Welcome to our global EPI newsletter.
With the global economy still in flux and the speed of recovery varying across temporal and geographic dimensions, it is a brave or foolish person that believes the world stands still. In the face of such volatility we have distilled some facts, case law developments and trends to help navigate the shifting sands.
Making shockwaves, the European Court of Justice has recently ruled in Schrems v DPC that the US Safe Harbour Scheme is invalid. This has wide ranging ramifications with clients across the world devising new approaches to mitigate the risk of non-compliance.
Meanwhile in response to work-related disasters in mainland China, the People's Republic of China (PRC) has been making efforts to enhance work safety, a welcome move by many but giving rise to a wave of new safety regulations.
In Indonesia the sands have shifted in favour of employers with changes to the much anticipated IMTA requirements and expatriate to Indonesian employee ratios, following the Ministry of Manpower regulation (No. 35 of 2015), which amends and clarifies certain requirements under Regulation 16.
Singapore High Court (SGHC) on the other hand has reached a significant decision on restrictive covenants impacting on employers in a widely anticipated judgement.
On the other side of the Pacific, a recent decision by the Second Circuit Court of Appeals (Bergman v Neo@Ogilvy LLC) creates a split with the Fifth Circuit concerning whistleblowers who report wrongdoing internally to their employer with repercussions for employers located within the Second Circuit's jurisdiction.
The overarching theme throughout is one of continued vigilance and environmental scanning to manage risk exposure.
1. Europe: European Court of Justice declares US Safe Harbour invalid
The EU Data Protection Directive imposes restrictions on the transfer of personal data outside the EU, with transfers permitted only if the relevant country provides an adequate level of protection or if the recipient entity can demonstrate it provides adequate protection, eg, by agreeing to the European Commission's model clauses or having an approved set of binding corporate rules in place. Another option, at least until very recently, was for the recipient to have subscribed to the US Safe Harbour Scheme. However, the European Court of Justice has recently ruled in Schrems v DPC that the US Safe Harbour Scheme is invalid.
The Court of Justice decided that the existence of the European Commission Decision 2000/520 in relation to the so-called US Safe Harbour (the "Safe Harbour Decision") did not prevent a national data protection authority from investigating individual complaints relating to the transfer of personal data to the United States; the Court further considered the Safe Harbour Decision itself and found it to be invalid.
As a result, businesses – chiefly US-based organisations – will no longer be able to rely on the US Safe Harbour Privacy Principles as ensuring an adequate level of protection to satisfy the requirements of the EU Data Protection Directive when transferring personal data outside the EEA.
The Court did not provide any transitional period for compliance. Nor did it provide any guidance on how organisations should react in the immediate aftermath of the ruling, for example, by stopping transfers of personal data relying on the Safe Harbour mechanism until alternative arrangements are in place.
The European Commission has been negotiating with the US authorities for some time regarding the introduction of a new, more privacy protective arrangement, and these negotiations can now be expected to be pursued with more urgency. However, in the meantime organisations which have relied on the Safe Harbour scheme will have to put in place quickly alternative compliance mechanisms, although the choice is limited.
Impact for employers
Organisations which transfer personal data (including of employees) to the US should urgently consider their response. For more details, including the position of various national data protection authorities, see our data protection update here. A
2. China: draft implementation regulations on work safety law issued
In response to the frequent and often disastrous work-related accidents (the devastating explosion in Tianjin Port is a recent example), the government of the People's Republic of China (PRC) has been making efforts to enhance work safety. Following the enactment of latest amendments to the PRC Work Safety Law last year, the PRC State Administration of Work Safety published the draft Regulations on the Implementation of the PRC Work Safety Law (Draft Regulations) on 11 September 2015, to solicit the public opinions. The Draft Regulations provide for more specific work safety requirements on companies in order to prevent work safety accidents.
