Planned changes to the Labor Code
Last week, the Ministry of Justice of Georgia presented its version of changes and amendments to the Labor Code. The labor legislation has been one of the problematic issues in Georgia for years, which has been pointed out by a number of local and international organizations. It was considered that the current Labor Code places the employer in an advantageous position and, in a number of cases, grossly infringed on the rights of employees.
On the whole, Transparency International Georgia welcomes the proposed initiative and believes that the adoption of these changes and amendments will markedly improve the employees’ rights, though there are several important issues that require better regulation.
In order for the society to have full information about what is being changed in the labor legislation, we have decided to give a detailed review of the main essence of the changes. At the same time, we will present our opinion about several vague or problematic issues.
The proposed change: Discrimination (gender, racial, ethnic, religious, etc.) made by the employer shall be prohibited not only during the labor relations (while the employee works), but also during the pre-contractual relations (before taking on a job, at the time of the job interview, while the job application is being reviewed, etc.). In such a case, if a person makes a complaint, the burden of proof shall be placed on the employer.
The current version: Discrimination made by the employer is only prohibited during engaged labor relations.
Our assessment/recommendation: It is a welcome fact that the code will protect not only employees, but also job candidates from discrimination.
The proposed change: The employer becomes obliged to provide the job candidate with: full information about the work to be performed; the form and term of the labor contract; the working conditions; the legal position of the future employee during the labor relations; and the remuneration.
The current version: The employer is not obliged to provide the candidate with the said information; the candidate has the right to obtain the information on his/her initiative.
Our assessment/recommendation: The change establishes a higher standard in terms of informing the job candidate and directly obliges the employer to provide the information.
The proposed change: The labor contract shall be concluded for a definite or indefinite term. It shall be concluded for a definite term only in cases when it is related to:
- fulfilling a concrete job;
- seasonal work;
- temporary increase in the amount of work;
- replacing an employee during his/her temporary absence;
- other objective circumstances.
The current version: The employer enjoys full freedom and can conclude a labor contract for a definite or indefinite term, as he/she sees fit.
Our assessment/recommendation: The aforementioned change is clearly a positive one, since it requires more substantiation on the part of the employer when he/she concludes a fixed-term contract and prevents using short-term contracts as an instrument to dismiss employees in a simplified manner.
The proposed change: The working time determined by the employer during which the employee performs the obligations imposed by the contract shall not exceed 41 hours per week. The working time does not include a break and rest time. The working time for minors aged between 16 to 18 and persons employed to perform hard, harmful, or dangerous work has also been limited, and it shall not exceed 36 hours per week. Also, the working time of minors aged between 14 to 16 shall not exceed 24 hours per week.
The current version: The current code also envisages a maximum working time of 41 hours, though the parties may agree on a longer working time. The current code also fails to limit the working time of minors.
Our assessment/recommendation: This change places an imperative ban on increasing the working time above the limit of 41 hours per week in a labor contract, which may create problems both for an employer and an employee who is willing to work more and, accordingly, to receive more remuneration. The limitation of the working time of minors is undisputedly a positive change.
The proposed change: The draft code defines overtime work as performance of work by an employee on the demand of an employer for a duration that exceeds the weekly limit of 41 hours, though it says that overtime work should be remunerated if it exceeds 48 hours per week (though the parties can also agree on less time). Overtime work shall be remunerated with a rate that exceeds the average hourly rate by at least 25%.
The current version: The current code defines overtime work as performance of work by an employee for a duration that exceeds the working time determined by the contract. Only in the cases when the contract does not specify the working time, a regulation that defines overtime work as work performed for the duration of more than 41 hours per week comes into play. The code fails to determine the amount of remuneration for overtime work and indicates that it shall be determined on the basis of an agreement between the parties.
