Martial Law in Ukraine and Labor Options for Employers and Employees

After February 24, 2022, the Ukrainian Parliament moved quickly to pass several martial laws that help guide employers and employees in their labor relations.  We will briefly outline below the impact martial law has had on labor relations in Ukraine.  As of date, martial law has been extended to at least August 2024.

General Overview

The general rules governing labor relations in Ukraine during martial law were initially set forth in the Law of Ukraine No. 2136-IX “On Organization of Labor Relations During Martial Law”, dated March 15, 2022 (as lastly amended on November 22, 2023 – the “Law”).  The Law applies to all local companies, foreign representative offices, private entrepreneurs that use hired labor, and individuals hired for contractual labor.

During martial law, employers and employees are able to agree upon the form of their labor agreements.  Trial periods may be set for any category of employees as opposed to the limits set forth in the Labor Code of Ukraine (e.g., no trial period for employees under 18, students fresh out of university or graduate school, disabled persons, pregnant women, single mothers, etc.).

Many companies are currently facing work stoppages or difficulties in hiring new employees in order to stabilize the work force.  Otherwise, employees have simply left the country with their families for safety reasons.  Therefore, the Law provides that an employer may hire new employees under temporary “fixed-term” agreements for the “duration of martial law” or for unspecified periods to replace temporarily displaced employees.  Under normal conditions, fixed-term agreements would need to have specific commencement and end dates regardless of the duration of specific conditions.

A) Change of Essential Work Conditions or Salary

One of the difficulties under the Labor Code of Ukraine is the change of essential working conditions without an employee’s consent and the need to execute numerous documents to effect such change (notice, acceptance statements, new labor agreement or contract, internal orders, etc.).  Under the Law, employees may be sent to perform work not provided by their labor contracts without their consent if such work will not be hazardous to the employee’s health or is located in an area where no military action is in progress.  Usually, employees are sent to assist with alleviating and clearing the consequences of past military actions or in circumstances that are or may become a threat to civilians.  In these cases, the employee retains his/her average monthly salary for their usual work.  Whereas the prescribed notice period for changing essential working conditions and salary is usually two months prior to such changes, martial law allows the employer to notify employees immediately upon implementation of the changes.

B) Termination of Labor Agreements

Martial law has temporarily changed the rules for termination of labor agreements at both the initiative of the employee and employer.  For employees, if their area or region is under military fire, they are allowed to give immediate notice to terminate their labor agreement or provide a specific amount of time (one week, two weeks, month, etc.) prior to the intended termination date.  Under normal rules, employees must give at least two weeks’ prior notice to terminate their labor relations with an employer.

From the employer’s side, outside of martial law, it has always been extremely difficult or next to impossible to dismiss employees while they were on temporary leave (sick leave, hospital visit, injury leave, etc.) or official leave (vacation, maternity leave, etc.).  However, the temporary martial law rules allow an employer to dismiss a temporarily absent employee (except pregnant women and child-caring mothers) with the date of dismissal on the first working day after temporary or official leave ends.  Discharge papers from hospitals, termination of rehabilitation procedures, end of annual or requested vacation requests on file or other documents serve as the basis of the eventual dismissal date.  Notwithstanding the relaxation of these rules, it remains practically difficult to document and enforce dismissal dates when employees decide to “extend” their leaves using unscrupulous means.

C) Recordkeeping

While the rules regarding employers’ obligations to organize labor documentation and archives are somewhat simplified under martial law, employers still must keep accurate records of work performed by employees and salary-related expenses.  Martial law also allows employers to use alternative means for issuing internal orders and instructions to employees, such as electronic means, rather than the usual requirement that such orders and instructions strictly be issued in writing for physical familiarization.  Notably, this issue must be specifically agreed upon by employers and employees in their labor agreements.

D) Nighttime Work, Hazardous Work

There are several rule changes for work during nighttime for certain categories of employees (pregnant women, mothers with child/children under one year old, disabled individuals, etc.).  Interestingly, women, except pregnant women and women with children under one year of age, can consent to work in vital or hazardous workplaces, even underground work.  Certain employee categories can be asked to work more than the usual 40-hour work week for up to 60 hours (with special rules for rest, lunch break and hours per shift).

E) Salaries

Employers must continue to pay salaries as per the normal labor rules – i.e., twice per month according to labor agreements with employees.  However, under the Law, employers are encouraged to use their “best efforts” to ensure the timely payment of salaries under the current conditions.  In other words, employers are able to avoid liability for late salary payments and suspend such payments if they can prove that the delay is/was caused by military actions or other “force majeure” circumstances.  This being said, however, employers still need to keep accurate account of missed salary payments and use “best efforts” to make these salary payments over the duration of the corresponding labor agreements or upon restoration of work capacity.

