Welcome to our international quarterly newsletter. This Fall 2015 edition focuses on employment, pensions and benefits legal developments which took place in the EU, Austria, Belgium, France, Germany, Italy, Japan, the Netherlands, Russia, Spain, the UK and the US over the past 3 months.



Economic and trade sanctions have become a favoured geopolitical tool of governments. The rules are complex, ever evolving, and the violation risks can be high. Every company operating across borders needs to plan for the potential effect of sanctions on its business, how to manage the risks, and how to position itself to operate safely by taking decisions that make business sense. Please have a look at our recent briefing to read more on how to best plan to protect your business.


ECJ finds the US an "unsafe" harbour

Following the Advocate General’s opinion on a case involving the US-EU Safe Harbor framework, the ECJ issued its judgment on 6 October 2015 declaring the Safe Harbor decision invalid. This means that companies relying on the Safe Harbor framework will need to think of alternative data transfer mechanisms – such as binding corporate rules, the EU model contract clauses, or obtaining data subjects’ consent. To ensure a consistent approach across Europe and certainty for business, the Commission will issue guidance to national data protection authorities very soon, while advancing works on an updated Safe Harbor agreement (Safe Harbor 2.0 – which rewrite has been discussed over the past two years) and on the new Data Protection Regulation. For more information, please read our latest update on the decision, available here, and our full briefing on the case here.

Trilogues on EU General Data Protection Regulation progress 

Trilogue negotiations on the EU General Data Protection Regulation started in June and are still ongoing. The official plan of negotiators is to adopt the data protection reform in 2015 . However, discussions on controversial points of the Regulation may take longer to be agreed on.

On 27 July 2015 the European Data Protection Supervisor (EDPS) published its own preferred version on the Data Protection Regulation. This is a unique and unprecedented step taken to influence the ongoing trilogue negotiations. An application for smartphones and tablets (Android and iOS devices) was launched to compare the Commission’s, the Parliament’s and the Council’s positions with the EDPS’ preferred text. A table comparing the different positions can be found here.

The aim of the EDPS is to put additional public pressure on the co-legislators not to ignore its recommendations. The EDPS is an independent institution of the EU, which is responsible - with respect to the processing of personal data - for advising and ensuring that the fundamental rights and freedoms of natural persons, including their right to privacy, are respected by the EU institutions and bodies – but it is not part of the trilogue negotiations.

Interestingly, the EDPS version of the Regulation is around 30% shorter than the other versions. This is consistent with the recommendation that the Regulation should be simple, with further details for compliance coming subsequently from the new European Data Protection Board. It remains to be seen to what extent the negotiators will be influenced by the recommendations of the EDPS. However, even if it is not a co-legislator, it will be difficult for the Parliament and the Council to completely ignore the EDPS’ opinion.

Mobile workers' journeys are to be considered as working time 

In the recently released case of Federacion de Servicios Privados del sindicato Comisiones Obreras v Tyco Integrated Security SL and another (C-266/14), the ECJ found that the time spent by workers with no “fixed or habitual place of work”, travelling between their homes and premises of the first and last customers of each day, constitutes “working time” for the purposes of the Working Time Directive (2003/88/EC, the Directive).

The concept of “working time”, within the meaning of Article 2(1) of the Directive, is defined as any period during which the worker is at work, at the employer’s disposal and carrying out his activity or duties, and that concept is placed in opposition to rest periods, the two being mutually exclusive.

The ECJ held that the travel time of mobile workers should be taken into account for the purposes of the calculation of their working week limit and rest breaks. Since the employer was organising the order of the customers and could cancel appointments at any time, the ECJ disagreed with the argument that workers had autonomy over itinerary and route. The workers were namely at the employer’s disposal during their travelling time, which could not be shortened or used by them for their own interests. As to the concern that workers might take advantage of the journeys to conduct their personal business, the ECJ suggested to put in place monitoring procedures to avoid potential abuse.

The case will be referred back to Spanish courts, however judges throughout the EU may take the decision into account, with big implications for multinational companies engaging employees with no fixed workplace and where travel is an integral part of their job, such as technicians, engineers, as well as care and construction workers. The judgment will also have a significant impact on the trend of companies moving from office-based businesses to more mobile ones and it will likely increase employment costs or risks of claims for alleged breaches of working time legislation and industrial relations issues. While the Directive does not have any direct effect on pay, the ECJ decision may mean a pay increase for workers on the national minimum wage.