Our assessment/recommendation: If we look at the changes to the aforementioned norm in the context of those made to the article that deals with the duration of the working day, it becomes clear that it will be impossible to agree on labor relations in a way in which the working time exceeds 41 hours per week, because the aforementioned will be considered as overtime work. The changes also prohibit concluding contracts by which the employee waives his/her right to receive remuneration for overtime work. The whole complex of aforementioned changes make overtime work regulations effective which is a positive step forward.As for the regulation according to which overtime work only becomes compensable above 48 hours (though the parties can agree to make it compensable above 41 hours), it makes the impression that the authors of the draft code think that overtime work of one hour per day (according to the changes, unpaid overtime work equals seven hours per week) should not be remunerated, which is not a convincing enough argument and definitely needs more explanation In addition, determination of the minimum amount of remuneration for overtime work by a legal norm is a novelty for the Georgian legislation, though it is quite a well-tested method in the law of Western countries and should be considered as a positive development.
The proposed change: The employee shall be entitled to a paid leave of at least 24 working days per year.
The current version: The employee shall be entitled to a paid leave of no fewer than 24 working days per year.
Our assessment/recommendation: It is unclear what goal this change serves. The contents of the norm are absolutely the same. The same change is observed in the section, which deals with unpaid leave.
The proposed change: Disability is considered as temporary if its duration does not exceed 60 calendar days on succession or if the entire duration over six months does not exceed 90 calendar days. It should be noted that determining the terms of temporary disability is very important for the protection of the employee’s labor rights, since the employer does not have the right to dismiss him/her during this period.
The current version: According to the current code, temporary disability shall not exceed 30 calendar days on succession or the entire duration over six months shall not exceed 50 calendar days.
Our assessment/recommendation: This is clearly a positive change, which makes it really possible to exercise this right.
The proposed change: The notorious Article 37, which regulates termination of contracts, has changed to a great extent. The main change is that the concept of “annulment of contract” (which implied termination of contract on the initiative of one of the parties) has completely disappeared, and it no longer constitutes grounds for terminating a contract. Therefore, the employer is no longer entitled to dismiss an employee without indicating the grounds (it should be noted that an employee may leave the job without naming a cause), and these grounds must be envisaged in this code. Article 37 contains a list of the causes of terminating a contract. The following grounds have been added to those that have existed till now:
- economic circumstances, technological or organizational changes that cause reduction of workforce that is necessary for production;
- leaving a position/job by an employee on his/her initiative (As noted above, an employee can terminate the contract without naming a cause);
- incompatibility of an employee’s qualifications and/or professional skills with the position held;
- gross violation of an obligation which makes it impossible to continue labor relations;
- systematic violation of an obligation if a measure of disciplinary responsibility has already been used in relation to the employee;
The grounds for terminating a contract that have existed till now and have been moved to the draft code without a change are as follows:
- expiration of a contract;
- fulfillment of a job stipulated in a labor contract;
- agreement between the parties;
- legally effective court judgment or decision which rules out the possibility to fulfill the job;
- death of an employing natural person or an employee;
- launch of liquidation proceedings of an employing legal person.
The current version: As noted above, the draft code no longer provides for the institution of annulment of contract, which implies leaving a contract on the initiative of one of the parties without naming a cause, as one of the grounds for terminating a contract.
Our assessment/recommendation: In addition to the fact that it is impossible to terminate a contract without a cause (or annulment of contract discussed above), it also becomes much more difficult to dismiss an employee from a job. At the same time, violation of any of the conditions stipulated in a contract by an employee is not enough for dismissal; the law gives a list of concrete violations that may become a precondition for terminating a contract. This puts an employee in a better legal position and is a positive fact undoubtedly. But it also, limits employer’s rights groundlessly and there is a risk that it will have a negative effect on creating new employment opportunities.It is also noteworthy that a gross violation of obligations by an employee only becomes grounds for terminating a contract if it “makes it impossible to continue labor relations”. The aforementioned norm allows ample room for interpretation and markedly limits the employer’s discretion.
