• Main Novelties in the Draft Labor Code of Ukraine
  • July 20, 2012
  • Law Firm: Vasil Kisil Partners - Kyiv (Kiev) Office
  • New realities pose serious challenges for labor laws, which first of all need to find a balance between the necessity to protect the rights of employees and the necessity to ensure labor market flexibility and trigger an active social dialogue. Apart from Poland, Ukraine is the only country among the Eastern European and Central Asian countries, which maintains in force the old Code of Labor Laws, the Code of Labor Laws of the USSR, dated December 10, 1971 No. 322-VIII (the “CLL of Ukraine”). In the nearest future, the Verkhovna Rada of Ukraine is planning to consider the Draft Labor Code under registration No. 1108 (the “Draft Labor Code”) in the second reading.
    It should also be highlighted that part 8 of Article 6 of the Draft Labor Code provides that labor laws shall not apply if any work is performed by a self-employed person; or a contractor. In addition, the Draft Labor Code permits to engage top management as contractors.

    The Draft Labor Code establishes the categories of foreign nationals who do not need any employment permit. Thus, part 6 of Article 20 of the Draft Labor Code assigns the following employees to such categories: 1) representatives of foreign maritime (river) fleet and foreign airlines that provide services to such organizations in the territory of Ukraine; 2) representatives of foreign mass media accredited in Ukraine; 3) actors and art workers to be employed in Ukraine in accordance with their professional qualification; 4) employees of emergency rescue services for performance of emergency works; 5) heads of representative offices of foreign business entities in Ukraine and chief executives of enterprises with foreign investment; 6) employees employed within and for the positions (areas of qualification) set out in a product sharing agreement.

    One of the most significant novelties in the Draft Labor Code is introduction of quotas for employment of persons in need of social protection. Such quotas cover minors, pregnant women, single parents, pre-pension age persons, etc and are set by local self-government bodies subject to approval by territory-based social dialogue authorities (Article 35 of the Draft Labor Code). The foregoing provision of the Draft Labor Code raises serious concerns since

    a. it introduces 5 schemes of quotas covering a wide range of employees, and
    b. it envisages a single standard for employers without any regard to industry, region or company size.

    Other novelties of the Draft Labor Code relate to the content and form of the employment agreement. Thus, Article 40 of the Draft Labor Code provides for the following terms and conditions of the employment agreement: 1) binding, 2) additional, and 3) other terms and conditions prescribed by applicable laws and by a collective bargaining agreement. Thus, as opposed to the currently effective CLL of Ukraine, the Draft Labor Code contains an exhaustive list of material terms and conditions of the employment agreement, failing which the employment agreement shall not be deemed executed. They, in particular, include the following terms and conditions: place of employment; effective date of the employment agreement; job duties, or profession in which the employee will work; remuneration conditions; work and rest time; occupational safety and health.

    The Draft Labor Code provides that the employment agreement must be made in writing (Article 41 of the Draft Labor Code), which should surely improve the social protection of employees. However, as provided by the Draft Labor Code, this rule will not apply to existing employment relations. Thus, subject to the foregoing provision and considering that, as stated above, the employment relationship arises, in particular, on the date the employment begins, and the actual admission to work is equal to the execution of the employment agreement, whether or not such agreement has been executed in writing.

    Like the currently effective CLL of Ukraine, the Draft Labor Code limits the scope of application of fixed-term employment agreements and provides that fixed-term employment agreements should be used only when the employment relationship cannot be established for an indefinite period of time.

    In the employers’ opinion, in view of the reforms currently underway in the global labor market, the Draft Labor Code should guarantee the right of the parties to employment relationships to freely agree on the execution of a fixed-term employment agreement regardless of the grounds or the nature of the job. Meanwhile, since the limited scope of application of fixed-term employment agreements is one of the important guarantees of the employees’ labor rights, the position of the Ministry of Social Policy of Ukraine and the trade unions on this issue remains unchanged. At the same time, a positive development is that Article 69 of the Draft Labor Code provides for an expanded and clearer list of grounds for establishing employment relations for an indefinite period of time.

    The Draft Labor Code also provides for an expanded list of grounds for terminating employment relations with an employee, as compared to the currently effective CLL of Ukraine. Thus, such additional grounds are as follows:

    1. A gross violation of labor safety rules, fire safety rules or traffic safety rules (Clause 5 of part 1 of Article 104 of the Draft Labor Code); 
    2. Disclosure of a state or commercial secret (Clause 2 of part 2 of Article 104 of the Draft Labor Code); 
    3. A violation by the director of the rules set by the founders (Clause 6 of part 2 of Article 104 of the Draft Labor Code); 
    4. The employee’s absence from work, with no information available as to the reasons behind such absence, for more than four months (Article 108 of the Draft Labor Code); 
    5. Decease of the employer (Article 113 of the Draft Labor Code); 
    6. Death of the employee (Article 114 of the Draft Labor Code).

    Evidently, such additional grounds for terminating employment relations as the decease of the employer and the decease of the employee are purely technical in nature.

    The Draft Labor Code also introduces new rules governing the procedure for dismissing employees. Thus, it imposes a ban on dismissal of employees while they are on a business trip (part 2 of Article 116 of the Draft Labor Code).

    The Draft Labor Code radically changes the legal status of the labor dispute commission, in particular, out of the primary authority for consideration of individual labor disputes, the labor dispute commission has been transformed into a conciliation body set up for the purposes of “settling individual labor disputes through a search for mutually acceptable solutions and reconciling the parties to such disputes”. The only authority authorized to consider individual labor disputes in accordance with the Draft Labor Code is the court, while the labor dispute commission performs only conciliatory functions.

    In accordance with the Draft Labor Code, the general limitation period for judicial recourse has been extended from three months to three years. However, the limitation period for filing a statement of claim with the court against an unlawful dismissal has not been changed and is still set at one month. The same limitation period is prescribed by the Draft Labor Code for filing claims regarding transfer to another job or unlawful refusal of employment. In the authors’ opinion, the positive novelty introduced by the Draft Labor Code is its provision saying that no limitation period shall apply only to the claims for recovery of accrued but delayed wages, and neither to any claims relating to labor remuneration (part 2 of Article 440 of the Draft Labor Code).

    Subject to the foregoing, the authors believe that a majority of the novelties proposed by the Draft Labor Code will help to find balance between the interests of employers and those of hired employees. However, a complex analysis of the provisions of the Draft Labor Code allows the conclusion that Ukraine still has not shifted towards the radical reforms suggested by the international experience of labor law reforms, such as the alleviation of overly strict labor law requirements to simplify the procedures for hiring and dismissing employees, the extension of the term and the scope of application of fixed-term employment agreements, the provision of a variety of possible options for entering into employment agreements, the introduction of flexible work hours, and the introduction of apprenticeship wages.