The Ukraine/Russia Conflict & Related Sanctions: 7 Pressing Questions Employers Are Asking

Updated March 18, 2022

Since we last reported on this topic, the war in Ukraine has persisted and Western countries have continued to ramp up sanctions against Russia. In light of this unfolding situation, employers with workforces in Ukraine and Russia have raised many employment law questions – some of them unprecedented. We address seven of these main questions below:   

  • Question 1:  In light of sanctions, how do we pay our workers in Russia?

There is no easy answer to this. The multi-lateral web of sanctions imposed by certain, mostly Western, countries, coupled with the Russian government’s own counter sanctions,1 have heavily restricted cross-border payments to and from individuals or entities in Russia. 

As an initial matter, any payment to or from Russia (even if made to nonrestricted individuals or entities) may violate the sanctions imposed by one country or another. Adding to this complication, Russian employment law invalidates compensation payments to employees by a third party who is not the employer of record. Thus, any employer attempting to make such payments should consult with counsel specializing in trade sanctions to determine the availability of sanctions-compliant payments, if any.

Indeed, certain countries have clarified that even non-traditional means of payment, such as via cryptocurrency, would be considered an illegal circumvention of the sanctions. For example, the U.S. Department of the Treasury2 as well as Japan’s Financial Services Agency3 recently emphasized that cryptocurrency payments are subject to their respective country’s sanctions rules. 

  • Question 2:  What if we cannot pay our workers in Russia?

Given the above severe difficulties in paying workers in Russia, employers are faced with difficult choices:  put them on leave, fire them, or shut down operations?

If the workers are independent contractors, the language of the independent contractor agreement will control the situation. Most standard agreements include force majeure clauses, but their applicability will depend on the exact contractual language. The usefulness of these clauses is questionable given that most Russian courts would refuse to classify current events in Ukraine as a “war” and may not excuse performance based on force majeure. Most such agreements will allow unilateral termination after a 30-day written notice, which is a more viable option. 

If the workers are employees, then the situation is much more difficult, as Russian law substantially limits employers’ ability to take adverse employment action against employees in Russia. Indeed, if an employer does not pay employees on time, it is liable for daily interest on any arrears, administrative fines, and, in the case of a long-term delay, even criminal penalties. Moreover, the employees have the option of stopping all work with a right to continuing pay until they are paid in full.  

Employers may consider declaring a “downtime” and suspend or freeze their operations. However, employers may only do so on valid grounds. The Ukraine conflict and the resulting sanctions may not constitute such valid grounds, in the eyes of the Russian authorities. Even if such valid grounds existed, the employer must pay each employee thwo-thirds of their average salary during the period of the “downtime.” Placing employees on unpaid leave is not a viable solution, because such leave, in order to be valid, must be at the request of the employees and not at the direction of the employer.

Any mass layoffs or the closure of operations should also be carefully considered, because Russian law imposes significant obligations in addition to certain written notices to the employees and government agencies. For example, terminating certain categories of employees (such as single mothers) is generally prohibited, and specific severance pay amounts are mandated, driven by the length of time it takes for the employees to secure other employment. The legal consequences of not following these procedures may result in a court reinstating the employee and ordering the employer to pay the average salary for the period of the forced unemployment. Moreover, such violations can result in criminal liability and administrative fines, which, depending on the circumstances, can range from RUB 30,000 to RUB 50,000 against the entity, and from RUB 10,000 to RUB 20,000 against company officials. In addition, the Russian authorities may consider a mass layoff or closure of operations to be a “deliberate bankruptcy,” which is a crime in Russia. Or, as the government has recently threatened, such measures may place private company assets under “external management,” which some consider to be a euphemistic phrase for nationalization.4

Because of these limited options under Russian law, some employers are encouraging, and in some cases actively assisting, workers in Russia to leave the country, and to continue their work remotely, from other countries, leading to a substantial “brain drain.”5 Of course, many jobs cannot be conducted in a remote manner, and, even if they could, pose a different set of challenges under the laws of the country where the worker conducts their work. See Question 7, below.   

  • Question 3:  Should we get our workers out of Russia? 

