Welcome to our international quarterly newsletter. This Winter 2019 edition reports on a number of labour and employment law developments happening in Asia, the European Union, Austria, Belgium, France, Germany, Italy, the Netherlands, Russia, Spain, the United Kingdom, and the United States over the past few months.
Whistleblowing – What should you be doing in the Asia Pacific region?
In Asia where whistleblowing legislation is generally more “light touch” compared to that of the UK and the European Union, it can be difficult for organisations to understand what is legally required of them and, practically, how they should implement and operate a whistleblowing system. Our recent blog post formulates a number of recommendations to employers.
Political unrest and strikes in Hong Kong: What employers need to know.
The protests and rallies which made the headlines during the past few months may have slowed down a little, certainly the violent ones, but there will be further calls for citywide walkouts/strikes in the coming months. We have collated a number of high-level frequently asked questions to help employers navigate this period of uncertainty. Read them in our blog post.
To downsize or not to downsize: What are the alternatives?
The US-China trade war and an easing in China’s economic growth, compounded by political unrest in Hong Kong and elsewhere across the region, have given rise to general fears about the health of the global economy. With these economic storm clouds brewing, an increasing number of companies are considering their contingency plans in the Asia region in case of a global recession.
But what does all this mean for the workforce? Does it simply mean redundancies? The good news is that it doesn’t have to.
Read more in our blog post about some potential alternatives to downsizing that might allow companies to retain their experienced, quality staff and avoid the expense of redundancies (in the short term) and future recruitment and training costs (in the long term).
New EU Directive on the protection of whistleblowers.
The new “Directive on the protection of persons reporting on breaches of Union law” commonly referred to as the “whistleblower protection directive” was published in the EU Official Journal on 26 November.
The Directive marks for the first time a harmonization at European—and international—level to better protect whistleblowers. It has the potential to trigger far-reaching changes to European whistleblowing regulations across different sectors and member states and even to become a new global standard.
Interestingly, the Assembly of the Council of Europe, which has a broader membership than the EU, issued a recommendation this October calling for the adoption of a binding legal instrument that would draw on the new Directive and even add new requirements to its content.
The Directive, when implemented by member states, will oblige global employers to establish the internal channels through which misconduct is reported, to encourage whistleblowing, and to protect the whistleblowers from retaliation. Read more about the new EU regime in our October briefing.
What should global employers expect from the new EU Commission?
The new EU Commissioner for Jobs, Mr. Schmit, who took office on 1st December, already gave some indications as to what his priorities will be for the next few years. He aims to boost employment considering the digital transformation and the climate transition. He further intends to promote social rights and social inclusion. He also supports the idea of a fair minimum wage for employees in all member states and better protection for platform workers.
Read more about the priorities of the new Commissioner for Jobs in our blog post.
ECtHR: Dismissal based on information acquired from personal communications does not (always) breach the right to privacy.
The European Court of Human Rights (“ECtHR”) upheld the decision of a UK tribunal, according to which the dismissal based on information acquired from personal communications of the employee did not breach his right to private life protected under article 8 of the European Convention of Human Rights. During an internal investigation the employer had relied upon materials seized from employee’s phone and other messages and emails to dismiss him for gross misconduct following stalking and harassment allegations.
The information about a harassment case and the messages contained in the phone of the employee were passed to the employer by the police. This fact was not challenged by the employee and thus not analysed from the ECtHR. However, the ECtHR analysed whether using personal communications as evidence to dismiss an employee would hinder private life.
The ECtHR ruled that in this case the employee should not have had any expectation that his communications would remain private as he was aware of harassment allegations brought against him. Moreover, he did not challenge the use of these communications during the internal investigations, to the contrary, he voluntarily submitted some of them.
It is important to remember that this case is not absolute. In a previous case (Barbulescu), ECtHR found that the right to privacy was violated because the employee was not put on notice as to the extent and the nature of his employer’s monitoring activities.
You can read the full ECtHR ruling here.
ECtHR: Video surveillance of dismissed employer has not breached the right to privacy.
In a case against Spain, the Grand Chamber of ECtHR ruled that covert video surveillance of employees suspected of theft does not constitute a breach of the right to privacy. Employees working as cashiers at a supermarket were dismissed after they had admitted that they had helped customers and other employees to steal items or stealing themselves. The employer had previously installed cameras and had informed the employees about the visible ones but not about the hidden ones. The employees took the case to the local court which decided in the favour of the employer. They then brought the case to the ECtHR.
