Category Archives: Employment

Employment Termination by Mutual Agreement

Yesterday we looked at termination of a Mongolian Employment Agreement due to an employee’s failure to meet disciplinary standards. In this post, we will look at another option for ending an Employment Agreement – termination by mutual agreement.

Where a company is not satisfied with an employee’s work performance but is not able to point to a series of breaches of discipline or an occurrence of serious breach and does not have procedures in place for a review Commission, the company has the option to directly negotiate with the employee, via a proposal to the employee to terminate employment. Mongolian law allows for termination of an Employment Agreement at any time if both parties agree. Often the agreement will entail some amount of severance compensation for the employee. Such severance compensation is not legally required but is required as a practicality to obtain the voluntary departure of the employee. Where a mutual agreement on termination is reached, it will legally be considered termination under the initiative of the employee, and the company’s risks of rulings against it at court are greatly diminished.

If employee agrees to such proposal, an employee must provide employer with written termination notice and may leave his/her workplace 30 days after presenting termination notice, unless the parties agree otherwise.

An employee’s written termination notice should come solely from employee’s own will and without improper influence or pressure from employer. So, if client will choose to negotiate with the employee, it is best to make sure the dismissed employee is happy with the termination deal and has no reasons to go to court against the employer. This is obviously most easily achieved by offering the employee generous terms of departure.

Breach of Employment Discipline

We have been posting series of articles describing the process for termination of an Employment Agreement for failure of the employee to perform. In short, it is not easy unless the company has a clearly defined and regularly used process for employee performance evaluation via a special review “Commission”. In practice, many smaller companies may not have such rules and will not have the time or resources to devote to such a review process by a formal Commission. If this is the case, what alternative options are there for a company to terminate an unsatisfactory employee?

If employee performance is an issue, our Mongolian lawyers advise our clients to look for patterns in breaches of employee discipline. Job “performance” and “discipline” are different grounds for termination under Mongolian law. Article 40.1.4 of the Labor Law provides that an Employment Agreement may be terminated at the initiative of the employer if the employee repeatedly “breaches employment discipline” or conducts a serious breach, as specified in the Employment Agreement, for which immediate termination of the Employment Agreement is stipulated. This may be useful as in many cases where an employee’s performance is inadequate there will also be breaches of discipline to consider.

Many Mongolian companies treat issues such as being late to work, poor work performance, or non-performance of assigned tasks as a breach of employment discipline under Article 40.1.4. Companies normally will specify within an internal employment handbook or rulebook a list of actions and behaviors which will be considered breach of employment discipline.

Where an employee has repeatedly breached employment discipline as outlined in the company rules the employer may choose to terminate the Employment Agreement. In making such determination, the employer must demonstrate multiple separate breaches of discipline. Each breach must be determined and proven separately. Each breach should be supported by a separate item of evidence. It is not mandatory for employer to impose disciplinary sanction on employee for every occurrence of breach, however the breach must be formally noted (usually via a disciplinary warning letter).

Under article 131.1 of the Labor law there are three types of disciplinary sanctions the employer may impose on an employee: a warning, decrease employee’s salary by up to 20 percent for up to 3 months, dismissal (termination of employment). Legislation does not require the employer to impose disciplinary sanctions in any particular order.

A Serious Breach under Article 40.1.4 includes actions or inactions which contradict the Employment Agreement obligations of the employee and which cause negative impact on the rights and interests of the employer such as damage of the employer’s property or harm to employer’s business or reputation. Actions which will be considered serious breach must be specified (listed) in the Employment Agreement. In the event of occurrence of any of the specified serious breach events, the employer may immediately terminate the Employment Agreement (a single occurrence is enough to support termination).

So, where an employee whose job performance is a problem also frequently comes into the office late or violates company policies regarding use of vehicles or communications with clients or co-workers, these disciplinary infractions may be used to build a case for termination of employment due to breach of discipline. Assuming all infractions are properly documented, this approach is less likely to be found to have been improperly applied by a court.

Termination of employment under Article 40.1.4 does not require severance compensation and there is no requirement for a notice period. Companies may consider termination under Article 40.1.4 in alternative to forming a Commission and doing a performance evaluation. A series of infractions and warning is all that is required to establish the legal case for termination.

What is the Mongolia Employment Performance Review Commission?

