Challenges in adoption of a new Labor Code

21.03.2017

2018

On 15 March, 2017 the Committee on Social Policy, Employment, and Pension Provision of the Ukrainian Parliament reviewed a draft new labor code (Draft Law No. 1658).  Despite a number of provisions opposed by trade unions, business groups, and civil society, the Committee recommended that Parliament adopt the law.

In 2016 the International Labor Organization (ILO) prepared a lengthy comment on the law, which included 59 Recommendations. Despite a several months long process of review, the Committee chose not to address a significant number of the ILO’s concerns, according to Olena Mykhalchenko a labor lawyer with the Labor Initiative NGO.

A major concern for civil society groups is the potentially destabilizing impact of the new law. Given the political and economic crisis ongoing in Ukraine, there is a serious concern that a lengthy, complex new labor law that confuses or undermines worker rights will incentivize protest, lead to an increase in legal conflicts, and make labor market costs less predictable for employers and investors.  “Given the economic situation in Ukraine, we really fear that this may be destabilizing.  The draft law will make it easier for large enterprises and the public sector to conduct mass layoffs on short notice and with no remediation planning. A serious concern is that currently popular support for reforms is too fragile to survive poorly planned mass reductions,” said Olena Mykhalchenko. “While the current law has issues, it is at least well understood by the courts, unions, employers, and employees.  At best, the new law will create a period of confusion and increased litigation.”

The ILO review highlighted that the draft law creates an extensive range of situations where fixed short term contracts may be concluded with workers. An increase in short term contracts may appear attractive to employers on the surface, but can also undermines stable employment and adversely impact the consumer market and overall economy.  “Labor market flexibility is an attractive concept on paper, but in reality, making it easier to fire people does not necessarily make employers more likely to hire.  It just doesn’t work out that way in the real world.  In a country with the economic corruption and centralization of Ukraine, making it easier to fire people probably just means more money offshored to a bank in Cyprus,” said Tristan Masat, the Ukraine Country Director for the international NGO Solidarity Center.

The draft law also reduces the right of employees to collectively bargain. “Weakening collective bargaining does not solve industrial relations conflicts, rather it pushes workers’ protests underground, or to the courts, both of which will cost the economy,” said Masat.  The law also reduces the role of minority unions at a workplace, which again diminishes the stabilizing role of trade unions in industrial relations, and disincentives constructive industrial conflict resolution.

“Many of the changes in the draft law will benefit the largest employers, which really means the oligarch controlled public and private enterprises,” said Tristan Masat.

Labor Initiatives NGO highlighted a number of other major areas of concern with the draft law:

  • The removal of gender identity and sexual orientation as specifically named categories for protections against workplace discrimination.  This was a major issue for Ukraine’s Association Agreement with the EU, and the regression here conflicts with EU requirements.
  • The possibility of the employer to conclude fixed term labour contracts in any field of economy (part 2 Article 35 of the draft), which is contrary to ILO Convention No. 158;
  • Transfer of an employee to another employer for a period of 3 months (Article 67) with the place of transfer being not restricted by the legislation (may be another region or even country), and social guarantees (for instance, temporary place for living) being not established;
  • Termless transfer of an employee from one employer to another under the agreement between them (Article 82). In practice, an employee`s refusal to accept such a transfer may be grounds for dismissal;
  • Monitoring the performance of the employees` job duties, including through the use of technological means of surveillance (Article 29) raises serious privacy concerns. The legislation provides no methods of control, nor a list or limitations on technical means of surveillance;
  • The draft law allows an employer to write in labor contracts an obligation for the employees to work on public holidays (part 3 Article 312);
  • The draft law introduces a confusing definition for the "suspension of the employment relationship,” which may allow the employer to pay partial salaries in some circumstances, for example (Article 70).
  • The draft law adds a number of poorly defined grounds for dismissal at the initiative of the employer in case of:
    • disclosure of commercial information (paragraph 2 part 2 Article 92). Such broad wording gives the employer the right to fire an employee for disclosure of any information of organizational, technical or other nature, for example, the disclosure of the employee’s own salary, or the internal labor regulations of the company;
    • insufficient qualifications, as confirmed by the results of not only certification, but also other undefined evidence (paragraph 2 part 1 Article 93);
    • avoiding from obligatory preventive vaccination or periodic medical examination (part 3 Article 93). The employment contract in this case may be terminated without notification.