Developments in the EU, Austria, Belgium, China, France, Germany, Hong Kong, Italy, Japan, Russia, Spain, the Netherlands and the UK.European UnionThe European Parliament had a busy plenary session this April.Below is a recap of recent votes and projects that are currently on hold until the new European Parliament and Commission are installed following the May 2014 elections.Field LegislationStatusNext steps/entry into force European UnionRemuneration in the financial sector CRD IV Published in the Official Journal on 26 June 2013 AIFMDPublished in the Official Journal on 1 July 2011. Implementation was due by 22 July 2013 UCITSV Awaiting formal adoption by the Council and publication in the National implementation was required by 1 January 2014, although the provisions on variable remuneration will first apply to the 2015 bonus round22 July 2014 marks the end of the transitional period for certain AIFMsMember states will have 18 months to implement ACorporate GovernanceAmendments to theShareholder Rights Directive (including a new say on pay regime)Disclosure of non- financial information DirectiveWomen on boardsdraft Directive on gender balance among non-executive directors of listed companiesThe Commission presented its proposals on 9 April 2014Directive awaiting publication in the Official JournalInitial draft published in late 2012. European Parliament legislative resolution voted in November 2013.Now awaiting Council positionOn hold until the new Parliament and Commission have been installedMember states will have two years to implementOn hold until the new Parliament andCommission have been installedThe Netherlands UKPensions PortabilityDirective Directive publishedin the Official Journalon 30 April 2014Member states willhave four years to implementField Legislation Status Next steps/entry into forceIORP DirectivDraft under discussion On hold until thenew Parliament and Commission have been installed EmploymentPosted workersDirectiveWorking timeDirectiveAwaiting publication in the Official JournalStill no agreement on the revised Working Time Directive despite years of discussions involving the Commission and social partnersMember states will have two years to implementOn hold until the new Parliament andCommission have been installedUCITS VOn 15 April 2014, the plenary of the European Parliament adopted the UCITS V Directive, which makes amendments to Directive 2009/65/EC (UCITS) in respect of depositary functions, sanctions and – most importantly for labour law purposes – fund manager remuneration. The vote follows a February compromise agreement between the European Council, Commission and Parliament.The Directive introduces remuneration provisions similar to those contained in the AIFMD and CRD III. There is, therefore, no cap on bonuses, as in CRD IV, although the Directive does provide that UCITS fund managers are to be paid partly in units of the funds managed, while compulsory deferral is introduced as a means of aligning remuneration with the long-term interests of investors.Prior to the earlier compromise agreement, lobbying efforts led by the UK resulted in an important last-minute amendment; the rules now state that they should apply ‘in a proportionate manner’ to anyone involved in the running of a UCITS fund.This has helped alleviate fears that the Directive will create compliance issues for those fund groups with European-domiciled funds managed by staff based outside Europe.The Council now needs formally to approve the Directive before it gets published in theOfficial Journal.Member states will have 18 months to implement the Directive, which is set to enter into European law in 2016.Pension rightsThe so called ‘portability’ Directive was adopted by the European Parliament and Council in April this year. Directive 2014/50/EU of 16 April ‘on minimum requirements for enhancing worker mobility between member states by improving the acquisition and preservation of supplementary pension rights’ was published in the Official Journal (link here) on 30 April and came into force on 20 May 2014.The objective of the Directive is to lessen the extent to which occupational pension rightspresent an obstacle to cross-border worker mobility.Important changes implemented by the Directive include the following.Acquisition of rights. A worker moving between member states, leaving a scheme by reason of the termination of an employment relationship (the ‘outgoing worker’) and before acquiring vested pension rights in the scheme, has a right to have the contributionshe made reimbursed. There is a limit of three years on the combined vesting period and waiting period for membership of an occupational pension scheme (and the minimum age that must be attained before the vesting of pension rights cannotbe set at higher than 21);Preservation of different benefits. The Directive provides outgoing workers with the right to preserve their vested pension rights in the scheme in which they accrued. As an alternative, the Directive gives member states the ability to allow the payment of a capital sum equivalent to the value of vested pension rights up to a threshold (which is yet to be specified); andInformation rights. The Directive provides active scheme members, deferred beneficiaries and surviving beneficiaries with various information rights. The Directive only appliesto workers who change employers in a cross-border context. It provides for a four-year implementation period: member states will have to adopt the Laws and Regulations necessary to comply with the Directive by 21 May 2018.Directive on the disclosure of non-financial and diversity information On 15 April 2014, the European Parliament adopted a draft Directive amending the Accounting Directive (2013/34/EU), which provides for mandatory reporting by large companies on various corporate social responsibility (CSR) matters.Following the amendments, companies will have to report on the current and foreseeable impact of their operations on the environment. They will have to disclose details about their use of (non) renewable energy, greenhouse gas emissions produced and any water and air pollution being created.In respect of social and employment matters, the recitals provide for a very broad listof topics: gender equality, implementation of ILO conventions, working conditions, social dialogue, information and consultation rights, trade union rights, health and safety and dialogue with local communities. Regarding human rights, anti-corruption and bribery, the recitals refer to information on the prevention of human right abuses and/oron instruments in place to fight corruption and bribery.The Directive deals separately with diversity at board level. It requires companies in scope to report on existing policies which are encouraging diversity at the top by referenceto a number of criteria, eg age, gender, education and professional background.The emphasis on transparency is made with a view to increasing the pressure on businesses to improve the current situation. The EU Commission has said that this transparency requirement complements the draft Directive on women on boards, which looks at reaching specific gender percentages and which is currently on hold because of the May EU elections.The new Directive will apply only to large ‘public-interest entities’ with more than 500 employees, ie approximately 6,000 large undertakings and groups across the EU. Public- interest entities include undertakings listed on an EU stock exchange, as well as some unlisted undertakings, such as credit institutions or insurance undertakings.Companies in scope will retain significant flexibility to disclose relevant informationin the way they consider most useful. The flexibility afforded by the Directive means thatclose attention will need to be paid to the forthcoming (non-binding) guidelines on whatnon-financial information will have to be disclosed – which the Commission has to prepare – and to specific national implementation (including how the EU-mandated regime will interact with reporting requirements that have already been introduced in certain EU member states; for example, the UK, pursuant to the Companies Act 2006).The Directive does not provide for sanctions, instead favouring a comply-or-explain approach. The EU Council has to formally approve the Directive before it gets published in the OfficialJournal and enters into force. After this point, member states will have two years toimplement. The first CSR reports will have to be published in relation to the first financial year after the transposition deadline (ie the financial year starting in January 2017 or later that year, as the implementation deadline is likely to be in 2016).New enforcement Directive on posted workersFollowing a lengthy process, the Council, Commission and European Parliament reached an agreement on 27 February this year on a new enforcement directive, which