As mentioned above, many companies are considering getting their workers in Russia out of the country, which raises the question:  should they? 

This question implicates the scope of employers’ “duty of care” towards their employees. Different jurisdictions draw the lines of this duty differently. Under Russian law, arguably, there is no cognizable duty of care that applies to the current situation. 

However, multinational employers whose headquarters or principal place of business is located outside Russia, have to consider not only the law in Russia, but also the “duty of care” law developed in their own jurisdictions. Indeed, in the United Kingdom, European Union, Canada, and the United States, courts have considered imposing such a duty on a company’s involvement in “harmful activities” outside their home jurisdiction.6 Thus, employers located in such jurisdictions should consider if they may be hauled into court in those jurisdictions for violating their “duty of care” to their workers in Russia.    

Such a “duty of care” analysis may be particularly warranted in the event Russian authorities start targeting Western companies’ workers in Russia, imputing those companies’ publicly expressed political views to those workers. Indeed, this scenario became more plausible following the Russian government’s recent laws clamping down on news and free speech, and punishing anyone spreading “false information” about the war with up to 15 years in prison.7 While these laws appear to threaten media companies directly, other Western companies – especially those that made public statements criticizing Russia’s actions in Ukraine – should also carefully consider whether their workers in Russia could be retaliated against by Russian authorities, and whether their continued work for the company can now be considered “hazardous/dangerous work.”

Certainly, this analysis will be different for non-Russian, “expat” workers that the company sent to Russia on assignment. For those workers, the argument for repatriating those employees is relatively strong, and often, such assignments include repatriation options, with costs to be borne by the company. On the other hand, the removal of local, Russian workers poses a much thornier issue.    

To the extent employers relocate any of their workers in Russia (expat or local) to any other country for purposes of continuing their work remotely from their new location, please note that this creates its own host of legal issues (see Question 7 below). 

  • Question 4:  Should we get our workers out of Ukraine? 

This question also raises the scope of an employer’s duty of care towards its employees. In Ukraine, the threat to workers’ health and safety in continuing “business as usual” at the workplace is clear. Thus, an employer’s duty to ensure its workers’ health and safety while at work, paired with the current dangerous situation, indicates that Ukrainian workers should be allowed to seek refuge and move to safety as quickly as possible. Employers should pay attention to advice from the Ukrainian government in implementing contingency measures to provide for these workers’ safety. Most of the Ukrainian offices located within the conflict zone – which now includes the capital Kyiv – are currently closed, and employees’ ability to perform any work is questionable.  

Faced with Ukrainian workers who cannot work, employers are well-advised to handle such situations delicately and with sensitivity. In considering their options, employers will have to look at their employment contracts and policies in view of Ukrainian law and the unraveling situation on the ground. 

Many companies are also actively assisting workers to relocate to safety outside of Ukraine, including, for example, providing them with information on options for crossing the border and applying for asylum or refugee status in other countries, like Poland, Canada, and the United States. Such activities may very well go above and beyond any “duty of care” imposed on those companies under any law. In doing so, employers should communicate to the workers that they are acting purely on a humanitarian basis, and beyond the scope of the employer-employee relationship. Such communication may help mitigate any tort or other claim against the employer from an employee who, in following the employer’s guidance, suffers injury.  Moreover, employers should be careful not to assist workers leave Ukraine in violation of the recent military conscription order prohibiting men aged 18 to 60 years from leaving the country. 

  • Question 5:  Where can Ukrainian workers go?

For those Ukrainian workers who are able to leave the country, many countries have put in place emergency measures to grant them temporary protected status, and associated benefits, including work permits. 

The EU:  Even prior to the war, Ukrainian passport-holders were allowed to enter EU Member States for 90 days without a visa. As of March 4, 2022, the EU has allowed Member States to suspend normal entry rules and authorize temporary residency on humanitarian grounds for up to 3 years8 for: (1) Ukrainian nationals, as well as their family members displaced by the conflict; and (2) non-Ukrainian nationals of third countries and stateless persons who can prove that they were legally residing in Ukraine on the basis of a valid permanent residence permit and who cannot return safely to their country of origin.

