In this section we highlight some recent legislative changes which may affect your business.  

Employment and Labor Law  

Czech Republic

The new right wing parliament, elected on 29 and 30 May 2010, is proposing several liberal changes to labor law over the next four years, in particular changes in the hiring and redundancy of employees, and matters regarding employment during times of recession. Czech labor law, which has thus far remained quite rigid, may therefore experience some of the greatest changes it has seen in 45 years. These changes will reflect matters of employment in times of economic slow-down and try to modernize forms of employment, work management, labor agencies, the hiring-out of workers between companies, the sharing of a work position between workers with half-time employment, and working hours.  

Those employers who are sending their employees to work abroad on secondment are looking forward to favorable changes as of 1 January 2011. The Czech government has responded to requirements of the European Council Directive as well as to the needs of the market by adjusting options for fixed‑term employment.  

According to the present arrangement, fixed-term contracts can be a maximum of only two years, even for workers seconded abroad to finish a particular project. This line was drawn to protect the employees and to prevent employers pushing employees to accept offers of indefinite term employment.  

The new statutory regulation proposes the extension of the maximum fixed term from two to five years for workers on secondment, not only within EU but also further afield. The employment contract will be governed by Czech law but an exception from the general fixed term employment rule will be made. Companies will therefore avoid painful processes on termination of the indefinite term employment.  

The statutory regulation also resolves the situation of different timing of bank holidays in the Czech Republic and the place of business of the employee. The employee will enjoy bank holidays of the country in which he/she is working.  

France

In application of decree number 2010-64, dated 18 January 2010, an employer must mention on the work certificate, remitted to the employee upon his/her departure from the company, the acquired rights with respect to the individual training right, this indication being complementary to the other compulsory information (dates of entry and departure, nature of the position or of the positions subsequently held and respective periods of time). More precisely and pursuant to Article D.1234-6 of the Labor code, the employer must indicate (i) the number of acquired and unused hours, (ii) the corresponding amount, and (iii) the name of the institution that is competent for financing the training measures undertaken within the frame of the individual training right.  

According to French Labor law, the internal redeployment obligation by which all French employers are bound when contemplating redundancies for economic reasons is assessed at the group level. Within companies operating on an international level, this obligation leads French employers to propose to affected employees redeployment positions situated outside the French territory, irrespective of the conditions of employment linked to these positions (notably in terms of application of local labor law and salary). This obligation has given rise to numerous debates and interpretations over recent years which have forced the French legislature to intervene. A bill passed on May 18, 2010 sets forth a specific procedure applicable to the redeployment of employees outside the French territory (article L. 1233-4-1 of the French Labor Code). Under this new procedure, French employers are required to ask their employees, prior to notifying them of their redundancy, whether or not they are interested in receiving redeployment offers for positions situated abroad and, if so, such redeployment offers shall be subject to certain limits to be observed by the employer, particularly in terms of location and salary. From a practical standpoint, such queries will be carried out by means of a questionnaire to be provided to the employees concerned. As from the receipt of said questionnaire, the employee has six business days to accept or decline. Only those employees who have responded positively to the questionnaire will receive offers for redeployment positions abroad. The redeployment offer made by the company must be precise, in writing and meet, as the case may be, the employee’s requirements mentioned in the questionnaire.  

For the first time, the French Supreme Court (Cour de cassation) has ruled that, in order to avoid any potential discrimination, the (quantitative) targets set by the employer with respect to variable remuneration need to be adjusted when dealing with an employee representative. Indeed, employees that serve as employee representatives must not be penalized by the fact that they spend less time on the performance of their actual professional functions due to their activity as employee representative. In other words, the performance of such role(s) must not negatively influence the employee’s remuneration. The calculation method which will need to be adopted by French employers from now on is as follows: for the portion of the employee’s activity dedicated to his/her employee representative role, the employee is entitled to the average amount paid to other employees for an equivalent period of time; for the portion of activity that corresponds to the performance of the employee’s actual professional activity (called “temps de production”), the calculation of the variable remuneration must be based on reduced targets in light of the time spent in the role of employee representative. Companies will have to anticipate these new rules when preparing and negotiating 2011 bonus plans in the next months.  