An initial decision by the Court ruled that there was a violation of the right to privacy as the employees should have been notified about the whole video surveillance (visible and hidden cameras). However, in October 2019, the Grand Chamber of the ECtHR decided that in the context of the proceedings before the local court, the employees had access to the recordings obtained by the video surveillance and were able to challenge their authenticity as well as their use in evidence, but they did not do so. Also, the video recordings were not the only materials in the file based on which the local court took their decision. Therefore, the Grand Chamber ruled that there was no breach of the right to privacy as the employees had not claimed so in front of the local court, and the local court had not committed any procedural breach.
You can read the full ECtHR ruling here.
Stock Amendment Act 2019.
Austria recently implemented the EU Directive on encouragement of long-term shareholder engagement, which aims at strengthening shareholders’ influence on the remuneration agreements with Board members ; and improving the transparency of such agreements. The new law states that a general remuneration policy must set out principles of the compensation of Management Board Members and Supervisory Board Members on the basis of financial and non-financial criteria, and the determination of fixed and variable components of remuneration. The remuneration policy for the company on the one hand, and annual remuneration reports on the other hand, have to be drawn up and submitted to the Annual General Meeting for approval.
Austrian employees entitled to one personal bank holiday per year determined unilaterally.
All Austrian employees are now entitled to a personal bank holiday which they can decide to take unilaterally, upon the condition that it is communicated to the employer three months in advance. This new regime follows a ruling of the European Court of Justice which found the previous ‘Good Friday’ regime to be discriminatory. The latter was a bank holiday which could be enjoyed only by employees of a certain religious belief, who could either take it as a day off or be paid additionally for working on that day, leading to discrimination on grounds of religion. After the above-mentioned ruling, all provisions in collective bargaining agreements or works council agreements which apply only to members of specific religions ceased to be in force.
Belgian Supreme Court extends the concept of remuneration by including premiums paid by a third party.
Belgian case law defines remuneration as the counterpart for the work performed in the execution of an employment contract. For social security purposes a different definition of remuneration is applied, and includes benefits in monies or valuable in monies, to which the employee is entitled, but is borne by the employer, and granted as a result of an employee’s employment.
On the basis of the latter definition, certain benefits did not classify as remuneration and were therefore not subject to social security contributions (because they were not directly or indirectly borne by the employing entity). For instance, the cost of the benefit was not borne or recharged to the Belgian employing entity, the latter had no role in administration of the plan, etc.
This all changed in 2018 when the Belgian Social Security Office decided that benefits whose costs are not borne by the employing entity are nevertheless part of the remuneration and subject to social security contribution. The Supreme Court recently confirmed this new interpretation.
This change in approach will have important financial consequences for Belgian employers who are part of a multinational group of companies as the Belgian authorities may now claim social security contributions on benefits that were, until now, granted free from such contribution requirements.
Local tribunal that rules salary scales, as defined by industry collective bargaining agreements, to be discriminatory based on age.
The number of service years accrued by an employee has long been a criterion for determining an employee’s salary under Belgian law, until the entry into force of EU Directive on equal treatment in employment and occupation. The latter finds determination of salary based on years of service discriminatory. Therefore, a group of companies from the same sector switched to using the employee’s professional experience as a criterion for determining salary scales. The European Court of Justice expressly confirmed that such criterion is acceptable and not discriminatory.
However, a local tribunal ruled that the salary adjustments are, in reality, tied more to the employee’s age than to their actual professional experience. An older employee may de facto claim a longer professional experience even if he has had several periods of professional inactivity. Salary scales under collective bargaining agreements at industry level thus constitute an indirect discrimination based on the employee’s age, with no legitimate aim nor proportionate means to justify the different treatment.
Belgian Constitutional Court interprets the concept of “employer” in the context of a TUPE transfer.
Employees transferring to an entity that previously had no employees are now protected under collective bargaining agreement 32bis, which implement the Acquired Rights Directive into Belgian law, thanks to a change in case law. The above-mentioned agreement applies to all employers in the private sector. Until May this year, it was debatable whether a transferee which does not have any employees would be considered as an employer and hence would fall in the scope collective bargaining agreement 32bis. After the ruling of the Belgian Constitutional Court, the concept of “employer” should be interpreted in a sufficiently broad way to cover transferees which, until the TUPE transfer, did not have any employees.
Recording employees’ computer screens and phone calls for training: French DPA issues guidance.
Some employers choose to record their employees’ computer screens, either as a screenshot or a video, and accompanying phone conversations, for staff training purposes.
To help employers understand how best to proceed, France’s data protection authority (the Commission Nationale de l’Informatique et des Libertés or CNIL) has recently published some guidance (in French), which we summarise in our blog post.