The proposed change: The procedure for terminating a contract is described in Article 38 of the draft code. In the current code, the aforementioned article regulates annulment of contracts which, as already noted, has been removed from the draft code. The new norm regulates the procedures for terminating a contract in detail. The first novelty we encounter in the article is the employer’s obligation to give the employee an advance notice (no fewer than 30 calendar days in advance, in writing) when the contract in terminated on the employer’s initiative. The aforementioned obligation is in force only in those cases when a contract is terminated due to staff reduction, lengthy disability of an employee, and the launch of liquidation proceedings of the employing legal person. However, according to the draft code, the employer also has another alternative in addition to giving an advance notice which implies terminating the contract (even on the same day) and paying the employee the remuneration of no less than one month/compensation.
One of the most important novelties of the draft code is included in Part 4 of Article 38. According to this norm, the employer is obliged to substantiate the grounds for terminating the contract in writing within seven calendar days of the employee’s demand. The employee has the right to appeal the substantiated decision in court within a term of 30 days, and, if the employer fails to substantiate the decision on dismissal in writing within seven days, the employee is entitled to appeal this decision of the employer within 30 days, in which case the burden of proof on factual circumstances is placed on the employer. If the court finds the decision on dismissal unlawful, the employer is obliged to restore the employee to the initial job or to provide him/her with an equivalent job.
The current version: The current code only obliges the employee to give a notice to the employer about the termination of the labor contract no fewer than 30 days in advance unless provided otherwise in the contract (the contract may also oblige the employee to give a notice earlier than 30 days in advance). As for the employer, he/she is not obliged to give an advance notice to the employee and must pay the employee the remuneration of no less than one month if the contract is terminated on his/her initiative (the aforementioned does not extend to the cases of termination of contract as a result of violation of contract terms by either party).
Our assessment/recommendation: As we have noted, both the current code and the draft code oblige the employer to pay the employee a compensation in the amount of one month’s wages if he/she terminates the contract on his/her own initiative, though the draft code gives the employer a choice and offers him/her simply to give the employee a notice about the termination of contract 30 days in advance instead of paying a compensation. This alternative only envisages the obligation to give a notice and does not presuppose paying any kind of compensation; the employee will only receive the remuneration provided for in the contract after 30 days. It should also be noted that during this time the employee will be obliged to continue fulfilling the terms of the contract (go to the office, etc.) as usual. Due to this, it is likely that when employers terminate a contract, the majority of them will use this new norm (of the aforementioned two alternatives) which suits them better, as a result of which the employees will also be left without this one-month compensation/remuneration.
We believe that the introduction of the new norm will put employees in a worse position than they are in now, as they will no longer be free to look for a new job, because they may have to continue going to the old workplace during the last month. Due to this, it will be appropriate if the aforementioned norms are not changed at all.
The proposed change: The draft code introduces the concept of “collective dismissal”, which implies terminating the labor relations with at least ten employees on the grounds of staff reduction (Paragraph A, Part 1, Article 37 of the draft code). In such a case, the draft code imposes additional obligations on employers. Specifically, they shall be obliged to:
- send a written notification to the Minister of Labor, Health and Social Affairs of Georgia and to the employees whose labor relations are being terminated;
- consult and cooperate with representatives of the employees to avoid collective dismissal or to decrease the number of employees whose labor contracts may be terminated.
The written notification shall be sent in advance. The date on which it should be sent depends on the number of people the organization employs and that of the employees whose labor contracts are being terminated:
- in an organization that employs 20-100 people and dismisses at least ten employees, the obligation to send a notification arises no later than 45 days in advance;
- in an organization that employs 100-300 people and dismisses at least 10% of them, the obligation to send a notification arises no later than 60 days in advance;
- in an organization that employs more than 300 people and dismisses at least 30 employees, the obligation to send a notification arises no later than 90 days in advance.
