The Changing Face of the Employment Relationship

Changes in the way we access goods and services, with a continuing focus on the use of technology, were a key feature of 2016. Those changes have, in many countries, brought with them an evolution in the approach taken by companies to the engagement of labour, particularly in the so-called "sharing" or "gig" economy. Will 2017 see a further change in the face of the traditional employment relationship, or a fight back by workers, unions and governments to protect workers' rights?

Our New Year bulletin sets out expected developments for the year ahead in some key Asia-Pacific jurisdictions. The prevailing expectation is of growing tension between businesses' desire for flexibility and workers' demands for greater protection.

Australia

DEVELOPMENTS IN THE GIG ECONOMY

Under the Fair Work Act 2009 (Cth), there are several minimum benefits to which employees are entitled. Depending on a range of factors, including the amount of control exercised by the "gig-business" over its workers, some contractors could be considered to be employees.

A recent report by a peak body for unions in Australia has asserted that, despite being branded as innovative, gig-businesses such as Airtasker are "no different to a combination of unregulated Taylorism within a Dickensian marketplace where workers compete for bite-sized fragments of labour". The report goes on to contend that the current distinction between "independent contractor" and "employee" does not accurately capture the dependent nature of gig-economy work. Given the level of control the typical gig-business maintains over its workers, the union body argues that its workers do not meet the definition of independent contractors. On this basis, the report makes the following recommendations in relation to gig-economy businesses:

  • imposition of minimum rates that cannot fall below industrial instrument rates, as opposed to the users setting prices for the services;
  • workers compensation insurance and superannuation obligations taken on by the gig-business in return for the fee received by the gig-business from each transaction; and
  • where businesses utilise gig-businesses for labour needs, the gig-businesses' operations should be treated similarly to that of a labour hire company.

Such issues have come to a head in recent times. CHOICE, a consumer advocate group in Australia, recently demanded that Airtasker substantiates its claim that workers can earn up to A$20,000 per month. Recent developments abroad, such as the first instance finding in the UK that Uber drivers are not independent contractors, but "workers" entitled to minimum wages, are likely to have repercussions in Australia in the long-term. Test cases to determine how similar issues would be dealt with in Australia are currently being prepared against Foodora and Deliveroo, which will be closely watched by all stakeholders in the gig-economy.

JUDGEMENTS REVEAL RECOGNITION OF FLEXIBLE LABOUR USE

2016 also witnessed the boost of the sharing economy in China. More and more people are providing services through platforms such as Uber, DiDi Chuxing and Good Chef. This development has brought increasing claims from the individual service providers against the platforms for recognition as employees (and the related benefits enjoyed by employees). Courts in several cities, including Beijing and Shanghai, delivered judgements on this matter in 2016.

Whilst the courts made their decisions on a case-by-case basis, their general approach was in line with the existing law with respect to identification of a de facto employment relationship - simply put, where the labour rules and regulations developed by the platform are applicable to the individual, and the individual is subject to labour management by the platform and takes a paid job offered by the platform, this will be deemed an employment relationship. Consequently the individual is entitled to employment-related benefits such as social insurance, annual leave, minimum wage and limits on working hours. By contrast, where the individual service provider can decide working hours at his own discretion, is not paid directly by the platform and is not subject to the management and regulations of the platform, the courts have confirmed that this does not constitute an employment relationship between the parties.

In light of these judgments, although the PRC law does not expressively recognize independent contractors, it is permissible in practice to engage individuals' labour in a more flexible way than under an employment contract. In addition to the approach taken by the courts, effective from 1 November 2016 the Interim Administrative Measures for Operational Services of Taxis by Online-appointment expressly allows the online-appointment taxi platforms (such as Uber) to engage drivers either under employment contracts or under other types of agreement. In the coming year, we expect to see more flexible modes being used to engage labour and service in these emerging industries within the sharing economy.

