Ukraine: "Resolution of Individual Labor Disputes: a Comparative Analysis of the Draft Labor Code and the Code of Labor Laws of Ukraine"

The procedure for the resolution of individual labor disputes is regulated by Chapter XV of Code of Labor Laws of Ukraine No. 322-VIII dated December 10, 1971, as amended (the "CLLU"). Draft Labor Code No. 1108 dated December 10, 2009 (the "Draft Labor Code"), which was submitted to the Verkhovna Rada of Ukraine for consideration in the second reading, contains Volume ІX devoted to individual labor disputes.

Definition and Subject Matter of Individual Labor Dispute

Applicable labor laws do not define the concept of an individual labor dispute. As the Draft Labor Code defines this term, an individual labor dispute means differences between an employer and an employee in relation to executing, performing, amending or terminating an employment agreement as well as complying with labor laws. A tentative list of differences which may constitute the subject matter of an individual labor dispute is provided in Article 425 of the Draft Labor Code. In particular, the subject matter of an individual labor dispute may include differences regarding establishing and changing working conditions, complying with labor laws, collective agreements, a collective bargaining or employment agreement, and any other agreements between an employer and an employee.

Bodies Authorized to Consider Individual Labor Disputes

In accordance with the CLLU, labor disputes shall be considered by courts and Labor Disputes Commissions (the "LDC"). The LDC is a mandatory primary authority to consider labor disputes, which deals with all categories of disputes, other than those falling within the exclusive competence of courts (Article 224 of the CLLU). However, according to Article 124 of the Constitution of Ukraine, justice in Ukraine shall be administered exclusively by courts. Therefore, upon the adoption of the Constitution of Ukraine in 1996, the parties may refer any labor disputes directly to courts without previously submitting them to the LDC.

The list of labor disputes, which may be settled by the LDC, is not limited by the Draft Labor Code as opposed to the currently effective CLLU. In this connection, the Draft Labor Code contains an unclear provision stating that the courts shall consider individual labor disputes upon application of an employee if the disputes are not to be considered by the LDC.

In addition, the LDC's legal status has been drastically changed: from the [mandatory] primary authority to consider individual labor disputes, the LDC has been transformed into a conciliation authority to be set up to "settle individual labor disputes by finding mutually acceptable solutions and conciliating parties to such disputes." In accordance with the Draft Labor Code, court shall be the only authority competent to consider individual labor disputes while the LDC shall perform conciliation functions only.

Settlement of Labor Disputes by the LDC

As provided by the Draft Labor Code, the LDC may be set up at all companies, regardless of their staff number, by agreement between an employer and a trade union representative. It should be reminded that the effective labor legislation stipulates that the LDC may be set up only at those companies where the total staff number is at least 15 people.

The Draft Labor Code has changed the procedure for setting up the LDC. Thus, according to Article 429, employees and an employer shall be equally represented at the LDC, while, as specified in the CLLU, the number of employees represented at the LDC shall be at least a half of the LDC's members. The number of LDC's members shall be determined by mutual consent between an employer and a trade union representative.

It should be highlighted that, pursuant to the Draft Labor Code, an employer shall nominate its representatives to the LDC by issuing its order while the employees' representatives to the LDC shall be elected by the general meeting of the labor collective or by a primary trade union organization.

Similarly to the effective CLLU, the Draft Labor Code obliges the employer to provide the organizational and technical support to the LDC.

According to Article 225 of the CLLU, an employee may apply to the LDC within three months after he/she has or should have found out about the infringement of his/her right and, in the case of salary disputes, an employee shall not be limited in time. It should be stressed that the LDC may restore the set period of time if such period of time is not met for valid reason. The Draft Labor Code does not set the time period for applying to the LDC. Thus, an employee may apply to the LDC for the protection of his/her rights within any time whatsoever. At the same time, according to Article 431 of the Draft Labor Code, before applying to the LDC, an employee should first apply directly to his/her employer (provided that the existing differences between the employee and the employer have not been settled within two weeks).

In accordance with the effective CLLU, an LDC's meeting shall be valid only if attended by at least two thirds of the LDC's elected members. According to Article 433 of the Draft Labor Code, an LDC's meeting shall be valid only if attended by at least one-half of the LDC's members.

As provided by the Draft Labor Code, the period of time for LDC to consider individual labor disputes has not been changed and is 10 [presumably calendar] days; if a dispute is complicated, the LDC shall be authorized to extend this term but no more than to 15 calendar days.

As contemplated by the Draft Labor Code, the LDC shall take its decision upon consent of all commission members participating in a session, but not by a majority vote of all members present thereat as it is provided by the effective CLLU. Should at least one LDC's member disagree with the decision proposed to be rendered, such decision shall be deemed to be failed (part one, Article 435 of the Draft Labor Code). Since the LDC's objective shall be to conciliate the parties to the labor dispute, the LDC's decisions may not adopted by a simple majority vote. Thus, reaching a consensus between all commission members is a pre-requisite for taking a decision, which will enable to ensure high level of voluntary performance of the LDC's decisions.

