New Law on Collective Bargaining Agreements

On February 23, 261 Members of Parliament (MPs) of Ukraine adopted in the second (and final) reading the draft law No.7628, “On Collective Bargaining Agreements.” (hereinafter – Law on CBAs). Initiated by the government, the bill’s text was tripartitely agreed upon. Social partners and interested representatives of several parliamentary factions worked on it in the parliamentary working group. On March 23, the Chairman of the Parliament signed the Law. On April 11, the Law was signed by the President.

The Law will enter into force six months after the termination or cancellation of martial law. Following this, the current law on collective agreements will lapse.

Despite the fact that the text of the Law was agreed upon in tripartite consultations, some of the union partners still have concerns about the Law.

Labor Initiatives experts believe that, in general, the Law is well-written and contains a number of progressive ideas (but gaps and contradictions are present as well). The new Law changes the approach to the CBAs to encourage more actual bargaining, as opposed to the Soviet legacy of presumed “consensus,” and addresses cases when the text of the CBA is often signed or re-signed without discussions and real bargaining. Unions and employers should be ready to negotiate many issues that previously were included by default. Negotiating skills and the ability to persuade should become vital for union leaders. Nevertheless, the most crucial is law enforcement and its proper implementation. New rules could be a bit unusual for many unions; thus training and raise- awareness campaigns should be held before the law fully enters into force.

Based on the official text unveiled after the signature of the Chairman of the Parliament, Labor Initiatives attorneys prepared the analysis below.

1. The Law expands the levels of the existing network of collective agreements.

Under the Law, collective agreements are concluded by the most representative unions and employers (and their associations) on a tripartite or bipartite basis at the following levels:

• national (state) level – the General Agreement;
• sectoral level – sectoral (inter-sectoral) agreements;
• *new – sectoral collective agreements of limited effect (in case one of the parties does not have a representative status);

Note. The representative status of a union or employer (and their associations) means that they match the objective and pre-established criteria related to legal registration, number of members (or employees), coverage of the economic sector, etc.

• territorial level – regional agreements within a certain administrative-territorial unit, usually an oblast;
• *new – territorial agreements for a separate industry and territorial agreements of a lower level than the oblast (for instance, at the level of territorial communities);

Note. After decentralization reform in Ukraine, a new administrative division of the country was established. One of the new units became a territorial community (in Ukrainian, “hromada”). For a long time, unions cannot conclude territorial CBAs at the level of hromadas. The new Law on CBAs resolves this issue, defining the social dialogue process at the level of territorial communities.

• local level – company-level collective bargaining agreements (or they may be called collective contracts) at enterprises, institutions, and organizations, regardless of the form of ownership and management, which use hired labor and have the status of legal entities or private entrepreneurship.

Note. The new Law on CBAs reiterates the right to conclude a company-level CBA if the employer is a private entrepreneur. Such an option was initiated by Law 2253-IX (also known as draft law No.5266) in May 2022. Before, those workers who were hired by individual (private) entrepreneurs were deprived of the CBA conclusion. CBA could be concluded only in legal entities.

In fact, instead of the existing 4-level system of agreements, there may be a 5- and even 6- level system of collective agreements. Given the fact that each new level of the agreement should be obliged only to improve the conditions of workers, it should raise the standards of decent work in Ukraine.

2. Modifications in the erga omnes clause of collective bargaining agreements at the local level

The so-called erga omnes clause extends the terms set in a company-level collective agreement to all workers in the same company, regardless of whether they are members of the trade union that signed the agreement or not. Under the new Law, all basic labor rights and guarantees which the CBA should regulate will be provided for all workers. Additional guarantees could be applied to those employees who are directly defined in the CBA (for example – additional benefits for union members).

3. Defining the procedure of joining the CBA for newly-formed unions on the sectoral level and on the local (company) level.