Different Member States are in different stages of transposing this allowance into local law, meaning that Ukrainians will receive different asylum benefits in different countries. For example, Slovakia will provide temporary residency, with free health care and permission to work. In Germany, while temporary residence is provided, at least for now, work permits are not immediately available.

The UK:  The UK has loosened certain normal visa procedures for Ukrainian nationals, and has implemented the “Ukraine Family Scheme,” under which a special pathway to residency has been granted to Ukrainians with family already settled in the UK. For those without family in the UK, the scheme allows local “sponsors” such as “communities, private sponsors, or local authorities.” Those arriving under these schemes will be granted the right to live, work, and access public services in the UK for up to three years. 

Canada:  A “Canada-Ukraine Authorization for Emergency Travel,” which is expected to  open later this month, will allow an uncapped number of Ukrainians to enter Canada temporarily. This authorization will loosen many regular visa requirements and could allow applicants to extend their stay by at least two years, during which time they can work, attend school, and receive social and medical assistance. The Canadian government is also developing a special family reunification pathway for permanent residence, through which Canadian citizens and permanent residents can apply for sponsoring eligible family members who are Ukrainian. Moreover, removal orders of Ukrainians already in Canada are temporarily delayed.     

The United States:  The United States has not gone as far as these other countries in granting entry and benefits to Ukrainians. However, it has designated Ukraine as a country eligible for Temporary Protected Status (TPS). Under this designation, Ukrainians without proper documentation who were already in the United States as of March 1, 2022, or earlier, will be granted temporary relief from removal proceedings for 18 months, during which time they can stay and work in the United States. However, TPS does not apply to Ukrainians who are arriving into the United States after March 1, 2022. For those individuals, there is pressure on the U.S. government to provide Ukrainians authorization to travel to the United States and, upon arrival and screening, issue them humanitarian parole, which allows those facing urgent humanitarian needs to enter and stay in the United States without a visa. 

  • Question 6:  Where can Russian workers go? 

In contrast to the many new humanitarian avenues for emigration available to Ukrainians, there do not yet appear to be such new avenues for Russians. Thus, Russians will have to rely on traditional pathways of emigration, including for example, tourist visas, in fleeing to other countries,9 and then apply for asylum, if eligible. For example, Russians who have been persecuted by the Russian government for engaging in political protests against the war may have arguments for asylum in some countries.  

  • Question 7:  Once our workers are out of Ukraine/Russia, should we have them conduct remote work for us? 

Once the Ukrainian or Russian workers relocate to third countries (with or without their employer’s assistance), many employers may suddenly find themselves with workers in countries where they had no previous presence. Thus, if those workers conduct work remotely, employers should consider the implications of now having to comply with the laws of those third countries. For example, those workers will now be protected under the employment laws of those third countries, triggering certain new statutory benefits. Moreover, having those workers conduct remote work from those third countries may lead to a finding that the employer has now created a “permanent establishment” in those countries for corporate tax purposes.   

For workers who end up in a third country where the employer does have a presence, including, for example, a branch or a subsidiary, the employer may consider having that local entity hire the workers, or have them be seconded to the local entity temporarily. In any event, the employer will have to be mindful of the local employment laws of the third country. 

Even if the workers were previously considered independent contractors, the misclassification risks in the third countries may be far higher than under the local laws of the workers’ home countries. For example, whereas certain gig economy workers were properly classified as independent contractors while working in Ukraine, they might no longer be considered independent contractors in the UK.10

Thus, employers should carefully consider the third countries’ laws before having the relocated Ukrainians or Russians do work for them while in those third countries and obtain legal advice before any work is commenced. 


See Footnotes

1 Russia has, inter alia, restricted the transfer of funds from the Russian accounts of entities in “unfriendly countries”; restricted the cross-border transfer of residents’ own funds in foreign currency to their own accounts in foreign banks; and required that 80% of residents’ foreign exchange earnings be converted to rubles.  See Presidential Decree of February 28, 2022 No. 79 “On the application of special economic measures in connection with the unfriendly actions of the United States of America and foreign states and international organizations that have joined them” (in Russian); Presidential Decree No. 81 dated March 1, 2022 “On additional temporary economic measures to ensure the financial stability of the Russian Federation” (in Russian). These Russian counter-sanctions appear to have been recently loosened to allow for loans to Russian entities controlled by foreign companies in “unfriendly countries,” if those loans are used to support local businesses in Russia.  

