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At the current time, the most widespread form of violation of employees’ rights is the substitution of the employment agreement with a civil-law contract. Often employers wonder why it is considered as a violation even though relations are formalized in accordance with the requirements of the civil legislation.

The answer to this question can be found in the fundamental principles of the Labor Code of the Republic of Azerbaijan (hereinafter referred to as the "Labor Code"). Article 2 of the Labor Code explicitly states that the formalization of labor relations by means of civil-law contracts is impermissible.

So how can we pinpoint whether relations are of a civil-law or labor nature? The next classifying criteria highlighted in the Decision of the Constitutional Court of the Republic of Azerbaijan"On the interpretation of Articles 7.2-3.4 and 7.2-4 of the Labor Code of the Republic of Azerbaijan in connection with Articles 35.3 and 35.4 of the Constitution of the Republic of Azerbaijan" dated October 20, 2023 can guide us on this matter:

1. In labor relations, there exists a certain hierarchical feature between the employee and the employer (for example, the economic dependence of employees on the employer, adherence to the work regime defined by the employer, the application of disciplinary sanctions to the employee, etc.). In civil-law relations, on the other hand, the parties are equal in rights.

2. While the labor activity of the employee is an integral part of the entity’s production activity, the performance in civil-law contracts usually possesses a one-time or periodic character without being an integral part of the entity’s production activity.

3. Civil-law contracts, while binding the parties to the expected date for the completion of the specified work or service, are generally of a fixed-term nature, whereas labor contracts are indefinite and are terminated only in legally prescribed circumstances.

4. The subject matter of civil-law contracts is the result of the work or ser

vice to be performed, while the subject matter of labor relations is constituted by the employee's labor activity.

5. In labor contracts, the employee personally performs the labor function, while in civil-law contracts, the performer can fulfill the work personally or through a subcontractor.

6. Unlike civil-law contracts, labor contracts impose an obligation on the employer to create a safe and healthy working environment for the hired employee.

7. In labor contracts, the employee has rights defined by labor legislation (such as the preservation of the workplace, granting of vacations, payment of exam-related expenses, continuation of education, etc.) and social benefits (such as social payments in cases of dismissal, temporary loss of working ability and other situations, implementation of social insurance, etc.). The employer has corresponding duties in relation to these rights. In contrast, in civil-law contracts, the performer has the right to use only the guarantees specified in the contract and established by legislation for this purpose.

Under what circumstances must an individual be conclusively engaged through a labor contract? Article 7.2-3 of the Labor Code specifically emphasizes the following points:

1. When the tasks to be performed by the employee are related to the main activities (services) of the entity (for example, when a company providing accounting services hires an accountant, the relationship becomes of a labor nature).

2. When the content of the service contract is similar to the provisions specified for the labor contract (such as defining working hours, adherence to internal rules and regulations of the entity, application of disciplinary responsibility, etc.).

3. When the contracted person provides services exclusively to one entity and regularly receives a fixed salary in exchange for the performed tasks (i.e., when the same amount of money is transferred to an individual by only one entity every month, the relationship is clearly of a labor nature).

4. When the performed work (service) has a temporary nature, but the duration of the contract is extended (when the relationship continues under the same conditions).

5. When the relationship between the parties is formed based on the substitution or temporary substitution of tasks (services).

What types of responsibilities can arise if labor relations are formalized through civil-law contracts? According to Article 192 of the Administrative Offenses Code of the Republic of Azerbaijan, for compelling individuals to perform any work (services) without enactment of the labor contract individuals may be fined in the amount from 1000 to 2000 thousand manats, officials- from 3000 to 5000 manats, and legal entities - from 20 000 to 25 000 manats

If 10 or more employees are recruited without the labor contract coming into legal force, in accordance with the Labor Code, Article 162-1 of the Criminal Code may be applied, resulting in a fine ranging from 7000 to 10 000 manats or corrective labor for up to 2 years, or restriction of freedom for up to 2 years, or deprivation of liberty for up to 2 years.

In any case, the question of whether the relationship between the parties is of an employment nature must be determined by examining the true essence of these relations and the factual pattern of the case.

About the author: Lala Askeri has more than 6 years’ experience in the field of law and human resources management. In 2015, she received a bachelor’s degree in “Jurisprudence” from the Academy of Public Administration under the President of the Republic of Azerbaijan, and in 2017, she received a master’s degree in “Criminal Law, Criminal Procedure, Criminology and Forensic Examination” from Baku State University.

She is member of the Bar Association of Republic of Azerbaijan since 2023 and currently continues her career at Legalize Law Firm. She is fluent in Azerbaijani and Russian languages, and knows English language at excellent level.

For more information about the author please see the following link: https://www.legalize.az/en/team/lale-esgeri

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