The Draft Revised Labor Law of Mongolia

During the meeting of the Government of Mongolia on 14 February 2018, the revised draft of the Labor Law (the “Draft Law”) was discussed and resolved to be submitted to the Parliament of Mongolia. The Draft Law was submitted by the Government of Mongolia to the Parliament of Mongolia on 26 March 2018. By enacting the Draft Law, related amendments are proposed to be made to the Violations Law, Law on Supporting Employment, Social Insurance Law, Law on Occupational Safety and Health, Minimum Wage Law, Law on Gender Equality, Law on Professional Education and Training, Law on Mediation, Law on the Civil Service, General Administrative Law and Law on Pensions and Benefits Provided by the Social Insurance Fund.

As of the date of this legal update, the Draft Law is currently undergoing the first round of discussions at the Standing Committee on Social Policy, Education, Culture and Science and has been included in the agenda for the ordinary session of the Parliament of Mongolia for the autumn of 2018.

The Draft Law contains the following principal changes that are different to the current Labor Law which was adopted in 1999 (the “Labor Law”):

1. Labor relations will not arise only by the establishment of an employment agreement

Article 2 of the Draft Law provides for the expansion of the regulated relationships and the scope of the law by providing for labor laws and regulations to become applicable upon the formation of the characteristics of employment relations whereby employment relations will be deemed to have begun. Article 26.2 of the Draft Law specifically regulates the points discussed above. On the other hand, Article 4.1 of the current Labor Law only provides for the regulation of the relations of the parties pursuant to the employment agreement and other employment relations that arise thereunder.

2. New legal terms and definitions are added to the Draft Law

Article 4 of the Draft Law contains the legal definitions of the new terms such as employment relations, part-time employee, mass redundancy, rotational shift working, labor interest disputes and labor rights disputes. For example, there is a concept of mass redundancy of employees in the current Labor Law, but there is no clear guidance on the number of employees it refers to. However, under Article 4.1.8 of the Draft Law, “mass redundancy” is defined as “when an employer that has 10-50 employees terminates 5 or more, employer that has 51-499 employees terminates 10% or more or when an employer that has 500 or more employees terminates 50 or more of their employees’ labor relations in a period of 90 days on grounds of the liquidation of a business, organization or the branches, units thereof or on the basis of reduction of workforce or abolishment of employment position.”

3. Union association, prohibition of workplace discrimination and other rights are included in more detail

Articles 5, 6, 7, 8 and 9 of the Draft Law provide for detailed regulation on the right of union association in employment relations, prohibition of unjust actions in employment relations, prohibition of discrimination in professional and employment relations, prevention of abuse in employment relations and the prohibition of forced labor. For example, Article 8.2 of the Draft Law which states that “committing sexual harassment defined under the Law on Gender Equality by the expression of sexual intent through words, gestures or in other ways without the consent of the employer, employee or third party is prohibited” is a regulatory provision that is currently not directly incorporated in the Labor Law.

4. Prohibition on the use of collateral deposit in employment relations

A new arrangement under the Draft Law to be highlighted is the provision which prohibits the use of collateral deposit in employment relations. Under Article 10.1 of this draft, it is stated that “The employer will be prohibited to demand and take security over money, valuable assets, or private documents such as diplomas, professional licenses, movable or immovable property certificates from employees or individuals at the beginning of employment.” There are currently no such provisions in the Labor Law on this matter.

5. Clarification of the fundamental rights and obligations of employers and employees

Articles 11 and 12 of the Draft Law clarify the fundamental rights and obligations of the employee and employer.

6. Clarification on the types and length of employment agreements

The Draft Law classifies employment agreements into (i) employment agreements, (ii) special condition agreements (same as the contract agreement under the Labor Law) in addition to the introduction of a new type which is a supply of labor force agreement.

Depending on the specific nature of the work of the employee, special requirements for employment agreements of the employees completing the following tasks and duties are regulated:

a) employment agreement for apprenticeship work;
b) employment agreement for part-time employees;
c) employment agreement for distance working employees;
d) employment agreements to be established with employees providing household services, herding services and other similar employees.