will complement the existing 1996 Posting of Workers Directive.The development follows pressure from some member states to combat ‘social dumping’ ie the situation where foreign service providers can undercut local service providers because their labour standards are lower – a problem for which some have blamed the 1996 Directive. The European compromise foresees the implementation of a list of control measures in cases where workers are posted and a mandatory joint liability mechanism for contractors in the construction sector, an area which is especially prone to abuses.The new Directive seeks to better protect the rights of posted workers and to combat abuses through a range of new measures aimed at identifying and sanctioning ‘letter box’ companies which have no real business activity (other than recruiting and seconding workers) and at identifying genuine posted workers and better protecting them, includingagainst bogus self employment. The Directive also looks to improve access to information for posted workers, so as to help them claim their rights, and to improve collaboration between member states to fight abuses and make sanctions effective across borders.Finally – and this is probably the most important point – the Directive introduces the idea of joint liability between the end user and the employer of the posted workers, although this is limited to any outstanding net remuneration, corresponding to the minimum salary. This joint liability will be compulsory for the construction industry and optional in others. Some member states already have such a joint liability system in place.The text resulting from the February agreement was voted through by the European Parliament on 16 April 2014 with no last minute surprises. Amendments to extend the new joint liability regime to other industries were rejected. In May, the Council formally adopted the text on the enforcement of Directive 96/71/EC, concerning the posting of workers, in the framework of the provision of services. The new Directive will be published shortly in the Official Journal and member states will have two years to implement it.This new Directive is different from the 2014/54/EU Directive on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement of workers, which was published in the Official Journal on 30 April and which looks at issues such as equal treatment between all Union workers and at better protecting their rights (and not just those of posted workers).Say on payhe European Commission has proposed expanding the 2007 Shareholder Rights Directive,to include, among other things, a new EU-wide ‘say on pay’ regime.Under the proposed regime, shareholders are to be given a binding vote on a directors’ remuneration policy. Companies must also make various disclosures about director pay. Notably, they must state the envisaged ratio between the average remuneration of directors and the average remuneration of the company’s full-time workers, stating why this ratio is considered appropriate.While there is already an emerging trend towards ‘say on pay’ legislation within the EEA, the proposed Directive would extend its reach. One notable implication of the Directive is that companies listed on the London Stock Exchange, but incorporated outside the UK, would now be required to put a directors’ remuneration policy to a binding (as opposed to advisory) shareholder vote, at least once every three years.To give an indication as to timeframe, it is unlikely the proposal will be agreed before late 2015.Labour market reformsThe sovereign debt crisis has triggered labour market reforms across Europe. These aim to simplify hiring and firing and to stimulate employment.The employment, pensions and benefits team publishes a reforms tracker and national briefings on changes in employment law (covering Belgium, France, Italy and Spain).You can find out more about our publications on our labour market reforms web page.Jean-François GerardE firstname.lastname@example.orgAustriaNew tax regulations concerning high-income earnersIn February 2014, the newly-elected Austrian government passed a tax law amendment with two criticised measures concerning high-income earners.All voluntary (contractual) severance payments made after 28 February 2014 will (i) on the employer side, cease to be deductible as an operating expense and (ii) on the employee side, cease to be subject to the privileged tax rate above a certain capOn the employer side, any remuneration paid to an individual, which exceeds €500,000 gross per annum, will cease to be deductible as operating expense as of 28 February 2014. This seems to be in line with the European trend against excessive remuneration agreements,but has raised constitutional concerns among commentators.On the employee side, the newly-introduced cap for the preferential tax rate on voluntary severance payments (6 per cent) will generally be the lower of (i) 25 per cent of the employee’s ongoing salary during the last 12 months, or (ii) the ninefold monthly social security contribution ceiling (€40,770 gross in 2014). Employees with three or more years of service will benefit from a larger cap depending on the exact duration of their employment.A new cap will also apply to the preferential tax treatment of compensation payments for notice periods (Kündigungsentschädigung) and settlement payments related to the termination of employment. Essentially such payments will continue to be subject to a tax exemptionat a rate of one fifth of the payment, but such exemption will only apply to up to one fifth of the ninefold monthly social security contribution ceiling (ie €8,154 gross in 2014).The changes are significant, especially with respect to board members of Austrian stock companies who are not entitled to statutory severance payments (as they are not considered employees) and therefore are usually only entitled to contractual, ie voluntary, severance payments. Commentators have raised constitutional concerns in this regard.Bi-annual compensation reportsEmployers with more than 500 but fewer than 1001 employees are reminded of their duty to issue a compensation report for 2013 (their last report having been due for 2011).Further, as from 2014, employers with more than 150 but fewer than 251 employees are required to issue compensation reports according to the Equal Treatment Act, starting with a report for 2013.In both cases, the 2013 report was due by 31 March 2014. Employers who have missed the deadline are still strongly encouraged to issue the compensation report as soon as possible. The Equal Treatment Act does not provide for immediate fines or similar legal consequences in case of a violation of the duty to prepare the reports. Theoretically, employees or employee representatives could try to enforce the preparation of the reports in court, which may result in coercive penalties.The reports must specify the number of men and women in each job category (under a CBA or internal practice), and the average remuneration of men and women in each category. They must be issued to the works council or, where no works council exists, made available to all employees.As yet, the law is unclear on the report’s parameters and some practical details of its correct preparation. While the Equal Treatment Act implies a strict confidentiality obligation on employees and employee representatives with regard to the contents of the compensation reports (including sanctions in case of breach), the reports may be used by employees and employee representatives in litigation on equal pay.The compensation report is due every two years, by the end of the first quarter of the subsequent year at the latest. The first reporting year depends on the respective employer’s number of employees. While bigger companies have already been subject to this obligation in recent years (so companies with more than 500 but fewer than 1001 must prepare a compensation report again for 2013), no duty to report is foreseen for employers with 150 or less employees. Reports for 2014 will be due by employers with either more than 250 but less than 501, or more than 1,000 employees.Karin Buzanich-SommereggerE email@example.comBelgiumMajor changes to termination rulesMajor changes to Belgian dismissal rules are taking place as part of a wider move towards harmonising the status of blue-collar and white-collar workers. Blue-collar workers will see their notice period (or termination indemnity paid in lieu) increase significantly from 2014, whereas white-collar workers will see theirs decrease. Other changes include the introduction of a right for dismissed employees to request that their employer provide reasons for the dismissal. This latter change applies to all terminations taking placefrom 1 April 2014. The attached briefing explains the new regime and how the transition will be organised.Cancellation of the LIMOSA notification