ArcelorMittal Temirtau fined for wages cuts: Prosecutor's Office of Karaganda

The prosecutor’s office of Karaganda along with Karaganda's Labor Inspection have completed a check into the legitimacy of the wages cuts affected by ArcelorMittal Temirtau in January. They made the check to determine whether the company's action complied with the country's Labor Code. The actions were found to violate the Code and ArcelorMittal Temitau was fined 594,600 tenge ($3,223) for illegally cutting the wages of its employees, Tengrinews reports.

Earlier, on February 2, the Kazakh metallurgical company announced massive wages cuts. The workers learned this from the decree signed on January 30 by Vijay Mahadevan, the company’s General Director, that introduced 25% wages cuts for the local personnel and 50% cuts for the foreign employees.

The company explained the need for the wages cuts with the complexity of the geopolitical situation, the overall slowdown of the region’s economic growth and the unfavorable situation at the foreign markets. This all led to financial difficulties within the company along with a shortage of cash on the company's accounts, they said.

The difficult financial situation of the steel giant was further exacerbated by devaluation of the Russian ruble, which made products of ArcelorMittal uncompetitive at the Russian market that is one of the main outlet markets of the company. Because of the depreciation of the ruble the cost of the Kazakh steel became significantly higher in comparison with that of Russian steel.

The company also said that the financial situation could get better and the company would be able to pay the remaining percentage of the wages if the Kazakhstan government finally repaid the 12 billion tenge ($65 million) of tax returns that had been due since 2010.

In response to the company's action, Kazakhstan's Trade Union of Workers of Mining and Metallurgical Industries applied to the prosecutor to question the legitimacy of these wage cuts. Consequently, the Labor Inspection of Karaganda Oblast (where Temirtau city belongs) started a check into the activities of ArcelorMittal Temirtau to determine the legitimacy of the company's action. "If the company's actions are found to be in breach of the laws steps will be taken to restore the employees in their rights," the prosecutor's office then said.

Following the completion of a check, the inspection declared that it detected violations of Kazakhstan’s labor laws. The prosecutor's office imposed a fine on the company amounting to 300 monthly calculation index (index used in Kazakhstan to calculate pensions, allowances and other social payments and also to increment fines and calculate taxes; for 2015 it has been set to 1982 tenge ($10.73)). “The company was fined 300 MCI (594,600 tenge or $3,223). February 5 is the deadline set for the company to comply with the laws regulating payment of salaries to employees, that is, to cancel the decree (of January 30)," chief prosecutor of the Department for Supervision of the Law Compliance within the Socio-Economic Sphere of the regional prosecutor's office Bekzat Akhmetov said.

According to the Article 23 of Kazakhstan’s Labor Code that describes obligations of employers, a company is obliged to fulfil prescriptions of the Labor Inspection.

Otherwise, Kazakhstan government may deprive the company of all the state benefits. Kazakhstan’s Deputy Prime Minister Berdybek Saparbayev spoke about it during his working visit to Karaganda (a Kazakh city near Temirtau). “We will going to take measures. The state has always cooperated with ArcelorMittal Temirtau company and provided its full support in terms of state benefits. The company should also cooperate with the state, especially in regards to its employees. Now the company is saying that it is not going to sign any memorandums on social support to the region. It this case we will raise the question of cancelling all the benefits that the company receives from the state,” Berdybek Saparbayev then said.

Writing by Assel Satubaldina, editing by Tatyana Kuzmina