Labor and Migration Audits in 2010

Julia Borozdna
Head of employment and migration law
Pepeliaev Group 

Unfortunately more and more companies are finding these days that labor and migration audits are part and parcel of the business landscape in Russia. The authorities have publicly proclaimed their intention of protecting business. However, to date such statements of intent have not been matched by actions.   

Numerous government and municipal authorities have declared their support for a major goal of the Russian government and core component of on-going administrative reforms — protecting business from excessive interference and countless checks. But how far are these declarations and goals actually being pursued by the Russian authorities?

Previous legislation to protect the rights of businesses during audits conducted by the state and municipal authorities proved ineffectual. It was replaced in May 2009 by a new law that advocated a more lenient regime.

Moreover it was intended that the new law on the protection of the rights of legal entities and sole proprietors during state controls (supervision) and municipal control (“the Law”) would fully come into force from Jan. 1, 2010. However, amendments to the Law adopted at the very end of 2009 delayed the entry into force of the Law for another year — until Jan. 1, 2011.

As a result, previous legislation on such audits lost effect (from May 1, 2009), while provisions of the new Law concerning types of audit, their subject matter, grounds and timescale do not apply. In other words, until Jan. 1, 2011 at the earliest, there will be no specific legislation to protect the rights of companies and sole proprietors during state audits in many areas (including labor and migration law). Inevitably, this provides room for abuse by the corresponding supervisory agencies.

Andrei Slepov
Lawyer in employment
and migration law
Pepeliaev Group

For example, provisions in the new Law on audit timescales that only become effective in 2011 established stringent controls on such audits, up to and including invalidation of the results if these rules were breached. Now there is no such protection for business until next year.

One has to assume that audits conducted by labor inspectorates in 2010 will be subject to the Labor Code and administrative labor and employment regulations. Administrative regulations may be applied to implement state controls and supervision over compliance by foreign citizens and employers with Russian migration legislation (effective from June 28, 2009). However, these regulations apply primarily to the rights of the supervisory authorities, rather than to the rights of businesses during audits, and accordingly do not offer enough protection.

However, there is some positive news for employers. The Prosecutor General’s Office published the unified schedule for audits for 2010 on its web site (www.genproc.gov.ru), which contains, inter alia, information on labor and migration audits. Previously information on planned audits was not publicly available. Now businesses can easily check whether they face planned audits in 2010 and also the area of the audit. However, the supervisory authorities may still conduct extraordinary audits not included in the annual plan.

So it would appear to be another case of two steps forward and one step back: The most favorable provisions for business on new audits in the Law will not be applied this year, which is an undesirable development and runs counter to the pro-business rhetoric of governmental circles. We will only learn from court practice this year what regulations and policy will actually be applied.