A court may reduce the amount of compensation for average earnings for delayed settlement upon dismissal after 19 July 2022, guided by the principles of reasonableness, fairness, and proportionality – SC GC

The limitation of the period for calculating compensation for delayed settlement upon dismissal to six months, introduced into Article 117 of the Labour Code of Ukraine after 19 July 2022 by Law of Ukraine No. 2352-IX of 1 July 2022 “On Amendments to Certain Legislative Acts of Ukraine Regarding the Optimization of Labour Relations”, establishes the maximum limit of the employer’s liability, but does not remove the need to apply the principles of reasonableness, fairness, and proportionality when determining the amount of compensation.

When considering such disputes after 19 July 2022, a court must take into account the proportionality of the amount of compensation claimed for recovery in view of the specific circumstances of the case (in particular, the amount of overdue debt, its ratio to the employee’s average earnings, the conduct of the parties, etc.).

This conclusion was made by the Grand Chamber of the Supreme Court.

In the case at hand, based on a decision of the supervisory board of the joint-stock company, the claimant was dismissed from her positions as Director of Capital Construction and Member of the Executive Board, and was granted severance pay in the amount of six average monthly salaries, as well as compensation for unused leave. On the day of dismissal, the company did not complete the full settlement and only later repaid part of the outstanding payments due upon dismissal, but not in full.

Considering the employer’s actions unlawful, the claimant argued that it should be held liable for the delayed settlement upon dismissal.

The courts partially satisfied the claim. The appellate court, guided by the principle of proportionality and taking into account the conclusions of the Grand Chamber of the Supreme Court in its judgment of 26 June 2019 in case No. 761/9584/15- ц, reduced the amount of average earnings for the period of delayed settlement proportionally to the actual extent of the violation committed.

The panel of judges of the Civil Cassation Court of the Supreme Court referred the case to the Grand Chamber of the Supreme Court for the resolution of an exceptional legal issue concerning the application of the criteria for reducing the amount of average earnings recoverable due to delayed settlement upon dismissal under Article 117 of the Labour Code of Ukraine – criteria established by the Grand Chamber in its judgment of 26 June 2019 in case No. 761/9584/15-ц – to legal relations that arose or continued after 19 July 2022 (the date on which Law No. 2352-IX entered into force). 

In reviewing the lower courts’ decisions in this case, the Grand Chamber of the Supreme Court noted that payment of average earnings under Article 117 of the Labour Code of Ukraine is essentially not a fine or punitive sanction but a special type of compensation for the employee’s expected pecuniary losses.

Law No. 2352-IX amended Article 117 of the Labour Code, introducing a new version that limits the period for which average earnings may be recovered to six months.

From the content of this provision, it follows that the limitation of the period for calculating compensation for delayed settlement upon dismissal to six months, introduced by Law No. 2352-IX, sets a maximum threshold for the employer’s liability. This statutory limit does not nullify the fundamental principles of reasonableness, fairness, and proportionality, nor does it alter the compensatory nature of the relevant payment.

When considering disputes over the recovery of average earnings for delayed settlement upon dismissal after 19 July 2022, it is necessary to take into account the proportionality of the compensation claimed in light of the specific circumstances of the case. In carrying out such an assessment, courts must be guided by the criteria established by the Grand Chamber of the Supreme Court in its judgment of 26 June 2019 in case No. 761/9584/15-ц (in particular, the amount of overdue debt, its ratio to average earnings, the conduct of the parties, etc.) to ensure a fair balance of the parties’ interests in labour relations. A court may reduce the amount of compensation regardless of the extent to which the employee’s claims for unpaid amounts are satisfied. However, the total period for which compensation is calculated may not exceed six months.

Thus, the approach applied by the appellate court ensured a fair balance of the parties’ interests: it protected the claimant’s right to full settlement and adequate compensation while preventing the joint-stock company from incurring unjust and disproportionate financial losses.

Resolution of the Grand Chamber of the Supreme Court of 8 October 2025 in case No. 489/6074/23 – https://reyestr.court.gov.ua/Review/131035280.

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