Chumachenko Y., Yemelyanova L. The New Labor Code: Notes on the Margins // Investors Voice. – 2015. – No. 66.
What is the New Labor Code Needed For?
As is known, the Program "100 Concrete Steps to Modern State for All" proposed by Nursultan Nazarbayev envisages liberalization of labor relations and adoption of the new Labor Code.
Kazakhstan has firmly embarked on the path to develop the market economy, which inevitably shifts priorities towards protection of production interests. Besides, Kazakhstan has joined the WTO (its membership being at the final stage of formalization) and has assumed obligations under the Agreement on the Eurasian Economic Union (EAEU), which also requires the Republic to harmonize its domestic legislation with the norms and standards applied by the said international organizations.
As legal practitioners, we have to mention that improvement of the main labor law of the country has become overdue not only for political and economic reasons. In our view, the current Labor Code in a number of its key points meets neither the employee, nor the business interests. In practice, there regularly occur situations, which are impossible to resolve due to gaps in legislation or a conflict of laws, or whose resolution is largely time and resource consuming. Some instruments, which would enable rational use of human resources, are missing.
We stand for good faith in labor relations, both on the part of the employer and the employees, and for both parties to possess a full-fledged set of instruments to protect their rights. It is specifically from this standpoint that AEQUITAS lawyers have been developing their proposals in the framework of work on the new Labor Code, based on their significant work experience and systems understanding of the Kazakh legislation.
What Has Been Done and What Has Yet to Be Done?
Undoubtedly, the governmental working group that prepared the draft law has accomplished a colossal work over a very short period. The draft new Labor Code has improved regulation over a number of issues, bridged certain legislative gaps and introduced new legal institutes. Generally, the document structure has become much more convenient for use by both lawyers and laymen.
However, there are still some contradictory or insufficiently clear provisions, which could be corrected in the course of further work on the draft.
Employee Representatives
The institute of employee representatives still remains poorly elaborated. We deem that it is necessary to clearly define the concept of this institute.
The current version is unclear as to whether the elective employee representatives will be representing the interests of the entire collective, including those who voted 'against' in the general meeting of employees, or only those employees who voted 'for' the said representatives.
Due to the ambiguity in the conceptual framework, the issue remains open whether third parties may act as employee representatives by proxy. In cases where the participation of employee representatives is mandatory (for instance, in the work of attestation commission), should only the representatives of specific (in particular, those being attested) employees participate in the statutory procedure, or are any other employee representatives allowed to participate? And what to do if a specific employee subject to attestation has no representative and is not willing to elect one? In this case, the employer's rights to conduct attestation may be paralyzed. We believe that in the draft new Labor Code the legislator must resolve the currently existing problems of employee representation and eliminate the contradictions. This is all the more important because the draft law if fraught with a new large problem – that of dispute resolution.
Dispute Resolution
It is contemplated that a person (employee or employer) may go to court only if the dispute has not been resolved by a grievance committee or if its decision has not been performed. This norm may entail impossibility for the parties to go to court if the grievance committee has not been formed (and this, as we can anticipate, will be the overwhelming majority of cases).
Thus, the constitutional right to judicial protection is violated. A particular person possesses no legal mechanisms to expeditiously form such committee, if it is not in place, or no employee representatives have been elected, or no general meeting to appoint the representatives on the committee has been held, or no agreement between the representatives and the employer has been reached. Besides, there may be disputes regarding the procedure for holding the above general meeting.
Moreover, in case of a dispute between a CEO and employer (in the person of participants/shareholders, etc.) the mechanism of the grievance committee functioning is handicapped, because the representatives of the legal entity's supreme management bodies (who in fact hired the CEO) are barred from participation in the committee, while the CEO acquires lots of legal possibilities for abuse. Such approach significantly violates the rights of participants/shareholders.
Executives
The necessity to regulate the issues related to the specifics of executive bodies functioning has become long overdue.
Employers should be entitled to independently regulate the specifics of employment agreement execution, labor remuneration procedure and conditions, imposition of disciplinary liability, resolution of individual labor disputes, granting of leaves, exercise of executives' rights and performance of their duties, and the founders (participants or other management bodies of the legal entity) should be empowered to determine who will be issuing orders on the above issues.
The ban on employment agreement termination in the period of the employee's being 'on sick list' or on leave should not cover the executives, to avoid material damages to the employer due to specifics of the corporate procedures for convocation of the general meetings of shareholders or participants. If such ban is in place, executive bodies may knowingly prevent the termination of their labor relations by going on leave or opening sick lists. Unfortunately, such instances are regularly encountered when terminating labor relations with the executives of legal entities; however, currently, the courts are refusing their reinstatement in job. We hope that the new Labor Code will include an express provision that the ban in question does not apply to this category of employees, which will eliminate the grounds for further disputes on this matter.