ESMA consults on remuneration guidelines

The European Securities and Markets Authority (ESMA) has launched a consultation on proposed Guidelines on sound remuneration policies under the UCITS V Directive and AIFMD. The proposed Guidelines will provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure in EU regulated collective investment funds.

The Consultation Paper examines the issue of proportionality in the application of the UCITS remuneration policies and considers it appropriate to disapply specific remuneration requirements under certain circumstances and conditions, in line with the AIFMD approach. The paper acknowledges that the EBA has taken a different view on similar drafting in CRDIV but ESMA “is of the view that an alternative legal reading of the equivalent provisions of the UCITS V Directive could also be envisaged”.

ESMA will consider the feedback received to the consultation ESMA by 23 October 2015 and will aim to finalise and publish the UCITS Remuneration Guidelines and a final report by Q1 2016 ahead of the transposition deadline for UCITS V Directive (18 March 2016).In relation to CRDIV, the EBA is expected to adopt its final guidelines on remuneration in December of this year.

Redundancy consultation thresholds: should directors and trainees also be taken into account?

In Balkaya v Kiesel Abbruch und Recycling Technik (C-229/14) the ECJ considered which workers should be included in the calculation of the number of collective dismissals when assessing whether redundancy consultation should take place, within the meaning of the Collective Redundancies Directive (98/59/EC, the Directive).

The case concerned a German company which decided to close one establishment and dismiss the relevant workers. Since the establishment counted 18 employees, thus less than the threshold of 20 employees laid down by the German legislation mandating redundancy consultation obligations, the employer did not proceed with any notification. However, one of the employees concerned challenged the calculation method for failing to take into account two workers of the establishment: a member of the board of directors of the company and a trainee. The ECJ was thus asked to rule on the qualification of those two workers as to whether or not to include them in the calculation of the relevant threshold.

Concerning the director, the ECJ noted that being a member of the board of directors is not sufficient to exclude a relationship of subordination to the company, since the director is appointed by the general meeting of shareholders, which may revoke his mandate at any time against his will. Moreover, the director is subject to the direction and supervision of that body and to its requirements and restrictions. Further, a director does not hold any shares in the company for which he carries out his functions and receives remuneration for the services he provides. Therefore, the ECJ stated that, despite enjoying a degree of independence in the performance of his duties that exceeds that of a “normal” worker, the board member is in a relationship of subordination vis-à-vis the company. This is why directors should be classified as a “workers” within the meaning of the Directive and, consequently, be taken into account in the calculation of the thresholds therein provided.

As for the trainee, the ECJ considered that on several occasions it had found that the concept of “worker” in EU law “extends to a person who serves a traineeship […] under the conditions of genuine and effective activity as an employed person, for and under the direction of an employer”.

Thus, in both cases, the ECJ concluded that the national legislation which excluded both company directors and trainees from the actual workforce breakdown was not compliant with the Directive. Both categories of employees may be considered as workers for the purposes of the Directive and, consequently, have to be taken into account in the calculation of the relevant thresholds.

ECJ on "transfer of a business"

The Acquired Rights Directive (2001/23/EC, the Directive) provides that a “transfer of a business” takes place where there is a disposal of an economic entity which retains its identity – namely an organised grouping of resources having the objective of pursuing an economic activity. The Directive provides that the transferor’s rights and obligations arising from an existing employment relationship are to be transferred to the transferee.

As the Portuguese airline TAP, majority shareholder of Air Atlantis SA (AIA), wound up its subsidiary, it assumed its obligations towards AIA’s customers, took on some of its equipment, assets and moveable property that were essential to pursuing the activity previously carried out by AIA, as well as recruited a number of its employees.

In Ferreira da Silva e Brito and others v Estado portuges (C-160/14), the ECJ ruled that there had been a “transfer of business” within the meaning of the Directive – strong indicators of this being: (i) the transfer of customers from AIA to TAP, (ii) TAP’s development of a charter flight business on routes previously served by AIA and (iii) the assignment of staff to roles which they had previously undertaken for AIA. Further, the ECJ noted that AIA retained its identity after the transfer despite the fact that it was integrated within TAP’s structure without retaining an autonomous organisational structure, because of the functional link of interdependence and complementarity between the elements transferred.