We had mentioned in our previous blog post about Employment Agreement termination due to lack of performance that a determination on non-performance must be made by a formal “Commission” of some sort. What is this Commission? How is it formed? Who should participate and sign off? What are its functions? We will review these questions below.

We note that in most cases it will likely not be appropriate to establish a review Commission and organize evaluation of skill or qualification for a single employee, regardless of whether management may think this employee’s performance has not been sufficient. As a matter of practical law in Mongolia, such a situation will likely be viewed by a court as discriminatory and likely based on personal reasons not truly related to job performance.

What exactly is the Commission required by Mongolian law? It is not simply a Human Resources professional or department. The company should have an established internal policy regulating the establishment and conduct of the professional review Commission, including appointment of members, number of members, rights and responsibilities of commission, operational procedures of commission, and other key points.

Within such policy there should be terms and regulations as to how employees’ skills or qualifications are to be evaluated for different jobs and positions taking into account the key skills and qualifications or requirements for different positions.

The Commission may take the form of an annual performance review conducted by Human Resources and other personnel duly appointed to participate according to the company’s rules for conduct of the Commission. During which the performance of each employee is evaluated along clear criteria set out for their respective position.  If an employee’s performance was found to be unacceptable by such Commission, the employee may be rightfully and legally terminated at initiative of employer. The Commission may include members of Human Resources department but should also include additional management personnel.

In practice, individuals in the following positions are often appointed as members of the Commission:

  • member of organization’s senior management);
  • head of unit/division/department;
  • employee’s supervisor;
  • HR manager(s).

The company Human Resources unit usually organizes the evaluation: assists and advises the Commission to plan and organize the evaluation, announces the upcoming evaluation, organizes actual evaluation process, combines results, presents results to the commission for review, etc. The Commission itself plans the evaluation, develops the tests and tasks for evaluation, reviews the results of evaluations, presents the results and reviews of evaluation to organization’s management, etc. Based on the evaluation results and Commission’s reviews the employer decides whether to promote, send to training, or dismiss respective employees. In most company policies there are two types of evaluation: scheduled and unscheduled evaluations. Scheduled evaluations may take place annually, or once in two or three years. It depends on organizations preference. Unscheduled evaluations usually take place at the request of employee: when an employee requests for promotion or for transfer to new job or position. Unscheduled evaluation may also take place at the initiative of employer: when employer proposes to employee a promotion or transfer to new job or position.

It is interesting to note that a spontaneous employer initiated review Commission will be considered valid for purposes of a planned promotion, but as mentioned above, will likely not be considered valid for purposes of intended termination.

Terminating Mongolia Employment Agreements for Non-Performance – Not So Fast

A client recently came to our Mongolian lawyers with a question regarding termination of an Employment Agreement (check out yesterday’s post to understand the differences between an Employment Agreement and an Employment Contract) for inability of the employee to meet performance expectations.

Article 40 of the Labor Law sets out the grounds for termination of an Employment Agreement at the initiative of the employer. Pursuant to Article 40.1.2, an Employment Agreement may be terminated at the initiative of the employer if it has been determined that the employee fails to meet the requirements of the job or position due to a lack of professional qualifications or skills. The Supreme Court of Labor Law as issued an official interpretation of this provision clarifying the meaning. The official interpretation states that the provisions of article 40.1.2 of Labor law refer specifically to an official finding and formal decision as to the employee’s condition as issued by a professional skill assessment “Commission” established by the employer organization (the company) or industry (in which company operates). The official interpretation of the law also states that the employer’s determination of the employee’s professional ability and skill for the job or position as unqualified for reasons such as absence of tertiary education or an education certificate shall not be grounds for the employer to terminate the Employment Agreement. In other words, the actual skills demonstrated on the job must be considered through a formal review process.

If the employer wants to dismiss an employee on the grounds of Article 40.1.2 of the Labor Law, the employer must obtain a proper evaluation of the employees’ skills or qualification and a decision of a Commission (as described above) that states that the employee is unqualified for the job or position. If such is not obtained and the dismissed employee is unhappy with the employer’s decision and goes to court, there is a high chance that the employer will lose in the court and will have to re-hire the employee or potentially pay additional damages in compensation due to illegal dismissal.