for traineesSelf-employed contractors and the employers of employees seconded to Belgium from another EU member state must pre-notify the Belgian authorities and provide certain information, such as the identity of the beneficiary of the workers’ services. This is known as the LIMOSA notification.Following a decision by the European Court of Justice on 19 December 2012, which ruled that the LIMOSA notification was an illegitimate obstacle to the free movement of self-employed contractors, the requirements for self-employed contractors have been simplified.In the same stream of simplification, the requirement of a LIMOSA notification has now been cancelled for trainees (whether self-employed or employees), who are established in another EU member state and who want to do an internship in Belgium.Amendment of the Flemish Decree of 19 July 1973 on the use of languageIn a judgment handed down on 16 April 2013, the Flemish Decree of 19 July 1973 on the use of language was ruled contrary to EU law by the European Court of Justice (ECJ) insofar as it relates to cross-border employment (see the summer 2013 edition of the ILLB).As a result of this decision, the Flemish Decree was modified on 14 March 2014. Within the framework of international employment relationships, while Flemish remains the official language for all employment-related documentation, it will now be permissible to draft an official version of the individual employment contract in one of the languages of the EU or the EEA that is understood by all partiesIt is unclear whether the concept of individual employment contracts for the purpose of the amended Decree covers the employment contract only, or also the separate documentation which sets forth employment terms and conditions and which is reputedly integrated into the employment contract, eg a bonus plan. In addition, if interpreted strictly, the condition that all parties must understand the other language used could limit the efficiency of the amendment in practice.Further, the use of another official language is only possible if the relevant employee:resides in another state of the EU or the EEA;resides in Belgium but has exercised his/her right to free movement or his/her freedom of establishment guaranteed by the EU legislation; andhe/she falls under the free movement of workers on the basis of an international orsupranational treaty.Finally, if there is a discrepancy between the Flemish version of the employment contract and the other version, the Flemish version will prevail.Decision of the Labour Court of Brussels of 17 December 2013 on the Flemish Decree of 19 July 1973 on the use of languageFollowing the ECJ’s 16 April 2013 judgment, discussed above, the Labour Court of Brussels has ruled that the interview of an employee in English, preceding the decision to dismiss the employee for gross misconduct, could be valid if it took place within the frameworkof cross-border employment. In the case at hand, the employee was Dutch but was employed in Belgium, the Netherlands and Luxembourg and reported directly to the European direction, which could not speak Dutch.It is questionable whether this decision, issued before the Decree was amended, would still be compatible with the amended Decree. The amended Decree, indeed, only provides that an official version of the individual employment agreement can be drafted in another language, in addition to the official Flemish version. The amended Decree does not provide that other documentation, such as an interview prior to a dismissal for gross misconduct, may be conducted in another language.It can thus be expected that the scope of the amended Decree will give rise to furtherdiscussion in the light of the decision of the ECJ of 16 April 2013.Satya Staes PoletE firstname.lastname@example.orgChinaDevelopments in collective bargainingOn 15 November 2013, the Third Plenum of the 18th Central Committee of the Communist Party of China (the CPC) issued the Decision on Major Issues Concerning Deepening Reforms, which provided a roadmap for China’s further development. The Decision provided for over 60 areas of development, one of which was the reform of China’s income inequality. The further development of the collective bargaining system was seen as a key part of reducing income inequality.In recent years, labour unrest, work stoppages and strikes have increased in frequency in China’s industrial hubs. Local governments have responded by using pressure against both employers and worker activists to settle disputes. Despite this, labour unrest has not eased and workers continue to strike. These strikes often do not involve local unions as many workers view such unions as being under the control of their employers and therefore not an effective guardian of their rights. The Decision aims to reduce labour unrest (which mainly stems from workers’ discontentment over wage levels) by encouraging collective bargaining on salary increases.In response to this, local governments have developed their own legal framework for the peaceful resolution of labour disputes through collective bargaining. A recent example of this framework is the draft Guangdong Province Collective Negotiations Regulations, which contain provisions for workers to elect their own representatives to the bargaining committee and allow workers to replace union leaders through a vote of no confidence.In addition, there are provisions protecting workers’ representatives against unfair dismissal and unfair labour practices, as well as provisions requiring employers to disclose financial information during the course of the collective bargaining process so that wages canbe determined by reference to the employer’s finances.We anticipate that the All-China Federation of Trade Unions (ACFTU) will continue to push for increased collective bargaining in 2014. Foreign Owned Enterprises and in particular, Fortune 500 companies, may be targeted by ACFTU to participate in collective bargaining (particularly in relation to wage increases) with their employees. Employers who refuse to participate in such collective bargaining leave themselves exposed to the risk of labour unrest and to pressure to participate in the collective bargaining process from local unions and local authorities.Joseph YueE email@example.comFranceObligation to invite employees to buy the businessA draft bill (so-called ‘projet de loi relatif à l’économie sociale et solidaire’) aimed at ‘facilitatingthe disposal of companies to their employees’ is currently under preparation in France.This draft bill provides that the sale of a business or of shares representing more than 50 per cent of the company’s share capital cannot be completed before the expiry of a two- month period as from the notification made to the company of the owner’s intent to sell,in order to enable one or more employees to make an offer to purchase the shares/business.In companies not subject to the obligation to set up a works council (ie in companies with fewer than 50 employees), the employer must immediately inform the employees of its intention (or the intention of the owner, in the case of a share sale) to sell the shares or the business. In companies employing between 50 and 249 employees, and therefore with a works council, such information must take place, at the latest, when the works council is informed and consulted on the contemplated sale.The employer has to inform the employees that they can make a purchase offer. Such information can be given by any means, such as by posting a notice in the workplace. The employees are bound by a confidentiality obligation as regards the information received.The bill provides that the sale can only be completed before this two-month period if the employees have informed the seller of their unanimous decision not to make a purchase offer. Any sale in violation of this rule could be cancelled by a court upon the employees’ request provided that their claim is filed before court within two months of publication of the sale or of the date on which they were informed of the sale.The draft bill is still under discussion at the national assembly.Obligation to seek a buyer before closing a siteThe ‘Florange law’, named after the controversial site closure of a blast furnace in north-east France by ArcelorMittal in 2012, was adopted by the French parliament on 24 February 2014.The main feature is the requirement imposed on companies with more than 1,000 employees to search for a purchaser before carrying out a collective dismissal that will involve asite closure.In this situation, the employer must inform its work council, the labour authorities and the relevant mayor that it plans to close the site before or during the works council consultation process in respect of the collective dismissal.Once the works council is informed, the company must provide a dossier containing all necessary information