Welcome to our international quarterly newsletter. This Fall 2017 edition focuses on legal developments which took place internationally and in the EU, Austria, Belgium, China, France, Germany, Japan, the Netherlands, Russia, Spain, and the UK over the past 3 months.
Update on Bangladesh Accord and Landmark Arbitration Rulings
On 4 September, a The Hague based arbitral tribunal issued a first decision in proceedings relating to the application of the 2013 Bangladesh Accord. The decision is a first and although it only touches on procedural questions, it will be of interest to brands having signed the 2013 Accord and to those considering signing the 2018 Agreement. Read more about the decision and its potential impact on our risk blog, and about the 2018 Accord in the Summer 2017 edition of this newsletter.
EU reaches deal on posting of workers
After lengthy negotiations on which we reported in our Summer edition, an agreement on the revision of the Posted Workers Directive was finally reached at EU Council level in order to tighten up labour rules on posted workers. The reform of the rules, strongly backed by French president Macron, aims to ensure better protection of posted workers and fair competition for companies. The agreement provides for a 12 month limit, extendable by six months, on posting (instead of the 24 months that were initially proposed and compared to 30 months under the current Directive). It will also reinforce the principle of “equal pay for equal work”, giving posted workers the same remuneration, including salary, bonuses and allowances , as local workers, in accordance with the host member state law and practice (in the current version of the Directive, equality is only being looked at by reference to hard law, excluding minimum rates of pay that are normally set by collective bargaining agreements or other sources, as confirmed by the European Court of Justice (ECJ) in the Laval case (C-341/05)). Transport workers like truck drivers will be temporarily exempt from the new Directive. A four-year transition period is provided for, in order to allow businesses to adapt to the changes, which will affect about 2 million EU workers.
While the revised Directive will provide for improved pay equity between the posted and local workers, social security contributions for posted workers will continue to be paid in the home country and this will inevitably maintain certain differences in labour costs between local and posted workers, just like it is the case today.
The EU Parliament and the Council are expected to start talks in November, aiming to reach a first-reading agreement soon after.
EU Parliament backs EU whistleblower protection
Whistleblowing was put back on the European agenda recently in the aftermath of a number of tax evasion scandals, and members of the European Parliament have been pushing for a proper EU-wide protection of whistleblowers. During its plenary session on 24 October, the European Parliament (EP) adopted a non-legislative resolution on whistleblower protection.
The EP recommended that Member States and the EU institutions should promote a speak-up culture and the positive and important role that whistleblowers play, in particular through awareness-raising and protection campaigns, communication and training. Interestingly, we also found in our recent whistleblowing survey that although whistleblowing culture within businesses seems to be moving in the right direction, there is certainly room for improvement if businesses are to benefit fully from the early intervention opportunity offered by the whistleblower.
The EP report further calls on the EU Commission to present a legislative proposal before the end of this year with a view to effectively protecting whistleblowers in the EU, study a tiered system enabling whistleblowing inside and outside an organisation, and propose the establishment of an independent body at EU level responsible for coordinating Member State activities, particularly in cross-border cases.
The EU Commission will have to consider the EP’s non-binding resolution, but this can be done even in an informal way. It has to be noted that the Commission has a monopoly of initiative in EU law-making, meaning that the EP (or the Council) cannot come up with a draft legislative proposal nor initiate a legislative process, but can only put pressure on the Commission to act. Trade Commissioner Malmström welcomed some aspects of the report, but also told members of the EU Parliament that the Commission does not intend to put forward the legislation. However, Justice and Fundamental Rights Commissioner Jourova said that “we foresee an initiative for 2018. I don’t know myself at this moment whether it will be a hard piece of legislation something like a directive or whether it will be a recommendation. We definitely want to strengthen the protection of whistle-blowers in the EU. We need brave people to report especially serious crimes, money laundering, corruption, health, security problems, environmental crime. We have a lot of bad things in Europe which we need good people to stop.” The Commission work programme for 2018 does not give much more detail on a possible upcoming legislative proposal, only stating that the Commission “will also continue [its] work on the protection of whistle-blowers”.
More transparency in employee monitoring
On 5 September, the Grand Chamber of the European Court of Human Rights (ECtHR) published its ruling in Bărbulescu v Romania, setting out the conditions under which an employer can monitor an employee’s electronic communications. This judgment overruled a decision issued by the lower Chamber of the ECtHR on 12 January 2016, which was deemed not to have adequately balanced the interests of the parties. Please read our full briefing to find out more on the impact this decision might have on several key European jurisdictions and our recommendations to employers.
