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Employment agreement and establishment of labour relations in accordance with the Draft Labour Code

08 May, 2012 Newsletters

Dear Sirs,

We avail ourselves of this opportunity to express to you assurances of our highest consideration and continuing the series of newsletters on the Draft Labour Code № 1108 in version as of December 10, 2009 (hereinafter – “the Draft LC”), bring to your attention this newsletter where we analyze changes the Draft LC introduces in the issues of conclusion of employment agreements, establishment of labour relations.

Form of employment agreement. In accordance with the current Code of Laws on Labour (hereinafter – “the Code”) the written form of employment agreement is mandatory only in cases provided by law. The Draft LC shall set the mandatory written form of employment agreement. At the same time, the rule that the employment agreement is considered to be concluded if the employee was actually allowed to work (while employment agreement was not concluded) shall remain.

Content of employment agreement. The Draft LC shall set obligatory provisions to be included into the employment agreement: place of work, effective date of the agreement (for a fixed term agreement – term and grounds for its conclusion), job function, terms and conditions of remuneration of labour, mode of work and rest, labour protection.

Probation. The Draft LC shall establish the obligation to fix condition on probation in employment agreement (currently – the condition on probation must be fixed in hiring order). The Draft LC shall include to the list of persons the probation shall not be applied to the following categories: persons elected for the post, persons who passed training during hiring while being discontinued from the main work, and winners of the competition. Unlike the Code, the probation may be applied to disabled who were assigned to work in accordance with recommendations of the medical social commission of experts, persons hired in another area and transferred to another enterprise. The Draft LC shall define the categories of persons the probation period of 6 months may be applied to: heads of legal entities and their deputies, chief accountants and their deputies, heads of remote units of legal entities. For the first time the Draft LC shall set the term the employer and the employee are obliged to notify each other (in written) on the termination of employment agreement during the probation period – no later than three days before the dismissal.

Hiring. The Draft LC shall establish the obligation of the employer to issue an order on hiring and familiarize employee with it on receipt within seven days after start of work, and provide the employee at his request with a copy of the order.

Hiring due to reservation and quota set for citizens requiring social protection. In accordance with the Law of Ukraine “On Employment of the Population” as of March 1, 1991 the employer is imposed to a fine in the amount of four minimum salaries for each refusal to hire such persons. The Draft LC in addition to the fine imposing envisages the obligation of the employer to pay reimbursement to the person assigned due to quota (on condition that the employer had a vacant place of work) in the amount of two minimum salaries.

Consequences of violation of the term of start of work by the employee. Current Code does not regulate the behavior of the employer when the employee has not started working in term determined in the employment agreement or hiring order. In practice such problem is usually resolved by means of dismissal of an employee who has not started working for truancy. The Draft LC entitles the employer to refuse in hiring in the aforesaid situation. In such case the employment agreement or employer’s normative act is the subject to annulment, and the employee is obliged to return to the employer received guarantee and reimbursement payments (if such payments were executed).

Moonlighting. Currently limitations on moonlighting and features on dismissal of by-workers shall be applied only to employees of state enterprises, institutions and organizations. The Draft LC shall set certain prohibition for enterprises of all forms of ownership. In particular, moonlighting is prohibited for employees engaged at heavy works and works in harmful or dangerous conditions if they are dealing with such conditions at the place of their main work, minors and pregnant women. The Draft LC shall foresee payment of severance pay to by-worker who is to be dismissed due to hiring the employee to whom this work will be the main place of work or appearing limitations on moonlighting in view of particular conditions and mode of work.

Execution of obligations under a vacant position. The appointment of the employee as the executor of obligations under the vacant position is not foreseen by current legislation. Aforesaid is possible only if the appointment for the position is conducted by the highest governing body. A novelty of the Draft LC is the possibility to charge the employee with obligations under the vacant position (with employee’s consent) with remuneration set for this position and releasing him from performing duties under the main job function (the Draft LC defines this as a temporary transfer to another work). The employee is considered to be transferred to the vacant position with his consent permanently if another employee has not been hired for this position within six months (for employees’ deputies this period shall be 1 year). For all that, the employee is granted his previous work if he refuses to be transferred.

Features of fixed-term labour relations. A novelty of the Draft LC is introducing the term within which the employer must inform the employee working at temporary job (a temporary job is considered a job up to two months or in case of substitution of temporary absent employee – up to four months) on dismissal – one week before the dismissal.

The Draft LC shall extend cases in which labour relations may be set for a definite period by adding the execution of jobs connected with temporary (up to one year) expansion of production or volume of services.

The Draft LC shall establish the rule that the term-fixed contract concluded with the employee repeatedly (two and more times) within the same job function, while the interval between dismissal and employment complies less than two weeks, are considered to be concluded for indefinite period.

The Draft LC shall establish the procedure of including to the employment agreement terms regarding the disclosure of commercial secret and other protected information and the consequences of its violation by the employee, rules regarding the conclusion of employment contract on work at home, conditions on conclusion of fixed-term employment contract for the next period, procedure of hiring persons elected or appointed to the post, winners of the competition, etc.

Currently future of the Draft LC remains uncertain. There is a probability that the Draft LC will be amended significantly. Therefore, we suspend analyzing the Draft LC. We will continue our work as soon as official information regarding the future of Draft LC appears.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Kind regards,

© TOV "KM Partners", 2012

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