about the site to potential buyers, though it can withhold confidential information which could harm the company’s interest or jeopardise the continuity of the site’s activity. Potential buyers are subject to confidentiality obligations regarding the information they access. The company must take into consideration any purchase offers, and provide a reasoned response to each purchase offer. The works council must be given details of any offers that are made and may receive the help of an ‘expert’ to analyse the economic reasons for the dismissal project and make sure the employer looks for a buyer in good faith and considers any offer.Initially, the Florange law also provided that, in the event the company refused a purchase offer without legitimate reason, a claim could be filed before the Commercial Court by the works council, asking for the company to be ordered (i) to pay a fine corresponding to up to 20 times the monthly minimum wage per position eliminated, or (ii) to reimburse any public aid received over the last two years.However, in a decision rendered on 27 March 2014, the French Constitutional Court held that these provisions affected companies’ constitutional rights as regards property and entrepreneurial freedom. The Court ruled that the first sanction was disproportionate, but confirmed the validity of the second sanction.New unemployment insurance rulesOn 22 March 2014, French employer associations and three trade unions agreed to stricter rules for claiming unemployment benefits. The new unemployment insurance rules should come into force on 1 July 2014 (though the text must be agreed by the Minister of Labour before being implemented).Articles 4 and 6 of the new unemployment insurance agreement affect both benefit rates and the date at which unemployment benefits start being paid.Unemployment benefit is paid for every day of the week. The amount of the daily allowance cannot be lower than 57 per cent (instead of 57.4 per cent currently) of the daily reference wage. Managers and executives being dismissed with high severance payments will haveto wait longer, up to 180 days instead of 75 days currently, before being eligible for unemployment insurance compensation. The way this waiting period is calculated has also been changed, making it less generous. For instance, an employee who receives anon-statutory severance pay in excess of €16,200 will have to wait six months before beingeligible for unemployment benefits.However, these new rules do not apply to dismissals based on economic grounds.The number of mutual termination agreements may increase significantly from now to30 June 2014. From 1 July 2014, such agreements will be less attractive to employees as their entitlement to unemployment benefit will then be lower than if they were made redundant.Working time for autonomous executives – new agreement for consulting engineers.On 1 April 2014, employer associations and trade unions signed an agreement on an amendment to the Syntec national collective bargaining agreement to enable the use of flexible working time arrangements for autonomous executives, based on a maximum number of working days per annum (so-called ‘forfait jours’), to continue. The Syntec agreement covers consulting engineers and their consulting firms.The agreement has not been ‘extended’ yet, meaning that it only applies to companies that are members of the employers’ organisations that actually signed the agreement.n 2012, the French Supreme Court held that the Syntec working time provisions were not sufficient to protect employees’ rights to health and rest where they were subject to an annual allowance of days’ work. As a result, ‘forfait jours’ arrangements entered into by employers with employees subject to the Syntec CBA (with no company-level collective agreement) were null and void, exposing employers to potential overtime claims and the risk of fines and criminal actions for concealed employment.he new amendment to the Syntec Collective Bargaining Agreement now includes provisions that are meant to ensure that the volume of work and workload remain reasonable, in order to protect employees’ health and safety.Works council rights on a takeover bidThe rules applicable to public takeover bids have been changed by the Florange law dated 29 March 2014. The new rules give the works council the right to hire an accountant paidby the company (instead of an accountant paid by the works council itself) whenever a public takeover bid is submitted. They also introduce an obligation to consult the works councilof the target company on the takeover bid before the board of directors gives its opinion; the works council must then render its opinion within a period of one month as from the date of the takeover bid. These measures are applicable to takeover bids submitted as from 1 July 2014, except where the bidder already controls the company.Laurence Harvey-WoodE firstname.lastname@example.orgGermanyGerman cabinet signs off statutory minimum wageOn 4 April 2014, the German cabinet gave the green light to the long-contested statutory minimum wage of €8.50 per hour. The minimum wage will apply to all employees nationwide, irrespective of any regional differences. However, it will not cover minors, trainees and, under certain conditions, interns. Further, long-term unemployed do not fall under the scope of the statutory minimum wage for the first six months of a new job.The minimum wage is due to apply as from 1 January 2015. However, during a transitional period until 31 December 2016, collective bargaining agreements may, for certain branches, stipulate deviating wages, if the respective collective bargaining agreement is rendered compulsory by the Federal Ministry of Labour and Social Affairs. As from 1 January 2017,the statutory minimum wage applies without any restrictions. The minimum wage level will be reviewed on an annual basis. The first such review will have effect from 1 January 2018. The development of tariff wages shall serve as a point of reference.Although the current draft bill still contains quite a few implementation issues that mustbe resolved, it is to be expected that the proposed bill will be passed after the summer break. It remains to be seen what effect the minimum wage will have on current employment relationships, especially in regionally weak locations.Employees may claim compensation in case of discriminatory dismissalUntil recently, it was not clear whether employees can claim monetary compensation in cases of discriminatory dismissal. In the past, discriminatory dismissals were merely held invalid by the German labour courts. In a recent decision, the German Federal Labour Court granted monetary compensation in a case where the dismissal was invalid due to the pregnancy ofthe employee. The Court considered such dismissal to be gender related discrimination.However, the German Federal Labour Court also made clear in another decision that monetary compensationmay not be claimed if the employer did not have the crucial information causing the dismissal to be discriminatory. In this case, the employer did not know about the employee’s pregnancy. Therefore, the violation of maternity protection laws could not serve as indication of a discriminatory dismissal. Nevertheless, the dismissal was still invalid because, under German law, maternity protection does not necessarily require the employer to have knowledge of the pregnancy when issuing the dismissal.Considering this recent development, employers must be prepared for the fact that, in the future, dismissed employees will not only file a complaint against the dismissal, but may also try to claim monetary compensation on the grounds of discrimination. In cases where this appears possible, employers should ensure that the decision to dismiss the employee is adequately documented in order to defend themselves against accusations of discrimination.Increased scrutiny of regulators means less flexibility when dealing with disciplinary issues2013 brought with it an increased focus by the Hong Kong regulatory authorities on good corporate governance amongst companies and accountability towards shareholders. 2014 looks set to continue this trend. Employers in Hong Kong are facing growing pressure from the regulatory authorities to monitor their employees’ regulatory compliance and to be accountable for any breaches that arise.In part, this means that employers have to ensure that they have robust policies in place that deal with employee compliance with the relevant regulations (such as employees’ dealing in securities), disciplinary procedures and the reporting of any breaches or ‘whistleblowing’. Procedures must also be in place to ensure that those policies are adhered to by staff. Such procedures should include steps to make certain that staff are aware of the policies and are appropriately trained on how to comply.
