EY Armenia Law Alert| Amendments to the Labor Code of the Republic of Armenia, June 2023

Facts

Several provisions of the Labor Code of the Republic of Armenia (hereinafter referred to as “Labor Code”), consisting of approximately 122 articles, have been amended by the Law No. HO-160-N on “Amendments and additions to the Labor Code,” adopted on May 3, 2023. These amendments will enter into force on July 31, 2023.

It should be noted that the introduced amendments encompass labor relations that originate from employment contracts entered into after the commencement of the law. Consequently, due consideration must be given to the abovementioned amendments and additions when devising labor relations arising after the specified date. The majority of the latter concern the requirements related to employment contracts, regulations governing the termination of such contracts, provisions concerning employee leaves, and the privileges bestowed upon employees responsible for childcare. Consequently, several noteworthy changes and additions to the Labor Code are presented below.

I.                 General provisions:

1. Going forward, employment contracts may be concluded by mail or through electronic communication channels facilitating the exchange of contract copies between the parties. In such cases, the employment contract is deemed to be terminated upon receipt of the contract copy, signed by both parties, by each party.
2. It is now mandatory to specify the workplace in the employment contract. Additionally, the definition of the workplace and the criteria for its determination are outlined.
3. With regard to specifying the salary amount, the employment contract must now include a note on applicable taxes, and other obligatory payments, in addition to the working time regime, its weekly duration (except for the cases of overall calculation of working time), as well as the methods of exchanging notices between the employer and the employee.
4. In cases of concurrent employment, the principle for determining primary employment has been established. Primary employment is defined as the work performed based on a previously concluded labor contract unless otherwise agreed upon by the parties.
5. Labor disputes may subsequently be subject to mediation in accordance with the provisions outlined in the Law on Mediation.

II.               Termination of the Employment Contract:

1.   The grounds for termination of the employment contract at the employer's initiative have been reviewed, and the grounds for termination due to retirement age have been eliminated. Furthermore, contrary to existing regulations, employers now have the opportunity to hire seniors under indefinite employment contracts.

2.   Conversely, the comprehensive list of grounds for terminating the employment contract has been expanded. Specifically, the employment contract is terminated by operation of law in the following instances: upon the expiration of a fixed-term employment contract when neither the employer nor the employee provided notice of termination and the employment relationship did not continue; if the employer fails to adopt a relevant individual legal act terminating the employment relationship after the expiration of the notice period specified by the employee in the notice of termination; and in the event of the demise of a natural person employer.

3.   The legal aspects concerning the resolution of employment contracts concluded with members of the executive bodies (both collective and individual) of legal entities have been clarified. Notably, according to the Labor Code, their particularities are from now on governed by the Civil Code of the Republic of Armenia and the laws governing the activities of these legal entities.

4.   The employment contract termination provisions t at the employee's initiative have been supplemented with an additional possibility. In the absence of the employer's objection, the employment contract may be terminated at a different time specified in the employee's notice without adhering to the minimum thirty-day notice period. If the employer objects to terminating the employment contract within a different period stated in the employee's notice, the employee is obligated to compensate the employer for each day of delay beyond the notice period.

5.   The regulations regarding termination of the employment contract by the employer prior to the contract's expiration have been modified concerning cases of long-term incapacity of the employee. Specifically, the timeframes for consecutive absences from work, which constitute a prerequisite for termination, have been revised accordingly. Previously, the requirement was more than 120 days consecutively or more than 140 days within the past twelve months. The current provision states that termination is permissible when exceeding the maximum  entitlement period to temporary disability benefits or more than 180 days within the past twelve months.

6.   Henceforth, when effectuating the termination of an employment contract on the basis of staff or position reduction, preferential treatment to retain employment shall be accorded to former servicemen entitled to disability pensions. This privilege shall also extend to family members (spouse, child, father, mother, sister, brother, grandmother, grandfather) of former servicemen receiving severe disability pensions or to the deceased, missing, or legally declared deceased servicemen, in accordance with the conditions prescribed by law.

7.   The grounds for terminating an employment contract due to loss of trust have been expanded. Consequently, the option to terminate the employment contract is now available in cases where the employee has violated safety and well-being regulations within the workplace or during the execution of job duties, thereby endangering the lives and health of individuals. Moreover, termination is applicable when the employee has illicitly utilized the employer's computer equipment or information systems to access work-related or personal data, engaging in the unauthorized use of data that disrupts the employer's normal functioning.

8.   The provisions governing the termination of an employment contract at the employer's initiative without providing prior notice to the employee have also been expanded From now on, the employer possesses the right to terminate the employment contract without notifying the employee in the event of the employee's reinstatement to their former position.

III.              Annual and study leave

1. Pursuant to the introduced amendments, annual employee leave may be granted before the expiration of the initial six months of continuous employment with the employer, subject to mutual agreement between the parties.
2. If an employee abstains from or declines to utilize their entitled annual leave or a portion thereof for two and a half consecutive calendar years without submitting an application for leave, the employer may determine the period for granting annual leave to the said employee without the need for an employee's application.
3. Should the employee not be granted annual leave within 18 months, the employer is obligated to provide compensation to the employee for each day that elapses beyond that period. The compensation should amount to 0.15 percent of the employee's average monthly salary, while not exceeding the average monthly salary unless otherwise stipulated by law.
4. With the employer's consent, an employee may be granted study leave for the entire duration of their studies, not exceeding two years, in order to enhance the employee's professional qualifications at foreign educational institutions or to acquire knowledge directly relevant to their job responsibilities.

