Draft Law on Labour: Pros and Cons for Ukrainian Employers and Employees

The declared aim of the Draft is to modernize the regulation of employment relations, as well as to adapt the national labour legislation to the EU requirements. Adopted in 1971, the current Labour Code of Ukraine has long ago gone against the realities of the market economy. So, despite the fact that the Draft needs improvement, its adoption could be a positive trend for Ukraine. 

What is new

The Draft suggests a number of novelties and changes to the existing regulation. One of such is the prohibition of any discrimination in the employment and related relations. Persons who believe that they have been discriminated or mobbed in the workplace, have the right to claim in court the restoration of the violated rights, compensation for material and non-pecuniary damage. In this case, it’s the employer who is responsible for proving the opposite. Moreover, the Draft provides for the non-discriminatory design of compensation systems, so that male and female employees get paid equally for similar work or work of an equal value. 

The introduction of these novelties will have a positive effect. However, there is a risk of employee extremism or abuse of these rights by the employees. Moreover, the obligation to pay equal wage for similar work or work of an equal value restricts the employers’ rights.

What else is there to know about the Draft for both employers and employees? 

The Draft, in particular:

• formalizes the elements leading to recognition of employment relations;

• ensures a stronger role of an employment agreement in these relations;

• introduces the possibility to suspend an employment agreement;

• provides additional grounds for termination of employment relations;

• introduces changes in regulation of working hours, leaves and freelancing;

• reduces the influence of trade unions; 

• clarifies the dispute resolution in employment relations and introduces mediation as an instrument.

Employment agreement

The Draft clearly aims to prevent the state from interfering into individual labour relations. The Draft abolishes an employment contract as a special type of employment agreements. 

According to the Draft, there will be only the employment agreement, which can be concluded only in a written form (including electronic). Amendments to the agreement can also be made only in writing, by executing of either an additional agreement or a new version of the employment agreement. Sample forms of the employment agreement shall be approved by the Ministry of Social Policy of Ukraine. 

The Draft provides for:

- the list of mandatory conditions to be included in the employment agreement (e.g. rights and obligations of the parties, liability of the parties, terms of filing a termination notice, the amount of compensation in case of early termination initiated by the employer, etc.); and

- the list of additional conditions, which are optional for inclusion by the parties (e.g. confidentiality, additional obligations for the employer with regard to improvement of working conditions, provision by the employer of social and household benefits, or social and cultural services, etc.). 

At the request of the employee, information which confirms a special legal status of the employee (e.g. a person with a disability, a person affected by the Chornobyl disaster) can be added to the employment agreement too. 

It is a constructive tendency to regulate the employment relations mainly in the employment agreement since it gives more flexibility to the parties. However, impossibility to conclude an agreement in a simplified form by fixing it in the employment order, the need to execute all amendments as bilateral agreements will require more paper work and efforts from the parties.

Innovative types of employment agreements

Compared to the current Labour Code, the Draft provides such innovative types of employment agreements as:

• short-term agreement concluded for up to 2 months. Either an employee or an employer may terminate it upon 3 calendar day notice. If the termination is initiated by the employer, the employee gets eligible for a compensation in the amount of wage unpaid due to the termination;

• seasonal agreement concluded for a certain period (season) which doesn’t exceed 8 consecutive months. The employee has a right to terminate it upon 5 calendar day notice;

• agreement with no fixed hours under which the employee works only upon receiving an assignment from the employer (on-call work). The number of agreements with no fixed hours for one employer may not exceed 1/10 of the total number of employment agreements. The minimum number of working hours for the employee is 8 during a calendar month. If the employee has worked less, they shall be paid for 8 working hours;

• apprenticeship agreement concluded for up to 6 months which might be an advantage for employees who want to combine work and studying at work;

• employment agreement with a domestic worker concluded for households (families).  

Termination of employment from the new angle

The Draft provides for the following grounds to terminate employment relations: 

• expiration of the employment agreement; 

• termination upon consent of the parties; 

• termination upon the initiative of an employee; 

• termination upon the initiative of an employer; 

• reasons independent of the will of the parties;

• the grounds provided for in the employment agreement.

The grounds for the termination of employment by an employer will significantly change. In particular, they will include some new ones like the termination upon the notice of the employer, breach by the employee of conditions of the employment agreement more than twice during 180 calendar days, absence of the employee at work and lack of information about reasons of such absence during 10 working days in a row. 

An important innovation is the right of an employer to terminate an agreement with an employee upon the employer’s notice without the need to provide the reasoning. The notice period is 15-90 calendar days, depending on the duration of employment. By mutual agreement of the parties or upon unilateral initiative of the employer, the notice period may be replaced by a monetary compensation. In the latter case the amount of the compensation should be doubled.

Notably, an employment agreement may establish the notice period longer than standard 2 weeks in case of resignation of CEO and other officials.

What is left out?

The Draft aims to adequately regulate various types of employment and provide more flexibility to the parties. But why then is it widely criticized by trade unions and other employees’ organizations? 

Possibly, because it does not mention trade unions at all. This means that employers will be free to make key decisions (including those related to the dismissal upon employer’s initiative) without a prior consent of the trade unions. Instead, the Draft refers to employees’ representatives as persons authorized to represent employees and protect their rights, however, ensures only their advisory role. Their activities should be regulated by a separate law which is yet to be developed. 

The Draft puts aside the following existing provisions and guaranties of employees: 

• guarantees for women (except for certain guarantees for pregnant women), thus reducing social security level for women with small children and children with disabilities;

• provisions on work discipline and disciplinary liability;

• definition and consequences of absence at work (‘truancy) for less than 10 days;

• provisions on ensuring employment of dismissed employees;

• cases for mandatory provision of additional paid vacation etc.

It reduces the amount of a minimum guaranteed compensation for overtimes, work on holidays and days-off from a double rate to 20% of the rate, limits the period for which an employee may receive the compensation for unused vacation to the current year and preceding year only.

The above reduction of employee’s guarantees and benefits understandably causes protests. 

Besides, the Draft does not cover many issues regulated by other legislation or not regulated yet (e.g. conclusion of collective bargaining agreements, issues related to outstaffing and outsourcing) and often refers to acts which are yet to be developed. 

Seeking for the balance of powers

For a long time, the Labour Code of Ukraine has remained substantially unchanged, incorporating Soviet model of labour relations with its pro-employee approach and disregarding the needs of the market economy. There has been a call for a new law, which would even out the imbalance of power between employers and employees, legitimize modern types of employment and make the labour market more flexible. Giving to employers more discretion in hiring and firing staff, establishing compensations and benefits, work regimes and conditions on a contractual basis envisaged by the Draft should add more flexibility to the relations of the parties and, as a result, help reduce the shadow employment in Ukraine. 

At the same time, the Draft has been blamed widely for making employees less socially secure that, eventually, may result in the increasing labour migration and unemployment. 

Of course, the Draft requires significant improvement and elaboration. Its adoption in 2020 is very likely, particularly because it has been initiated by the Government which is now the strongest player on the Ukrainian political arena. Hopefully, by the moment of adoption all imperfections of the Draft are given considerable thought by MPs and the relevant Parliamentary committee. That will result in making the new Law on Labour a functional tool to balance the needs of both employers and their staff.

By Inna Kostrytska, Senior Associate, and Yuliya Bleshmudt, Associate, Integrites