The recent spotlight on these issues also means that employers will find that they have less flexibility in the way that they are able to deal with any issues of employee misconduct. While employers may have been tempted in the past to take a softer approach towards employees in respect of more minor or unintentional acts of misconduct, the increasing pressure from regulators, combined with reporting requirements, means that employers will have less opportunity to take a lenient approach and may be subject to scrutinywhere they do.It is therefore important for employers to be aware of their reporting obligations, have robust policies and to apply those policies consistently.Deregulation of fixed-term contracts, temporary agency work and apprenticeships The Italian government enacted a decree in March, deregulating fixed-term contracts, Temporary Agency Work (TAW) and apprenticeships.Initial fixed-term and TAW contracts of up to 36 months no longer have to be justified with specific reasons. In addition, the original term can be extended, provided the extension is justified with objective reasons. No more than eight extensions are possible. The numberof employees employed through fixed-term and TAW contracts cannot exceed 20 per cent of the employer’s total workforce.Apprenticeship has been deregulated too. This is the main way for young people (15- to 29-year-olds) to enter the labour market. Before March 2014, the employer was able to enter into fresh apprenticeship contracts with existing apprentices, subject to hiring as permanent employees a minimum quota (at least 50 per cent)of the apprentices used in the previous 36 months. This is no longer a requirement.The European Court of Justice on collective dismissals and executivesThe European Court of Justice (decision C-596/12) has sentenced the Italian government over the misapplication of Directive 98/59/EC ‘on the approximation of the laws of the member states relating to collective dismissals’.Italian law provides that top-ranked employees (Dirigenti) are excluded from the collective dismissal procedure and, in the case of mass redundancies, they have to be dismissed individually.Accordingly, the dismissal of a single Dirigente, (in the context of wider employee redundancies) does not trigger the collective dismissal procedure, with five dismissals in 120 days constituting the threshold. The ECJ deemed this exclusion was not consistent with Directive 98/59/EC.It is debatable whether the decision of the ECJ has direct effect because it came at the end of an infringement procedure, but there is the material risk that the Italian employment courts will take the view that this judgment will actually have a direct effect on the Italian system.However, it is likely that the Italian government will legislate soon on the matter, in order toavoid further sanctions from the EU.The European Court of Justice on transfers of part of a going concernThe European Court of Justice has given a preliminary ruling after the Tribunal in Trentoraised a question before it, regarding the transfer of part of a going concern.According to this decision, even if the transferred part of a going concern cannot be identified as an autonomously productive unit already existing prior to the transfer, the transfer is legitimate, on the proviso that the national law of the member state specifically admits such an operation: this is the case of Italian law. As a possible consequence, if the law of a member state does not require the existence of the transferred part of the going concern prior to the transfer, the transferred employees will be legitimately transferred; no consent of the relevant employees will be needed in Italy, even though the part of the going concern was not an autonomously productive unit prior to the transfer. In addition, the ECJ stated in its decision that the transfer will also be effective in cases where a strict business link between the transferor and the transferee still remains.JapanEmployment Guideline may help you avoid employment disputes in JapanOn 1 April 2014, the Japanese government issued the Employment Guideline (the Guideline), which ‘aims to help global companies and start-up companies accurately understand Japanese employment rules, improve foreseeability and ease business expansion without triggering employment disputes’.Although the Guideline is not legally binding, it should have certain practical influence. Especially, in an employment dispute relating to dismissal, following the Guideline may help foreign companies resolve the case in their favour.Background and overview of the GuidelineSince the inauguration of his second Cabinet in December 2012, Prime Minister Abe has mapped out an economic policy that consists of three concepts, nicknamed ‘The Three Arrows’. Following the First and the Second Arrows (monetary easing and public spending, respectively), the Cabinet has worked towards implementing the Third Arrow: a growth strategy. As part of this growth strategy, the National Strategic Economic Growth Areas Act (the Act) was enacted in December 2013, among others, to encourage foreign investment into Japan and new industrial growth.In Japan, it is often said that it is hard to predict outcomes of employment disputes, particularly for foreign companies. This unpredictability has caused foreign companies to hesitate to start business in Japan. The Act seeks to alleviate these concerns by requiring the government to support foreign companies or other business owners that start operating and hiring employees in the designated growth areas, such as Tokyo or Osaka, by preventing individual employment disputes.The Guideline will be utilised by the ‘Employment Labour Advisory Centre,’ which will be established in the growth areas, to provide employment advice in response to inquiries from global companies and other entities, although the details of the Centre have not beenmade public.What follows is a general overview of the structure and content of the Guideline.First, the Guideline notes that Japanese courts may consider differences as to the human resources management between typical Japanese companies operating under the long- term employment system (‘internal labour market type’) and others such as foreign or start-up companies (‘external labour market type’).Second, the Guideline summarises legal precedents and relevant regulations, mainly around issues that are of keen interest for global companies and issues that tend to be highly disputed.Third and most importantly, the Guideline suggests that, in order to prevent disputes regarding dismissal, ‘external labour market type’ companies should set out the potential reasons for dismissal, dismissal procedures, appropriate payment, re-employment support and other matters in the employment contract or rules, and carry out such measures when dismissing an employee.Suggestions under the guidelineItems below summarise the matters that ‘external labour market type’ companies should consider including in their employment contracts or rules to prevent employment disputes in relation to probation periods, overtime allowance and dismissal, respectively, all of which are frequently disputed in Japanese courts. These suggestions assume a situation where the relevant employee is a manager, or a specialist of a considerably high level, who is attractively remunerated, which is often the case with foreign companies’ recruitment practices.Probation periods. A relatively short probation period should be set (eg three months). In addition, work duties and expected performance levels should be drafted in as much detail as possible, and it should be