, with the employee retaining their average wage. 

Upon request, breastfeeding breaks may be combined with lunch and rest breaks or used at the beginning or end of the shift. If a woman chooses to combine breastfeeding breaks and use them at the end of her shift, her working day will be shortened by the total duration of these breaks.

Besides the stated, women with a child under the age of one-and-ahalf are entitled to reduced working hours, capped at 36 hours per week.

1.3. Do fathers possess the right to take paternity leave?

According to Article 127.1 of the Labor Code, one of the parents or another family member directly caring for the child until the child reaches the age of 3 years has the right to use partially paid social leave for childcare, with an allowance determined by law. Therefore, yes, fathers can benefit from partially paid social leave.

1.4. Are there any additional parental leave rights that employers must adhere to?

In one working year, fathers have the entitlement to take 14 days of unpaid leave following the birth of a child. Alternatively, they can opt for 7 days of unpaid leave to address family, domestic, or other social matters. It's important to note that these regulations do not constitute a parental leave scheme but rather fall under the umbrella of unpaid leave.

Regardless of the duration of employment with the company, an employee whose wife is on maternity leave can request to take annual leave, as stipulated in Article 133.4 of the Labor Code.

1.5. Do employees have the right to flexible working arrangements if they are responsible for dependents?

Flexible work schedule is not provided for by the Labor Code of the Republic of Azerbaijan. However, it is worth noting that the Labor Code establishes minimum norms of rules ensuring labor rights of individuals and the exercise of these rights.

The parties may define in an individual employment contract the conditions that do not contradict the labor legislation and do not infringe the rights of the employee in comparison with the norms of the labor legislation.

(2) Termination of Employment

2.1. Is it mandatory for employers to provide notice of termination of employment? How is the notice duration determined?

Various statutory terms apply depending on the grounds of termination.

If the employment agreement is terminated by the employer due to the probationary period not being passed, the notice shall be provided within three days before the end of the probationary period.

Upon downsizing or staff reduction, before the employer terminates the employment contract, the employee must be officially notified by the employer within the following periods, depending on the years of service, established in accordance with the employment contract(s) with this employer:

• Less than one year of service: at least two calendar weeks' notice in advance;
• One to five years of service: at least four calendar weeks' notice in advance;
• Five to ten years of service: at least six calendar weeks' notice in advance;
• More than ten years of service: at least nine calendar weeks' notice in advance.

In the event of a change in employment conditions, the employee must be informed accordingly. This notification must be provided in writing and at least one month in advance. If the employee chooses not to continue employment under the new conditions, they must be offered transfer to another position. Only if transferring the employee is not feasible, s/he can be dismissed under Article 68.2 (c).

2.2. Can employers enforce "garden leave" during the notice period, where the employee remains employed but does not have to attend work?

The concept of “garden leave” is not recognized under the Labor Code of Azerbaijan. Employees who have been terminated or have resigned are typically required to work out their notice period unless otherwise agreed upon by both parties.

2.3. What safeguards do employees have against dismissal? Under what circumstances is an employee considered to be dismissed? Is consent from a third party necessary before dismissal by an employer?

In Azerbaijan, employees have safeguards against dismissal, which can vary depending on the grounds for termination. These safeguards typically include protection against unjustified dismissal, entitlement to notice periods, potential eligibility for severance pay, adherence to dismissal procedures as outlined in the Labor Code, and the right to appeal dismissals through appropriate legal avenues.

The employee is considered to be dismissed once the notice of termination of an employment contract is entered into the electronic information system using an enhanced electronic signature and directed electronically to the employer.

Prior consent must be obtained from the trade union operating within the enterprise in order to terminate an employment agreement under Article 70(b) and Article 70(ç) of the Labor Code with an employee who is a member of the trade union.

