Features of Termination or Cessation of the Employment Contract with Certain Categories of Employees
Termination of an employment contract on the grounds provided for in subparagraph 23) of paragraph 1 of Article 52 of the Labour Code must be based on a decision of the founder, the owner of the property of the legal entity, or a person (body) authorized by the founder or owner, or an authorized body of the legal entity.
Taking into account the peculiarities of labour regulation for the head of the executive body of a legal entity and other members of the collegial executive body of the legal entity, as well as employees of the internal audit service and the corporate secretary, the founder or property owner of the legal entity has the right, during the term of the employment contract, to decide on the early termination of the powers of the head of the executive body, members of the collegial executive body, or an individual member of the executive body of the legal entity, as well as, in accordance with the Law “On Joint Stock Companies,” employees of the internal audit service and the corporate secretary, based on the decision of the founder, property owner, or an authorized person (body) or authorized body of the legal entity.
According to subparagraph 2) of paragraph 2 of Article 43 of the Law "On Limited and Additional Liability Partnerships", the exclusive competence of the general meeting of participants includes "the formation of the executive body of the partnership and the early termination of its powers."
According to paragraphs 7 and 8 of Article 58 of the Law “On Joint Stock Companies,” the right to appeal a decision of the Board of Directors in court belongs to members of the Board of Directors or a shareholder. A contested decision of the Board of Directors is not considered an act of the employer.
A decision adopted by the Board of Directors is binding for the head of the executive body and other members of the collegial executive body of the legal entity.
Accordingly, termination of an employment contract on the grounds set forth in subparagraph 23) of paragraph 1 of Article 52 of the Labour Code is permitted on the basis of a decision executed in accordance with the legal and regulatory acts of the Republic of Kazakhstan by the founder, owner of the property of the legal entity, or an authorized person (body) or authorized body of the legal entity.
Based on the decision of the Board of Directors regarding early termination of powers of the head of the executive body, members of the collegial executive body, or an individual member thereof, as well as employees of the internal audit service and the corporate secretary under the Law “On Joint Stock Companies,” an order is issued to terminate the employment contract in accordance with subparagraph 23) of paragraph 1 of Article 52 of the Labour Code.
In accordance with paragraph 4 of Article 140 of the Labour Code, an act of the employer to terminate an employment contract at the employer's initiative must be signed by a person authorized to do so by a decision of the founders, owner of the property of the legal entity, or a person (body) or authorized body of the legal entity, or by documents approved by them. The restrictions on termination of employment contracts at the employer’s initiative set forth in Article 54 of the Labour Code do not apply to the aforementioned categories of employees.
On April 28, 2017, the sole participant of the Partnership adopted a resolution appointing B. as Director for a term of three years.
On March 16, 2020, a decision was made by the sole participant of the Partnership to dismiss B. from the position of Director.
B. claimed that his dismissal violated labour legislation: he was not given one month’s notice, and the employment contract was terminated in violation of Article 53 of the Labour Code.
The court of first instance rejected the plaintiff’s claims, finding that the formation of the executive body of the Partnership and the early termination of its powers fall within the exclusive competence of the sole participant. On the date the dismissal decision was made, B. had reached retirement age, and therefore, the employer was not obligated to comply with Article 53 of the Labour Code.
The appellate court reversed the decision and partially satisfied B.'s claim, citing paragraph 4 of Article 30 of the Labour Code, noting that the decision of the sole participant did not specify the grounds for termination and that, at the time, there was a ban by the State Labour Inspectorate on changing the head of the Partnership, rendering the participant's decision unlawful.
The Judicial Panel of the Supreme Court overturned the appellate court’s ruling and upheld the decision of the court of first instance, indicating that the appellate court’s conclusions regarding the violation of paragraph 4 of Article 30 of the Labour Code were unfounded, as that provision concerns the term of an employment contract and the parties’ actions upon its expiration.
The Panel confirmed the correctness of the court of first instance in ruling that decisions by the State Labour Inspectorate prohibiting changes to the head of the Partnership violated the latter's rights and contradicted the Constitution of the Republic of Kazakhstan and the Labour Code.
The plaintiff’s arguments regarding the lack of a positive decision from a commission composed of equal numbers of employer and employee representatives, in accordance with Article 53 of the Labour Code, were rightly rejected by the court of first instance. This provision did not apply to the plaintiff, who was already 64 years old and had reached retirement age at the time of the dismissal decision.
