Welcome to our international quarterly newsletter. This Winter 2016 edition focuses on employment, pensions and benefits legal developments which took place internationally and in the EU, Belgium, China, Germany, Japan, the Netherlands, Russia, Spain and the UK over the past 4 months.
Legal Landscape 2016
Under the headline ‘building public trust’, Freshfields’ fourth annual Legal Landscape was launched in early January 2016, highlighting relevant trends in the legal market for the year ahead. Read more about the three areas where recent and forthcoming changes will have significant implications for global companies in every sector on our website, including data and human rights, two hot topics for the HR legal community.
Asia Employment Landscape 2016
“Change” was our predicted theme for employment law in much of Asia last year and this remains the case for 2016. The employment law and HR horizon across Asia is mixed – while some governments are aiming to introduce greater flexibility into the labour market, in other countries the recent or expected changes will place a greater burden on employers. Please follow this link to read our selection of key issues from 9 jurisdictions across the region where changes to the legal landscape may raise challenges in the year ahead.
New Data Protection Regulation
The new EU Data Protection Regulation (the so-called GDPR), was informally agreed on 15 December 2015. The text, the unofficial version of which is available here, promises greater harmonisation, e.g. through the ‘one-stop-shop’ mechanism, allowing businesses to deal with one lead regulator across the EU. Moreover, the new data rules:
- introduce new fines for non-compliance (up to 4% of worldwide annual turnover for the most serious offences);
- require companies that do large-scale processing to appoint a data protection officer;
- require businesses to notify the regulator of serious data breaches (e.g. hacks) as soon as possible;
- introduce stricter rules on getting consent to use customer and employee data; and
- extend to non-EU businesses that offer services in the EU.
The new rules are likely to come into force in early 2018, however it is wise for businesses to start preparing well in advance of that. Please read our full article for some ideas on what to consider when reviewing your global data policy.
New EU-US Agreement on Data Transfers
The “EU-US Privacy Shield” (formerly dubbed “Safe Harbour 2.0”) was announced on 3 February 2016, setting out a new framework for data transfers from the EU to the US. Please read our briefing on this very important development for businesses that previously relied on Safe Harbour for transatlantic data flows.
In addition, the official press release states that any company handling human resources data from Europe will have to commit to comply with decisions by European data protection authorities. This provision seems to give a lot of power to such local authorities in HR matters, including the possibility to request additional guarantees, potentially leading to a patchwork regime across Europe for global employers, at least until the GDPR comes into force.
Private messages at work can be read by employers (under certain conditions)
In Bărbulescu v Romania, (application no. 61496/08), the European Court of Human Rights has held that there was no violation of an employee’s right under Article 8 of the European Convention on Human Rights in circumstances where an employee had been dismissed for using the company’s internet for personal purposes during working hours, contrary to the employer’s internal policy. Please read our complete briefing concerning this judgment and its impact here.
Women on Boards Directive
On 7 December 2015, the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) Ministers met with the aim of reaching an agreement (the so-called ‘General Approach’) on the draft Directive on Women on Boards, which aims to improve diversity on company boards by reaching specific gender percentages. Ahead of the meeting it was noted that only 15 countries out of 28 supported the proposal as currently drafted. Despite new compromises proposed by the Luxembourg Presidency, Ministers were unable to reach an agreement at the EPSCO meeting.
It will now be up to the Dutch Presidency to move this dossier forward. However, this looks rather unlikely considering that the Netherlands was among the countries that opposed to the initial Commission’s proposal and maintained reservations to the Luxembourg compromises.
EPSCO Ministers have nonetheless agreed Council Conclusions on equality between women and men in the area of decision making. They notably call on the Commission to adopt a new Strategy for Gender Equality after 2015, which should be closely linked to the Europe 2020 Strategy.