As to the circumstances in which a final appellate court must make a reference to the ECJ, the ECJ noted that both the fact that lower national courts had reached conflicting decisions on the correct interpretation of “transfer of a business” and the uncertainty and frequent difficulties of interpretation of the concept in issue triggered such an obligation, providing new guidance so as to avoid the risk of divergent decisions among member states in the future.

Which jurisdictional rules apply when suing an individual in his dual capacity as employee and director? 

In Holterman Ferho Exploitatie BV and others v Spies von Büllesheim (Case C-47/14) the ECJ discussed which jurisdictional rules apply when an individual is sued in his capacity as employee and director. The ECJ held that – while it is up to the national courts to analyse the facts – the existence of an employment contract between the parties indicates that the rules relating to individual contracts of employment prevail over all and any other relevant previsions. For this reason, an employee can only be sued in the member state in which they are domiciled (pursuant to Article 20 of Regulation (EC) 44/2011, also known as the 2001 Brussels Regulation), in accordance with the more favourable rules applicable to employees, regardless of (i) whether they are also a director, (ii) their nationality, (iii) the location of the company and (iv) the place where the individual performed some or all of their duties.

This judgment is likely to be welcomed with a sigh of relief by all those employees and/or directors domiciled in one country but working most of their time elsewhere, as they can be reassured that with regard to liability claims against them the law of the country of domicile will apply.

Race Directive covers associative indirect discrimination

In CHEZ Razpredelenie Bulgaria AD v Komisia za zashtita ot diskriminatsia (C-83/14) the ECJ considered whether an individual could claim indirect race discrimination under the EU Race Equality Directive (2000/43, the Directive) on the basis of association with a group that was disadvantaged by a provision, criterion or practice, even if she was not of the same ethnic group.

CRB supplied electricity to a Bulgarian district predominantly populated by Roma people. While electricity meters were normally fixed at a height allowing users to check their usage, in Roma districts these were placed higher - the reason for the difference lying in the frequent occurrence of unlawful connections to the electricity network in such areas. Ms Nikolova (a local non-Roma shop-owner) presented a claim to the Bulgarian Commission for Protection against Discrimination (KZD) that she had been discriminated against by the placing of the meters, complaining that her electricity bills were excessive compared with her actual consumption and suspecting that CRB applied an excessively high consumption value to compensate for losses suffered elsewhere in the district.

The ECJ held that – although Ms Nikolova was not of Roma origin – it was that origin that constituted the factor on the basis of which she felt that she had suffered less favourable treatment or a particular disadvantage. The ECJ confirmed that an indirect discrimination claim can be brought by an individual not possessing a protected characteristic of the disadvantaged group, which has given rise to the discriminatory practice in question: irrespective of the ethnic origin of the person suffering the collateral damage, it is sufficient that that person suffers alongside those of a certain ethnic origin to enjoy the protection offered by Directive (“associative discrimination”).Although the case involves race discrimination in the provision of goods and services, it has far reaching implications and is relevant in an employment context. In fact, this decision should apply equally to indirect discrimination claims in the workplace on the basis of any protected characteristic (eg gender, race, age). This is likely to open up possibilities for claimants to bring complaints once not available to them and to make it more difficult for employers to manage workplace discrimination issues.

EU Blue Card Directive for public consultation

Among various policy initiatives, one of the key priorities included in this year’s European Agenda on Migration is the EU Blue Card Directive. Adopted in May 2009, it provides a scheme to make Europe as attractive as the favourite migration destinations such as Australia, Canada and the USA, while leaving it up to the member states to decide on the number of economic migrants they admit. The scheme is designed to facilitate the admission and mobility of non-EU highly skilled professionals and their family members by harmonising entry and residence conditions throughout the EU and providing for a legal status and a set of rights. All EU member states (except for the UK, Denmark and Ireland) participate in it, however the scheme remains underused. The Commission therefore consulted on the Blue Card Directive in order to improve the EU’s skilled labour migration policies. The consultation closed on 30 September 2015.