Consensus on the European Pillar of Social Rights reached
As we mentioned in our last edition, the “European Pillar of Social Rights” is an initiative by the EU Commission which aims to create convergence between Member States towards better working conditions. A consensus between the three EU institutions has now been reached on the joint text and the principles will be officially signed at the summit for fair jobs and growth, which will take place in Gothenburg on 17 November.
Revision of the Written Statement Directive
As part of the European Pillar of Social Rights initiative, the Commission is looking at broadening the scope of the so-called “Employment Contracts Directive” (the 1991 Written Statement Directive, which requires employers to confirm in writing some of the terms and conditions of the relationship, e.g. start date, remuneration, paid leave etc.), extending it to new and atypical forms of employment, such as on-demand workers, voucher-based workers and platform workers. By improving the timeliness and information given at the start of any form of employment relationship, the Commission believes that workers (whatever their legal status is, thus irrespective of the fact that they are working under a classic employment contract or not) will be more aware of their rights and thus better at enforcing these. The Commission issued another consultation paper on 21 September. The social partners were asked to share their additional views by 3 November 2017, and the Commission aims to present a legislative proposal before the end of the year.
Pregnant workers’ protection applies from the beginning of the pregnancy and regardless of employer’s information
The Advocate General (AG) of the ECJ gave an opinion in the Spanish case of Porras Guisado v Bankia SA and others (C-102/16) on the relationship between the Pregnant Workers Directive (92/85/EEC) and the Collective Redundancies Directive (98/59/EC). The Spanish court referred the case to the ECJ for interpretation of the prohibition to dismiss pregnant workers in the event of a collective redundancy. Keeping in mind that the aim of EU law and of previous case law of the ECJ is to recognize pregnant workers as a vulnerable group deserving special protection in the workplace, the AG interestingly stated that protection applies from the beginning of pregnancy, regardless of when the employer is informed, thus even before that. This is a controversial aspect of the opinion, as under the Pregnant Workers Directive in order to be defined “pregnant workers”, the worker must have informed her employer of the pregnancy. The AG opinion is also noting that not every collective redundancy is an “exceptional case” justifying the dismissal of a pregnant worker. For the dismissal to be exceptionally lawful, there must be no “plausible possibility” of reassigning the pregnant worker to another suitable position. The ECJ’s decision on this issue is eagerly awaited in the coming months. It has to be noted that the AG’s opinion precedes the decision of the ECJ and is not binding on the Court, which in practice often follows the AG’s reasoning but could also reach different conclusions in its final judgment.
Lack of workplace risk assessment for breastfeeding worker is direct sex discrimination
In Otero Ramos v Servizo Galego de Saude (C-531/15), the ECJ found that a failure to assess the risks the workplace may pose to a breastfeeding worker, as required by the Pregnant Workers Directive, should be considered as less favourable treatment of a woman related to pregnancy or maternity leave, and constitutes direct sex discrimination. Not only do employers owe certain obligations to pregnant workers where their role may pose a potential risk to them or their child, but the duty is ongoing and continues after the worker returns from maternity leave. Moreover, employers should perform a risk assessment both with respect to a particular role and to a particular worker.
Minimum height requirement is indirect sex discrimination
In Esoterikon v Kalliri (C-409/16) the ECJ ruled that a minimum height requirement of 1,70m to join the Greek police was indirectly discriminatory against women - as far more women than men were disadvantaged by the requirement - and could not be objectively justified. Moreover, not all police functions require the use of significant force or particular physical aptitude, which is also not necessarily connected with being over a certain height.
ECJ judgment on the jurisdiction over cabin crew employment contracts
On 14 September, the ECJ handed down its judgment in the joined cases of Sandra Nogueira and Others v Crewlink Ltd and Miguel José Moreno Osacar v Ryanair (C-168/16 and C-169/16).
Between 2009 and 2011, Ryanair and Crewlink (specialized in the recruitment and training of cabin crew for airlines), both based in Ireland, hired employees of Portuguese, Spanish and Belgian nationality, who were then assigned to Ryanair, as cabin crew (air hostesses and stewards).
In 2011, six employees brought claims in the Belgian Courts against Crewlink and Ryanair for unpaid wages, overtime pay, increased pay for night work and severance pay. The Belgian Labour Court referred the question of whether it had jurisdiction over the claims to the ECJ. The claimants’ employment contracts were drafted in English, they were subject to Irish law and any disputes were to be resolved in the Irish courts. However, the contracts designated Charleroi airport in Belgium as the claimants’ “home base”. The claimants started and ended their working days at the airport and had to live within an hour of this airport.