2.4. Are there specific employee categories enjoying special protection against dismissal?

The following group of workers is protected against dismissals, except in cases where the enterprise is liquidated or the contract's term expires. Those are:

• pregnant women and women with child under age three, single fathers raising a child of up to 3 years of age;
• employees whose only income source is the enterprise where they work and who are single parents raising up children under school age;
• employees temporarily disabled;
• employees with pancreatic (insular) diabetes or multiple sclerosis;
• individuals because they are members of trade unions or other political parties;
• workers with dependent family member who is a person with a disability diagnosed before the age of 18 or with a diagnosed disability due to 81-100% impairment of bodily functions;
• employees on vacation, on a business trip or engaged in collective negotiations.

Except in cases of liquidation of an enterprise, regardless of the term, the employer may not terminate an employment contract concluded with persons with disabilities undergoing treatment in a rehabilitation institution and other rehabilitation entities, or with an employee specified in Article 24.1 of the Law of the Republic of Azerbaijan "On the Rights of Persons with Disabilities".

2.5. Under what circumstances is an employer justified in dismissing employees: 1) due to individual reasons; 2) business-related grounds? Do employees receive compensation upon dismissal, and if so, how is it calculated?

The Labor Code outlines various grounds for termination of employment contracts. These include:

a) Liquidation of the enterprise;
b) Personnel cutbacks at the enterprise;
c) Determination by a competent body that the employee lacks professional skills for their position;
d) Failure of the employee to fulfill job duties as defined by the employment contract, or gross violation of job description without valid reason;
e) Failure to meet expectations during the probation period;
f) Initiatives of one of the parties;
g) Expiration of the employment contract;
h) Changes in terms and conditions of employment;
i) Changes in ownership of the enterprise;
j) Other circumstances beyond the control of the parties;
k) Agreed-upon cases established in the employment contract.

These grounds for dismissal can be categorized into two groups: business-related and individual needs.

Upon termination of the employment contract due to the enterprise's liquidation or staff redundancy, the employer typically provides severance pay based on the employee's years of service, as stipulated in their employment contract(s) with the employer. Additionally, on the last working day, the employee must receive compensation for unused vacations.

2.6. Are there particular protocols that employers must adhere to regarding individual dismissals?

When dismissing an employee, the employer must adhere to the followings:

1. Issue a dismissal order and provide it for the employee's signature;

2. Ensure that all payments due to the employee from the employer, including compensation for unused vacation days, are made on the day of dismissal;

3. Provide the employee with a labor book;

4. Make necessary updates to the electronic portal on employment and insurance.

2.7. What claims can an employee pursue if they are dismissed? What remedies are available for a successful claim?

In Azerbaijan, if an employee is dismissed unlawfully, they may pursue various claims against their employer. If the dismissal violates the provisions of the Labor Code or the terms of the employment contract, the employee may seek reinstatement to their position and compensation for wrongful termination.

Additionally, the employee may pursue various entitlements such as unpaid wages, severance pay, overtime pay, and annual leave pays. Remedies available for a successful claim may include:

• Reinstatement: If the employee proves that the dismissal was unjustified or unlawful, the court may order the employer to reinstate the employee to their former position;
• Compensation: The court may award financial compensation to the employee for lost wages, benefits, and other damages resulting from the dismissal;
• Legal costs: In some cases, the court may order the employer to reimburse the employee for legal costs incurred during the dispute.

To initiate a successful claim, the employee must first engage in mediation, which is a prerequisite before filing a lawsuit. If an agreement is not reached during the mediation process, the employee may proceed with filing a lawsuit.

2.8. Can employers resolve claims before or after they are initiated?

The law in Azerbaijan does not prohibit the settlement of claims either before or after they are initiated.

2.9. Does an employer bear additional obligations when dismissing multiple employees simultaneously?

In the event of a change of ownership by a new owner or employer, it is imperative to prevent the indiscriminate termination of employment contracts on a large scale, especially when such termination is not based on the lack of professional competence, ability to perform job functions, or the incompetence of the employee. Such actions, aimed at abusing business activities and legal provisions, may adversely affect the business operations of the owner and must not be permitted.