Proper termination of employment on grounds of Article 40.1.2 of the Labor Law should be done through the employer’s establishment of a professional skill assessment Commission. Such commission should properly organize an evaluation of skill or qualification of all employees with respect to their jobs and positions, including presentation to employees of official results of evaluation, obtaining each employee’s opinion on his/her evaluation results, presentation of commission’s decision, and so on.

If based on the official results of the review and commission’s decision the employer decides to dismiss the employee, employer must provide a written Termination Notice to the employee 1 month prior the termination. The Employer must issue a decision (usually a CEO’s order) specifying a period for the employee to hand over his/her duties, the date of employee’s last work day (same date as termination of Employment Agreement), and the amount of severance pay. Pursuant to the Labor Law, when terminating employment on grounds of Article 40.1.2 the employer must pay to employee a severance pay in the amount equal to at least one month average salary of employee.

Compliance with all proper procedures by the employer leading to the termination is important. In practice, employees dismissed on grounds of article 40.1.2 of the Labor law are frequently unhappy and often go to court against employer. In such case, for an employer who did not comply with all proper procedures as mentioned above (terminating the employee via the Commission process) this may result in a court finding in favor of the employee. If the employer is not able to provide clear documentary evidence that the employee indeed does not qualify for the job or position, the court is likely to find that the termination was based on personal (non-professional) reasons, resulting in a ruling against the employer.

Note that there are other options for an employer initiated termination under Mongolian law, which we will review in coming blog posts.

Mongolia Employment Contracts: One Size Does Not Fit All

A longstanding client of the firm which operates a company in Mongolia posed a simple question to our Mongolian lawyers, asking the best way under Mongolian Employment law to fire an employee who has not lived up to performance expectations. The question is interesting because it requires first determining what type of employee is to be terminated. In Mongolian law, not all employment relationships are equal. There are two difference kinds of employment in Mongolia each with different rules and different processes for termination of the employee.

The Labor Law of Mongolia provides for 2 types of employment: (1) Employment pursuant to an “Employment Agreement” and (2) Employment pursuant to an “Employment Contract”. It is important to understand that that these are two distinct types of employment under Mongolian law, subject to different rules, not simply a difference in translation.

In Mongolia, most employment relationships are pursuant to an Employment Agreement, which is basically described as an agreement to be employed for general purposes. While the actual role the employee performs may vary, no particular or unique skills are required on the part of the employee. This type of employment is defined by an Employment Agreement.

However, under the Mongolia Labor law, when an employer hires someone specifically for his/her high skills or unique talents an Employment Contract may be concluded, rather than a simple Employment Agreement. The Mongolian government puts out a list which sets out the positions subject to an Employment Contract.  According to the list, an employer may conclude an Employment Contract with Directors, Chief Executive Officers, General Managers, Division (department) Managers, and Chief (head) of Divisions (departments).  Other types of employees may only be hired pursuant to an Employment Agreement.

There are several differences between an Employment Agreement and an Employment Contract. Generally, an Employment Agreement for a permanent position is concluded for an indefinite term or if the parties mutually agree for a specified term. In the latter case, at the expiration of the term of the Employment Agreement if the parties do not propose its termination, and the employee continues to perform his/her work, the Employment Agreement is considered to be extended for the initial term.

Whereas, an Employment Contract may be concluded for up to a maximum of 5 years. When concluding an Employment Contract, among other terms, the parties must specify in the Employment Contract a detailed procedure for the evaluation of performance of the employee under the Employment Contract. When this is included in the Employment Contract, it is relatively easy to conclude upon evaluation of the employment contract whether the employee has sufficiently performed his/her duties. If the employee as performed sufficiently, the Employment Contract may be extended.

An Employment Contract must specify in detail all duties, responsibilities, rights, privileges, benefits of the employee, including a description of assets to be given under employee’s responsibility, the rules of possession, the use and disposition of such assets, final results to be achieved by the employee, the liabilities of the employee. Because under an Employment Contract the employer hires the employee specifically for his/her high skills or unique talents, such employee has more responsibility, accountability, rights, privileges and benefits than a “regular” employee employed under an Employment Agreement.

