Making Staff Redundant Under Ukrainian Labor Law

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Making Staff Redundant Under Ukrainian Labor Law

By Valeriya Savchuk and Daryna Lysyk*

 

INTRODUCTION


Prospective economic or organizational adjustment frequently leads to dismissals for “redundancy reason”, the process of which is substantially regulated by the provisions of Ukrainian Labor Code. Thus, in Ukraine, an employer is at full liberty to make an employee redundant for such changes in the organization of production and labor, as reorganization, liquidation, bankruptcy, and re-profiling of an employing company, and reduction of personnel[1]. An employer resorts to staffing cuts ad libitum, at his/her own discretion, without having to obtain trade union’s approval of such a decision. Moreover, pursuant to a number of Resolutions of the Ukrainian Supreme Court (the latest of which is dated 16 January 2018[2]) the justification of redundancy should not be put into question at court.


BEING SELECTED FOR REDUNDANCY


Based on the changes envisaged in the staff list, an employer is to carry out a selection process among the employees subject to redundancy. However, this doesn’t constitute an employer’s exclusive discretion. Thus, employees may not be dismissed for the redundancy reason during their sick leave or vacation[3]. To comply with the statutory prohibition, the dismissal of employees should be done on the first working day after the sick-leave or vacation. Besides, dismissal as a result of redundancy is forbidden without offering the employee other vacant positions within the employing company[4].


Protected Employees


Certain categories of redundant employees may have a priority right to retain their job position. According to the provisions of current Ukrainian labor law, the following categories of employees may not be made redundant or removed from the staff schedule in the course of the redundancy procedure:

  • pregnant women;
  • women who have children under 3 years old; and
  • single mothers (single women with a child if the birth certificate of a child contains no information about the father of the child; widows and other women who support and bring up their child alone) who have children under 14 years old or disabled children[5];
  • employees called for military or alternative service[6];
  • trade union representatives within one year upon termination of their mission within the trade union (with some exceptions, such as (i) company’s liquidation, (ii) mismatch between an employee and his/her job, (iii) actions taken that may be a reason for dismissal as provided by law, or (iv) poor state of health). However, the said guarantee does not cover the situation where such mission is earlier terminated due to improper performance, at the employee’s own discretion or due to poor health[7].

If any of the above-mentioned protected employees are dismissed for redundancy reason, the court will recognize such dismissal as illegal, order the employee’s reinstatement at work and compensation of the average salary for the time of the employee’s unemployment.


Preemptive right to retain the job


Prior to any dismissals caused by redundancy, an employer should consider the priority right to retain their job for those employees who hold similar positions and perform similar works[8].

 

In particular, the preemptive right to retain the job and stay further employed should be given to the employees with higher qualification and efficiency. If the qualification and efficiency are equal, the ranking of the prospective redundant employees should be determined by using the criteria provided by the applicable law, which include: 

  • family persons having two or more dependents;
  • employees who are sole breadwinners in their families;
  • employees with a long continuous employment record with the employer;
  • employees who are on-the-job students of colleges or specialized secondary educational institutions;
  • employees who are combatants and disabled war veterans;
  • employees who are victims of the Chernobyl accident;
  • authors of inventions, utility model, designs and technical innovations;
  • employees who suffered labor injury or occupational disease at the employing company;
  • persons deported from Ukraine within five years as from their return to permanent place of residence in Ukraine;
  • army conscripts and persons who performed alternative (non-military) service within two years from the date of their retirement;
  • employees of less than three years before the retiring age (with the right to receive pension payments).

Priority right to be re-employed


According to Ukrainian labor laws and regulations, employees dismissed for redundancy reason shall benefit from a priority right to be re-employed at their position within a one-year period of the termination date[9].


Considering this rule of law, should such a redundancy scenario be chosen, an employer may not re-open the positions of the redundant employees or open new positions with a different job title, but with the same or mostly identical job duties. Consequently, the employer may not employ another employee to perform the redundant employee’s duties (including his part-time duties) as set forth in his employment agreement and job description within a one-year period.