The new owner or employer is required to conduct a certification of workplaces and employees to ascertain the professional capabilities of the workforce and the necessity of retaining existing positions within the enterprise for their continued entrepreneurial activities.

Article 67.3 of the Labor Code also prohibits mass layoffs as a result of workplace certifications.

2.10. How can employees enforce their rights regarding mass dismissals, and what are the consequences if an employer fails to comply with its obligations?

Employees can enforce their rights regarding mass dismissals by taking legal action, filing complaints with government agencies, or using mediation. Consequences for non compliance by employers include legal penalties, compensation payments to affected employees, reinstatement orders, damages, and reputational damage.

(3) Data Protection and Employee Privacy

3.1. How does the employment relationship get impacted by employee data protection rights? Is the transfer of employee data across borders unrestricted for employers?

According to Article 14.2 of the Personal Data Law, cross-border transfer of personal data shall be prohibited in the following cases:

• in case of existence of threat to national security of the Republic of Azerbaijan;
• in case if the legislation of the country, to which personal data is transferred, fails to ensure legal protection of this data in the level provided for in the legislation of the Republic of Azerbaijan.

The cross-border transfer of the personal data may be performed regardless of the level of legal protection in cases:

• when the data subject has given his/her consent for such a transfer of personal data;
• when transfer of personal data is required for protection of life and health of the data subject (Article 14.3 of the Personal Data Law).

Additionally, pursuant to Article 88 of the Labor Code, the employer may only send data on the employee's identity or employment history to another employer or relevant authority or to another location upon written request and with the consent of the employee. It is prohibited for an employer to send characterizations, recommendations, personal documents of the employee, their copies, and other documents to another location without first allowing the employee to familiarize themselves with the contents. However, it is permissible to send a positive characterization or recommendation to another location without the employee's familiarization. In such cases, the employer must inform the employee of where these documents have been sent.

3.2. Are employees entitled to obtain copies of any personal information held by their employer?

Following the requirement of Article 88.1 of the Labor Code, the employer is obliged to provide the documents related to the employee’s labor activity upon the employee’s request. This may include extracts from the employment record book, wage statements, and copies of other personal documents.

3.3. Do employers have the authority to conduct preemployment checks on prospective employees (such as criminal record checks)?

When hiring an employee, the employer is required to request the documents specified in Article 48 of the Labor Code. This includes a document confirming the identity and the labor book. However, the employment contract can be concluded without the labor book in certain cases as provided for in the Labor Code. Additionally, upon concluding an employment contract, the employer shall be provided with the relevant education document in cases where the specifics of the employee's job function require professional training or education. In workplaces with difficult, harmful, and dangerous working conditions that adversely affect the employee's health, as well as in order to protect public health in sectors such as the food industry, public catering, health care, trade, and other similar workplaces, employees must also submit a health certificate.

An employee entering into an employment contract shall not be obligated to submit any additional documents beyond those specified by the Labor Code. This includes documents unrelated to their employment duties or position.

3.4. Do employers have the right to monitor employee emails, phone calls, or use of company computer systems?

Employers generally have the right to monitor employee’s companyowned devices, provided that such monitoring is conducted in compliance with applicable laws and regulations.

3.5. Can employers control an employee's use of social media both inside and outside the workplace?

Employers may control the employees' use of social media during working hours to ensure productivity, protect company reputation, and maintain confidentiality. However, restrictions on employees' use of social media outside of working hours on personal devices is not controlled by the employer.

(4) Court Practice and Procedure

4.1. Which courts or tribunals hold jurisdiction over employment-related complaints, and what is their composition?

In Azerbaijan, there are no specialized courts exclusively dedicated to handling labor disputes, including those related to employment. Instead, all individual labor disputes are resolved by the district courts. The composition of the court varies depending on the stage of the legal process:

• In the court of first instance, a labor dispute is resolved by a single judge.
• In the courts of the second and third instance, labor disputes are reviewed collectively by a panel of judges.