Expat Visa and Work Permits in Mongolia: Part III

We continue our guide to Mongolia visa and work permits. In this article we shall cover work permit visas (HG visa). (Don’t forget to also check out Part I and Part II)

Work permit visas (HG visa) are issued to foreign citizens, who work in Mongolia under labor contract. HG visas are valid for up to 1 year, depending on employer’s request. Holders of these visas are required to obtain residence card from Immigration Agency and work permit from Labor and Welfare General Agency.

There are several key considerations that employer should be aware of. A key influence is that a foreign employee quota is set by the Government of Mongolia every year for local and foreign companies in Mongolia. This usually ranges from 5% to 80% depending on the sector in question. Generally, however, the default quota for companies is 5%. Another key condition is that employer must pay a workplace fee. Employer must pay on monthly basis a workplace fee, equal to twice the minimum wage set by the Government, for every foreign employee they hired.

So, if you, an employer, have decided to hire a foreign employee then as usual you must first provide a visa invitation letter for your foreign employee. Firstly, employer must obtain a work permit letter from Labor and Welfare General Agency at least one month prior to employee’s arrival to Mongolia. Thereafter a request must be submitted along with required packet of documents (including a work permit letter) to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign employee’s country of residence, where he/she applies for HG visa. HG visas are valid for 183 days upon their issuance until the entry into Mongolia.

Upon arrival of foreign employee to Mongolia, employer must register him/her with the Immigration Agency within 7 days, obtain a residence card within 21 days and obtain work permit within 10 business days.

If necessary employer may apply for a single exit-entry, two-time exit-entry or multiple exit-entry visas (valid for either six months or one year) depending on employee’s or employer’s needs. HG visas may be renewed.

Also, there are other visa options for those who seek to engage in other types of activities, such as employment in NGOs, religious organizations and other. Therefore, companies inviting foreigners should carefully choose what visa suit their purpose before applying for visa.

Expat Visa and Work Permits in Mongolia: Part II

Continuing our guide to Mongolia visa and work permits, in this article we shall cover foreign investor visas (T visa).

Foreign investor visas (T visa) are issued to individuals, who are foreign investors or chief executive officers of a foreign invested company, or its branch or representative offices. These are valid for either 6 months or 1 year. Unlike multiple-entry B visas, holders of T visas are required to obtain residence permit (residence card) and therefore may stay the full period of their visa.

Like B visas, company inviting a foreign investor (or chief executive officer) must first provide a visa invitation letter. A request must be submitted along with required packet of documents (including a foreign investor card previously obtained from General authority for intellectual property and state registration) to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign investor’s country of residence, where he/she applies for T visa. T visas are valid for 183 days upon their issuance until the entry into Mongolia.

Inviting company must register the investor with the Immigration Agency within 7 days and obtain a residence card for the investor within 21 days upon their entry into Mongolia.

In case of need, inviting company may apply for a single exit-entry, two-time exit-entry and multiple exit-entry visas (valid for either 6 months or 1 year) during investor’s stay in Mongolia. T visas may be renewed.

Expat Visa and Work Permits in Mongolia

The Mongolian Government is known for generally enforcing a fairly flexible investment policy, with foreign investment well received in all sectors of the economy. So Many entrepreneurs seek partnership with foreign investors. Also, as there remains a notable shortage of skilled labor in Mongolia, foreign workers are therefore encouraged to fill these gaps. For entrepreneurs and companies considering inviting foreign investors/partners or employees to Mongolia, we will provide you a brief guide to Mongolia visa and work permits in several parts.

In this case there are three visa options available: business visa (B visa), foreign investor visa (T visa) and work permit visa (HG visa).

There are single-entry and multiple-entry B visas. Single-entry B visas are valid for a period of up to 90 days, and multiple-entry B visas are valid for either 6 months or 1 year. However, inviting company should take note that with multiple-entry B visas one time stay of a visitor should not exceed 30 days upon entry into Mongolia. In other words, visitor may enter Mongolia multiple times within the period of issued visa, but every stay may not exceed 30 days. Whereas visitors with single-entry B visa may enter Mongolia one time only and stay for a period of up to 90 days (depending on issued visa). B visa holders cannot legally work while in Mongolia – they may attend business meetings, conferences, exhibitions and other similar events. B visas may be sponsored only by a company duly registered in Mongolia. Therefore, B visas are generally intended for potential or current business partners and investors visiting Mongolia.

