New Labour Code: What is going to be changed?

The Ministry of Healthcare and Social Development has prepared a draft new Labour Code (the “Draft”). Significant changes are presented below. Certain provisions may be reconsidered during discussions between labour unions and representatives of employers, as well as in the Parliament

Secondment

The Draft introduces the concept of secondment (provision of personnel), which previously was only in the Tax Code. Secondment is performance of work by the seconded employee within his specialization envisaged by his / her employment contract for another legal entity.

Secondment may be made to a direct or indirect subsidiary, to a parent or affiliated entity. The positions and number of secondees should be specified in a written agreement between the companies involved. Terms, conditions and payment for the secondment should be provided in an attachment signed by the companies and secondee(s).

Employer holds open position for the secondee. Written consent of parties to the employment agreement is required for a secondment, effected by signing an addendum to the employment agreement.

During the secondment the employee should comply with working and rest hours of the legal entity, to which he/she is seconded, except for terms and conditions of annual paid leave.

If the secondee has disciplinary issues, the employer of the seconded employee should be notified within three working days and be provided with documents to decide on the disciplinary liability. If there is an accident involving the secondee, any investigation should involve a representative of the employer.

The existing and similar concept of ‘corporate transfer’ (temporary transfer of an expatriate from a foreign company to its affiliated Kazakh entity) is not provided in the Draft. Amendments to the Kazakhstan work regarding permits rules should be also made accordingly.  

Non-competition clause

Employment contract can stipulate an obligation of an employee not to perform any activity, which can cause damage to an employer. Compensation for the employee can be provided for the period of such non-competition clause.

In case of breach of the non-competition clause by employee and which causes damage to the employer, the employer suspends payment of compensation, and can claim a refund of compensation paid and (or) reimbursement of any damages. Breach of the non-competition clause may be a ground for termination of the employment contract by the employer.

The Draft does not specify the period for which the non-competition is effective. The expectation is that it applies for the period of the employment contract only, not for future periods. This would not be consistent with international norms. Amendments to Kazakhstan competition legislation may follow. 

Period of employment contract

At the end of the employment contract, it may be extended indefinitely or for a definite period not less than one year. The Existing Code envisages extension for an indefinite period only. Regarding the head of a company, the employment contract shall be extended for a period before adoption of decision of shareholders or the authorized body to appoint the same person as a head of the company or another person. 

Probation period

Currently the employer may require a probation period of up to three months. The Draft keeps this provision, but for CEOs and their deputies, head accountants and their deputies, heads of branches and representative offices, it may be up to six months. 

As present, if the probation is not successful, the employer can terminate the employment agreement with seven days written notice.  The notice period is not required under the Draft.

Termination of employment contract

The Draft introduces grounds for termination of employment by the employer due to the financial situation of the organization:

·    deterioration of economics of the organization (reference is made to lower levels of work, services and production);

The Employer should provide fifteen working days notice, if employment and (or) collective contract do not provide for longer. Notice can be replaced with payment of salary pro-rata to the unfinished term, by agreement of the parties. The Employer should notify representatives of employees at least one month before termination specifying reasons for termination.

The Draft does not specify how “deterioration of economics of the organization” is determined or how the employee can be satisfied that such grounds for termination are reasonable. Compensation of two months average salary is due.

·    breach of the non-competition clause in the employment contract (considered above);

·    there is a loss of trust due to some action (or inaction) by employee;

Termination of the employment contract within one month of reaching retirement age is allowed as well, with payment of compensation as provided by a collective contract and (or) act of employer. It is unclear is there is just this one month window for this action. 

Termination of the employment contract is allowed if the employee is absent for more than one month, and the employee did not provide reasons within ten calendar days after the act of absence of employee was sent by the by employer. Such act of absence should be sent by registered mail.

Currently the employee has the right to terminate his / her contract, notifying the employer in writing at least one month in advance. This provision remains. According to the Draft, however, the employment contract may allow for a longer period of notice by the employee.

Disputes resolution

Per the Draft, labour disputes should be considered by a mitigation committee and, if not resolved, in court. Currently an appeal can be made to either level: in future it will be sequential.

The mitigation committee has 15 working days (seven calendar days at present) to review the application. 

The Draft provides the following period for appealing to the mitigation committee or court:

·    for re-instatement of employment - one month from receiving the act of the employer on termination of employment, for appealing to the court - two months from the date of decision of the mitigation committee;

·    for other labour disputes: one year from the day when employee or employer has revealed or should have revealed a breach of his / her rights. 

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Об авторах

Azamat Gumarov, Senior Associate, Legal Services, PwC Kazakhstan

Rashid Gaissin, Partner, Head of Legal Practice, PwC Kazakhstan

 

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