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New registration system for employment contracts in Kazakhstan and other key labour law changes

Written by
AEQUITAS Law Firm, the top labour and employment practice in Kazakhstan.
Authors
Larissa Yemelyanova
Larissa Yemelyanova
Senior Associate - Kazakhstan
AEQUITAS Law Firm
Kazakhstan
12.06.20
9
Kazakhstan has made major changes to its employment rules and conditions, including the introduction of a new system of registration for employment contracts. This article presents the main changes for employers. 

During the state of emergency in effect in Kazakhstan, the Parliament forced the adoption of the Law which is proving unpopular with HR departments. There had previously been extensive discussions and disputes concerning this Law, and there was a hope that the quarantine would freeze or delay its adoption.

The key point of concern is the introduction of an obligation on employers to put information about employment contracts into the Unified Accounting System of Employment Contracts (UASEC). The law also contains many other amendments, variously useful, disputable or neutral. Details of the key points for employers are set out below.

UASEC

Employers must use UASEC to provide information concerning:

  • the conclusion of an employment contract;
  • amendments to an employment contract relating to the parties’ details, work (position, specialty, occupation, qualification), place of work, term, work commencement date, date of conclusion and employment contract number; and
  • termination of an employment contract.

 

The Rules for submitting and obtaining information about employment contracts from UASEC will be determined by the Ministry of Labour and Social Protection of Population of Kazakhstan. The law does not provide for any transition period. Information must be introduced as soon as the Rules enter into force.

The law does not create an obligation to put ‘historical data’ into the system. However, we do not exclude that the Rules will require employers to introduce information about current employment contracts.

Information from UASEC is not official confirmation of employment in accordance with Article 35 of the Labour Code. Introduction of information into the system is associated with a range of technical, practical and legal complexities and nuances, which will affect most employers.

e-ECs and е-acts of employers

Electronic employment contracts (e-ECs) and employer’s acts are now permitted. However, practical implementation of this helpful option requires as follows:

  • Employees and employers must have an electronic digital signature (EDS) of National Certification Authority of Kazakhstan (NCA). Note: internal corporate digital signatures and digital handwritten signatures cannot be applied to e-ECs!
  • Appropriate software allowing users to identify and use EDS of NCA is required for these purposes.
  • Evaluation of potential risks for e-document: please ensure confidentiality and security are guaranteed; make employees familiar with e-acts to avoid potential disputes; provide detail on other practical complexities and ambiguous issues.

 

Payment for dismissal without reasons ended

Article 50.3 was excluded from the Labour Code. This means that it is no longer possible to establish the employment contract condition that gives employers a right to cancel an employment contract by paying compensation based on ‘agreement of the parties’ without agreeing the date of cancellation with an employee.

The reason for this is numerous labour disputes associated with the application of this rule. The disputes were mainly caused by the fact that the employees were dissatisfied by the level of compensation or by the fact of their sudden dismissal.

The removal of this option may give rise to:

  • dismissals of employees based on a ‘negative’ reason without paying any compensation;
  • increased numbers of official dismissals; and
  • possible requests for high levels of compensation from bad faith employees with whom the companies would in good faith like to amicably terminate relations ‘by agreement.’

 

Production and living conditions

An employer must provide employees with equal, non-discriminatory production and living conditions.

‘Production and living conditions’ (according to the law) are the labour conditions that are mandatory for employees who stay in the workplace, including for a rotation-based work regime (this is, for example, when an employee works a certain number of days in another city or place and lives there in premises provided by the employer; rotation work is often used for oil fields and other sites if the employee has no possibility of going home each day).  They encompass provision of sanitary facilities and amenities and conditions for rest and meals.

This widely drafted rule contemplates equality of all employees in an organisation, regardless of the position held, work performed and place (region) of performing work.

For example, if housing is provided for rotation employees, it should be of the same degree of comfort, if food is provided in canteens, then there should be the same choice for all employees, sanitary facilities (toilets, showers) should also have an equal degree of comfort for all employees, etc.

This rule is likely to strengthen the activities of trade unions and we do not exclude significant growth of individual and collective labour disputes. The issues could relate to the dimensions of rooms and furnishings at rotational villages, sanitary facilities and amenities, number of ‘stars’ of hotels during business trips and other ‘production and living’ details.