Company inviting a foreign partner or investor must first provide a visa invitation letter to such partner or investor. A request must be submitted along with required packet of documents to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign partner’s or investor’s country of residence, where he/she applies for B visa. Single-entry B visas are valid for 90 days upon its issuance until the entry into Mongolia, and multiple-entry B visas are valid for 183 days.

Inviting company is responsible for registering the visitor with the Immigration Agency within 7 days upon their entry into Mongolia.

Issues in Mongolia Employment: Employment of Minors

Foreign companies operating in Mongolia are sometime surprised regarding local laws on employment of minors. In Mongolia, employment of minors, is legally acceptable under limited circumstances and with high protections required in favor of the young employees.

There are a number of legislations regulating the child employment In Mongolia. There is the Labour Law, as well as The Law on Protection of Child Rights, and the relevant international conventions. Mongolia was one of the first countries to ratify the Convention on the Rights of the Child in 1990. Minimum Age Convention, 1973 (No. 138) and Worst Forms of Child Labour Convention, 1999 (No. 182) were also ratified by Mongolia.

In Mongolia, a person at the age of 16 is allowed to enter into an Employment Agreement.  In addition, a person of age 14-15 years of age may be hired under the consent of the parents or guardians for the purpose of acquiring vocational training or work experience.

However, minors are allowed to be hired only in approved sectors. The Minister in charge of labour issues recently renewed the list of positions at which minors not allow to be employed, namely alcohol, tobacco related, plastics industry, construction, hotel, nightclub, bar, casino gambling, entertainment venue and generally jobs with hazardous labour conditions.

Horse racing, a traditional Mongolian sport, often sees children as young as five riding horses in the races. The children train the horses at even younger ages. Such activities have come under criticism by international child protection organizations for being a hazardous activity for these children, but due to the traditional nature of the sport, it is not likely that it will be restricted.

The employer of a minor is obligated to protect the health of minor employees by providing a medical examination twice a year. Furthermore, it is prohibited to require the minor employees to carry or lift load exceeded the permitted amount, and to work overtime, on public holidays or weekends. Violations may result in fines to the employer in addition to a requirement to compensate the young employee for with.

Mongolian Employers Face Fines for Violation of Employee Rights to Unionize

We continue our series on the fundamental principles of labor law and the rights of the worker in Mongolia. As explained in a previous post, Mongolia became a member of the International Labor Organization (ILO) in 1969. This membership means Mongolia embraces the fundamental principles embodied in the ILO Constitution and the Declaration of Philadelphia, including the principle of freedom of association.

Ensuring the freedom of association and of collective bargaining is a fundamental principle recognized by Mongolia through the ratification of the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87), and the Right to Organize and Collective Bargaining Convention, 1949 (No. 98) in 1969.

Article 16 of the Constitution of Mongolia guarantees citizens freedom of thought, speech and expression, the right to favorable working conditions, to form a party, association or other public organization on the basis of social and personal interests and opinion, and to hold peaceful assembly. Furthermore, the discrimination and persecution of a person for joining a political party or other associations or for being their member is prohibited under Mongolian legislation.

The Labour Law (1999) sets out relations to be regulated by collective agreement and collective bargaining agreement, who may participate in them, how they shall be conducted and regulations on strike action etc. The Law on the Rights of Trade Unions (1991) deals with forming and joining unions, and prohibits discrimination due to union membership or non-membership. It also sets out the rights of unions and lays out measures to prevent employers’ interference with union activities.

Mongolian legislation provides for the right of employees to form and join organizations of their own choosing and enshrines the right of these organizations to freely organize their activities and formulate their programmes. Free and voluntary negotiation is promoted at all levels between employers or employers’ organizations without the intervention of the public authorities.

The Labor Law prohibits organizing a strike involving employees of organizations responsible for national defense, national security and public order. Public servants in general are entitled to join in unions, but banned from participating in strike action under the Law on Public Service (2002).

In recent years, labour disputes in related to the breach of freedom of association and collective bargaining have been increasing in the mining, industrial and construction sectors in Mongolia. There have been cases in which employees which are terminated due to organizing a trade union or being a member of trade union organize a strike to force collective bargaining.

A company taking action against employees or labour unions, or otherwise in breach of the freedom of association and collective bargaining face Sanctions. Penalties have increased under the newly adopted Law on Infringement and employers risk fines up to MNT 500,000 for violations.