Retroactive Application of the Law in Labor Disputes Applies to Relations Arising After Their Entry into Force
According to Article 4 of the Civil Code, acts of civil legislation do not have retroactive force and are applied to relations arising after their entry into force. The legal force of an act of civil legislation on relations that arose before its enactment applies only in cases where this is explicitly provided.
K. filed a lawsuit against the JSC seeking to declare orders unlawful and void, to be reinstated at work, to recover wages for the period of forced absence, and compensation for moral damage.
By the decision of District Court No. 2 of the Kazbekbi District of Karaganda city dated March 6, 2020, partially upheld by the ruling of the Judicial Panel for Civil Cases of the Karaganda Regional Court dated May 12, 2020, the claim was partially satisfied. The order of the branch of the JSC dated August 5, 2019, on applying disciplinary punishment in the form of a reprimand to K. was declared illegal and canceled.
The rest of the claim was denied.
Court documents indicate that the plaintiff was hired on January 5, 2011, as head of a branch under a labor contract.
Between October 3, 2012, and October 10, 2016, a number of additional agreements were concluded due to the plaintiff’s internal transfers within the organization.
By the order dated October 10, 2016, the plaintiff was transferred to the position of head of the Saransk city branch.
An additional agreement dated May 17, 2018, revised the January 5, 2011, labor contract.
Another additional agreement dated January 8, 2019, changed the employee’s compensation to a time-based bonus system with a salary of 120,000 tenge.
Due to the transition to a piece-rate bonus system with a salary of 120,000 tenge, another additional agreement No. 13 dated May 27, 2019, was signed between the employee and the employer.
By an order dated August 5, 2019, the plaintiff was subjected to disciplinary action in the form of a reprimand under subparagraph 3) of paragraph 1 of Article 64 of the Labor Code, for improper performance of job duties, specifically failing to meet the income plan for the first half of 2019.
By an order dated October 22, 2019, the employment contract was terminated by mutual agreement under subparagraph 1) of Article 49, paragraph 3 of Article 50, and paragraph 96 of the Labor Code, with compensation for unused paid vacation (50 calendar days) and two monthly salaries.
According to paragraph 3 of Article 50 of the Labor Code, by agreement with the employee, the labor contract may include the employer's right to terminate the contract without observing the requirements of paragraph 2 of this article, with a compensatory payment determined by the labor contract.
The order dated October 22, 2019, stated that the termination was based on the disciplinary commission protocol of September 20, 2019, and additional agreement No. 13 dated May 27, 2019.
According to paragraph 27 of the Regulatory Resolution, in disputes over reinstatement of an employee whose labor contract was terminated under paragraph 3 of Article 50 of the Labor Code, if the court finds that the labor contract provides the employer the right to terminate the contract without notice and without specifying the termination date but with compensation, the employee cannot be reinstated.
Subparagraph 1) of paragraph 8.1 of the additional agreement dated May 27, 2019, provides for termination of the employment contract by mutual agreement. Subparagraph 3) of paragraph 4.1 affirms the employer's right to apply paragraph 3 of Article 50 of the Labor Code, with compensation equal to two monthly salaries.
Given these circumstances, the courts reasonably concluded that there were no grounds to declare the termination order illegal.
Regarding the application of Article 50 of the Labor Code in its new version to the disputed relations
According to Article 4 of the Civil Code, acts of civil legislation do not have retroactive force and apply to relations arising after their entry into force. Legal force on relations that arose before enactment is granted only if explicitly stated.
In the Law of the Republic of Kazakhstan dated May 4, 2020, No. 321-VI “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Labor Issues,” it is not specified that it applies to relations that arose before its enactment.
The reference in the motion to Article 43 of the Law “On Legal Acts” stating that a legal act that improves citizens' conditions has retroactive force was deemed unfounded. This provision reflects subparagraph 5) of paragraph 3 of Article 77 of the Constitution of the Republic of Kazakhstan, which states that laws imposing or increasing responsibility or worsening the position of citizens have no retroactive force.
According to the interpretation in the Constitutional Council’s resolution of March 10, 1999, No. 2/2, retroactive force does not apply to laws regulating legal liability and introducing or increasing penalties.
Thus, the expressions “improving” or “worsening” the position in Article 43 of the Law “On Legal Acts” apply only to laws on legal responsibility and do not extend to civil legislation, which is based on equality of the parties.
Therefore, changes to the Labor Code made on May 4, 2020, do not affect the validity of previously concluded labor agreements that included provisions allowing the employer to terminate without notice but with compensation. These terms were agreed upon while the old version of Article 50 was in effect and have not lost legal force.
E. filed a lawsuit against an LLP, seeking to declare the order terminating his employment illegal, to be reinstated, to recover wages for the period of forced absence, and to invalidate clause 16.10 of the labor contract.
By the order dated July 31, 2023, the labor contract with the plaintiff was terminated under subparagraph 1) of Article 49 of the Labor Code and clause 16.10 of the labor contract, with a compensatory payment of three monthly salaries.
The court established that the labor contract was signed on January 6, 2017, and clause 16.10 corresponded to the then-effective version of paragraph 3 of Article 50 of the Labor Code.
The trial court denied the claim, reasoning that the contract was signed under a law that permitted termination without the employee’s consent and with compensation, and that the plaintiff did not challenge the contract’s terms.
The appellate court overturned the decision and satisfied the claim, stating that labor contracts must conform to current law at the time of termination. At the time of termination, the clause allowing termination without employee consent had been removed from the law.
The Supreme Court overturned the appellate ruling and upheld the original decision, emphasizing that the labor contract was signed before the amendment, and the repeal of paragraph 3 of Article 50 does not invalidate clause 16.10, which was lawful when the contract was concluded.
