To work in a European way:

What is in Ukrainian legislation that prevents increasing the effectiveness of labor

Published on the Ukrainian business publication Delo.ua, September 17, 2015. Original in Russian here. Translation by New Cold War.org.

Labor and employment law in the European Union is based on several key principles – equality, the power of trade unions, and flexibility in solving disputes between employer and employee. In comparison with Ukrainian law, EU law gives employers more freedom to maneuver. But the current Labor Code of Ukraine for a long time must be brought into line with economic realities. Proposed cosmetic corrections do not accomplish this.

The Global Competitiveness Index indicates that in Ukraine, there is not a good relationship between employers and employees. Ukraine scores 3.8 points on a seven-point scale. According to this index, our country occupies 119th place in the list of 144 countries. This indicates the low competitiveness of the domestic labor market.

For nearly a quarter century, Ukraine has built a market economy. At the same time, the country continues to operate a Labor Code which entered into force in 1972. Despite numerous amendments, it is still focused on the socialist legal approach, which is the comprehensive protection of the worker. According to the Code, the employer is extremely limited in the legal levers of influence on the productivity of employees.

“Ukrainian labor legislation originates from the Soviet Union, where an employee was in the centre of the state’s attention and business did not exist as a distinct concept. Accordingly, it involves a lot of privileges to the worker and “oppresses” the position of the employer, says Dmitry Ponomarev, chief legal adviser of the publishing company Ekonomika Communication Hub. “In modern conditions, it assumes the occurrence of disputes in which an employee may, frankly, be wrong but strongly protected. And that means the employer can be subject to blackmail.”

“Procedures for upholding the rights of employers in our current Labor Code are very bad, but the procedures for upholding the rights of the employee are detailed. One of the most striking examples of this imbalance is the practice of the legal dismissal. “I’m sure everyone has heard how the employer pressures an employee to apply for a dismissal ‘of their own volition’ [a widespread practice – most workers in Ukraine are not dismissed according to labor law but are pressured or forced to sign a dismissal paper–translator].

“The question itself suggests that an employer cannot fire an employee if he did not wish to be dismissed. Although, on the one hand, this means a protection from unscrupulous employers, there is another side. The employee may not even be present in the workplace, but to fire him, the employer will have to go through seven circles of hell associated with paperwork. All in preparation for a possible trial. Without documentations, the employer will almost certainly lose in court.”

According to the managing partner of the law firm Vasil Kisil & Partners, Oxana Voinarovska, a large number of categorical legal prohibitions against employers enshrined in the Ukrainian Labor Code has ensured that employers operate in the shadows and avoid dealing by law with employees “because this involves too much red tape and excessive attention to labor inspectors”.

The fundamental principles of EU labor law

Labor Law of the European Union mainly regulates issues that are not included in the scope of self-regulation of the members of the bloc. Pan-European rights have to do with the fight against discrimination, ensuring equality in labor relations and the protection of workers from dismissal or bankruptcy of the employer. These principles are also reflected in European social policy.

The underlying principle in European labor law is the principle of equality. The EU is actively fighting discrimination on grounds of sex, age, color or the form of property of the employer. [here, the author of the article asserts there is a discrimination against employers in Ukraine’s current labor code–translator]

The second fundamental of European principles is freedom of movement of persons. In broad terms, this implies the movement of workers, students, pensioners who are nationals of third countries, visa-free movement of persons within the Schengen area and freedom of establishment of legal persons. Freedom of movement of workers, in turn, is a fundamental principle of the functioning of the European labor market and a key principle of labor and social rights of the EU.

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The principle of regulation of time for work and leisure in the framework of Directive 2003/88 / EC [European Commission] introduces minimum requirements for hours of work and rest periods throughout the European bloc. These are: the length of the working week shall not exceed 48 hours; during the seven-day working week, there be 11 hours of rest per day and one continuous break of at least 24 hours; if the working day is longer than 6 hours continuously, the employee is entitled to a break; the duration of vacation leave is at least 4 weeks; leave to care for a child is available for at least three months.

