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Recommendations on Labor Code draft

By Keti Arjevanidze
Tuesday, April 16
The American Chamber of Commerce in Georgia (AmCham) and the International Chamber of Commerce in Georgia (ICC) released their observations and recommendations around the new Labor Code. AmCham Georgia supports the need for a new Labor Code although it cites negative consequences in terms of employment through specific amendments in the current draft.

AmCham approves the pragmatic Labor Code, protecting the rights of both sides as employers and employed as well. The release also remarks that the code should include the flexibility needed for business growth. In order to achieve a balanced Labor Code, AmCham Georgia deems it necessary to revise several aspects of the draft before the legislation is passed on the second hearing in Parliament.

They think the companies must be allowed to sign one-year contracts with employees. The current version implies that the employers can conclude a labor contract for a definite or indefinite term, as they see fit.

AmCham Georgia thinks that their recommendation allows for employee stability and for better financial and administrative planning for companies.

ICC-Georgia also recommends that fixed-term contracts should be permitted under the amended Labor Code. According to ICC-Georgia, the draft code does not allow provisions for any kind of shift work or flexible working schedule. “Specific types of work require flexibility in number of hours worked per week,” reads the statement adding that it must be legal for a company to contract employees for more than 40 hours a week based on mutual agreement and governed by the requirements for equivalent rest time.

The current code also envisages a maximum working time of 41 hours, though the parties may agree on a longer working time. The current code also fails to limit the working time of minors. While the proposed changes determine that the working time during which the employee performs obligations shall not exceed 41 hours per week defined by the contract.

Transparency International Georgia also released the recommendation around the issue. According to their assessment, these changes place an imperative ban on increasing the working time above the limit of 41 hours per week in a labor contract, which may create problems both for an employer and an employee who is willing to work more and, accordingly, to receive more compensation. The limitation of the working time of minors is undisputedly a positive change.

AmCham Georgia considers it unrealistic that according to the draft, every company will be obliged to enter a written contract for any labor relationship lasting more than 3 months. According to them it will cause a legal and administrative burden for small and medium enterprises to contract each employee that works for 3 months or more.

AmCham Georgia concludes that points underlined by them are more restrictive than in the United States and EU countries, where employee rights are more institutionalized and recognized.

“In a country like Georgia, that is trying to encourage economic development and investment, these points will have a negative effect on employment, business growth, investment and the population as a whole,” they said in a statement.

ICC-Georgia singled out the limitations on the ability of employers to terminate employment contracts. According to the proposed changes to the Labor Code, the unilateral termination of employment contracts by employers is no longer permitted. Termination of employment contracts will only be permitted on the basis of a number of limited reasons provided in the Labor Code.

ICC-Georgia recommends that employers maintain the right to unilaterally terminate employment contracts, upon providing fair and adequate notice and compensation to employees. Transparency International Georgia also released the assessment on the termination of contracts and recommends that the law gives a list of concrete violations that may become a precondition for terminating a contract. This puts an employee in a better legal position and is a positive fact undoubtedly.

According to ICC-Georgia “despite numerous requests, the draft Labor Code was not discussed through the Tripartite Commission that includes all social partners (Trade Unions, Employers and Government) as recommended by the International Labour Organization” because discussion of the Labor Code within the Tripartite Commission might have resulted in “a balanced document that would have fostered equally the interests of employers and employees and would have preserved economic growth and a friendly business climate in Georgia.”

The draft Labor Code has been approved by the Georgian Government and is currently being considered in Parliament.