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Thursday, 23 May 2019

On April 12, 2019, the Minister of Employment and Labour Relations released a concept of the new Labour Code (the ‘Concept’). According to the Concept, the revised Labour Code (the “Code”) that is planned to be adopted this year is aimed at positively affecting SME businesses in Uzbekistan. Broadly, amendments and addendums shall, among others, address the following labour issues: employment, probation, worker’s education, gender discrimination, dismissal, retirement, payments to employees, massive layoffs and settlement of labour disputes. The exact dates for the adoption of the Code have not been announced. However, it is clear that employers will have six months before the Code enters into force.

It is to note that this is only a concept that is being publically discussed. The Code is still being finalized. As many of its proposals are reflected within the Concept, this legal alert briefly reviews some of the most significant propositions of the Concept in order to familiarize the companies with both burdensome and favourable changes the Code may introduce.

Electronic labour books and contracts

In accordance with the Concept, the paper-form labour books will not be issued and the practice of maintaining relevant records in paper form will be abolished starting from 1 June 2019. Instead, electronic records will kept in the all-Republican online system maintained by the authorised state agency. All the records will be synchronised with the relevant database of tax authorities, so that the tracking of personal income tax payments by employees and social contributions by employers could be streamlined. It is also planned to introduce the electronic form of labour contracts. For now, it is proposed that such contracts shall be executed in Uzbek language.

Employment on decent terms

The employees are going to be granted with the broader range of rights and guarantees upon their employment. The Concept provides for the basic right of employees for an annual paid leave to be incorporated in an employment contract. Otherwise, the employment contract shall be considered void. In addition, it is proposed to simplify the procedure for abandoning work that poses a threat to the life and health of the employee, as well as requiring him/her to be engaged in illegal or humiliating activities. The Concept seeks to systematize the payment of allowances for work in specific conditions (dangerous work, work in hard climate conditions, etc.) with references being introduced to relevant rules that have to be elaborated by authorised state agencies. Certain provisions are also devoted to the protection and storage of employees’ personal data, as well as to the conditions for their transfer to third parties. For more details on the development of personal data regulations, please see: https://kostalegal.com/legal-alerts/uzbekistan-to-adopt-the-law-on-personal-data.

In addition, it is planned to revise the provisions on probation period. Currently, the probation period is set at the discretion of the parties and shall not exceed the period of three months. The Concept proposes to establish the order, according to which the term of the probation period will depend on the position being occupied.

Furthermore, the issues of flexible working hours shall be also addressed in the Code. The Concept proposes to introduce provisions for flexible schedule that shall allow employers to use their time more effectively and optimize the production. Speaking of time, it is additionally offered to introduce hourly wage. Thus, the employers shall have a right to make regular salary payments based on actual hours of their employees’ work. Overtimes shall be regulated with the introduction of (a) special procedures regulating how an employee may be attracted to overtime work and (b) lists of exceptional cases, where an employer is entitled to recruit an employee for overtime work without any consent provided. In all other cases, the employee’s consent is essential.

Fixed – term employment contracts

Currently, Uzbek law permits to conclude fixed term employment contracts in a very limited number of cases and generally, sees them as undesirable. According to Article 76 of the Labour Code, such employment contracts may be concluded with (i) the chief executive officer of a company, his or her deputes, and the chief accountant, (ii) in cases, where the nature and conditions of performed work as well as interests of the employee do not allow to conclude a permanent contract, or (iii) in specific cases directly provided by Uzbek law. It is now proposed to significantly expand this list to give more flexibility to a potential employer, as well as to clarify application of the rule (ii) above.

Gender equality

An analysis of current labour legislation and practice shows that one of the main causes of gender discrimination today is that most of the benefits and guarantees associated with family responsibilities are granted only to women. It is for this reason that many employers prefer to employ men, who do not need such guarantees and benefits. As a result, on the one hand, the equality of the parents’ rights to raise their children, as enshrined in the Family Code of the Republic of Uzbekistan, is violated. On the other hand, the benefits established for women often turn into "disadvantage" that impede their employment. Thus, the Code shall encompass articles eliminating gender discrimination.

Pursuant to the Presidential Decree No. PP - 4235 of March 7, 2019[1], men have received the same package of rights related to the childcare since 1 May 2019. Additionally, the President ordered to revoke the prohibitions on the use of female workers. As a corollary, the list of the professions that excluded the females’ presence has gained a recommendatory nature. These changes shall also be reflected in the Code.

As a result, the employers shall be more cautious in anticipating the claims associated with gender discrimination.

Dismissal issues

Current labour legislation on retirees is more beneficial for employers, as they are eligible to unilaterally terminate the employment contract upon the attainment of retirement age. The Concept suggests restoring the balance of rights through exclusion of such basis for contract termination with the retention of the right to receive the pension.

The issue of employment contract termination in general is also going to be addressed in the Coode with regard to cases of mutual consent and change of management. The problem of current legislation is in the absence of the clear procedure established for contract termination implemented through mutual consent. The Code shall fill in this gap. Another issue that needs to be clarified is the employment contract termination associated with the change of company’s management. It is clear that , when the owner of a company changes, the employment relationship between the employee and the employer continues, if the employee agrees. However, it is not clear how to terminate an employment contract without the need to wait the conformation/expiration of dismissal notice (two weeks), if the employee is reluctant to work with the new directors of the company. More specifically, the termination issues shall also be clarified with regard to the microenterprises operated by a sole proprietor. The Code shall expand the list of grounds for the employment contract termination providing the employers with clear procedures that address all possible cases. 

Massive layoffs

The current Labour Code requires an employer to provide employees with two months prior notification before massive layoff occur. The term of employee's advance notification on his/her dismissal at the initiative of the employer is to be reduced from 2 months to 1 month. Furthermore, it is planned that the Code shall provide the employer with a right to choose either to keep the employees as staff for an extra month(s), or to terminate the relationship immediately with an appropriate compensation provided. It is also proposed that the notification period and the amount of compensation may be directly dependent on the employee’s length of service.

Moreover, currently, an employer is obliged to inform regional labour departments on all mass dismissals. The Concept proposes to define the term of “mass layoffs” by introducing relevant thresholds, i.e. a mass layoff is a dismissal of 10% of employees for companies with less than 100 employees.

Other changes

The Concept contains other novelties that mainly concern freelancers - residents of Uzbekistan, particularly the ones who are working remotely, employment of homeworkers and wage earners who work and study. Furthermore, the Code shall establish the procedure for labour disputes resolutions, where the mediation procedures shall be available to the parties.

The adoption of the Code shall introduce the need for remote workers to have employment contracts. More likely that the electronic type of contracts shall serve as an appropriate framework for such labour relations. The employees, who combine work and study, shall be provided with particular advantages and guarantees.

[1] http://lex.uz/ru/docs/4230938