Anti-Wage- and Social-Dumping Act ("Lohn- und Sozialdumping-Bekämpfungsgesetz")

In Austria, an amendment of the Anti Wage- and Social-Dumping rules entered into force on 1 January 2015 (the Austrian Labour and Social Amendment Act 2014). The Act implements substantial changes in the Anti Wage- and Social-Dumping rules by extending the material scope of the provisions and drastically increasing the amounts of the applicable penalties in case of violations.

Under the new rules, employers face penalties in the range of EUR 1,000 to EUR 50,000 per affected employee in case of violations of remuneration or documentation rules, the amount of such penalties depending on the number of affected employees and on the frequency of the offence.

Austrian and foreign employers who employ staff in Austria, as well as non-Austrian employers who second employees to Austria, will be fined at these levels for not paying at least the adequate remuneration according to applicable law, regulation, or collective bargaining agreement.

The same fines will be triggered if non-Austrian employers fail to have the following documentation and information in relation to the secondees available - in German language - at the Austrian place of work:

  • employment agreement,
  • payslip,
  • proof of salary payments or bank transfer receipts,
  • salary/compensation records,
  • records of working hours, and
  • documentation with respect to the secondees’ classification for payroll purposes (which may not be applicable if comparable Austrian employees are not within the scope of a collective bargaining agreement).

In addition to these penalties, if repeated violations or violations with respect to more than three employees occur at employers with their corporate seat outside Austria, these employers can be banned from carrying out their business activity in Austria for a period of one to five years.


Increase of legal retirement age

Even though legal retirement age was set at 65 years, the effective retirement age in Belgium appears to be much lower and is even amongst the lowest of all OECD countries. Consequently, due to the growth of the ageing population, the financing of the Belgian pension system is under increasing pressure. Whilst previous governments had focused on adopting measures to push back the effective retirement age, leaving the legal retirement age untouched, the new governmental parties have agreed on an increase of the legal retirement age in their Government Agreement.

The Belgian legislator has adopted a law on 10 August 2015 confirming the increase of the legal retirement age, which will be implemented gradually, with an increase to the age of 66 in 2025 and eventually an increase to the age of 67 in 2030.Subcontractors’ unpaid salaries

On 29 March 2012, the Belgian legislator enacted a law under which principals with one or more (sub)contractors may become jointly and severally liable to pay the unpaid salary of their contractors or subcontractors’ employees, relating to the services agreed with the (sub)contractors.

The sectors of industry that would be affected by such chain joint liability have been confirmed by several Royal Decrees and so far include industries such as construction, cleaning and security.

By Royal Decree of 24 April 2014, the chain joint liability also became applicable in the sector of transport and logistics. However, pursuant to the law of 29 March 2012, such Royal Decree must be preceded by an advice that was unanimously adopted by the social partners within the competent sector joint committee. No such advice appeared to be given prior to the adoption of the Royal Decree of 24 April 2014. Therefore, the Council of State recently decided to annul said Royal Decree. As a result, the chain joint liability does not exist any longer in the sector of transport and logistics, with no further impact on the applicability of the chain joint liability in other sectors of industry.

Number of service years no longer determining salaries?

The number of service years that an employee has accrued with an employer has long been a criterion to determine the employee’s salary in a high number of industry sectors. The more service years an employee accrued, the higher the salary would be, with a salary increase for each additional service year.

A draft law will soon be proposed in Parliament providing that trade unions may no longer agree on sector-level collective bargaining agreements linking salary increases to the number of accrued service years only. Consequently, the employee’s performance will become even more important for the purposes of determination of the salary than ever before. This proposal, if adopted, would substantially change the reasoning behind Belgian employment law, where service years have always played an important role. However, trade unions have already expressed serious concerns in relation to the proposal, which is thus far from being adopted yet.


The Macron and Rebsamen Acts to simplify overly complex French Labour Law 

French Labour law suffers from its reputation as being complex and highly costly, rendering the prospect of conducting or launching a business in France less attractive to foreigners. The need to change this situation led to the adoption, in August 2015, of the “Economic growth, activity and equal economic opportunity” known as the “Macron” Act, named after the French Minister of Economy, who introduced the bill. The “Modernization of social dialogue” Act (known as the “Rebsamen” Act, after the former French Employment Minister) also adopted in August 2015, follows the same trend.

