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Publication date: 14.05.2024
active and purposeful military lawyer with more than 4 years of experience
Simplified mode of regulation of labor relations: what advantages and disadvantages should be known to employees and entrepreneurs
On July 19, 2022, the Verkhovna Rada of Ukraine adopted Law of Ukraine No. 2434-IX "On Amendments to Certain Legislative Acts of Ukraine on Simplifying the Regulation of Labor Relations in the Field of Small and Medium Enterprises and Reducing the Administrative Burden on Business Activity" (hereinafter Law No. 2434). Law No. 2434 proposed rather bold ideas for Ukrainian labor law, which it called a "simplified regime for regulating labor relations."
For whom and how long will the simplified regime apply?
Law No. 2434, as well as the simplified regime introduced by it, will be valid only for the period of martial law. This approach is somewhat ambiguous, since Law No. 2434 amends the Code of Labor Laws of Ukraine (hereinafter referred to as the Labor Code), Law of Ukraine No. 504/96-BP of November 15, 1996 "On Vacations" and other laws, and is not a separate regulatory legal act. The general impression is that Law No. 2434 was prepared as an act that was supposed to operate without reference to martial law, but at the last moment its effect was limited. Therefore, in the future, changes in the relevant legislation should be followed in detail.
The simplified regime can be applied only on a voluntary basis, that is, if the employer and the employee agree on its application.This mode can be used only in two cases:
1) if the employer is a subject of a small business (with an average number of employees for the reporting period (calendar year) up to 50 people and an annual income of up to 10 million euros) or a medium-sized business (with an average number of employees of up to 250 people and an annual income of up to 50 million euro);
2) if the employee will receive a sufficiently high wage, namely, more than 8 times the minimum wage (as of August 2022 — 52,000 hryvnias).
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How to issue a simplified regime and what are its advantages?
The essence of the simplified regime is that employees and employers, who have the right to apply it, conclude an employment contract (in written or electronic form), in which they have the right to deviate from some provisions of labor legislation.
For example, the parties may, at their own discretion and by mutual agreement, settle issues related to the emergence of labor relations, the dismissal of an employee, the remuneration system, labor standards, the amount of wages, incentive payments, standards of working hours and rest, duration weekly uninterrupted rest and other rights and guarantees of a labor nature.
It seems that this type of employment contract should be attractive primarily to employers. At the same time, Law No. 2434 explicitly states that when concluding an employment contract on simplified regulation, the parties must comply with guarantees regarding the minimum wage, the normal duration of working hours per week, the duration of weekly uninterrupted rest and "other rights and guarantees" defined by the Labor Code. Obviously, in such a case, on issues that Law No. 2434 expressly did not allow to be regulated by an employment contract, the possibility of deviating from the provisions of the Labor Code would be a risky "gray zone".
Among the advantages of Law No. 2434, employers who apply the simplified regime have the right not to keep some personnel documentation and not to draw up some local acts on issues that will be regulated by the employment contract. In particular, these are documents regarding the regime of working hours and time of rest and vacations.
Features of labor contracts on the simplified regime
In addition to the usual open-ended employment contract, the parties can also agree on a fixed-term employment contract. At the same time, Law No. 2434 does not provide for any special grounds for concluding a fixed-term employment contract - the agreement of the parties is sufficient. A fixed-term employment contract can be concluded for a certain period of time or for the time of performing certain work.
Law No. 2434 also defines the list of essential terms of the employment contract, which are mandatory for enshrining in the contract.There are quite a lot of such essential conditions, among other things, this is the place of work, the employee's duties, terms of payment, work regime, duration of working hours and rest, duration of the main annual leave, working conditions, terms of notice of termination of the employment contract at the initiative of the employer, procedure and the form of information exchange between the employer and the employee, etc. It is worth noting that the weekly duration of working time and rest time cannot be less than the guarantees established by the Labor Code.
Among the rather unusual essential conditions of work, Law No. 2434 also provided for the conditions of non-disclosure of commercial secrets, ensuring the protection of intellectual property, and the conditions for the occurrence and procedure for the settlement of conflicts of interest. Such conditions must also be agreed upon by the parties in the contract in a mandatory manner.
In addition, the employment contract may stipulate the grounds and procedure for engaging the employee to work overtime and at night, on holidays, non-working days and weekends, specifying the amount of payment for such work. The amount of such payment cannot be less than the amount determined by the Labor Code. Involvement of an employee in overtime work does not require the permission of the trade union.
Termination of the employment contract under the simplified regime
Perhaps the greatest advantage of the mechanism of simplified regulation is the possibility of establishing additional grounds for the dismissal of an employee. Thus, Law No. 2434 provided that in an employment contract, the parties at their own discretion can determine the grounds for its termination, which are not provided for in the Labor Code.
However, if the employment contract is terminated at the initiative of the employer for reasons not provided for in the Labor Code, then he must justify or specify such reasons. That is, it is seen that dismissing an employee simply with prior notice would be contrary to Law No. 2434, as there must be a certain reason (both objective and related to the employee). In addition, in case of dismissal for reasons not provided for in the Labor Code, Law No. 2434 also obliges the employer to pay compensation to the employee in the amount and in the manner specified in the employment contract, but not less than:
• half of the minimum wage, if the employee's experience with this employer is no more than 30 days;
• the minimum wage, if the employee's experience with this employer is more than 30 days;
• three minimum wages, if the employee's experience with this employer is more than one year;
• five minimum wages, if the employee's experience with this employer is more than two years.
The question arises whether the length of service acquired before the introduction of the regime of simplified regulation is taken into account. The affirmative answer seems logical, since Law No. 2434 uses the general phrase "work experience with the same employer."Also, in the employment contract, the parties must agree on the period in which the employer must notify the employee about the future dismissal.
The way to terminate such an employment contract is to sign an additional agreement on termination of the employment contract or unilaterally by sending the employee an official notice of termination of the employment contract in the manner specified by the employment contract or by registered mail with a description of the attachment.
The consent of the trade union to terminate the employment contract is not required, except in cases of dismissal of employees elected to trade union bodies.
Holidays with a simplified regime
Law No. 2434 allows, at the request of an employee, to grant him a full annual leave or to divide it into parts of any length. At the same time, due to family circumstances, an employee may receive leave for a period longer than 15 calendar days per year, if such a condition is stipulated in the employment contract. At the same time, as provided by previously adopted legislation, employees also have the right to leave without pay for reasons related to martial law.
Salary for the entire period of annual leave is paid before the start of the leave, unless otherwise agreed in the labor or collective agreement.
Conclusion
It can be stated that certain mechanisms of simplified regulation can be beneficial for employers, namely, provisions on additional grounds for dismissal, application of fixed-term employment contracts and exemption from the obligation to maintain certain personnel documents.At the same time, in order to achieve such an effect, employers will need to develop a sufficiently voluminous text of the employment contract in order to include in it all the essential conditions defined by Law No. 2434. Also, taking into account the wording of Law No. 2434, a departure from other provisions of the Labor Code in the employment contract seems quite risky , as it can be considered as violating labor guarantees for employees.
