Gave legal advice to an agent on employment abroad on the issue of a proper contract drafting with an employee

A Client, for whom we previously obtained a license for the employment of Ukrainian citizens abroad, retained our services again in July of 2018. The Client did not understand the essence of his legal relationship with future employees, could not explain to them, why he charges them under the contract however it was clear for him that he is likely doing something wrong, risking to lose recently obtained license. At that point he wasn’teven sure if he could enter into such contracts and charge for it.

As one may know, licensed activity in the field of employment of Ukrainian citizens abroad involves signing of intermediary agreements with foreign employers, gathering information regardingavailablevacancies and search for potential employees in Ukraine, to whom a licensed intermediary can lawfully offer the vacancies of only those employers with whom he has a signed agreement. Therefore, is there a need to enter into an agreement with a potential employee and is it legal to charge him a fee?

In accordance with clause 10of Licensing Terms ofagency services in employment abroad, such services are provided to the client only after he/she has concluded an agreement (contract) for provision of intermediary services in employment abroad in two copies, which must be kept for 3 years after their termination.

This means that the intermediary firm cannot avoid entering into contracts with the employees, as it will lead to the revocation of the license.

As in regard to the payment under the contract, commercial servicesin Ukraine are provided exceptionally for a fee.

The contract in questionby its legal nature is most closely related to the services agreement and agency agreement, both of which stipulate that the Customer is obliged to pay for the provided services.

For instance, clause 1 of article 297of the Commercial Code of Ukraine (CCU) (The subject of agency agreement) stipulates that “under the agency agreement, one party (commercial agent) undertakes to provide services to the other party (the entity represented by the agent) in entering into agreements or assistance in their conclusion (provision of actual services) on behalf of the entity and at his expense”.

Section 1 of article 301 of the CCU provides that “Under the agency agreement, a commercial agent receives remuneration for provided agency services on behalf of the represented entity in the amount stipulated by the agreement”.

Clause 12 of the Licensing Terms also provides that a Ukrainian company is not entitled to be paid for intermediary services in employment abroad prior to the date of signing the act of acceptance of rendered services.

Therefore, the Services provider (Intermediary) is actually obliged to be paid in the form of payment upon completion of services provision.

Thus, the question remains, what is the subject of a contract with an employee, if, actually, all intermediary services are paid by the employer?

According to the law, an intermediary represents an employee’s interests in negotiations with an employer, as well as the employer’s interests in negotiations with the employee. By facilitating the process of entry into contract, the intermediary provides a specific amount of representative services, which cannot be provided free of charge without a contract, as we stated above. Information services are also provided under such contract. As an example one can provide the intermediary’s obligation to inform employees about mechanism of voluntary participation in compulsory state social insurance of the employer’s country.

The legislator also entrusts the intermediary with a number of additional responsibilities, in particular, liability under the law for deterioration of the terms and conditions of the employment agreement concluded between an employee and a foreign employer.

Because the Client did not understand the essence of his legal relations with a potential employee, he made a number of substantial mistakes when drafting the contract, which was used for signing with the Ukrainian employees. The mistakes were so substantial that they could lead to the revocation of the license for employment abroad. Our lawyers made adjustments to the contract and provided the Client with comprehensive answers to his questions in order to avoid such mistakes in the future.
Publication date: 04/09/2018

About author

Name: Volodymyr Gurlov

Position: Partner

Education: National Academy of the Security Service of Ukraine

Knowledge of languages: Russian, Ukrainian, English

Email: [email protected]

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