Layoffs and Job Cuts: Unregistered Workers at Risk of Losing Everything

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For the past two months, Tigran Aharonyan, 28, has not had an income. He lost his job after a State of Emergency was declared and has very little hope of finding a new one in the near future.

The palms of his hands are covered in red and white patches. “I have been struggling with psoriasis for the past 16-17 years and it’s getting worse,” Aharonyan says. “I am a waiter and bartender. A few restaurants saw [my hands] and refused to hire me, or they fired me and I have lost my job because of it.”

Aharonyan’s last job was at a Middle Eastern restaurant. He worked there for about four and a half years. “The owners were good people. I showed my hands to the manager, and he said, ‘That’s why you’ve been wearing gloves?’ I said, yes, I was embarrassed and upset that you might fire me,” the young man recalls.

Although Aharonyan only has positive things to say about his employer for hiring him, the reality is that he did not have an employment contract. Now that he has lost his job, he is not eligible to apply for any of the state assistance programs.

Unregistered Workers: When an Employer Can Fire You at Any Moment

The State Revenue Committee (SRC) carried out 2,255 inspections to identify unregistered employees last year. Among the 1,372 violations, they disclosed 2,380 unregistered employees. According to Rafik Mashadyan, the SRC Deputy Director, businesses were fined a total of 590 million AMD.

In the first quarter of 2019, out of 295 inspections, 187 violations were recorded, involving a total of 358 unregistered workers. In the same period of 2020, 295 inspections were carried out, revealing 189 violations, involving 411 unregistered workers. That is, unregistered worker infractions were up 15% this year.

According to Mashadyan, the SRC had not changed its inspection process, however, they did not carry out inspections at businesses that had ceased operations. “There isn’t much change in the number of violations or unregistered workers,” he says. “I believe that, after all of our admonitions, there will be fewer cases; they will become more law-abiding. We will, of course, continue our monitoring.”

If you do not have an employment contract, you are not protected by the Labor Code. An unscrupulous employer, by not providing an employment contract, not only avoids paying taxes, but also violates the employee’s rights.

Lawyer Gevorg Sloyan says that unregistered workers can reinstate their violated rights by filing a suit with the courts to have their de facto “employment relationship” recognized.

“It is enshrined in the Labor Code that, if a court rules that there was a working relationship between an employer and an employee, then the working relationship is considered to have begun on the day that the employee began working,” Sloyan explains. “An employee has the right to apply to the court during the factual working period and even up to one year after their employment was terminated.” If the court rules that the relationship counts as employment, the employer could be fined for tax evasion and failing to register the employee.

“Article 412 of the Tax Code envisions a fine of 250,000 AMD for each unregistered employee,” Sloyan adds.

Narine and Her Four Children Have Found Themselves on the Street

Before the spread of COVID-19 and the State of Emergency, 43-year-old Narine Navasartyan was able to provide the basics for her family. She would clean restaurants or other people’s homes and sometimes would also take care of critically ill people.

However, on April 4, she found herself on the street with her four children. Unable to pay the rent, her landlord wanted her out. When she sought assistance, the Yerevan municipality secured her two month’s rent, and staff there helped her find a job in a store. However, Narine doesn’t have anywhere to leave her children when she goes to work.

“Before all of this, the children would attend a boarding school. In the evenings, after work, I would pick them up and go home. We had no problems,” Narine says. “I don’t have anyone, I’m a single mother. I can’t ask anyone to sit with the children so I can go to work. My youngest is 6 years old, the oldest is 12. And they are very naughty…” The children’s education has also suffered because of the situation; they don’t have the necessary means to take part in online learning.

For someone who has never shied away from hard work, the uncertainty has left Narine frustrated. “I don’t want to take my children to an orphanage,” she says. “I am struggling in every way, but larger dreams, about whether we will have our own home, do not exist. I know miracles don’t happen, at least in my life…”

She is renting a dilapidated, damp one-bedroom apartment. There is one bed in the bedroom and two mattresses on the floor. They couldn’t afford a place with better conditions; she lost her income while her expenses remained the same.

Narine also cannot receive any benefits from the state assistance programs because she was an unregistered worker and is also not registered as a beneficiary of the state.

Alvard Arshakyan, Chief Specialist of the Department of Health and Safety Control at the Health and Labor Inspectorate, said that following the declaration of a State of Emergency, they have received numerous calls on their hotline. Some of those calls have been about issues faced by unregistered workers. “One of the circumstances for not being able to benefit from the COVID-19 social assistance programs was to be an unregistered employee,” Arshakyan explains.

Number of Registered Employees Declining

In February of this year, the number of registered employees was 616,209. That figure actually rose to 619,000 in March. However, for the necessary context, the SRC Deputy Chairman says additional data must be considered.

“The number of employees in March is always higher than in February. There is more economic activity. Last year’s increase between February and March was 10,500. This year, it was only 3,600. The situation with COVID-19 is playing a big role here,” Mashadyan explains.