Practice also demands that the specifics of regulation over executives' labor be extended onto the heads of branches and representative offices, as well as onto other elective bodies.
Secondment
We would also like to focus on the issues of secondment (provision of personnel). These relations have gone massive, especially in cases of importing foreign employees from abroad, which is facilitated by the Tax Code provisions exempting the foreign organization providing personnel from the obligations to form the so-called 'permanent establishment' for tax purposes. In practice, however, many organizations forget that fulfillment of the Tax Code provisions is impossible without applying the Labor Code, as the person being provided and the inviting organization are forming ample labor relations between themselves, which requires execution of employment agreement, payment of salary and other administration, which contradicts the institute of agency labor.
The draft new Labor Code dedicates to secondment a separate article, albeit covering only the provision of personnel in the framework of a vertical structure of affiliates and not applying to horizontal relations so highly in demand (transfer of personnel between legal entities that are dependents of the same parent organization).
Moreover, the subjects of secondment relations, according to the version proposed by the draft Law, may only be legal entities with shares (participation interests), i. e., essentially, joint stock companies and partnerships, thus making secondment impossible for other forms of legal entities, including foreign. Also questionable remains secondment of an employee from a foreign legal entity to its local branch or representative office. We deem that such restrictions within the same group of affiliate legal entities are unjustified.
Also open remains the issue of the law to govern labor relations with foreign employees seconded to Kazakhstan.
Qualification Requirements and Names of Positions
The key goal of the new Code is to liberalize labor relations. But how does this goal correlate with the state's intention to bring qualification descriptions, names of positions and labor conditions in line with professional standards, wage-rate and qualification and other generally binding reference books?
The names of positions established by the Qualification Reference Book (QRB) and the Unified Wage-Rate and Qualification Reference Book (UQRB) lag far behind the labor market and the sought-after occupations and positions. Practically all employers encounter a problem when they cannot find the necessary positions in the occupational standards, QRB and UQRB.
The currently effective occupational standards are far from ideal. Moreover, the normative legal acts themselves contain contradictions. For example, special legislation envisages positions, which are not mentioned in the reference books.
Employers do not understand why they cannot introduce those positions they need, if the employees agree to such work and to the corresponding names of positions. Demand is growing for 'multifunctional' positions where employees perform different functions under the same job description.
It is unclear why employers must hire to some positions only the employees of a specific specialty and qualification, if another employee is available who suits the employer best.
The transfer of occupational standards approval functions to the National Chamber of Entrepreneurs (NCE) does not add 'flexibility' to this matter as well. First, not all employers are members of the NCE: branches and representative offices of foreign organizations, not-for-profit organizations and private individual employers are not. Furthermore, not all employers have the resources and possibilities to partake in the development of industrial occupational standards. Moreover, it is impossible in principle to have the standards account for all employers' interests.
The draft Code establishes that an occupational standard must define the requirements to the level of qualification, competence, content, quality and conditions of labor (which include, inter alia, work and rest regime and salary amount) in a particular area of professional activities. The occupational standard will be based on the national and industry qualification frameworks.
In other words, it is planned to standardize the labor and labor conditions in all types of labor activities, which contradicts the normal competition on the market and can significantly impede development of specific organizations (especially small and medium businesses) and the country's development on the whole.
We are of opinion that in the private sphere it should by no means be allowed to limit the possibility to establish the names and the functional content of positions and the labor conditions by any reference books or standards, which are remote from the actual needs of organizations. The said documents are useful only as long as they are of recommendatory nature. Private employers should be granted freedom in this matter, subject to statutory labor guarantees.
Social Partnership
The idea of social partnership pursues the primary objective to protect the interests of workers, resolve conflict situations and consolidate the efforts of all participants in resolving production problems through voluntary dialogue between the social partners proper, or with state involvement. Unfortunately, the concept of the Labor Code has, in fact, turned the idea of voluntary social partnership into a 'social imposition,' since most employers have no practical mechanisms to influence the negotiations on social partnership agreements and the final content of these documents, but are required to perform thereunder, while these agreements may establish an additional, as compared to the statutory, scope of employer's obligations, including financial. We believe that the Labor Code should provide for a voluntary, rather than mandatory, accession of employers to social partnership agreements, because only such an approach is consistent with the nature of these agreements and ensures protection of the parties to social partnership. Another alternative to employee protection with state's involvement is a collective agreement at enterprises concluded with the participation of employee representatives, seldom practiced by employees so far. Here, again we revert to the idea that the institute of 'employee representation' should be substantially revised, taking into account the accumulated practical issues.
The list of issues that, according to practitioners, should be regulated by the Labor Code can be continued. We are keenly watching the new Labor Code development progress and hope that in the course of its draft discussion in the Parliament it will be finalized taking into account the balance of interests of the parties to labor relationships and the opinions of the labor law experts and lawyers of who will have to apply its provisions in practice.