The deadline of 1 October 2014 has now passed for companies to implement the changes to the Labour Code, adopted by parliament on 27 December 2013. Now the Ministry of Labour and Social Protection of the Population is in the process of comparing the list of legal entities and employees registered with the Registry of Commercial Legal Entities of the Ministry of Taxes and other agencies through integrated electronic systems to the list of legal entities that registered the employment contracts of their employees.

The changes introduced a new approach to concluding labour contracts and the manner in which they enter into force. Before the changes were adopted, employment contracts would enter into force on the date they were signed or another date stipulated in the contract. Employers did not have to register employment contracts with government; moreover, Article 49 of the Labour Code prohibited the registration or confirmation of labour contracts with/ by government agencies. With December changes to the law, however, government imposed an obligation on employers to register the notifications regarding the concluding of employment contracts, amendments thereto as well as the termination of such contracts with the Ministry of Labour and Social Protection of the Population. The exception to this rule applies to contracts for the public sector employees and civil servants.

According to the Law on Amendments and Additions to the Labour Code, the Ministry of Labour and Social Protection of the Population had to introduce an electronic registry system for labour contracts and take measures to ensure the registration of employment contracts in the system by 1 July 2014. The Ministry, however, did not make the system available by July, thus the deadline for the registration of employment contracts was extended until 1 October 2014.

Amendments to the Code of Administrative Offences, dated 27.12.2013 envisaged financial sanctions applicable to instances where employers involved individuals in any kind of works (services) before their employment agreements (contracts) become effective, as stipulated by the legislation. Employers who are natural persons who make use of an individual's work without an employment contract in force will be subject to fines in the amount of AZN 1,000 to AZN 3,000, and the directors/executives of entities will receive a fine ranging from AZN 3,000 to AZN 5,000, and legal persons (entities) shall be subject to fines ranging from AZN 20,000 to AZN 25,000.

The Laws mentioned above are not the only legal mechanisms aimed at ending discriminatory treatment and ensuring that all citizens and foreigners employed in the country enjoy the rights provided by Labour Code and regulations. The above-mentioned wrongdoing can result in tax and/ or criminal liability in addition to being in breach of labour law. The Tax Code establishes financial sanctions for employers who create conditions for the concealment (understatement) of the income of individuals working without an employment agreement (contract) in force. Such actions (inactions) may result in fines in the amount of AZN 1,000 for each individual that works without an enforceable employment agreement. Since, as mentioned above, an employment contract, which has been signed and sealed, is not effective unless and until it is registered with government, then any employment pursuant to an agreement which has been signed and sealed but not registered is considered "working without an employment agreement (contract) in force" and subject to fines and penalties, when applicable.

The Law on Amending the Criminal Code of the Republic of Azerbaijan regulates the criminal liability of employers for employment of 10 or more individuals without a valid employment agreement (contract). A penalty for such action can either be a fine ranging from AZN 7,000 to AZN 10,000 or imprisonment for up to three years. If the same crime has been committed repeatedly, a person may be sentenced for three to seven years of imprisonment.

The rationale behind such a change to the law was to establish governmental control over the fulfilment of employment conditions provided for by the labour legislation and labour contracts. Officials of the Ministry of Labour and Social Protection of the Population state in interviews that the purpose of creating the electronic system of registration of employment contracts is to rectify the problems in the employment sector, which pertain mainly to compensation issues and to prevent illegal employment. This electronic system serves as a guarantee of the fulfilment of employers' obligations to create equal working conditions for all employees as well as ensuring the social rights of employees.

On 2 October 2014, the Ministry of Labour and Social Protection of Population announced through its official website that more than 1,276,000 employment contracts had been registered in the Ministry's electronic information system by 1 October. According to the website, the Ministry detected that not all employment contracts had been registered and those entities that concealed the contracts or did not otherwise comply with changes to the Labour Code would be strictly punished, while employers that failed to register the contracts due to technical issues would be assisted in the completion of the registration.

Indeed, the Government let the above mentioned group of employers complete the registration by 10 October. No further extension of the deadlines is expected.

Originally published in Expert guide: Discrimination Law & Equality 2014 - Corporate LiveWire – November 2014

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