Ukrainian business urged to use 'internal investigations' to fill legislative gap

Whistleblower series: Ukraine

With labour law in Ukraine currently unable to address many of the forms of corruption common to the corporate world, Ukrainian companies are now being urged to establish their own internal investigation procedures and police themselves in matters of internal corruption and employee wrongdoing.

According to experts, Ukraine authorities may lack the tools and resources to investigate certain types of corruption, but it is in a Ukrainian-based company’s best interests to implement effective internal investigation systems that represent the best practices of the industry.

Why? Although Ukraine labour law does not include specific requirements for internal investigations, proactive action by companies to prevent and root out corruption can reduce the risk that its staff will be found guilty of violating Ukrainian law. In addition to legal risks, this policy also protects firms from financial loss and the incalculable cost of a diminished reputation.

In terms of reputation, the existence of visible and effective internal investigation procedures sends a message to the business community that the firm is committed to transparency and honest business practices. Similarly, these systems can also boost staff morale by creating an employee friendly environment where all personnel feel both secure and empowered.

But internal investigations are also necessary given the prevalence of corruption in the Ukrainian corporate world, which experts attribute to imperfect laws and a lack of investigative resources by certain authorities. Given Ukraine's problematic legal environment, Ukrainian companies have only a few guidelines they must follow in regard to internal investigations. For example, employee sanctions are limited to only two types of actions: reprimands and dismissals.

In the case of dismissals, this action can only be executed by corporate bodies with the legal power to hire personnel: the company director or its board of directors. But there is a statute of limitations on dismissals that makes efficient and expeditious internal investigations both valuable and necessary, particularly in cases of serious breaches.

Staff members guilty of misconduct can only be sanctioned within a month of a breach, a time limit that can be extended if the employee under investigation is on leave, but cannot be extended more than six months. Furthermore, only one sanction can be issued per case.

Even though Ukrainian labour law is mum on the nuts and bolts of an internal investigation, other legal considerations makes it essential that any staff member under scrutiny must be given a full opportunity to explain his actions and refute any charges.

Companies must be aware that sanctions – mainly dismissals – can be appealed, but that Ukrainian labour law does not have a mechanism for employees to lodge grievances other than the established system of labour-dispute resolution. For companies that have labour or works councils, these bodies can be used to mediate grievances and cooperate in investigations. But it should be noted that Ukrainian law differs from the labour codes of many western European countries in that it does not mandate works commissions. As a result, not many Ukrainian companies have them in place.

When collecting evidence as part of an in-house inquiry, companies are primarily advised to adhere to laws on data protection, since most investigations involve the collection and storage of data. Ukrainian law does not regulate the collection of data during internal investigations, but it does have strict guidelines on collecting personal data of employees. Hence, if an internal investigation is likely to impact or affect an employee's sensitive personal data, the company's data protection officer and the state data authority – the Ukrainian Parliament's Commissioner for Human Rights – should be notified.

The latter office must be informed within 30 days of the beginning of any investigation that collects sensitive personal data. The importance of adhering strictly to the general rules of data privacy and data collection regulations cannot be overstressed given that personal privacy in the Ukraine is a constitutional guarantee.

If personal data is not an issue in an investigation, companies are not required to inform authorities of a query, and may only be obliged to do so after an investigation has been concluded if evidence has been uncovered of state crimes, such as theft or fraud.

To protect themselves from data-protection restrictions in an investigation, companies are advised to warn employees at the start of an employment relationship that their professional communications (i.e. company email accounts and phone records) can be accessed in any investigation. They should be warned not to use professional accounts for personal use, and if they do so, they should mark all personal emails as "private" so that these communications can be avoided in an inquiry.

Other points to remember in an investigation: all investigations should be carefully documented and adhere to an established system and schedule; in interviews, the subject of the investigation should be informed that his professional data will be reviewed, transferred and stored and no personal data can be accessed without the employee's permission; and lastly professional email communications can be monitored so long as the personal privacy of the individual has not been violated.

In short, Ukrainian law may not demand that companies have effective internal-investigation procedures in place, but it is in a company's best interests to do so and ensure that all investigatory procedures respect every Ukrainian citizen's constitutional rights for privacy and data protection.

For more information on internal investigations in Ukraine, contact your regular CMS source or local CMS experts Evgenia Prudko and Mykola Heletiy.