Trade Secrets Directive
On 15 December 2015 (press release here), the EU Parliament and the EU Council (represented by the Luxembourg presidency) took a step forward with regard to legal redress against theft or misuse of businesses trade secrets, by reaching a “provisional agreement” on the main areas of political contention within the framework of the draft Trade Secrets Directive. Assuming that the wider EU Council also approves the draft and any remaining points, the final text could therefore be put to the vote in plenary in early 2016. Based on the prior drafts (the EU Council’s common approach, as opposed to the Parliament’s proposed amendments), potential areas of contention include whistleblowing and employee mobility.
The agreed rules strengthen the rights of whistleblowers reporting wrongdoings and in good faith revealing trade secrets for the purpose of protecting the general public interest (such as public safety, consumer protection, public health or environmental protection). In such cases, victims of theft or misuse of commercial secrets won’t have the right to redress.
As for workers’ mobility, according to the press release the directive will not limit employees' use of the experience and skills honestly acquired in the normal course of their employment.
According to the press release, both of these issues will now largely be left to national law.
Trilogue negotiations between the Parliament, the Council and the Commission are expected to be finalised by March, when the Parliament will vote on the compromised text, which will be the final version that will be adopted. If everything runs smoothly, the directive will be incorporated in domestic laws by early 2018, allowing for a two year implementation period.
New EBA Guidelines on Sound Remuneration within the Banking Industry
On 21 December 2015, the European Banking Authority (EBA) published the final guidelines on sound remuneration policies, together with an opinion on the application of proportionality. They are the product of a three-month consultation and intense lobbying by certain groups following the publication of a draft set of guidelines last March.
Consistent with its initial proposal, the EBA recommended legislative changes to CRD4 to ensure a uniform approach to proportionality and the potential exemptions for smaller and non-complex financial institutions or for individuals with low variable pay. However, the EBA’s recommendation is that any exemptions only cover deferral obligations and the requirement to use instruments and do not extend to the so-called “bonus cap”. The EBA is standing firm on the idea that the maximum ratio of fixed to variable pay should apply to all institutions and individuals in scope.
Within two months of the publication on the EBA website of the translation of the guidelines into official European languages, local regulators will have to state whether they intend to comply with the EBA guidelines (and explain the reasons for not complying under the ‘comply or explain’ principle). It has to be kept in mind that the EBA has no direct claim against financial institutions based on the guidelines.
The new guidelines will enter into force on 1 January 2017, replacing the 2010 version issued by EBA’s predecessor, the CEBS. Whether the EBA’s recommendations will be adopted and the legislation amended before the guidelines come into force will depend on political consensus between the Council, the Parliament and the Commission. Until 1 January 2017, the existing 2010 CEBS guidelines will continue to apply but supplemented by the published legal opinion on the acceptability of proportionality under CRD4. To add to the potentially conflicting regimes, local regulators may also issue their own guidelines in anticipation of the EBA guidelines coming into force.
Please read our recent client briefing which goes into more detail on key points of the guidelines and their implications.
UK CAC Decision on EWC
On 19 January 2016, the UK Central Arbitration Committee (CAC) issued its decision in the dispute between Emerson Electric’s European Works Council (EEWC) and the management of the company. The EEWC complaints were based on the fact that Emerson Electric (EE) announced to all employees its intention to spin off one business and to explore strategic alternatives for others in a press statement, without previously informing or consulting with the EEWC.
Though the EEWC chairman was notified shortly after the announcement, at the request to hold an exceptional circumstances meeting, EE denied specifying that restructuring decisions were not subject to prior consultation with the EEWC. In fact, EE argued that the restructuring project did not have just a European dimension but was global, therefore it fell out of scope. Moreover, management stated that no additional information on the spin-off was available beyond that which had been shared with all employees at the time of the announcement and that it would have briefed the EEWC at the annual meeting scheduled for later in the year. By way of contrast, the complainants criticised EE for not having provided the relevant information presented during the annual meeting prior to it, so as to give the EEWC enough time to thoroughly evaluate it.