IV.             Childcare

1. A provision has been introduced to grant employees the right to reduce working hours for childcare purposes, specifically for the care of children under two (previously, the stipulated age was one).
2. The regulation regarding additional breaks every three hours for breastfeeding the child until the age of one and a half has undergone revision. Notably, the requirement for breastfeeding the child has been removed. Instead, it has been stipulated that in addition to regular rest and feeding breaks every three hours, a woman with a child up to two is entitled to an additional break of no less than half an hour. The duration of these breaks now depends solely on the child's age rather than the need for feeding. Furthermore, it is important to note that the age limit for the child has been extended to two years, as opposed to one and a half years in the previous provision.

V.               Internship and trainings

1. The employer has been granted the right to organize work internships for a maximum duration of two months, limited to a single occurrence and without the possibility of extension. Additionally, the number of trainees under the employer's tutelage shall be at most ten percent of the total number of employees at any given time.

1. The employer has also been allowed the opportunity to arrange professional training for prospective employees for a maximum period of five months before their official employment, whether conducted at the employer's premises or elsewhere. Throughout the training period, the trainee shall be entitled to receive a salary equivalent to the minimum monthly wage prescribed by law.  A written agreement between the parties shall govern all matters pertaining to professional training.

In light of the above, the amendments and additions to the Labor Code introduced several changes that may have implications for employers. Here are some possible outcomes for employers based on the previously presented information:

1. Increased flexibility in contract conclusion: Employers can now conclude employment contracts through mail or electronic communication channels, simplifying the process. This allows for quicker contract exchanges and convenience for both parties.
2. More detailed contract requirements: Employers must specify the workplace, salary amount that includes taxes and other payments and methods of exchanging notices in employment contracts. This ensures clarity and transparency in contractual terms.
3. Mediation for labor disputes: Labor disputes can now be resolved through mediation, providing an alternative method for dispute resolution. This could potentially reduce the burden on employers by avoiding lengthy legal proceedings.
4. Changes in termination grounds: Employers have new possibilities for terminating employment contracts. For example, employers can now hire seniors under indefinite contracts, and the grounds for termination due to retirement age have been eliminated. However, employers also have expanded grounds for termination due to loss of trust, such as violating safety regulations or unauthorized use of company systems etc.
5. Modifications to termination procedures: Employers have the right to terminate an employment contract without prior notice if an employee is reinstated to their former position.
6. Changes in annual and study leave: With mutual agreement, employers may grant annual leave before six months of continuous employment. If an employee does not use their entitled leave for a certain period, the employer can determine the leave period without the need for an application. Employers must provide compensation if annual leave is not granted within 18 months. Additionally, employees can be granted study leave for up to two years with the employer's consent.
7. Childcare provisions: Employers must accommodate reduced working hours for employees caring for children under two. Breaks for breastfeeding have been revised to include additional breaks of no less than half an hour for women with children up to the age of two.
8. Internship and training opportunities: Employers have the right to organize work internships for a maximum of two months, limited to a single occurrence and a specified number of trainees. Professional training can also be arranged for prospective employees for up to five months, with trainees receiving a salary during the training period.

The abovementioned amendments and additions aim to provide more clarity, flexibility, and protection for employees, which may require employers to adjust their contract templates, policies, and procedures accordingly. It is important for employers to review and understand the specific details of these changes to ensure compliance with the revised Labor Code.

 How EY can help?

• As your trusted partner, we are well-equipped to offer you a wide range of legal services and expertise, particularly in light of the recent amendments to the Labor Code. We understand the complexities and implications of these changes and are ready to provide you with valuable guidance and advice.
  
• Our team of experienced lawyers can assist you in drafting and reviewing employment contracts and policies, as well as modifying employment contract templates, ensuring that all necessary provisions are accurately included.
• We will help you navigate the expanded grounds for termination, offering strategies to mitigate legal risks and ensure compliance. Moreover, we can provide comprehensive support in to annual and study leave matters, helping you understand your obligations and rights concerning leave entitlement, compensation, and employee training.
• With our expertise in labor law and our commitment to staying abreast of legal developments, we are dedicated to being your reliable partner, providing the necessary legal support and guidance to ensure compliance and mitigate potential risks in the ever-changing employment landscape.

Contacts

Inquiries may be directed to either of the following executives:

Alexey Markov | Partner | Head of Law Practice in Armenia
“Ernst & Young” CJSC
Vazgen Sargsyan 2, Kamar Business Center, 0010, Yerevan, Armenia
Office: +374 (60) 50 7777
Alexey.Markov@am.ey.com

Grigor Grigoryan | Manager | Law Practice in Armenia
EY Armenia
Vazgen Sargsyan 2, Kamar Business Center, 0010, Yerevan, Armenia
Office: +374 (60) 50 7777
Mobile: +374 (77) 55 97 55
Grigor.Grigoryan@am.ey.com