Procedure for Termination of an Employment Contract by Mutual Agreement of the Parties
Procedure for termination of an employment contract by mutual agreement (Article 50 of the Labour Code) and at the initiative of the employee (Article 56 of the Labour Code)
Local courts often confuse and misinterpret the substantive legal norms when considering disputes regarding the termination of employment contracts either by mutual agreement (Article 50 of the Labour Code) or at the initiative of the employee (Article 56 of the Labour Code), which has led to the annulment of judicial decisions.
For instance, E. filed a lawsuit against the LLP and a third party (a State Institution) seeking to declare the dismissal order unlawful, to be reinstated in his position, and to recover wages for the period of forced absence from work.
The claim was based on the fact that on 13 October 2021, E. submitted a resignation letter based on mutual agreement using a standard form provided by the HR department.
The following day, on 14 October 2021, he submitted a request to withdraw his resignation, but his request was denied.
By an order of the LLP’s branch, the employment contract with E. was terminated effective from 1 November 2021, pursuant to subparagraph 1 of Article 49 of the Labour Code, on the grounds of mutual agreement.
By decision of the LLP’s conciliation commission dated 26 November 2021, E.’s request for reinstatement was denied.
By a decision of District Court No. 2 of the Kazbekbiy District of Karaganda city dated 24 February 2022, E.’s claim was fully rejected.
The court of first instance rejected the claim on the grounds that E. had submitted a request to terminate the employment contract by mutual agreement as of 1 November 2021.
On 14 October 2021, upon receiving the request, the employer sent E. a written confirmation of agreement to terminate the contract on the proposed date. By order dated 1 November 2021, the employment contract was terminated pursuant to subparagraph 1 of Article 49 of the Labour Code, on the basis of mutual agreement.
The plaintiff was notified of this order on 1 November 2021.
However, the appellate court, overturning the essentially correct decision of the court of first instance and issuing a new ruling in favour of the plaintiff, concluded that E. had withdrawn his initial resignation request on 14 October 2021. He stated that due to changed circumstances, his resignation letter dated 13 October 2021 should be considered void. This withdrawal request was accepted and registered by the employer.
The panel held that if the employee seeks to revoke the resignation letter submitted under mutual agreement, the employer may not proceed with termination under subparagraph 1 of Article 49 of the Labour Code, since no mutual agreement had been reached.
The panel also found that E.'s claims were lawful and that his expressed intent to withdraw from the agreement indicated his lack of consent. In such a case, termination should have been carried out under the employee’s own initiative in full compliance with the Labour Code of the Republic of Kazakhstan.
Furthermore, the panel disagreed with the findings of the Labour Inspection Department of the Karaganda Region, which stated that there were no violations of labour legislation. The panel ruled that the inspection report contradicted the requirements of Articles 49 and 50 of the Labour Code and failed to account for the absence of a final mutual agreement, particularly since the resignation letter had been withdrawn. The established circumstances demonstrated that the employer lacked legal grounds to terminate the employment contract under mutual agreement.
According to Article 50 of the Labour Code, termination of an employment contract by mutual agreement is a separate legal ground for dismissal, with the effective date determined by mutual consent.
The party initiating the proposal to terminate the employment contract by mutual agreement must send a written notice to the other party.
The receiving party must respond in writing within three working days with its decision.
The date of termination by mutual agreement must be determined by mutual consent between the employee and the employer.
An employee may propose termination by mutual consent by submitting a written proposal (not a resignation letter under personal initiative) to the employer. In accordance with paragraph 2 of Article 50 of the Labour Code, the employer must review the proposal within three working days. Upon agreement, the termination is formalised by issuing an order effective on the agreed date.
Courts handling cases of this nature must first examine the termination procedure outlined in the employment contract concluded between the parties.
Under subparagraph 11) of paragraph 1 of Article 28 of the Labour Code, an employment contract must include provisions on the procedure for its termination.
Therefore, employment contracts must define the procedure for termination, including termination by mutual agreement. If the procedure is not defined in the contract, courts must apply Article 50 of the Labour Code, which does not provide for unilateral withdrawal of a mutual termination proposal. Consequently, once one party proposes and the other party accepts, the termination is lawful.
Case materials show that on 13 October 2021, E. submitted a request to terminate the employment contract by mutual agreement as of 1 November 2021. This request was approved by the employer, as evidenced by the employer's endorsement on the application.
Clause 4.2 of the employment contract concluded between the parties on 30 April 2019 provides that the employer may terminate the employment contract without complying with the requirements of paragraph 2 of Article 50 of the Labour Code, with compensation equal to one month's average salary.
