Issue 1, 2012. February-March

   

FLEXIBILITY IN THE LABOR CODE: A POSITIVE SIGN FOR EUROPEAN INTEGRATION?

As Georgia takes a historic journey back to its European routes, with the recently launched Deep and Comprehensive Free Trade Area (DCFTA) negotiations, a lot of emphasis is naturally being put on approximation of its standards and practices with those prevailing in the European Union.
While the country has already succeeded in a number of important areas and fast reforms are still underway, criticism is often heard that more progress is needed in harmonizing Georgia's labor law with its international commitments. This article will consider the way recent developments in this area might be seen within the context of increasingly close ties with Europe.


Sophie Panjikidze and Zakaria Shvelidze

Labor Discrimination - Pre-Contractual Relationship

If discrimination in the hiring process is to be avoided, then the sanctions against labor discrimination need to apply to the pre-contractual period. This is one area where the Georgian labor law has been considered weak. However, recent announcements by the Georgian Government suggest that this will soon change.

Unsurprisingly, prior to the reformation of labor law in 2006, the pre-existing soviet-era labor legislation did not contain any regulation on discrimination at all, so this was a central novelty of Georgia's new Labor Code. Arguably, however, a number of important aspects have yet to be brought in line with European standards.

The general ban on discrimination, which is found in Article 2.3 of the Labor Code, provides that it applies only to "labor relationship" i.e. from the moment of conclusion of the respective employment contract. This means that any pre-contractual relations fall outside the scope of the application of Article 2.3. This is problematic as the pre-contractual stage is when the risk of labor discrimination is particularly high.

Arguably, this legislative gap is bridged by Article 1.1 of the Labor Code, providing that "the present Code regulates labor and associated relations on the territory of Georgia". However, whether "associated relations" cover the recruitment/selection process would be subject to a court's interpretation in each individual case, and therefore would not guarantee uniform interpretation and application in all cases.

The problem in question was scrutinized by the International Labor Organization (ILO), where the ILO Committee notes that:

...taking into account the Government's statements that the legislation is meant to cover all forms of discrimination in employment and occupation, including discrimination in respect of recruitment and selection, the Committee strongly recommends that the existing non-discrimination provisions of the Labor Code be amended to clarify that the prohibition of discrimination also applies to recruitment and selection.

Interestingly, while these issues remain outstanding, the government of Georgia has recently signaled its preparedness to consider this issue, at least in specific instances, in their representation to the US Trade Representative. The AFL-CIO, an American labor union, had pointed out, as part of a representation to the US Government that union membership protections in the Georgian labor code did not clearly apply to the pre-contractual period. In response, the Georgian Government has said that they will:

Ensure a clear and better-articulated prohibition of discrimination based on trade union membership during pre-contractual as well as contractual labor negotiations.

This is clearly a positive step in relation to trade-union protections, but may signal a broader acknowledgement of the importance of pre-contractual rights.

Labor Discrimination - Burden of Proof

Another significant shortcoming, that some have suggested in the context of labor discrimination, is that the burden of proof rests with the employee/claimant who has to prove the fact of discrimination from the side of the employer/respondent. In this regard, the Georgian courts normally follow the default rule of the Georgian civil procedure, whereby the claimant is required to prove the facts on which the claim is based.

Conversely, in both the EU and the US, the burden of proof is specifically shifted towards the employer, and it is for the employer/respondent to prove that there has been no breach of the fundamental principle of equal treatment in the employment context. This contrast also helps explain why Georgian case law is so uniquely homogeneous - in the negative sense that not a single case can be quoted where existence of labor discrimination was successfully proved. The routine finding in all cases is that the plaintiff failed to prove the existence of discrimination.

Despite the above grim picture, optimism can be drawn from a recent decision by the Georgian Supreme Court where it reads that, in cases related to dismissal....the employer bears the burden of proof. Namely, where the employee argues that termination of employment was a discriminative action, the employer shall prove the legitimacy of his will on dismissal and the existence of nondiscriminatory grounds for termination.

In essence, this seems to accept that in certain cases the burden of proof should be reversed, and therefore, suggests that Georgian law may be naturally aligning itself with European standards.

Regulation of Working Time

According to Article 14.1 of the Labor Code, the regular weekly working hours of an employee (excluding breaks and rest time) are up to 41 hours a week. The problem is that the parties remain free to agree a different number of hours as a matter of their employment contract.

That the maximum weekly working time is, in practice, so flexible is inconsistent with the EU's working time Directive which sets 48 hours as the limit for a legal working week. This is problematic because, in 2005, Georgia ratified certain articles of the European Social Charter and therefore undertook to harmonize its domestic legislation with the provisions of the Charter, while the EU's assessment of these provisions has suggested that Georgia is currently in conflict with it.

Similar to the situation with working time, the conditions of overtime labor are left entirely to the agreement of the parties to the employment contract, according to Article 17 of the Labor Code. Thus, the Labor Code does not provide any imperative regulation as regards remuneration for overtime work or its maximum duration. These important conditions are subject to party agreement and, consequently, the employer is obligated to remunerate overtime work only where the employment contract contains a specific clause.

According to Article 4.2 of the European Social Charter, with a view to ensuring the effective exercise of the right to a fair remuneration, the Parties undertake to recognize the right of workers to an increased rate of remuneration for overtime work.

In the ECSR's 2010 Report, they conclude that "the situation in Georgia is not in conformity with Article 4.2 of the Revised Charter on the grounds that: (i) the Labor Code permits employers and workers to agree on overtime hours without limitations; (ii) the Labor Code does not guarantee workers the right to an increased remuneration or a longer rest period in compensation for overtime work".

Interestingly, while this does seem to be in conflict with the European Social Charter, the EU as a whole may be in a process of revising its position on this issue, as the EU, faced with financial crisis starts to dismantle some of its less affordable social protections.

Termination of Employment

By virtue of Article 38.3 of the Labor Code, if employment is terminated at the initiative of the employer, an employee is entitled to a severance pay equivalent to at least one month's salary. Subject to this modest severance pay, the Labor Code empowers the employer to terminate the employment contract without notice for any reason or for no reason.

The Labor Code grants the employer the unrestricted right to terminate employment at its absolute discretion without giving any explanation or advance notification to the employee. Such one-sided and freewill termination of the employment relationship is justified by the liberal views of labor relations taken by the Georgian Government.

However, court practice is not yet finally settled on how to interpret these norms, as demonstrated by a number of conflicting judgments rendered by the Georgian courts in various instances, where immediate dismissal of the employee in the absence of any reasoning and advance notice is sometimes justified, and sometimes challenged and ruled unlawful.

Unsurprisingly, ECSR declared in its 2010 Conclusions that "the situation in Georgia is not in conformity with Article 4.4 of the Revised Charter because the Labor Code does not specify any period of notice for termination of employment". ECSR has asked Georgia to provide information with a view to ascertaining that the only exception that exists in law and practice is the immediate dismissal for serious offences.

These clarifications have not, as yet, been forthcoming. However, what is increasingly clear is that the Georgian Labor Code is open to more Europe-friendly interpretation than has often been thought.

Furthermore, the Georgian Government, in its discussion with the US Trade Representative has shown a degree of flexibility which suggests that pragmatism may ultimately trump its fire-brand libertarian reputation. As a result, the negotiations on labor issues in the up-coming DCFTA negotiations may be easier than many people expect.

Sophie Panjikidze and Zakaria Shvelidze are Senior Associates with Gvinadze & Partners, a leading Georgian business law firm.