27 April 2017, 15:37

Who Benefited from Modifying the Draft Labor Code?

Oksana Voynarovska
Oksana Voynarovska Partner, Vasil Kisil & Partners
Savchuk Valeriya
Savchuk Valeriya Counsel Labour & Employment Vasil Kisil & Partners

The draft Labor Code is now undergoing another reincarnation. This time there are good chances that the Verkhovna Rada (Parliament) of Ukraine will adopt the code since the political will to adopt the same was strong yet long ago.

The draft Labor Code (LC), which is now pending in the Verkhovna Rada (Parliament) of Ukraine (VRU), was adopted in the first reading yet in November 2015. Finally, the VRU Committee for Social Policy, Employment and Pension Benefits recommended in March 2017 to adopt the draft in the second reading and in general. It took almost one year and a half for the working group composed of MPs, representatives of trade unions, practicing lawyers and scientists to finish thoroughly the draft. Acting as members of the working group, authors of this article were directly involved in the molding of future key legislative act to govern employment relationships and actively participated in debates that often happened at meetings of the working group among representatives of the business and trade unions.

Who won these battles? Did employers manage to carry their point and delete from the text of the draft LC rules protecting excessively employees? Or have trade unions managed to lobby inserting rules aimed at having more control over employers' operations? This article will address this issues in detail below.

Upon preparing the draft LC for the second reading, the working group has worked over more than 1900 amendments in aggregate as filed by MPs. Moreover, the draft LC was sent to ILO to obtain its opinion. Based on results of its examination, ILO sent its own report and recommendations for modifying the draft LC, which were taken into account upon finishing the draft LC. Please find below the key changes made in the draft LC to prepare it for the second reading.

Mandatory application of tariff and qualification directories (Profession Classifier, Qualification Characteristics Directory, etc.). There was quite a stir among business representatives as the draft LC recognized tariff and qualifications directories as mandatory. We remind that there are now lots of such documents as, for example, Profession Classifier, Qualification Characteristics Directory, etc. While the Profession Classifier was mandatory according to the classifier as such, the Qualification Characteristics Directory remained a recommendation, to which employers could refer upon preparing, for example, job descriptions.

Recognizing similar documents as mandatory raised lots of issues and caused a number of problems for the business. Thus, if employment duties assigned to a certain position implies the employment function, which under the Qualification Characteristics Directory is inherent to several positions, then, in the meaning of the draft LC, this is dual job holding requiring relevant extra pays.

Therefore, the business actively criticized this norm of the draft LC. Moreover, ILO also opposed to inserting such a rule in the Code. ILO reasonably noted for members of the working group that employment functions throughout the labor market might not be standardized. As the business changes, employee's employment duties change as well. That is why employees holding similar positions with companies varying by their size may perform totally different volume of employment duties.

Respecting views of the business and ILO recommendations, the working group deleted from the draft LC the rules compelling employers to use tariff and qualification directories, state standards and other relevant acts of regulatory and technical nature that governed employment relations. Thus, if the LC is adopted in such wording, the Profession Classifier will not be mandatory. Furthermore, there would be no need to bring position titles in line with the Profession Classifier and find the most suitable name upon creating a position that does not match the Classifier.

Explaining reasons for refusing hiring in writing. While the Labor Code currently in effect confines itself to the declarative prohibition from refusing hiring without good reason, the draft LC has several articles dedicated to the refusal of hiring and recruitment of employees.

To be more specific, the draft LC distinguishes separate grounds, for which the refusal to hire may be deemed as reasonable, through the list given in the draft LC is not exhaustive. Thus, the refusal to hire an applicant is reasonable if he or she let the period designated by the employer for medical examination to elapse, if a medical examination is mandatory for such category of employees.

Moreover, when the draft LC was modified for the second reading, a provision was inserted in the draft text that the refusal to hire will be treated as reasonable, if employer and applicant failed to reach an agreement on a probation period.

Generally speaking, the draft LC states the refusal to hire is unreasonable, unless it is connected with the employees' qualifications and professional characteristics.

Moreover, upon finishing the draft LC for the second reading, members of the working group took into account amendments proposed by MPs L.L. Denysova and M.M. Papiiev, which provided for the employer's obligation to explain in writing, at request of the applicant, reasons for refusing to hire. The applicants' exercise of their rights to be explained in writing reasons for refusing to hire is likely to increase the number of court proceedings brought to challenge such refusals. While the main problem applicants earlier faced in connection with similar court disputes was to prove actual reasons for refusing to hire, now, having in hand written evidence that the refusal was unreasonable, it would be significantly easier to challenge the same.

Using technical monitoring devices. Another issue extensively covered in the press and discussed among business representatives was to enable employers to have technical monitoring devices (such as, audio and video surveillance) to monitor an employee discharging his or her employment duties. Such issue raised debates at working group meetings. MPs submitted lots of proposals and amendments to this article in the draft LC. To be more specific, they proposed to strike out the employer's obligation to advise employees of the use of technical monitoring devices, but, for obvious reasons, such an amendment was not supported by representatives of trade unions.

