Currently, due to the economic slowdown and deepening political crisis, more and more companies in Ukraine trying to reduce their costs consider the option of business reorganization.  Companies either move into a new line of business, or, in the worst case, even stop operations.  In any case business reorganization means that certain positions will be eliminated and some employees will be dismissed.  Such market trends have resulted in a significant increase in employment and labor disputes related to staff redundancy.

Recent court practice confirmed the statutory obligations of the employer in the course of redundancy proceedings and proposed a more complete interpretation of certain obligations of employers, a summary of which is provided below.

The employer must notify employees about their upcoming redundancy and offer any vacant positions in the same company.

In its most recent Orders the Supreme Court of Ukraine (the “Court”) confirmed that the employer is obliged to notify employees personally about their forthcoming redundancy not later than two months before the targeted redundancy date and offer them any vacant positions in the same company1  regardless of the department in which the relevant employees work.2

Such vacant positions must be offered throughout the notice period (i.e., from the date when the redundancy notice was served until the date the employment agreements of such employees are terminated).3

The Court found that the employer will be deemed compliant with its obligation if it has offered the employee all vacant positions that (1) exist in the company from the date on which the redundancy notice was served; (2) exist as of the termination date; and (3) correspond to the qualifications or experience of the relevant employee, or any other work that the employee can perform given his/her education, qualifications, experience, etc.4 In other words, the safest option for the employer is to offer any vacant positions even if such positions require lower qualifications and less experience compared to the eliminated position of the employee.

The employer must obtain the trade union’s consent to dismiss an employee (if necessary).

In an order dated 1 July 2015 the Court found that if the trade union refuses to give its consent to the employee’s dismissal, the decision of the trade union must be substantiated with evidence that the employer violated the employee’s rights in terminating the employment agreement.5 If the decision contains no justification why the relevant consent was not given to the employer, the employer is entitled to dismiss such employee without the trade union’s consent.6

The employer must make all payments and return the labor book to the employee on the termination date.

In recent cases the Court confirmed that failure of the employer to provide a full settlement can trigger liability under the applicable law.7 By way of reminder, the employer must pay all employment-related payments for the period ending with the last day of employment inclusive.  Otherwise, this will trigger the employer’s obligation to pay the employee’s average salary for the entire period of the delay in payment of the correct amounts to the employee.

The Court also confirmed that in order to calculate the final settlement, a special formula must be used pursuant to which all payments made for all working days of such employee for the last two full calendar months before termination should be taken into account.8