Organization of labor and its payment under martial law

First of all, it has to be said that the options for organizing labor relations under martial law in general can be divided into two groups depending on the status of employees:

A. in relation to employees performing duties in the Armed Forces of Ukraine or the territorial defense;

B. in relation to other employees (who are not in the Armed Forces of Ukraine and not in the defense).

Further, we consider the procedure for formalizing labor relations in relation to each group of employees.

1. Organization of labor payment of employees who are in the Armed Forces of Ukraine or the territorial defense

First of all, it should be noted that according to Art. 119 of Labor Code (hereinafter referred to as the Labor Code), for the duration of the performance of state or public duties during working hours, as well as military service by conscription or contract, employees in any case retain their place of work (position) and an average wage.

Therefore, the employer should issue an appropriate order on temporary release from the performance of their duties for employees who are in military service in the Armed Forces of Ukraine or are enrolled in a volunteer formation of a territorial community (hereinafter referred to as the territorial defense) with saving their place of work (position) and the payment of an average wage for the time they perform relevant responsibilities.

The grounds for issuing such an order may be:

– ideally – a statement from the employee in paper form with a copy of supporting documents (military ID with a mark of conscription, etc., the contract of a military man or volunteer of the territorial defense, a certificate of conscription from the military registration and enlistment office or an extract from the order of a military unit, etc.);

– at least – it is desirable to receive a scan (photo) of the employee’s application for temporary release from official duties in connection with the conscription, enrollment in the territorial defense, etc.

If both of the above-mentioned options are impossible, in our opinion, the basis for the employer’s order may be a message from the employee in the messenger, from which it will be clear what duties they perform.

2. Organization of labor payment for employees who are NOT in the Armed Forces of Ukraine or the territorial defense

Options for organization of labor payment for this group of employees will depend on whether specific employees can perform their work remotely (outside the enterprise) or not.

Accordingly, we will consider the following sub-options:

a) organization of remote work;

b) organizing the employment of employees who cannot work remotely.

2.1. Organization of remote work

For those employees who (can) work remotely, the employer can issue an order for remote work, in which it is possible to establish the procedure for its implementation: a period of free time for the employee to rest (when they may not get in touch), the procedure for submitting reports on work performed, the procedure for notifying the administration of the impossibility of performing work, etc.

According to Art. 60-2 of the Labor Code in a situation of martial law¹, remote work can be introduced by the order of a head of an enterprise with the employee familiarizing themselves with such order within two days from the date of its adoption, but before the introduction of remote work².

As a way to notify employees, today we find it possible to send a scanned copy of the order by e-mail, and if this is not possible, via messengers.

At the same time, the transfer to remote work does not change the conditions of labor payment of employees.

2.2. Organization of employment of employees who can NOT work remotely

Options for organizing the employment of employees who cannot work remotely, depending on the possibility of their implementation with or without the consent of the employee, can be divided into the following two groups:

* An option that does not require the consent of employees:

– downtime (not through the fault of the employee);

* Options requiring the consent of employees:

– voluntary transfer to part-time work;

– vacation (paid and unpaid).

In addition, many of the above options also have sub-options, which can also be divided into those that lead to a reduction in salary, and those that do not fundamentally change the amount of payments to employees.

Below we will consider in detail each of the blocks of options according to the criterion of the consent of employees for their implementation.

2.2.1. Option that does not require the consent of employees – downtime

First of all, the beginning of downtime must be issued by order of the head of an enterprise. Downtime can be declared both in relation to the entire enterprise and in relation to specific divisions of the enterprise, for example, individual teams or their parts, i.e., specific employees.

The downtime order may contain conditions both for the presence of employees on the territory of the enterprise during downtime, and for the absence of the need for them to stay at the enterprise (that is, without going to work), since the issue of the location of the employee in such a situation is not regulated by law.

As for the indication of the reasons for downtime in the order, the Labor Code (hereinafter referred to as the Labor Code), among other things, contains the following wording:

– «other circumstances industrial accidents».