The EEWC decided to bring the complaint before the CAC for breach of the EEWC agreement and of the TICE Regulations. In its decision, the CAC held that strategic decisions of acquisitions and disposals were not excluded from EWC competence, just as were not global matters: in fact, the EWC must be actively involved in project affecting workers located in the European Union or in the European Free Trade Agreement Area. Additionally, the CAC found that an exceptional circumstances meeting should have been convened and EE should have launched transnational consultations prior to the public announcement - regardless of whether the company had all the information on the consequences of its projects - however the CAC did not make any order in this respect.
Validity of non-compete clauses
Too broad or unreasonable non-compete clauses have long been held entirely void by case law in Belgium, hence unenforceable. However, two recent decisions by the Supreme Court held that non-compete clauses that go beyond what is acceptable regarding their duration or the material or territorial scope, are not necessarily to be considered entirely void and unenforceable. The judge may reduce the scope of the clause to what is acceptable, provided that it is possible and that the parties have expressly provided for such possibility. The decisions related to non-compete clauses in commercial contracts and the rulings will apply to non-compete clauses in service contracts with self-employed contractors. Whether this case law will also have an impact on non-compete clauses in employment contracts remains to be seen.
Nevertheless it is important to include severability clauses in the relevant agreement in case employment jurisdictions would follow these rulings.
Statutory minimum return on defined contribution plans adjusted
Employers operating a defined contribution (DC) pension plan need to ensure that on retirement the participants to the plan are entitled to at least the amount of the contributions, capitalised at the statutory guaranteed minimum rate.
Under Belgian law, this statutory minimum return has been equal to 3.25% on employer’s contributions, and 3.75% on employee’s contributions since 2004. Given the change in market conditions and the current low interest rates, it has become difficult for insurance companies to maintain their rates at the statutory minimum level, which could force employers to make up for the difference.
Employers will welcome the new rates of statutory minimum return which will be applicable on contributions paid as from 1 January 2016. The new rates will be calculated based on the average of the rates of 10-year linear bonds in Belgium, but may never be lower than 1.75% or higher than 3.25%. The minimum rate of 1.75% will be the minimum to be reached for 2016 and is expected to remain applicable for the next few years, given the current low level of rates of 10-year linear bonds. The same minimum rate will apply for both the employee and employer contributions to the DC plan.
Labour made less expensive
In order to incentivise recruitment, employers will be exempt from paying social security contributions for their first hire between 1 January 2016 and 31 December 2020. This exemption will be valid for an indefinite time. In addition, employers will benefit from reductions on social security contributions for each second to sixth employee hired as from 1 January 2016.
Separately, employers’ social security contributions will gradually decrease starting from 1 April 2016. The nominal rate for employers’ social security contributions will be reduced from 32.4% to 25% by 2018. In addition, employers will enjoy structural reductions on the social security contributions they need to pay for employees with a low income. The income cap under which employees are considered to have a low income will gradually be increased by 2019. Hence, more employees will be considered to have a low income, which will result in a larger group of employees for which employers can enjoy structural reductions of their social security contributions.
Enhanced protection for female employees
Female employee protection has become a hot topic in China, heated by the recently-released official news that the government will soon amend the existing one child policy, allowing for 2 children. It is believed that this change in policy may disadvantage female employees in the job market as they will have one more opportunity to enjoy pregnancy, maternity leave and one-year nursing period benefits, which will increase employers’ costs.
Meanwhile, legislators are trying to enhance female employees’ rights and protect their interests throughout the pregnancy and nursing period. The State Council issued the nationwide Special Rules on Labor Protection of Female Employees in 2012 (the State Rule), forming the fundamental legal protections for female employees. On 1 October 2015, the Regulation of Shanxi Province on Labor Protection of Female Employees came into force (the Shanxi Regulation). This is the first regulation at provincial level targeting female employee protection enacted after the State Rule. The Shanxi Regulation strengthens protection and introduces a few innovations, going beyond what is required by the State Rule and existing rules in other provinces:
- More restrictions on overtime work and night shifts for pregnant women
Where the State Rule provides that employers are not allowed to require pregnant women more than 7 months along to work overtime or night shifts, the Shanxi Regulation extends such protection to those who are within the first three months of pregnancy.
