Employment agreement on hold: legal risks for the employer

The key approach to understanding the legality boundaries of suspension and the consequences of its violation was established by the Supreme Court sitting as the Joint Chamber of the Civil Cassation Court in the resolution dated May 5, 2025, in case № 758/4178/22.

When is a suspension legal?

The Supreme Court emphasized that the suspension of an employment agreement is permissible only if there is a real, proven impossibility to perform labor duties both on the part of the employer and the employee. For example, when production or organizational capacities have been destroyed, there is no access to production tools, and remote work is not feasible.

Thus, the fact of military aggression against Ukraine alone does not constitute an unconditional basis for an employer to suspend an employment agreement.

The key circumstances justifying suspension are:

• the employer’s inability to provide work, and
• the employee’s inability to perform work.

Only the simultaneous occurrence of these two circumstances allows for the use of suspension as a temporary legal construct.

In the referenced case, the Court established that since the beginning of martial law, employees (including the plaintiff) were set to work remotely. Later, the employer decided to suspend the plaintiff’s employment agreement. However, the enterprise continued its operations, so there were no objective reasons for suspending the agreement. Therefore, the suspension order was recognized as illegal and canceled by the court.

Payment of average salary as a consequence of illegal suspension

The Labour Code of Ukraine (hereinafter referred to as the LC of Ukraine) does not explicitly provide for compensation in the event of unlawful suspension. However, the Supreme Court emphasized that in such cases, by analogy with Article 235 of the LC of Ukraine, an employee is entitled to receive average salary for the period of forced absence.

This approach is applied by the Supreme Court, particularly in the resolutions dated May 28, 2025, in case № 492/800/23, October 31, 2024, in case № 761/14792/22, and January 31, 2024, in case № 161/8196/22. In these decisions, the Court found that suspension of an agreement without proper legal justification effectively removes the employee from performing their duties and is therefore legally equivalent to unlawful dismissal.

Accordingly, in cases of illegal suspension of an employment agreement, the restoration of the employee’s violated rights should involve both declaring the suspension order unlawful and reinstating the employment agreement, as well as the employer paying average salary for the period of forced absence.

Constitutional basis for the Court’s position

A key argument in favor of compensation is Article 43 of the Constitution of Ukraine, which guarantees everyone the right to work and to timely remuneration. If an employee was unreasonably deprived of the opportunity to work, it constitutes a violation of their constitutional rights.

The Court also referred to part 9 of Article 10 of the Civil Procedure Code of Ukraine, which allows the use of legal analogy or analogy of law in cases where disputed relations are not regulated by law. Therefore, courts apply Article 235 of the LC of Ukraine as the most legally similar norm.

Can the aggressor state be held liable for salary compensation in case of unlawful suspension?

Part 4 of Article 13 of the Law of Ukraine “On the Organization of Labor Relations under Martial Law” states that salary compensation for the suspension period must be provided by the aggressor state. However, this applies to lawful suspension only.

In turn, if the court finds the suspension unlawful, all expenses are borne by the employer who unjustifiably deprived the employee of the right to work.

The Supreme Court stated that an employer’s argument that payments should be made by the aggressor state cannot be accepted when the suspension is deemed unlawful.

Practical conclusions for employers

• Suspension of an employment agreement must be justified, documented and applied in exceptional cases only.
• The employment agreement cannot be suspended only in connection with military aggression against Ukraine.
• Suspension is lawful only if, at the time of the respective order, there were circumstances that made it impossible for both parties to fulfill their employment obligations.
• If the suspension is found to be unlawful, the employer will be obligated to compensate the employee with average salary for the entire period of forced absence.
• Salary compensation for the suspension period is borne by the aggressor state only in the case of a lawful suspension.