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Print articleChecklist: Mutual separation – what else to consider before and after concluding the agreement
February, 2023 - ALRUD
When terminating employees and senior executives, including in case of a conflict, the main focus should be on negotiating separation terms and concluding a mutual termination agreement (“MTA”). However, protecting the company’s interests and ensuring that any related processes are legally compliant and unhindered, entails a much wider range of issues and actions that need to be considered prior to and once the agreement with an employee has been reached.
We have created a checklist that will guide you through such issues making your separation process smooth and safe for the company.
| Issue | What to consider |
|---|---|
| Choosing a termination date | (i) Termination on a day-off or holiday is permitted but entails numerous complexities (final settlement when banks are not working, payment for the work of an HR team outside of normal working hours, etc.) (ii) Check if it is required to notify the employment center on termination upon mutual consent (subject to regional regulations and simultaneous staff redundancy of other employees) (iii) Check employment-related documents for special conditions on the date of employment termination |
| Isolation of potentially “malicious” employee before separation | (i) No concept of “garden leave” in Russian law (ii) Downtime (paid partially or in full), paid/unpaid leave and remote work (subject to an employee’s consent) may be used as alternatives |
| Processing employee’s personal data (PD) in a due way | (i) Separate consent on former employee’s PD processing is required for saving data in corporate resources and assuring continuity of its processing (ii) Deal with cross-border transfer of employee’s PD if it is transferred to any company within the group abroad, including a head company |
| Protecting company’s IP rights and confidential data | (i) Ensure that the proper secrecy policy is in place, check employees’ due familiarization with its most recent version (ii) Obtain separate NDA (iii) Establish non-disclosure obligations in the MTA (iv) Consider possibility to include non-compete and non-solicit clauses (v) Consider limiting access to corporate resources and databases to mitigate data stealing risks before separation. However, note that a complete restriction of an employee’s access to corporate systems and company premises may be considered as labour law violation |
| Transfer of properties | (i) Prepare inventory list along with transfer & acceptance act for retrieving properties from the employee (ii) Prepare documents formalizing sale (in some cases cash register equipment is required) or free transfer of company’s properties to the employee (iii) Estimate terms and processes necessary for transferring properties to/from and exchanging documents with remote employee |
| Payment issues | (i) Incentives due to the employee and deferred bonuses: decide how much to pay and when (ii) Shareholders’ approval of compensation upon one or few MTAs (in aggregate) as major transaction: check whether the amount exceeds the criteria (iii) Loans provided to or by the employee: the parties may agree on their return before the separation or discuss how the respective relations will be continued or ended after it (iv) Parachutes and termination conditions in the contract, side letters and other agreements: assess applicability and influence on the process |
| Specifics of top executives’ termination | (i) Termination of the CEO and other members of the executive body require adopting shareholders’ resolution and registration within Russian tax authorities (ii) Separation with the CEO and other managers (including the Chief Accountant) may be subject to further precautions as finding the substitute in advance, PoA withdrawal, notification of the bank and proper transfer to the substitute of documents, logins, etc. |
| The last day of work | (i) Complete the transfer of properties (ii) Carry out HR formalities (iii) Remember to notify the Social Fund |
We hope you find this checklist useful! ALRUD specialists have extensive expertise and will be glad to provide any legal support on issues related to mutual separation processes. For more information on this and other frequently faced issues listen to our podcasts “Be Aware and Share”.
Note: Please be aware that all information provided in this letter was taken from open sources. Neither ALRUD Law Firm, nor the author of this letter, bear any liability for consequences of any decisions made in reliance upon this information.
If you have any questions, please, do not hesitate to contact ALRUD team.
