On the Labor Code of Georgia

The 9th Parliament of Georgia adopted an extensive package of changes to the Labor Code of Georgia (“LC”) before expiration of its term of authority. Economic development of the country generated the need for modifications. In the mid-2000s, when the government policy was aimed to make the Georgian legal framework sharply liberal and investor-friendly, a wave of deregulation had a serious impact over the then version of the LC, leaving employees without sufficient protection. In 2013, when the policy changed, Georgia partially reformed the LC, providing a better balance between the interests of the parties. Despite that, throughout the 7 years of operation, the judicial system detected a number of shortcomings which needed to be addressed by the legislators. Furthermore, adoption of the new amendments was accelerated by the need to fulfill obligations undertaken in accordance with the Association Agreement between the EU and Georgia.

The new amendments can be considered as yet another (and rather successful) attempt to bring Georgia’s Labor legislation in line with international standards. The amended version of LC bans discrimination in the workplace, defines the terms of employment contracts, fixes working hours, determines conditions for internship and part-time work, strengthens the Labor Inspectorate, provides more social guarantees, and creates a much more favorable working environment for the most vulnerable groups of employees, such as the pregnant and disabled. Below, we will provide an overview of the major changes to the LC.

Commencement of Labor Relationships

Newly enacted amendments provide that there are no alternative documents to the employment contract. Previously, the application of a person and the employment record on hiring an applicant to a respective position were deemed equivalent to an employment contract; nevertheless, the new regulations carve this provision out and require execution of an employment contract.

The term within which the execution of the written employment contract was required has been shortened from three to one month. Moreover, if a fixed-term employment contract is concluded without the relevant grounds specified in the LC, it will be considered as a permanent employment contract.

The employer is now obliged to notify a fixed-term employee of vacant positions so that they, like any other employee, has an equal opportunity to hold a position under a permanent employment contract;

Work Performance

Prohibition of Labor Discrimination - the notion and regulation of discrimination has been expanded, considering that a whole chapter has been added to the LC, while until now this issue had been regulated by one article only. The strength of the current version of the discrimination definition is its non-exhaustive wording, which enables any victim of discrimination to bring their case to court. The updated LC obliges employers to ensure equal pay for a woman and a man conducting the same work. The issues concerning the burden of proof in discrimination-related disputes are also regulated: the burden lies on the employer in case the applicant or employee points out facts and/or circumstances which raise reasonable doubt that the employer has violated the rules for prohibition of discrimination.

Working hours and Overtime Work - the amendments contain new provisions concerning limits on work hours, mandatory weekly rest time, breaks between shifts, and better protection for night-shift workers.

Previously, a 40-hour weekly cap on working hours existed only on paper, the loophole allowing many employers to stretch weekly working hours from 40 to 48 hours without reimbursing additional work as overtime. Now, the Code introduces the definition of Normalized Working Time, which shall not exceed the 40 hours per week.

The new document also regulates break times, stating that if the working hours in a day are no less than 6 hours, the employee has the right to a minimum 60 minutes of break and at least one 24-hour rest period a week, or a 48 hour rest period in every two weeks. A new obligation has been imposed on employers, as they have to record the working time on a daily basis and keep the data;

The changes affected overtime work. For overtime work, employee’s consent is required and, where possible, the employer is obliged to notify the employee in writing about overtime work 1 week in advance. The overtime remuneration should be paid together with monthly remuneration, after the overtime work is performed. The employee should be given additional rest time no later than 4 weeks after performing overtime work, unless otherwise agreed by the parties.

Remuneration - the concept of remuneration has changed and it now includes not only the usual basic or minimum wage or salary, as well as any other remuneration paid in cash or in kind.

Termination of Labor Relationships

In case of termination of the contract on the basis of "other objective circumstances", the employer is obliged to substantiate in the notice of termination, the objective circumstance which justifies the termination of the employment contract.

The amended LC also defines the regulations related to the transfer of the enterprise and prohibits termination of employment on this basis.

Changes also concern civil-law procedures in employment disputes. In particular, it specifies time limits for appealing the decision of the employer on termination of the employment contract and the claims that an employee can have in case of termination. The limitation period for lodging any claim under the LC to court constitutes one year after an employee has learned or should have learned of the violation of the right.

Existing Challenges

The draft law was influenced by the discussions held with the participation of representatives of the business sector, so the final version is rather different from the one that was initiated by the parliament. There were two most controversial issues that caused debates with business groups:

The amount of overtime pay - the initial version of the draft law suggested that an employee should have been paid at least 125 percent of the normal hourly rate for overtime work. However, this provision is not included in the final version and the fair amount of overtime payment is still left to the judicial practice to decide.

The amount of Labor remuneration - according to the initial version of the draft law, an employee should have been paid no less than the minimum salary. The mechanism for indicating the minimum salary and related regulations should have been stipulated by the law on minimum remuneration. This provision has not survived three readings in parliament either.

Moreover, considering the reality we live in and the problems society faces today, it would have been preferable to regulate the employment relations in cases such as the Covid-19 pandemic.

The adoption of the changes to the LC, which we briefly reviewed, is a somewhat successful step towards improvement of Georgian Labor legislation and ensuring compliance of labor regulations with EU standards, which could have been made considering the economic environment of the country.

It became clear from the discussions held and decisions made during the process of adoption of the amendments that the business sector in Georgia is not ready for relatively strict regulations yet. Thus, despite the fact that the amended LC is more employee-oriented and its provisions give employees labor/social guarantees, they do not put too much pressure on the business sector. However, it introduces some additional procedural burdens for employers and imposes new obligations, which require more time, paperwork and expenses. Overall, the amended LC provides a substantially improved balance between the interests of employers and employees in comparison with the previous version.

It is evident that, along with all the pros listed above, the current version of the LC leaves some important issues open to interpretation. Until the loopholes in the law are corrected, the court is responsible for interpreting the vague provisions and regulating issues regarding which law is silent.

Sandro Samadbegishvili, Partner

Ani Nanobashvili, Junior Associate

Mariam Karseladze, Junior Associate