Supreme Court: Employment Contract Terms Cannot Be Less Favorable Than Those in the Collective Agreement

The Supreme Court has emphasized that the conditions of employment in an individual employment contract (including salary) must be at least as favorable for the employee as those set out in the collective agreement. The employment contract may contain terms more favorable to the employee but cannot include conditions that are less favorable than those in the collective agreement.

This conclusion was reached by the First Judicial Panel of the Cassation Civil Court in a case concerning salary claims.

Case Summary

The plaintiff worked as the director of a municipal enterprise. Upon the expiration of the employment contract, he was dismissed. He brought the case to court, claiming that his salary had not been fully paid according to the terms of the collective agreement. Specifically, he argued that he had not been paid based on the minimum tariff rate for a 1st category worker, as stipulated in the collective agreement.

The first instance court and appellate court ruled in favor of the employer, reasoning that the plaintiff had agreed to the terms of the employment contract each time it was renewed and had not raised any concerns regarding partial salary payments. The contract terms for directors could only be modified by signing an additional agreement.

However, the Cassation Civil Court overturned these decisions, remanding the case for reconsideration and stating the following key legal conclusions:

• Under Article 5 of the Law of Ukraine on Collective Agreements, the terms of collective agreements are binding for the enterprises and the parties involved. Any provisions in collective agreements that worsen employees' conditions compared to current legislation are invalid and cannot be included in individual contracts.
• The terms of collective agreements cannot include conditions that worsen the situation of employees compared to the law, collective agreements, or any other agreements.
• The collective agreement stipulated that the minimum tariff rate for a 1st category worker is 120% of the minimum wage, with a coefficient of 1.15 for primary production workers.

As a result, the individual employment contract could not be the sole source of legal authority for determining salary terms in the case of the plaintiff, especially when a collective agreement existed but had not been fully implemented.