National legislation may make changes to these requirements in the direction of more favorable conditions for workers. But reducing these workers’ rights is in conflict with EU law and therefore illegal.

Among other things, the EU developed an active trade union movement. Unions really affect the balance of labor relations, as evidenced by the fact that strikes are a common phenomenon.

Socialist spirit

In an article for the journal Legal Practice of the international legal law firm ‘B.A.M.’, Anna Lobkovsky wrote that the Labor Code of Ukraine is not worse, and even significantly better in comparison with the legislation of many European countries, in protection of certain rights of workers.

“For example, Article 50 of the Labor Code of Ukraine stipulates that the normal working hours of employees cannot exceed 40 hours a week. According to the Article 6 of Directive 2003/88 / of the European Commission, the duration of the working week in the EU should not exceed 48 hours, including overtime. Even if we add to this the Ukrainian norm of 120 hours of overtime per year allowed by Article 65 of the Labor Code of Ukraine, European rules allow you to work longer.

“According to Article 70 of the Labor Code of Ukraine, the duration of weekly days of continuous rest must be no less than 42 hours, but in accordance with Article 5 of the Directive 2003/88 / EC, it is 24 hours.

“The right to a break for rest and food is provided for all workers in Article 66 of the Ukrainian Labor Code, except for employees in jobs where a break cannot be set because of the nature of the work, whereas under Article 4 of Directive 2003/88 / EC, employees do not have such a right to a break when working hours are less than six hours,” said Lobkovsky.

However, the expert points out that the Ukrainian labor law involves a number of restrictions and regulations that put the employer in the rigid framework of labor relations. Therefore, in practice, labor relations are fundamentally different from those prescribed in legislation.

Igor Konopka from the law firm FCLEX explains that the Labor Code guarantees the equality of the labor rights of citizens regardless of origin, social and property status, race or nationality, sex, language, political views, religious beliefs, type and nature of occupation, residence and other circumstances (vv. 2-1). However, in practice, the main problem is discrimination on grounds of sex and age.

“Notice in the above Art. 2-1 of the Labor Code, there is not a word about age. This is a common problem. Very often, we see ads for a job only to persons of a certain age–“beginning from age of 25 “, “up to the till age of 50″, and so on. These conditions may be found illegal by a court, but that requires a proof of refusal to accept a worker for this reason. But to obtain from the prospective employer a written confirmation of refusal to accept a worker because of his/her age is problematic,” Konopka says.

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Jobs are often denied according to gender. This is especially true for pregnant women.

As for the activity of trade unions in Ukraine, their activities are regulated by the Labor Code as well as by a special law on trade unions. Until recently, trade unions were more concerned with ideology and party work. Now their activity is visible only in large enterprises as well as public associations.

The Ukrainian Labor Code provides a special procedure for the resolution of individual labor disputes – through the creation of relevant commissions. Such commissions can only be created at enterprises and organizations which employ 15 people or more. “The Code establishes which disputes cannot be considered by a commission (for example, for reinstatement). Then the commission shall decide the dispute within 10 days, its decision can also be challenged in court within 10 days. In principle, this mechanism is obsolete – a resentful employee just wastes his time and can immediately go to court. It should be noted that in recent years in the field of pre-trial settlement, mediation is gaining in popularity, but its use is unfortunately not regulated by the Labor Code, ” said Konopka.

As a result, one of the main objectives of the reform of labor legislation of Ukraine is to create more flexible conditions for the solution of conflicts between employer and employee. “The Europeanization of Ukrainian labor law should lead all parties to a common denominator, in which the skilled worker will be able to count on a decent standard of living, with good wages and safe working conditions, and the employer will be able to create the conditions under which the work of his/her employees will be most effective,” says lawyer Roman Drobotsky of the law firm Asters.

But in parallel, it is necessary to ensure that the employer has a responsible attitude to the law after the weakening of legal pressure upon him or her. This is possible only when the full-fledged triangle – ‘power-employers-trade unions’ – is functioning. “Europeanization” of the legislation is unlikely to be enough.