NEW REGULATIONS AIM TO PROMOTE LABOUR PROTECTIONS

The increase in flexibility for some employers is balanced, on the other hand, by a further strengthening of labour protections. Two new regulations issued by the Ministry of Human Resources and Social Security took effect on 1 January 2017, which apply to all employers incorporated and existing in China, including domestic companies and foreign-invested entities.

The Measures for Grading Compliance and Integrity Level of Labour Protection Acts of Enterprises introduce a yearly rating system to grade employers as class A, B or C by evaluating their compliance with labour protection laws, including execution of employment contracts, compliance with labour dispatch regulations, contribution to social insurance, observance of limits on working hours and the practice of offering leave and rest breaks. These rankings will serve as the basis for the labour administrative authorities to exercise regulation differently, in particular in terms of the frequency of inspections. The labour authorities will pay special attention to companies in class C, talking to management and urging them to make necessary changes and improvements with regard to labour protection. We expect to see more inspections and regulations against violations of labour protections in the coming year.

Meanwhile, according to the Measures for Publicising Material Violations of Labour Protection Laws, material violations of labour protection laws will be disclosed by the labour administrative authorities to the public on their official websites and also via the media. The violations include but are not limited to serious delay in salary payment, failure to duly make contributions to social insurance, failure to provide special labour protections to female and minor (age 16-18) employees, usage of child labour and any acts in breach of labour protection laws that adversely impact society.

Employers in Hong Kong have traditionally had a lot of flexibility to organise their workforce in the way that they wish. There continues to be comparatively few restrictions in Hong Kong that would prevent an employer from operating with a high level of flexibility, however, there are some changes on the horizon that suggest a subtle shift towards a more protective legal environment.

Currently there is no general legislation around standard working hours in Hong Kong and with recent studies showing that workers in Hong Kong have some of the longest working hours in the world, this has become a topic of some debate.

The Standard Working Hours Committee, which was set up in 2013 to advise the Government on working hours policy, is now due to provide a report to the government by the end of January 2017. The report will cover views of the public and recommendations on implementing measures to standardise working hours in Hong Kong. The recommendations are expected to include the mandatory inclusion of terms on working hours (such as overtime compensation arrangements) in contracts of employment, protections of grass-roots employees with lower income and voluntary sector specific guidelines.

It remains to be seen what, if any, initiatives the government will adopt in response to the recommendations but one thing is clear: any changes are likely to have significant impacts on most employers in Hong Kong given the previous lack of any regulation.

SEVERANCE PAYMENTS

The Government announced a proposed change to the mandatory provident fund offset mechanism at the policy address on 18 January 2017. The offset mechanism currently allows employers to offset an employee's entitlement to a severance or long service payment on termination against the contributions that the employer has made to that employee's retirement fund. This ability has long been the subject of some controversy and has been widely criticised by labour unions and other commentators.

In the policy address, it was proposed that the Government would progressively abolish the offsetting of severance and long service payments. In order to lessen the effect on employers, the amendment will not have retrospective effect. This means there will most likely be a future cut-off date, after which employers will no longer be entitled to offset any further mandatory provident fund contributions.

The Government also proposed subsidies to employers over a 10-year period after the implementation date of the abolition to help employers absorb some of the impact of the change.

The amount of statutory severance and long service payment which employees are entitled to will also be reduced downwards. At the moment an employee is entitled to two-thirds of one month's wages for each year of service (capped at HK$15,000). It was proposed in the policy address that this will be reduced to half of a month's wages.

If the public supports the proposal, the Government will launch a three-month consultation period before tabling the necessary amendments.

India

EQUAL PAY FOR EQUAL WORK

The Contract Labour (Regulation & Abolition) Rules (the legislation governing contract/temporary labour in India) provide that where the type of work done by temporary workmen via a contractor arrangement is the same as the work performed by workmen directly employed by the principal employer, the workmen employed by the contractor are entitled to the same wages. The term "workmen" refers, broadly, to blue collar workers (although see below for a recent development in this area).