Under the applicable EU rules on jurisdiction (the 2001 Brussels Regulation), an employee may sue an employer either in the courts of the Member State where the employer is domiciled, or in the courts of the place where the employee habitually carries out his work, or the last place where he did so. An employee who does not habitually work in any one country may sue the employer in the country where the business in which the employee is engaged is or was situated. The ECJ found that the concept of the place where the employee habitually carries out his work should be interpreted broadly, as covering the place where, or from which, the employee in fact performs the essential part of his duties vis-à-vis his employer. In the case of the claimants, that was Charleroi airport. The concept of “home base” is not comparable to the place from which the employee habitually carries out his work, but it amounts to a significant indicator to determine jurisdiction for the purposes of the Brussels Regulation.
The ECJ also noted that the jurisdiction clause in the claimants’ contract, conferring exclusive jurisdiction to the Irish courts, was unenforceable. Therefore, the ECJ ruled against Ryanair, stating the airline could not insist its employees’ contracts follow Irish law no matter where they were based. This case will now return to the referring court to take a final decision on the question of jurisdiction, before looking at the substance of the claims.
New Austrian Data Privacy Act passed
The General Data Protection Regulation (GDPR) is intended to directly and comprehensively regulate data protection within the European Union. However, the GDPR contains a certain amount of so called ‘opening clauses’ granting Member States the discretion as to how to enact their domestic laws to specify the GDPR. The new Austrian Data Privacy Act implementing the GDPR was published in the federal law gazette on 31 July 2017. Please read our full briefing summarizing the main changes.
Governmental Summer Pact
On 26 July 2017 the Belgian government agreed a “Summer Pact”, which contains a few employment law measures, three of these being of particular interest:
Trial period – Abolished in 2014, the trial period would be reintroduced. In practice, this would be implemented by shortening the notice period during the first six months of the employment agreement. The notice periods would be brought back to one week during the first three months of service, to gradually increase until the end of the fifth month of service. The notice periods as from the sixth month of service would remain unchanged.
Night work in e-commerce – The recently introduced exception to the prohibition of night work for e-commerce activities requires that the features of such regime are agreed upon with all trade unions in a company-level collective bargaining agreement. The introduction of such night work regime for e-commerce activities would be simplified as from 1 January 2018, to the extent that a collective bargaining agreement shall no longer be required or, alternatively, that a collective bargaining agreement could be reached with one single trade union represented in the company.
Employee profit sharing schemes – Employers would be able to let their employees participate in the undertaking’s profits in a more tax and social security favourable way, which does not require the employees to participate in the company’s registered capital. Such profit participation would be limited to 30% of the total salary mass and would be subject to a taxation of 7% and social security contributions of 13.07% for the employee. Employers would not be liable to pay employer’s social security contributions in the context of such profit sharing schemes, and would only be subject to company tax. Moreover, the implementation of such profit sharing scheme would not require a collective bargaining agreement. Governmental action is now required to implement these measures.
Whistleblowing in the financial industry
The Law of 31 July 2017 introduces a legal framework for individuals to notify the Financial Services and Markets Authority (FSMA) of any infringements by a financial institution of its obligations in the financial sector. The law also provides for a protection to all whistleblowers, irrespective of whether they are employees or self-employed.
The confidentiality of the whitleblower’s identity is guaranteed and a whistleblower who has reported an (alleged) infringement in good faith cannot be subject to any civil, criminal or disciplinary claims or professional sanctions as a result of the reporting. Reporting through this channel will also not be considered as a breach of any confidentiality or non-disclosure obligations to which the whistleblower is bound.
Employee-whistleblowers who have made a notification in good faith to the FSMA are, in addition, protected against acts of retaliation, discrimination and other forms of unfair treatment and are entitled to claim damages in case of breach of this prohibition. In case of dispute, the burden of proof is with the employer.
Employers who dismiss a whistleblower, despite the aforementioned prohibition, may be obliged to reintegrate the employee, otherwise they will be liable to pay a lump sum of six months’ remuneration, without prejudice to claim higher damages. In case of acts of retaliation, discrimination or other forms of unfair treatment after the termination of the whistleblower’s employment, the employer will be liable to pay the same lump sum of six months’ remuneration.
The Law of 18 September 2017, implementing the Fourth Anti-Money Laundering EU Directive, provides for a similar whistleblowing regime in the private sector for notifications made to the Belgian Financial Intelligence Processing Unit (CTIF-CFI) in the context of anti-money laundering and counter-terrorist financing. These are the first industry-wide whistleblowing systems in the Belgian private sector.