Hailed as a “step into the right direction” by the EU, these two Acts aim to render the French labour market more flexible as well as modernize and strengthen dialogue with employee representatives in order to attract and reassure investors.

  1. The Macron “economic growth” Act

Sunday work

The Macron Act creates 4 new categories of geographic areas in which retail companies providing goods and services will be able to have their employees work on Sundays, on a rotating basis. These include so-called “international touristic zones” characterized by an international reputation attracting an exceptional number of tourists. The exact number of international touristic zones has not yet been set, but in Paris, such areas would typically include the Champs Elysées or Place Vendôme. Furthermore, the number of Sunday openings to be granted by mayors to retail shops is increased from 5 to 12 per year. Work on Sunday remains voluntary for employees and in any case, refusal to work on Sundays can never constitute a ground for dismissal.

Sale of a company

The so-called “Hamon” Act of 31 July 2014 imposed new obligations on small and medium sized companies considering a business transfer or share sale, by compelling them to provide information to employees aimed at enabling them to make a purchase offer and buy out the business / company. The sanction in case of failure to comply with this obligation was catastrophic as any employee was entitled to claim for the cancellation of the sale. Taking into account the decision of the French constitutional council of 17 July 2015, acknowledging that this sanction was excessive and constituted a disproportionate violation of entrepreneurial freedom, the Macron Act provides that the sanction for failing to comply with this obligation is a civil fine of up to 2% of the actual sale price. Consequently, the sale itself will not be annulled although from a financial standpoint, 2% can be a rather heavy fine.

Selection criteria in mass redundancies

Under French Law, on a collective dismissal, if the number of positions being cut within a given “professional category” is lower than the number of employees in that category, the employer has to apply selection criteria based on the age, length of service, professional skills/qualities and number of dependents of the employees to determine which employee would be dismissed. Controversially, case law required employers to apply the selection criteria within the company at national level (rather than just at the site where the job cuts were to be made). With the Macron Act being adopted, employers will be entitled to unilaterally limit the geographical scope of application of the selection criteria in the social plan. However, the geographical scope can only be limited to “employment areas” which have not yet been defined.

“Top-hat” pension schemes for corporate officers of listed companies

The Macron Act toughens the conditions for granting top-hat pension schemes to officers of companies whose securities are listed on a regulated stock exchange, which are now subject to compliance with:

  • The so-called “regulated agreement procedure”, applicable to agreements between a listed company and one of its corporate officers where the agreement grants a special benefit to the officer;
  • Performance requirements to be assessed by the Board of Directors or the Supervisory Board, in light of the company’s performance, prior to any payment. The Board of Directors’ or the Supervisory Board’s decision must be published on the company’s website. Failure to comply with this obligation renders the pension commitment null and void.

The increase of the conditional rights acquired by the corporate officers is capped at 3% of the annual remuneration serving as the basis for calculation of the pension rights.

No conditional rights can be granted in case of non-compliance with the aforementioned conditions, in order to exclude the grant of so-called “golden hellos”, which enable corporate officers upon arrival within a company to “buy back” the years of service accrued with their previous employer.

Moreover, the Board of Directors’ annual report must state, for each corporate officer, the precise terms on which any commitments regarding top-hat pension schemes have been made and include an estimate of the pensions likely to be paid further to these commitments.

The Board of Directors or the Supervisory Board has to verify the compliance with the above conditions annually.

  1. The Rebsamen “reform of social dialogue” Act

Social dialogue 

The Rebsamen Act deeply modifies and simplifies the rules on dialogue with employee representatives. Under French law, companies with at least 11 employees have to elect employee delegates and companies with at least 50 employees have to elect a works council and a health and safety committee. The Labour Code offered the possibility for companies with fewer than 200 employees to elect a sole employee representative body, regrouping the works council and the employee delegates. This is the so-called “Sole Staff Delegation” also known as “DUP”.

With the Rebsamen Act, the possibility to set up such a sole representative body is extended to companies with fewer than 300 employees. In addition, the sole employee representative body can now include not only the employee delegates and the works council, but also the health and safety committee. The decision to proceed to such a “concentration” of employee representative bodies within one single body is up to the employer.

In addition, further to the Rebsamen Act, companies with at least 300 employees can also have a sole representative body including the Works Council, Health and Safety Committee and employee delegates. This is possible where so provided by a collective agreement concluded with trade union representatives representing more than 50% of the workforce, and the body must be implemented at the time where employee representative elections are held.