clarified that the employee may be dismissed at the end of or during the probation period depending on the employee’s performance or other relevant circumstances. It should be also clarified that during the probation period, the employer will undergo periodic work evaluations, provide notice thereof to the employees, and the employer should point out problems with the employee’s work performance, if any. The Guideline also advises setting a notice period and a severance payment amount in caseof a dismissal at the end of or during the probation period.Overtime allowance (for overtime-eligible employees). In principle, overtime work and holiday work payment systems should be specified. If overtime allowances are included in the employee’s base salary, it should be stipulated in the employment contract or rules.Dismissal. The Guideline sets out various matters that should be in place in a company’s employment contracts or rules to address certain types of dismissals. For example, if a dismissal is for performance reasons, the company should set out in its employment contracts or rules, detailed work duties, responsibilities and skill sets required to perform the duties and responsibilities. The employment contract or rules should also specify that the employee may be dismissed for failing to satisfy his or her duties and responsibilities to a reasonable degree or for continuing to considerably underperform for a certain period and that the employer will undergo periodic performance evaluations and notify the employee of the evaluations.For redundancy-based dismissals, the company’s employment contracts or rules should state that an employee may be dismissed for reasons not attributable to the employee(eg downsizing or eliminating the position).The Guideline also suggests that severance package provisions, in accordance with the employee’s position,achievements, years of service and other relevant circumstances, should be included for each type of dismissal (ie dismissals due to private health reasons, performance reasons or redundancy).Practical influenceWhile the Guideline suggests that companies set out certain specific matters in their employment contracts or rules, these specific matters are not mandatory requirements that Japanese courts must take into account after a dispute arises. However, in practice, there is a fair possibility that the courts will generally respect the Guideline and take it into account when handling issues referred to in the Guideline. This could result in situations where courts rule in favour of employers that have set out in their employment contracts or rules, the specific matters mentioned in the Guideline and complied with them. Traditionally, Japanese courts usually have not taken into account the provision of severance payment in determining whether a dismissal is valid. However, the Guideline may change this.Accordingly, to mitigate liability risk in employment disputes and to prevent disputes in the first place, it is recommended for foreign companies operating in Japan to review and consider revising their standard employment contracts and rules by setting out the matters suggested in the Guideline.If you have any questions on the Guideline and/or need any assistance to review and reviseemployment contract and rules, please contact:RussiaA simplified procedure for obtaining work permits…On 10 January 2014, amendments to Law No. 115-FZ On the Legal Status of Foreign Nationals in the Russian Federation came into force. Pursuant to these amendments, foreign nationals can obtain work permits via a simplified procedure, if all of the terms below arecomplied with.(a) They are sent to Russia by a foreign company registered within the territory of a member state of the World Trade Organisation (at present 159 countries are member states of the WTO, including Austria, Belgium, Great Britain, Germany, Denmark, Israel, Netherlands, the US and France).(b) They are sent to fill a managerial post or are highly qualified (in the latter case there is a requirement concerning the employee’s minimum salary).(c) The foreign company sends foreign nationals to its own subsidiary, representative orbranch office within the territory of the Russian Federation.d) They have worked for the home company for not less than one year before being sentto Russia.
Work permits for those who qualify shall be issued for a period of up to three years, and the permit may be extended on repeated occasions. Foreign employees can obtain a work permit that will be valid in two or more constituent entities of the Russian Federation.
No work permits are being issued at the present time until the Federal Migration Service of Russia implements the relevant procedure.
…but a new requirement is being introduced: foreign citizens will now be obliged to confirm their knowledge of Russia in order to receive a work permit From 1 January 2015, in order to receive a work permit, foreign nationals will have to confirm their command of Russian language and demonstrate their knowledge of Russian history and basic legislation of the Russian Federation. Foreign nationals who received work permits prior to 1 January 2015 will be required to provide documents confirming their command of Russian, Russian history and Russian law in order to extend the term of their previously issued work permits. Only those foreign nationals classified as highly qualified specialists and those studying full-time in professional educational institutions or higher education establishments in the Russian Federation may obtain work permits without providing this relevant documentation.
Tightening responsibility for violating labour legislation
Amendments have been adopted to the Administrative Offences Code of the Russian Federation concerning an employer’s responsibility for violations of labour legislation and legislation on labour protection. These amendments will come into force on 1 January 2015.
The maximum penalty has been increased for various violations of labour legislation; for example, executing a civil law contract rather than an employment contract now carries
a fine of up to RUB100,000 (currently $1 is equal to RUB36.5. Repeated violations carry a fine of up to RUB200,000.
The Administrative Offences Code of the Russian Federation has also been supplemented with new article 5.27.1, which introduces liability for violating requirements on labour protection. In particular, if a company has not performed an assessment of labour conditions, it can be fined between RUB60,000 and RUB80,000.
The new section 23 in article 19.5 stipulates that a director may be fined between RUB30,000 and RUB50,000 for non-compliance with the labour inspector’s order, while the company may be fined up to RUB200,000. At present, a director can be fined between RUB1,000 and RUB2,000, while the company can be fined between RUB10,000 and RUB20,000.
Furthermore, starting from 1 January 2015, the limitation period for bringing the employer to administrative responsibility for violating labour legislations will be increased from two months to one year.
Severance pay and compensation will be banned in certain cases where a contract of employment has been terminated
On 13 April 2014 amendments to the Russian Federation Labour Code came into force which prohibit the payment of severance pay and/or compensation upon the termination of a contract of employment as a result of an employee’s guilty actions or failure to act.
The terms and conditions of employment contracts concluded prior to the date the amendments come into force, which provide for the payment of compensation under these circumstances, have now become void.