Confirmation and extension of flexi-job system
In a decision of 28 September 2017, the Constitutional Court dismissed the claim brought by trade unions against the so-called system of “flexi-jobs”. This system was introduced in 2015 and allows employees who already carry out 4/5th of a full-time occupation in the non-catering industry to perform side activities in the catering industry. These side activities, and the income derived therefrom, enjoyed a favourable social security regime. Such favourable regime was considered by the trade unions as discriminating against “regular” employees in the catering industry not benefitting from such favourable regime. The Constitutional Court however did not withhold the arguments raised by the trade unions, which means the system of “flexi-jobs” is now fully in force.
Moreover, as part of its Summer Pact, the Belgian government has decided to introduce the “flexi-job” system in the retail trade industry (e.g. bakers, butchers, hairdressers, etc.). It can therefore not be excluded that this system will be further extended to other industries in the future.
International treaties in respect of social security
On 19 May 2017, China entered into a social security agreement with Spain so as to solve social security issues encountered by employees working abroad. Though China entered into the social security agreements with Finland in 2014, with Canada and Switzerland in 2015, and with the Netherlands in 2016, these social security agreements did not come into force until 2017. According to the agreements, employees of Canadian corporations who are seconded to work in China are exempted from making Chinese pension insurance contributions, and employees of Finnish, Swiss and Dutch corporations who have been seconded to China are exempted from making contributions to Chinese pension insurance and unemployment insurance. Such exemption of social security contributions is reciprocal and therefore applies to Chinese employees who are seconded to Canada, Finland, Switzerland the Netherlands and Spain as well. In addition to the five countries above, China has also entered into similar social security agreements with four more foreign countries as of today, including France, Germany, Korea and Denmark.
Changes to Arbitration Rules of Labour Disputes
The Ministry of Human Resources and Social Security published the Rules for Handling Arbitration Cases Involving Labour Disputes (Case Handling Rules) and the Organizational Rules for Arbitration of Labour Disputes on 8 May 2017 and both rules came into effect on 1 July 2017. The Case Handling Rules aim to perfect the Chinese system for handling labour arbitration cases, and to continuously improve the quality and efficiency of arbitration. Employers in China should be aware that the Case Handling Rules:
(i) add a chapter of “Mediation Procedure” before the labour arbitration even begins, which is not mandatory for employees and employers but will be encouraged by the arbitration tribunal;
(ii) provide a simplified arbitration procedure for labour arbitration cases with explicit facts and small amounts (i.e., less than the average salary of the preceding year in this region), pursuant to which arbitration documents can be served via phone calls or emails. The arbitration tribunal may have the discretion to shorten the time periods of adducing evidence, arbitration and documentation on a case-by-case basis;
(iii) add the arbitration procedures for collective labour disputes (i.e., cases with 10 employees or in respect of collective bargaining agreements), pursuant to which the arbitration tribunal must have three arbitrators (instead of one) and the employees may choose three to five representatives for the arbitration; and
(iv) state that the arbitration awards will be final for labour disputes if the amount adjudicated for each claim is less than the aggregate 12-month wages (based on the local minimum monthly wage standard) or if the claim is about working hours, leave entitlement or social security contribution.
The Organizational Rules for Arbitration of Labour Disputes, on the other hand, aim to improve the management of the arbitration organizations and to strengthen the abilities of arbitrators to handle disputes.
Foreign Talent’s Visa
On 8 August 2017, State Council promulgated the Circular on Several Measures to Boost the Growth of Foreign Investment. According to the Circular, China aims to release the implementing rules on the visas issued to foreign talents, increasing the duration of the period of validity of foreign talent’s visa, signing and issuing long-term multiple-entry visa for the eligible foreign talents. The administrative regulations for foreigners working in China is expected to be formulated and announced to the public in 2018. These regulations aim to establish the system of granting work permits to foreign talents seeking employment in China, characterized by unified criteria and standardized procedures throughout China.
French labour law reforms explained
The Macron reforms came into force on 24 September 2017 (though some of their provisions will only become applicable later on), despite protests by left-wing politicians and trade unions. The changes are intended to tackle unemployment, and stimulate France’s economy by providing a simpler and more secure set of rules for employers and investors. The most important reforms relate to rules on termination of employment, employee representation and collective negotiation. Please read our briefing, in which we summarise the main changes.
Conflicting company level collective bargaining agreements
Germany regulates conflicts that arise if several collective agreements of different trade unions are applicable in one company. The relevant law states that in case of conflict, the collective agreement of the trade union with the most members in a company prevails, and provides for court proceedings to determine which union forms the majority. The union whose collective agreement is not applied has the right to adopt the collective agreement of the majority union. In a July 2017 decision, the Federal Constitutional Court partly invalidated the current law to the extent it does not appropriately protect the interest of small trade unions. Until current law is altered, a collective agreement may only be displaced if it is plausibly demonstrated that the majority trade union has seriously and effectively considered the interests of members of the minority trade union within its collective agreement.