The current version: The current code does not contain additional regulations on collective dismissal.
Our assessment/recommendation: The article presumably aims at avoiding the negative consequences of collective dismissal or at eradicating them as painlessly as possible, which should be ensured by making the employer obliged to give the employee an advance notice. However, there is a danger that this obligation may only act as an additional bureaucratic barrier. As we have already noted, collective dismissal is defined as a simultaneous dismissal of ten or more people. In this definition, the word “simultaneous” is quite vague and leaves ample room for different manipulations. For example, if an employer dismisses nine employees simultaneously and nine more of them later, will such a case considered as collective dismissal, considering the fact that he/she dismissed 18 employees within a short term but didn’t do so simultaneously?
Another obligation imposed on the employer at the time of collective dismissal is to consult and cooperate with representatives of the employees to avoid collective dismissal or to decrease the number of employees dismissed. The norm fails to specify the procedures or the decision-making mechanisms, and keeping it in this form is highly likely to turn it into a pure formality, which will only act as an additional burden on the employer.
Due to this, it is desirable to explain the criteria of “simultaneous dismissal” in a reasonable manner, as well as to explain the mechanisms of effective functioning of the obligatory consultation.
The proposed change: With a labor contract, the employer may obligate the employee not to use the knowledge and qualifications acquired while performing the terms of the contract for the benefit of another, competitor employer. This restriction may not apply after the labor relations are terminated.
The current version: According to the current code, the restriction is in force not only during labor relations, but also after their termination, but no longer than for three years.
The proposed change: One of the ways of examining and settling a dispute in labor relations is agreement of the parties through participation in conciliatory procedures. The conciliatory procedures are provided for both in the current code and the draft changes, though the draft code differentiates between examination of disputes that arise in individual labor relations and of those arising in collective labor relations and establishes different procedures for them.
The procedure for examining a dispute that arises during individual labor relations has remained the same, though several important aspects have been added to it. The party that starts a conciliatory procedure shall send the other party a notification that lays out his/her demands. The other party shall be obliged to let him/her know of his/her own decision within ten calendar days. If the parties fail to reach an agreement within 14 days or if any of the parties avoids taking part in conciliatory procedures, the parties shall be given the right to resort to a court. According to the draft changes, if the dispute continues in court, the burden of proof on factual circumstances shall be placed on the party that has avoided taking part in the conciliatory procedures. The aforementioned change gives the parties more incentive to try to settle the dispute through negotiations before a court reviews it.
A different regulation of examination of disputes that arise in collective labor relations is a novelty of the draft code; the current code regulates them in the same way as disputes arising in individual labor relations. According to the draft changes, even in the case of a collective dispute, the dispute shall be settled though conciliatory procedures between the parties which shall involve:
- an employer and a group of employees through direct negotiations, or
- an employer and a trade union through direct negotiations, or
- the same parties through mediation. The Minister of Labor, Health and Social Affairs of Georgia shall appoint the mediator if one of the parties sends the Minister a corresponding written request.
- At any stage of the negotiations, either party has the right to send the Minister a written request to appoint a dispute mediator with the aim of starting conciliatory procedures.
- At any stage of the dispute, the Minister has the right to appoint a mediator without a written request of a party.
The mediator shall examine the dispute in accordance with “The rule of examining and settling of disputes that arise during collective labor relations” approved by the Minister. The Minister has the right to make a decision to stop conciliatory procedures at any stage. Participation in the procedures is obligatory for the parties. The parties may also agree to transfer the dispute to an arbitration court at any stage.
The current version: As we have noted, the procedures for examining disputes that arise during individual labor relations are identical in the current code and the proposed changes, with the difference being that in the case of avoiding the procedures by a party, the burden of proof in court does not move to this party. The current code does not single out examination of disputes arising in collective labor relations and regulates them with the same rules that apply to disputes arising in individual labor relations.
