DRAFT LEGAL ACTS
New Labor Code on the Horizon
On November 05, 2015 the Draft Labor Code of Ukraine1was passed in the first reading by the Verkhovna Rada. This document was highly anticipated, especially by employers, as the effective Labor Code of Ukraine was adopted in 1971 and it does not reflect the current economic situation and labor market conditions in Ukraine.
The Draft Labor Code of Ukraine, if adopted, will introduce a great many innovations to the current labor regulation, such as:
- written employment agreements;
- extended list of grounds for conclusion of fixed-term employment agreements;
- monitoring of employees;
- background checks;
- suspension of employment;
- new grounds for dismissal of single mothers;
- termination of employment in case of extraordinary circumstances (war, catastrophe, act of God, epidemic, etc.);
- termination of employment in case of disclosure of confidential information;
- possibility to reduce the notification period;
- increase of annual paid vacation from 24 to 28 days.
It is expected that the new Labor Code of Ukraine will become effective on January 01, 2016. The Draft Labor Code of Ukraine provides for the 1-year transition period, when all employers should adapt labor relations with their employees to provisions of the new Labor Code of Ukraine.
The Verkhovna Rada voted for an expedited ad hoc procedure for consideration of the Draft Labor Code of Ukraine. The Draft Labor Code of Ukraine will be submitted for consideration in its second reading by the Verkhovna Rada in 3 weeks.
LEGISLATIVE DEVELOPMENTS AND CLARIFICATIONS
Liability for Violating Rights of Employees Called to Arms
On November 03, 2015 the Verkhovna Rada adopted the Law of Ukraine2 which established liability for violations of statutory guarantees for employees called for military service. The existing guarantees provide for retention of the job and the monthly compensation of an average salary of employees called for military service.
The Law establishes the following fines for violating these guarantees. In case of violation, an employer (i.e. legal entity or private entrepreneur) will be punished with a fine in the amount of UAH 13,780 (approx. EUR 550) per each affected employee; the employer’s officers will be punished with an administrative fine in an amount ranging from UAH 850 (approx. EUR 35) to UAH 1,700 (approx. EUR 70).
The Law is expected to become effective by mid-December 2015.
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IMPACT: Employers whose employees are mobilized and/or called for military service |
RISK: Failure to follow the statutory guarantees for employees who were mobilized or called for military service |
RECOMMENDATIONS: To ensure human resources and payroll follow the statutory guarantees |
Hire Notification Rules Clarified
On October 02, 2015 the State Fiscal Service of Ukraine (the “SFS”) rendered the Letter3 clarifying rules on hire notification with respect to hiring managers whose personal data is also submitted to state registrars with further publication in the Unified State Register of Legal Entities and Private Entrepreneurs. The SFS has explained that employers are obliged to report to the SFS on employment of a new manager (e.g. director, general manager), even though they submit a separate filing on manager’s change to the state registrar.
| IMPACT: All employers | RISK: Administrative fine on companies in the amount of up to € 60 per each failure to notify and on corporate officers in the amount of up to € 85 per each failure to notify | RECOMMENDATIONS: To ensure that the notification on employment of a new manager is filed with the SFS prior to the commencement of his/her work, even though a separate filing is submitted to the state registrar |
External Labor Migration Outlined in the Law
On November 05, 2015 the Verkhovna Rada adopted the Law of Ukraine4 from the so-called “EU visa-free package” outlining the legal framework for the external labor migration. It is expected to become effective by mid-December 2015.
The Law envisages the basic notions related to the external labor migration (e.g. “labor migrant”, “reintegration”) and divides the spheres of external migration competence between certain governmental bodies (i.e. the Cabinet of Ministers, the Ministry of Labor and Social Policy, local state administrations). Its adoption brings Ukraine closer to establishing the visa-free regime with the EU.
Average Salary Compensation for Employees Called for Military Service
The Cabinet of Ministers presented the Draft Resolution5 amending its prior Resolution devoted to the compensation of an average salary to mobilized employees. We remind that the Law extended the term of these guarantees from 1 year to the factual demobilization or end of the special period (ATO).
The Draft Resolution, if adopted, will allow employers to receive a compensation for payments made to employees called for military service. In contrast, according to the current edition of the Resolution, the Ministry of Labor and Social Policy is only allowed to compensate payments made to mobilized employees.
SIGNIFICANT COURT DECISIONS
Supreme Court Developed Test for Trade Union’s Rejection of Dismissal
On July 01, 2015 the Supreme Court of Ukraine (the “SC”) delivered the resolution6 in a case concerning dismissal upon the trade union’s consent. In this resolution, the SC expressed its legal position regarding “the well-foundedness of the trade union’s rejection to dismiss an employee”. We remind that, in accordance with Article 43(7) of the Labor Code, “the trade union’s rejection to dismiss an employee must be well-founded. If the rejection of dismissal lacks justification, the employer is allowed to dismiss the employee without the trade union’s consent”.
The SC noted that it had never interpreted the term “well-foundedness” in the context of the trade union’s rejection of dismissal. Therefore, in its resolution of July 01, 2015, the SC developed a special test for the rejection to be recognized as well-founded, namely:
- the rejection must be sufficient;
- it must be well reasoned;
- it must contain reference to legal grounds proving the illegality of dismissal or reference to the employer’s failure to consider the factual background which has led to the employee’s dismissal with a breach of his/her legitimate rights.
| IMPACT: Employers with trade unions | RISK: Recognition of the dismissal as unlawful with the employee’s reinstatement | RECOMMENDATIONS: To ensure that employees are dismissed despite of the trade union’s rejection only if the rejection does not satisfy the test requirements |
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1 - The Draft Labor Code of Ukraine No. 1658 dated December 27, 2015
2 - The Law of Ukraine “On Amending Certain Legislative Acts Regarding Strengthening the Liability for Violating Statutory Guarantees for Employees Called for Military Service”, dated November 03, 2015
3 - Letter of the State Fiscal Service of Ukraine No. 20929/6/99-99-17-03-03-15, dated October 2, 2015
4 - The Law of Ukraine “On External Labor Migration”, dated November 05, 2015
5 - The Draft Resolution of the Cabinet of Ministers of Ukraine “On Amending Resolution No. 105 of the Cabinet of Ministers of Ukraine dated March 04, 2015”
6 - The Resolution of the Supreme Court of Ukraine in case No. 6-703цс15, dated July 01, 2015