2 See U.S. Treasury Dept., Financial Crimes Enforcement Network News Release, FinCEN Provides Financial Institutions with Red Flags on Potential Russian Sanctions Evasion Attempts (Mar. 7, 2022); Emily Flitter and David Yaffe-Bellany, Senators want to know if Russia can use cryptocurrencies to skirt sanctions, The New York Times (Mar. 2, 2022).

4 See Anton Troianovski, Facing economic calamity, Putin talks of nationalizing Western businesses, The New York Times (Mar. 10, 2022).

6 For UK cases, see e.g. Vedanta Resources Plc and Konkola Copper Mines Plc v Lungowe and Ors., [2019] UKSC 20 (Zambian villagers’ claims against UK-based Vedanta and its Zambian subsidiary can proceed to trial); Okpabi & Others, [2021] UKSC 3 (company arguably owed a duty of care to Nigerian citizens in respect of alleged environmental damage and human rights abuses by Nigerian subsidiary). For EU cases, see e.g. Milieudefensie & Others [C /09/365498/HA ZA 10-1677] and [C /09/330891/HA ZA 09-0579]; [C / 09/337058 / HA ZA 09-1581] and [C / 09/365482 / HA ZA 10-1665] (company liable for certain damages suffered through oil spills in Nigeria). For Canada cases, see, e.g., Nevsun Resources Ltd. v Araya & Others, 2020 SCC 5 (Canadian parent company may be liable for breaches of “customary international law” arising from alleged forced labor and torture by subsidiary in Eritrea). For U.S. cases, see, e.g., Jesner et. al. v. Arab Bank, PLC, No. 16-499 (2018) (holding that foreign corporations cannot be sued in the United States under the Alien Tort Statute, but leaving the door open for claims against U.S. corporations that are involved in harms abroad). 

7 See Anton Troianovski, Russia Takes Censorship to New Extremes, Stifling War Coverage, The New York Times (Mar. 4, 2022).

Under Russian law, no “war” has been declared; instead the Russian government insists that the events in Ukraine be described as a “special military operation.”  Consistent with this approach, on March 4, 2022, Federal Law No. 32-FZ amended the Criminal Code of the Russian Federation to introduce a number of new crimes, which include the following: 

  1. public dissemination (including, arguably, digital communications such as email and social media posts) of “deliberately false information” about “the use of the armed forces of the Russian Federation used to protect interests of the Russian Federation and its citizens, to secure international peace and safety”;
  2. “public actions” aimed at “discrediting the use of the armed forces of the Russian Federation used to protect interests of the Russian Federation and its citizens, to secure international peace and safety, including public calls to prevent their use”; and   
  3. appeals/calls by Russian citizens (who were previously found to be administratively liable for a similar act) on non-Russian entities to impose sanctions against Russia.

Similar amendments were introduced into Federal Law No. 31-FZ to the Code of Administrative Offences, which provides for administrative liability.

8 Commission Communication Providing operational guidelines for external border management to facilitate border crossings at the EU-Ukraine borders 2022/C 104 I/01, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ%3AJOC_2022_104_I_0001&qid=1646422292305#ntc5-CI2022104EN.01000101-E0005; Council Directive 2001/55/EC of 20 July 2001 on minimum standards for giving temporary protection in the event of a mass influx of displaced persons and on measures promoting a balance of efforts between Member States in receiving such persons and bearing the consequences thereof, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32001L0055

9 See Anton Troianovski and Patrick Kingsley‘Things Will Only Get Worse.’ Putin’s War Sends Russians Into ExileThe New York Times (Mar. 13, 2022).

10 See, e.g., Aslam and others, UKSC 2019/0029 (holding that rideshare drivers in the UK are employees, and not independent contractors). 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.