There are times in life that one's faith, be it in human nature or of a more humble kind, must be held resolute in spite of events that challenge one's beliefs. Notwithstanding, change is inevitable. There are a number of geo-political events which, regardless of one's persuasion, will impact the EPI landscape both positively and adversely.
In Japan, the Act to Promote Women in the Workplace in force recognises the structural and cultural challenge facing its economy, demanding new responses and sweeping changes for public and private sector employers with immediate impact. Meanwhile in Singapore, the Tripartite Alliance of Fair and Progressive Employment Practices has introduced measures to assess and promote fair employment opportunities for the indigenous population, signalling potentially adverse consequences for employers failing to meet certain criteria.
The UAE passed a landmark ruling on Article 18 penalty payments with ramifications for employers' end-of-service gratuity entitlements. In the UK, the EU Market Abuse Regulation kicked into force on 3 July 2016 with significant impacts across UK listed companies and a considerably expanded scope compared with the former Market Abuse Directive. Across the European market more generally, The Trade Secrets Directive was passed by relevant authorities, placing a two year window on implementation of its provisions. Further, the General Data Protection Regulation has also been approved and comes into effect in 2018. Both changes require a level or preparedness and action now by employers.
Over in Hong Kong, the Equal Opportunities Commission has published recommendations to the Government in relation to discrimination law with areas highlighted for immediate redress. Alongside, a parallel consultation is underway concerning policy options for regulating working hours in Hong Kong, further signalling a change in approach to employer relations. Lastly in Australia, the commodities rout continues to place a pressure on operators and we offer some commercial and practical tips in the context of modern awards and enterprise bargaining agreements.
Collectively, these changes are perhaps a reflection of the austere times many regions continue to face, and the socio-political and economic will to generate a brighter future. The key is to act now and in advance of measures being implemented to mitigate risk and ensure business readiness – uneasy lies the head that wears the crown.
Finally, our global EPI practice is pleased to launch the 2016 edition of our flagship publication, the Asia Pacific Employment Law Guide. Compiled by our network of Herbert Smith Freehills employment lawyers and local counsel, the Guide covers 21 jurisdictions and has become the go-to publication for in-house counsel and HR leaders as they navigate the often complicated, constantly changing employment laws across the region. Click here for further information including details on how to register for the London launch event on 14 June 2016. Our Asia EPI team also produce a monthly e-bulletin - please click here to subscribe.
1. Australia: the challenge of reducing labour costs in the resources sector
Low commodity prices look like they will continue to challenge Australia's resources sector for some time to come. Many operations conceived during the commodities boom and the businesses that serve them are confronting the reality that a step change in the cost of production - including labour costs - is required.
Achieving this step change is a significant challenge. However, there are options to consider:
- Modern awards and enterprise agreements contain minimum standards which impede options for change. But there are usually many options available to change the way things are done. Implementing change through assertive consultation and dispute resolution procedures is a real and viable option.
- Enterprise agreements can be varied before their normal expiry, with employee agreement (in the form of a simple majority in an employee ballot). Employees of contractors may be particularly motivated to agree a variation where the variation is needed to maintain competitiveness and to navigate their employer losing their contract.
- Re-negotiations of enterprise agreements at the end of their nominal term present the opportunity to achieve transformational change, provided management is well-prepared and clear on the leverage points and objectives. Protected industrial action will be available and employers should plan to minimise its impact.
- A rarely used option is to seek termination of agreements by the Fair Work Commission after the agreement’s normal expiry date. In the resources sector, there has been a recent tribunal decision to terminate an enterprise agreement applying to Peabody at its Coppabella and Moorvale mines. The company had insourced work from Sedgman, making Sedgman’s enterprise agreement (negotiated at the height of the boom in 2011) binding on Peabody. The FWC found that the coal price, having fallen by more than half, as a relevant factor in support of termination.
Australia’s prescriptive and, in many respects, inflexible industrial relations system is a reality of doing business here, but gains in the form of reduced costs are possible.
2. Europe: developments in EU laws on trade secrets and data protection
- The Trade Secrets Directive was passed by the Council of Europe on 27 May 2016. It will come into force 20 days after its publication in the EU Official Journal and member states will then have a two year window in which to implement its provisions. It will introduce a harmonised regime for the protection of trade secrets, aimed at encouraging cross border R&D as well as providing more security for confidential information within the EU. Our London office is hosting a seminar on trade secrets and the impact of the Trade Secrets Directive on 1 July 2016. Click here for further information including registration.