Changes to the law on commercial secrets
On 1 October 2014 amendments to Law No. 98-FZ on Commercial Secrets will come into force. The amendments reinforce some employee obligations which were not previously provided for by the law, including:
the obligation not to disclose information held by the employer and its counterparties and classified as a commercial secret, and not to use such information for personal purposes without their permission throughout the term of such commercial secrecy, including after termination of the employment contract; the obligation to compensate the employer in full for any damages directly resulting from the disclosure of information classified as a commercial secret, including after termination of the employment contract; and
(c) the obligation of the company’s chief executive officer to pay damages directly resulting from, and loss of profits caused by, disclosure of information classified as a
Changes to the procedure for calculating average daily salary for holiday pay
Under the amendments to the Russian Federation Labour Code, which came into force on
2 April 2014, the average number of calendar days used to calculate average daily salary for holiday pay and payment of compensation for unused holiday was changed to 29.3 days. Prior to the amendments coming into force, the average number of calendar days used to calculate average daily salary was 29.4 days.
Ban on personnel leasing (secondment)
On 5 May 2014, Federal Law No. 116-FZ on the Amendment of Certain Laws of the Russian Federation, came into force. It limits a company’s ability to engage seconded (leased) personnel, allowing secondments only between affiliated companies or by specialised agencies on a temporary basis as described below.
Secondment means work carried out by secondees under the instruction of an employer, for the benefit and under the supervision and control of an individual or company that is not the secondees’ actual employer.
Generally, secondments will be banned from 1 January 2016. But the law allows exceptions. Two types of companies will be able to assign employees to another company under employee assignment agreements:
companies that temporarily assign employees to their affiliates; joint-stock companies,
if the assigning party is a party to a shareholders’ agreement with the other participants in the company; or companies that are a party to a shareholders’ agreement with the assigning party; and
accredited private employment agencies incorporated in the Russian Federation.
Also, private employment agencies may only second workers for temporary work in another
replace temporarily absent employees; and/or
work on a predetermined temporary (up to nine months) increase in production or scope of services; and/or
provide temporary employment to people who experience difficulties in finding employment under normal circumstances – for example, single parents and parents with three or more children, those bringing up young children, those in full time education, and so on – in cases where fixed-term employment contracts can or should be entered into with these employees as set out in article 59 of the RF Labour Code.
The law introduces requirements that private employment agencies must comply with to receive accreditation. These include an increased charter capital requirement as well as special requirements for the education and experience of the CEO of the private employment agency.
The law also provides that the terms and conditions of the seconded employees’ pay should not be inferior to those of the recipient party’s employees who perform the same functions with the same qualifications.
Companies and other people to whom the staff are seconded shall bear secondary liability for all the obligations of an employer arising out of the employment relationship between the seconding party and the secondees, including paying salaries and other amounts due to the employees.
On 1 January 2015, an amendment to Federal Law No. 115-FZ on the Legal Status of Foreign Citizens in the Russian Federation will come into force. As a result, accredited representative offices of foreign companies will be able to take on foreign employees as ‘highly qualified specialists’ and get work permits for them.
Transfer of Undertaking Regulations
In relation to the Acquired Rights Directive (ARD), a recent judicial resolution by the Superior Court of Madrid has adopted a very narrow interpretation of the concept of transfer of undertaking in an outsourcing situation.
In this case, the company, A3 TV (one of the most high-profile media undertakings in Spain), transferred its documentation services unit to Accenture Outsourcing Services (Accenture). The transfer affected 57 employees who did not consent to the transaction.
All the relevant material assets were duly transferred, but A3 TV set out a prohibition on subcontracting the service to a third party, and retained the right to modify the services to be provided, also keeping control over the manner in which this was done.
In the circumstances, the Superior Court understood that Accenture was not an autonomous employer, given that its powers of organisation were subject to A3 TV decisions. Thus, the transaction was not considered a transfer of a business as a going concern, as it did not comply with the ARD requirements. Consequently, and given the fact that the employees had not consented to the transaction, the judicial resolution declared that the transfer was null and void and that the employees had to be reinstated at A3 TV.
The Claw-Back Act
On 1 January 2014, the Claw-Back Act entered into force, enabling Dutch public companies and financial undertakings to adjust and recover excessive bonuses of managing directors. In addition, the claw-back provisions apply to daily policymakers of financial institutions as defined in the Financial Supervision Act (Wet op het financieel toezicht).
The most important rules introduced by the Claw-Back Act are:
(i) the corporate body that is authorised to determine the remuneration of the directors of a company (in general the supervisory board) can adjust the amount of awarded bonuses in case payment thereof would be unacceptable according to reasonableness and fairness tests;
the company can (fully or partially) claw back any bonus payment made in the case that
it has been awarded on the basis of incorrect information;
directors of listed companies are required to pay back the value increase realised on shares, awarded to them as remuneration, as a result of a public bid, merger, demerger or a decision as referred to in Art. 2:107a of the Dutch Civil Code, to prevent the occurrence of incentives leading to improper judgement of directors in case of takeover situations (this rule will lapse on 1 July 2017); and the company must report the amount of the adjustments and/or claw-backs made in the company’s explanatory notes to the annual report over the relevant financial year.
Amendment of the Foreign Nationals Employment Act
An amendment of the Foreign Nationals Employment Act (Wet arbeid vreemdelingen) entered
into force as per 1 January 2014, pursuant to which new rules are introduced, restricting
the admission policy of migrant workers and preventing further competition of employment
The reason for restricting the admission policy is to fully exploit the working ability of people from the Netherlands and the rest of the EU (being the priority workforce) prior to job vacancies being fulfilled by workers from outside the EU. Among others, the criterion for denying a request for a work permit (required for people coming from outside the EU) will therefore change from whether there is actually appropriate labour supply available for the vacancy for which a work permit is requested, to whether there would be sufficient jobseekers present on the labour market who fit within the job vacancy profile (resulting in
fewer work permits being granted). Furthermore, a work permit will, in principle, be granted for a maximum period of one year and a limit on the number of work permits may be introduced for sectors which insufficiently take the responsibility to fulfil their vacancies with people of the priority workforce.
To support the entry of highly-educated migrants, the restricted admission policy does not apply to workers from whom it may be expected that, due to their knowledge, they will contribute to the Dutch economy.
