Do not take the trouble

Businessmen expect more detailed regulation of the functions of state supervision and control over compliance with labor legislation from the authorities

In view of the introduction of amendments to the Labor Code (KZoT) of Ukraine by the Parliament in 2014, Law No. 77-VIII as of December 28, 2014, the issue of both being aware of labor legislation by employers and its practical application became topical.  Thus, the aforementioned amendments to Article 265 of the Labor Code of Ukraine has been set out in the new version, which provides for the types of violations of labor legislation and significant financial sanctions that apply to employers.

This means that consequences can occur in the event that the bodies of the State Service of Ukraine for Labor issues (State Labor Inspectorate), which are obviously not very desirable.

Follow the practice

 However, the dispositions of the second part of Article 265 of the Labor Code of Ukraine, which determine what it exactly means – a violation of labor legislation, are not entirely clear in their design. 

Therefore, with a view to understand exactly what actions or inaction of the employer can qualify for one or another paragraph of Part 2 of Article 265 of the Labor Code of Ukraine, one should refer to the legal conclusions of the Supreme Court.

Thus, part 5 of article 13 of the Law of Ukraine “On the Judicial System and the Status of Judges” stipulates that the conclusions regarding the application of the rules of law set forth in resolutions of the Supreme Court are binding for all subjects of authority applying the legal act in their activities, which contains the relevant legal norm.

It follows from the above-said that the bodies of the State Labor Inspectorate are obliged to be guided by the legal opinions of the Supreme Court, when carrying out the qualification of the revealed violations of labor legislation by business entities.

At the same time, Part 6 of Article 13 of the Law of Ukraine “On the Judicial System and Status of Judges”, which corresponds to Part 5 of Article 242 of the Code of Administrative Procedure of Ukraine, provides for the obligation of the courts to take into account the conclusions of the Supreme Court when applying the legal norms set forth in its resolutions.

After analyzing the resolution of the Cassation Administrative Court as part of the Supreme Court, it can be stated that the State Labor Inspectorate bodies most often reveal such violations.

Thus, the most common problem is the admission of an employee to work without entering into an employment contract, liability for which is provided for in paragraph 2 of part 2 of article 265 of the Labor Code of Ukraine in the amount of thirty minimum wages established by law at the time of the violation, for each employee, for which such a violation.  That is, today the financial sanction would cost the employer 125 190 UAH for one employee

As a matter of practice, the above-mentioned paragraph 2 of part 2 of article 265 of the Labor Code of Ukraine includes: the conclusion of civil law contracts with both individual entrepreneurs and individuals without such status;  allowing the employee to work under the pretence of an internship, but without entering into an employment contract;  the assignment of an employee probationary period before the conclusion of the employment contract, but meanwhile an employee is performing his actual duties;  and other cases.

Another “costly” problem is the failure of the employer to comply with the minimum state guarantees in labor remuneration, the liability for which is set at 10 minimum wages on the day – the violations are detected for each employee, which will be at present, for example – 41,730 UAH.

This qualification includes, for example, salary indexation.  However, it should be noted that in the case, even if the indexation was to be insignificant, at the level of, let’s say, 10-15 UAH, you still have to pay a financial sanction.

Likewise, 15 minimum wages should be paid in the case of non-payroll at night in violation of the requirements of Article 108 of the Labor Code of Ukraine, as well as for employee remuneration on holidays in violation of the requirements of Article 107 of the Labor Code of Ukraine, which is also qualified by the Supreme Court as a violation of the minimum  state guarantees in wages.

It will not redeem from liability

Attention should be paid to the fact that, if an employer violates labor legislation, which provides for the liability for admitting an employee without entering into an employment contract, or failure to comply with minimum state guarantees in remuneration, the obligation to pay financial sanctions occurs in any case.  The Supreme Court is adamant here and the employer will not be redeemed thanks to the argument that, for example, he fulfilled the prescriptions on time and also charged and paid the workers proper indexation.

So, rejecting the employer’s arguments about the groundlessness of imposing a financial sanction on him, since they had fulfilled the instructions of the State Labor Inspectorate  “Gostrud” on time, and justifying their legal standpoint by referring to the norms of part 11 of Article 7 of the Law of Ukraine “On the basic principles of state supervision (control)”, the Supreme Court indicated that this rule of law does not apply to bodies that exercise state control over the observance of labor legislation by business entities, and he made reference to clause 29 of Order No. 295, which provides for measures to hold the site of visit and its officials liable for the use of “off the books” employees labor, late payment of wages, failure to comply with the minimum state guarantees of pay. So, non-observance of minimum state guarantees in labor remuneration is applied simultaneously with the issuance of a prescription, regardless of the fact – the violations found during an inspection visit have been eliminated, or outside travel inspection.

