What does employment law in Ukraine require of employers when it comes to restructuring a business? How will this affect the employees? What are the employer’s obligations when it comes to making redundancies? These are important questions if you're a business with a presence in Ukraine where, just like the rest of the world, businesses are striving to survive the pandemic. We’ll come on to that shortly but first some background.
Back in March Ukraine was in the news when Volodymyr Zelensky, a former comedian, was elected Ukraine’s president. As the BBC reported, Zelensky won by a landslide on the back of bold promises to reform the country and end the war of attrition in eastern Ukraine and he remains remarkably popular. Initially Covid-19 was kept under control, probably due to a very early decision to lock down. On 22 May Ukraine went into an “adaptive quarantine” stage whereby most of the restrictions were lifted, but in the areas with high infection rate all quarantine restrictions remained in place. By December, according to data published by the OECD, the economic outlook was stable, with steady growth, moderate public debt and relative price and currency stability. On 9 December the Ukrainian Cabinet announced that a “total lockdown” was to be introduced from 8 to 24 January. In order to help employees and business overcome this hardship the Ukrainian parliament adopted new legislation aimed at supporting businesses and individuals affected by the lockdown. The Support Package Law now in place amounts to one-time aid payments to employees and businesses, as well as compensatory payments to eligible businesses. To be eligible to receive aid, employees and businesses have to be engaged in certain activities affected by the lockdown, which are listed in regulations, and include retail businesses, hospitality establishments, fitness and entertainment venues, and household-service providers. Businesses are able to obtain one-time payments for each employee, a maximum equivalent to 230 Euros, to reimburse salary losses caused by cut of working hours to their employees. Eligible companies, whose main activities are included under the list of restricted activities during the lockdown, are also entitled to 10% reimbursement of the unified social contributions paid for their employees for ten months prior to the effective date of the Support Package Law. The support is viewed by most people in Ukraine as inadequate – that is certainly the view of one of the lawyers at our best friend firm Wolf Theiss based in Kiev. Olga Ivlyeva is a labour law specialist at the firm. This is what she had to say on that:
Olga Ivlyeva: “The government of Ukraine has implemented a number of insignificant incentives in order to maintain employment and help businesses suffering due to COVID-19. The most recent incentives include the provision of a one-time financial assistance to private entrepreneurs to some categories of employees and companies the due to quarantine restrictions workforce to temporarily reduce the employee's working hours. From the regulatory perspective, the government introduced fiscal and inspection breaks. However, in December 2020, the incentive was cancelled. At this stage, it is hard to judge whether the governmental support created the economic motivation that was noticeable to everyone. However, the government most certainly tries to concentrate more on health measures for small businesses that suffer more compared to others.”
So as you heard there, the government’s support has not helped businesses much at all so no surprise to see that many have shut down completely or are restructuring in an attempt to survive, resulting in mass redundancies. That is when Ukraine’s collective redundancy laws kick in which we can now come on to.
Earlier in the year we were due to host a webinar on this subject with a focus on restructuring across a number of different countries of Europe, including Ukraine, but because of the pandemic we had to cancel that event unfortunately. Nonetheless all the firms were keen to adapt and the result is a series of programmes we are releasing as HR Guides over the coming weeks, covering each of those countries, hearing from lawyers based in each one. The theme of the webinar was to set out 5 do’s and 5 don’ts when it comes to restructuring a business. So let’s hear from Olena Kravtsova, another employment layer at Wolf Theiss, on restructuring in the Ukraine. First the 5 do’s:
Olena Kravtsova: “So, the five things to do when restructuring are: (1) Number one. The redundancy process should be duly planned and organised in advance. It is recommended to define the purpose and legally sound selection criteria for redundancy and to determine the particular reason for redundancy, the quantity and categories of employees planned to be dismissed and the timing of dismissals. This information should be included in the company's internal order on planned redundancy that should be issued three months before such planned dismissals. Please note that the prevailing right to keep the job in the case of redundancy is given to employees with higher qualifications and production level. If several employees have the same qualifications and production level, the preference is given to the employee who has the pre-emptive right to keep the position such as married employees who have at least two dependent individuals, employees whose family members are unemployed, employees studying at a higher educational institution. employees with a lasting uninterrupted work experience at a given company, war veterans including people with disabilities, and persons rehabilitated by law from among those repressed. Authors of inventions of useful models, industrial samples and innovation proposals, and others. It should also be considered that certain categories of employees are generally protected against redundancy. (2) Number two. Inform and consult with the trade union or union representative, if established, upfront about the intended restructuring or redundancy. According to law, at least three months prior to the planned dismissals the company should provide information about such dismissals to the trade union including information about reasons for dismissals, the quantity and categories of employees that are planned to be dismissed, the timing of dismissals as well as consulting with the trade union regarding the measures aiming to prevent or minimise the employees' dismissals. After the employees subject to redundancy are selected, the employer should receive the approval of the trade union or union representative in respect of the dismissal of a particular employee if the employee is a member of the trade union. (3) Number three. Inform the local employment centre on pending organisational changes in case of massive redundancy. The employment centre should be notified two months before the planned dismissals. Redundancy is considered to be massive if at one time, or during one month, 10 or more employees in the company having from 20 to 100 employees are dismissed, or if 10% or more employees in the company having from 101 to 300 employees are dismissed, or 20% or more employees are dismissed during three months notwithstanding the total amount of employees in the company. (4) Number four. The employer should inform each selected employee personally and in writing of his or her planned dismissal. The notification is served individually to each employee with receipt confirmation two months in advance of such planned dismissal. We recommend keeping in store the documents confirming the receipt of such written notifications. (5) Number five. The employer should offer an employee who should be dismissed, any vacant position that may appear in the company during the two months' notification period after the employee is notified of the planned redundancy. Only if the employee rejects to the jobs offered can he or she can be dismissed."
"(1) Number one. Do not lay off the so called protected categories of employees. For example, pregnant women, women having children under three years old, single mothers having children under 14 years old, or children with disabilities, etcetera. 2) Number two. Do not lay off employees while they are on sick leave or vacation. (3) Number three. Do not forget that employees dismissed under the redundancy procedure have a pre-emptive right to be re employed by the company in case a vacancy for a similar position or qualification is opened by the company within one year after the redundancy. So, in case the company is going to hire employees of a similar position or qualification within one year after the redundancy, the company should offer the relevant job to the dismissed employees. (4) Number four. Do not forget about restructuring costs when planning a restructuring, including severance, and think about an individual risk of challenging the termination in court for each concerned employee. As noted before, the employees should be notified at least two months in advance and paid severance in the amount of at least one average salary. Internal documents, for example internal policies, if any, and employment agreements may provide for additional benefits for employees in the case of redundancy, therefore they should be checked in advance. So in order to terminate the employees by way of redundancy, the employer should reserve cash amounting to at least three employees' salaries. (5) Number five. Last but not least, do not violate the procedure and the terms provided by Ukrainian law for the redundancy procedure as this could lead to the invalidity of terminations and to the reinstatement of the dismissed employees. In the case of reinstatement of an employee, the employer is obliged to pay such employees salary for a period of forced unemployment as well as moral damages."
You can find more about both Olena and Olga, who we heard from earlier, by visiting the firm’s website – Wolf Theiss based in Kiev.
- Link to website of Ukraine law firm law firm Wolf Theiss