Pre-Trial Settlement of the Dispute
Practice of Applying the Provisions of Article 159 of the Labour Code
Article 148 of the Civil Procedure Code (CPC) outlines the requirements for the form and content of a claim. According to subparagraph 1 of part 6 of Article 148 of the CPC, the statement of claim must contain information about the observance of the pre-trial procedure if it is established by law or contract.
According to paragraph 1 of Article 159 of the Labour Code, individual labour disputes are considered by conciliation commissions, except for disputes between the employer and an employee of a microbusiness entity, a non-profit organization with no more than fifteen employees, a domestic worker, a sole executive body of a legal entity, the head of the executive body of a legal entity, and other members of a collegial executive body. Unresolved issues or non-execution of a conciliation commission's decision are resolved by the courts.
Thus, the requirement to apply to a conciliation commission does not apply to disputes between employers and employees in microbusinesses, non-profit organizations with fewer than fifteen employees, domestic workers, sole executive bodies, or other specified categories.
This requirement also does not apply to categories of employees whose labour is governed by the Labour Code of the Republic of Kazakhstan with specific features under special laws or regulations, including military personnel, employees of special state and law enforcement agencies, and public servants.
Jurisdiction
According to paragraph 5 of the Normative Resolution of the Supreme Court of the Republic of Kazakhstan "On Certain Issues of Application of Legislation by Courts in Resolving Labour Disputes" dated October 6, 2017 No. 9, lawsuits arising from labour relations are filed with the court under general civil procedure rules at the location of the defendant – the body of the legal entity or at the place of residence of the employer if the employer is an individual.
Under part 2 of Article 29 of the CPC, a claim against a legal entity is filed in the court at the place of its registration according to its charter or the address listed in the National Register of Business Identification Numbers.
Claims may also be filed at the location of a branch or representative office under part 3 of Article 30 of the CPC, provided that the defendant is a legal entity.
Jurisdictional issues in this category of cases generally do not present difficulties.
For example, by a ruling of the Ust-Kamenogorsk City Court, a civil case on the claim of Zh. against an LLP for damages, overtime pay, and moral harm was transferred to the Interdistrict Civil Court of Astana for substantive consideration.
This ruling was correct, as the defendant – a legal entity – is registered at the address: Astana, D. Konayev Street, and lawsuits arising from labour relations must be filed according to general civil procedure rules at the location of the defendant.
Additionally, courts should consider Article 19 of the Labour Code, which states that the head of a branch or representative office of a foreign legal entity exercises all the rights and performs all the duties of an employer on behalf of the legal entity. Therefore, an employee may file a claim at the location of the foreign legal entity’s branch, subject to prior verification of the branch head’s authority to represent the legal entity.
Issue of Jurisdiction in Labor Disputes in Cases of Rehabilitation or Bankruptcy of the Employer
According to Part 8 of Article 35 of the Civil Procedure Code (CPC) of the Republic of Kazakhstan, cases arising in the course of rehabilitation and bankruptcy procedures, including those concerning the invalidation of transactions concluded by the debtor or its authorized representative, the return of the debtor’s property, and the recovery of receivables upon claims by the bankruptcy or rehabilitation manager, shall be heard by the same judge who rendered the decision to apply the rehabilitation procedure or to declare the debtor bankrupt, except for cases where jurisdiction is established under Article 31 of the CPC.
By a ruling of the court of the city of Aktobe dated 15 February 2021, the claim filed by Zh. against the LLP regarding the cancellation of orders on suspension and dismissal from work, reinstatement, recovery of overtime pay, wages for the period of forced absence, penalties, and moral damages, was returned based on subparagraph 2 of paragraph 1 of Article 152 of the CPC due to lack of jurisdiction.
In returning the claim, the court stated that, by virtue of a decision of the Specialized Interdistrict Economic Court (SIEC) of Aktobe Region, a rehabilitation procedure had been applied in respect of the Partnership, and therefore, pursuant to Part 8 of Article 35 of the CPC, the case must be reviewed by the economic court.
Indeed, by a final and binding decision of the SIEC of Aktobe Region dated 14 October 2016, a rehabilitation procedure was applied in respect of the Partnership.
