In order to increase the ease of doing business in Ukraine and reduce the administrative pressure of labor and employment controls on business entities, the Parliament passed the Draft Law “On Amendments to Certain Legislation of Ukraine Regarding Prevention of Excessive Pressure on Business Entities by State Labor and Employment Control” (the “Draft Law”) in the first hearing on 12 July 2017.

The draft law prescribes the following measures aimed at preventing excessive pressure being applied on business entities when complying with labor and employment legislation:

1. A clear distinction between state and internal controls in the sphere of compliance with labor and employment legislation The only organ which will become authorized to monitor compliance with labor and employment legislation will be the State Labor Service of Ukraine and its territorial units. The local authorities, according to the legislative change, will not have the right to conduct monitoring, and will only be authorized to monitor entities which are functionally subordinated to them in order to ensure internal compliance with labor and employment legislation. Moreover, the local authorities will have the right to refer to the State Labor Service of Ukraine to report any infringements of labor and employment legislation and initiate the performance of state monitoring.

2. Increased liability for labor and employment control entities

If labor and employment monitoring entities take administrative action against business entities, and if said action is cancelled in administrative or judicial proceedings, then the fines for the monitoring entities are to be increased. Moreover, if the draft Law becomes effective, then administrations will be made liable for reporting untruthful information about infringements of labor and employment legislation which then lead to unreasonable initiation of state monitoring measures.

3. Changes to the liability of business entities for infringing labor and employment legislation The Draft Law allows liability to be mitigated for business entities that infringe labor and employment legislation the first time. Instead of a fine, they will be given the period of no less than 15 days to eliminate the identified infringements. The Draft Law specifies that the business entity can be fined for the infringements of labor and employment legislation for a period of 6 months after the identification of infringement but not more than 1 year after the day of infringement. The business entities in Ukraine are often found administratively liable for creating obstacles to labor and employment monitoring entities because the current legislation is vague on determining what the obstacles are and how they are created. The Draft Law therefore contains a definition of how obstacles for labor and employment monitoring entities are created and also requires these entities to describe the acts of the business entities that are considered to be obstacles. The monitoring entities are also required to provide a reference to the appropriate norm of the legislative acts in their documents of state monitoring. If the proposed changes are adopted in the second hearing of the Parliament and signed by the President of Ukraine, then they should reduce the pressure of labor and employment monitoring measures on the business entities, and may become an effective measure to increase the number of business entities in Ukraine and reduce corruption.

Legislation:

Draft Law No 6489 “On Amendments to Certain Legislation of Ukraine Regarding Prevention of Excessive Pressure on Business Entities by State Labor and Employment Control” passed in the first hearing on 12 July 2017