F) Leaves

As to vacations and leaves, during martial law employers are permitted to limit basic annual vacations to the minimum of 24 calendar days in the current year.  If an employee grants more than 24 calendar days of annual vacation to employees, then any vacation days unused during martial law can be transferred to the period after termination or cancellation of martial law.  At the employer’s decision, unused days of such leave may be granted to an employee without pay.  While an employer can refuse to grant the use of unused vacation days during martial law, the rules regarding the transfer of such unused days are not applicable under martial law and, thus, these days can be transferred to periods after 12 months or granted even after two years of uninterrupted work without the use of unpaid vacation days.  According to the Law, the provision of unused days of such leave shall be postponed to the period after the termination or lifting of martial law or, at the employer’s decision, unused days of such leave may be granted without pay.  Compensation for unused vacation days upon dismissal is treated as normally treated in the Law “On Vacations” during martial law.

Special martial law also provides an employee with the right to request unpaid leave for an unlimited term.  During peacetime, the Labor Code allows employees to request such leave, but for no more than 15 calendar days per year.  Unless certain outstanding circumstances dictate (e.g., care for sick or disabled children), displaced Ukrainian employees living abroad during martial law may request unpaid leave for a term of up to 90 calendar days without taking into account any time already spent on basic annual leave.

G) Labor Agreement Suspension

Martial Law now makes it possible for employers to “suspend” labor agreements.  A labor agreement can be suspended in connection with military aggression against Ukraine if the situation renders it impossible for an employer to temporarily provide work and an employee to temporarily perform work under current employment arrangements.

Importantly, suspension of labor relations does not lead to dismissal or resignation of an employee.  In other words, labor relations are not officially terminated.  Official commentaries to the Law explain that the principal condition for suspension of labor relations is that the employer has “absolutely no possibility” to provide work and the employee has “absolutely no possibility” to perform work in present conditions.

In order to initiate suspension of a labor agreement, the parties, if possible, must inform each other by any available means of communication.  The formalization of a suspension of labor relations depends upon who initiates the request for suspension (employer or employee).  If the initiator is the employee, then he/she should submit an application/request, which should be accepted and registered by the employer in the employee’s staff file.  If the initiator is the employer, then an application/request from the employee is not required and the employer simply notifies the employee via internal work order regarding suspension in writing or via electronic means.  Employees are free to appeal an employer’s unilateral decision to suspend labor relations.

An employer may suspend labor relations with certain employees for up to 90 days; however, salary-related payments for the duration of the suspension of labor relations should be compensated in full by the state, which has initiated military aggression against Ukraine (in the current situation, the Russian Federation).  Of course, the question is: how will this be practically implemented once martial law comes to an end?  The recommended course of action is for the employer to refrain from paying salary during a suspension, but the employer’s accounting department should keep track of all salary-related payments during the time of suspension, including payments that accrue for the relevant social insurance funds.

The suspension of labor relations at the initiative of either the employer or employee may only last up until the officially announced end of martial law.  If labor relations are reinstated under a labor agreement prior to the expiration of martial law, the employer has 10 calendar days prior to reinstatement to notify the employee about the need to commence work under normal working conditions.

Simplified Labor Relations

Due to the current armed aggression against Ukraine, the Ukrainian Parliament passed several laws, which regulate various relations during martial law.  One of the most interesting novelties for employers is the possibility to opt into simplified labor relations with employees both during peacetime and martial law.  This change was brought about by the addition of a new chapter to the Labor Code of Ukraine.

As a general overview, the parties to labor relations may elect so-called simplified labor relations (hereinafter – “SLR”) if labor relations arise between (i) employees and employers of small or medium size businesses (as defined by law) with an average amount of staff within the current calendar year of no more than 250 individuals or (ii) employers and employees with a monthly salary exceeding 8 minimum monthly salaries (as of April 2024 – 8 x 8,000 UAH = 64,000 UAH).

If the parties are eligible to elect the SLR, then they must voluntarily agree to enter into new labor arrangements.  In other words, the employer cannot force the SLR on an employee, and during martial law, the provisions of the SLR shall apply to the extent that they do not contradict the legislation regulating labor relations during martial law, unless otherwise agreed by the parties.  Should the parties wish to enter into SLR, they may agree upon individual conditions directly within their labor agreements.  Obviously, the aim of the SLR is show team solidarity between employers and employees not only during martial law but also after its cancellation.

