New sanctions for labour law violation

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On 2 February 2020, the Law of Ukraine “On amendments to the Labour Code of Ukraine” No. 378-IX (the Law) became effective.

The Law introduces changes to the procedure of application of fines (financial sanctions) for labour law violations as may be made by employers (rather than administrative fines applicable to the officers of the employers). The Law amends the types of sanctions applicable to the employers as well as amounts of certain fines. Please see below information on the key amendments.

i. Admission of employee to work without conclusion of employment agreement (contract) or alternative formalization of employment agreement; formalizing employment as a part-time assignment, while an employee actually works full working time; payment of salary (remuneration) without accrual and payment of unified social contribution and taxes result in:

a) General sanction – fine equal to ten minimum salaries (in 2020 UAH 47,230) for each employee affected by violation.

b) Sanction applicable to single tax payers registered within first, second, third group – legal warning (newly introduced sanction).

c) Sanction for repeated violation within two years upon reveal – fine equal to thirty minimum salaries (in 2020 UAH 141,690) for each employee, affected by violation.

ii. Non-compliance with minimum state guarantees on staff remuneration (e.g. non-payment of minimum salaries, non-payment for overtime work, vacation compensation, etc.) – fine amounting to two minimum salaries (in 2020 UAH 9,446) for each employee affected by violation (fine reduced in five times as compared to previous version of the said article).

iii. Non-admission of state labour authorities to conduct labour inspection or creation of obstacles to labour inspection conduction, when the inspection was initiated to reveal the violations listed in item i. entails fine in the amount of sixteen minimum salaries (in 2020 UAH 75,568).

iv. Other violations of labour law (in comparison to the violations listed in Article 265 of the Labour Code of Ukraine) repeatedly within one year starting from the date when such other violation(s) was (were) revealed result in fine in the amount of two minimum salary (in 2020 UAH 9,446) for each of such other violation.

Additionally, an incentive for timely payment of fines has been introduced. Namely, when employer pays 50 percent of imposed fine (any of the fines mentioned in Article 265 of the Labour Code of Ukraine) within 10 banking days from the serving of the resolution on fine application, the obligation to pay fine is deemed fully performed (e.g. employer performed all necessary actions under resolution).

According to the Law elimination of the violations listed in items i., iii., iv does not release the employers from the obligation to pay fines (where applicable).

Therefore, the amendments proposed by Law narrow down mainly to the reduction of fines/sanctions.