- More tolerance to mothers back to work after maternity leave
The Shanxi Regulation provides that employers should allow one or two weeks for the female employee to adapt to work after return from her maternity leave. Such wording is not entirely clear, it presumably means the employer should progressively put back the workload on female employees and in case of poor performance during such period of time, this cannot serve as grounds for termination of employment.
- New penalties for non-compliance of female employee protection regulations
The Shanxi Regulation also adopts a new form of sanction in addition to the penalties stipulated in the State Rule. Any employer infringing employees’ rights and refusing to remedy to the violation in accordance with the labour authority’s request will be publicly labelled as dishonest employer. Such negative record will impact the employer’s credibility as a business, not to mention its reputation as employer.
We expect other local governments may follow such trend and promulgate similar local legislation in the future to enhance female employee protection. However it remains to be seen whether this will have any adverse effect on the female employees or even worsen the gender discrimination in employment which widely exists in China's workplace.
Grace period on usage of labor dispatch ends soon
The Amendments to the PRC Employment Contract Law which came into effect on 1 July 2013 set out the restrictions on the usage of dispatched employees (similar to agency workers). Employers may only use dispatched employees in temporary, auxiliary or substitute positions and the dispatched employees must not exceed 10% of the whole workforce. The Interim Provisions on Labor Dispatch which came into effect in March 2014 further provided that employers must reduce dispatched employees to no more than 10% of the total workforce within two years after its entry into force. Such two-year grace period ends in February 2016, after which any company using more than 10% dispatched employees will be at risk of being sanctioned for such violation.
Certain local labour authorities such as the labour bureau in Guangdong Province have further issued filing forms to urge the employers to make changes and meet the requirement. In Shanghai, labour bureaus at district level are closely monitoring major companies which are using labour dispatch in significant excess of that statutory limit, and checking their adjustment progress on a regular basis. With respect to practice after the grace period, no implementing rules have been issued in Shanghai so far. But according to some officials in the district labour bureau, the municipal labour authority may release certain rules very soon in order to guide and strengthen the strict enforcement of the Interim Provisions on Labour Dispatch after the grace period.
A new "Temporary Employment Act" under discussion
One of the most discussed employment law topics in Germany is the envisaged reform of the German “Temporary Employment Act" (Arbeitnehmerüberlassungsgesetz – AÜG). On 16 November 2015 the draft bill of the Federal Ministry of Labour and Social Affairs entered “early coordination”, i.e. a period of consultation between the ministerial departments and the Chancellor’s Office. However, only a few weeks later the Chancellor’s Office stopped the inter-governmental consultation process and demanded sustainable amendments to the draft bill.
Main content of the draft bill
The recent draft bill provides several new regulations with the aim to restrict temporary work:
- Maximum hire term: The most important restriction is the introduction of a maximum hire term of 18 months. According to the draft bill, the maximum hire term refers to the individual temporary employee: “The same temporary employee must not be supplied to the same hirer for longer than 18 consecutive months”. Hire times prior to 1 January 2017 shall not be taken into account for the 18 months period. After 18 months, the provider may supply a different temporary employee to the same hirer without the previous supply counting towards the maximum period. It should, however, be possible to deviate from the maximum hire term by way of collective bargaining agreements of the sector of the hiring company or by way of works agreements entered into on the basis of such collective agreements.
- Equal Pay: Furthermore, the draft bill states – as agreed in the coalition agreement between the conservative parties (CDU/CSU) and the social democrats (SPD) – that the principle of equal pay shall apply no later than after nine months. After this period a temporary employee must not be paid less than a comparable employee in the organisation of the hiring company.