- the "person in charge” at each company is required to report the company's work safety conditions at a shareholders' meeting and to the employee representatives' congress on an annual basis, and shall accept their supervision;
- certain types of company (eg, those engaging in the production or storage of hazardous chemicals, fireworks or firecrackers, mining companies and metal smelting companies) are to be subject to enhanced corporate governance and human resources requirements, including to establish a work safety committee responsible for coordinating and solving significant work safety issues, and (depending on the size of the company) to have a certain number of work-safety specialists and safety engineers;
- more detailed requirements concerning the screening and elimination of such hidden risks;
- special requirements for companies with sensitive operations (ie, where the work safety accidents are more likely to occur such as where there are oil and gas storage tanks or factory buildings at risk of dust explosions);
- a requirement for companies engaged in the production or storage of hazardous chemicals, fireworks or firecracker, mining companies or metal smelting companies to maintain work safety liability insurance.
Impact for employers
Employers should review what steps they will need to take to comply with the new requirements. Further details of the changes are available here.
3. France: Macron law implements changes to a variety of employment law requirements
Law n°2015 990 for growth, activity and equality of economic opportunities, the Macron Law, was finally adopted on 6 August 2015. This law covers a wide range of matters from Sunday working, reform of regulated legal professions to driving licences. Some of the key changes for employers include:
- relaxation of the regime for free shares;
- changes to the criteria for directors representing employee shareholders ;
- changes to the criteria under which directors representing employees must be appointed in large public companies, including a reduction in the thresholds (pursuant to law n°2015-994 dated 17 August 2015);
- a reduction in the number of directorships that can be held by a managing director or member of the directoire in large listed companies;
- changes to the Supplementary Company Pension Regime (Retraites Chapeaux);
- relaxation of the obligation to inform employees in the event of a sale, including a change to the sanction to a fine of 2% of the purchase price, the exclusion of transfers as opposed to sales, clarification of the methods of providing information to employees, and the exclusion of sales where, in the 12 months prior to the sale, the employees have already been informed as part of the employer’s general three yearly information obligation. These changes should come into effect by the end of 2015 following publication of a decree (décret d’application);
- changes to the penalties for obstructing the proper functioning of the works council (Délit d’entrave), including that the prison sentence is abolished for the least serious case, interference with the everyday functioning of the works council, and the fines are doubled from €3,750 to €7,500 for individuals (€37,500 for legal entities).
Impact for employers
Employers will need to familiarise themselves with these changes and put in place any necessary changes. They should also be aware that new proposals from the Government are expected in connection with the damages for unlawful dismissal, as the provisions in the Macron Law on this subject were censured by the Conseil Constitutionnel which considered that the distinction by size of company was contrary to the principle of equality.
More detail on these and other changes introduced by the Macron law are available here.
4. Germany: Facilitated entry for asylum seekers to the German employment market
In the light of increased numbers of refugees seeking asylum in Germany, legal acts have been issued over the last few years to facilitate entry into the German employment market and to reduce administrative hurdles for employers, especially when it comes to training programs.
Since a change in the law 2014, it is possible for asylum seekers to undertake employment without the previous authorisation by the employment office, inter alia, in case of:
- company-based training programs and apprenticeships;
- highly-qualified people (requirements similar to the EU Blue Card); and
- internships as a mandatory part of educational programs.
Since August 2015 previous authorisation by the employment office is no longer needed for some additional types of internships, such as certain short-term internships (under three months) for orientation purposes.
However, entering into actual employment-relationships is in most cases still subject to approval by the employment office. An application is possible after three months of staying in Germany. The administration will in each case undertake an assessment as to whether a certain job position could be filled by a German or EU citizen instead. Only if this is not the case will a work permit be issued.
Impact for employers
While some administrative barriers have been lifted and employing asylum seekers in Germany increasingly becomes an option for companies, especially where certain personnel is needed, the legal framework will in many cases still necessitate legal assessment of each given case. However, work integration and job related training has become considerably less restricted.
5. Indonesia: new ministerial regulation on requirements for employment expatriates
On 23 October 2015, the Ministry of Manpower issued a new ministerial regulation (No. 35 of 2015) which amends and clarifies certain requirements under Regulation 16 concerning the procedures to employ foreign workers in Indonesia. Regulation 35 relaxes some of the key requirements under Regulation 16 as follows:
- The requirement to have 10 Indonesian employees whenever an employer hires one expatriate has been removed. It is currently not clear what expatriate to Indonesian employee ratio will now be applied, but we understand from our recent discussion with the Ministry of Manpower that this may be interpreted to mean that it is possible for an employer to only hire one Indonesian employee whenever the employer hires one expatriate. We anticipate further developments in this area in the near future.
