Article 21 of the Labour Code of Ukraine defines a labour contract as a special form of labour agreement, by which the parties specifically agree to the rights, obligations and liabilities of the parties, work conditions, duration, and termination provisions of employment.
According to the Resolution of the Cabinet of Ministers of Ukraine “On the Application of the Contractual Form of Labour Agreement” dated 19 March 1994, N 170, any terms of a labour contract that worsen an employee’s status comparing to that provided for by legislation for labour agreements, and under any applicable collective agreement are considered invalid.
Early Termination of the Labour Contract
The Labour Code provides for an employee’s right to terminate a standard labour agreement (which does not contain a specified duration period) on two weeks notice. This, however, should not be applicable to a labour contract with a specified fixed duration period that, according to its terms, may only be terminated early by an employee upon the occurrence of a special condition, such as the employer’s non-fulfilment of the contract’s obligations, non-compliance with labour law provisions, illness or disability, or other serious reasons (e.g. moving with his family to a distant location, enrolling in an educational institution, retirement, impossibility to live in the region, etc). Ukrainian labour legislation does not contain an exhaustive list of the “serious reasons” for early termination of a labour contract; however, it does not appear that a more beneficial employment offer would be considered by Ukrainian courts as a sufficient ground for the pre-mature termination of a labour contract.
If none of the “special reasons” mentioned above, nor any early termination events that are specified in the Labour Contract have occurred than they should not apply.
Thus, if a labour contract specify so, there are reasons to believe that the early termination of the Labour Contract by the Employee without observing the three month notice would constitute a violation of his Labour Contract and might lead to the Company bringing a lawsuit against him for damages and penalties, as well as for termination of his employment elsewhere during this three month period.
Limitations on Employment with a Competing Company
As mentioned above, any conditions of a labour contract that worsen an employee’s status or employment conditions compared to that which applies under agreements and any collective agreements should be invalid. Ukrainian labour law does not provide for the possibility for an employer to impose any limits on an employee’s future employment. Arguably, such restrictions can be imposed for the duration of a labour contract; however, it seems highly unlikely that a Ukrainian court would recognise any such limitations as being valid after the expiration or other termination of the labour contract. In addition, the Ukrainian Constitution in Article 43 provides for the right of Ukrainians to work, which includes the right to earn living by work which the person freely chooses or to which such person freely agrees, and there are reasons to believe believe that such Constitutional provision may be interpreted by the Ukrainian court to restrict the right of a company to prevent an employee from working for a competing business, especially where the employee has a special expertise and this is his profession.
Therefore, such a limitation on an employee accepting employment with any person or entity that competes or may compete with the Company for 12 months after the employee leaves the Company, should probably be considered invalid by Ukrainian courts as therefore not binding on the Employee.
If the contract prohibits the Employee from using for personal benefit or disclosing to any other person the Company’s confidential or other non-public information. Such a provision is not a subject of Ukrainian labour law, but should be binding and enforceable under Ukrainian civil, tort and criminal law. There are reasons to believe do not believe that such provision can interfere with the Employee’s obtaining future employment with a competing company, as the mere fact of an employment relationship with a rival entity does not constitute a violation of any of the confidentiality provisions, provided that the president makes no use of any such confidential or other non-public information while working at his new employer.
On the other hand, if the Employee makes a disclosure of or uses for the benefit of his new employer any information mentioned in the list of the Company’s confidential and non-public information as stipulated in the contract, or of any other information that is considered confidential according to Ukrainian law, he may be liable for damages.
Threat of Litigation and a Court Injunction
Taking into account that a labour contract is a special form of labour agreement which provides for the specific employment conditions to which the parties agree, it should be possible for Ukrainian courts, in principle, to satisfy an application by the Company asking for a court injunction to require the Employee to perform certain actions as required based on the provisions of his contract, in particular to prevent the Employee from working for a competing company during the three month notice period.
Such a court injunction may be applied for in the case as a preventive measure, in advance of substantive hearings on the case, based on an application by the plaintiff Company, if the plaintiff is able to prove to the court that such a court injunction is necessary so that enforcement of the likely future court decision will not be undermined. Such an injunction seems likely to ensure that the Employee respects his three month notice requirement. However, it appears unlikely that a court may consider that an employee’s decision to take a position with a rival company requires a jurisdiction to ensure enforcement of any future court decision on the 12 month ban on employment with competitors, since among other reasons, there are no reasons to believe that the company is likely to prevail on this issue, as explained above. Even if the confidentiality issue is also raised, a Ukrainian court is unlikely to issue an injunction because it is unlikely to take the position that confidentiality will be violated merely because of the fact that the employee takes a position with a rival company.
Such a court injunction, for example in the form of an order that the Employee refrain from employment with any other company for a three month period of time, may also be included in the final court decision, if the court so resolves the matter in favour of the plaintiff.
There is no known Ukrainian court practice on these issues, except for cases where employees have attempted to regain their jobs after their employer has fired them based on the provisions of labour contracts. Ukrainian courts in such cases usually are biased in favour of protecting the employees if the conditions of the labour contract are considered to be to their disadvantage compared to the conditions of employment otherwise provided by law. In general, it is reasonable to expect that such an approach by the Ukrainian courts will be applied in any case regarding the Employee’s resignation from the Company and his acceptance of employment elsewhere, Though the courts may feel less of a need to protect such a senior (and presumably sophisticated) manager.