- Statutory definition of the term “employment relationship”: The draft bill provides that the German Civil Code is to contain criteria to distinguish between the supply of temporary employees and the deployment of external staff on the basis of service contracts. The envisaged regulation is highly disputed: eight criteria are identified that are meant to be of key importance in the overall assessment of whether someone works in an integrated manner and is subject to instructions (and is therefore deemed to be an employee). The draft bill, however, contains alleged key criteria that case law has clearly found not to be relevant (e.g. the use of third-party resources). So far in cases of doubt between temporary work and service contracts, it was common practice to apply for an official permit for the supply of temporary employees by way of precaution in order to prevent the consequences of an illegal supply of employees. On the basis of the draft bill such a “precautionary permit” will not prevent the consequences of a wrongful classification of the status of a temporary employee.. In future, an employment relationship shall arise with the hiring company if the relationship is not expressly stated as temporary work and a court classifies the relationship between the provider and the hiring company as temporary work.
- Strike: The draft bill also stipulates the prohibition to use temporary employees as “strike breakers” if a business is directly affected by a labour dispute.
- Co-determination: The draft bill provides for the obligation to inform the works council about “the term of the hire of temporary employees, their place of work and their work responsibilities”. The employer will have to submit inter alia the contracts on which the hire of external temporary staff is based. In addition, the draft bill provides that temporary employees must be taken into account when calculating thresholds under the law on works councils (e.g. with regard to the number of works council members).
The political discussion focusses on the catalogue of criteria to distinguish temporary work from work of external employees on the basis of service contracts. It is expected that the Ministry of Labour and Social Affairs will have to cut down the draft bill and will present a more employer friendly draft in the first quarter of 2016.
Pension rights for in-house lawyers
The reform of the law on in-house lawyers came into force on 1 January 2016. As mentioned in our summer 2015 edition, the reform enables company lawyers to remain in the Lawyer’s Pension Funds, ie entitles them to be released from the statutory pension scheme. Such release is generally considered as favourable due to the Lawyer’s Pension Funds traditionally paying considerably higher pensions. By this law, the legislator has corrected the decision of the Federal Social Court (Bundessozialgericht - BSG) from April 2014, according to which in-house lawyers were required to pay contributions to the employer statutory pension insurance instead of to the lawyer’s occupational pension insurance. As a consequence of this decision it was difficult for companies to attract lawyers as employees (e.g. for the legal department or the HR department). Since this decision had significantly negative impact on almost 40.000 in-house lawyers in Germany, the legislator was forced to react.
However, the new law does not only concern the pensions issue: for the first time, it expressly regulates the occupational group of in-house lawyers at companies. From now on, lawyers who are employed by companies and who work in a professionally independent and autonomous manner shall be admitted to the bar as so-called company lawyers.
But in-house-lawyers still remain excluded from the right to represent the employer in court in criminal, civil matters or matters of administrative fines.
Implementation of the EU Mobility Directive
The Federal Council recently approved the draft bill on the implementation of the EU Mobility Directive which aims to eliminate obstacles to mobility such as long vesting periods in pension plans. According to the new law the vesting period for pension entitlements newly granted from 1 January 2018 is to be reduced from five to three years.
On the basis of the EU Mobility Directive, pension rights of former employees may not in principle be treated differently than pension rights of active employees. Therefore, German lawmakers determined that for former employees, the pension rights based on periods of employment from 1 January 2018 are in principle also dynamic after they have left the company. This is very important for salary-linked pension schemes and overall pension entitlements and will often lead to increased expenses for the employer. Employers should analyse the potential risks of this new statutory regulation as soon as possible.
Abe's "Womenomics" legislation enacted
As part of his “growth strategy” to boost Japan’s economy, Prime Minister Shinzo Abe has been emphasizing the greater involvement of women in the workforce and promoting their status in society. Along this line, the government enacted legislation in September last year to embody the concept of “womenomics”. The following is a summary of primary impacts of such legislation on major employers operating in Japan.