Interestingly, the new provisions allow the employer and employee to simplify their relations in terms of official labor documentation by entering into SLR.  However, the employer should still keep clean records and accounts before the local tax and controlling authorities regarding working hours, permissible leaves, etc.  Accounting and recordkeeping services are still important for employers to ensure transparency before employees and local authorities in future periods in case employee disputes arise.

The “simplification” lies within the fact that the employer and employee may regulate hiring and dismissal at their own initiative without straying too far from the basic rules provided by the Labor Code.  This gives a bit of flexibility for the parties, and such issues as work schedules, salary amounts, leaves, benefits, bonuses and other remuneration can be negotiated in a manner that is beneficial for all parties.

During the period of martial law, certain rules of the Labor Code of Ukraine should not be taken for granted, but there are a several rules for martial law purposes that change such issues as work hours, annual vacations, unpaid leaves, weekly social guarantees and timely salary payments.  Any issue that is not regulated by the parties within SLR or specific labor arrangements will be regulated by the effective provisions of the Labor Code.  Below are the rules for annual paid vacations and unpaid vacations under SLR:

• Employees may generally request full or partial (in any increments) annual vacation;
• Employees may be granted in excess of 15 calendar days of unpaid vacation to handle family matters outside of the rules of the Labor Code;
• Employees may agree with employers that payment for annual vacation may be paid after the employee enjoys his/her annual leave (instead of payment prior to annual leave).

Nevertheless, there are certain essential conditions for entering into the SLR relationship, first being a voluntarily written employment agreement, which may either be for an indefinite or a fixed term (until the performance of a specific volume of works).  The following are the essential/mandatory terms and conditions for SLR labor contracts:

• Defined workplace, including distance working conditions or work outside of the usual workplace and general labor conditions;
• Contractual validity term under SLR conditions;
• Labor duties, including applicable work hours;
• Salary conditions (no less than twice per month), including leave allowances, bonuses, overtime pay, etc.;
• Annual leave conditions, including any additional leaves provided by labor law;
• Work conditions (work during holidays, nighttime work, overtime, dangerous or unhealthy work, heightened hazards, etc.);
• Notices regarding any change of labor conditions, optional termination or other notices to the parties;
• Conditions for introducing amendments to labor contracts;
• Non-disclosure covenants (commercial secrets, intellectual property, copyrights, etc.) and liability for breach of such covenants, including conflict of interests provisions;
• Severance payments upon termination of labor relations (whether via the Labor Code or specifically agreed upon conditions);
• Penalties for salary delays, if agreed upon.

As to the ever-famous “worsening of conditions of labor conditions” under the Labor Code, the SLR rules allow employers to actually “worsen” the conditions via notice two months prior to the changes without employee consent.  Under the Labor Code, an employee can refuse to accept “worsening of conditions”, unless there was a substantiated change in production capacity.

Overall, this new addition to the Labor Code of Ukraine allows employers and employees to move a bit outside of the strict rules of the Ukrainian Labor Code, which were have been effective since 1971.  However, these rules still do not allow employers to delve too far outside of the normal rules, as the Labor Code still requires compliance with its specific provisions, for example valid grounds for labor relations termination.  Therefore, careful evaluation of each employee’s situation is vital in determining how to bring relations forward, whether they be labor-related or personal.

Finally, SLR relations can be formalized in writing or by agreement between the employee and the employer, an employment agreement under the SLR may be concluded in the form of an electronic document.  This being said, Ukrainian employees can obtain qualified electronic signatures, but they have to go through a tedious and bureaucratic process.  As a recommendation, the parties should sign the initial labor agreement and exchange originals with a provision that notices and internal orders can be communicated between the parties via electronic means.  In any case, all labor documentation must be set forth in writing in Ukrainian, even internal correspondence. 

A) Termination/Severance Conditions

Labor termination conditions have also been simplified, although formalities still apply under SLR relations.  Termination of the SLR at the initiative of the employer on the grounds not provided for by the Labor Code should be carried out with justification (indication) of the reasons for such termination.  The employer is still required to pay substantiated severance as established by a specific employment agreement but no less than the following minimum amounts:

• Half of the minimum monthly salary if the employee did not work for more than 30 days (currently, 8,000 UAH / 2 = 4,000 UAH);
• One minimum monthly salary if the employee worked for more than 30 days (8,000 UAH);
• Three minimum monthly salaries if the employee worked for more than one year (3 x 8,000 = 24,000 UAH);
• Five minimum monthly salaries if the employee worked for more than two years (5 x 8,000 = 40,000 UAH).