The Draft Law contains a clear definition of fixed-term employment agreements, and also provides that if the combined initial and extended period of a fixed-term employment agreement is more than 2 years, such agreement will be considered as an indefinite employment agreement, except for the cases of (i) a temporary employee appointed in work which will not impede the health of the employee until the recovery of their working capacity on the basis of the decision of the medical and labor inspection commission, or (ii) an employee covering for another employee who is on childcare leave.

7. Introduction of new regulations such as part-time, distance and rotational shift work

An employer is permitted to hire part-time employees and unless otherwise provided by law, such employee will have rights and obligations the same as a full time employee would.

Moreover, an employer may establish a distance working employment agreement with an employee and permit the individual to permanently complete their work duties from their place of residency.

Also, the conditions and procedure for the implementation of rotational shift working by employers of the mining sector who employ people to work in remote areas have been introduced.

8. Clarification of the amount of compensation for termination of labor relations

The Draft Law specifies that unless otherwise provided by law, the amount of the one-time compensation payable to the employee in the following instances is to be equivalent to the employee’s salary for 2-4 months depending on the duration of their employment at the relevant organization: (i) the liquidation of a business, organization or the branches, units thereof or on the basis of reduction of workforce or abolishment of employment position, (ii) determination that the employee is not qualified for his/her employment duties in relation to their qualifications, professional abilities or skills, (iii) determination by the medical and labor inspection commission that the employee cannot complete their employment duties because of his/her health, there is no other job position to transfer him/her to and regardless of the employer taking all possible measures, the employee is unable to work, or (iv) the permanent transfer by the employer of his/her ownership rights to another person. The compensation payable for mass redundancy and to retiring employees are also regulated in relation to the amount discussed above.

9. Changes in salary regulation

New regulations such as basing employees’ wages on skills and qualifications, introducing a system for the use of professional qualifications and standards on a national level and establishing a National Qualifications Committee have been introduced. Moreover, if the payday lands on weekends or on public holidays, it shall be transferred to the preceding working day. Other regulations of note include the designation of the immediately following working days after a public holiday as a non-working day in cases where public holidays fall during the weekends and the allocation of a minimum of 5 days of paid leave for employees whose wife has given birth.

10. Classification of labor disputes as interests or rights disputes

Under the Draft Law, labor disputes will be classified as interests or rights disputes depending on its subject matter and nature and detailed provisions on resolving each type of dispute have been introduced. Pursuant to this, rights disputes will be resolved by the business or organization’s labor dispute resolution committee, or tripartite labor dispute resolution committees of the soums, districts or by the courts. Interests disputes will be dealt with in stages of initial negotiations between the parties, moving on to labor intermediaries or labor arbitration, and the last stage which will consist of organizing strike action.

11. Amendments that will be made to the Violations Law by the enactment of the Draft Law

In line with the clarification of the rights and obligations of employers and employees by the Draft Law, provisions of the Violations Law in relation to the breaches of the Labor Law are proposed to be expanded and clarified under the Draft Amendment Law to the Violations Law. New breaches in relation to demanding collateral deposit from employees, unjust acts and omissions, and supply of labor agreements have been introduced by the draft law which are subject to penalties ranging from 250 to 3,000 units or MNT 250,000 to MNT 3,000,000 for legal entities. A specific violation of the failure of a business or organization to establish a labor dispute resolution committee has been added which is subject to a penalty of 300 units or MNT 300,000. Detailed violations in respect to child labor and strikes have also been introduced. Other existing breaches have been clarified and interestingly, there has been a decrease in some of the penalties applicable.

If you have any questions or comments regarding this legal update, please do not hesitate to contact us.

SOLONGO.B, Partner (solongo@gtsadvocates.mn, tel+976 331020)

KHULAN.B, Associate (khulan@gtsadvocates.mn, tel+976 331020)



gtsadvocates: 16 7 2018