Moreover, Ukrainian labor legislation prohibits engaging temporary workers, namely individuals working on the basis of outsourcing and outstaffing schemes, if there was staff redundancy during the previous year[10]


Redundancy action plan


Termination of employment of employees for redundancy reason should strictly comply with the respective procedure provided for in Ukrainian legal instruments, so that the employer is not found guilty of unfair dismissal.


Redundancy resolution


The first step in the process of redundancy is a decision of an employer about the reduction of the staff. A respective redundancy resolution is to be passed by the employer, for instance, because of overall restructuring program aimed, among other things, at the reduction of employee costs and elimination of job positions. The employer should amend its staff list by the same redundancy resolution and exclude positions which are not needed by the employing company anymore.


Consultations with trade unions


Should a trade union exist, the employer has a statutory duty to notify it of the estimated restructuring three months prior to the redundancy[11]. Thus, the employer should disclose to the trade union (or other elected representatives of the affected employees) the information about the business reason that has caused the restructuring, the updated staff schedule, a list of redundant employees, etc.


At the same time the employer is also bound to start consultations with the trade union regarding the reduction of staff. The trade union has a right to contribute their suggestions on the postponement or cancellation of the redundancy.


Failure to comply with the statutory requirements regarding notification to the trade union should not be a reason to consider the following dismissals as illegal. However, this does not exclude attempts or threats of collective disputes that may be initiated by the trade union. It should be noted that collective disputes may not be resolved in courts because Ukrainian legislation provides for the non-claim reconciliation arbitration procedure of collective dispute resolution. Ukrainian courts deny the initiation of proceedings or close the proceedings if one of the parties to a collective dispute files a claim for resolution of a collective dispute to the court.


Furthermore, the trade union may use the employer’s failure to consult as a reason to refuse consent to dismiss an employee who is a member of the trade union. In this case, there is a risk that such refusal of the trade union may be considered by the court as justified.


Notification of the State Employment Service


Provided that the restructuring triggers a massive (large-scale) reduction, some additional rules and requirements should apply. Subject to Ukrainian law, redundancy is considered massive when the number of dismissed employees is:

  • ten or more employees within one month where headcount is 20-100 employees;
  • 10% of employees within one month where headcount is 101-300 employees; or
  • 20% of employees within three months irrespective of headcount[12].

 

In such a case the employer must notify the State Employment Service at least two months prior to the date of the actual dismissal. The notification must be in the form of a written report on an official form. Within ten days of the dismissals, the employer must submit a further report to the state authority regarding the dismissed employees.


Notification of employees


According to the Ukrainian labor legislation, the employer should give a two months’ prior written notice of dismissal to each redundant employee[13].


As mentioned, dismissal as a result of redundancy is allowed only if the transfer of redundant employees to another position within the employing company is impossible[14]. Thus, together with the redundancy notification, the employer should offer each redundant employee any other vacant position according to his profession or skills within the employing company, if available. If a vacancy occurs within the two-month notification period, such vacancy should be also offered to the redundant employee. Otherwise or if the redundant employee refuses to be transferred to the offered position, such an employee may be dismissed.


It is recommended to hand over the notice to each redundant employee against his or her signature, which is, among other things, important in case of any further potential litigation regarding the legality of such dismissals. If an employee refuses to accept the notice, the employer should draw up a statement signed by three other employees and evidencing that the redundant employee refused to receive or sign the notice.


Any redundant employee’s period of vacation/sick-leave or absence at work for any other good reason shall be included in the said two months’ period. Consequently, the two-month notification period should be followed strictly, and the redundant employees may be dismissed only after this period ends. The employer is prohibited to pay the redundant employees any compensation for a part of the notification period and terminate the agreements in advance due to redundancy. During the two-month notification period, the employer may dismiss the employee on other grounds, such as mutual consent, etc.


