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Labor Inspections

On August 30, 2019, the Procedure for Exercising State Control over Compliance with the Labor Legislation, approved by the Resolution of the Cabinet of Ministers of Ukraine No. 823 dated August 21, 2019 (hereinafter referred to as the “new Procedure” or “Procedure No. 823”) entered into force.

We will remind that the new procedure was adopted due to that on May 14, 2019, the Court of Appeal (case No. 826/8917/17) invalidated the Procedure for Conducting Inspections of Compliance with Labor Legislation, approved by the Resolution of the Cabinet of Ministers of Ukraine No. 295 dated April 29, 2017, in connection with the violation of the procedure for adopting this Procedure and the contradiction with the laws of Ukraine, including the relevant Law “On the Basis of State Supervision (Control) in the Field of Economic Activity”.

However, already a week after the entry into force of the New Procedure No. 823, the question of its legitimacy will again arise. On September 12, 2019 , the State Regulatory Service of Ukraine asked the government to cancel Procedure No. 823 on the basis that the new procedure, like the previous one, was adopted in violation of the laws of Ukraine.1  

We draw attention to that the New Procedure, as well as the previous one, contains provisions that labor inspectors may not be allowed to inspect if the decisions of the Ministry of Social Policy on approving the form of the certificate of inspection visit are not published on the official website of Gostrud. To date, the official site of Gostrud has published exclusively an inspection visit form, approved by the order of the Ministry of Social Policy dated 18.08.2017 in pursuance of already inactive Procedure No. 2952. The new form of the certificate is approved today.

In connection with the possible resumption of labor inspection visits and the existing uncertainty about its legitimacy and duration of action, we consider it necessary to draw your attention to the following.

Key Provisions of the New Procedure No. 823 

The new procedure as a whole is of a similar nature to Procedure No. 293, which we described in detail in previous consultations (YC dated 26.06.2017 Ex. No. 13068/EK/KM, YC dated 31.05.2019, Ex. No. 13451/IN).

The labor control can be carried out in such forms as:

– inspection visit;

– non-visit inspection.

Inspection visits can be carried out:

– by Gostrud inspectors;

– by inspectors of the executive bodies of local councils (in relation to the issues of remuneration and registration of labor relations).

Before starting a visit, the inspector must:

– provide official certificate;

– provide a referral for an inspection visit;

– sign in the company’s inspection journal.

As before, the absence of a referral or refusal to sign a journal is not a reason for not allowing an inspector! The absence of referral may become a reason to challenge the results of the inspection visit.

Reasons for an inspection visit include the following

(paragraph 5 of Procedure No. 823): 

– a person’s complaint about a violation of labor laws against this person;

– an information from the media on a discovery of informal labor relations;

– a mismatch of the number of employees with the volume of production (performed works, services) to average indicators by type of economic activity;

– carrying out business activities without state registration as a business entity (i.e., the provision of services by an individual without registration as a private entrepreneur);

– payroll of 30% and more of employees less than the minimum;

– an absence of a filed tax notice of employment;

– an increase of 20% in the number of part-time workers within 1 month;

– a performance of works by individuals under a civil contract at one employer for more than 1 year;

– a work of 30% and more of individuals under civil contract terms (i.e. if a company with 7 employees has 3 contractors-individuals without a private entrepreneur status);

– a reduction within a month of 10% or more of the number of employees with a staff of 20 or more employees (i. e., with a staff of 20 employees, a dismissal in the order of reduction of 2 employees within 1 month).

The inspector has the right not to notify the company of the upcoming visit.

Procedure No. 823 made significant changes in terms of determining the duration of the inspection. Now, regardless of the size of the enterprise, including for small ones, the duration of the visit cannot exceed 10 working days, which begin to be calculated from the moment the company provides the documents and explanations requested by the inspector.

The number and total duration of labor inspections per year is not limited!

The labor inspector is endowed with a wide range of rights:

– to visit the premises of the enterprise at any time of the day;

– to get acquainted with any documents, make copies of them;

– to communicate confidentially with employees;

– to involve law enforcement agencies;

– to have a workplace at the enterprise;

– to carry out photo, video shooting;

– to receive information from government bodies.

At the same time, inspectors are prohibited from:

– disclosing production and commercial secrets;

– seizing the original documents.

Requirements of the inspector to provide information, documents, explanations are mandatory.

Based on the results of the inspection visit, a Certificate is drawn up on the last day of the visit and, in the case of violations of labor legislation, a prescript is drawn up.

The Certificate and prescript may be appealed in an administrative or judicial order.

The penalty for the employment of non-formalized employees (UAH 125,190) is put on the company simultaneously with the imposition of prescript. Other fines for violation of labor law are imposed in case of non-compliance by the company with the prescript.

Also, in case of non-admission to inspection, a fine is imposed on the enterprise in the amount from UAH 12,519 to UAH 417,300.

CONCLUSIONS to the above stated:

The general trend today has been the removal of undeclared labor from the shadows and the question remains exclusively in the form of conducting labor inspections. We would recommend conducting a full audit of the procedure for formalizing employment and labor relations at the enterprise with a view to its compliance with the laws of Ukraine.