4.2. What procedures govern employment-related complaints? Is conciliation obligatory before proceeding with a complaint, and is there a fee for employees to submit a claim?

According to Article 4.6 of the Civil Procedure Code, parties involved in commercial disputes, as well as those arising from family and labor relations, are required to participate in a preliminary mediation session in accordance with the procedure outlined in the Law of the Republic of Azerbaijan "On Mediation" before applying to court. If the parties do not reach an agreement during the preliminary mediation session, they are then permitted to file a lawsuit in the appropriate court.

The remuneration for the provision of mediation services during the initial mediation session for disputes arising from labor relations is set at 50 manat.

4.3. What is the typical duration for resolving employment-related complaints?

Cases concerning reinstatement at work are typically addressed and resolved within a period of up to two months from the date the application is accepted for court proceedings.

Other employment-related disputes are considered and resolved within four months from the date of receipt of the application by the court of first instance. However, this timeframe may be extended by up to two months through a relevant resolution of the court.

Courts of the second and third instances are obligated to review the case no later than three months from the date of its receipt.

4.4. Is it possible to appeal against a decision at the first instance, and if so, how long does such an appeal usually take?

An appeal must be lodged within 30 days from the date of receipt of the decision issued by the court of the first instance by the parties. Courts of the second and third instances are obligated to review the case no later than three months from the date of its receipt.

(5) Work Permits

5.1. What are the restrictions or limitations placed on individuals holding a work permit in terms of job duties, employer changes, or duration of stay?

Individuals holding a work permit in Azerbaijan are generally subject to some restrictions and limitations that include:

1. Work permits in Azerbaijan are typically issued for specific job positions or occupations. Therefore, individuals holding a work permit are generally restricted to performing the job duties specified in their permit. Engaging in activities outside of the permitted job duties may require additional authorization;

2. Individuals holding a work permit are usually tied to the employer who sponsored their permit. Changing employers may require obtaining a new work permit;

3. Work permits in Azerbaijan are typically issued for a period of 1 year, and if the employment contract is to be concluded for a period of less than 1 year, it is issued for the same period. Individuals holding a work permit may need to renew their permit before it expires to continue working legally in the country.

5.2. What are the requirements for obtaining a work permit?

Obtaining a work permit in Azerbaijan typically involves meeting certain requirements outlined by the Migration Code. While specific requirements may vary based on the grounds of obtaining a work permit, some common requirements include:

• Employers, including legal entities, individuals engaged in entrepreneurial activities, branch offices, and representations of foreign legal entities, are responsible for applying for a work permit on behalf of the applicant;
• Applicants must demonstrate the necessary qualifications, skills, and experience required for the job position, which may include educational degrees, professional certifications, and relevant work experience;
• The employer is required to submit the necessary documents for obtaining a work permit as outlined in Article 65 of the Migration Code;
• Upon receiving a positive decision from the State Migration Service, the applicant is required to pay the applicable state duty as stipulated by legislation.

5.3. Are there any recent changes or updates to work permit regulations or policies that individuals or employers should be aware of?

On May 16, 2023, the President of the Republic of Azerbaijan signed the Law of the Republic of Azerbaijan "On Amendments to the Migration Code of the Republic of Azerbaijan".

The recent amendment has revised the conditions for obtaining temporary residence permits under Article 45.1.6-1 of the Migration Code in Azerbaijan. Thus, if before the changes, a foreigner held the position of head and deputy of a legal entity established in the Republic of Azerbaijan and at least one of the founders was a foreign legal entity or natural person, he could apply for a temporary residence permit in the territory of the country. After the new law came into force, the head of a foreign-invested legal entity registered in Azerbaijan, with paid-up shared capital not less than 50.000 manats, or the founder who owns at least 51% of the shares of that legal entity can apply for a temporary residence permit. Consequently, deputy heads are no longer exempt from the requirement and must obtain a work permit.