To prevent competition on employment conditions, one of the newly-introduced rules is that
a request for a work permit will be denied in case the salary offered is below market practice.UKPensions overhaul announced in Budget 2014Chancellor of the Exchequer, George Osborne, delivered the UK Budget on 19 March 2014. The Budget 2014 stated that the government will:‘introduce the most fundamental reform to the way people access their pensions in almost a century byabolishing the effective requirement to buy an annuity, giving people much greater freedom over how they access their pension savings’.From a pensions perspective, the Budget announcements focused heavily on defined contribution pensions and concentrated on the key themes of flexibility and information for individuals with defined contribution pensions.The Chancellor announced a series of reforms to increase flexibility in the way in which defined contribution pensions are able to be accessed. The Chancellor announced that, from April 2015, individuals with pension savings will no longer be required to purchase annuities on retirement. Interim measures in 2014 that took effect from 27 March 2014 included:the capped drawdown limit increasing from 120 per cent to 150 per cent;the guaranteed income requirement for accessing flexible drawdown falling from £20,000 to £12,000;the maximum individual pension pot lump sum that can be taken increasing from£2,000 to £10,000;the number of pension pots of below £10,000 that can be taken as a lump sum increasingfrom two to three; anthe trivial commutation limit increasing from £18,000 to £30,000.With effect from April 2015, those with defined contribution pensions will be able to draw all of it down from age 55, subject to their marginal rate of income tax (rather than 55per cent).It was also announced that, from April 2015, all individuals with a defined contribution pension pot will be offered free and impartial face-to-face guidance at the point of retirement. The government has pledged up to £20m over the next two years in developing this initiative.
These are significant reforms in the UK pensions market. The announcement was largely unexpected and has been the subject of much analysis and speculation since it was made. The focus of industry analysis has so far included issues such as the impact of the reforms on the availability of credit for companies, whether or not the reforms will increase the burden of retirement support on the state and the structure and delivery of the free guidance for individuals in their year of retirement.Mandatory early conciliationFrom 6 May 2014 employees will (in the vast majority of cases) be required to attempt early conciliation through the Advisory, Conciliation and Arbitration Service (ACAS) before being able to commence an Employment Tribunal claim. While ACAS previously offered a voluntary conciliation service to parties in employment-related disputes, the introduction of a mandatory conciliation period – via the Enterprise and Regulatory Reform Act 2013 – constitutes a significant development in UK employment law.With effect from 6 May this year, employees wishing to bring an Employment Tribunal claim must first register their dispute by contacting ACAS with an early conciliation request. After establishing the details of the dispute, ACAS will make contact with both parties and endeavour to promote a settlement within one month.If an agreement is successfully negotiated, this will be recorded on an ACAS form (knownas a COT3). This form constitutes a legally binding contract and means that the claimant will not be able to make a Tribunal claim in respect of the dispute.If at any point the ACAS conciliation officer concludes that a settlement is not possible, he will issue a certificate, confirming that early conciliation has been unsuccessful. The claimant will then be free to launch a Tribunal claim. In practice, either the employer or
employee can stop the process at any time. A certificate will also be issued if no settlement has been reached after the period of one month (although there is leeway for this time limit to be extended by a further 14 days where there is still a realistic prospect of a settlement being reached).
A final key point to note is that beginning early conciliation ‘freezes time’ for the purposes of statutory limitation. This is potentially significant given that in most cases, employees in the UK are required to lodge claims within the relatively short period of three months from the alleged unlawful act.For more information on early conciliation, see the ACAS guide: ‘Early conciliation explained’.Self-certification of HMRC or tax-advantaged share schemesFrom 6 April 2014, companies that implement and operate UK HMRC approved share plans which offer participants tax-favoured treatment, must register and self-certify that those plans comply with the applicable UK tax legislation. Self-certification affects both new plans that are established after 6 April 2014 and existing plans that already have HMRC approval as at 6 April 2014. These provisions apply to share incentive plans (SIPs), save as you earn plans (SAYE) and company share option plans (CSOPs).Existing share plans must be notified to HMRC by 6 July 2015 if they are to remain tax advantaged for 2014/15 and following years. New plans must be notified by 6 July following the tax year in which the plan is first used. The notification must be accompanied by a declaration that the requirements of the legislation have been met. Tax reliefs for the company and employees will be lost if the deadline is missed. In respect of the 2014/15 year only, if the 6 July 2015 deadline is missed, SAYE and SIP participants awarded options and shares before 6 April 2014 will be protected from loss of tax reliefs but CSOP participants granted options before 6 April 2014 will not.In addition to the new registration and self-certification requirements, companies must in future make online filings of the annual share plan returns required by HMRC for tax advantaged plans. This requirement applies to returns for 2014/15 and subsequent years. Companies must ensure that they have registered with HMRC’s Online Service before
July 2015.The Finance Bill 2014 makes various changes to tax advantaged share plans with effect from 6 April 2014 that are automatically read into plan rules and that companies need to be aware of to ensure that plans continue to meet the legislative requirements. One change imposes a new requirement on companies to provide certain information to CSOP participants when options are granted to them on or after 6 April 2014. Another change may alter the exercise rights given to participants’ estates after their death.HMRC has powers to enquire into a plan’s compliance with the requirements of the legislation. Companies found to be non-compliant may be subject to penalties and/or be required to make necessary changes in order to comply. The severity of any penalties will vary depending on the seriousness of the breach.We recommend that companies undertake a review of their tax approved plan rules so thatthey can implement the amendments.Online registration of unapproved share plansFor the 2014/15 tax year and subsequent years, all non-tax advantaged plans under which UK tax may be payable must be registered with HMRC online. The Form 42 annual returns in relation to those plans for 2014/15 and subsequent years must also be made online. Companies that have not registered for online services with UK HMRC must now do so. HMRC’s 14th and 15th Bulletins on Employment Related Securities (available here) give details of the process and timings involved.Internationally mobile employeesThe Finance Bill 2014 will modify the income tax, national insurance contributions and corporation tax treatment of securities and options awarded to internationally mobile employees in the case of relevant chargeable events occurring after 6 April 2015 regardless of when the award or option was granted. These changes will introduce some relief from UKincome tax on share options and shares for individuals who may be UK resident when awards are made to them but who leave the UK during the vesting period. From April 2015, the gain accruing while an employee is non resident and performing non UK duties may no longer be subject to UK tax. Conversely however, options and awards granted to individuals when they were not UK resident but who move to the UK before the award or option vests, may find that a proportion of the gain relating to the option or award will be brought into charge to UK tax (which may not have been the case previously).