Other MPs proposed instead giving such notice in writing against employee's personal signature. Moreover, certain MPs even proposed not to notify only, but to obtain their consent to use such technical devices. If so, there is an issue whether it is technically possible to have selective technical control over those employees who gave such consent. By way of example, it is difficult to imagine how video surveillance could be selective.

As a result of emotional discussions, the initial wording of the draft LC article dealing with the application of technical monitoring devices remained almost unchanged. To use such devices, an employer shall obligatorily notify employees thereof, but is not required to obtain employees' consent for their use. In addition, the draft LC does not restrict an employer from choosing a form of notice. Such notice may be given, inter alia, by placing special signs in the premises, where technical monitoring devices are used. At the same time, the text of the draft LC prepared for the second reading now contains a rule requiring setting out a procedure for using technical monitoring devices in the collective bargaining agreement or the employer's local act (such as, special local policy).

Labor record books. As it was expected, once the new labor code has been adopted, labor record book will be no longer needed. However, notwithstanding such expectations, the draft LC still requires keeping labor record books. MPs submitted to the working group lots of amendments that required setting aside the labor record books, the working group, however, did not accept any of them.

However, this does not mean that paper-form labor record books will stay out of the progress. Yet, at its last meetings, the working group agreed upon an amendment filed by MPs who proposed that labor record books should stay until the online Unified Register of Information on Employee's Labor Activities is introduced. The relevant rule is inserted in Final and Transitory Provisions of the draft LC.

Non-compete clauses. Now there are many doubts as per whether non-compete clauses may be inserted in an employment agreement. We note that so-called "non-compete clauses" are terms and conditions in an employment agreement that prohibit an employee from hiring, during certain period after terminating employment relations with the employer, with his or her employer's competitors or competing with the employer on his or her own.

Such clauses are widely used in employment relationships abroad. However, Ukraine still lacks well-established court practice relating to this and actual enforcement of such non-compete clauses is still questionable. Thus, there are concerns that Ukrainian courts may interpret the non-compete clause as contrary to the labor laws.

A group of MPs proposed to incorporate in the draft LC provisions to govern the possibility of using non-compete clauses. To be more specific, they provided that the prohibition might not be unconditional. It should be limited to certain area of business, locality and certainly the time. Moreover, a period, during which the former employee is prohibited from competing with the employer, should have been paid.

However, trade union representatives strongly opposed to incorporating similar provisions in the draft LC, so that such amendment had no necessary number of votes of the working group members and was not inserted in the draft LC for the second reading.

Remote work. Upon preparing the draft LC for the second reading, the working group members made attempts to liberate certain provisions defining working conditions. To be more specific, sometimes they have managed to delete from the draft LC provisions that governed in detail labor relationships between the employer and employee by referring the relevant area of employment relationships to be regulated under agreement between the employer and employee.

One of such liberalization examples is a rule inserted in the draft LC and stating that an employee may work remotely (outside of the employer's premises) and have remote access. Moreover, the working group members have managed to keep a reasonable balance and not to burden the draft LC with excessive details describing such remote access, as this is the case for the other sections of the draft LC.

Consultations with the trade union upon redundancy. During its analysis, ILO noted for the members of the working group that the draft LC required mandatory consultations with trade unions upon reducing any number of employees. As ILO representatives reasonably stated, there was no need to consult with the trade union if a small number of employees or even one employee only is reduced.

Thus, ILO proposed to have prior consultations with the trade union if the is redundancy was of a large-scale nature. However, upon finishing the draft LLC, such proposals were not reflected therein. As before, the draft LC still requires an employer to consult with the trade union to mitigate the redundancy no later than three months before they are expected to start.

Monetary compensation instead of redundancy notice. Upon preparing the draft LC for the second reading, a rule was inserted therein stating that notice of further redundancy could be replaced by monetary compensation.

However, notwithstanding that this rule was aimed at meeting the employer's interests, it hardly could ensure that employer's interests are met in full. Thus, this rule provides that the period of notice may be replaced with a monetary compensation under an agreement between the employer and employee only. Still, this rule is an acceptable alternative of its previous wording set out in the draft LC adopted in the first reading. So, the initial wording of this rule provided that such replacing could occur under a court ruling only.

Absence without leave is the absence during a business day. The modified draft LC addresses the reasons for dismissing employees on the initiative of the employer. Thus, the rules derived yet from the previous labor code and authorizing the employer to dismiss an employee if he or she is absent from work for three hours in a row was fully reflected in the draft LC.

However, upon finishing the draft, the requirement for being absent during three hours was deleted from the text of the draft LC. As a result, an employee may be dismissed for absence without leave, if he or she was absent from the work during a business day without reference to the specific number of hours of such absence.

Generally speaking, the finished draft LC, which the working group has been elaborating almost one year and a half, contains no conceptual or any other fundamental changes as compared to the draft adopted by the VRU in the first reading. All amendments proposed by MPs and taken into account by the working group are mostly of editorial nature. Moreover, the draft LC proposed for the second reading offers no revolutionary changes at all in the regulation of employment relationships and performs a codifying function only by consolidating rules of labor laws scattered among more than a hundred of regulatory legal acts.

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