An employer with more than 300 employees is required to:
- (a) have an appreciation of the current career status of women within the organisation (e.g. the ratio of female-to-male employees; the difference between men and women in the years of service to the organisation; female employees’ working hours) and analyse areas of development in this regard;
- (b) prepare an action plan to address the issues identified through item (a) above (the action plan must contain (i) a target period, (ii) numerical goals, (iii) a description of planned actions, and (iv) the deadline by which such goals are to be implemented), file the action plan with the competent local Labour Bureau, familiarise employees with the action plan and promote it; and
- (c) disclose certain information concerning the career advancement of women within the organisation (which can correspond to the information listed in item (a) above) approximately once a year, through the Internet or other appropriate means.
“Womenomics” in Japan is still in its preliminary stages and it will take some time before the concept truly filters through into society. However, this legislation is expected to improve the public’s understanding of women’s full participation in society.
As of 1 April 2016, independent contractors will no longer have to apply for a so-called “VAR” (a declaration of independent contractor status), but will either have to work on the basis of model contracts published by the Dutch Tax Authority or on the basis of a contract that has been pre-approved by the Tax Authorities, in order retain or have a self-employed status for tax and social security purposes in the Netherlands.
Please note that the Tax Authorities take a “substance over form” approach, which means that if the relationship between the parties is factually regarded by the Tax Authorities as an employment relationship, it will be reclassified as such. In that case the principal will be responsible for taxes and social security contributions with retro-active effect (including interest and fines). The contractor may in addition be able to claim labour protection.
A transitional arrangement will apply until 1 May 2017. Based on this arrangement, a “VAR” provided for 2014 or 2015 can still be used in 2016 and part of 2017 in the event that the contractor will continue to perform the same work under the same circumstances.
Tackling sham arrangements
A new Act, called the Labour Market Fraud Act (WAS), looks at tackling sham arrangements, strengthening the position of employees and preventing unfair competition between companies by underpaying their employees. The first part of the Act relating to the liability of principals for the payment of wages entered into force on 1 July 2015.
As we reported in our summer 2015 edition of the newsletter, the most important implication of this part of the Act is that every principal in a chain of principals will be jointly and severally liable for the payment of correct wages to employees if the employer and the principals lower in the chain do not comply with a claim of the employee for the payment of correct wages. Correct wage means the wage the employee is entitled to on the basis of a (collective) labour agreement and/or statutory minimum wage.
The second part of the WAS entered into force on 1 January 2016. In short this concerns the obligation for employers to pay at least the minimum wage to their employees, thereby not making any deductions or setoffs. The obligation to pay the minimum wage and minimum holiday allowance via a bank account and the rule that salary components and any withholdings and deductions will need to be specified on the salary slip. Dutch labour authorities will be monitoring whether the employers comply with these rules, and will make their findings public.
Working beyond the State pension age
New rules applicable since 1 January 2016 are making it more attractive to retain employees after their state pensionable age. In short, in respect of employees who reached the state pensionable age (currently 65 years and six months):
- the obligation for the employer to continue payment of their wages during sickness has been reduced from 104 to 13 weeks (and may even be further reduced after evaluation of the Act in 2018 to 6 weeks);
- the obligation for the employer to reintegrate a sick employee will only apply during the 13 weeks instead of 104 weeks. In addition, the obligation for the employer to seek suitable work with another employer and to draw up a plan of action does no longer apply;
- the prohibition for the employer to terminate a contract during sickness will only apply during the 13 weeks instead of 104 weeks (and may also be reduced even further to 6 weeks after the evaluation of the Act in 2018). The employer will need to substantiate that the employee is not expected to get better within 6 instead of 26 weeks and that there is no suitable work available within a reasonable period of time;
- the statutory notice period for the employer is limited to one month (which could otherwise be up to four months depending on the length of service);
- an employer is not obliged to honour requests for an increase or reduction of the number of working hours;
- the successive fixed term contract rule is more flexible; the total length of the service can be 48 instead of 24 months, and the maximum number of successive fixed term contracts is 6 instead of 3.