In practice, the principle of equal pay for equal work between employees and contractors has not been followed by employers. The Supreme Court of India, in a recent judgment, made it clear that a mere difference in nomenclature is not sufficient to disentitle a temporary employee from being paid wages at par with permanent employees. The Supreme Court observed that an employee engaged for the same work cannot be paid less than another who performs the same duties and responsibilities - doing so constitutes an act of exploitative enslavement and is in violation of the Constitution of India. Whilst the Supreme Court has ruled that the principle of "equal pay for equal work' constitutes a clear and unambiguous right and is vested in every employee, whether engaged on a permanent or temporary basis, it is yet to be seen whether the court's judgment will have an effect on established practice.

DEFINITION OF "WORKMAN"

In India, a different regime applies to termination of "workmen" level employees and "non-workmen" level employees. The termination of white collar employees is primarily regulated by the terms of the employment contract and can typically be done by simply giving the other party a notice in writing with a specified notice period (or payment in lieu of the notice period). On the other hand, termination of blue collar employees is governed by the Industrial Disputes Act, 1947 (the ID Act) in which case prior approval of, or notification to, the Government is typically required. This position could, however, be set to change following some recent judgments.

The Chennai Labour Court, in a recent judgment, set aside the dismissal of a software engineer working in an Information Technology (IT) company on the ground that a software engineer working in an IT company is a "workman" since his job involves skill and technical knowledge. The dismissal was rendered unlawful by the Court and the employer was directed to reinstate the employee with continuity of service and to pay full back wages and all other benefits from the date of dismissal to the date of reinstatement. Whilst labour courts in India are considered to be biased towards employees, this judgment follows a ruling by the Chennai High Court which also, in an interim order, considered a software analyst to be a workman and granted an injunction against her unlawful termination. These judgments have added further ambiguity to the definition of "workman", which has so far typically been interpreted to apply only to blue collar employees.

Whilst on one hand the Central Government is trying to overhaul labour laws in India to make them more employer-friendly, these judgments seem to point to an alternative approach being taken by the courts. Following these judgments, the statutory protections which were hitherto granted only to blue collar employees under the ID Act could now be claimed by a broader workforce including white collar employees.

Japan

The Japanese traditional working style is in a transitional period as the government is working on one of Prime Minister Abe's core policies, "evolution of working style". The two pillars of the evolution are (i) an implementation of the policy of equal pay for equal work, and (ii) elimination of excessive overwork. Work related issues are gathering more attention than ever, and we expect to see the evolution of working style to continue and accelerate in the next year.

ACCELERATING THE POLICY OF EQUAL PAY FOR EQUAL WORK

In Japan, there is a notable discrepancy in working conditions between regular and non-regular employees (i.e. fixed term employees, part-time employees and agency workers) concerning base pay, bonus payments, retirement allowance and other benefits. Recently, this gap has been the subject of much discussion.

The government is planning to submit a bill at the Diet session in Autumn 2017 to implement the policy of equal pay for equal work and has launched a study committee to discuss the details of the policy. The committee has recently issued draft guidelines to identify unfair treatment of non-regular employees and under what conditions the discrepancy in work conditions between regular and non-regular employees would be acceptable. It is envisaged that these draft guidelines will become official once the bill passes the Diet.

BECOMING MORE SENSITIVE TO THE ISSUE OF OVERWORK

Japan has been known as a society where workers are expected to show dedication and commitment to the firm they work for, which often results in very long working hours. The issue of overwork is gaining more prominence.

In 2015, a special unit was established in the Tokyo Labour Department and Osaka Labour Department to eliminate and investigate illegal overtime work. Since the establishment of this new unit, the number of cases which resulted in criminal prosecutions against companies and executives for inadequate management of overtime has risen. Actions taken by the Labour Standards Bureau over a suicide caused by excessive overtime work triggered much public interest in this issue. In response to such new-found interest, the government is currently discussing the need to tighten regulations on excessive overtime practice by amending laws and regulations.

