New Labor Code: Employment Agreement Termination

In 2015, the head of the state signed the new Labour Code of the Republic of Kazakhstan, which came into force on 1 January 2016.

Provisions of this Code introduced amendments to many aspects of employment relationships, and one major issue, both for employers and employees, shall be whether the grounds and procedure for the termination of employment agreements have changed.

In this connection, we decided to take a closer look at the procedure for termination of employment agreements in view of changes in legislation.

Grounds for termination of employment agreement

Several grounds for the termination of employment agreements at the initiative of employers, as well as the transfer of an employee to another employer, have become fundamentally new.

Other than that, the general grounds for termination of employment agreements remain the same and include such items as termination of employment contracts upon mutual agreement of the parties, upon expiry of the agreement, at the initiative of employer, at the initiative of employee and other grounds in compliance with Article 49 of the Labour Code.

Another considerable difference between the old and the new edition of the Labour Code is the change in the procedure for termination of employment agreements. We’d like to further review this procedure in detail in individual cases of employment agreement termination, as well as risks associated with violation of the established procedure for termination.

Termination of employment agreement upon mutual agreement of the parties

Parties in the employment agreement may decide to terminate the employment agreement upon mutual agreement in two cases.

In the first case, the party that indicated its willingness to terminate the employment agreement must send a written notification and await the decision of the other party within three working days. In case of a positive response, the parties sign an according agreement, and the employer issues an order on the termination of the employment agreement upon mutual agreement of the parties.

If no positive response follows, then the grounds for terminating the labour agreement cannot be applied.

In the second case, the parties may provide in the employment agreement for the employer’s right to terminate the agreement without notification but with payment of compensation. Whereas the old edition of the Labour Code in this scenario specified the amount of compensation as not less than the average wage of the employee for the calendar year, the new Labour Code determines the amount of compensation in accordance with the employment agreement.

If the employment agreement contains such an item, the employer may, without any preliminary notifications, issue an order to terminate the employment agreement with payment of previously agreed amount of compensation to the employee.

Termination of employment agreement upon expiry of agreement

According to the regulations of the new Labour Code, upon expiry of the employment agreement the party that expressed willingness to terminate the employment agreement must file a written notification to terminate the agreement with the other party on the last working day.

If neither of the parties are notified about the termination of the employment relationship, the agreement is considered to be extended for the same period as it was concluded for; however, such extensions cannot occur more than twice.

One should bear in mind that this provision does not cover small businesses.

The new Labour Code kept the provision that if at the employment agreement expiry date, concluded for not less than a period of one year, a pregnant woman provides medical assessment of 12 or more weeks’ maturity pregnancy, or an employee who has a child under three years and is willing to execute his right for unpaid maternity leave, submits a written application, the employer must extend the employment agreement until the date the maternity leave ends.

Termination of employment agreement when initiated by employee

The new Labour Code introduced considerable changes to the procedure for termination of the employment agreement at the initiative of the employee.

As before, the employee has the right to terminate the employment agreement at any time by filing a minimum of one month’s prior written notification.

Nevertheless, whereas former legislation enabled the parties to reduce this period through mutual agreement, according to the new Labour Code the period for termination of the employment agreement can be reduced only with the written consent of the employer. This period for filing notification can also be extended if the employment agreement expressly provides so.

The employee also has the right to resign from his job in case if the employer fails to comply with the terms of the employment agreement. For this purpose, the employee has to submit a written application, and if at the end of the seven-days period the employer continues nonperformance of the agreement, the employee may unilaterally terminate the employment agreement, notifying the employer in writing not later than three working days before the date.

A key distinction of the new Labour Code is the employer’s ineligibility to withdraw an application of resignation. Thus, according to the old edition of the Labour Code, an employee had the right to withdraw at his discretion the application of employment agreement termination within the period of application. Now such application can be withdrawn only with the consent of the employer.

Also, the new Code added a regulation that determines that upon expiry of the application period the employee has the right to quit his job, except for cases of acceptance and transfer of the employer’s property (documentation) incompletion due to the fault of financially responsible persons. The day of the employment agreement termination with financially responsible employees shall be the date of acceptance and transfer of the employer’s property (documentation) completion.

Termination of employment agreement at the initiative of employer

As mentioned above, the new Labour Code expanded grounds on which the employer has the right to terminate the employment agreement.

Even while the draft of the new Labour Code was still in discussion, the greatest interest was generated by such grounds as deterioration of the economic condition of the employer as a result of decline in production, works or services.

This regulation provides that, if the employer (1) had an organisation unit closed, (2) is unable to transfer an employee to another job position, and (3) gave a month’s prior notification to the representatives of the employee, the employer has the right to terminate the employment agreement with the employee, notifying the employee in writing 15 working days prior to the date and having paid two months’ wages. At mutual agreement of the parties, the notification period may be replaced by payment of wages, in proportion to the unfinished period.

Another novelty is the absence of the employee at the workplace for more than a month for reasons unknown to the employer. In this case, the employer has the right to terminate the employment agreement if the employee fails to provide reasons for his absence within 10 calendar days from the date the employer mails with notification an act of absence to the employee.