A transitional period will apply to employees who will reach the state pensionable age (65 years and six months) prior to 1 July 2016. In respect of these employees the prohibition to serve notice during illness and the obligation to continue to pay wages will continue to apply until 1 July 2016. After 1 July 2016 the term of 13 weeks will apply, unless this means that the total term of 104 weeks will be exceeded. No transitional measures exist in respect of the other rules.
Ban on Turkish employees and contractors
According to the recent Decree of the President of the Russian Federation on Ensuring National Security and the Application of Special Economic Measures Concerning the Republic of Turkey dated 28 November 2015, from 1 January 2016, Russian companies are prohibited from engaging Turkish citizens to perform work or render services.
The restriction does not apply to companies included in a special list compiled by the Russian Government, nor to those contracts entered into before 31 December 2015.
Collective redundancy: important case law
Further to the Supreme Court judgment of 20 April 2015, which declared the collective redundancy implemented by Coca Cola Iberian Partners, S.A. null and void (please see the report in our summer 2015 edition), the company started negotiations with the employees, either to terminate their employment relationships or to reinstate them. However not all of them could be reinstated under the same working conditions, due to the fact that some of the Spanish factories had already been closed. Thus, some employees were reinstated in a different factory and location, or with a different role.
In this context, some employees brought new claims against the company arguing that it had not correctly executed the judgment.
On 30 September 2015, the relevant court (the National Audience), stated that the closure of the factories by the company was reasonable and had been carried out in good faith, and declared the following regarding the execution of the judgment:
- For the employees from the closed factories that were reinstated in a different factory, involving a change of location, the court decided to implement a dismissal with the corresponding severance payment. However, it rejected to fine the company or to force it to pay any additional compensation for damages to these employees.
- For the employees who were reinstated with different roles, the court found that the readmission had been carried out correctly by the company. The professional groups and the other basic conditions (shifts, working hours, remuneration) were maintained, with just the tasks being different. The court considered that it could not have been otherwise for practical reasons.
- Finally, for another group of six employees whose home factory has not been closed but who were reinstated in other factories, involving a change of location, the court forced the company to reinstate the employees in their original workplace.
This seems to have (finally) settled the case. The court found it disproportionate to force the company to reopen the factories which had been closed on a reasonable basis, just to reinstate employees representing a minimum percentage of the original workforce of the factory. It comes to say that a reinstatement in its own terms cannot be abstracted from the circumstances of each case and that the conservation of the employment relationship is more important than the application of the rigid and traditional principle of invariability of working conditions.
The draft Finance Bill 2016 was published on 9 December 2016, proposing several changes relevant to the employment law landscape in the UK. The consultation on the proposals ran until 3 February, with the final details being confirmed in Budget 2016 and finally introduced in the Finance Bill 2016. Employment lawyers may be interested in:
- Proposals to simplify the tax rules in relation to employee share schemes;
- A crack-down on disguised remuneration schemes;
- Proposals to take forward changes in relation to employment status, following a review of that topic;
- A review of, and possible changes to, salary sacrifice arrangements in response to the growth of such arrangements; and
- The introduction of a new penalty of 60% of tax due to be charged in all cases successfully counteracted by the General Anti-Abuse Rule to create a disincentive from entering into abusive tax avoidance.
Junior doctors' contracts
A hot topic in the UK over the past few months has been the government’s proposed changes to junior doctors’ contracts, which - if imposed - are widely considered to result in a detrimental impact on junior (that is, all doctors other than consultants and General Practitioners (i.e. family doctors)) doctors’ terms and conditions of employment, most notably more anti-social hours and less pay (in general). 98% of junior doctors voted in favour of a strike. After the first proposed strike being called off at the last minute when the parties entered into negotiations, strikes did take place on 12 January and on 10 February. We await further news on revised proposals, and whether further strikes will be proposed if no agreement is reached on terms.
