Redundancy Period
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The redundancy notification rules applicable in Ukraine are among the least flexible when compared to those applied in the European Union. Even in Russia, where labor legislation was identical to the Ukrainian one up until the early 1990's, an employee has a right to terminate an employment agreement before the expiration of the notice period and be paid an average salary equal to that such employee would have earned had he continued to be employed until the redundancy date. Ukraine, however, continues to maintain an approach providing for a mandatory 2-month redundancy notice period (Article 49-2 of the Labor Code). At the same time, if an employee is terminated before the expiration of the statutory 2-month notice period, the court may, at the request of the redundant employee, extend the employment termination date so as to include the mandatory 2-month notice period into the employee’s period of service with the employer and order the employer to pay the employee’s average salary for that period.
The staff redundancy periods (from the statutory redundancy notice date to the actual termination date) vary considerably in different EU countries (e.g., 3 business days to 3 months in Poland, 2 to 6 months in Luxembourg). At the same time, most of the Western countries have a common approach consisting of two elements:
1) the redundancy period depends on how long an employee has worked at the company / the organization; and
2) an employer may immediately terminate an employee’s employment due to redundancy and pay to him/her an average salary the employee would have earned had he/she continued to be employed by the employer until the redundancy date (payment in lieu of notice).
Employees' Rights in Case of Redundancy
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The statutory protection against redundancy is granted to:
• pregnant women (Article 184 of the Labor Code);
• women who have a child under 3 years of age or women on maternity leave caring for a child of up to 6 years of age (Article 184 of the Labor Code);
• single mothers, fathers, foster parents, adoptive parents who have children under 14 years of age or disabled children (Articles 184, 186-1 of the Labor Code);
• minor children (Article 198 of the Labor Code); and
• employees who are on a sick leave as of the employment termination date (Article 40(3) of the Labor Code).
- In case of massive redundancy (“massive” redundancy is the one meeting the criteria presented as an infographic), an employer is required to submit a special report to the State Employment Service (Article 49-2 of the Labor Code).
- An employer must release a copy of a dismissal order and return an employment record book to the redundant employee on the redundancy termination date and make full payment to the employee, including a statutory severance payment in the amount of the employee’s one average salary (Article 47 of the Labor Code).
- A redundant employee shall have a priority right to be re-employed to his/her position with the employer within one year from the termination date if the employer opens any relevant vacancy (Article 42-1 of the Labor Code).
- The redundancy is allowed only in case of any changes in the organization of production and labor (e.g., closure of departments, business lines, workflow optimization / improvement, etc.).
Redundancy Procedure
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The Ukrainian law contains numerous requirements for the redundancy procedure. In order to comply with them, prudent and painstaking efforts are required to be taken by both the management team and the staff. At the same time, we always warn our clients against a formal understanding of the redundancy procedure as the only possible algorithm of action. Personal negotiations quite often result in the selection of such formats for termination of employment relations that are more advantageous for both the employer and the employee. It takes years to build relations with employees, and redundancy often means their suspension rather than their end: after a fall, the market starts growing again, and the employer invites former employees to come back to work. We hope that a detailed understanding of the redundancy procedure will help employers to effectively organize the redundancy process and avoid litigation risks.
The launch of the redundancy process depends on whether there is a collective bargaining agreement and / or a trade union at the company. If the collective bargaining agreement contains any special redundancy provisions, they must be complied with. If there is a trade union, it must be notified of the forthcoming redundancy three months before the prospective dismissal date. After giving such notice, the employer must hold consultations with the trade union on how to mitigate redundancy consequences in accordance with Article 49-4 of the Labor Code.
The generally applicable procedure envisages the issue of an order on redundancy (the introduction of a new staff list) two months before the prospective redundancy dismissal date. On the day of issue of such order, the employees subject to redundancy must be notified of the forthcoming redundancy by way of reading the redundancy order or being served a special notice (in both cases, the employee must sign an acknowledgment of having read the order / having received the notice). In case of partial redundancy (for example, when five out of 10 full-time “driver” positions are cut), it is necessary to comply with the employees’ priority right to remain at work in accordance with Article 42 of the Labor Code.
If the redundancy falls under the definition of "massive redundancy" (see above), then, on the day when the redundancy order is issued, the respective notice must also be given to the State Employment Service in the form of a 4-ПН Report.
Simultaneously with the notification of employees of the forthcoming redundancy, the employer must offer other vacant positions (if available) to them. Furthermore, according to the position of the Supreme Court, the employer must offer to the employees subject to redundancy any vacant positions arising during the subsequent two months and matching their professional background and qualifications (such positions must be equal to or lower than their current positions).
Two months after the notification is given of the prospective redundancy, provided that there are no vacant positions or that the employees refuse to be transferred to the vacant positions offered to them, individual dismissal orders must be issued. Those employees, who are made redundant, must be provided with their employment record books containing a dismissal entry in accordance with Article 40(1) of the Labor Code and a copy of the dismissal order. On the day of dismissal, the employer must make full settlements with the dismissed employees (including salaries, compensation for unused leave, and severance pay in the amount of one average salary).
It should also be kept in mind that if the positions cut due to redundancy are opened again within one year after the dismissal of the employees who previously held such positions, the employer must comply with their priority right to be re-employed to such vacant positions as provided by Article 42-1 of the Labor Code.
Authors: Oksana Voynarovska, Oleksiy Dorogan