If the LDC's decisions are not performed on a voluntary basis, the applicable labor legislation provides for the enforcement of such decisions. Thus, according to Article 230 of the CLLU, if an owner or its authorized agency fails to perform the LDC's decision within the prescribed period, the LDC shall issue a certificate to an employee, which certificate shall have the effect of a writ of execution. The LDC's decision shall be enforced on the basis of such certificate submitted to the state enforcement service no later than three months of its issuance date.

In accordance with Article 438 of the Draft Labor Code, the LDC's decisions shall be binding upon the parties to an individual labor dispute and shall be performed by an employer on a voluntary basis within the period prescribed by such decisions. Thus, the Draft Labor Code provides only for a voluntary performance of the LDC's decisions by an employer.

At the same time, necessary amendments have not been made to the Law of Ukraine "On Enforcement Proceedings" and, thus, if such Draft Labor Code is adopted, the LDC's certificate shall continue to be an enforcement document. Only an employee shall have the right to appeal against the LDC's decision in accordance with the Draft Labor Code of Ukraine (as opposed to the currently effective CLLU). The latter may be treated as an additional argument in favor of a point about an exclusively voluntary procedure for performance of the LDC's decisions in the Draft Labor Code. In other words, the reason why an employer is deprived of a right to appeal against the LDC's decisions is because such decisions are not subject to enforcement.

Individual Labor Dispute Resolution Procedure

Under the Draft Labor Code, the general limitation period for individual labor disputes has been extended from three months to three years. The limitation period for filing a statement of claim for illegal dismissal has not changed and remains set at one month. The Draft Labor Code provides the same limitation period for filing claims regarding transfer to another job or unlawful denial of employment. Meanwhile, it is a positive thing, in our opinion, that the Draft Labor Code states specifically that limitation period will not apply only to claims for payment of accrued but delayed wages and salaries, and not to any claims originated from remuneration for labor (part 2 of Article 440 of the Draft Labor Code).

Just like the current labor laws, the Draft Labor Code exempts employees from payment of state duties and court costs.

The Draft Labor Code does not limit the paid period of forced absence in a situation where an employee is illegally dismissed. Thus, an employer will have to pay an employee his or her average wage or salary for the entire period of forced absence (or a difference in earnings for a lower-paid job period) should the respective court proceedings end in favor of the plaintiff. It should be mentioned in this context that part 2 of Article 235 of the CLLU provides that for illegally dismissing an employee, the employer must pay such employee his or her average wage or salary for the period of forced absence or a difference in his or her earnings for a lower-paid job period, but not more than for one year (except when the case has been pending for more than one year through no fault of the employee). Meanwhile, under the existing court practice, courts often rule that employees should be paid their average earnings for entire period of forced absence without any period limitation.

In contrast to the current CLLU, the Draft Labor Code does not provide for the employer's obligation to pay dismissed employees their average earnings for the entire period of delay in the return of their work record books. Meanwhile, a work record book is one of the necessary documents that need to be provided by an employee when entering a new job. An employee is thus unable to secure employment in line with the requirements of applicable laws due to his previous employer's wrongful failure to duly return his or her work record book.

Like the current CLLU, the Draft Labor Code provides that if respective final judgment are delayed for a dismissed employee through the employer's fault or if the employer fails to timely comply with a judgment to reinstate a dismissed employee in his or her job, the employer must pay such employee his or her average earnings for the entire period of delayed judgments (clause 3 of Article 127 of the Draft Labor Code).

Like the current CLLU, the Draft Labor Code provides for the financial liability of a company's officer for damages caused to an employee by illegal dismissal or illegal transfer to another position (payment of the employee's average earnings for the period of forced absence or for the period of a lower-paid job).

It should be noted in this context that the Prosecutor General's Office of Ukraine has recently launched an initiative to impose a greater liability on the officers for gross violations of labor laws, including for illegal dismissals. Thus, in November 2010, the Prosecutor General of Ukraine addressed the President of Ukraine seeking to submit the draft law authored by the Prosecutor General's Office of Ukraine for consideration by the Verkhovna Rada of Ukraine. This draft law provides that any dismissal of an employee for personal motives and any other gross violation of labor laws will be punishable with a fine of up to UAH 8,500 or with imprisonment for up to two years.

Just like the current CLLU, the Draft Labor Code provides that employers may be under an obligation to compensate their employees for moral damages.

A totally new provision of the Draft Labor Code in the context of labor dispute resolution is set out in part 3 of Article 442 of the Draft Labor Code. It provides that "further to a motion by the employer and subject to consent from the employee, the court may, rather than re-instate such employee in his or her job, decide that such employee should be paid a compensation in the amount to be agreed between the parties, but in any event at least in the amount of his or her average earnings for a period of 12 months". Therefore, this provision allows a settlement agreement between the parties with respect to some claims and a judgment with respect to the other claims. In our opinion, however, it will be rather difficult to apply this provision in practice from a procedural standpoint.

Under the Draft Labor Code, just like under the current CLLU, a judgment to re-instate an employee, who has been illegally dismissed or moved to another job, is subject to immediate execution. The Draft Labor Code also prohibits reversal of judgments issued in labor disputes, except when the reversed judgment is based on false information or forged documents provided by the plaintiff.

Labor Disputes: Proposed Legislative Amendments

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