Korea

In January 2016, the Korean government announced two guidelines on ordinary dismissal and rules of employment respectively. The guideline on ordinary dismissal was intended to give employers greater flexibility in employment and to result ultimately in the creation of more jobs (Ordinary Dismissal Guideline). The Ordinary Dismissal Guideline, which reflects the positions of the government and ruling party in Korea, has been strongly opposed by the labour industry and unions, who feared that the Guideline would result in a dramatic increase in the dismissal of poor performers. However, in contrast to what the labour industry and unions anticipated, the Ordinary Dismissal Guideline has not resulted in such an increase, as employers are taking a cautious stance and waiting for the Korean courts' judicial interpretation of the Guideline.

In the coming year, the Korean government seems poised to continue its efforts to increase employment flexibility. However, given the current political climate in Korea surrounding President Park and her potential impeachment, it is unclear whether the Korean government will be able to accomplish its objective.

Malaysia

USE OF FIXED TERM CONTRACTS

Employment relationships in Malaysia have generally remained conventional, with employers and employees embarking on their relationships by entering into an employment contract.

Although a typical employment relationship would be one that is permanent in nature and usually subject to a retirement age, there are a number of employers who utilize fixed term contracts for engaging certain categories of employees. Whilst there is no specific legislation to cover use of fixed term contracts, permanency in employment can be inferred by the Courts especially in circumstances where fixed term contracts are repeated and automatically renewed over a period of time. The Courts have in the past been guided by a review of the job in question and whether such a job is temporary or permanent in nature. Where a job is found to be required even after a fixed term contract ends, there has been a tendency to find that this is not a genuine fixed term arrangement and non-renewal of such contracts could result in substantial compensation being paid out.

Over the past year however, a number of cases were litigated in the Industrial Court concerning fixed term contracts and there now appears to a wider recognition of the parties' intention to enter into fixed term contract arrangements. Even where unjust dismissal was established in cases where the fixed term contracts were terminated early, compensation was limited to the unexpired portion of the fixed term contract. This is a departure from the previous trend of awarding the full extent of compensation as if the employee was employed on a permanent basis. Notwithstanding this wider recognition of fixed term contracts, the Courts may still infer permanency into contracts that are repeatedly and automatically renewed over a period of time. Contracts should be drafted in such a manner to avoid suggesting a relationship that is permanent in nature, e.g. with retirement ages or a progressive vacation entitlement based on service years when the contract is only for a 1 year period.

PERSONAL DATA PROTECTION

Aside from changes to the potential flexibility of employment relationships, over the past year there has also been enhanced awareness on the part of employers in respect of the need to comply with the Personal Data Protection Act 2010 (PDPA). This will continue to be an important issue in the year ahead. Whilst the PDPA came into force in November 2013, activities by the Personal Data Protection Commission (PDP Commission) appear so far to be focused on administrative matters such as registration and providing certain general standards for compliance. Though there has been no known enforcement of the PDPA provisions at this time, it is anticipated that the PDP Commission could look into enforcement activities in the near future.

Accordingly, employers need to ensure that their employees have received statutory notices consistent with the requirements of the PDPA. For employers who have a global presence, the notices should also cover the right to transfer data cross border to holding or parent companies beyond the shores of Malaysia. Whilst there was an ability to freely transfer data previously without any need for notification or consent, there is a need now for employers to ensure that employees are notified of such transfer and the purpose of the transfer. Where sensitive personal data is concerned, employers must ensure that employees provide explicit consent before such a transfer can be made.

Philippines

The Philippines is currently months into the new administration of President Rodrigo Duterte, whose platform included a promise to "end" all contracting arrangements in the country. This campaign promise has been interpreted as a noticeable shift in the employment landscape. Most prominently, employers have been encouraged to regularize their contractual workers. This is because, while the current administration's thrust has been focused on putting a stop to contracting arrangements, the law has essentially remained the same.