Employers will face administrative liability for ‘inequality’: the fine under Article 90.1 of the Administrative Code is 30 MCI (for small-scale businesses and non-profit organisations), 60 MCI (medium-scale businesses) and 100 MCI (large-scale businesses).

Labour disputes

The elements of labour disputes that do not require pretrial settlement with a conciliation board have been changed. From now on, the exception covers the labour disputes of:

  • Microbusinesses (small-scale businesses whose average annual number of employees ≤ 15 persons or the average annual income ≤ 30,000 MCI);
  • non-profit organisations with 15 or fewer employees;
  • domestic workers;
  • executive bodies of legal entities (sole or a member or a head of a collective body); and
  • some other situations.

 

Labour disputes relating to other categories of employees (including former) and their employers must be considered, prior to applying to court, by a conciliation board composed of the representatives of employees and employer.

Conciliation board

An employer must establish a conciliation board. This obligation, however, is not accompanied by an obligation on employees to elect their representatives to participate in the conciliation board. It is obvious that in the absence of employees’ representatives an employer has no legal mechanisms for the establishment of a conciliation board.

The quantitative composition of a conciliation board, its operating procedure, content and procedure for issuing resolutions by a conciliation board, its term of office, and the issue of involving a mediator must still be determined in a written agreement between employer and employees’ representatives or in a collective agreement. This means that prior to conclusion of a special agreement or a collective agreement on these issues the employer will not be able to establish a conciliation board unilaterally. An employer is not authorised to determine the quantitative composition and term of office of a conciliation board unilaterally.

Despite these legal inconsistences, in practice there is a danger that ‘blame’ for a failure to establish a conciliation board may be largely attributed to employers. Therefore, we recommend employers who have not yet established a conciliation board immediately take measures to make the employees elect their representatives, sign an agreement with them and establish a conciliation board. This will require a significant amount of detailed documentation on election of employees’ representatives, establishment and activities of a conciliation board.

Employees’ representatives

In addition to trade unions and elective representatives of employees in ‘pure’ form, the Law has introduced a ‘mixed’ representation option. Employees can now be represented by:

  • trade unions and their associations (please note: represented by their bodies);
  • elective representatives if there is no trade union within an organisation;
  • both a trade union and elective representatives, if the employees’ membership in trade unions is under half of the number of employees.

 

Payment for overnight work on holidays and days off

In the event night work coincides with a holiday or a day off, payment must be made separately for the night hours and hours of holidays and days off.

Dismissal of individuals using job positions for personal gain

The Labour Code now contains a new ground for dismissal in connection with loss of trust: Article 52.1.13 includes an employee using his or her position for personal interests or for the interests of third parties contrary to the employers’ interests in exchange for material or other benefits.  This ground was removed from the procedure for imposing disciplinary sanctions.

Termination of an employment contract based on this ground must be confirmed by an internal investigation providing evidence that confirms wrongful acts or omissions of an employee. The internal investigation procedure is established by an employer’s act.

Sending correspondence

Certain documents defined in the Labour Code (e.g. order on termination of an employment contract, imposition of a disciplinary sanction, etc.) were previously required to be sent by a letter with confirmation of receipt. From now on, they must be sent by postal registered letter with confirmation of receipt.

If sending a document by a courier service, please make sure that the courier company has the status of ‘postal operator’ and is able to forward a registered letter with confirmation of receipt in accordance with the acts of the Universal Postal Union and the Post Law of Kazakhstan. Otherwise, employers must use KazPost JSC. It is worth mentioning that, in addition to the above characteristics of posting, it is reasonable to send all legal correspondence with the postal inventory of the letter’s contents.

Increased penalty

The penalty for late settlements with an employee (including in the event of termination of an employment contract) is now 1.25 of the refinancing rate of National Bank of Kazakhstan.

Compulsory military service

In the event an employee is called up for compulsory military service or for military gatherings, his or her employment contract must not be terminated (as it was before). The employee retains his or her position.

Discipline on rotation

An important and helpful amendment was introduced for employers of rotation employees (see above). The employee’s obligation to comply with regulations as established by an employer at a facility and in places specifically equipped for living (rotation villages) while on rotation, is now a legal requirement.

