Is It Still Possible to Terminate an Employment Contract Under Paragraph 3 of Article 50 of the Labour Code of the Republic of Kazakhstan?

Until 4 May 2020, Paragraph 3 of Article 50 of the Labour Code of the Republic of Kazakhstan (the “Labour Code”) was in effect. It granted employers the right to terminate an employment contract by mutual agreement with the employee, with compensation to be paid in an amount predetermined by the employment contract. As of 16 May 2020, this provision was removed.

This amendment has led to differing interpretations within the legal community regarding whether an employment contract may still be terminated on the basis of compensation that had been agreed upon before the deletion of Paragraph 3 of Article 50.

Some lawyers believe that employment contracts may still be terminated if the respective compensation clauses were agreed upon prior to the deletion of Paragraph 3 of Article 50. Others maintain that the removal of this provision precludes the application of such compensation agreements, even if they were concluded before the deletion.

The Ministry of Labour and Social Protection of the Population of the Republic of Kazakhstan published an official position stating that previously concluded compensation agreements remain valid and may be enforced.

The Supreme Court of Kazakhstan, however, expressed the opposite view, stating that such agreements have no legal force. The authors of this article agree with the Supreme Court’s position, including an additional reason explained below that was not mentioned by the Court.

1. Temporal Effect of Legal Norms

A legal provision enters into force upon the effective date of the normative legal act that contains it and ceases to apply once that act loses its legal force.

According to Paragraph 1 of Article 43 of the Law of the Republic of Kazakhstan “On Legal Acts,” a normative legal act does not apply to relations that arose before it entered into force. This means that agreements concluded prior to the deletion of Paragraph 3 of Article 50 retain legal force.

Exceptions to this rule include cases where retroactive effect is expressly provided in the normative legal act or its implementing act, or where the act eliminates obligations imposed on citizens or improves their legal position.

Given this provision, we believe that Paragraph 3 of Article 50 in employment contracts concluded earlier — where the employer had the right to terminate the contract by agreement with compensation — must be considered invalid and unenforceable. In our view, and in the opinion of the Supreme Court, such clauses worsen the employee’s position in comparison with the Labour Code.

The authors agree with the Supreme Court, but also consider it important to highlight another feature of the regulation of employment termination grounds, which further strengthens the argument that agreements concluded before the deletion of Paragraph 3 contradict the nature of employment law.

2. Grounds for Termination Must Be Explicitly Provided in the Labour Code

It is well-known that employers must cite an applicable ground from the Labour Code when issuing an act (order) on the termination of an employment contract. This follows from several provisions of the Labour Code, including Subparagraph 2 of Paragraph 1 of Article 23, which states that the employer has the right to “terminate employment contracts with employees in the manner and on the grounds established by the Labour Code.”

Thus, employers may not use grounds for termination that appear in the employment contract but are not provided for in the Labour Code itself.

Given this, can a compensation clause agreed upon before the deletion of Paragraph 3 of Article 50 still be used, even though this ground no longer exists in the current Labour Code? The authors’ answer is below.

Since the ground under Paragraph 3 of Article 50 no longer exists in the Labour Code, it can no longer be cited in the employer’s act of termination—regardless of the fact that it previously existed. The Labour Code establishes an exhaustive list of termination grounds, and only those grounds currently in effect may be applied.

Thus, after the deletion of Paragraph 3 of Article 50, it cannot be used in termination documents. The existence of a compensation clause in the employment contract cannot serve as a legal ground for termination without a corresponding provision in the Labour Code.

Nevertheless, there are various ways to interpret and apply these norms. The legality of termination always depends on the parties’ intentions and on the specific terms of each employment contract, as well as which grounds from the Labour Code are used. Therefore, each case must be analysed individually.

Our legal team can help find an optimal solution for such matters, taking into account an individualised approach to each case.