The Grand Chamber of the Supreme Court in the judgement dated October 8, 2025 in case No. 489/6074/23 established one of the key legal positions in 2025 in disputes arising out of labour relations. The Grand Chamber emphasized that the legislative limitation of the period for calculating compensation for delayed settlement upon dismissal to six months does not deprive the courts of the right to reduce its amount, considering the principles of reasonableness, fairness and proportionality. This judgement of the Grand Chamber changed the previous approach of Administrative Cassation Court and raised guidelines for shaping judicial practice in disputes arising out of dismissal of employees.
Reasons for the Grand Chamber's new decision
The Article 117 of the Labour Code of Ukraine (hereinafter to referred as “Labour Code”) provides for the employer’s liability for delay in settlement upon dismissal. Specifically, if the employer had not made a final settlement upon dismissal for employees on time, the employer may be required to pay the dismissed employee average earnings for the period of delay. But the high courts’ practice formed opposite positions regarding the application of the above-mentioned article. Such differences appeared after coming into force the Law of Ukraine dated July 1, 2022, № 2352-IX “On amendments to certain legislative acts of Ukraine regarding the optimization of labour relations”. It was the first law which sets the limited period of six months for final settlement upon dismissal.
After introduction of such a restriction the court’s practice raised a question whether the court retains the right to influence the amount of compensation awarded, considering the circumstances of the particular case.
In judgement of Administrative Cassation Court dated June 20, 2024 in case № 120/10686/22 a panel of judges determined that changes in law do not deprive the court of discretion to reduce the amount of average earnings for the period of delay in settlement upon dismissal especially according to of Grand Chamber’s position which were formed in judgement dated June 26, 2019 in case № 761/9584/15-ц.
At the same time in the judgement of Administrative Cassation Court dated December 6, 2024, in case № 440/6856/22 the court determines the opposite conclusion, noting that setting the limitation is an independent mechanism of ensuring proportionality of employer liability. Thus, after coming into force the above-mentioned law there are no grounds for reducing the amount of compensation by the court.
Under such conditions, in law enforcement practice emerged the mutually exclusive approaches to interpreting the new version of Article 117 of Labour Code. It caused the impossibility of consistent and predictable application of this article. It was precisely these discrepancies that led to case № 489/6074/23 being referred to the Grand Chamber for the purpose of resolving an exceptional legal issue and ensuring the uniformity of judicial practice.
Case circumstances and the Grand Chamber’s position
The dispute in case № 489/6074/23 arrived from failure by the employer to make full payment to the employee on the day of dismissal. The claimant was dismissed from a lead position in a joint-stock company and all the payments which were due to her were paid late and not in full.
In her claim to the court, the claimant demanded, among other things, the payment of average earnings for the entire period of delay in settlement upon dismissal based on Article 117 of the Labour Code. The claim was partially upheld. The court of appeal used the principle of proportionality and considered the previous position of Grand Chamber in judgement dated June 26, 2019, in case № 761/9584/15-ц and reduced the amount of average earnings during the period of delay according to the extent of the actual violation.
Reviewing a case, the Grand Chamber concentrated on resolving an exceptional legal issue concerning the possibility of the court to reduce the amount of compensation provided for in Article 117 of the Labour Code, following the legislative restriction of the maximum period for its accrual to six months.
In their positions the Grand Chamber noticed that payment of average earnings for the period of delay in settlement upon dismissal according to Article 117 of Labour Code is not punitive or penal sanction by its legal nature, but is mostly characterized as compensatory and aimed at compensating for the employee's expected property losses. The court highlighted that limiting the period of its accrual to six months establishes the upper limit of the employer's liability, but it does not eliminate the need to apply the principles of reasonableness, fairness and proportionality as well as compensatory nature.
Moreover, the Grand Chamber emphasized that courts should assess the proportionality of the amount of compensation and consider the specific circumstances of the case when resolving disputes in this category of cases. In particular the amount of the debt, its ratio to the average earnings, conduct of the parties etc. are considered. In this regard the court may reduce the amount of compensation regardless of the extent to which the claims for recovery of sums due to the dismissed employee are satisfied, provided that the six-month statutory limit for accrual is observed.
As a result, it was precisely for these reasons the Grand Chamber departed from the conclusions of the Administrative Cassation Court on the amount of average earnings for the period of delay in settlement upon dismissal after a new version of Article 117 of the Labour Code came into force.
Key takeaways
The new position of Grand Chamber means for employers the obligation to make a full settlement on the day of dismissal remains unconditional, and violation of this obligation continues to entail liability in the form of payment of the employee’s average earnings for the period of delay. At the same time an employer has the right to justify the disproportionate nature of the amount claimed for recovery, considering the actual amount of the debt, its ratio to the employee’s average earnings and other circumstances of the case.
For employees this approach confirms the right to receive compensation in the form of average earnings for the relevant period in the event of a delay in settlement upon dismissal, but at the same time indicates that the amount of such compensation is not determined automatically and may be adjusted by court. At the same time, the total period for which compensation may be calculated may not exceed six months.
Thus, the new approach of the Grand Chamber of the Supreme Court aims to achieve a fair balance between the interests of the parties of labour relations and forms a more flexible and predictable model for the application of Article 117 of Labour Code in disputes related to the dismissal of the employees.