Draft Law No. 13507: Cooperation with Individual Entrepreneurs May Be Recognised as Employment

The Ukrainian Parliament is considering Draft Law No. 13507, which may significantly change how relationships between companies and individual entrepreneurs (FOP) are classified. The draft sets out nine criteria to determine whether such cooperation actually constitutes employment.
If at least seven out of nine criteria are met, a court may classify the relationship as employment regardless of the presence of a civil law contract.

Key criteria:

1. Personal performance of work without the ability to subcontract or hire assistants.
2. Work under direct instructions of the client regarding both content and timing.
3. Client‑controlled work process – schedule, rules, reporting lines.
4. Integration into the company structure: participation in internal meetings, access to internal systems, or representation of the company externally.
5. Regular payments constituting at least 80% of the contractor’s total income from the same client over two years.
6. Reimbursement of expenses (e.g., fuel, communication).
7. Provision of social benefits (e.g., paid leave).
8. Provision of tools, equipment or materials by the client.
9. Client‑funded training.

Liability for misclassification

If a court recognises such cooperation as employment, the client (employer) must:

• formalise employment relations under the Labour Code;
• pay a fine equal to 10 times the statutory minimum wage (currently UAH 80,000) for employing staff without proper contracts, concealing full working hours, or paying “off‑the‑books” wages.
  For clients on the simplified tax regime (Groups 1–3), the first violation will result in a warning, but repeated non‑compliance within two years will trigger a UAH 240,000 fine.

Our recommendations to business:

• Review all existing FOP contracts for the presence of these criteria as current widespread practice could be risky: routine cooperation with FOP may be reclassified if the client controls how and when work is performed.
• Amend terms where necessary to emphasise independence (payment structure, work organisation, subcontracting rights).
• Assess HR and compliance policies to minimise misclassification risks: companies may need to revise contracts and working arrangements to preserve independence of contractors.

Legislative status

The draft law is under committee review in Parliament.