Dismissals in Ukraine

1. Dismissal of employees

1.1 Reasons for dismissal

Generally, it is difficult to terminate an employee without the employee’s consent under Ukrainian law. Valid grounds for termination may be divided into those related to the employee’s breaches of employment duties (“termination with cause on the part of the employee”) and those not related to the employee’s actions (“termination without cause”). Termination is not generally allowed while an employee is on annual or sick leave.

An employer may unilaterally terminate an employee with cause in the following cases:

  • systematic unjustified failure to fulfil employment obligations;
  • unjustified absence from work for more than three hours during one day;
  • appearance at work while under the influence of alcohol or drugs;
  • misappropriation of property;
  • a single gross violation of employment obligations;
  • actions of a company head causing delayed or reduced payment of wages;
  • immediate subordination to a related party contrary to the Ukrainian law “On Preventing Corruption”;
  • actions of an employee entrusted with company assets (cash or property) that result in the loss of the employer’s trust; or
  • immoral conduct.

Termination in most of these cases is regarded as a disciplinary sanction and must be imposed following special procedures prescribed by law. An employer may terminate an employee without cause in the following cases:

  • changes in organisation of work and production (redundancy);
  • employee unsuitability for the job or position due to lack of qualification or poor health conditions;
  • reinstatement of an employee who previously occupied the position;
  • absence from work due to sickness for more than four continuous months;
  • recruitment by the army or mobilization of an employer-natural person during a special period; or
  • the employee’s unsuitability for the job or position is discovered within his / her probation period.

Except when an employee is absent for four months due to sickness, termination without cause is only allowed if the employee cannot be transferred to another position or job.

1.2 Form

In all cases, a decision regarding dismissal must be conveyed in the form of a written order and signed by a duly authorised representative of the employer. The employee is to be provided with a copy of the dismissal order on the last day of his / her employment.

1.3 Notice period

This depends on the grounds for dismissal.

The statutory minimum notice period is two months if the case involves redundancy.

In certain cases (e.g. where there has been a single gross violation of employment duties), notification is not required.

1.4 Involvement of works council

Not applicable unless provided for by a collective bargaining agreement or the internal policies of the employing company.

1.5 Involvement of a union

In cases involving redundancies, the employer must notify and consult with the trade union at company level (if such a union operates at the employing company). In some cases, moreover, the employer is required to obtain prior consent from the trade union at company level (if one operates) to terminate the employment of trade union members. Such cases can include redundancy (unless the redundancy is caused by the liquidation of the employing company).

1.6 Approval of state authorities necessary

Not applicable.

1.7 Collective redundancies

Currently there are no specific rules for collective redundancies in Ukraine, i.e. the redundancy procedure is the same irrespective of the number of people being made redundant.

In cases of redundancy, the employer must comply with the following notification and consultation requirements:

  • it must inform the trade union at company level (if one such operates within the company) about the redundancies being considered.The notice must be given within three months of the decision on the redundancies being taken, but no later than three months before the redundancies are expected to take place. Given these time requirements, it is advisable to notify the trade union promptly after the decision on redundancies has been taken;
  • it must notify the employees of the redundancy two months in advance;
  • in case of collective redundancy (see definition below), it must notify the State Employment Centre (in this text, the ‘Agency’) of any redundancies being considered, two months in advance;

The applicable law defines “collective redundancy” as a one-time dismissal

or series of dismissals following a decision by the employer made within

i. one month, if

  • ten or more employees have been dismissed from a company employing 20 to 100 individuals; or
  • 10% or more of the workforce have been dismissed from a company employing 101 to 300 individuals; or

ii. three months, if

  • 20% or more of the workforce have been dismissed, irrespective of the total number of staff.

1.8 Summary dismissals

Generally, dismissal without notice by an employer is only possible with respect to certain categories of employees (i.e. the general management of the company) in cases where there has been a serious breach of duty. Also, dismissal without cause and without notice is possible for employees qualifying as company officials (e.g. director) if their corporate mandate is terminated.

1.9 Consequences if requirements are not met

Employees are reinstated, and / or awarded continued payment of salary.

1.10 Severance pay

A statutory severance payment of one average monthly salary is only required if the decision regarding the dismissal has been taken by the employer on the following grounds:

  • changes in organisation of work and production (redundancy); or
  • employee unsuitability for the job or position; or
  • reinstatement of an employee who previously occupied the position.

When dismissing a company official in connection with the termination of his / her corporate mandate, a statutory severance payment of six times the employee’s average monthly salary must be paid.

In all cases of dismissal, an employer must pay a terminated employee all payments due under his / her employment agreement (e.g. salary and compensation for any of the employee’s annual vacation accumulated but unused during his / her whole term of employment with the employing company). Voluntary severance payments are also subject to negotiations between employer and employee. These are especially common if the justification for a dismissal may be doubtful.

1.11 Non-competition clauses

Post-contractual non-competition covenants are not enforceable in Ukraine.

1.12 Miscellaneous

Certain categories of employees cannot be dismissed by an employer without their prior consent. These “protected” employees include:

  • pregnant women; and
  • women with children under the age of three, or under the age of six if a registered medical practitioner certifies that home care is necessary; and
  • single parents or the legal guardians of a child under the age of 14 or a handicapped child.

The law only allows “protected” employees to be dismissed if the employer is liquidated without legal succession. Under these circumstances, the law requires that they be paid their average salaries for three months following the termination.