France’s new law offers a pragmatic solution to protect gig workers in what appears to be a balanced way.
French legislator has adopted a new law in November which confers drivers of ride hailing Apps a number of employment type rights such as: the right to disconnect from the app and the right to refuse to take a ride, without being retaliated against. The law also imposes on platforms information requirements including communicating the distance and the net minimal price to drivers before each ride and publishing key indicators on their websites (including financial information on average working time and revenue for drivers from the past year).
The new law launches the concept of an optional charter of rights, which will contain further details on working conditions for drivers, how the above rights will effectively be implemented, quality control and even provide for additional benefits for drivers. Platforms choosing to have such a chart will have to consult with the drivers and seek homologation by the authorities - the details of the procedure still need to be agreed on. The law does not allow such a charter to be used for qualifying an employment relationship, as the French Government's intention is not to push for an overall requalification. However, this will not prevent more court cases from being filed according to the first commentaries. Drivers will still be able to introduce requalification claims in front of labour courts, despite the new law and even if a charter is in place (but presumably they will have less reasons for doing so).
This new law is welcomed by some stakeholders (including platforms) but not by trade unions. According to the latter, France is moving towards the launch of a third employment status which stands in between self-employed and employee, similar to the worker status in the UK or the TRADE one in Spain, which they don’t see as the right answer to the challenge. However, despite the support or the critics, the law has a long way to go before promulgation (if at all) as its constitutionality has been challenged in late November.
Stricter sanctions for companies involved in criminal actions.
The German legislature is expected to implement the first corporate sanctions. At the moment, the criminal laws in Germany apply only to individuals, whereas companies are subject to the law on regulatory offences (which follows different rules compared to a criminal proceeding). The draft law, which is expected to pass the legislative process in Spring 2020, significantly changes the treatment of companies in cases of criminal actions.
The draft law covers white-collar crimes, and industrial and occupational accidents, committed by managing staff, employees, or external third parties who are subject to the company's right to give directions. Offences committed abroad can be sanctioned by the German prosecution authorities under the draft legislation under certain conditions. It provides for stricter sanctions for companies involved in criminal actions including, inter alia, penalties of up to 10 percent of the group revenue. It also sets strong incentives for companies to conduct internal investigations, which must meet several requirements. It is to be expected that cooperation agreements will become even more relevant in the future to make sure that employees provide (relevant) information in an internal investigation.
Compliance measures of the company are considered in the sentencing. However, the draft law does not provide clear guidance concerning the requirements of a Compliance Management System, which could have been done by referring to existing national or international standards. If the law passes the legislative proceedings, companies will be given the opportunity to prepare and review their compliance standards as it will not become effective until two years after its promulgation.
Measures aimed at better protecting gig-economy workers.
A new law aims at increasing the protection of gig workers. It aims at facilitating the reclassification of certain self-employed relationships into employment relationship. The new law amends the current legislation. The new law requires self-employed workers, whose working activity was performed on an exclusively personal and continuous basis, and organised by the principal, were treated the same as employees. The same treatment between the self-employed workers category, mentioned above, and employees is also applicable to working time and workplace of the performance.
The new legislation enlarges the scope of the current legislation by broadening the definition of self-employed workers to be treated as employees. For instance, it will also apply when the performance of the working activity is organised by the principal through platforms (including digital ones).
Hence, the new law does not bring any material change, but rather clarifies and broadens the definition given by the current legislation. A broader interpretation has already been applied by a local court early this year. In its ruling the court deemed that the work performance of certain food-delivery workers, organised by their principal through a digital platform, should be governed by employment rules.
On the other hand, the new law aims at ensuring better working conditions for certain kinds of genuinely self-employed workers, such as those engaged in performing urban delivery services, using cycles or motor vehicles, through platforms (including digital ones). For this category of workers, the new legislation provides a list of conditions which must be respected by their principal.
Most of these requirements will enter into force 12 months after approval by the Parliament which was given on 2 November 2019.
Due diligence and reporting obligations related to child labour in supply chains.
The Dutch Senate has adopted the Child Labour Due Diligence Law (Wet zorgplicht kinderarbeid). When it comes into force, the new law will impose due diligence and reporting obligations on certain companies (including companies incorporated outside the Netherlands) relating to the risk of child labour in their supply chains. It follows in the footsteps of corporate human rights legislation introduced in the UK, Australia, France and elsewhere, but –there are a number of elements that set the Dutch law apart, as our blog post explains.
Roskomnadzor has made it obligatory for personal data operators to audit personal data processing.