- The General Data Protection Regulation has now been approved and published in the EU Official Journal and will come into force on 25 May 2018. New standards for consent, enhanced information rights and greater sanctions for data processors and controllers indicate a potentially significant impact for employers; organisations should take steps now to prepare for the changes. A detailed briefing will be available shortly - please contact us if you would like a copy.
- There have been further developments of concern to employers in relation to cross-border transfer of data. Our last e-bulletin reported on the proposal for an EU-US Privacy Shield providing a new framework to facilitate the transfer of EU personal data to the US, following an ECJ ruling that the old Safe Harbour framework was invalid. The Article 29 Working Party (ie, the EU data protection regulators) has now assessed the proposal and concluded that, while there are significant improvements compared to the Safe Harbour decision, it still has strong concerns on both the commercial aspects and the access by public authorities to data transferred under the Privacy Shield. It has urged the Commission to resolve these concerns and improve the clarity of the documents before approving them. Similar concerns have been expressed by the European Data Protection Supervisor and European Parliament. Meanwhile, the Irish Data Protection Commissioner has made a referral to the ECJ on the legal status of one of the alternative data transfer mechanisms, the EU's Standard Contractual Clauses. Although the UK Information Commissioner's interim statement post the Safe Harbour decision noted that other transfer mechanisms such as Standard Contractual Clauses and Binding Corporate Rules could still be used, it also commented that the judgment inevitably cast some doubt on their future given that data transferred under them are also liable to be accessed by intelligence services, whether in the US or elsewhere. Unfortunately, this leaves data controllers with continuing uncertainty in the meantime.
3. Germany: changes to maternity rights
Recently, the German Federal Cabinet approved the draft law which provides for new regulations on maternity protection. The reform will become effective as from 1 January 2017.
The key aspects of the new draft law are as follows:
- the period of protection (during which women cannot work) after the birth of a child with disabilities will be increased from eight to twelve weeks;
- a special termination protection for women who suffer a miscarriage after the twelfth week of pregnancy will be implemented;
- under certain circumstances, the Maternity Protection Act will not only apply to women in an employment relationship, but also to pupils and students, and during internships.
Actions for employers
As from 1 January 2017, companies with employees in Germany should be aware of the new law when handling with maternity protection cases.
4. Hong Kong: consultation on standard working hours proposals and recommendations for discrimination law reform
- The Standard Working Hours Committee has released a discussion paper for public comment on policy options for regulating working hours in Hong Kong. Currently, there is no statutory restriction on the number of working hours for employers aged 18 years or over and no legislatively prescribed rate of pay for overtime worked. Following a first-stage consultation and survey, the Committee is now seeking public comment by 24 July 2016 on a dual-pronged approach, comprising:
- the "big frame": legislation requiring parties to enter into written employment agreements specifying working arrangements, including for example working hours, rest breaks and the method of calculating overtime pay (which may include no overtime pay);
- the "small frame": involves additional rules for grassroots employees with lower income, lower skills and less bargaining power, to regulate weekly working hours and mandate overtime pay.
Comment is also sought as to whether other policy measures (eg, voluntary guidelines for individual sectors) would be more appropriate.
- The Equal Opportunities Commission has recently published recommendations to the Government in relation to discrimination law. Some of the key measures flagged as high priority and in need of action include:
- disability discrimination: introducing a distinct duty on employers and others to make reasonable accommodations for persons with disabilities and repealing the "unjustifiable hardship" provisions;
- harassment: holding employers liable if they fail to take steps to prevent harassment of their employees by a third party (where the employer has notice of the harassment) or of others in a common workplace; and
- protection for women: introducing a statutory right for women to return to their previous role (or, if that no longer exists, a suitable alternative role) on their return from maternity leave and expressly prohibiting discrimination on the ground of breastfeeding.
The EOC also called for research and consultation on proposals to improve legal recognition and protection from discrimination for unmarried couples (whether heterosexual or homosexual) in a cohabiting relationship.
5. Japan: Act to Promote Women in the Workplace in force
As part of the Abe Government's strategy to encourage more women to join the workforce, the Act to Promote Women in the Workplace was passed in August 2015 and came into force on 1 April 2016.