Failure to comply with the statutory requirements regarding the two-month notification period may not be a sufficient ground for the employee’s reinstatement at work. However, in case of a labor-related claim brought by a redundant employee, the court will shift the termination date so that the two-month notification period requirement is complied with and collect the employee’s average salary from the employer for the period of shifting.


Application to the trade union for a consent to employees’ dismissal


If any of the employees subject to dismissal due to redundancy is a member of the trade union, the employer should seek the trade union’s consent to such a dismissal. The employee should be dismissed by the employer within one-month period after receiving the trade union’s consent to such a dismissal. 


Any trade union’s refusal to grant its consent to such employee’s dismissal must be justified. If the refusal is unjustified, the employer may still dismiss the employee without such consent[15].


According to the Ukrainian jurisprudence, the refusal may be considered justified provided that it is based on (1) relevant labor legislation and (2) professional traits of the employee. Also, it must (1) be sufficient, (2) be well-reasoned and (3) contain reference to legal grounds proving the illegality of dismissal or reference to the employer’s failure to consider the factual background which has led to the employee’s dismissal with a breach of the employee’s legitimate rights[16].


The refusal may be deemed by court as unsubstantiated if: (1) it lacks references to violation of the dismissal procedure by the employer; (2) it lacks references to violation of specific provisions of the labor legislation by the employer when dismissing the employee, etc.


Dismissal and severance payment


The employer should issue a dismissal resolution with regard to each redundant employee on the contemplated date of dismissal.


On the dismissal date, each redundant employee should be given a copy of the dismissal order and his employment record book with the respective termination records, and receive all payments due, including a severance pay, as indicated below. If an employee refuses to receive the dismissal resolution and/or the employment record book, the employer should draw up a statement evidencing this. This statement should be signed by three other employees. It is recommended to send a copy of the dismissal resolution to the home address of the redundant employee by registered mail. However, it is forbidden to send the employment record book by post, unless the employee expressly instructs so.


Each redundant employee is entitled to a severance pay of not less than one-month average salary of such employee (in addition to the salary, the compensation of unused vacation days and other payments due)[17]. The severance payment to employees who are victims of the Chernobyl accident reaches the three months’ average salary of such an employee[18].


CONCLUSION

 

In conclusion, dismissal for “redundancy reason” is a complicated process requiring letter-bound precision. However, by taking into consideration rules for selection of employees subject to redundancy and by adhering to all steps of redundancy procedure, an employer may minimize the risk to be pursued in court by the redundant employee and maximize the chance to prove that the dismissal was fair if the action after all is brought.


 

[1] Article 40 (1) of the Labor Code

[2] Resolution of the Supreme Court of Ukraine in case No. 519/160/16, dated 16 January 2018

[3] Article 40 (3) of the Labor Code

[4] Article 40 (2) of the Labor Code

[5] Article 184 of the Labor Code

[6] Article 119 of the Labor Code

[7] Article 41 of the Trade Unions Law

[8] Article 42 of the Labor Code

[9] Article 421 of the Labor Code

[10] Article 50 (5) of the Law on Employment

[11] Article 494 of the Labor Code

[12] Article 48 of the Law on Employment

[13] Article 492 of the Labor Code

[14] Article 40 (2) of the Labor Code

[15] Article 43(7) of the Labor Code

[16] Resolution of the Supreme Court of Ukraine in case No. 6-703цс15, dated 01 July 2015

[17] Article 44 of the Labor Code

[18] Article 20 (1) of the Law on Status and Social protection of victims of the Chernobyl accident



[*] Valeriya Savchuk specializes in labour law issues, including labour disputes, drafting employment contracts for top management, placement of foreigners. She also specializes in data protection issues, family and inheritance law issues, disputes on protection of consumers, as well as defamation claims. 

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Kyiv,
Wednesday, April 25, 2018
Employment / Labor Law