Germany

Currently, the core regulation for the protection of employee data is found in section 32 of the German Data Protection Act. The government plans to replace this provision and extend the scope of protection. Among the corner stones of the proposed new regulation are the following issues:  

  • Any collection, usage and/or transfer of employee data will only be permissible, if the requirement of necessity is met. The government proposal elaborates on the new necessity criteria in further detail.  
  • The new law will have provisions to fight corruption and rules regarding compliance issues will be added.  
  • Special provisions will govern the use of email, internet and telephone data. According to the proposal employers are allowed to collect and save all necessary data of communication acts of their employees. However, if the communication has obviously been for private purposes, the employer has to observe certain restrictions. Private data may only be collected if there is – for instance – a suspicion of criminal behaviour or a serious breach of contract by the employee.  
  • The proposal restricts the use of video surveillance and biometric control methods with regard to the employment relationship.  

The change in the law can be seen as a consequence of recent data protection scandals in Germany. Some major companies were accused of not respecting the employee’s privacy and data protection rights when surveilling the workforce or collecting data about the employees financial situation and other sensitive issues.  

Poland  

Pursuant to Polish Labour law, employers are obliged to allow employees time to improve their professional qualifications. The parameters of this obligation have been set by several government ordinances.  

However, the Polish Constitutional Tribunal considered these incompatible with the Polish Constitution. On 16 July 2010, an amendment to Labour Law entered into force which regulates the rights and duties of an employer and employee in this area.  

According to the amendment, improving qualifications is understood as an employee gaining or supplementing their knowledge or skills at the employer’s initiative or consent.  

All of the rights and duties of the employer and of the employee connected with this should be specified in a written agreement between those parties. The employer is generally obliged to enter into such agreement with the employee, except when the employer does not wish to continue the employment relationship with the employee after they have completed courses undertaken to improve their qualifications.  

In general, employees are entitled to paid leave to allow them time to improve their qualifications. The employer may (but is not obliged to) make additional payments to the employee to cover the employee’s costs of education, transport and accommodation in connection with activities undertaken to improve the employee’s qualifications.  

The employee may have to reimburse any payments made by the employer if the employee terminates the employment agreement while still undertaking activities to improve their qualifications, or after such improvement is completed, but before the term agreed in the employment agreement has expired.  

Romania  

On 11 August 2010, the Romanian Prime Minister publicly announced that the Government is preparing a comprehensive legislative package seeking to amend the existing employment and labour framework. The Labour Code, the law on trade unions, the law on employers’ associations and the law on collective bargaining agreements are the main enactments that are likely to undergo changes. The Romanian Government announced that it may also put up for debate a Social Assistance Code, establishing unitary regulation for the social security rights and welfare, as well as a new law concerning wages in the public sector. Although no specific details have been made public yet, it is hoped that the new legislative package would increase the flexibility of the labour force and provide incentives for investors to create new jobs and for Romanian citizens to renounce welfare benefits in favour of active employment. The new legislative package will be sent to the Parliament most likely in September or October, but the Romanian Prime Minister has suggested that it might be possible to have this legislative package passed without parliamentary debate, by an accelerated procedure.  

Russia  

According to new amendments to the Criminal Code introduced on 11 May 2010, failure to respect the labor safety rules may entail, in particular, criminal liability for the company’s executives (if the violation of the labor safety rules has caused, as a result of negligence, serious harm to health), including (i) a penalty of up to RUB 200,000 (US$ 6,667) or the executives’ salary or other income for up to 18 months; (ii) correction works for a maximum of two months, (iii) imprisonment of up to one year, or (iv) mandatory works for a term of up to 240 hours.  

It is also noteworthy that the criminal sanctions may be more severe if the violation has caused human death. In this case the company’s executive may be imprisoned for up to three years and deprived of the right to occupy certain positions or perform certain activities for up to three years.  

Slovakia

As a result of respective EU regulations and proceedings initiated by the European Commission, the Slovak Parliament adopted an amendment to the Labor Code which enables employers to conclude or prolong an employment contract for a definite term twice in two years, as opposed to the current restriction of once in three years. The amendment also abolishes the simpler termination regime for part-time employment contracts, thus making the regime the same as the termination regime for full time contracts.