According to subparagraphs 5 and 7 of Article 67 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy,” during the rehabilitation procedure, the court shall review cases of a proprietary nature where the debtor is the defendant, as well as disputes between participants of the rehabilitation procedure.
Under subparagraph 16) of paragraph 1 of Article 1 of the Labor Code, a labor dispute is defined as disagreements between an employee (or employees) and an employer (or employers), including former employment relationships, regarding the application of labor legislation of the Republic of Kazakhstan, the performance or modification of the terms of agreements, individual or collective labor contracts, or the employer’s acts.
It was established that the dispute between the parties arose from labor relations, is based on the norms of labor legislation and terms of employment contracts, and is not related to the implementation of the rehabilitation procedure.
Therefore, since the court misapplied the provisions of Part 8 of Article 35 of the CPC, by a ruling of the judicial board dated 12 March 2021, the lower court's decision was overturned and the case was remanded for reconsideration to the court of first instance.
In cases where the employer is declared bankrupt or a rehabilitation procedure is applied, disputes arising from labor relations (such as reinstatement or wage claims) shall be considered by courts of general jurisdiction, and the provisions of Part 8 of Article 35 of the CPC do not apply to labor disputes.
State Duty
According to paragraph 7 of Article 610 of the Tax Code (TC), a state duty in the amount of 0.5 Monthly Calculation Index (MCI) shall be levied on claims of a non-property nature.
Based on paragraph 1 of Article 951 of the Civil Code (CC), moral harm is defined as a violation, diminution, or deprivation of personal non-property rights and benefits of individuals.
Pursuant to Article 149 of the CPC, a document confirming payment of the state duty must be attached to the statement of claim.
Under subparagraph 1) of Article 616 of the TC, plaintiffs are exempt from paying state duties in courts on claims for the recovery of wages and other claims related to employment activity.
In case the claim is satisfied, the court is obliged under Article 117 of the CPC to recover the state duty from the defendant for the benefit of the state, unless the defendant is exempt from its payment.
It has been identified that some courts, in violation of subparagraph 2) of paragraph 1 of Article 149 of the CPC, accept claims for proceedings without payment of the state duty.
According to the case materials, A. filed a lawsuit against the LLP seeking payment of wages, compensation for downtime, penalty, and compensation for moral harm.
By decision of the Zhetysu District Court of the city of Almaty dated 13 April 2022, which was upheld by the judicial board for civil cases of the Almaty City Court, the LLP was ordered to pay A. wage arrears, a penalty, compensation for moral harm, and legal expenses.
The LLP was also obligated to make pension contributions and other mandatory payments for A.’s period of employment from 22 June 2021 to August 2021.
Legal Framework
The main legal acts applicable to the reviewed category of cases include:
The Constitution of the Republic of Kazakhstan;
The Civil Code of the Republic of Kazakhstan (General Part) dated 27 December 1994;
The Civil Code of the Republic of Kazakhstan (Special Part) dated 1 July 1999;
The Civil Procedure Code of the Republic of Kazakhstan dated 31 October 2015 No. 377-V (CPC);
The Labor Code of the Republic of Kazakhstan dated 23 November 2015 No. 414-V ZRK;
The Tax Code of the Republic of Kazakhstan dated 25 December 2017 No. 120-VI ZRK;
The Entrepreneurial Code of the Republic of Kazakhstan dated 29 October 2015 No. 375-V ZRK;
The Code “On Public Health and the Healthcare System” dated 7 July 2020 No. 360-VI ZRK;
The Law “On Trade Unions” of the Republic of Kazakhstan;
The Law “On Enforcement Proceedings and the Status of Judicial Officers” dated 2 April 2010 No. 261-IV;
The Law “On Notaries” dated 14 July 1997 No. 155-I;
The Law “On Limited and Additional Liability Partnerships” dated 22 April 1998 No. 220-I;
The Law “On Joint Stock Companies” dated 13 May 2003 No. 415;
As well as the following normative resolutions of the Supreme Court of the Republic of Kazakhstan:
“On Certain Issues of Application of Legislation by Courts in Resolving Labor Disputes” dated 6 October 2017 No. 9;
“On Application of Legislation on Compensation for Moral Harm by the Courts” dated 27 November 2015 No. 7;
“On Judicial Decisions in Civil Cases” dated 11 July 2003 No. 5;
“On Application of the Legislation on Court Expenses in Civil Cases” dated 25 December 2006 No. 9.
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