- The requirement on employers to apply for an IMTA (ie, an employer’s permit to employ foreign workers) for the appointment of non-resident foreign directors and commissioners in Indonesian companies has been removed.
- Temporary IMTAs will be issued to employers who intend to invite foreign visitors to carry out (i) commercial film production which has received the relevant regulatory approval, (ii) audits, quality control or inspection on an Indonesian branch for a period of more than one month, or (iii) a role that relates to machine or electrical installation, after sales activities or product pre-testing. Temporary IMTAs are no longer required by employers who intend to invite foreign visitors to “attend meetings to be held at the head or branch offices in Indonesia or carry out a one-off type of role”.
Impact for employers
In broad terms, the amendments introduced in Regulation 35 in relation to abolishing the requirements to have an IMTA for non-resident directors and commissioners, and the removal of the 10 to 1 local to expatriate ratio, are to be welcomed. Such incremental improvement is a positive signal that the Indonesian government is focused on the effort to gradually reduce the red tape that foreign investors currently face in seeking to operate in Indonesia.
Further details are available here.
6. Japan: Worker Dispatch Act amended
A number of amendments to the Worker Dispatch Act were passed by the Japanese Diet on 11 September 2015. Key amendments are as follows:
- For dispatches starting or renewing on or after 30 September 2015, a succession of dispatched workers may be used indefinitely for all types of work, provided the utilising company duly consults an employee representative representing the majority of workplace employees on this. Previously, there was distinction between different types of work in determining the maximum period for which a role could be filled by dispatched workers.
- For dispatches starting or renewing on or after 30 September 2015, a three-year limit per dispatched worker per company division has been introduced. This means a dispatched worker can only be retained in the same company division for a maximum of three years. After that, the utilising company must either offer direct employment to the dispatched worker, engage the dispatched worker in another company division, or if the utilising company is replacing the dispatched worker with another dispatched worker in the same division, it must have made efforts to provide employment opportunities to the original dispatched worker before replacing him or her.
- Confirmation of the previous 2012 amendment stipulating that from 1 October 2015, if a utilising company accepts a dispatched worker, knowing that the arrangement is in serious breach of the Worker Dispatch Act, it will be deemed to have offered the dispatched worker a direct employment contract. It has been further clarified that breaches of the new time limitation provisions set out above may be considered such a serious breach of the Act.
Impact for employers
Companies with dispatched workers will need to familiarise themselves with these amendments.
7. Singapore: Responding to mass resignations
In a recent decision, the Singapore High Court (SGHC) declined to grant a "springboard injunction" to an employer who sought to prevent a number of its employees taking up employment with a competitor by relying on alleged breaches of fiduciary duties owed by the employees to act in its interests.
The employer was forced to seek this type of relief as there were no post-employment non-competition restraints in the employees' employment contracts. In the absence of local authority on whether springboard orders were available in circumstances other than misuse of confidential information, the SGHC considered the approaches in the UK, Hong Kong and Australia. The SGHC favoured the approach taken by Hong Kong and Australian courts and declined to make springboard orders given the absence of threatened or actual misuse of confidential information on the facts before it.
Impact for employers
The decision highlights the reluctance of Singapore courts to restrict employees' rights to move freely between employers, provided they have complied with the express terms of their employment contract. Accordingly, employers should ensure that, express restrictive covenants are included in employment contracts and such covenants are reasonable to protect their proprietary interests.
For more details click here.
8. Spain: consolidation of labour law
On 23 October 2015, the Spanish Council of Ministers approved Legislative Royal Decree 2/2015, of 23 October, which approves the amended Spanish Workers' Statute. The Royal Decree is fully in force to the extent that it brings together provisions that are already fully applicable.
The amended Workers' Statute has kept its previous structure of 92 articles; all legal changes that have been made in recent years have been included at the end in the form of 21 additional provisions and 12 transitional provisions, as well as two final provisions related to competencies and regulatory implementation.