The new right wing Government elected in June 2010 has proposed amendments to the Labour Code which aim to motivate employers to support work-life balance by establishing more flexible labour relations. The Government hopes to propose changes to lower expenses for employers by abolishing the overlap between termination notice period and severance pay (at present, a minimum of two months wages on top of the payment in respect of the notice period). The proposed changes should remove the possibility for extension of collective bargaining agreements without the consent of the employer, thus lessening the privileges of labour unions and better enabling the employer and employee to agree on operative changes of working conditions directly at the site. The conditions for the provision of medical care at workplace should also be simplified. Employers’ expenses may increase as a result of anticipated changes in the field of social and health insurance payments, which shall affect both employees and employers as contributors to the system.  

South Africa

In South Africa, the duties and liabilities of directors are governed by both common law and statute. Failure to properly perform common law duties may render a director personally liable for monetary damages, whereas the inability to perform certain statutory duties may result in a director facing criminal liability. Currently, statutory duties are regulated by the Companies Act, 1973 (the “Companies Act”). The Companies Bill, 2008 (the “Companies Bill”), which will replace the Companies Act in its entirety, is anticipated to come into effect in October 2010 but may only be enacted in early 2011.  

The new Companies Bill has codified director duties, clarifying what is legally required and asserting that directors must be sufficiently qualified and where necessary, have relevant experience to perform the role. The Companies Bill proposes that directors are personally liable for losses sustained by the company as a result of a failure to perform their duties with adequate care, diligence and skill. There are certain notable additions in the Companies Bill that will extend directors’ duties and liabilities, thereby increasing the accountability of directors to the shareholders of a company. These additions include those requirements which relate to directors’ use of information and conflicting interests (section 75), the standard of directors’ conduct (section 76) and certain liabilities which are placed on directors and officers (section 77). The Companies Bill also incorporates a section addressing the standard of conduct expected from directors (section 91) in the “business judgment rule”, which qualifies a director’s judgment as being “reasonable” if the director has taken reasonably diligent steps to become informed about the subject matter at hand, does not have a material personal financial interest in such subject matter and demonstrates judgment that a reasonable individual in a similar position could hold in comparable circumstances. These provisions are in addition to, not in substitution for, a director’s common law duties. Furthermore, the Companies Bill refers to directors as including alternate directors and a prescribed officer or a person who is a member of a committee of a board of a company or of the audit committee of a company.  

While not statutory, the third King Code and Report on Governance in South Africa (“King III”) recently become effective in March 2010 and provides guidance on certain corporate governance principles that will be enacted in the Companies Bill. King III requires directors to act in “the best interests of the company”, as does the Companies Bill. King III is drafted on an “apply or explain” basis that requires management to explain how the principles of the code were applied, or if not applied, their reasons for not applying them.  

United Kingdom  

The UK government has announced that the Equality Act 2010 will be implemented on 1 October this year. The Act consolidates existing equality law into a single piece of legislation and introduces a number of new rights and remedies to protect individuals from discrimination. For example, pay transparency will be increased by making secrecy clauses unenforceable in certain circumstances and there is a power for the government to require employers to publish information relating to differences in pay between male and female employees.  

The Act now prohibits employers from asking pre-employment health questions of a prospective employee other than in certain limited circumstances and also extends the scope for employers to positively discriminate in relation to under-represented groups.  

The Government have announced their proposal for the abolition of the default retirement age of 65 in the UK. Under this proposal, employers will be prohibited from issuing new notifications of retirement using the default retirement age from 6 April 2011. An employer will no longer be able to prescribe a compulsory retirement age, unless it can justify it as a proportionate means of achieving a legitimate aim.  

The Agency Workers Regulations 2010 come into force in October 2011. The Regulations give temporary agency workers in the UK the right to the same basic employment conditions after 12 weeks in a given job as if they had been employed directly by the entity to whom they provide their services.  

United States

On 15 April 2010, Congress voted to approve the Continuing Extension Act of 2010 (H.R. 4851) (the “Act”), which, among other things, extends eligibility for the COBRA premium subsidy provided by the American Recovery and Reinvestment Act of 2009. President Obama signed the Act into law on 16 April 2010. Eligibility for the COBRA premium subsidy, which had previously expired on 31 March 2010, has now been extended to 31 May 2010. Under the Act, individuals who are involuntarily terminated between 1 April 2010 and 31 May 2010, and who would have otherwise been qualified to receive the COBRA premium subsidy, will now be eligible to receive it. Another bill passed by the Senate and currently being considered by the House of Representatives, would further extend eligibility for the COBRA premium subsidy until 31 December 2010.  

