The invalidity of employment contracts and cancellation of enforcement inscriptions

We have recently invalidated the employment contracts and cancelled the enforcement inscriptions for our client in a dispute against the debtor and its close relatives. After another successful court dispute on leasing contracts for debt recovery against a legal entity and an individual (guarantor), we transferred the writ of execution to a private bailiff (PB-1) for execution. During the enforcement proceedings PB-1 informed us that PB-2 approached him with a request to distribute the amount received from the sale of movable property of the guarantor (debtor), taking into account the order of satisfaction of claims. PB-2 had two enforcement proceedings pending to recover wages and other payments accrued but not paid to employees from an individual entrepreneur as debtor in favor of his close relatives (employees of the individual entrepreneur).

PB-1 asked us to initiate legal proceedings against the debtor and his close relatives on the basis of the responses of governmental authorities that there is no information about the employees and registered employment contracts, and no deductions were made from the individual entrepreneur in favor of the employees.

Simultaneously with filing a claim to invalidate employment contracts and cancel enforcement inscriptions, we filed a claim to challenge the actions of PB-1 to suspend the transfer of funds in favor of the debtor, as well as a claim to challenge the actions of PB-2.

PB-1, PB-2 and notaries who issued enforcement inscriptions on the recovery of wages and other payments accrued but not paid to employees from the individual entrepreneur as debtor in favor of his close relatives participated in the court proceedings as third parties not asserting independent claims. PB-2 and the notaries asserted that the employees provided all the necessary documents for the issuance of the enforcement inscriptions (copies of employment contracts, employer's certificate on the amount of accrued wages, pay slip C1, certificate on delayed wages), therefore, the enforcement inscriptions were issued lawfully, and our client's claims were groundless.

The debtor and his close relatives expressed the position that the labor relationship actually took place, the relationship does not affect the interests of the client, and the debtor did not enter information on employment contracts since he was not aware of the need to enter such information.

In the court proceedings, we filed a motion to demand documents confirming the actual existence of the labor relationship between employer and employees. After receiving the documents, we drew the court's attention to the following facts (1) there are no actual payments of salaries to employees, whereas the dates of employment contracts are more than 1 year ago and the individual entrepreneur received substantial income during the period of work of the debtor's close relatives (2) there is no transfer of pension contributions in favor of employees for the whole year (3) the debtor issued decrees for large bonuses, while at the same time he did not pay salaries for the whole period of work of the debtor's close relatives, etc.

Based on the above-mentioned facts, the responses of the governmental authorities, as well as the fact of close kinship between the employer and the employees, the court decided that the employment contracts were fraudulent, concluded without the intention of generating labor law consequences, at the same time implying the receipt of benefits of a monetary character, and the enforcement inscriptions were committed by the debtor with affiliated persons in order to evade the execution of the court decision.

Consequently, as a result of invalidation of employment contracts and cancellation of enforcement inscriptions, the client refunded 14 million tenge.