1. Australia: High Court rules no implied term of mutual trust and confidence in Australian employment contracts

The High Court of Australia has unanimously held that there is not an implied term of mutual trust and confidence (Implied Term) in Australian employment contracts, with the majority noting that the history of the development of the Implied Term in the UK is not applicable in Australia.

The High Court held that implying such a term would be a step beyond the legitimate law-making function of the courts and should not be taken. Rather, if such a term is to be implied, it should be left to the legislature to take that step via legislation.

The High Court found that the existence of an implied term must be determined with reference to whether the proposed implication is ‘necessary’, in that it is implicitly required by the nature of the contract itself – it is not determined by the reasonableness of the implication. The Implied Term did not answer the criterion of necessity required to support its implication in law in Australian contracts generally.

Given the previous level of uncertainty in Australian law in relation to the existence and extent of the Implied Term, this clear High Court authority will be very welcome to employers.

Actions for employers

Employers should continue to ensure they act consistently with their contracts, policies and procedures to minimise the risk of legal claims.

Employers should be aware the High Court was careful to note that its judgment should not be taken as reflecting upon the question of whether there is a general obligation to act in good faith in the performance of contracts, nor does it reflect on the related question of whether contractual powers and discretions may be limited by good faith and rationality requirements.

To read our briefing on this case please click here.

Authors: Miles Bastick and Amanda Lyras, Sydney

2. China: clarification of scope of work-related injuries for insurance purposes

The Supreme People's Court has provided guidance regarding the scope of work-related injuries in China. The Provisions on Certain Issues in Work-related Injury Insurance came into force on 1 September 2014 and specify that:

  1. injuries at work during working hours and in the workplace will be work-related if the injuries:
  • arise from the performance of work during working hours and in the work place, except if the employer or the labour authority can prove that the injury is not work-related;
  • occur when the employee participates in activities organised by the employer or in which the employer directs participation; or
  • arise from performance of work during working hours within a reasonable distance from work or while commuting between workplaces;  
  1. injuries during work-related travel will be work-related if the employee is injured when:
  • engaged in work-related activities outside the workplace as directed by the employer or required by the work;
  • assigned by the employer to study or attend a meeting outside the workplace; or
  • engaged in other activities outside the workplace as required by the work;  
  1. injuries arising from traffic accidents during commuting to/from work will be work-related if an employee is injured when :
  • commuting between the workplace and the employee's residence via a reasonable route and within a reasonable time;
  • commuting between the workplace and the residence of the employee's spouse, parent or child via a reasonable route and within a reasonable time; or
  • commuting via a reasonable route within a reasonable time during which the employee does something necessary for his/her daily work or life.  

Actions for employers

Employers should:

  • be prepared to collect evidence as to an employee's injury both in and outside the workplace;
  • take steps to ensure employee safety, including giving clear safety instructions for both in or outside the office; and
  • ensure that employee-related insurance policies are up-to-date.  

Authors: Nanda Lau and Jasmine Chen, Shanghai

3. France: new obligations for smaller employers to inform employees in advance of the intention to sell

In relation to the sale of a majority shareholding or the sale of a business completing on or after 1 November 2014, smaller employers now have an obligation to inform employees two months in advance of completion of the intention to sell. This is in order to give the employees an opportunity to make an offer to buy the shares/business.

The obligation only applies to: 

  • companies with fewer than 50 employees, and
  • companies with an obligation to put in place a works council (ie, which have more than 50 employees on average for 12 months over three years), but which have less than 250 employees and a turnover of under €50 million and total profit and loss balance sheet of less than €43 million.  

This obligation also applies to intra-group sales and asset transfers.

We are currently awaiting an implementation decree for further details of the information which must be given to employees.

In the case of companies with fewer than 50 employees, the two month period can be shortened in the event that all employees confirm that they are not interested in making an offer.

In the case of companies with an obligation to put in place a works council, the information must be provided at the same time as information and consultation of the works council.

A failure to comply with this obligation means that any of the employees may seek a court order for the sale of the shares/business to be declared null and void.

Note that the seller does not have to accept any offer made by one or more of the employees and is free to choose the buyer it prefers.

Actions for employers

Employers should ensure that employees are informed no later than two months in advance of closing of the intention to sell.  Note that this obligation is in force for any transactions which are due to close on or after 1 November 2014.

Author: Emma Röhsler, Paris

4. Germany: statutory minimum wage introduced

The German government has implemented for the first time a general statutory minimum wage, in force from 1 January 2015.