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. The Dodd-Frank Act contains, among other things, provisions intended to encourage employee whistleblowers by providing monetary rewards for providing information to the Securities and Exchange Commission (“SEC”) and/or the Commodity Futures Trading Commission (“CFTC”). Sections 748 and 922 also prohibit retaliation against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower (i) in providing information to the SEC or CFTC in accordance with the whistleblower reward provisions; (ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the SEC or CFTC based upon or related to such information; or (iii) in the case of Section 922, making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (“SOX Act”), the Securities Exchange Act of 1934, Section 1513(e) of Title 18 of the United States Code, or any other law, rule, or regulation subject to the jurisdiction of the SEC. Sections 748 and 922 create a private right of action in federal court for whistleblowers who have suffered such unlawful retaliation. Section 1057 of the Dodd-Frank Act also creates a private right of action for employees in the financial services industry who are retaliated against for disclosing information about fraudulent or unlawful conduct related to the offering of a consumer financial product or service primarily for personal, family or household purposes.  

The Dodd-Frank Act also clarifies that the SOX Act applies to employees of all subsidiaries and affiliates of publicly traded companies “whose financial information is included in the consolidated financial statements of [the publicly traded company]”– many courts had previously held that the SOX Act applies only to publicly held companies and not to their non-publicly traded subsidiaries. Among other things, the Dodd-Frank Act also doubles the statute of limitations for SOX Act whistleblower claims from 90 to 180 days and also prohibits predispute arbitration agreements for SOX Act claims.  

Compensation and Benefits

Australia

From 1 July 2009, an entity which provides employee share schemes in Australia (an “ESS Provider”) is subject to reporting obligations to both the individual employee and the Australian Tax Office (ATO). An ESS Provider is required to provide a ‘ESS statement’ to each employee no later than 14 July each year if an ESS taxing event occurred for that employee in that financial year. In addition, such an ESS Provider is required to lodge an ‘ESS annual report’ in the approved form to the Commissioner of Taxation no later than 14 August for each year in which an ESS taxing event occurs for at least one employee during that year.  

France

The Government has announced proposals to enact President Nicolas Sarkozy’s flagship pension reforms, which include raising the legal retirement age from 60 to 62 or 63, extending contribution periods and increasing taxes in order to plug the country’s pension deficit, which stands at between 1.7% and 2.1% of GDP.  

Greece

The new capital tax regime is set to come into effect as of 1 January 2011. The new rates will mean that the sale of shares which have been held for 3-12 months will be taxed at a 10% rate, whilst shares held for less than 3 months will be taxed at 20%. No capital gains tax will be due on the sale of shares held for over 12 months. The previous capital gains tax regime will continue to apply to shares acquired prior to 1 January 2011, where all shares sold would be subject to a flat transaction tax rate of 0.15%.  

A new method of income calculation has been introduced following a new Greek tax law effective as of on 27 April 2010, applying to all outstanding options as of this date. Income from options is now calculated as the difference between market value of the shares at exercise and the exercise price. It is advised the issuers apply for a tax ruling from the Ministry of Economy and Finance to confirm the tax treatment of equity awards other than options. Furthermore, a number of key issues have been left unaddressed including employer tax withholding and reporting obligations as well as social security contributions. Once again, it is advised that clarification is obtained from the Ministry of Economy and Finance, and/ or the Greek social insurance authorities.  

Romania

The Constitutional Court has rejected the Government’s demands for a 15% cut in state pensions as part of a deficit‑reducing financial austerity measure. In a decision that cannot be appealed, the court ruled that the pension cut was unconstitutional. The court did not publish its reasoning behind the ruling, but unions say pensions partly funded by worker contributions to are protected by the constitution.

On 1 July 2010, significant amendments to the Romanian Fiscal Code entered into force. In this respect, the standard VAT rate was increased from 19% to 24% and several new taxes were introduced for the purposes of increasing the tax revenues. As such, the interest paid by credit institutions in relation to bank accounts and deposit to natural persons will be taxed at a rate of 16%. Meal, nursery and vacation tickets are henceforth considered as taxable benefits, subject to a 16% tax, as well as compensation paid to employees made redundant. The tax on capital gains from share transfers was set at 16%, regardless of the period of time during which such shares were held. As of the same date, all persons gaining income from an independent professional activity on a regular basis are required to pay mandatory social security contributions.