2. Dismissal of managing directors

The legal requirements applicable to dismissing managing directors of Ukrainian companies are the same as for all other employees, except for the special terms of dismissal applicable to them if their corporate mandate is terminated. Ukrainian law allows a company to enter into an employment contract with the managing director. An employment contract is a specific form of employment agreement which, unlike a regular employment agreement, may provide additional grounds for dismissal comparable to those available under the law. As a result, a managing director may also be dismissed on grounds and subject to procedures provided by his / her employment contract (if such is concluded). In June 2018 the new Law of Ukraine on Limited and Additional Liability Companies (New LLC Law) came into effect presenting certain innovations for regulating the formation of a company management body (including general managers). Although the New LLC Law leaves open the theoretical possibility of appointing someone to head such a management body based on either an employment or a civil law contract, and presents additional grounds for termination of employment, the wording of the current version of the New LLC Law is vaguely drafted in this respect.

Therefore, we may only speculate on these innovations until the relevant court practice becomes available and brings more certainty.

2.1 Reasons for dismissal

The main reason for dismissal of a managing director is a termination of his / her corporate mandate. Additional grounds for dismissal of a managing director are described below. Such grounds may be divided into those related to the managing director’s breaches of employment duties (“termination with cause”) and those not related to the managing director’s actions (“termination without cause”). Termination is not generally allowed while a managing director is on annual or sick leave.

An employer may unilaterally dismiss a managing director with cause in the following cases:

  • systematic unjustified failure to fulfil employment obligations;
  • unjustified absence from work for more than three hours during one day;
  • appearance at work while under the influence of alcohol or drugs;
  • misappropriation of property;
  • a single gross violation of employment obligations;
  • actions of a managing director causing delayed or reduced payment of wages;
  • immediate subordination to a related party contrary to the Ukrainian law ‘On Preventing Corruption’;
  • actions of a managing director entrusted with company assets (cash or property) that result in the loss of the employer’s trust (if applicable); or
  • immoral conduct.

Termination in most of these cases is regarded as a disciplinary sanction and must be imposed following special procedures prescribed by law.

An employer may terminate a managing director without cause in the following cases:

  • termination of a corporate mandate of a managing director;
  • termination on grounds provided in the managing director’s employment contract;
  • additional general grounds for termination as described below:
    • changes in organisation of work and production (redundancy);
    • managing director’s unsuitability for the job or position due to lack of qualifications or poor health;
    • reinstatement of an employee who previously occupied the position;
    • recruitment by the army or mobilisation of an employer-natural person during a special period;
    • managing director’s unsuitability for the job or position discovered within his / her probation period;
    • absence from work due to sickness for more than four continuous months.

Termination without cause (except when a managing director is absent for four months due to sickness) is only allowed if a managing director cannot be transferred to another position or job.

2.2 Form

In all cases, a decision regarding dismissal of a managing director must be conveyed in written form and approved by the highest governing body of the employer (e.g. by means of shareholder's/supervisory board’s resolution for joint-stock companies or resolution of participants for limited liability companies). The managing director is to be provided with a copy of the dismissal decision on the last day of his / her employment.

2.3 Notice period

This depends on the grounds for dismissal.

The statutory minimum notice period is two months if the case involves redundancy.

In certain cases (e.g. where there has been a single gross violation of employment duties or the mandate of a managing director is terminated), notification is not required.

2.4 Involvement of works council

No involvement.

2.5 Involvement of a union

In cases involving redundancies, the employer must notify and consult with the trade union at company level (if such a union operates at the employing company). In some cases, moreover, the employer is required to obtain prior consent from the trade union at company level (if one operates) to terminate the employment of trade union members. Such cases can include redundancy (unless the redundancy is caused by the liquidation of the employing company).

2.6 Approval of state authorities necessary

Not necessary.

2.7 Collective redundancies

Not applicable.

2.8 Summary dismissals

Dismissal without notice by an employer is only possible with respect to the general management level of the company in cases where there has been a serious breach of duty. Also, dismissal without cause and without notice is possible in respect to a managing director (as he / she qualifies as a company official) if his / her corporate mandate is terminated.

2.9 Consequences if requirements are not met

The managing director is reinstated, and / or awarded continued payment of salary.

2.10 Severance pay

If a managing director is dismissed in connection with the forcible termination of his / her corporate mandate, a statutory severance payment of six times the managing director’s average monthly salary must be paid.

In turn, a statutory severance payment of one average monthly salary is required if the decision regarding the dismissal has been taken by the employer on the following grounds:

  • changes in the organisation of work and production (redundancy); or
  • managing director’s unsuitability for the job or position; or
  • reinstatement of an employee who previously occupied the position.

In all cases of dismissal, an employer must pay the managing director all payments due under his / her employment contract / agreement (e.g. salary and compensation for any of the managing director’s annual vacation accumulated but unused during his / her whole term of employment with the employing company). Voluntary severance payments are also subject to negotiations between the employer and managing director. These are especially common if the justification for a dismissal is in doubt.

2.11 Non-competition clauses

Post-contractual non-competition covenants are not generally enforceable in Ukraine.

On the other hand, the New LLC Law provides a set of limited non-competition clauses in relation to a managing director. For instance, a managing director may not conduct business activities as an individual entrepreneur within a field of activity of his / her employer without a consent from the highest governing body of the employer.

2.12 Miscellaneous

Not applicable.