Clarification on the Minimum Wage Act
On 20 September 2017 the German Federal Employment Court took a new decision on the Minimum Wage Act (Mindestlohngesetz). The employer had paid a 25% special allowance for night work on top of a wage rate which was lower than the minimum wage under the German Minimum Wage Act. As per the relevant press release, the Court ruled that special allowances paid for night work (in addition to the normal hourly wage) need to be calculated at least on the basis of the minimum wage as nominal base salary. The Court also prohibited a similar practice regarding holiday pay based on a contractual agreement to pay 1,5 times the average earned income on holidays. The Court ruled that the calculation of such special payments must be carried out on the basis of the minimum wage level (currently EUR 8,84 per hour). According to the Court, the minimum wage is an integral part of the hourly wage and the employer cannot rely on a remuneration clause with a lower level.
Changing the work culture
On 15 September 2017, the Ministry of Health, Labour and Welfare published an outline of the draft bill concerning Work-Style Reform. The outline has two main purposes, set out below.
1. Eliminating excessive working hours and allowing for diversified and flexible work styles This includes reconsidering the working hours systems, in particular overtime regulation (please refer to our Summer edition for a review of the proposed new rules), promoting breaks between work and designate dates of 5 days paid annual leave every year in advance for employees who are given 10 or more days of paid annual leave per year. Moreover, currently, small and medium enterprises enjoy a grace period to increase the rate of overtime pay in case it exceeds 60 hours per month. This grace period will be abolished in April 2022. The scope of discretionary work system will be expanded, and a professional type White Collar Exemption will be introduced for the first time in Japan. Lastly, the function of company doctors will be strengthened by requiring employers to offer them all necessary information.
2. Equal treatment regardless of employee status The government will introduce regulations to eliminate unreasonable inequality of treatment between regular and non-regular employees and also of dispatched workers. In case of difference in treatment, employers have an obligation to provide an explanation. The government will take measures to ensure compliance and establish an ADR system for related disputes. A draft bill was initially planned to be submitted to the National Diet this Autumn, with a target implementation date of 1 April 2019. However, this has been postponed because the House of Representatives was dissolved on 28 September 2017. Therefore, the implementation date may be pushed back. Further details of the amendments will be set out in the draft bill which is yet to be published.
Akiko Yamakawa Our Tokyo colleagues operate through a new and independent entity, ‘Vanguard Lawyers Tokyo’, as from 1 September 2017.
Proposed labour law reforms
On 10 October 2017 the newly formed Dutch government, presented a number of labour law reforms of which the most important are: • The existing obligation for employers to continue to pay sick employees during the first two years of illness will be reduced to one year for small and medium sized employers. • The statutory severance payment (‘transition payment’) will no longer require a two year minimum employment period to be triggered and the severance formula will be simplified to a straightforward formula of one third of a monthly salary per year of service. • The period after which consecutive fixed term contracts automatically convert into a permanent contract will be extended from two to three years. • The period during which employers are required to pay a differentiated social insurance premium under the Occupational Disability Act – pursuant to which employees who are partially disabled may receive illness benefits after two years of illness – is reduced from 10 to five years. After the five-year period, a collective, uniform premium will apply. • A maximum trial period of five months (instead of two) will be introduced for permanent contracts and of three months (instead of one) for fixed term employment contracts of a duration longer than two years. The one month trial period will continue to apply for fixed term contracts of a duration ranging from six months to two years. • Starting 2019, parental leave will be increased from two to five days on full pay. With effect from 1 July 2020 employees will be entitled to additional parental leave of five weeks on 70% pay (up to a certain cap), paid for by the Dutch labour office (UWV). • Tax authorities will automatically qualify individuals working for over three months for the same employer against an hourly rate between €15 and €18 as employees. At the top of the market (an hourly fee of more than €75 and a contract of less than a year) there will be an opt out for wage withholding tax and social security premiums. For independent contractors working on the basis of an hourly fee above the minimum fee, the contractor will have to fill in a digital form which should give the principal comfort that the individual is indeed an independent contractor and that no wage withholding tax and social security premiums are due. This system will replace the “model agreement” for independent contractors recently introduced. • Under current law, if a number of dismissal grounds have been partially met, the employment cannot be terminated even if the combination of these grounds justify the dismissal. The government proposes to introduce a new ground for dismissal allowing to cumulate grounds for dismissal that have been partially met. In this case, the court can award an additional severance of up to 50% on top of the statutory severance.