The Act applies to both the public and private sectors. It sets out the following obligations for employers who regularly employ more than 300 workers:
- to be aware of the company's current status in promoting women in the company and to analyse the relevant issues and challenges; for example, in the proportion of women out of all new recruits and out of all employees in managerial positions, the disparity between men and women in their length of service, and issues relating to or arising from their work hours;
- to formulate a plan of action that sets out: (i) the term of the plan; (ii) (numeric) targets; (iii) what to do; and (iv) when to do it. The plan should be accessible to all workers, including non-permanent staff, and should be made public;
- to make a filing at the local Labour Bureau about the action plan;
- to make public the information set out in the first bullet above.
Actions for employers
Employers who regularly employ more than 300 workers should be complying with the above obligations immediately.
Employers that do not regularly employ more than 300 workers are encouraged to make an effort to do so.
6. Korea: proposed changes to employment law derailed
Our last e-bulletin discussed proposals to amend Korean labour laws (summarised here), introduced by the Park administration in September 2015. Employers should note that the proposals were not voted on and were automatically disposed of following the formation of the new Korean National Assembly in April's general election.
The new Korean National Assembly commenced its term on 30 May and the Opposition parties, who were strongly opposed to the proposed amendments, won a majority.
This makes it extremely unlikely that the proposed amendments will ever become law even if the ruling party tables the bills again.
7. Russia: secondment provisions now in force
On 1 January 2016 the provisions of Russian law on employee's labour arrangements (secondments) adopted back in 2014 entered into force.
The new provisions of the Labour Code now officially establish general prohibition on arrangements under which employees perform their work upon their employer's instruction in the interests and under the management and control of an individual or a legal entity that is not their employer (the 'customer'). At the same time the Labour Code and related legislation provide for a specific regulation on where such arrangements are allowed.
In particular, the provision of employee's labour can be carried out by:
- accredited private employment agencies in accordance with Chapter 53.1 of the Labour Code; or
- other legal entities if the provision of employees is between related persons, including (a) affiliates, (b) parties to shareholders’ agreements and (c) by a shareholder bound by the shareholders’ agreement (as employer) to joint stock companies (but not limited liability companies) in respect of which the agreement is concluded (as customer) in accordance with separate regulations which have not been adopted yet.
The new rules also provide certain protections for the employees provided under secondment arrangements and prohibit employers from seconding employees for certain reasons, such as replacing employees on strike.
Actions for employers
Since the beginning of this year care should be given to structuring secondment arrangements with Russian companies so as to avoid breaches of Russian law.
Click here for more details
8. Singapore: measures tightening the rules on hiring foreign workers
The Ministry of Manpower has announced measures to ensure fair employment opportunities for Singaporeans, including two main proposals:
- MOM has introduced the following additional "company related" criteria that will be taken into account in assessing work pass applications:
- how strong the "Singaporean Core" is in the company;
- if the company has a weak "Singaporean Core", whether it has a commitment to nurture and strengthen this in the future; and
- how relevant the company is to Singapore's economy and society.
- The role of the Tripartite Alliance of Fair and Progressive Employment Practices (TAFEP) is to be enhanced. The TAFEP will be the body responsible for assessing the additional "company-related" criteria. At TAFEP's recommendation, "triple weak" companies may be put on a watch list, and if such companies do not show progress, their work pass privileges can be suspended. There will also be additional support for "triple strong" companies. MOM will take proactive steps to identify and partner "triple strong" companies. MOM will also launch new support programmes like the Human Capital Partnership Programme to help "triple strong" companies nurture and develop local talent into regional and potentially global talent.
Actions for employers
Companies should conduct an assessment of their hiring and staffing practices to ensure that they do not fall foul of these rules.
Companies with a strong "Singaporean Core" can expect greater support from the MOM in further developing the role of Singaporeans within their organisations.
Click here for more details.
9. UAE: landmark ruling on Article 18 penalty payments
The DIFC Court of First Instance has ordered an employer to pay a penalty in excess of USD 1.5 million to a former employee for failing to comply with Article 18 of the DIFC Employment Law (as amended) (CFI 015/2015 Asif Hakim Adil v Frontline Development Partners Limited).