Our assessment/recommendation: As the procedures show, at the time of an examination of disputes that arise in collective labor relations, quite an important role is played by the mediator appointed by the Minister, despite the fact that the draft code gives the mediator’s authorities and obligations quite generally. At the same time, the draft code states that the procedures shall be regulated by “The rule of examining and settling of disputes that arise during collective labor relations” approved by the Minister. The aforementioned normative act is still non-existent, and it is not known what procedures it envisages. Due to this, it is not quite clear what legal consequences we should expect from this norm. So, it is essential to have mediator’s authorities precisely defined, which will create clear expectations about legal consequences we should expect from this norm.
The proposed change: According to the draft changes, it is no longer necessary to hold a warning strike or lockout before exercising the right to stage a strike or a lockout, though it is obligatory to observe certain procedures:
- In a dispute that arises in individual labor relations:
- The right to stage a strike or a lockout arises after the passage of 21 calendar days from the day a written notification about the commencement of conciliatory procedures is sent to the other party.
- No later than three days before a strike or a lockout begins, the parties shall notify each other in writing of the time, place, and character of the strike or the lockout.
- In a dispute that arises in collective labor relations:
- The right to stage a strike or a lockout arises after the passage of 21 calendar days from the day a written notification is sent to the Minister of Labor, Health and Social Affairs of Georgia with the aim of starting conciliatory procedures or from the day the Minister appoints a mediator on his/her initiative.
- No later than three days before a strike or a lockout starts, the parties shall notify each other and the Minister of Labor, Health and Social Affairs of Georgia in writing about the time, place, and character of the strike or the lockout.
The current version: As we have noted, according to the current code, the parties are obliged to hold a warning strike or a warning lockout before they exercise the right to stage a strike or a lockout. In addition, the current code considers a strike of employees who had been informed about the termination of labor contract before the dispute arose as unlawful. This provision has been removed from the draft code.
Our assessment/recommendation: According to the draft changes, the right to stage a strike or a lockout at the time of collective labor relations only arises when conciliatory procedures end without a result; it is only after this that it becomes permitted to resort to such radical measures as a strike or a lockout. And, as we have already described in detail, it is possible to conduct conciliatory procedures both though direct negotiations of the parties (the employer and an association or trade union of employees) and through a mediator appointed by the Ministry. The participation of a mediator depends of the will of the parties or on the Minister’s initiative to get involved in a dispute. Accordingly, the conciliatory procedures can be conducted both with and without the involvement of a mediator appointed by the Ministry.
However, the changes envisaged in the draft code relate the origin of the right to stage a strike or a lockout closely to a mediator appointed by the Ministry (it is permitted to exercise the right to stage a strike only after 21 days from the day a party sends the Minister a request to appoint a mediator or 21 days after the day the Minister appoints a mediator on his/her own initiative) and it is only permitted to stage a strike if the conciliatory procedures involved a mediator of the Ministry. Accordingly, if the conciliatory procedures were conducted without a mediator of the Ministry (which, as we have noted, is quite possible), the parties lose the right to stage a strike or a lockout, which is a right protected by the Constitution of Georgia and restricting it in any manner requires important grounds, which is not observed in this case. For this reason, it is more logical to choose the moment to send the other party a notification as to the grounds for starting a lawful strike.
It is necessary to remove Part 4 of Article 52, which regulates the procedures of a warning strike, from the draft code, since the warning strike has been removed from the draft code altogether.
The review given above only deals with the primary and essential changes envisaged in the draft code proposed by the Ministry of Justice. In addition to the provisions we have discussed, the draft code also contains a new chapter on freedom of association of employees and employers, which prohibits discrimination in labor associations, creates guarantees of non-intervention in their activity, etc. The draft code also contains more detailed chapters on collective contracts and social partnership. The latter elaborates on the functions and authorities of the Tripartite Commission, which creates more safeguards to ensure that the aforementioned institution will be effectively put into use.
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