New TUPE case law
The Employment Appeals Tribunal (EAT) has held in ICTS UK Ltd v Mahdi and others that a tribunal can take into account events occurring after the putative transfer date in a TUPE service provision change when determining whether a client intended the activities to be in connection with a “task of short term duration” and therefore whether the service provision change rule under TUPE will apply (as Regulation 3(3)(a)(ii) provides an exception in relation to tasks intended by the transferee to be of short term duration).
ICTS had a contract to provide security at a university campus. The campus closed in 2012, but ICTS continued to guard the empty site. The site was purchased in mid-2013 by a purchaser who was planning a major redevelopment. ICTS offered to enter into a new contract but instead a new security company was engaged. The new security company argued that no relevant transfer had taken place, as ICTS had initially been providing campus security and that the property would become a building site pending redevelopment. They argued therefore that the construction project was a “task of short-term duration”.
The employment judge classified the relevant task as being provision of security for an unoccupied site. As the site would only remain unoccupied for the limited period in which renovations were occurring, there had been no relevant transfer under TUPE.
The EAT subsequently found that the employment judge had erred in ignoring later events, including the fact that no planning permission for a major building project had been granted and no building work had commenced as at the date of the tribunal hearing and held that subsequent events can be relevant in deciding what the relevant intention was and should be taken into account where relevant to guard against potential unfairness.
Cap on public sector payouts
The UK government has published the draft Public Sector Exit Payment Regulations 2016 which will impose a cap of £95,000 on the total aggregate value of exit payments made to most public sector workers. The draft regulations, which have been published for illustrative purposes, follow the government’s recent response to its consultation and will be made under a new section 153A-C to the Small Business, Enterprise and Employment Act 2015, to be inserted by the Enterprise Bill 2015-16.
The list of companies affected by this is provided by the Office for National Statistics and available online at this link.
Increasing focus on administrative steps required in redundancy situations
Although there has for many years been an obligation to disclose to the Secretary of State prescribed information about proposed redundancies a minimum period of time before the redundancies take effect (30 or 45 days, depending on the number affected), and it is well known that it is an offence not to provide the relevant information, there has recently been increasing focus on this, and in particular on high profile companies’ failures to do so. Notably, a case has been brought against three ex-directors of City Link in relation to their failure in the context of that company being put into administration at the end of 2014. Although the directors were acquitted, this shows a potential trend in the Department for Business, Innovation and Skills (BIS) taking an interest in this obligation – at a time when section 85 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 has removed the £5,000 cap on fines in the magistrates' court (such as a failure to comply with this notification requirement) for offences committed on or after 12 March 2015.
Please read our client briefing for more information on this.
Incentive exercises: update on change to code of good practice
The Incentive Exercises Monitoring Board has issued an updated code of practice and several “boundary examples” which illustrate when and how it applies to incentive exercises. The updated Code applies where an offer is made to a member after 1 February 2016. Please read our recent client briefing setting out the changes. They will be of interest to employers, trustees and advisers who are planning or implementing any measures that could be treated as incentive exercises.
Pension schemes and changes to contracting-out rules: do you need to take action?
The abolition date of the second tier State pension is approaching rapidly. From 6 April 2016:
- members of defined benefit pension schemes will cease to accrue contracted-out rights; and
- all defined benefit pension arrangements will cease to have contracted-out status.
To find out more about key issues employers and trustees may need to consider, please read our briefing.
Excepted group life policies - an alternative solution? What employers need to know
As Excepted Group Life Policies (EGLPs) fall outside the registered pension scheme regime, they have become an increasingly popular solution for employers to provide life insurance to employees. Our briefing provides a summary of the advantages and potential pitfalls associated with this approach.