Last week a group of our favorite European colleagues joined us in the Bay Area for a few special client visits. Even if you weren’t in the room, we’ll share a few key headlines here. (And, here’s link to listen in to our recent webinar: Global Employment Law Fastpass — Spotlight on Europe!)
From practical tips on the best ways to implement employee redundancies to the expected impact of the recently-passed EU Directive on Pay Transparency, here’s five things to know:
1. The EU Whistleblowing Directive (WBD) Requires Private Employers with 50 or More Workers to Establish a Local, Entity Level Reporting Hotline
The WBD was supposed to be implemented by the EU’s 27 member states by December 2021, but we are still waiting for around 8 EU member states to do so. For example, France, Belgium and Austria have transposed the WBD, Germany has not but is close. Spanish companies with at least 250 employees have until June 13, 2023 to comply. (For more, read our alert here.)
While legislation is still awaited in a number of jurisdictions, we are now in a much better position to see the challenges the WBD poses for global employers. . . and there are several.
- It can be tricky to implement the new requirement for a local channel alongside a centralized group level reporting system (e.g., through a global “hotline”). Under the WBD, employers are not prevented from maintaining and encouraging the use of their central reporting hotline; however, now, entities with more than 50 workers, must establish a local, entity level, channel. This means employers who meet the threshold will need to establish local entity level reporting systems alongside existing global channels.
- The second key challenge is where companies have multiple entities in one jurisdiction, whether one internal reporting channel can be established at a country level or whether the channel must be established in each entity. The implementing legislation in some countries is unclear on this point but, where the requirement is for entity level channels, this raises challenges for companies which have multiple entities within a jurisdiction but only one HR or Legal function which operates across multiple entities.
Fortunately, we have a multijurisdictional analysis matrix covering five key areas of WBD compliance at a local level available at a fixed fee per jurisdiction so that companies operating in the EU can wrap their arms around this new requirement. The matrix answers questions about the Directive’s scope and implementation requirements for internal procedures, protection of whistleblowers and data privacy issues. Our experienced team of lawyers can then assist with implementing the changes, as well as with training, communications and more.
2. The EU Pay Transparency Directive is Coming and as the Kids Say, It’s Extra
Last month the European Parliament formally adopted the Pay Transparency Directive and its provisions are likely to enter into force in most EU member states in 2026. It’s sort of a big deal, requiring significant attention and touching on many aspects of the employment lifecycle (read our detailed alert here).
A preview: there are pre-employment pay transparency requirements, and broad worker and representative rights to workforce pay information. The impact may be more muted in countries like France where works councils already have access to pay data, though the access will become much more granular under the Directive.
For employment lawyers, the most fear-provoking and onerous requirement is likely to be the requirement to conduct detailed pay audits in certain circumstances, including an equal value assessment, and to address pay gaps in cooperation with worker representatives. We heard tales of some rather off the rails comparisons (e.g. a HR manager and a CFO) from case law in several countries. (That one did not go the employer’s way.)
Though of course no longer a member of the EU, we do predict a “spill-over” effect in the UK. Stay tuned, or grab a pint with Stephen Ratcliffe for more. (Also, to get a handle on pay equity compliance globally — reporting requirements, compensation disclosure requirements, salary history bans, etc. — contact a team member to learn more about our Global Pay Transparency Matrix. This tool monitors the legal pay equity requirements and forthcoming developments across over 70 jurisdictions (of which over 40 currently have transparency or reporting requirements) to help clients manage their global workforces).
3. Spain Pulls Ahead with Progressive Policies
While Europe is well known for more progressive employment policies than the US, Spain is sort of standout at the moment. In Spain:
- Menstrual leave | Starting June 1, 2023, women with secondary incapacitating menstruation or secondary dysmenorrhea associated with pathologies will be entitled to sick leave.
- Miscarriage and maternity leave | Starting June 1, 2023, employees dealing with miscarriage or the interruption of pregnancy, whether voluntary or not, will be considered eligible to qualify for sick leave while they are receiving medical care from the Public Health Service and are unable to work. Additionally, the law will provide a special sick leave for pregnant employees from the first day of the 39th week of pregnancy. This leave is in addition to the 16 weeks of maternity leave.
Notably, beyond just Spain, the European Commission is keen to safeguard the right to work-life balance though a number of different measures.
4. Obligation to Record Working Time is Coming to Germany Soon
While the Draft Bill was published just last month (more here), it is likely to pass soon. Reading the tea leaves, we suspect it will not go into effect immediately and employers will have some time to implement the requirements. Notwithstanding, we recommend planning ahead since employers will be obliged to electronically record the beginning, end and duration of the daily working time of their employees on the day that the work is performed.
5. A Word to the Wise on Restructuring
Across Europe, inflation has put significant pressure on wages. Employers are grappling with increasing employee activism and general discontent while managing rising business costs more generally.
We are seeing various responses with many organizations taking steps to reduce labor costs and reallocate resources. Many employers have pulled back on previously ambitious hiring projects, particularly in the tech sector. Some organizations have already announced proposed redundancies and the number is growing.
Despite the economic turmoil, unemployment rates in many jurisdictions remain low and the market for key talent is still very competitive. Employers are having to balance recruitment and retention of this talent with the need to make costs savings.
Our team reports that while voluntary exit programs can be very helpful in achieving the desired headcount reductions in some locations (e.g. this has worked well recently in France), but in others they are impractical because they are expensive and local regulatory constraints can limit their effectiveness. Notably, the UK is proposing legislation to encourage employers that want to change workforce terms and conditions to do so by negotiation and agreement, and only as a last resort to dismiss then “re-hire” the existing (or new) workers on new term. (Read more here.)
All in all, a tailored jurisdiction-specific approach taking account of local market factors may appear to be more complex to manage at the outset, but in reality, could lead to a smoother process overall and enable organizations to take advantage of approaches available in some jurisdictions that may not be possible in others.