One perennial complaint among Ukraine’s reformers is that no matter what labor legislation gets passed, it will be ineffective as long as much of the country’s workforce is employed unofficially, working in the shadows.
Without having contracts or legal work status, employers and employees in the private sector can sidestep Ukraine’s current, Soviet-era labor code – and its replacement, when it comes.
But the roughly one million employees at the country’s 3,000 state-owned enterprises find themselves in a legal loophole for a different reason.
Many of these employees operate under the purview of government ministries, use state funds in their daily operations and are regulated by the country’s Soviet-era labor code. But non-officer employees of state-owned corporations are not civil servants, and so current
Ukrainian anti-corruption legislation, which defines governmental bribery as improper payments made to civil servants, doesn’t apply to them.
No corruption prosecutions?
According to Ivan Khilobok, an adviser on questions of civil service reform at the Presidential Administration, applying equal treatment to state and private companies is a matter of principle: “There should be no difference between private companies, and (companies) that are owned by the state,” Khilobok said.
Khilobok added that a state-owned enterprise’s employees should be paid out of the company’s own profits.
But that leaves open a loophole in corruption legislation for employees at state companies. While they operate with state support, they cannot be held accountable under anti-corruption laws, and their workers cannot be prosecuted as recipients of official bribery under Ukrainian anti-corruption legislation.
Mikhail Samus, the deputy director of the Center for Army, Conversion, and Disarmament Studies, gives the notoriously corrupt Ukroboronprom, Ukraine’s state-owned defense manufacturer, as an example.
Ukroboronprom officials cannot be prosecuted for corruption, as they are not public officials, he said.
“In the anti-corruption legislation – it’s always about civil servants,” Samus said. “Workers at Ukroboronprom are not civil servants, so they don’t fall under anti-corruption legislation. It’s a state concern, but since they are not civil servants, they can go outside the bounds of this legislation.”
Modernized T-80 tanks undergo testing at a factory before being deployed for military service on July 13. (Ukrafoto)
In fact, many foreign international anti-corruption laws are stricter than domestic Ukrainian legislation on the definition of who constitutes a government official. For instance, under the
U.S. Foreign Corrupt Practices Act, which prohibits bribery in exchange for business with foreign governments, foreign officials are defined as anybody acting on behalf of the interests of a government.
U.S. federal prosecutors often target businesspeople who make improper payments in order to win contracts with state-owned enterprises.
Circular problem
In a sense, the problem is circular.
Workers at state-owned enterprises are subject to the labor code but not the civil service code, because state-owned enterprises are supposed to function like normal companies.
But these companies have a continual need for financial support from government ministries, draining public funds.
Khilobok said the companies need financial support from the government “due to corruption schemes” which get covered by the state budget via subsidies.
In turn, the government can’t prosecute those involved in corrupt schemes at state companies because they aren’t civil servants, and thus not subject to the civil service code, under which they could be charged with bribery.
Meanwhile, the labor code, which is skewed heavily in favor of workers, means it’s virtually impossible to oust corrupt managers from state-owned companies.
Experts say that additional regulations could be passed to solve the problem. However, until the underlying issues of low salaries and the lack of systematic prosecution of state corruption are addressed, the problem will likely continue.