Nonetheless, on 14 October 2021, the employer duly responded within the three-working-day period set by paragraph 2 of Article 50 of the Labour Code, notifying the employee of its agreement to terminate the employment contract by mutual agreement.
Due to the employee’s refusal to acknowledge receipt of the employer’s response, a record was drawn up on 14 October 2021. Therefore, the employer complied with the statutory procedure for termination by mutual agreement, and there were no grounds to annul the lower court’s decision.
Compliance with the Pre-Trial Settlement Procedure
Practice of Applying the Requirements of Article 159 of the Labour Code
Article 148 of the Civil Procedure Code (CPC) contains a list of requirements regarding the form and content of a claim. Pursuant to paragraph 1, part 6 of Article 148 of the CPC, the statement of claim must include information on compliance with the pre-trial procedure for addressing the dispute with the respondent, if such procedure is established by law or stipulated by the contract.
In accordance with paragraph 1 of Article 159 of the Labour Code, individual labour disputes shall be considered by conciliation commissions, except for disputes arising between the employer and an employee of a microenterprise, a non-profit organisation with no more than fifteen employees, a domestic worker, a sole executive body of a legal entity, the head of an executive body of a legal entity, and other members of a collegial executive body of a legal entity. Unresolved issues or failure to comply with the decision of the conciliation commission are subject to judicial review.
Thus, for disputes arising between an employer and an employee of a microenterprise, a non-profit organisation with no more than fifteen employees, a domestic worker, a sole executive body of a legal entity, the head of the executive body, and other members of the collegial executive body, compliance with the preliminary dispute review by the conciliation commission is not required.
The requirement to apply to a conciliation commission also does not apply to specific categories of workers whose employment is regulated by the Labour Code of the Republic of Kazakhstan with special conditions provided by specific laws and other regulatory legal acts of the Republic of Kazakhstan, including those in military service, employees of special state and law enforcement bodies, and civil servants.
Jurisdiction
According to paragraph 5 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan "On Certain Issues of the Application by Courts of Legislation in the Resolution of Labour Disputes" dated October 6, 2017 No. 9 (hereinafter – the Regulatory Resolution), claims arising from labour relations shall be submitted to the court according to the general rules of civil procedure – at the location of the respondent, being the legal entity or the place of residence of the employer, if the employer is a natural person.
According to part 2 of Article 29 of the CPC, a claim against a legal entity shall be filed at the location of the legal entity as stated in its founding documents and/or the address listed in the National Register of Business Identification Numbers.
When submitting claims at the location of a branch or representative office, as provided for in part 3 of Article 30 of the CPC, only legal entities may act as defendants.
Issues of jurisdiction in cases of the summarised category do not pose significant challenges.
For example, by a ruling of the Ust-Kamenogorsk City Court, a civil case on the claim of Zh. against LLP for the recovery of damages, overtime pay, and compensation for moral harm was transferred by jurisdiction to the Interdistrict Civil Court of the city of Astana for consideration on the merits.
The court's ruling was correct, as it was established that the defendant – a legal entity – is located and registered at the following address: Astana city, D. Konayev Street. Claims arising from labour relations must be filed at the location of the defendant, as per the general rules of civil procedure.
Additionally, courts should pay attention to the provisions of Article 19 of the Labour Code, which stipulates that the head of a branch or representative office of a foreign legal entity exercises all the rights and fulfils all the obligations of the employer on behalf of such legal entity. Accordingly, an employee has the right to file a claim at the location of the branch of the foreign legal entity, subject to verifying the branch head's authority to represent the legal entity.
Jurisdiction in Labour Disputes in Cases of Rehabilitation or Bankruptcy of the Employer
According to part 8 of Article 35 of the CPC, cases arising within rehabilitation or bankruptcy procedures, including those for the recognition of transactions concluded by the debtor or its authorised representative as invalid, the return of the debtor’s property, and the recovery of receivables by the bankruptcy or rehabilitation administrator, shall be considered by the same judge who issued the decision on applying the rehabilitation procedure or declaring the debtor bankrupt, except for cases whose jurisdiction is determined by Article 31 of the CPC.
By a court ruling of the city of Aktobe dated February 15, 2021, the claim of Zh. against LLP for the annulment of dismissal orders, reinstatement at work, recovery of overtime pay, compensation for forced absence, penalties, and moral harm was returned on the grounds of subparagraph 2, part 1, Article 152 of the CPC due to improper jurisdiction.