The claimant was a managing director whose employment was orally terminated on 30 June 2013. The claimant brought proceedings against the defendant employer, claiming that he was entitled to unpaid salary and other employment benefits (including end-of-service gratuity) from 1 July 2013 in lieu of his notice entitlement. The employer claimed that he had dismissed the MD without notice, alleging that the MD had committed "numerous and serious breaches" of the employment contract and denied any payments were due on the basis that the claimant had been absent from work and had not performed any duties from this date. The employer also brought a number of counterclaims against the claimant including damages for breach of contract and of fiduciary duty. The employer's defence and counterclaims were rejected and the Court determined that termination had not been for cause, but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement.
Article 18 states that an employer must pay all wages and other amounts owing to its employee within 14 days of termination of employment. Failure to do so will result in the employer being liable to pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.
Acknowledging that this was the first case in which the Court was asked to consider Article 18 in detail, the judge ordered the defendant employer to pay the claimant unpaid sums, as well as a penalty of USD 1,643.84 per day. The Court rejected the employer's argument that the language of Article 18 should be modified to imply a judicial discretion as to whether a penalty should be ordered (for example, to take into account circumstances where a large penalty could become payable for failure to pay a small amount or where failure to pay was due to honest mistake).
Actions for employers
Employers should ensure that end-of service gratuity entitlements are paid within 14 days of termination of the employee's employment in order to avoid penalties becoming payable.
10. UK: new market abuse and inside information regime
The EU Market Abuse Regulation (MAR), which replaces the Market Abuse Directive, comes into force on 3 July 2016 and is directly applicable in EU Member States. MAR will have a significant impact on all UK listed (including AIM-listed) companies, considerably expanding the scope of the current regime in terms of the markets and products that will be covered, and introducing more stringent regulation and significant new procedural requirements in a number of areas. It implements new provisions governing the timing of closed periods, dealing in shares by persons discharging managerial responsibilities (PDMRs) and insider trading. To reflect MAR, the existing UKLA Model Code is to be repealed and the AIM rules amended.
MAR's impact on employee share plans will need to be carefully analysed, for example the new regime will have an impact in relation to:
- action in connection with employee share plans proposed when inside information exists (in light of the new insider information regime);
- any operation of share plans during MAR closed periods, as the current regime's exemptions relating to the operation of share plans (in particular all-employee plans) will be repealed, giving rise to some uncertainties. Note that MAR imposes "closed periods" of 30 days prior to year-end and half-year results. There has been concern that, where preliminary results are published, an additional closed period would apply, of 30 days ending on the publication of the annual report. However, the Financial Conduct Authority (FCA) has recently given its view that this will not be the case, provided there is no other inside information (although this view remains subject to any contrary European guidance).
MAR will also need to be considered in an employment context; in particular the new rules on disclosure of inside information may impact on executive termination negotiations.
Actions for employers
In addition to familiarising themselves with the new regime, companies will need to update company share dealing codes and template employment agreements. They should also brief PDMRs on new requirements to notify dealings directly to the FCA.
See our Remuneration and Incentives Briefing for further details.
11. US: New EEOC guidance for wellness programs
Large employers using wellness programs to reduce the cost of medical benefits must take care not to inadvertently violate various federal laws, including The Americans with Disabilities Act (ADA), The Health Insurance Portability and Accountability Act (HIPPA) and The Genetic Nondiscrimination Act. To assist employers in this regard, on 16 May 2016, the Equal Employment Opportunity Commission (EEOC) issued a final rule regarding the interplay between wellness programs and the ADA.
Many employers encourage participation in workplace wellness programs, which serve to improve employee health and often reduce the cost of medical benefits. In connection with these programs, employers sometimes request health information about employees and their families through the use of questionnaires, health risk assessments or biometric screenings (medical exams), which are only permissible under the ADA if they are part of a voluntary health program. However, prior to 16 May, the regulations did not define the term "voluntary" or explain what constitutes a "health program". The concern was that, if over-incentivised, a voluntary program could become involuntary and thus would impermissibly require the disclosure of otherwise protected information. The EEOC has addressed this concern by issuing its final rule amending the regulations and interpretive guidance, providing guidance on the extent to which employers may use incentives (whether framed as rewards or penalties) to encourage participation in wellness programs that require employees to answer disability-related questions or to undergo medical examinations. The EEOC has also provided guidance regarding the differences between the ADA's requirements for voluntary health programs and other federal laws, such as HIPAA, as amended by the Patient Protection and Affordable Care Act.
Actions for employers
Employers should review and revise as necessary wellness programs and policies to ensure compliance with the new EEOC regulations, and circulate EEOC guidance to those involved in managing those programs.
For more details see the EEOC's website here.