The new rules dictate as such that the employer is required to terminate labor relations via an additional agreement with the employee, while the employee is able to terminate labor relations at any time whether there is a threat of military action or not.

Unfixed Work Hours for Labor Agreements

In 2022, another option for labor agreements was adopted – labor agreements with unfixed work hours, a type of flexible labor relation.  Although somewhat convoluted in its definition, unfixed work hours simply mean that the individual performing the work must perform his/her work at the employer’s demand (when necessary and not constantly), provided that the employer adheres to the payment conditions established by the new Article 21-1 of the Labor Code.  Thus, there are limited labor relations between the parties, but they should agree upon all specific working conditions in the labor agreement.  The employer independently decides the need and time of engaging the employee in work, including the scope of work.  The employer also agrees with the employee the contractually established term of his/her work schedule and the duration of working hours required for performing the relevant work.  Of course, in this case, the employer should adhere to the standard requirements regarding the duration of working hours and rest periods set forth by the Labor Code of Ukraine.

Employers are limited to the hiring of up to 10% of the workforce under labor agreements with unfixed work hours.  Employers, including private entrepreneurs, with under 10 employees may only conclude one labor agreement with unfixed work hours.

Unfixed work-hour agreements must, at a minimum, include:

• The method and timeframe for notifying the employee about the commencement of work to be performed. Notice must be sufficiently given to the employee to enable him/her to commence the performance of the specific assignment or his/her obligations;
• The method and maximum period of notification from the employee on his/her readiness to start work or refusal to perform it in cases provided for by Article 21-1 of the Labor Code;
• Basic work hours and days within which the employee can be asked to perform the task.

The Ministry of Economy approved a model labor agreement for working under unfixed hours in October 2022.  The Ministry recommended that labor agreements with unfixed work hours should be concluded in writing with a description of the above minimum requirements and adherence to the model form of such agreement.  The employer should also formalize the hiring of the employee in an internal order with a description of the job duties and work conditions of the employee. 

Of course, there are limitations involved in this type of labor relationship.  For example, basic working hours cannot exceed 40 hours per week at a maximum of a six-day work week.  The employee has the right to refuse excess work performance if the employer requires work outside of the basic days and hours or if the employee has been notified of the availability of work in violation of the minimum notice period.  However, if the employee refuses to work during any agreed upon basic days and hours, the employer may discipline the employee as per the regular rules of the Labor Code of Ukraine.

Salary under unfixed-hour agreements is paid on an hourly basis for work actually performed and reported by the employee.  For fixed fee arrangements, the employer pays the employee for the full amount of work at the agreed upon rates in the labor agreement.  Employers must provide at least 32 hours of work each month to employees with unfixed hour labor agreements and, therefore, even if the employer is unable to provide work 32 hours, monthly salary payments may not be lower than 32 hours of the employee’s hourly rate per month.  Overtime payments remain at twice the employee’s regular hourly rate as per the Labor Code.

Employees working under unfixed hour labor agreements cannot be prohibited to work under alternative labor relations with other employers.  This means that employers are not permitted to insert provisions into unfixed hour labor agreements that would restrict an individual’s constitutional right to work in free conditions, including non-complete or similar clauses.  Thus, employers should wisely choose the candidates for these types of labor agreements.  However, the parties can agree upon termination provisions outside of the Labor Code of Ukraine, provided such additional provisions are directly related to the employee’s behavior or other economic, technological and other factors.

Employees who work under these alternative conditions for over 12 months have the right to appeal to the employer to conclude definite or indefinite labor agreements under the general rules of the Labor Code.  The employer has 15 calendar days to contemplate and resolve this issue or sever ties with the employee.  Prior to the expiration of an unfixed hour labor agreement, the employee can repeatedly request the conclusion of regular labor relations within each 90-day period.

Conclusion

While the situation may still seem grim for employers currently working under martial law conditions, the Ukrainian lawmakers are continually tweaking the laws to soften the impact of the Russian Federation’s egregious acts against the peaceful Ukrainian population.  When it becomes possible to resume normal life after this war, the Ukrainian Parliament will more than likely instill more modern and effective conditions into the currently effective Labor Code of Ukraine.

By Frishberg & Partners, Ukraine, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact ukraine@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 84 Brook Street, London W1K 5EH, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.