Generally, all employees working in Germany will be entitled to a minimum wage of €8.50 gross per hour. Any benefits and additional payments will be disregarded when determining compliance with the minimum wage. However, there are several exceptions from the minimum wage, eg, for specific internships. Additionally, transitional rules will be applicable until January 2017 for certain collective bargaining agreements and other regulations which provide for lower wages (eg, for temporary agency workers or newspaper delivery staff). Higher statutory minimum wages for certain industries (eg, construction sector) prevail.

Non-compliance with the minimum wage may result in an administrative fine of up to €500,000 and an exclusion from public orders and bid proceedings. A company might also be liable for third parties' breaches if a company's contractor does not pay the minimum wage to its employees.

The minimum wage will be reviewed every two years.

Actions for employers

Companies with a business in Germany need to check whether their employment contracts comply with the minimum wage or whether any exceptions and transitional rules apply.

Compliance with the new minimum wage requirements will also need to be considered for any transactions in Germany, particularly in the due diligence process and in negotiating the share/asset purchase or merger agreement. In terms of the parties' liability, the following rules apply (although the seller and buyer may re-apportion liabilities between them by negotiating indemnities in the transaction agreement):

  • share deal: the acquired company remains liable for any violations and imposed fines.
  • asset deal: the buyer is not liable for violations and imposed fines; however, employees can claim against the buyer to pay the (minimum) wages retrospectively (and for the future).
  • merger or division (eg, split-off): the successor will be liable for any violations and imposed fines of the legal predecessor.  

Authors: Moritz Kunz and Christian Strunck, Frankfurt

5. Hong Kong: e-signatures and paperless contracts 

In Hong Kong, employers are increasingly turning to the use of electronic signatures (or "e-signatures") as a more efficient means of entering into binding employment contracts, particularly as they think about ways to improve and streamline their recruitment processes. E-signatures take the form of either a typed name or digitalised image of a handwritten signature, or a unique digital "fingerprint" created using bespoke software. E-signatures are valid and enforceable in Hong Kong provided they comply with the requirements set out in the Electronic Transactions Ordinance:

  • the e-signature must be attached to, or logically associated with, the electronic message;
  • the e-signature process must be reliable as is appropriate given the purpose for which the signature is required; and
  • the recipient must consent to the signatory using an e-signature.  

There are no express requirements for the e-signature to be in a certain form or format.

If the employment contract involves any government entity, the e-signature must also be supported by a recognised digital certificate.

Actions for employers

There are a number of practical considerations employers should bear in mind before they leave behind the world of paper-based contracts:

  • In some jurisdictions in South and Southeast Asia, electronic documents carry less evidentiary weight in a court of law than a traditional hard copy. Employers should therefore consider whether they are likely to need to rely on its terms in court in such a jurisdiction.
  • The employer should be able to satisfy itself that the signature adequately identifies the signatory and gives sufficient indication of the signatory's approval of the information to which it relates. Employees could be asked to undergo a secure verification process.
  • Employers should ensure that their e-signature systems are sufficiently reliable and secure, either by requiring the employee to answer security questions to access the offer letter or, ideally, by using a system that employs public key/private key technology, which effectively turns a paper-based signature into an electronic "fingerprint".  

Author: Helen Beech, Hong Kong

6. Japan: new measures to prevent death due to overwork

The Government has enacted legislation to promote measures to prevent death due to overwork.

Japan is notorious for its overtime working culture. Karoushi (literally, death due to overwork) is a common phenomenon among Japanese working men. There are generally two types of death due to overwork – death caused by health problems, and suicide as a result of stress.

In our previous global e-bulletin, we discussed the heated debate in Japan over the introduction of an amendment law to extend the categories of employees who would no longer be eligible for overtime pay. It is hoped that introducing a "no-overtime pay" law will discourage employees from doing unnecessary overtime work, and produce a healthier and more productive workforce overall.

In addition, the Government has introduced an Act on the Promotion of Measures to Prevent Karoushi, which is expected to come into force by no later than 27 December 2014. This legislation was enacted after strong lobbying by bereaved family members whose loved ones have died from karoushi. It enshrines the Government's responsibilities to conduct research on karoushi, provides for the establishment of a committee for the promotion of measures to prevent karoushi, and sets out the principle that the relevant parties (ie, the state, local government and businesses etc) should closely collaborate to prevent such deaths. The legislation also provides for November to be a karoushi awareness month.