Clarification of labour law rules on part-time work
On 29 June 2017, amendments to the Russian Labour Code (the Labour Code) entered into force which clarified, inter alia, the procedure for establishing part-time work. The amendments resolved certain legal gaps and clarified practical issues relating to part-time work. In particular now the Labour Code: • directly provides that part-time work can be arranged for set or unlimited periods agreed between the employee and the employer; • clarifies that arranging for part-time work means reducing (i) the number of hours an employee works per day; (ii) the number of days an employee works per week; or (iii) both; • provides that irregular working hours can only be established for an employee working a reduced number of days per week, but not for an employee working a reduced number of hours per day; and • provides that, upon an agreement between the employer and the employee, or in accordance with the employer’s internal house rules, the employee working no more than four hours a day is not entitled to a lunch break.
Minors at work
On 12 July 2017, amendments to the Russian Labour Code (the Labour Code) regarding regulation of the work of minors entered into force. As before, an employment contract may, as a general rule, be concluded with adolescents having reached 16 years of age. Teenagers aged 15 and older may also be engaged to perform light work, provided that they have received general education. Moreover, with the new amendments, those having reached 15 years of age and who are receiving general education outside official educational organisations (in the form of family education and self-education), may also be engaged to perform light work, provided that such work is not harmful to their health and does not interfere with their studies for general education. The Labour Code’s provisions permitting employment of 14-year-olds subject to the approval of one of the parents/guardians and the Child Protection Services were supplemented with the requirement to document such approval in writing. Even before the amendments, the Labour Code provided for a reduced working time for adolescent employees (ie, no more than 24 hours a week for employees under 16 years of age and no more than 35 hours per week for employees aged 16 to 18). Moreover, if such adolescents worked and studied at the same time, their working time during the school year could not exceed half the above limits. The amendments clarified that such limits apply to adolescents receiving any type of general education or mid-level vocational training. This means that employees in higher education aged 16 to 18 can now work 35 hours per week during the school year.
Health and safety training
In its Letter No. 15-2/ООГ-1277 dated 5 May 2015, the RF Ministry of Labour and Social Protection reminded employers that, under the Labour Code, they are obliged to provide introductory health and safety training to new employees and employees transferred to new positions, as well as those persons who are seconded to the employer, on internships or otherwise participate in its business. Furthermore, according to the Labour Ministry, such introductory training shall be provided to the employee on the first day of actual employment. The employer shall keep a record of the provided trainings in the relevant register and have such entries signed by the persons giving and receiving training. Employers are obliged to adopt an introductory civil defence training programme and instruct all new employees accordingly during the first month of their employment. Companies are also obliged to develop a civil defence and emergency response course training programme for their employees and to run such programme every year. As the basis for their programmes employers may use the Sample Programme approved by the Ministry of Civil Defence, Emergencies and Elimination of Consequences of Natural Disasters (the MChS) on 22 February 2017 No. 2-4-71-8-14. Companies may change the topics and duration according to their needs, but the total number of training hours may not be less than 16. The MChS stated that it would conduct scheduled inspections on compliance with civil defence requirements only in organisations with a special civil defence status, eg companies who possess defence facilities and/or unique historical/cultural assets, and whose business presents a high emergency risk. The MChS will inspect other employers only where there are serious grounds for doing so, eg, at the request of a prosecutor’s office. In such cases, the head of the company will be notified about an unscheduled inspection in advance. The MChS promised employers that for the first violation of civil defence requirements it reveals during an inspection it will only issue a verbal reprimand or warning, rather than a fine (which, for a legal entity, may range from 100 to 200 thousand roubles).
Collective dismissal threshold applicable to the closing of an establishment
The Spanish Supreme Court has recently ruled on the collective dismissal threshold under article 51.1 of the Workers' Statute and article 1.1 of the Collective Redundancies Directive (98/59/EC), clarifying certain doubts raised in Spain by recent ECJ case law. It is to be noted that there is a great difference in process and cost when dealing with collective or non-collective redundancies in Spain.
In the relevant case, a Spanish company with 20,000 employees entered into an agreement with Oviedo’s city council to operate the facilities of the local equestrian centre, which had 12 employees. The city council would remain the owner of the facilities and no transfer of undertakings would take place upon termination of the contract. The parties terminated the contract in April 2016 and the Spanish company gave notice of the termination to the employees stating that they would be employed either by the city council or by the new operator of the centre. However, as the city council decided to close down the facilities, the employees filed a claim for collective dismissal on the basis of the thresholds set by the Workers’ Statute and the Collective Redundancies Directive. The High Court of Asturias ruled that the threshold had not been met. The judgment was appealed by the employees arguing an incorrect application of the thresholds and of the ECJ’s doctrine in Rabal Cañas (C-392/13), where it ruled that it was not sufficient to look solely at company level to determine whether there was a collective dismissal.