In practice, currently the newly-formed unions at the local or sectoral level do not have mechanisms to join the acting CBA. The procedure was stipulated neither by law nor by CBA`s provisions. Moreover, some unions were reluctant to extend benefits and other guarantees to newly formed organizations that had not participated in collective negotiations. On the one hand, it created obstacles for new, especially independent and minor union organizations that truly want to join and protect their members. But on the other hand, it was reported that minor newly-formed organizations sometimes speculate on their status and demand to receive the same benefits as the larger unions.

The new Law on CBAs stipulates clear rules for joining the CBA. However, LI lawyers revealed one legislative gap. Whereas, in case of rejecting the request to join the CBA, the newly-formed unions at the local level may appeal such a decision, the new union at the sectoral level does not have such right under the Law.

4. Extension of the sectoral (inter-sectoral) agreement to all employers whose employees do not exceed 10 people.

Now, many companies operating in the sector which do not match the representation criteria established by legislation (for instance, membership) are unlikely to be covered by the sectoral agreement. The new Law on CBAs sets new rules for sectoral agreement expansion for such employees.

The first versions of the Law contain restrictions of such expansion for the enterprises that have less than 25 employees. According to unions, there are a lot of enterprises in the education sphere (kindergartens) or the housing and public utility sector with less than 25 employees. The introduction of such a high threshold could have led to the destruction of the system of collective agreement regulation at a significant number of enterprises and a decrease in the level of the social and legal protection of employees. Thus, thanks to negotiations before the final voting of the Law and unions proposals, the legislators dropped the threshold to 10 people, corresponding to the definition of micro-enterprises.

The decision on expanding sectoral agreement may be adopted by the governmental body in charge of labor relationships (currently it is the Ministry of Economy).

5. Determining precise rules for forming a joint representative body for the bargaining process

A joint representative body from the union and employer side is created in case of the functioning of several trade unions/companies at the local, sector or national level).

6. Introducing rules for suspension of the CBA provisions.

It is alleged that situations with suspending CBA provisions (at various levels) took place in recent years. The new Law on CBAs stipulates particular grounds for suspension: (1) by mutual agreement of the parties for a specific term under conditions established by the collective agreement; (2) force-majeure.

7. Apart from introducing new clauses of collective negotiations and signing a CBA, the Law (in its Transitional and Final Provisions) also amends a number of labor-related laws. In particular:

• For the first time, international trade union initiatives have been included in national legislation. The law of Ukraine, “On Trade Unions, Their Rights and Guarantees” (Art.30), directly enshrines the authorities of trade unions to participate in (1) the implementation of sustainable development principles within the processes of production modernization, (2) in the creation of green jobs, and (3) in the organization of measures to ensure a just transition to the economy without a negative impact on the surrounding natural environment.
• Under current legislation, employers are obliged to allocate funds to trade unions for the implementation of measures provided for by collective agreements (including cultural-public, recreation, and sports activities) in the amount provided for by collective agreements, but not less than 0.3 percent of the wage fund.

The new Law on CBAs amended the law of Ukraine “On Trade Unions, Their Rights and Guarantees” by removing the minimum mandatory amount of deduction to unions proposing instead parties to agree on the amount. Thus, it will be a legislative collision: the lex generali – Labor Code stipulates the specific amount of deductions (0,3%), while the lex specialis – the agreed amount which could be less than 0,3% of the wage fund.

Moreover, if previously a loophole and ambiguous wording of the law allowed each and every union functioning at the enterprise to qualify for 0,3% of wage fund, the new Law set a strict rule. If there are several union organizations, the funds are deducted proportionally with the number of union members among the employees.

• According to the valid legislation, the employer must provide material, technical, and organizational conditions for the trade union activities at the enterprise, for example, to give a premise or room for the union. In practice, there were many questions about how to create organizational conditions for several trade union organizations. The new Law stipulates that in the case of operating several unions at the enterprise, premises, other material and technical means are
  provided by the employer only for their joint use unless otherwise provided by the collective agreement.
• The Law modernized the bodies of social dialogue. The composition of the National Tripartite Socio-Economic Council has been optimized. Its powers have been increased (in particular, in terms of monitoring the implementation of international social and labor guarantees in Ukraine).