Legal Updates of Labour & Employment Practice (Q2, 2018)

Non-Disclosure and Non-Compete Obligations of Corporate Officers
 

On June 17, 2018, the new Law of Ukraine "On LLCs and ALCs"[1] (the "Law") became effective. This Law has extended the obligations of corporate officers at LLCs and ALCs (members of the executive body, supervisory board, other persons defined by the company’s charter) and laid down the additional dismissal grounds for violations of those obligations. 

The Law has established the non-compete obligations for corporate officers. From now on, the corporate officers while being employed at the company, shall seek an approval of the general meeting of participants or the supervisory board to conduct the following activities:

• to conduct business as a private entrepreneur in the sphere of the company’s activity;
• to act as a partner of a full partnership or a full partner at a limited partnership, which conduct business in the sphere of the company’s activity;
• to hold positions at executive bodies or supervisory boards of other companies that conduct business in the sphere of the company’s (employer’s) activity.
   

The latter limitation is worth attention, as many businesses in Ukraine operate as several LLCs or ALCs, where one person may simultaneously act as the corporate officer (i.e. director). In this case, the companies shall consider conducting the general meeting of participants to approve such overlapping of positions. 

The Law also brings the definition of the corporate officer’s conflict of interests, the i.e. situation where the duty to act reasonably and in a good faith for the company’s interests conflicts with private interests of the corporate officer of his/her affiliated persons. From now on, while being appointed, the corporate officer shall provide the company with a list of affiliated persons (family members, controlled legal entities) and regularly update the company on changes thereto. Should the corporate officer or his/her affiliated persons receive from the third parties any funds or other values for actions or inactions in relation to the corporate officer’s duties, this will constitute a conflict of interests. 

Moreover, the Law introduces non-disclosure obligations with respect to the corporate information. Hence, the corporate officers cannot disclose a trade secret or confidential information of the company. This prohibition survives the dismissal and remains valid for 1 year after the employment agreement (contract) is terminated. In addition, this surviving period may be extended by the parties’ agreement.

Finally, the most important thing is that the corporate officer’s failure to comply with any of these new obligations constitutes a ground for unilateral dismissal at the employer’s initiative, without any compensation.

New Residence Permits

On April 25, 2018, the Cabinet of Ministers of Ukraine has adopted two Resolutions, No. 321[2] and No. 322[3] approving new procedures for obtaining permanent and temporary residence permits, respectively. On June 1, 2018, these Resolutions became effective.

Starting from June 1, 2018, the residence permits will be issued as ID-cards with a readable electronic chip. The chip will contain biometric data (fingerprints), digitized face and signature of the holder. These new rules will require the documents for the residence permit to be submitted personally by the applicant. The residence permits will be issued within 15 days from submission date. 

From now on, the permanent residence permit (ID-card) will be issued for 10 years with a right of renewal upon expiration. The temporary residence permit (ID-card) will be generally issued for 1 year as previously and, if further extended, reissued with a new photo for next 1 year.

At the same time, those units of the State Migration Service of Ukraine which lack an equipment for ID-cards will continue issuing old passport-style permits. In addition, the "old" residence permits that were issued on the basis of the documents submitted before June 1, 2018, will remain effective for their respective terms of validity.

Getting Temporary Residence Permits Became Easier

On July 18, 2018, the Cabinet of Ministers of Ukraine approved the Resolution[4] amending the Procedure for temporary residence permit obtainment. Before this, certain foreigners were required to leave Ukraine and return only to make their entry date later than the date of the work permit issuance. 

From now on, citizens of certain countries, who are waived of type "D" visa requirement under respective treaties, may apply for the TRP without leaving Ukraine while staying here. The only precondition is that the work permit issuance date shall be no later than 30 days from the foreigner’s entry date into Ukraine.

Employment Record Books of Representative Offices – GDIP’s Monopoly Ceased

On July 18, 2018, the Cabinet of Ministers of Ukraine approved the Resolution[5] and the Decree[6] lifting the obligation of the foreign representative offices to store employment record books at the Directorate-General for Representative Offices (the "GDIP"). Before that, only GDIP was authorized to make records in such employment record books. From now on, the representative offices may keep and file the employment record books by themselves.

JUDICIAL PRACTICE

Dismissal of Pregnant Woman upon Expiration of Fixed-Term Employment Agreement – Claims for Employer’s Obligation to Employ, not Reinstatement

The Grand Chamber of the Supreme Court in its Resolution[7] dated May 16, 2018, resolved the case concerning that employer’s right to dismiss a pregnant woman upon expiration of the fixed-term employment agreement. This dismissal ground mandates the employer to employ this woman at the same or another entity. 

However, if the employer fails to fulfill this obligation within 3 months from the dismissal, the court may then hear a claim on obliging the employer to provide a new job, but not to reinstate the dismissed woman in her previous job.

Trade Union Lacks Standing to Represent all Staff in Court

The Grand Chamber of the Supreme Court in its Resolution[8] dated May 23, 2018, stated that as the staff of the company is not a legal entity, it doesn’t have standing before the court. Accordingly, the trade union is not authorized to represent the staff at commercial or civil proceedings. So, in lawsuits brought in the interests of staff, the trade union acts on its own behalf, not on behalf of the staff.