The Supreme Court dismissed the appeal of the employees and ruled that the national law contains a more favourable provision when it sets the threshold at the company level, which is allowed by the Directive. However, it does not prevent the application of the threshold at establishment level as contained in the Directive. Therefore, as the establishment only had 12 employees, the Supreme Court concluded that neither of the thresholds contained in the Workers’ Statute (the company had 20,000 employees) and in the Collective Redundancies Directive (the establishment had less than 20 employees) had been met. In addition, the judgment remarks that the closing of a company, which would render the dismissal of at least five employees a collective one under the Workers’ Statute, cannot be interpreted as if it included the closing of an establishment.
In conclusion, the Supreme Court has provided further clarification on the thresholds contained both in the national law and the Directive in order to assess whether a redundancy is a collective redundancy. As such, it will be necessary to look at company level and establishment level to determine whether a collective dismissal is triggered.
Dismissal because of offending comments made on Facebook
The High Court of Justice of Andalucia recently ruled that the dismissal of an employee because of obscene comments aimed at a co-worker on Facebook was grounded and valid. The employee alleged that the conduct had taken place outside the workplace and working hours and thus could not justify a dismissal. But the Court found that that the relationship between the offender and the victim existed as a “work relationship” and that therefore the comments on social media amounted to serious misconduct, rendering the disciplinary dismissal fair.
Data Protection Bill published on 13 September
The UK government has published a Data Protection Bill which will repeal and replace the Data Protection Act 1998. Concerning data processing, the government envisages that the Bill, once implemented, will supplement the EU General Data Protection Regulation (GDPR) which will become directly applicable in the UK and the 27 other member states on 25 May 2018. The Bill confirms that the UK government will not be using the permitted derogation under Article 88 of the GDPR which allows member states to put in place their own specific rules governing the processing of personal data in the employment context.
UK Corporate Governance Update
White Paper published on 29 August
The UK government has published its response to the Green Paper on Corporate Governance Reform (the White Paper). Many of the more controversial proposals in the Green Paper (on which we reported in the Spring 2017 edition of this newsletter), such as annual binding votes, caps on pay and changes to directors’ duties have been dropped. Instead, the government has given the Financial Reporting Council and other key bodies a mandate to develop codes and guidance. None of the proposals will require primary legislation but some of them, including the requirement to publish the ratio of CEO pay to average pay will be implemented through secondary legislation. The current intention is to bring the reforms into effect by June 2018 to apply to company reporting years commencing on or after that time. For our analysis of the potential implications of the White Paper for UK public companies, please see our briefing here.
Parker Review Report on ethnicity on boards
On 12 October 2017, the Parker Review Committee published its final report into the ethnic diversity of UK boards. The report’s key recommendations are as follows:
- Each FTSE 100 Board should have at least one director of colour by 2021 and each FTSE 250 Board should have at least one director of colour by 2024. Companies that do not meet this recommendation by the relevant date should disclose in their annual report why this is the case.
- In any FTSE 100 or FTSE 250 Board level recruitment, the nomination committee should require the search team/firm to identify and present qualified people of colour as candidates for the role.
- The FTSE 100 and FTSE 250 should develop mechanisms to identify, develop and promote diversity within their organisations to ensure a pipeline of Board capable candidates and their managerial and executive ranks which appropriately reflects the importance of diversity to their organisation.
- A description of the Board’s policy on diversity should be set out in the annual report, and should include a description of efforts to increase ethnic diversity within the organisation, including at Board level. Margot James, the UK Business Minister, has urged the UK’s largest companies to take up the recommendations made by the report.
UK cases update
Employment tribunal fees unlawful
The Supreme Court has decided in the case of R (on the application of UNISON) v Lord Chancellor that the employment tribunal fees system, which was introduced in July 2013, is illegal under both UK and EU law because it has the effect of preventing access to justice. Since the ruling held that the system was unlawful from the outset, all employment tribunal fees which have been paid since July 2013 must be reimbursed to the claimants who paid them. Following this decision, it is likely that the number of claims lodged with the Employment Tribunal will increase (there had been a 70% long term reduction in the number of claims brought since the introduction of the system). It may also be the case that certain claimants may now seek to bring their claims out of time if they can show that the fees system effectively prevented them from pursuing the claim within the applicable time limit.