The new amended Workers' Statute primarily includes:
- The labour reform of 2012 (Royal Decree Law 3/2012 and Law 3/2012), which added internal flexibility to employment relationships; it modified the process by which to carry out collective layoffs (removing the requirement to seek administrative authorisation) and changed the system of priority in the application of collective bargaining agreements with the aim of stimulating employment and employment relationships, among other aspects;
- Royal Decree Law 11/2013, which modified the regulation governing negotiation commissions representing the workers during consultation periods in the context of collective layoffs and measures to foster internal flexibility;
- Royal Decree Law 16/2013, which reformed part-time employment contracts.
Impact for employers
Since the previous amended Workers' Statute was published in 1995, it had been modified on more than 50 occasions, the changes made in recent years being particularly significant. It was therefore necessary to consolidate into a single text all the developments and changes that had been made, thus providing the general population with access to a single, comprehensive, and systematic provision
9. Thailand: test for employment relationship
Employers may sometimes try to avoid statutory obligations under Thai labour law by entering into contractor agreements instead of employment agreements. Under Thai labour law, employees are entitled to certain statutory entitlements including public holidays, annual leave, maternity leave and severance pay. Conversely, contractors are not entitled to these statutory entitlements.
Employers may sometimes try to avoid these statutory obligations by entering into contractor agreement instead of employment agreements. However, a contractor agreement may still be considered an employment agreement. Determining whether a worker is a contractor or an employee depends on the nature of the working arrangement and not the label given to the agreement.
Irrespective of what the agreement is called, courts will look into the nature and substance of the arrangement on a case-by-case basis to determine whether an employment relationship has in fact
been created. Generally, the courts will focus on two key issues: (1) the way in which wages or remuneration is paid and (2) the extent and nature of the employer's authority to supervise that contractor.
The Thai Labour Court has a tendency to be lenient towards employees in order to protect their entitlements. If a worker is deemed an employee, the employer may be liable for payment of entitlements such as holiday pay, overtime and other statutory allowances.
Impact for employers
In determining how to engage a worker, companies should consider the totality of the relationship with a particular focus on the proposed way in which remuneration is paid and the extent to which they will have authority to supervise and control the work of the worker.
Further details are available here.
10. United Arab Emirates: New labour laws to come into force
The UAE Ministry of Labour (the "MoL") has issued three Ministerial Decrees aimed at bringing greater transparency to labour contracts.
- Offer letters: Employers will be required to issue a standard offer letter to prospective employees in advance of the employee moving to the UAE or leaving their existing UAE employment. The signed offer letter must be filed with the MoL and the terms of the subsequent employment contract must reflect those of the offer letter. Amendments to the offer letter will only be permitted under the employment contract where the proposed amendments are favourable to the employee and approved by the employee and the MoL.
- Amendments to termination: Fixed term contracts will be terminable at any time by either party following the contractually agreed notice period (which may not be less than one month or greater than three months, with such periods also applying to unlimited term contracts). Currently, an employer is required to pay compensation to its employee where it terminates the contract prior to its expiry date. he provisions relating to the termination of fixed term contracts will apply retrospectively, with a three month notice period automatically applying where no period is specified. Notably, the duration of a fixed term contract will be limited to a maximum of two years.
- Restrictions to labour ban: The automatic six month labour ban will no longer be imposed, provided that the employee has met his or her contractual and legal obligations and has been employed for at least six months. Minimum service requirements will not apply to skilled employees. The Decree is intended to increase the mobility of employees between UAE employers.
Impact for employers
The Decrees are due to take effect from 1 January 2016, after which employers should ensure that:
- offer letters are provided to employees and filed with the Ministry of Labour; and
- the duration of limited term contracts does not exceed two years.
11. UK: European Court of Justice ruling on working time creates headache for employers of peripatetic workers
The European Court of Justice has ruled that, for peripatetic employees with no fixed or habitual workplace, time spent travelling from home to the first customer and from the last customer of the day back home does count as ‘working time’. This is because during such journeys the workers are at work, at their employer’s disposal and carrying out their duties or activities. (Federacion de Servicios Privados v Tyco Integrated Security)
The ruling is relevant to mobile workers such as sales representatives, care workers, maintenance technicians and engineers, who visit a number of customer locations in a workday. Employers may face arguments as to whether it also applies where workers regularly move from site to site but spend at least a full day and potentially longer periods at one site; further case law will be needed to clarify whether such workers are viewed as having a fixed or habitual place of work for the duration of each project.