Other novel grounds are repeated failure of testing knowledge on occupational health and safety by the employee, who is responsible for maintaining these functions in the organisation that performs production activities, which enables the employer to terminate the agreement, based on the results of the examination commission.

Conditions for termination of the employment agreement at reaching the retirement age have also been changed. Now, the employer must notify the employee not less than one month prior to the date of employment agreement termination, with payment of compensation in the amount determined by employment and collective agreements and/or act of the employer. Further on, the parties have the right, at their mutual agreement, to annually extend the employment agreement, concluded with the retired person.

In case of noncompliance of the employee with his occupied position due to insufficient qualification, the employer may terminate the agreement based on the results of the certifying commission, which must include the representative of employees.

In case of the employee’s violation of labour discipline (grounds provided by article 52, paragraph 1, subparagraphs (8)–(18) of the new Labour Code), the employer must comply with the procedure for imposing of disciplinary sanction with regard to the employee, i.e., demand a written explanation from the employee (in case of refusal to provide explanations, an act of employee’s refusal must be drawn up). Then, the employer has the right to terminate the employment agreement by issuing a respective act with which he must familiarise the employee via his signature or mail the act to the employee with notification in case of failure to familiarise the employee with the act in person.

In case of the employee’s absence at work for more than two months in a row because of temporary disability, except for cases where the employee is on maternity leave, as well as where the disease is on the list of diseases approved by the authorised state authority, the employer has the right to terminate the employment agreement after employee provides a sick leave certificate.

In case of the employer’s winding-up, or staff reduction, the employer may terminate the employment agreement with one month’s prior notification to the employee (if the employment or collective agreement doesn’t provide for a longer period). At that, the employer must pay the employee compensation in the amount of his average monthly salary. In this case, there is a limitation for employees of retirement age, namely, their discharge may be carried out only with a positive decision of the commission, composed of an equal number of the employer’s and the employees’ representatives.

When discharging employees on the above grounds, the employer must in due form notify the employment centre on the discharge of said employees not less than one month prior to the proposed discharge.

In the termination of employment relationships in case of the employee’s noncompliance with his occupied position due to medical condition, preventing the continuation of this job and eliminating the possibility of its continuation, the employer must rely on valid medical assessment.

In the case where the employee was present at the workplace in a state of alcoholic, narcotic, or inhalant intoxication (or imbibes such in his working hours), the employer may terminate the employment agreement subject to positive medical assessment, or on the basis of the act of the employee’s refusal to pass medical examination.

Termination of employment agreement due to transfer of employee to another legal entity

These new grounds provide that at the transfer of an employee to another legal entity, the employee must file a written notification with the new employer, who, in turn, must confirm the hiring of the employee in writing.

Employment agreement at employee’s refusal to extend employment relationships

This section also covers the changes that facilitated the procedure for the termination of employment agreement. Thus, if previously the employer had to mandatorily obtain the employee’s written refusal to extend the employment relationship, now this shall not prevent his discharge, and the employer’s drafting of the act of the employee’s written refusal is sufficient.

Termination of employment agreement due to employee’s transfer to elected job

This procedure for the termination of employment agreements hasn’t changed, and if the employee indicated willingness to transfer to an elected job, the employee must notify the employer of this fact and provide an act of election or appointment of employee to the elected job (position).

Formalities at termination of employment agreement

This regulation hasn’t undergone essential changes, except for the elimination of the item that established the date of the termination of the employment agreement as the employee’s last working day.

Other than that, irrespective of the grounds for termination, the employment agreement termination must be executed via the employer’s act with specification of grounds for termination of the employment agreement in accordance with the Labour Code.

A copy of the act must be handed by the employer to the employee or mailed with notification within three working days from the issuance of the employer’s act.

Risks associated with violation of procedure for termination of employment agreement

In case of violation of procedure for termination of the employment agreement, the employer bears considerable risks, including financial, administrative and criminal liability, let alone reputational risks.

Thus, according to the new Labour Code, in case of illegal discharge, the employee may be restored in his former occupation with payment of compensation by the employer in the amount of his average monthly salary and other entitlements, but not for more than a six-month period.

Whereas, without regard to the employer’s expenses for dispute consideration in conciliation commission and court representation and the amount of the recovered salary, the employer might bear additional losses through compensation of moral damages to the employee, associated with illegal discharge.

The Administrative Code of the Republic of Kazakhstan also establishes the employer’s liability for violation of the requirement to provide the authorised body in the sector of employment with information on impeding discharge of employees in connection with the employer’s winding-up, and staff reduction.

A harsher punishment is stipulated by the Criminal Code of the Republic of Kazakhstan.

Thus, for illegal termination of the employment agreement, officials of the employer may be brought to criminal account in the form of community service (240 hours) or arrest (up to 75 days), with deprivation of the right to hold particular occupations or perform particular activities for a period of up to one year.

In turn, the employee may also be brought to account in case of causing damage to the employer in connection with noncompliance with the procedure for termination of the employment agreement at the initiative of the employee. In this case, direct actual damage to employer may be recovered, which employee must reimburse.

Thus, both the employer and the employee should look closely at compliance with the requirements of the new Labour Code with regard to the procedure for termination of the employment agreement, which would allow them to avoid serious consequences in the future.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.