This amendment signifies a stricter criteria for obtaining temporary residence permits and requires certain individuals to acquire work permits where previously exemptions were granted.

Additionally, a new case has been added to the list of cases that are the basis for obtaining a temporary residence permit in the territory of the Republic of Azerbaijan. Thus, foreigners and stateless persons who own state securities with a nominal value of at least 100,000 manats or investment securities of legal entities in which 51% or more of their shares belong to the state can apply for a temporary residence permit in the country.

According to Article 45.1.7 of the Migration Code (engaging in entrepreneurial activity), new concessions are established for obtaining a temporary residence permit. According to the conditions before the change, in order to obtain a temporary residence permit, a foreigner engaged in entrepreneurial activity had to sign (hire) an employment contract with at least 5 (or 10 in the case of part-time work) people, with at least 80% of his employees being citizens of Azerbaijan. After the change, at least 80% of employees shall be Azerbaijani citizens, as well as persons with permanent residence permits, persons married to Azerbaijani citizens, guardians of Azerbaijani citizens who are under the age of 18 or disabled due to 81-100% impairment of body functions, also foreigners who seek asylum, are considered victims of human trafficking, or provide assistance to law enforcement agencies.

It should be noted that Articles 45.1.6-1 of the Migration Code (the right of the founder or head of legal entities to obtain a temporary residence permit) and Article 45.1.7 (obtaining residence permit on the ground of doing business in Azerbaijan) are considered as acceptable the basis for obtaining a temporary residence permit (extending the period) for a foreigner or stateless person who has lived in Azerbaijan for at least 1 year on the said grounds, provided that their annual turnover (revenue) is not lower than the prescribed limit.

5.4. Are there specific industries or occupations that have different requirements or exemptions for obtaining a work permit?

Article 64 of the Labor Code outlines cases in which individuals are exempted from the requirement of obtaining a work permit. These cases are:

1. foreigners who possess permanent residence permit in Azerbaijan;

2. those engaged in entrepreneurship activity in Azerbaijan;

3. employees of diplomatic representations and consulates; 

4. employees of international organizations;

5. managers of the organizations established under international agreements and their deputies;

6. those employed by relevant executive power;

   6.1. military personnel and experts, invited to the service or work in the Armed Forces of the Republic of Azerbaijan and other armed groups, established in accordance with the legislation of Azerbaijan;

7. employees of media entities accredited in Azerbaijan;

8. those who are seconded for a missions to the Republic of Azerbaijan with total duration of 90 days within a year on activity fields defined by Decision of the Cabinet Ministers of Azerbaijan;

   8.1. specialists in categories determined by the respective executive authority and invited by citizens of the Republic of Azerbaijan or legal entities incorporated in the Republic of Azerbaijan for the purpose of rendering services or performing works in fields determined by the respective executive authority;

9. sailors;

10. professors and tutors invited to universities (higher educational institutions) for delivering lectures and lecturers;

11. art workers, coaches and athletes invited to work in sport clubs and registered at relevant executive authority;

12. those who perform professional religious activities in the officially registered religious institutions;

13. heads of branch offices and representations of foreign legal entities in the Republic of Azerbaijan and their deputies;

   13.1. heads of legal entities which are registered in the Republic of Azerbaijan and the founder or at least one of the founders of which is a foreign legal entity or individual, and the founder having not less than 51 percent of shares (stocks) in the authorized capital of the said legal entity (if he carries out activities in the legal entity founded by him);

14. those married with the citizen of the Republic of Azerbaijan, subject to registration of that citizen in the territory of the Republic of Azerbaijan at the place of residence;

15. those, who applied for IDP status, received IDP status or was granted a political asylum;

   15.1. persons recognized as victims of trafficking or assisting criminal prosecution bodies;

16. those who patronize persons being citizens of the Republic of Azerbaijan under 18 years old or individuals with an established disability due to 81-100% impairment of bodily functions;

17. persons involved in labor activity in cases defined by the relevant executive authorities;

18. persons involved in the work on the territory of the Alat Free Economic Zone, by the competent structure, administrative institution and legal entities of the Alat Free Economic Zone, as well as to the representatives of these legal entities;

19. resident of the technological park (in relation to a legal entity - persons holding the position of its head and deputies) and specialists with experience in information and communication technologies and involved by the resident to work in the territory of the Republic of Azerbaijan.