This approach conflicts with the interpretation given to the UK Working Time Regulations previously, but UK tribunals will now be obliged to interpret them in a way which is consistent with this ruling.
Note that there is no obligation under the National Minimum Wage Regulations to pay the minimum wage for time spent travelling from and to home, and there is no obligation to interpret these consistently with the Tyco ruling. However, employers may face pressure to pay wages for this time, even if there is no current contractual requirement to do so.
Impact for employers
UK employers may need to change their approach with regard to working time rights such as rest breaks, maximum working week and so on, and should now review this carefully. This could also be an important factor to take into account for businesses considering becoming less office-based and more mobile.
Employers who are concerned about employees performing personal tasks on the way from or to home may wish to put in place monitoring and disciplinary procedures to avoid abuse and perhaps make clear that workers must take the most direct route possible in their journeys, including between home and their first and last customers of the day. Other jurisdictions The ruling is relevant to other European jurisdictions. In both Spain and France, this travel time at the start and end of each working day is currently not paid as or considered to be working time, so this is likely to result in increased costs for employers and could raise an issue in relation to working time limits. Where employers seek to introduce changes in response to this ruling, particular care will be needed where this involves changing terms and conditions of employment, as the correct procedures will need to be followed. In Germany, the ECJ judgment reinforces the position already established by the German Federal Labour Court, which ruled in 2009 that the travel of field service workers, sales representatives, etc, both between clients and also the first and last journeys of the day between client and the employee's home, could be considered part of their fundamental contractual obligations, as these employees were unable to comply with their obligations without the travel. Under German law, such travelling time which is compulsorily linked to the employee’s job performance has to be remunerated and the remuneration must comply at least with the requirements of the new German Minimum Wage Act, ie, EUR 8.50 per hour.
12. US: Second Circuit decision protecting internal whistleblowers creates circuit split
A recent decision by the Second Circuit Court of Appeals (Bergman v Neo@Ogilvy LLC) held that the Dodd-Frank Act protects employee whistleblowers who report wrongdoing internally to their employer, in addition to employees who report wrongdoing to the Securities and Exchange Commission ("SEC"). The court's decision creates a split with the Fifth Circuit, which previously held that the same provision applied only to whistleblowers who reported wrongdoing to the SEC. The employer plans to file a petition for certiorari with the U.S. Supreme Court to resolve the circuit split.
The litigation arose from a potential ambiguity in the Dodd-Frank Act: the statute defines "whistleblower" as an individual who provides information relating to violations of securities laws to the SEC, but the provision protecting employee whistleblowers from employer retaliation applies both to employees who report to the SEC and employees who report wrongdoing internally to their employers.
The court held that the "arguable tension" between these two provisions created an ambiguity, and deferred to the SEC's interpretation of the statute, under which internal whistleblowers were protected from employer retaliation. The court noted that a strictly textual reading of the retaliation provision would only protect employees who simultaneously reported wrongdoing to the SEC and to their employer, and reasoned that Congress likely did not intend to create such a limited protection, especially because employees such as attorneys and auditors cannot report wrongdoing to the SEC until after reporting it to their employer.
The Second Circuit's decision is in conflict with the Fifth Circuit's decision in Asadi v. G.E. Energy that the statutory definition of "whistleblower" means that the statute only protects internal whistleblowers who simultaneously report wrongdoing to the SEC.
In light of the circuit split, the employer has informed the Second Circuit that it plans to file a certiorari petition with the U.S. Supreme Court, and the Second Circuit has stayed its mandate pending the resolution of that petition.
Impact for employers
Employers located within the Second Circuit's jurisdiction should be sure that the language of their employment policies is consistent with the Second Circuit's ruling with regard to internal reporting. In addition, employers should monitor the status of the case before the Supreme Court.