“Ukraine is one of the few countries where an employer can be held criminally liable for the dismissal of an employee,” comments Oksana Voinarovska, managing partner of the law firm Vasil Kisil and Partners.

Does the current Labor Code of Ukraine encourage a shadow labor market?

Our legislation does not encourage employers to formalize of their staff. The legislation acts through punishment. To hire someone without issuing a formal employment contract, the employer has to pay 36,500 hryvnia (1,700 USD). But it is hard to catch those who evade this.

The government has provided an opportunity to reduce the single social contribution [a tax]. But because of the complex and not fully transparent process, few employers seize this opportunity.

As a result, we have more than half of the employees who are working without official registration at the main place of work. According to a study of the World Bank the number of such workers is only 23 per cent of the workforce, but it is still higher than the European average level by 3-4 times.

In Ukraine, is it hard to fire an employee? How does it affect the attitude of the employer to the employee?

Officially, to fire an employee is very difficult. Ukraine is one of the few countries where in some cases, an employer can be held criminally responsible for dismissal of an employee. The Labor Code of Ukraine also establishes categories of workers who cannot be at all dismissed by the employer. Even in the case of restructuring of the enterprise, the employer must take into account a number of factors when selecting employees who have a priority right to remain in the workplace.

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What needs to be changed in the Labor Code so that it ceases to be from the Soviet era and responds to a market economy?

In my opinion, the first necessity in the draft Labor Code is to abandon the heritage of the Soviet era, which is not typical for modern business. Unfortunately, the government’s draft of the new Labor Code still uses Soviet terms such as “conditions in an enterprise”. The draft of the new code includes positive expectations of Ukrainian business: the abolition of employment record, monetization of certain benefits and guarantees, increasing the role of employment contracts in the regulation of relations between workers and employers.

How does this situation hinder the investment attractiveness of Ukraine?

There is an outflow of investment capital and, as a result, a decrease in the number of jobs. The current Labor Code contains a lot of declarative rules, voids and procedures but doesn’t contain the modes of their implementation. In particular, the norm is long outlived prescribing mandatory re-employment of pregnant women, women with children under three years of age and single mothers when an enterprise is closed.

Since to follow these rules, in practice, is not possible, employers fill “gaps” with their own interpretation. But their interpretation doesn’t always correspond to the official one – especially in courts. The result is that the country has no unified forms of judicial and real-life practices. [In other words, the law doesn’t correspond with the widespread tactics of employers – that is employers violate the law and try to adapt the law to correspond their real practice—translator.]

The developers of the new draft Labor Code attempted to minimize the number of such “dead” rules and prescribe in detail the procedure for their implementation. Because of this, the new draft Labor Code by volume exceeds the current Labor Code of Ukraine by one and a half times.

But even this did not eliminate outright absurdities. For example, the draft of the Labor Code prescribes the detailed procedure for dismissal of an employee who is in a state of intoxication. Yet there are no instructions on how to identify that an employee is really intoxicated. The head of the company is left to do it on his/her own way.

How will the new Labor Code regulate certain aspects of labor relations at the contractual level?

Some points are provided there. It is an absolute positive. For example, the current Labor Code prohibits women from night work. The draft Labor Code allows for night work for women with children under the age of 15 years (provided they sign a consent form). The labor market needs more flexibility, otherwise it will be extremely inefficient.

Note by New Cold War.org editors:
The focus of the above article is to examine how employers in the ‘new’, Euromaidan Ukraine can get out fully from onerous labor legislation dating from a different era. In practice in today’s Ukraine, violations of labor rights are routine. As we saw earlier this year during the strike at Kyiv public transport, the right to strike is being severely curtailed. And there have been tens of thousands of redundancies (layoffs) in factories and state institutions where workers rights, under existing law, to job relocation or generous financial compensation have been routinely violated. A worker in today’s Ukraine who seeks protection under current labor legislation faces a difficult battle filled with financial cost, pressures and threats.

Euromaidan employers want to dispose of the last vestiges of Soviet-era labour laws altogether. On the other hand, they cannot be seen to flout too blatantly the rights of workers as codified in EU labor legislation, even if Ukraine is not an EU member.