In addition, the Supreme Court, in its resolutions, has repeatedly noted that the introduction of a prescription to eliminate the violations of labor legislation, as well as the adoption of measures on prosecuting the perpetrators, is a mandatory norm, which gives the inspector the duty to act in case of detection of these violations.

The arguments of employers regarding the groundlessness of inspections are critically evaluated by the Supreme Court.  For example, the argument that the employer was not properly notified that the inspector arrived with a check.  Thus, in some cases, the Supreme Court, refuting such allegations, noted that the powers, rights and obligations of state inspectors of the State Labor Inspectorate are defined, in addition to general laws, by conventions of the International Labor Organization, ratified by the laws of Ukraine “On ratification of the International Labor Organization Convention No. 81 of 1947 on inspection  Labor in Industry and Commerce ”dated September 8, 2004 No. 1985-IV and“ On ratification of the Labor Inspection Convention No. 129 of 1969 on Labor Inspection in Agriculture ”dated September 8, 2004  № 1986-IV.

Thus, in some cases, the Supreme Court, refuting such allegations, noted that the powers, rights and obligations of state inspectors of the State Labor Inspectorate have been defined, in addition to general laws, by conventions of the International Labor Organization, ratified by the laws of Ukraine “On ratification of the International Labor Organization Convention No. 81 of 1947 on inspection  Labor in Industry and Commerce” dated September 8, 2004 No. 1985-IV and “On ratification of the Labor Inspection Convention No. 129 of 1969 on Labor Inspection in Agriculture ”dated September 8, 2004  No. 1986-IV.

According to Article 16 of the International Labor Organization Convention No. 81, inspections at enterprises are carried out as often and as thoroughly as necessary to ensure the effective implementation of the relevant legal provisions.  And according to Article 12 of this Convention, in case of an inspection visit, the inspectors report their presence to the employer or his representative, unless they feel that such a report could do harm to performance of their duties.

Cancellation of the Resolution?

However, the legal standpoint of the Supreme Court regarding dual legal liability for the same violation of the law is interesting.  Thus, in one of the cases, the Supreme Court reversed the resolution of the State Labor Committee due to the fact that an individual entrepreneur has already been held administratively liable as an employer under paragraph 3 of Article 41 of the Administrative Offenses Code of Ukraine, therefore the additional holding this entity liable under paragraph 2 of part 2  Article 265 of the Labor Code of Ukraine, given the provisions of Article 61 of the Constitution of Ukraine, sounds impossible, since the subject of liability and the type of violation fully coincide.

Concurrently, it should be remembered that the non-admission of labor inspectors to conduct the inspection, the purpose of which was to monitor compliance with labor laws regarding the proper registration of employees, that is, the existence of concluded labor contracts, costs as much as 100 minimum wages, which is today 417,300 UAH.

But the most important event was the resolution adopted on May 14, 2019 by the Sixth Administrative Court of Appeal in case No. 826/8917/17, which the court overturned as illegal, the resolution of the Cabinet of Ministers of Ukraine of April 29, 2017 No. 295 on labor of Ukraine and Article 34 of the Law of Ukraine “On Local Self-Government”.  It was namely this resolution that regulated the order and procedure of on-site and off-site inspections by the State Labor Inspectorate authorities.

Considering that the court decision adopted by the appeals instance comes into force at the moment of its announcement, there is no regulatory act governing the procedure of inspection visits by the State Labor Inspectorate.

However, there is no doubt that the Cabinet of Ministers of Ukraine will appeal against the mentioned resolution of the Sixth Administrative Court of Appeal under cassational procedure.

Consequently, businessmen should wait for some time until the Supreme Court says its “decisive word” regarding the above-mentioned case, or until the Cabinet of Ministers of Ukraine adopts a new regulatory act that governs in detail the implementation of the State Audit Office of state supervision and control over compliance with labor legislation.

Ilya LAVRINETS – attorney Dynasty Law Firm

 

Publications 12 June, 2019

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