According to Roskomnadzor (Russia’s Federal Service for the Supervision of Communications, Information, Technology and Mass Media), the failure to audit the processing of personal data is a violation of the law.
According to Federal Law on Personal Data, an audit of the processing of personal data is one of the possible measures for ensuring that operators fulfil legal obligations. The data operator has the right to define the list of such measures independently. However, Roskomnadzor believes that the lack of a plan for conducting an audit, and the lack materials relating to past audits, is a violation. The courts side with Roskomnadzor on this issue.
Fines introduced for non-compliance with the requirement to localise personal data in the Russian Federation
A new law adopted on 2 December established the administrative liability of data operators for failing to collect personal data of Russian citizens by using databases located in Russia (‘the Localisation Requirement’). The Localisation Requirement has previously existed in the Personal Data Law. However, the new law provides for a definition of ‘collection personal data’, which was missing in the legislation and was provided by the competent Ministry.
Moreover, the earlier legislation did not provide for separate liability for failure to comply with the Localisation Requirement. The new law introduces administrative fines that vary depending on a first or repeated violation of the Localisation Requirement. A fine may reach up to 18 million roubles for legal entities and it may be imposed on any foreign legal entities whose activity has been directed towards Russia.
Working time recording: The National Court rules that time not worked may be discounted from the monthly wage.
The introduction of mandatory working time recording has been generally praised by employees as it makes it easier for them to prove and get compensation for overtime. On the other hand, the employers have resented this new regime as it increases bureaucracy and decreases flexibility at the workplace. However, in June this year the National Court issued a landmark ruling that makes it clear that there is a balance to be had.
In the case in question, a contact centre company introduced a working time recording system in line with the new legal requirements. As from the introduction of such system, the company started to discount salary from the monthly payslips of the employees in proportion to any minutes of delay incurred by them in arriving at their work posts within the previous month.
The plaintiff unions challenged this practice with a view to recovering the discounted amounts claiming, essentially, that monetary penalties are not permitted by Spanish employment law. The National Court rejected the claim and clarified that the discount of salary amounts does not constitute a penalty and is, rather, a consequence of the bilateral obligations to work and remunerate work, as established under the employment contract. In this regard, the National Court clarifies that the company would be entitled, in addition to discounting any salary in proportion to time not worked, to take disciplinary action against the employees.
“Working time à la carte”: first judicial resolutions.
One of the main new developments introduced by Royal Decree-law of 2019, concerning urgent measures aimed at guaranteeing equal treatment and opportunities between women and men in employment matters, is a broader regulation of the right to request an adaptation or reduction of their working time in order to make their right to work-life balance effective. The law is not prescriptive as to how this right is to be exercised, whether it be by reducing or redistributing working hours, or by rearranging how the work is carried out (i.e.: remotely from home).
Until the entry into force of the reform, this right was phrased by the Workers’ Statute in vague terms, which made it seem like an instrument of principle, rather than an instrument of substance. It had required collective bargaining agreements to set out the ways of implementing this right. However, the new wording has clarified a number of practical aspects concerning its exercise, which had escalated in requests and (of course) related litigation.
The amended Workers’ Statute foresees that this right shall be further developed by collective bargaining agreements, but in the absence of such, a period of negotiation between the requestor and the company lasting up to 30 days shall be initiated. Upon finalization of this negotiation period, the company shall accept or deny the request, or propose an alternative measure. The law indicates that the denial of a request by the employer shall be grounded on objective reasons. Disputes shall be submitted to the employment courts within 20 days from the communication to the employee of the employer’s decision. The judgement will be final and binding.
Even though some scholars and the press are referring to a right to “working time à la carte” this is not the reality of the situation. A recent local ruling considered lawful the denial of a request to begin working day one hour later than usual. Organizational reasons alleged by the employer for such denial were justified, as the company was a contractor of a city hall which fixes the working time, and that the employee was offered the alternative to reduce his working hours. On the other hand, a number of rulings have upheld employees’ claims.
Attention UK remuneration committees: highlights from the updated IA Principles of Remuneration.
On 1 November 2019, the Investment Association (the “IA”) published the updated IA Principles of Remuneration (the “Principles”) setting out investors’ expectations on executive remuneration for the 2020 Annual General Meetings season. The updates are especially pertinent as many companies are due to seek shareholder approval of a new remuneration policy in 2020.
Key areas of focus include: the introduction of discretion in incentive schemes to limit vesting outcomes; the reduction of incumbents’ pension contributions; leaver provisions; post-employment shareholding requirements; and alternatives to traditional long-term incentive schemes.
UK Finance report on the impact of the Senior Managers and Certification Regime.