Safety and remote work

The Law has introduced the rule that the procedure for compliance with on occupational safety requirements and those on labor protection and on safe performance of labour duties by an employee remotely working must be determined by an employer’s act.

Commenters have described this amendment  as an important ‘feature’ of remote work. At the same time, occupational safety and labour protection instructions must not only be adopted by employers and training conducted for remote work: this is a mandatory requirement for all types of work without any exceptions.

At the same time, after the introduction of this rule , special attention should be paid to the adoption of the required instructions and other employer’s acts for employees involved in remote work (which must include the procedure for compliance with requirements on occupational safety, labour protection and the safe performance of work duties), especially given the current quarantine regime.

Employment contract with the executive body

Important amendments were introduced with respect to relations with a company’s executive body (see Article 140.2 of the Labour Code). Previously, the first and the second paragraphs of Article 140.2 related solely to a special situation where the same person acted as both sole founder (participant, shareholder) and sole executive body. Given the situation, the individual would not conclude an employment contract with himself or herself and changes in the composition of participants (shareholders) logically entailed conclusion of an employment contract with him or herself in accordance with the general procedure.

The sense of the second paragraph now drastically differs. It relates not only to the above situation, but also to all changes in the composition of founders (participants, shareholders), and to all members of a collective executive body, not only a sole member.

In the event of changes in the composition of founders (participants, shareholders):

  • a new employment contract must be concluded with the head of the executive body and all members of the collective executive body; or
  • labour relations with them must be terminated based on a resolution of the relevant authorised corporate body of the legal entity.

 

This gives rise to perplexity… and numerous problems for businesses, especially for joint stock companies where shareholders may change very often (even several times a day).

From now on, each change in the composition of participants or shareholders requires the conclusion of new employment contracts with all members of the executive body. So, what should be done with the old employment contract?  Should it be terminated by terminating the powers of the executive body (eliminating any entitlement to leave and settlements with respect to all payments)? And if no new employment contract is concluded, does this mean that the conditions of the old one cease to apply? These are only some of the issues arising…

Payment for involuntary absence

In the event of involuntary absence (where an employee is reinstated at work) payable will be not the average salary, but ‘just’ the employee’s salary. The six-month limit is still in force.

Liability of general contractors

The general contractor is now liable for the total coordination of work on compliance with occupational safety and labour requirements concurrently by several (more than two) organisations in the course of operations at a construction site.

Miscellaneous

Other important amendments relate to:

  • secondments;
  • suspension from work;
  • termination for the term of substitution of a temporarily absent employee;
  • termination in the event an employee refuses to continue labour relations;
  • termination of additional work (sideline job, substitution, expansion of service areas);
  • female labour (including in the course of pregnancy);
  • leave;
  • rotation and shift work (on a special schedule, usually more than the traditional eight hours per day) work;
  • working hours of disabled individuals;
  • employer’s obligations in the sphere of occupational safety and labour protection;
  • accidentss
  • attestation of workplaces with reference to labour conditions;
  • conciliation board’s operating procedure;
  • status and powers of communities (unions, associations) of employers.

 

What should employers do? A checklist

Key actions to be taken by employers in connection with the amendments in the labour legislation are set out below:

  • bring model forms of employment contracts (general, shift, rotation-based work, contracts for substitution of a temporarily absent employee, etc.) into compliance with the amendments;
  • amend current employment contracts (if employees agree);
  • ensure the presence of employees’ representatives, and conclude agreements with them on the conciliation board’s operating procedure;
  • establish a conciliation board by an employer’s act (in the event of absence, if necessary);
  • amend current agreements on the conciliation board’s operating procedure;
  • amend the internal rules, regulations on payment for labour and leave and other employer’s acts;
  • adopt the new required employer’s acts (e.g. on internal investigation procedure, rotation employee regulations, use of EDS, introduction of data into EASEC, remote work, etc.);
  • amend employees’ job descriptions;
  • create occupational safety and labour protection systems at a proper level required by legislation;
  • conduct an inspection as to compliance with requirements on equality of production and living conditions and eliminate discrimination;
  • general contractors should strengthen contracts with subcontractors to ensure occupational safety and labour protection and include the required protection mechanisms;
  • ensure adjustment of other business processes as necessary.