– “the absence of organizational or technical conditions necessary for the performance of work.” We believe that this may include the lack of applications for the performance of works or services, etc.;

– “inescapable force”. However, there is no definition of this term in the Labor Code. But in the spirit of the norm, we believe that this can include the introduction of a state of emergency and martial law (hereinafter jointly – martial law);

– “an industrial situation that is dangerous to life or health of an employee or to people around him and the natural environment.” This obviously means accidents and other industrial incidents that are dangerous from the point of view of labor protection;

– other circumstances.

Thus, the Labor Code does not contain a detailed list of causes of downtime, so the employer can formulate them in the order at his discretion. But at the same time, it is desirable, among other things, to refer to the above caused specified in the Labor Code, with reference to the wording of the enterprise.

In our opinion, in the current situation, the most appropriate wording of the causes of downtime is “the introduction of martial law and a state of emergency (inevitable force), which led to the lack of organizational and technical conditions necessary for the performance of work”, which should be as detailed as possible by the enterprise with reference to specific actual circumstances of its work.

Further, it is necessary to ensure that all employees covered by the order are familiarized with its text.

As a way to notify employees, today we see it possible to send a scanned copy of the order by e-mail, and if this is impossible, via messengers.

Thus, the minimum necessary package of documents for the introduction of downtime is the order of the head of the enterprise and evidence of familiarization of employees with it.

However, taking into account that the introduction of downtime will affect the labor payment of employees, which may cause claims, as well as. in case the company is unable to make payments and there are risks of being held criminally liable for unreasonable and deliberate non-payment of wages through the fault of the employer, we recommend using additional documentary justification of the reasons and the start of downtime:

A. The act of fixing the downtime. Such a document is usually drawn up by at least 3 employees, for example, with the participation of a personnel management specialist, labor protection engineer, chief accountant, head of the trade union, and contains a fixation of the suspension of work. For example, due to the absence of orders for the performance of work / supplies of raw materials and the closure of the territory of the enterprise, employees do not fulfill their production tasks, etc.;

B. protocol on holding consultations and agreeing on a decision on downtime with the trade union committee. Such a document is specified in the Law “On Employment of the Population” in an article providing for the possibility of receiving assistance for partial unemployment from an employment center. However, we believe that regardless of the intentions of the enterprise to apply for payments, such a document in any case will not be redundant.

According to the Labor Code, the amount of payment for downtime, as a general rule, is 2/3 of the tariff rate / official salary (without bonuses, additional payments and allowances) ³, and for downtime “when an industrial situation has arisen that is dangerous to life or health of the employee or to those around him, and the environment is not through his fault” – the employee retains the average wage.

From this we can conclude that in order to save the wage fund in the documents of the enterprise, the wording “a situation dangerous to life and health of the employee, to those around him, the natural environment” should be avoided.

As for the timesheet of employees, it will be necessary to indicate “Downtime” in the time sheet.

It should be taken into account that if an employee has an annual vacation during the period of downtime, it is payable in the general manner, without taking into account the restrictions associated with downtime.

2.2.2. Options requiring the consent of employees

2.2.2.1. Voluntary transfer to part-time work

Article 56 of the Labor Code provides that by agreement between the employee and the employer, the employee may be assigned a part-time or part-time work week. In this case, payment is carried out in proportion to the working hours (or depending on the output).

Therefore, if relevant applications are received from employees, they can be transferred to a new mode of work (for example, one day a week) immediately after receiving the applications (starting from the date indicated in them).

2.2.2.2. Vacation (paid and unpaid)

The next way to temporarily interrupt the performance of duties by an employee is to provide him with paid or unpaid vacation at the request of the employee⁴ by issuing an order.

The enterprise can use the annual basic and additional paid vacations that were not used by employees in previous years – from the moment they were employed at the enterprise. Payment for such vacations will be made in accordance with the general procedure, taking into account the provisions of the collective agreement of the enterprise.