Holiday pay and commission
In Dudley Metropolitan Borough Council v Willetts, the Employment Appeal Tribunal held that voluntary overtime, out-of-hours standby payments and call-out payments should be taken into account when calculating holiday pay if they are made with sufficient regularity, on the basis that the payments formed part of the worker’s ‘normal remuneration’. The judgment relates only to the calculation of the four weeks’ holiday under Regulation 13 of the Working Time Regulations 1998 and not to the additional 1.6 weeks’ holiday paid under Regulation 13A. The case follows the Bear Scotland line of cases on overtime on which we reported in the Winter 2014 edition. Businesses should review any voluntary overtime, standby or call-out arrangements they have in place. They should assess (i) to what extent payments under those arrangements are made with sufficient regularity that they should be taken into account when calculating holiday pay and (ii) the risk of any claims relating to historic underpayment of holiday pay on these grounds.
Equal pay claims in the private sector
In Asda Stores Ltd v Brierley and others, the Employment Appeal Tribunal (EAT) has upheld the first instance decision that the mainly female retail store workers employed by Asda (a supermarket chain) are entitled to compare themselves to the mainly male workers based in its distribution centres for the purposes of the equal pay claims they have brought (of which there are more than 7,000). Asda has been given permission to appeal to the Court of Appeal and therefore the EAT judgment is not the final one in this case, but private sector employers may nevertheless wish to take steps to identify any pay gaps within their workforce and understand the reasons behind these gaps. They should also be aware that female workers who do ‘broadly similar’ work to a group of higher-paid male workers might be entitled to bring an equal pay claim even if the two groups work at different establishments, as long as there is a ‘single source’ of pay and conditions for both groups.
UK Financial Services Update
Extension of the Senior Managers and Certification Regime (SM&CR) to all FSMA authorised firms
In July, the FCA and PRA published three consultation papers on the extension of the SM&CR to all authorised firms under the Financial Services and Markets Act 2000 (FSMA). The SM&CR was implemented in March 2016 and currently applies only to banks, building societies, credit unions, PRA designated investment firms and certain insurers. The new regime will replace the approved persons regime in force for authorised firms currently outside the scope of the SM&CR. It represents a shift of responsibility from the regulators to firms to certify that many of their employees are fit and proper to carry out relevant functions. Affected employers will have to redesign their compliance and human resources processes in order to ensure that employment contracts, policies and practices comply with the new requirements. You can find more information about the HR implications of the extension of the SM&CR in our blog post here.
Employer’s duty of trust and confidence
Two decisions handed down by the Court of Appeal provide some clarity to employers on the test that courts will apply to determine whether they have failed in their duty not to act in a way that breaches an implied mutual duty of trust and confidence when dealing with discretions under pension schemes (the Imperial Duty). In IBM United Kingdom Holdings Ltd and another v Dalgleish and others, the Court of Appeal upheld IBM’s appeal and held, that for cases which involve the exercise of an employer’s discretionary power, the correct test to be applied by a court is a rationality test equivalent to the “Wednesbury” test which applies to public authorities. This means looking at whether (a) the employer took all relevant matters into account, and disregarded irrelevant matters, and (b) whether the decision is one which no rational (rather than reasonable) employer could have reached. In Bradbury v BBC, a differently constituted Court of Appeal considered the scope of the Imperial duty and the duty of trust and confidence when looking at whether the BBC had breached its Imperial duty when it sought to make changes to the BBC pension scheme. In order to reduce a significant deficit, the BBC asked pension scheme members to agree to limit the extent to which future salary increases would be pensionable. The Court of Appeal held that the BBC had the power under the scheme rules to determine that not all pay would be pensionable and upheld the first instance decision and found that the changes did not breach either the Imperial duty or the implied contractual duty of mutual trust and confidence. For further details see our alert.
Pension rights for civil partners and same sex married partners
In Walker v Innospec, the Supreme Court overturned the earlier decision of the Court of Appeal and ruled that civil partners and same-sex married partners have a right to claim for equal treatment with opposite-sex married partners for spouses’ pensions in respect of all of the service that their partner has accrued in the relevant scheme, rather than only post-December 2005 service. UK legislation had permitted an exception from equal treatment for same sex partner survivor benefits in respect of service in pension schemes before 5 December 2005. The Supreme Court has declared this exemption to be incompatible with European anti-discrimination protection for same-sex partners, and declared that it should be disapplied. In doing so the Supreme Court overturned the earlier decision of the Court of Appeal. The decision will have implications for pension schemes that have not fully equalised survivor benefits for same-sex partners. Those schemes that made use of the permitted exception under the legislation and only provided equal treatment of same sex partner survivor benefits in respect of service in pension schemes after 5 December 2005 will need to review their rules to determine whether there are any potential claims for equal treatment from same sex spouses and civil partners. The case also raises interesting questions about the legality of a similar exemption in respect of age discrimination, where UK legislation states that age discrimination protections do not apply in relation to pensions for periods of service before 1 December 2006. For further details see our alert and blog