Discussions around the draft of the new Labor Code are ongoing, as the document aims to make significant changes to labor legislation. As the “Sudovo-Yurydychna Gazeta” wrote, the draft Labor Code is designed to regulate individual and collective labor relations on the basis of freedom and equality of the parties, and to ensure decent working conditions. Moreover, the draft proposes a transition from an overly overloaded model to a more flexible system based on contractual freedom between the employee and the employer. At the same time, the draft law provides for safeguards that should minimize the risks of abuse.
One of the main innovations is the introduction of nine specialized types of labor contracts. Each of them will have its own conditions regarding wages, working hours, and liability of the parties, which will allow for better consideration of the specifics of different employment formats.
Previously, business used civil law contracts on a large scale to save on taxes and social guarantees. Now this will become extremely risky. The Labor and Employment Inspectorate of the Dnipro City Council emphasizes that a relationship will be considered labor if at least 5 of the following 8 features are present:
Personal performance of work in a certain profession or position.
Control by the person for whose benefit the work is performed.
Compliance with the rules of internal regulations.
Provision by the customer of work tools, such as a computer, desk, equipment.
Regular payment of remuneration.
Setting of working hours.
Regulation of the work process by the customer.
Compensation for expenses related to the performance of work.
If the draft Labor Code is adopted, all employers who keep staff on FOP contracts or CPD will need to check their employees, and if their work has signs of labor, it will be necessary to plan a transition to one of the new types of contracts.
What contracts does the draft Labor Code provide for?
According to Article 54 of the draft, several specialized types of employment contracts are provided for, which can be applied depending on the nature of the work. An important change is the possibility of combining different types of contracts in one employment relationship – provided that this does not contradict their legal nature and logic of application. This approach allows for a more accurate consideration of the specifics of work, in particular in areas with non-standard schedules or project-based employment.
Open-ended contract. The draft of the new Labor Code retains the open-ended employment contract as the main employment model. According to Article 55, this format will continue to be considered the classic for formalizing employment relationships. An open-ended contract provides for the stability of employment without a specific end date, which provides the employee with basic guarantees and predictability of working conditions.
Fixed-term contract. The draft establishes clear restrictions on the use of fixed-term employment contracts. According to Articles 56–58, an employer will be able to conclude no more than two consecutive fixed-term contracts with one employee to perform the same work. The total duration of such contracts should not exceed three years. If this limit is exceeded, the contract will automatically be considered indefinite. In addition, the employer will be obliged to inform employees working under fixed-term contracts about available vacancies for permanent work within five days. Such restrictions are aimed at preventing abuse of fixed-term contracts and stimulating the transition of employees to more stable forms of employment.
Seasonal contract. Such a contract can be concluded for a period of up to 8 months. Its feature is the absence of a trial period, as well as a simplified termination procedure – either party can terminate the contract by giving only 3 working days’ notice. This format is designed to provide flexibility for seasonal work, while simplifying both hiring and termination of employment relationships.
Contract with unfixed working hours. The project introduces a new employment format, which is the Ukrainian analogue of “zero-hours contracts”. Under such a contract, the employee is involved in work only when the employer needs it. At the same time, the bill provides for minimum guarantees: even if the employee has not actually worked, he must be paid a salary for at least 32 hours per month. In addition, a restriction is established for employers – the number of such contracts cannot exceed 10% of the total number of personnel. Performing work under conditions of unfixed working hours does not entail any restrictions on the scope of employees’ labor rights.
Apprenticeship contract. Such a contract allows combining work with training directly at the workplace for a period of up to 6 months. A mandatory condition is the appointment of a mentor who accompanies the employee and monitors the performance of tasks. An important restriction is established: the employer does not have the right to re-enter an apprenticeship employment contract with the same employee in the same specialty, except in cases where such a contract was terminated for reasons beyond the employee’s control.
Home-based contract. Provides for the performance of work at a fixed place of the employee’s residence. In this case, the general operating mode of the company is observed, and changing the workplace without the employer’s consent is prohibited. The draft Labor Code provides for the possibility of temporarily introducing home work in the event of a threat of the spread of an epidemic, pandemic, the need for self-isolation, armed aggression or emergencies of a technogenic, natural or other nature. This form of work can be established by the employer by an individual act in accordance with the norms of the Code. The employee must be familiar with this act before starting to work from home.
Remote contract. The contract gives the employee complete freedom to choose a place of work and independently plan working hours. The key innovation is the right to disconnect, which guarantees rest time, when the employee can ignore work calls and letters without consequences for himself. According to the norms of the legislation, performing duties outside the office does not affect the calculation of seniority, the right to advanced training or appointment to higher positions. An employee has the right to request a temporary transition to remote work for a period of up to 2 months if facts of discrimination, bullying or harassment are recorded at the workplace. Pregnant women, parents of children under 1.5 years old or children with disabilities can initiate a remote format upon application, if the employer has the appropriate resources.
Employment contract for domestic work. This type of contract legalizes the work of nannies, housekeepers and gardeners. The employer is an individual – a member of the household. The status of a domestic worker is granted if the work is performed regularly and for more than 40 hours per month. The contract stipulates the working conditions, schedule, method of payment and the period of notice of dismissal. The parties decide for themselves whether to keep a work book. Domestic workers have the right to vacation, safe working conditions and voluntary participation in the social insurance system.
The employer can provide housing to the employee both free of charge and for a fee. At the same time, it is forbidden to arbitrarily deduct housing costs from wages. Summarized accounting of working hours is allowed. The concept of “waiting periods” has been introduced, when the employee must be ready for work – they are paid no less than the minimum wage. Accompanying family members on vacation is also considered working time.
Employment contract for temporary (agency) work. The new rules regulate tripartite relations: between the employee, the agency as the employer and the user, that is, the actual customer of the work. An employment agency hires an employee to send him to another company for a certain period of time. The employee performs tasks under the control of the user, but his salary is paid by the agency. In this case, the user is obliged to provide the temporary employee with the same conditions as its permanent employees. It is important that the salary of a temporary employee cannot be lower than the salary of the user’s full-time employees in a similar position. In addition, the draft provides safeguards for the agency. Thus, the agency is prohibited from charging the employee for employment, the agency does not have the right to prohibit the employee from subsequently finding a permanent job with the user. And the user is prohibited from using agency work to replace strikers or during mass layoffs.
The draft Labor Code significantly narrows the possibilities of using civil law contracts as an alternative to classic labor relations. At the same time, businesses are offered legal tools for organizing labor. In particular, it concerns the expansion of the use of remote work, contracts with unfixed working hours, as well as temporary agency employment. At the same time, the draft raises concerns due to the potential risks of its practical application.
One of the key challenges is the risk of reclassification of relations. The labor inspectorate may receive expanded powers to recognize civil law relations as labor on formal grounds, which creates additional pressure on business. Another problematic issue is the legalization of home work. It involves keeping records and reporting by individuals, which may prove to be an excessive administrative burden and, conversely, stimulate further shadowing of this segment. It is also worth noting the complexity of the mechanism of temporary agency work. The tripartite relationship between the agency, the employee and the user may complicate administration and make this format less attractive for business.
