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The Court Orders No Limitations on Salary Claims


By Natalia Nepriakhina
Source: The Kommersant

Employees who were previously delayed payment of wages can now claim any unpaid income without prescription / limitations, with eligible amounts will be readjusted against the inflation index for the period of delay. Such decision was made by the Constitutional Court. Although many will want to take advantage of this opportunity, lawyers say that the whole thing is about the indexation of minimum wages.

The Constitutional Court ordered that there shall be no prescription / limitation periods in cases dealing with recovery of wages from employers and indemnification of losses where the payment of income was delayed. This rule applies regardless of whether such amounts were accrued by the employer or not. The Constitutional Court in this way responded to the appeal of Mr. Yuri Dzioba who complained about the ambiguous interpretation by the courts of Section 233(2) of the Labour Code. Failure to obtain the fair adjustment of wages violated his «constitutional right to a timely pay». This order is second in a row that the Constitutional Court made the last week. Previously, the court recognized the permanent right of employees to receive wages for idle periods which occurred other than by his own fault (see The Kommersant issue dd. October 18th).

The order of the Constitutional Court is final and binding. As the Court’s press service explained to The Kommersant, pursuant to the Payroll Indexation Act, obligations relating to the indexation of wages apply both to private businesses and governmental corporations. However, Orest Dozhdzhanyuk at Selepey, Volkovetsky & Partners believes that only a few companies observe this rule due to the lack of a transparent system of payments and responsibility. «The labour Inspectorate should check the correctness of calculations, but no one cares», the expert said. According to Daniil Fedorchuk, senior lawyer at Beiten Burkhardt international law firm, in effect, businesses often only made adjustments of salary which was less than or equal to the subsistence minimum (which is, in turn, equal to the minimum wage). A larger part of wages was not indexed because it was «too burdensome» for employers. «Now, these business owners are automatically included in the risk group as potential offenders who can no longer hide behind prescription / limitation periods», Mr. Fedorchuk added.

Mykhailo Spasov, a Partner at Vox Legum, believes it is not unlikely that the decision of the Constitutional Court will trigger an increase in the number of claims to recover indexed payments. Although Mr. Dozhdzhanyuk reminds that back in May the Higher Specialized Court had explained that indexation is an integral part of the salary, and that employees are entitled to claim their money without any prescription / limitation periods. Mr. Spasov explains that the consumer price index to determine the threshold of indexation is calculated by multiplying the monthly index of inflation starting from March 2003 with the publication of the Act No. 491 IV dated 6 February 2003 amending the Payroll Indexation Act. The debt that existed until 2003 will not be indexed even through court. However, getting your money is only possible from an operating business. «If a debt persists, for example, since 2000, it is very unlikely that the company is still operating», said Maksym Kopeychykov, a Partner at Ilyashev & Partners. Further, he believes that indexation should start from the date of actual disbursement of wages rather from the date of claim.

According to Orest Dozhdzhanyuk, hearing such cases in court can take a year, and employees who can not calculate the necessary amount of payments will require a forensic accounting evaluation. Companies can no longer refuse to provide documents. Claims may deal with small salaries as, according to Cabinet Ordinance No. 1078, only regular cash payments to the employees within the subsistence minimum (UAH 1,147) are subject to indexation.

However, Daniil Fedorchuk is sure that the amounts of debt that existed until 2003 shall be subject to indexation as well, because the profile law has been in force since 1991, and such obligation existed initially. «Such claims will look exotic – dragging with making a claim for 10-20 years is no good”, Mr. Fedorchuk said. «The absence of a prescription / limitation periods for specific requirements is seen by the European Court of Human Rights as a violation of the principle of legal certainty, unless there is a very serious legal reasoning». Chances of winning are high, the lawyers say, if only the courts will not refuse to obey the orders of the Constitutional Court, as it was the case before». «In my opinion, the quality of judgments is decreasing. In particular, the Supreme Court refuses to apply the order on the ownership of the share capital in a privately-held business, and they have an explanation ready», says Daniel Fedorchuk. «The question whether to start indexing salaries from 1991 or from 2003 alone leaves much ambiguity».

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