The ban on loan labor in Russia: legal regulation and responsibility
Article is prepared by Vorobyov Alexey, lawyer of Confidence Group, 27.03.2016
On January 1, 2016 the amendments to the Labor Code, prohibiting the loan labor, came into force.
We analyzed the amendments and prepared series of recommendations for employers, which would help to avoid responsibility for the violations.
What are the peculiarities of this prohibition?
The concept and features of the loan labor are provided in the legal regulations newly entered into force. So, the Federal law as of May 5, 2014 № 116-FZ "On Amendments to Certain Legislative Acts of Russia" (hereinafter - the Law № 116), which entered into force on January 1, 2016, provides the addition of the Article 56.1 "The prohibition of the loan labor" to the Labor Code. The Article, establishing a ban on loan labor, defines it as work carried out by an employee by order of the employer, on behalf, managed and under the control of the private person or legal entity which is not the employer of the employee.
Starting from the January 1, 2016, many forms of outsourcing were prohibited in Russia. Most employers don’t have an opportunity to use loan labor in Russia. However, there are some exceptions.
The Article 56.1 provides that the peculiarities of labor regulation of workers, temporarily sent to other individuals or legal entities under the contract of labor provision are set in the Chapter 53.1 of the Labor Code. The Chapter 53.1 was added to the Labor Code with the entry into force of the Federal Law № 116 as of January 1, 2016, the Chapter is called – «Peculiarities of labor regulation of workers, temporarily sent to other individuals or legal entities under the contract of labor provision».
The Article 341.1 of the Chapter 53.1 provides that private employment agency or other legal entity which is entitled to provide workers, has the right, under the conditions of this chapter, to temporarily send their employees with their consent to the private person or legal entity which is not the employer of the employees for work under control of indicated entities.
At the same time the Federal Law №116 introduces a list of persons entitled to use the mechanism of Chapter 53.1 of the Labor Code, to the Federal Law as of April 19, 1991 number 1032-1 (ed. as of December 22, 2014) "On employment in Russia" (hereinafter - the Law on employment).
This law was also changed. For example, starting from the January 1, 2016, the Law on employment was added with the Article 18.1 "Implementation of activities on the labor provision of employees (staff)". The Article established that the following entities have the right to carry out activities for the provision of employees (personnel):
- private employment agencies - legal entities registered in Russia and accredited to carry out this type of activity;
- other legal entities, including foreign legal entities and their affiliates (except individuals ), on the terms established by the federal law in cases when workers with their consent are sent temporarily to:
- a legal entity, which is affiliated to the sending party;
- a legal entity, a joint stock company, unless the sending party is a party of the shareholders' agreement on the implementation of the rights certified by the shares of the joint-stock company;
- a legal entity that is a party to the shareholders' agreement with the sending party.
The Chapter 53.1 of the Labor Code provides exceptions of the prohibition established by the Article 56.1 of the Labor Code, as it is also loan labor as indicated by this article. We would like to note that it would be preferable to state Clause 1 of the Article 56.1 of the Labor Code ("loan labor is prohibited") in a slightly different wording, such as "loan labor is prohibited, except as provided by the Chapter 53.1 of the Labor Code". At the same time, we would point, that this activity, which appears as an exception to the prohibition of loan labor, is called not loan labor, but activity on the labor provision of the workers (personnel).
Responsibility for the violation of the ban
The administrative responsibility for violation of the prohibition is provided by the Code of Administrative Offences. Thus, the Clause 1, the Article 5.27 of the Administrative Code provides a warning or an administrative fine for officials in the amount from one thousand to five thousand rubles for such a violation; for persons engaged in entrepreneurial activities without forming a legal entity - from one thousand to five thousand rubles; for legal entities - from thirty thousand to fifty thousand rubles.
At the same time, if a person is held liable repeatedly for committing such a violation, clause 4, Article 5.27 establishes a penalty as an administrative fine for officials in the amount from ten thousand to twenty thousand rubles or disqualification for a period from one to three years; for persons engaged in entrepreneurial activities without forming a legal entity - from ten thousand to twenty thousand rubles; for legal entities - from fifty thousand to seventy thousand rubles.
The Russian Federation Code of Administrative Offences in previous editions provided administrative suspension of activity of an organization or an entrepreneur for up to ninety days as alternative penalty for the violation. Such penalty was able to cause serious damage to the organization or entrepreneur activity. However, it was excluded from the Code of Administrative Offences and now, in accordance with the current version, the offender may expect warning (previously it was not provided) or an administrative fine in the specified size.
Possible actions of the employer
Although, starting from January 1, 2016, the loan labor was prohibited by the law, its definition specifying in the Article 56.1 of the Labor Code gives to the employers some opportunities. As mentioned above, the loan labor is understood as the work carried out by an employee by order of the employer, on behalf, managed and under the control of the private person or legal entity which is not the employer of the employee.
This means that there are three basic features, and if all of them are being present in the action, the action may be qualified as a violation of the prohibition. They are: 1) work on behalf; 2) work managed by; 3) work under the control of - a person who is not the employer.
Notably that the absence of one of these features means that the term «loan labor» is not applicable, as well as the appropriate penalties for violating the ban.
This means that if the work is carried out, for example, on behalf of another person and managed by this person, or, for example, the work is carried out on behalf of another person and under control, but not managed, this work is not called «loan labor».
So we may come to the conclusion that some opportunities for employers still remain. They should bring their activities and the activities of the employees in accordance with legal requirements.
It should be noted that similar activities can be carried out within the framework of civil-legal mechanisms - for example, agreements on provision of services or performance of work (including construction contracts).