5.5. What is the ratio of foreign and local labor?

According to Article 51 of the Migration Code, issuance of a work permit is carried out within the framework of labor migration quota approved by the Cabinet of Ministers of the Republic of Azerbaijan.

As per Decree of the Cabinet of Ministers of the Republic of Azerbaijan dated 14.03.2016 under No. 124 on approval of the "Procedure for determining the quota of labor migration" the labor migration quota (hereinafter “quota”) represents the maximum limit on the number of foreign individuals permitted to engage in paid labor activities within the territory of the Republic of Azerbaijan within a given calendar year.

There are quotas in different business areas. For example, construction field – 1800, education – 400, mining industry - 1200 and etc.

(6) Tax

6.1. What are the legal obligations and requirements regarding the individual income tax paid by employers?

Personal income tax (PIT)

The rates of PIT applied to salaries of employees vary depending on whether the employee is working in the oil-gas and public sectors or not.

According to Resolution #56, the below entities are qualified as operating in the oil-gas and public sectors:

1. State Oil Company of the Republic of Azerbaijan (including its structural subdivisions), and contractors and operating companies that are engaged in Production Sharing Agreements (PSAs), agreements on main pipeline and other similar agreements;

2. local and foreign subcontractors, which provide goods, works and services to the legal entities indicated in clause (i) above if the volume of their annual income (without taking into account expenses) received during the previous calendar year for goods, works and services provided to these entities exceeds 50% of total annual income; and

3. public legal entities established by the state, budget organizations and other entities and organizations funded by the state budget, as well as state-owned funds in the Republic of Azerbaijan, and legal entities in which the state directly or indirectly holds a controlling package of shares (51% or more).

PIT at the below rates applies to salaries of employees working in oilgas and public sectors (Article 101.1 of the Tax Code):

According to Article 101.1-1 of the Tax Code, salaries of employees (up to AZN 8,000 monthly) working in non-oil-gas and non-public sectors are taxed with PIT at a rate of "0" percent from 1 January 2019 for a period of 7 years. Therefore, PIT at the below rates applies to salaries of employees working in non-oil-gas and non-public sectors:

Insurance contributions

The rates of insurance contributions applied to salaries of employees vary depending on whether the employee is working in the oil-gas and public sectors or not.

Insurance contributions at the below rates apply to salaries of employees working in the oil-gas and public sectors:

1. Social security contributions (Article 14.3 of the Social Insurance Law):

2. Unemployment insurance contribution (Article 9 of the Unemployment Insurance Law):

• 0.5% of the calculated salary fund of the employer – from the employer;
• 0.5% of the employee's salary – from the employee.

3. Health insurance fees (Article 15-10.1.2 of the Health Insurance Law):

Insurance contributions at the below rates apply to salaries of employees working in the non-oil-gas and non-public sectors:

1. Social security contributions (Article 14.4 of the Social Insurance Law):

2. Unemployment insurance contribution (Article 9 of the Unemployment Insurance Law):

• 0.5% of the calculated salary fund of the employer – from the employer;
• 0.5% of the employee's salary – from the employee.

3. Health insurance fees (Article 15-10.1.2 of the Health Insurance Law):

6.2. What is the percentage of withholding tax?

Please see the tax rates applicable to income of employees above.

 

Authors:

Royal Ibrahimli, Shabnam Sadigova-Huseynova.