Employer Liability for Violating Labor Laws: Myths and Reality
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On the threshold of the adoption of the new RF Labor Code in the fall of 2006, the importance of employers properly interpreting the Code and its application to labor relations will increase. Employers will be most concerned with legal liability related to violations of the Code.
In theory and practice, legal liability implies various negative consequences for guilty parties. According to Article 419 of the RF Labor Code, companies and individuals guilty of labor law violations are held liable in accordance with various civil and criminal codes. This applies to both the employer and its executives.
Disciplinary liability stands apart from other liability types. It is not the state, but the employer empowered to apply disciplinary sanctions. The risk of disciplinary liability lies with employees responsible for labor law compliance (e.g., HR managers). It poses a serious threat to the interests of such staff, since it may lead to dismissal (Article 192 of the RF Labor Code), impugn a reputation, cause material losses, limit promotions, etc.
Civil liability (including financial liability) lies with the employer and includes payment of damages caused to an employee and his/her property or financial interests. If found guilty of civil liability, an employer must reimburse an employee his/her salary for the time period in which the employee was denied work.
There is a high degree of risk for an employer held liable for harm caused to an employee’s life and health. According to Article 1072 of the RF Civil Code, and the Federal Law “On Factories’ Compulsory Accident Insurance and Professional Disease Insurance,” payment of insurance compensation does not fully relieve the employer from damage reimbursements.
Administrative liability measures for labor law violations are provided for by Article 5.27 of the Russian Administrative Offense Code. The newest edition of the code allows for liability of both the employer and its executives and allows for several types of sanctions, primarily including monetary penalties. For individual entrepreneurs and employer executives, these penalties range from 500-5000 rubles, and for organizations, they range from 30,000-50,000 rubles for each violation.
Any violation of labor legislation, even insignificant ones, may serve as grounds for holding someone liable.
For executives previously found guilty of administrative violations of the labor law, the Administrative Offense Code has a special punishment: disqualification for a term of 1-3 years. According to Article 3.11 of the Administrative Offense Code, disqualification means deprivation of a physical person’s right to occupy certain executive positions in executive bodies of legal entities, to be a member of a board of directors (a supervisory board), to provide the management services of a legal entity, or to manage a legal entity in other cases. After a corresponding court resolution comes into force, the disqualified person is fired (excluded from the corresponding body) or a legal entity management agreement with this person is terminated.
Besides monetary penalties and disqualifications, Article 5.27 provides for a new type of punishment: administrative suspension of operations for a term of up to 90 days. This punishment consists of a temporary forced suspension of operations of individual entrepreneurs, legal entities, their affiliated branches, representative offices, divisions, and also of installations operation, buildings or constructions, and of performance of certain types of activities. This punishment includes the payment of salaries to employees during the time activities are suspended (Article 220 of the Labor Code of the RF).
Article 19.5 of the Administrative Offense Code also levies fines in the event a guilty party fails to comply with the law within a time frame set by the controlling body. Fines on executives range from 1,000-2,000 rubles or disqualification for a term of 1-3 years and on legal entities from 10,000-20,000 rubles.
Criminal liability provides the most unfavorable consequences for law violators and even holds employers’ representatives, including CEOs, criminally liable.
The Criminal Code of the Russian Federation outlines three main crimes in labor relations (Article 143: “Violation of Labor Safety Rules,” Article 145: “Unjustified Refusal to Employ or Unjustified Dismissal of a Pregnant Woman or a Woman with Children Under Three,” and Article 145.1 “Non-Payment of Salaries, Pensions, Scholarships, Financial Allowances and other Payments”).
The listed regulations of the Criminal Code contain different sanctions, including monetary penalties, prison sentences, revocation of the right to occupy certain positions, and correctional and obligatory works. On penalty of criminal punishment, the law also forbids discrimination, including labor and other related interactions (Article 136 of the Criminal Code).
Other Aspects
An incorrect application of labor law regulations also results in violations in related branches of law. For example, labor law violations of adjustments and payments of salaries results, in many cases, in accounting violations in the payment of taxes, compulsory charges and other payments (pension, insurance-related ones).
Violations of employment rules for foreign citizens are generally enumerated by Russian migration laws. Fines for violations of foreign labor regulations may be as high as $10,000. Additionally, employers may be forced to bear expenses related to deportation or administrative expulsion of foreign citizens. If it is proved that employer executives, when employing foreign citizens, participated in the organization of their illegal entrance to Russia or their continued stay in the country, such executives may be held criminally liable as provided for by Article 322.1 of the Criminal Code.
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