At present, the Labour Code of the Philippines merely prohibits labour-only contracting. In order to augment this, however, the Department of Labour and Employment (DOLE) has tightened its implementation of the law. In particular, the DOLE has increased its on-site spot checks and investigations to determine whether employers are compliant with labour laws. Further, a circular was issued halting the registration of contracting companies. Nevertheless, there has been news that Department Order No. 18-A, which governs contracting arrangements, will be revised shortly in order to reflect the current administration's stance against such arrangements.

All in all, the employment landscape in the Philippines is expected to continue the current trend of promoting regularization or increasing the security of tenure of employees. This does not, however, mean the total eradication of contracting arrangements. Moreover, hiring projects and seasonal employees remain allowed. At most, tighter regulations and stricter implementation of those regulations will be put in place. This means that, while it may be harder to continually hire temporary workers, employers nevertheless retain the flexibility to employ workers based on varying business needs. The demand for Filipino workers, especially overseas, remains high due to their proven work ethic and professionalism.

Singapore

Singapore is no exception to the rapid growth of the gig economy. In light of the increasing numbers of freelancers and independent contractors, there have been calls in Singapore for such workers to be granted more rights at law and greater support from the relevant governmental and statutory authorities, and changes could be made before 2017 is out.

In the face of likely global economic headwinds, Singapore will also be increasingly focused in 2017 on keeping workers in the labour force and helping those who are laid off. Retrenchment notifications to the Ministry of Manpower will be made mandatory for most companies that retrench five or more employees within any given six-month period. The statutory re-employment age for older workers will also be raised from 65 to 67.

On the disputes front, 2017 will see the establishment of an Employment Claims Tribunal (ECT) to adjudicate pay-related disputes that cannot be settled amicably through mediation at the new Tripartite Alliance for Dispute Management. A significant development is that the ECT will have jurisdiction over all employees, including those who would not otherwise be protected by the Employment Act (which does not cover Professionals, Managers and Executives (PMEs) earning more than S$4,500 per month), potentially reducing costs and providing swifter legal recourse for PMEs and other employees on more straightforward claims. At the higher end of the spectrum, 2017 could also see Singapore's Court of Appeal finally get the opportunity on appeal to provide needed clarification and refinement to the laws on non-competition and restraint of trade.

Employment laws in Singapore will continue to be relatively employer-friendly compared with other developed economies, but the needle has been moving for some time, and 2017 is likely to see the continuation of this trend, with a greater emphasis on ensuring that none get left behind.

Taiwan

DRAFT BILL OF DISPATCHED WORKERS PROTECTION ACT TO BE REVISED AND RE-PROPOSED BY THE MINISTRY OF LABOUR

In response to the increasing numbers of dispatched workers in Taiwan businesses and government agencies, the Ministry of Labour of Taiwan (the MOL) had proposed a draft bill of the Dispatched Workers Protection Act back in 2014 in order to regulate the relationship between dispatching firms, user firms and dispatched workers. However, the draft has not been adopted into a law as the legislators have not been able to compromise on the maximum percentage of dispatched workers permitted in a user firm, which had been proposed to be capped at 3%. According to the draft bill, a violation of such limitation would result in an administrative penalty from NT$ 90,000 (approx. US$ 2,813) to NT$ 450,000 (approx. US$ 14,063). Although it was previously reported that a revised bill would be proposed by the MOL by the end of 2016, no new draft has yet been announced. As the Minister of the MOL had previously stated that the long-term goal of the bill is to eventually eliminate the demand for dispatched workers, it is possible that the new draft would propose even more stringent restrictions on the hiring and use of dispatched workers.