According to Article 383 of the Civil Code, a contract must comply with mandatory rules in force at the time of its conclusion. If later legislation introduces different mandatory rules, existing contract terms remain valid unless otherwise provided.
Thus, the use of the former paragraph 3 of Article 50 of the Labor Code in a contract signed before the amendments is not a violation of labor law.
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Jurisdiction over Labor Disputes in Cases of Rehabilitation or Bankruptcy of the Employer
In accordance with Part 8 of Article 35 of the Civil Procedure Code (CPC) of the Republic of Kazakhstan, cases arising from disputes within the framework of rehabilitation or bankruptcy procedures — including cases on recognizing transactions made by the debtor or an authorized person as invalid, return of the debtor's property, or collection of receivables initiated by a bankruptcy or rehabilitation manager — shall be considered by the same judge who rendered the decision to apply the rehabilitation procedure or to declare the debtor bankrupt, except for disputes whose jurisdiction is established by Article 31 of the CPC.
By ruling of the Aktobe city court dated February 15, 2021, the claim of Zh. against the LLP regarding the cancellation of orders on suspension from work, dismissal, reinstatement at work, recovery of overtime wages, recovery of wages for forced absence, penalties, and moral damages was returned under subparagraph 2 of part 1 of Article 152 of the CPC due to lack of jurisdiction of the court over the dispute.
The court stated that, according to the decision of the Specialized Interdistrict Economic Court (SIEC) of Aktobe Region, a rehabilitation procedure was applied to the Partnership. Therefore, pursuant to part 8 of Article 35 of the CPC, the case should be considered by the economic court.
Indeed, a final and binding decision of the SIEC of Aktobe Region dated October 14, 2016, imposed a rehabilitation procedure on the Partnership.
According to subparagraphs 5 and 7 of Article 67 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy", the court during the rehabilitation procedure accepts disputes of a property nature for which the debtor is the defendant, and also resolves disputes between participants in the rehabilitation procedure.
According to subparagraph 16) of paragraph 1 of Article 1 of the Labor Code, a labor dispute is defined as disagreements between an employee(s) and an employer(s), including former employment relationships, regarding the application of labor legislation, implementation or modification of agreement conditions, employment and/or collective agreements, or employer acts.
It was established that the dispute between the parties stems from labor relations, is based on labor law provisions and employment contracts, and is unrelated to the rehabilitation procedure.
Since the court incorrectly applied the provisions of part 8 of Article 35 of the CPC, the ruling was overturned by the Judicial Board on March 12, 2021, and the case was returned for reconsideration by the court of first instance.
In cases where an employer is declared bankrupt or is subject to rehabilitation, disputes arising from labor relations (such as reinstatement, wage recovery, etc.) are subject to consideration by courts of general jurisdiction. 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), state duty is charged on non-property claims in the amount of 0.5 MCI (Monthly Calculation Index).
Under paragraph 1 of Article 951 of the Civil Code (CC), moral damage refers to the violation, diminution, or deprivation of personal non-property rights and benefits of individuals.
In accordance with Article 149 of the CPC, a document confirming payment of the state duty must be attached to the claim.
According to subparagraph 1) of Article 616 of the TC, plaintiffs are exempt from paying state duty in courts for claims related to wage recovery and other labor-related demands.
If the claim is satisfied, the court is obliged, under Article 117 of the CPC, to recover the state duty in favor of the state from the defendant, provided the defendant is not exempt from such payment.
There are individual cases where courts, contrary to subparagraph 2) of part 1 of Article 149 of the CPC, accept claims without payment of state duty.
From the case materials, it follows that A. filed a claim against the LLP for wage recovery, compensation for downtime, penalty, and compensation for moral damages.
By decision of the Zhetysu District Court of Almaty dated April 13, 2022, upheld by the ruling of the Civil Division of the Almaty City Court, the LLP was ordered to pay A. wage arrears, penalties, moral damages, and legal representative fees.
The LLP was also obliged to make pension contributions and other mandatory payments for A.'s employment period from June 22, 2021, to August 2021.
Legal Framework
The main regulatory legal acts applicable to cases of this category are:
The Constitution of the Republic of Kazakhstan;
The Civil Code of the Republic of Kazakhstan (General Part) dated December 27, 1994;
The Civil Code of the Republic of Kazakhstan (Special Part) dated July 1, 1999;
The Civil Procedure Code of the Republic of Kazakhstan dated October 31, 2015 No. 377-V;
The Labor Code of the Republic of Kazakhstan dated November 23, 2015 No. 414-V ZRK;
The Tax Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI ZRK;
The Entrepreneurial Code dated October 29, 2015 No. 375-V ZRK;
The Code of the Republic of Kazakhstan dated July 7, 2020 No. 360-VI ZRK "On the Health of the People and the Healthcare System";
The Law of the Republic of Kazakhstan "On Trade Unions";
The Law of the Republic of Kazakhstan dated April 2, 2010 No. 261-IV "On Enforcement Proceedings and the Status of Judicial Executors";
The Law of the Republic of Kazakhstan dated July 14, 1997 No. 155-I "On Notariat";
The Law of the Republic of Kazakhstan dated April 22, 1998 No. 220-I "On Limited and Additional Liability Partnerships";
The Law of the Republic of Kazakhstan dated May 13, 2003 No. 415 "On Joint-Stock Companies";
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 October 6, 2017 No. 9;
"On Application of Legislation on Compensation for Moral Harm" dated November 27, 2015 No. 7;
"On Judicial Decisions in Civil Cases" dated July 11, 2003 No. 5;
"On Application of Legislation by Courts of the Republic of Kazakhstan Regarding Court Expenses in Civil Cases" dated December 25, 2006 No. 9.
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