April’s job data will be available by May 20, but according to preliminary calculations, there is already a reduction in jobs, Mashadyan notes.

“In April, slightly more people were let go than those who found jobs, about 3,000 less than in March. And in April of last year, there were about 8,500 more than in March,” Mashadyan says. “In fact, if we look at the statistical dynamics, we should have had more employees in April than in March, but the initial estimate is that we will not have an increase in jobs, but a slight outright decrease.”

Layoffs: Will Workers Be Paid and by Whom?

Even those workers who had employment contracts ended up facing problems because of COVID-19. According to Bella Shikaryan, President of the International Society of Human Rights NGO, during this time period, many workers were let go because of a decrease in workload, although for others the workload increased.

“There are employees in the service sector who have only a 15-minute break, they are on their feet for seven hours straight, they don’t even have time to sit,” Shikaryan says. They are even responsible for ensuring employees have masks and gloves. Not to mention the sometimes disrespectful treatment.”

After the declaration of a State of Emergency on March 16, when it was decided that many types of businesses would have to shut down, many workers were laid off, and there was uncertainty about remuneration and the amount to be paid.

Article 186 of the Labor Code defines the requirements for remuneration for laid off employees. If the employee is not at fault for the layoff, then they must be paid a certain amount. Point 6 of the same article states that the employee shall not be paid for the layoff in the case of force majeure or when the layoff is due to the fault of the employee.

Workers who had been laid off were demanding severance because the layoff was not their fault, while employers were saying it was a force majeure (in other words, it was brought forth because of insurmountable reasons) and they should not be required to pay severance.

Lawyer Setrak Asatryan notes that it is a true force majeure situation. “Point 6 of Article 186 states ‘in accordance with the procedure established by the legislation of the Republic of Armenia.’” He explains that, if the Warden of the State Commission of the State of Emergency says a particular type of work is prohibited and at the same time there are problems with the freedom of movement, thereby it is a force majeure situation. “It is a different matter if the type of work is not prohibited, because by the decision of the Warden the type of activity was among the exceptions,” Asatryan explains.

According to the lawyer, if the employer is not obligated to pay, then the state must pay and there are different mechanisms to do that.

“I had proposed including a clause in the Law on Temporary Disability and Maternity Benefits that would refer to quarantine benefits and be retroactive. The problem would be solved quickly, the employees would present the form, the employer would pay as in the case of a normal disability application, the employee would be paid, and the employer would have the opportunity to lighten the tax burden,” he said.

Asatryan says this would be an expression of social solidarity and would have prevented issues such as the employees of the Gloria garment factory, in violation of the decision of the Warden of the State of Emergency, wanting to return to work.

The state, however, decided to take a different approach to regulating labor rights. On April 29, the National Assembly passed a new law on amendments to the Labor Code, which entered into force on May 8.

With this law, “force majeure” was defined and noted that the pandemic is also considered an insurmountable force. And in this case, it’s not that the employer doesn’t pay the worker, but rather can choose not to pay an employee who has been laid off. This provision is retroactive and can be applied from the first day of the declaration of the State of Emergency.

Member of Parliament Heriknaz Tigranyan says that paying an employee who has been laid off is the right of the employer and not a responsibility. “This means that the discretion, whether to pay or not, is legal,” she says, adding that this amendment was an encouraging step for those employers who had been found to be kind and had paid their employees.

If an employee does not report to work because of measures to prevent the transmission of the virus or the subsequent elimination of work caused by those events, it will no longer be considered a violation of the conditions of the employment contract. Similarly, if schools (and kindergartens) move vacation dates or announce unplanned vacations, the full or partial absence of a parent in charge of a child under 12 years of age from work, for the duration of the vacation, is no longer considered a violation of conditions of employment.

“Under no circumstances does the employer have the right to impose a penalty or terminate the employment contract with an employee who does not report to work or arrives to work late because of the State of Emergency, even when the type of work is permissible, but public transportation is not operating. In other words, we are providing protection,” notes the parliamentarian.

The law also regulates the issue of remuneration during this period. For example, if the employee is working remotely, then they must be remunerated fully, and in case of non-full-time employment, the employee is paid, at minimum, in accordance with the time actually worked or the work actually done.

Further Protection

Today, the only way to protect your employment rights is to apply to the court, which is not always effective, given the time-consuming and costly process.

However, under the new law, all written claims with regard to the Labor Code submitted after March 16 will be overseen by the Health and Labor Inspectorate. It will be possible to initiate administrative proceedings and, when and if there are violations, apply relevant sanctions.

“This is a message to workers that, at this stage they are not alone. And it is a message to employers to not take advantage of the situation created by the epidemic by treating the employees as they wish,” explains Tigranyan.

Although the law is already in force, the Inspectorate does not have the right to exercise control yet.

Until that time, since these changes have not been made, the Inspectorate urges all those who have filed complaints regarding violations of their rights to try and reinstate their rights in accordance with Article 38 of the Labor Code, by filing a suit with the courts.