In case of reinstatement of a dismissed employee at work by a court decision, the employer faces two questions: what payments should be made to such an employee and what to do with the amounts that were paid upon dismissal?
The employer who allowed the illegal dismissal is obliged to reimburse the restored employee for lost earnings (according to part 2 of article 394 of the Labor Code of the Russian Federation), moral damage in the amount determined by the court (part 2 of article 237 of the Labor Code of the Russian Federation), as well as legal costs (part 1 of article 98 and part 1 of article 88 of the Code of Civil Procedure of the Russian Federation).
Unearned earnings
All the time when the employee was deprived of the opportunity to work, that is, he was fired and challenged his dismissal in court, is considered forced absenteeism. During the forced absence, the employer pays the reinstated employee the average earnings (Article 139 of the Labor Code of the Russian Federation), in the calculation of which only working days are taken into account. In this case, the awarded amounts can be indexed by the court.
Personal income tax is withheld from the accrued average earnings. That is, the organization in this case on the basis of paragraph 1 of Art. 24 and Art. 226 of the Tax Code of the Russian Federation is recognized as a tax agent and is obliged to calculate and withhold the amount of personal income tax.
If the writ of execution indicates a fixed amount of unearned earnings, the employer must issue it to the employee without withholding tax. Personal income tax can be withheld at the next payment, and if there is no such payment, the employer notifies the tax office in writing about the impossibility of withholding tax and the amount of the taxpayer's debt. In this case, the employee independently calculates and pays personal income tax.
In addition to personal income tax, insurance premiums are charged on average earnings for the period of forced absenteeism.
According to Art. 236 of the Labor Code of the Russian Federation in connection with the violation by the employer of the established payment deadline, interest (monetary compensation) is charged on the amount of wages not received by the employee. Cash compensation is calculated based on 1/300 of the current refinancing rate of the Bank of Russia and is not subject to personal income tax.
Unreceived earnings during forced absenteeism are paid simultaneously with the cancellation of the order of dismissal and the reinstatement of the employee at work.
Compensation for non-pecuniary damage
According to Part 2 of Art. 237 of the Labor Code of the Russian Federation, moral damage caused to an employee by unlawful actions of the employer is reimbursed to him in cash in the amount determined by the court in the decision to reinstate the employee. Compensation for moral damage is not subject to personal income tax and is not subject to insurance premiums.
Reimbursement of legal costs
The party that lost the trial, by a court decision, must reimburse the other party for all legal costs incurred by it (part 1 of article 98 of the Code of Civil Procedure of the Russian Federation).
If the court decides in favor of the employee, the employer must pay the duty (Article 103 of the Code of Civil Procedure of the Russian Federation and Article 333.17 of the Tax Code of the Russian Federation) within 10 days from the date of entry into force of the court decision (subparagraph 2 of paragraph 1 of Article 333.18 of the Tax Code of the Russian Federation)).
In this case, the amount of reimbursement of legal costs is subject to personal income tax. Insurance premiums are not charged for them.
Offset of amounts already paid upon dismissal
An employee with whom the employment contract was unlawfully terminated at the initiative of the employer is paid the following amounts upon dismissal:
- wages for hours worked (amount of work performed);
- compensation for unused vacation, if by the time of dismissal he had not taken part of the vacation;
- severance pay (where applicable).
After the court recognizes the fact of dismissal as illegal, compensation for unused vacation and severance pay are recognized as overpayment, as paid without sufficient grounds. By paying the reinstated employee the amounts assigned by the court, the employer can reduce them by the amount of the severance pay received by the employee upon dismissal. But the amount of compensation for unused vacation can be credited only with the subsequent accrual of vacation pay.
Another important feature, if during the period of forced absenteeism, the employee received unemployment benefits at the labor exchange, salary from another employer, remuneration for work under a civil law contract, temporary disability benefits, etc., such payments are not recognized as illegally received.