UK Finance has published results of a study involving individuals at banking institutions to find out whether the Senior Managers and Certification Regime (the “Regime”), which in 2016 replaced the Approved Persons’ Regime, has made any real difference to practice and policy.
The results were positive overall. Meaningful change was identified by the majority of institutions following the introduction of the Regime and there was particular awareness amongst Senior Managers of the impact of their behaviours. Firms were also being proactive in identifying breaches of conduct rules and looking into regulatory references for new hires with greater scrutiny than ever, often adopting a zero-tolerance approach that is to be applauded given the aim of the Regime.
However, the results observe that there are several areas for which the Regime should not be viewed as a ‘fix-all’ solution. The increased focus on decision-making has become too complex and produced a more risk-averse industry. The increased obligations, which it was found resulted in Senior Managers giving greater thought to the Regime in their everyday lives, indicate that the increased burden has been accepted, as has the attitude to risk that accompanies it.
From 9 December 2019, the Regime will be extended to apply to FCA solo-regulated firms. The extent of each firm’s obligations under the Regime will be dependent on which of three categories apply.
You can read more in our blog post here.
Pensions: will a new government potentially criminalise legitimate corporate activity?
A “Pension Schemes Bill”, laid by the Conservative Party shortly prior to Parliament being dissolved, is likely to be reintroduced following the UK’s general election which took place on 12 December. As a result, it may not be long before a wide range of ordinary corporate activity could, in certain circumstances, be a criminal offence where a group operates a defined benefit pension scheme. This includes paying dividends, reorganising a corporate group, or granting security to a lender.
The bill had cross-party support when it was first laid before Parliament. We are therefore expecting the bill to be revived in a very similar form to that published in October regardless of the political party (or parties) that forms a government.
The bill would introduce two new criminal offences carrying a maximum penalty of seven years in prison where any person:
- engages in an act or conduct that they knew or ought to have known would have a “materially detrimental effect” on a defined benefit pension scheme; or
- commits an act that prevents the recovery of employer debt due to a defined benefit pension scheme or otherwise compromises or settles such a debt (including by means of arrangements permitted under pensions law).
You can read more on the Pension Schemes Bill in our blog post here.
New consent requirements for the payment of dividends by UK public companies?
Perhaps prompted by the proposed Pension Schemes Bill legislation (see entry above, Pensions: will a new government potentially criminalise legitimate corporate activity?), on 30 October 2019, a separate private member’s bill was brought before the House of Lords which, if it had passed into law, would have required that prior to paying any dividends, UK public companies would be required to first obtain the written approval of (i) the trustees of any pension scheme responsible for the pensions of current or former employees of the company, and (ii) TPR.
The introduction of this bill highlights the increasing regulatory and political focus on the payment of dividends by companies that sponsor UK defined benefit pension plans. It is indicative of an appetite, in some quarters at least, to place greater controls on the payment of dividends.
It seems reasonable to expect that a reincarnation of this bill may be brought before the next session of Parliament. If such provisions were introduced, they could make it significantly harder for public companies to pay dividends. Pension scheme trustees would no doubt embrace the opportunity to negotiate for a share of the available cash to be paid to the scheme in return for their written approval. TPR could also be expected to take a tough stance when it comes to giving its approval.
You can read more on this bill here.
UK Supreme Court: employee owed £2m for 1980s invention.
The UK Supreme Court handed down its judgment in Shanks v Unilever. The Supreme Court held that an employee was responsible for an invention that generated revenue for Unilever and so it owed him quite a bit of compensation. This broadens the circumstances in which employers must compensate their employees for inventions made in the course of their employment and may impact all innovative businesses employing UK-based inventors. This suggests that lawyers should not regard the invention provisions in an employment contract as simply boilerplate language: they can have real significance.
In a unanimous decision, the Supreme Court allowed Professor Shanks’ appeal and awarded him compensation of £2m, as a fair share of the ‘outstanding benefit’ of £24.5m which his 1980s invention had provided to his employer.
You can read more in our blog post here.
California Reshapes Employment Law Landscape with New Worker Classification Statute.
California recently enacted a new law which will reshape the current worker classification law landscape by creating the presumption that a worker is an employee rather than an independent contractor for purposes of certain California wage orders and labor and insurance laws. To overcome this presumption, hiring entities must affirmatively demonstrate that certain conditions are satisfied or that an exemption applies. This new law will have a sweeping impact on businesses that rely heavily on the use of independent contractors, including businesses involved in the so-called “gig” economy. On September 2019, California governor, Gavin Newsom, signed Assembly Bill No. 5 into law.
You can read a detailed analysis on this development in our briefing.