KEY AMENDMENTS TO THE LABOUR STANDARDS ACT

Significant amendments to Taiwan's Labour Standards Act were passed on 6 December 2016 to improve the rights of workers to paid leave. Some of the key amendments are as follows:

1. One regular day off and one recess day

Previously, a worker was entitled to at least one regular day off in every seven days. After the amendments took effect (on 23 December 2016), a worker is entitled to have at least two days off in every seven days, provided that such two days off are divided into one regular day off and one recess day. Employees may not be required to work on a regular day off except in exceptional circumstances. Employers may ask employees to work on recess days, but wages for the work on the recess days will be much higher than on normal work days.

2. National holidays

National holidays will now follow the regulations set by the Ministry of Interior of Taiwan, and as a result have been reduced from 19 days per year to 12 days.

3. Annual Paid Leave

The number of days of annual paid leave has been increased, especially for workers with less than 5 years of service. The amendments with respect to national holidays and annual paid leave came into effect on 1 January 2017.

Thailand

CHANGES TO THE MINIMUM WAGE FRAMEWORK

In response in part to increased focus on the minimum wage paid to workers in Thailand, there were legislative changes made during 2016 to restructure Thailand's minimum wage framework. These changes had the expressed goal of encouraging vocational training and development through lower salaries to keep the costs down in less developed provinces, whilst accounting for different economic, social and seasonal conditions between provinces (specifically those dependent or agriculture). In the past, Thailand imposed a blanket minimum wage of Baht 300 per day that applied uniformly throughout Thailand. By contrast, the new law seeks to differentiate among workers based upon geographic location, with Thailand split into 4 groups of provinces with each group having a separate, single minimum wage. Although an increase in the minimum wage of between 5-10 Baht per day has been implemented for most of Thailand, workers in eight provinces are not entitled to such an increase. It is hoped that such differentiation will more closely reflect the financial strength and capacities of those businesses conducted in certain more prosperous provinces. In addition, these new laws introduced minimum wage groupings for more than 20 different vocations as well as for outsourced work.

Although these changes in Thailand's minimum wage framework are not expected to cause a migration towards those provinces with the greatest minimum wage increases, it is anticipated that cost-sensitive businesses may, over time, relocate to those provinces which either have no or a more modest increase in minimum wages.

Vietnam

Vietnam's Ministry of Labour, Invalids and Social Affairs is circulating for public comments an early draft of amendments to the current Labour Code of Vietnam, which has only been in force since 2013. These amendments aim to introduce a number of modifications and clarifications on issues that the business community claims to be ambiguous or impractical, principally relating to labour contracts, labour discipline, wages, foreign labour in Vietnam and retirement age. These amendments also aim to align the Labour Code with (i) a number of new laws or regulations on employment matters that came into effect recently, for instance laws on employment, vocational education and social insurance and (ii) standards set by the International Labour Organisation (ILO) or requirements for Vietnam's accession to a number of international or regional treaties (including the TPP). The amendments to the Labour Code are expected to be passed during 2017.

REGIONAL MINIMUM WAGE INCREASE

It may take at least another year before the final form of the amendments to the Labour Code becomes clear. In the meantime, an immediate change that was effective from 1 January 2017 is the increase in the regional minimum wage. The average increase will be 7.3%. As an indication, the monthly minimum wage in Region I which generally covers almost all urban districts of Hanoi and Ho Chi Minh City will increase from VND3.5 million (about USD159) to VND3.75 million (around USD170) per month. The figures for Regions II, III and IV will be VND3.32 million (about USD150), VND2.9 million (about USD130) and VND2.58 million (about USD117) respectively. The regional minimum wage is applicable to unskilled employees working under normal working conditions (exclusive of additional benefits - for example because of harsh/toxic conditions, night shift or overtime). For skilled employees (which generally means employees who have at least completed vocational training), the minimum salary must be at least 7% above the regional minimum wage. Such increases take effect annually and the business community keeps a close eye on announced increases at the end of every year to assess the impact on their business plan for the year ahead.