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Your power to winDue Diligence on labour issues
According to the latest updates established in the Procedure for State Control over Compliance with Labor Legislation, approved by the Resolution of the Cabinet of Ministers of Ukraine No. 1132, dated December 4, 2019, labor inspectors (which also include executive bodies of councils) with official identification have the full right, without prior notification, to access any production, office, or administrative premises of the visited entity at any time of the day, taking into account the requirements of occupational safety legislation, where hired labor is used.
Such unexpected inspections can result in not only large fines but also the involvement of management in criminal liability.
Based on our practice of serving employers, the most vulnerable moments during a State Labor Inspection may include:
- Unregistered labor relations and admission to work before an official order is issued
- The formalization of actual labor relations under civil law agreements
- Violation of deadlines and amounts of salary payments
- Non-payment or non-calculation of indexation, vacation pay, etc.
- Discrepancies between the documentation of the company and open-source information
- The presence of large production volumes with a small number of employees
- Payment of low salaries while transferring large sums to the accounts of individual entrepreneurs for services rendered.
Therefore, employers must always be prepared for a meeting with State Labor Inspectors and take necessary actions in advance to mitigate the potential risks of labor law violations. This responsibility is usually entrusted to the legal department, but if in-house legal counsels are overly occupied with other projects or lack sufficient specialization in labor law, the manager should consider engaging professional attorneys with the relevant experience and qualifications.
The team at WinnerLex Law Firm conducts audits on labor-related matters, including:
- Conducting a comprehensive legal review of labor relations within the company;
- Full legal audit of personnel documentation and internal regulations of the company;
- Legal audit to examine the status of obligations under labor legislation;
- Development and implementation of restructuring and workforce reduction schemes;
- Optimization of labor resources;
- Legal support for the organization of personnel document flow within the company;
- Due Diligence of personnel and labor documentation.
For the absence of internal labor regulations, the employer may be subject to administrative liability and a fine ranging from 30 to 100 non-taxable minimum incomes of citizens.
If you collaborate with contractors under civil law contracts, you must be very careful when drafting contracts to avoid the risk of reclassifying contractual relationships into labor relations. Also, ensure that the number of such contractors does not exceed 30% of the total number of employees.
If your company's business model involves outsourcing certain tasks, you should be aware that the basis for conducting an unscheduled inspection visit by the State Labor Service is information about individuals performing work (providing services) under civil law contracts with a single employer for more than one year.
As a general rule, concluding a collective agreement is mandatory when hired labor is used at the enterprise, regardless of the number of employees and if at least one party initiates it. If neither party initiates, no one can force the parties to conclude such an agreement, as the voluntary consent of the parties is a mandatory condition for entering into any agreement (Article 4 of ILO Convention No. 98, part three of Article 203 of the Civil Code of Ukraine). However, if the company’s statute requires the executive body to conclude a collective agreement, the absence of such an agreement can be seen as a violation of labor rights at the enterprise, with corresponding sanctions.
Indeed, Article 265 of the Labor Code of Ukraine provides for employer liability in the form of a fine for violating labor laws. Additionally, Article 80 of the Labor Code of Ukraine prohibits the denial of full annual vacations (24 days) for two consecutive years. However, the key point is the employer's initiative to offer such a vacation and inform the employee about their right. For more details, you can read our article "How to Avoid a Fine for a Workaholic."
The main uninterrupted part of the vacation, which must last at least 14 calendar days, is one of the parts of the annual leave that can be provided to the employee upon their request. It should be noted that the employee chooses when they want to take this leave, either at the end or the beginning of the year. Similarly, the employee may divide the remaining part of the annual leave into the desired number of days as they wish.
Public oversight of compliance with occupational safety legislation is carried out by trade unions present at the enterprise, whose primary tasks include protecting employees' rights and interests. If no trade union exists, an authorized person at the enterprise carries out this oversight.