To push this forward, the Government has already set up a hotline (which became operational on 1 September 2014) for both employers and employees to consult about working conditions and, in particular, excessive or unpaid overtime and impairment to health caused by excessive overtime work.

Actions for employers

There has been increasing awareness in Japan of the health implications and unproductivity caused by excessive overtime work. This legislation will encourage employers to create a more employee-friendly environment.

Author: Florence Cheung, Tokyo

7. Russia: recent changes to the law governing foreigners' employment

Following Russia's accession to the World Trade Organisation and various policy developments, the law governing the engagement of foreign employees in Russia has undergone several changes.

  • From 10 January 2014 a new work permit procedure has been available to employees who have worked for at least one year for a company registered in a WTO member-state (WTO Company) and who have been appointed the head of that WTO Company's Russian subsidiary, branch or representative office, provided the business of the latter and the employee is of a specified type. The procedure is similar to the regime for highly qualified specialists (HQS) as there is no requirement for the employer to obtain an employment permit and the employee's work permit can have an extended term of up to three years. Unlike for HQS, there is no requirement for a minimum salary for employees of RUB 2 million.
  • From 1 January 2015 most foreign employees (except for HQS and certain other categories of employees) will be obliged to confirm their knowledge of Russian language, history and law in order to obtain or renew a work permit. A foreign employee will have to submit to the migration authorities either a Russian school or high school diploma or a current special certificate confirming the required knowledge (these will be valid for five years). This must be done within 30 days of the work permit's issuance, failing which the permit will be cancelled.  

Actions for employers

When engaging employees from WTO Companies, we recommend assessing the advantages and disadvantages of following either the HQS regime or the new work permit procedure and using the most suitable regime.

As for the knowledge confirmation requirement, we recommend Russian employers to either engage foreign employees as HQS (with a minimum salary of RUB 2 million) or make sure that the new requirements are fulfilled (eg, by requesting the relevant confirmation documents from the employee).

Author: Arina Fot, Moscow

8. Singapore: Court of Appeal confirms employer-friendly approach to constructive dismissal damages 

In the recent decision of Wee Kim San Lawrence Bernard v Robinson & Co (Singapore) Pte Ltd the employee claimed constructive dismissal based on an alleged breach of the implied duty of trust and confidence. He argued that, where the relevant breach was of the implied duty of trust and confidence, the damages should be calculated differently from other repudiatory breaches and should reflect the wages he would have received had he continued in employment for the foreseeable future.

The Court of Appeal ruled that, where a breach was relied on to claim constructive dismissal, damages should reflect the loss flowing from that premature termination, regardless of the specific nature of the repudiatory breach. As a matter of principle, the damages should be the same as the damages which would have been awarded if the employee had been actually (rather than constructively) dismissed unlawfully (ie, notice pay).

Actions for employers

This case reaffirms Singapore's reputation as an employer friendly employment jurisdiction: when assessing damages for premature termination losses, the orthodox position of limiting losses to the salary payable for the relevant notice period still applies.

However, the court noted that the employee in this case did not assert either an independent breach of the implied term of mutual trust and confidence or any continuing financial losses going beyond the premature termination losses, eg, those resulting from an impairment of future employment prospects, or injuries such as illness or mental or emotional distress. Where a claim is made for these types of losses, employees may well be able to claim damages beyond those limited to the salary due over their notice period.

For further details, see our blog.

Author: Fatim Jumabhoy, Singapore

9. Spain: 2012 Labour Market Reform declared constitutional

In a judgment dated 16 July 2014, the Spanish Constitutional Court rejected, by a large majority, an appeal lodged by the Parliament of Navarra in which it requested that three provisions of the 2012 Labour Market Reform be declared unconstitutional.

As a result, the following measures have been declared to be constitutional:

  • The establishment of a probationary period of one year in the "contracts supporting entrepreneurs", during which time the employer is able to terminate a contract with no compensation for the employee. The judgment states that increasing probationary periods to one year in this kind of contracts (by contrast with the general rule of 15 days to three months applicable to other fixed-term contracts) not only allows employers to verify the employee's training and aptitude, but also the economic sustainability of the new job post.
  • The role of the National Advisory Commission on Collective Agreements as mediator when workers' representatives and companies cannot reach an agreement on the non-application of collective bargaining agreements.
  • The priority of company-wide agreements over sector-wide collective agreements. The judgment states that the aim of this measure is to protect company productivity and viability and, ultimately, employment.  