At the beginning of 2020, the Labor Code was amended to stipulate that if the Cabinet of Ministers sets a quarantine, the period of unpaid leave during the quarantine period shall not be included in the total period of such leave, set at 15 days. As of today, the quarantine is set⁵ until 31.03.2022, so it is currently possible to send an employee on unpaid leave before that date⁶.

However, we are not sure if the quarantine period will be extended in the future and therefore if there will be grounds for extending the period of unpaid leave beyond 31.03.2022.

The granting of leave should therefore be seen as a temporary measure for individual workers, as this option is unlikely to fundamentally solve the issue of the organization and payment for the labor during martial law.

CONCLUSIONS:

Considering the above, the following options for organizing and remunerating workers under martial law can be summarized:

1. for employees in the military and defense forces – no other option but to pay an average wage;

2. for employees who can work remotely – remote working can be introduced, but it has no effect on wages;

3. for the remaining workers, there are the following two main options to save on the wage bill:

– if it is possible to obtain applications from the employees to change their working conditions (this is more likely to be the case in smaller enterprises), then the introduction of part-time working hours (part-time work week) and the payment of wages in proportion to hours worked (or according to output) is the best option;

– if it is impossible to obtain the employees’ consent to change their working conditions (especially in large companies with a large workforce), the only option is to declare downtime: this would allow paying 2/3 of the “bare rate”, unless otherwise provided for in the company’s collective agreement.

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P.S. We would like to draw your attention to the fact that in 2020, in the midst of the pandemic, pinpoint amendments were made to the Employment Act (Art. 47), which provided for a mechanism for partial unemployment supplements made by the Employment Centre to employers to be paid to employees under a number of conditions, in particular when employees lose part of their wages due to a forced reduction of normal working hours due to temporary suspension (reduction) of production for reasons beyond the control of either the employees or the employer, but without terminating the employment relationship with the employees.

One of the main criteria for applying for such assistance is suspension or reduction of production lasting at least 3 months, but not more than 6 months, for at least 20 per cent of all personnel or personnel in a particular workshop (section) where the working hours are reduced by 30 per cent or more per month.

Although there is no direct correlation between the Employment Act and the Employment Code, in our opinion the provisions of Article 47 can be applied to part-time work.

The conditions and procedure for the application of this mechanism are set out in a special Procedure⁷.

In particular, the Procedure stipulates the following procedure for receiving payment from the Employment Centre – the employer must draw up the necessary documents as early as the first days of the downtime, in particular:

А. notification to the municipal employment centre about the start of suspension (reduction) of production, in the form enclosed to the Procedure;

Б. an order to suspend (reduce) the production, stating the reasons, start date and duration (here you can specify “until the end of martial law”) and to whom the order applies;

В. a protocol for consultation and agreement with the trade union committee on the decision to suspend (restrict) production. In such a document, it must be made clear that the parties see no other alternative means of dealing with the situation and therefore the trade union approves and supports the employer’s decision to suspend (reduce) production.

It should be noted that this mechanism was developed specifically for the pandemic, but as of this moment we have no reliable information as to whether it has been applied in practice or has remained declaratory. Moreover, at this stage we cannot assess whether the mechanism can be applied by a company in a martial law situation.

It should also be borne in mind that the Act explicitly states that the above-mentioned payments from the Employment Centre are not payable when employees receive remuneration for downtime from the company.

We believe that if the measures we have described in our advice (downtime, part-time work) still do not allow the company to meet its wage payment obligations, it is advisable to at least try to apply the mechanism provided for in the Procedure and submit a notification to the Employment Centre in the prescribed form (enclosed).

Even if, in the future, after more careful consideration of this option and consultation and negotiation with the Employment Centre, the company is still unable to obtain these payments, this will at least minimize the potential risks of prosecution under criminal law for willful and unjustified non-payment of wages. Because then the employer will be able to document that they have taken all measures in their power to ensure that their employees’ financial interests are not breached, which can be used as evidence of the employer’s lack of fault.