Increased Employer Liability and Other Changes in Ukrainian Labor Law

On 1 January 2015, the Law of Ukraine "On Amendments to Certain Ukrainian Laws regarding Reform of Mandatory State Social Insurance and Legalization of Salaries Fund" of 28 December 2014 No. 77-VIII became effective (the "Law").

The Law, inter alia, has introduced the following amendments to Ukrainian law aiming to increase liability for violations in the employment sphere:

(1) Amendments to the Ukrainian Labor Code institute financial liability of employers in the form of fines for labor law violations (such as failure to duly formalize employment or payment of salaries, delays in payment of salaries or other payments, incompliance with minimum state guarantees as regards labor remuneration, and other violations). Depending on violation, the amounts of such fines vary from one minimum statutory salary (approx. USD 77) per violation to thirty minimum statutory salaries (approx. USD 2,317) payable for each employee, with regard to whom employer commits a violation.

The State Labor Inspectorate of Ukraine will impose the above fines pursuant to the procedure to be approved by the Cabinet of Ministers of Ukraine.

(2) The Law has amended the Ukrainian Administrative Offences Code with regard to administrative liability of employer's officers in the following respects: administrative fines have been introduced for allowing an individual to work without an employment agreement, as well as for hiring a foreign citizen, a stateless person, or an applicant for a refugee status without obtaining a work permit; the amounts of administrative fines have been increased for violations of labor law, as well as legislation on the unified tax for state mandatory social insurance (the "Unified Social Tax") and mandatory pension fund contributions.

(3) Amendments to the Ukrainian Criminal Code envisaged by the Law with regard to criminal liability of employer's officers: provide that illegal dismissal of a whistleblower employee because the latter has reported a breach of the Law of Ukraine "On Fundamentals of Preventing and Combatting of Corruption" qualifies as a material violation of labor law that triggers criminal liability; increase the amount of criminal fines for material violation of labor law and evasion of the Unified Social Tax and mandatory pension fund contributions.

Also, the Law introduces a number of other amendments to the Ukrainian Labor Code that, inter alia: prohibit employer from admitting an employee to work without issuing an internal order on employment; require employer to notify the authority in charge of administering the Unified Social Tax (currently, the State Fiscal Service of Ukraine) about hiring of any employee under the procedure to be approved by the Cabinet of Ministers of Ukraine; cancel the requirement to have employment agreements with individual employers registered at the State Employment Service of Ukraine; enable Ukrainian courts to deliver judgments on formalization of an individual's employment, as well as on the period of such employment (if an individual has worked without entering into an employment agreement or worked full-time while being formally employed part-time). When issuing such judgments, courts may award salary to an employee in the amount not less than average salaries within relevant type of business activity in the region (on top of any actually paid salary), as well as require accrual of respective amounts of personal income tax and the Unified Social Tax.

For further information please contact Asters' partner Svitlana Chepurna
and associate Inesa Letych.

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