The court stated that a rehabilitation procedure had been applied to the partnership by a decision of the Specialised Interdistrict Economic Court (SIEC) of the Aktobe Region, and therefore, based on part 8 of Article 35 of the CPC, the case falls under the jurisdiction of the economic court.
Indeed, the SIEC of the Aktobe Region had applied a rehabilitation procedure to the partnership by a final decision dated October 14, 2016.
Under 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, hears cases of a property nature where the debtor is the defendant, and resolves disputes between participants in the rehabilitation process.
According to subparagraph 16), paragraph 1 of Article 1 of the Labour Code, a labour dispute refers to disagreements between an employee(s) and an employer(s), including former employment relations, concerning the application of labour legislation of the Republic of Kazakhstan, or the performance or modification of conditions in agreements, labour and/or collective agreements, and employer acts.
It was established that the dispute arises from labour relations, is based on labour legislation and employment contract conditions, and is unrelated to the implementation of the rehabilitation procedure.
As the court incorrectly applied the provisions of part 8 of Article 35 of the CPC, the Judicial Collegium reversed the ruling on March 12, 2021, and returned the case to the court of first instance for reconsideration.
Therefore, in cases where the employer is declared bankrupt or is under a rehabilitation procedure, disputes arising from labour relations (e.g., reinstatement, wage recovery, etc.) shall be resolved by courts of general jurisdiction. The provisions of part 8 of Article 35 of the CPC do not apply to labour disputes.
State Duty
Pursuant to paragraph 7 of Article 610 of the Tax Code (TC), a state duty is levied on claims of a non-property nature in the amount of 0.5 Monthly Calculation Index (MCI).
In accordance with paragraph 1 of Article 951 of the Civil Code (CC), moral harm refers to the violation, diminution, or deprivation of personal non-property rights and benefits of individuals.
According to Article 149 of the CPC, the claim must be accompanied by a document confirming payment of the state duty.
However, in accordance with subparagraph 1) of Article 616 of the TC, plaintiffs are exempt from paying state duties in courts for claims related to the recovery of wages and other demands arising from employment.
In case of claim satisfaction, the court must, in accordance with Article 117 of the CPC, recover the state duty from the defendant, if the latter is not exempt from payment.
There are instances where courts, in violation of subparagraph 2), part 1, Article 149 of the CPC, accept claims for proceedings without payment of the state duty.
According to the case materials, A. filed a claim against LLP for wage recovery, compensation for downtime, penalties, and compensation for moral damage.
By a decision of the Zhetysu District Court of Almaty city dated April 13, 2022, upheld by the Judicial Collegium for Civil Cases of the Almaty City Court, the court ordered LLP to pay A. wage arrears, penalties, moral damages, and attorney’s fees.
The LLP was also obligated to make pension and other mandatory contributions for the period of A.’s employment from June 22, 2021, to August 2021.
Regulatory Framework
The following regulatory legal acts are subject to application in consideration of the cases in the generalised category:
Constitution of the Republic of Kazakhstan;
Civil Code of the Republic of Kazakhstan (General Part) dated December 27, 1994;
Civil Code of the Republic of Kazakhstan (Special Part) dated July 1, 1999;
Civil Procedure Code of the Republic of Kazakhstan dated October 31, 2015 No. 377-V;
Labour Code of the Republic of Kazakhstan dated November 23, 2015 No. 414-V ZRK;
Tax Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI ZRK;
Entrepreneurial Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V ZRK;
Code of the Republic of Kazakhstan dated July 7, 2020 No. 360-VI ZRK "On Public Health and the Healthcare System";
Law of the Republic of Kazakhstan “On Trade Unions”;
Law of the Republic of Kazakhstan dated April 2, 2010 No. 261-IV “On Enforcement Proceedings and the Status of Bailiffs”;
Law of the Republic of Kazakhstan dated July 14, 1997 No. 155-I “On Notaries”;
Law of the Republic of Kazakhstan dated April 22, 1998 No. 220-I “On Limited and Additional Liability Partnerships”;
Law of the Republic of Kazakhstan dated May 13, 2003 No. 415 “On Joint-Stock Companies”;
Regulatory Resolutions of the Supreme Court of the Republic of Kazakhstan:
“On Certain Issues of Application by Courts of Legislation in the Resolution of Labour Disputes” dated October 6, 2017 No. 9;
“On the Application by Courts of the 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 the Application by the Courts of the Republic of Kazakhstan of Legislation on Judicial Expenses in Civil Cases” dated December 25, 2006 No. 9.
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