Actions for employers

As a result of this decision, employers are able to benefit from applying an extended probationary period for new hires whenever the specific requirements for using it are met.

Author: Carmen Martinez, Madrid

10. UAE: obligation on Dubai employers to provide health insurance

Employers in Dubai must now provide health insurance for all employees. This brings the position in Dubai in line with that of Abu Dhabi.

The Health Insurance Law for the Emirate of Dubai (No. 11 of 2013) (the "Law") came into effect on 1 January 2014 and requires compulsory health insurance provision for all employees, including those working in free zones. The Law is to be implemented in three phases, according to the number of employees employed within a workforce, with the final phase to be completed by the end of 2016.

Under the Law, employers must put in place direct cover for all employees and employers are prohibited from deducting the cost of the insurance from the employee's salary. Employees, like in Abu Dhabi, may be required to pay a "co-insurance" amount payable directly to the medical services provider at the time of their medical appointment. However, in contrast to the position in Abu Dhabi, employers will not be responsible for providing health insurance for an employee's dependants.

Actions for employers

Employers should review their health insurance provisions and take any necessary action to ensure these meet the requirements of the Law at the time of the relevant implementation phase.

Authors: Stuart Paterson and Zoe Ireland, UAE

11. UK: employers need to adapt policies to reflect new shared parental leave regime

A new shared parental leave (SPL) system will come into force on 1 December 2014. Parents of babies due or children placed for adoption on or after 5 April 2015 will be able to opt to share between them 50 out of 52 weeks' statutory maternity leave and 37 out of 39 weeks' statutory maternity pay, taken as shared parental leave and pay. This will replace the current entitlement to additional paternity leave for mothers' partners.

SPL can be taken by both parents concurrently or consecutively, in a single block or in up to three discontinuous, separate blocks. The basic notice requirement for taking or varying leave will be eight weeks.

From 1 October 2014, fathers and partners will also be able to take (unpaid) time off to accompany a pregnant woman to up to two antenatal appointments.

Actions for employers

Employers will need to introduce a shared parental leave policy and review maternity, paternity, adoption policies. Given the relatively short notice required from employees, employers should also consider in advance how they will source cover for short periods of leave.

Another key concern for employers who currently enhance maternity pay will be whether and how to enhance pay during shared parental leave. A recent tribunal decision has highlighted the risk of indirect sex discrimination claims in the analogous situation where an employer enhanced pay for maternity leave but not additional paternity leave.

A detailed HSF briefing on the new SPL regime is available on request.

Authors: Anna Henderson and Jemima Coleman, London

12. US: Dodd-Frank Act’s whistleblower anti-retaliation provisions do not apply extraterritorially

The US Court of Appeals for the Second Circuit has ruled that the whistleblower anti-retaliation provision of the Dodd-Frank Act does not apply extraterritorially, to a non-US citizen employed abroad by a foreign company, where all events allegedly giving rise to the liability occurred outside the United States.

In Liu Meng-Lin v Siemens AG, a compliance officer of Siemens China, a wholly owned subsidiary of NYSE-listed Siemens AG, claimed that he was demoted and then terminated after reporting his belief that Siemens’ employees were making improper payments to Chinese and North Korean officials. After he was fired, the plaintiff made a report about the conduct to the SEC and brought a claim alleging that Siemens had retaliated against him in violation of the Dodd-Frank Act. A trial court concluded that Dodd-Frank's anti-retaliation provision did not have extraterritorial effect and dismissed the action.

On appeal, the Second Circuit (covering New York) has agreed. After finding that all the relevant entities were foreign to the US and all relevant conduct (eg, the whistleblowing, the alleged corrupt activity, and the alleged retaliation) occurred outside the US, the court held that the anti-retaliation provisions of Dodd-Frank do not apply extraterritorially. In doing so, the court applied the US Supreme Court's presumption against extraterritorial application of US law unless a contrary intent and a “clear indication of extraterritoriality” is apparent. The court found that these circumstances are not present with the anti-retaliation provisions of Dodd-Frank.

Actions for employers

In summary, the Second Circuit has confirmed that foreign whistleblowers, who have no connection with the US, and whose conduct has no connection with the US, are not protected by and cannot bring an action under the Dodd-Frank Act’s whistleblower anti-retaliation laws. This is an important development for non-US companies in evaluating their compliance policies and procedures.

Author: Christopher Leahy, New York