The Act also provides for a certain “rationalization“ of the mandatory annual consultations with the Works Council and negotiations with the trade union delegates.

Failure to comply with the annual consultation obligation of the works council triggers criminal sanctions. The Rebsamen Act has concentrated the 17 different subjects on which annual consultation of the works council is compulsory into three main information and consultation topics, which are: (i) the company’s economic and financial situation (ii) its social policy and working conditions as well as (iii) its strategy.

Another key innovation of the Rebsamen Act is that the collective agreements negotiated with the company’s trade union delegates are not subject to prior consultation of the works council before being signed with the trade union delegates or before being modified or terminated. This will significantly simplify social dialogue in France.

Just as the mandatory annual consultations of the works council, the 13 mandatory negotiations with trade union delegates will be grouped in three topics, ie (i) the annual negotiation on remuneration and working time, (ii) the annual negotiation on professional equality between men and women and quality of life at work as well as (iii) the triennial negotiation on management of employment and professional training (only for companies with at least 300 employees).

Temporary and fixed-term contracts

Finally, the Rebsamen Act allows employers to renew temporary and fixed-term contracts twice rather than just once. This measure aims to encourage employment within small companies. However, this measure does not impact the maximum duration of such contracts which in most cases remains fixed at 18 months, including renewal.


Infringement procedure against the application of the German Minimum Wage Act to the transportation sector 

The European Commission has initiated an infringement procedure against Germany, concerning the application of the Minimum Wage Act to the transportation sector. The Commission stated that - while it fully supports the introduction of a minimum wage in Germany - it considers the application of the Minimum Wage Act to all transport operations which are conducted on the German territory including for a short period of time a disproportionate restriction to the freedom to provide services and the free movement of goods.

In particular, the application of formal requirements (documentation and reporting obligations of foreign employers in several sectors like the transportation sector) to transit and international transport operations could not be justified, as it creates disproportionate administrative barriers. In the Commission’s view, the measures are unnecessary to safeguard the social protection of workers and to ensure fair competition.

Federal Constitutional Court dismissed constitutional complaints against the Minimum Wage Act

The Federal Constitutional Court has dismissed three constitutional complaints filed against the Minimum Wage Act. The claimants argued that the documentation and reporting obligations listed in the Minimum Wage Act, the obligation to pay the minimum wage to all employees working on the German territory and the exclusion of employees younger than 18 years of age are not in line with the German constitution. The Federal Constitutional Court, however, has decided that the claimants would have had to bring legal action to the employment courts before filing a constitutional complaint.

However, the Federal Constitutional Court also stated in its decisions that certain issues regarding the compatibility of the Minimum Wage Act with constitutional and European law are in need of clarification, especially as regards the application of the Minimum Wage Act to short-term employment in Germany.

Reduction of reporting and documentation requirement under the Minimum Wage Act

On 1 August 2015 the Federal Ministry of Labour and Social Affairs issued a regulation concerning the reporting and documentation requirement under the Minimum Wage Act that reduces the administrative work for employers.The regulation provides that the reporting and documentation requirement under the Minimum Wage Act does not apply if an employee’s permanent regular remuneration exceeds EUR 2,958 or EUR 2,000 and the employer verifiably paid this remuneration for the previous full 12 months.

Legislation for the implementation of the Portability Directive 2014/50/EU introduced

On 16 April 2014, the European Parliament and the Council adopted the proposal for the “Directive on minimum requirement for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights” (Directive on Improving the Portability of Supplementary Pension Rights 2014/50/EU). The German Federal Government has introduced a bill for the implementation of the European Directive on 1 July 2015. The proposed changes include lowering the minimum age for the beginning of vesting periods to 21 years and to reduce the minimum statutory vesting period from 5 to 3 years. In addition, the bill provides that for employment periods as of 2018, vested pension rights may have to be adjusted in line with an interest rate that is inherent to the pension scheme.


New Bank of Italy guidelines on whistleblowing

On 21 July 2015, Bank of Italy published guidance on whistleblowing which looks at further implementing CRD IV as to the obligation for credit institutions to set up adequate reporting procedures and mechanisms.

Credit institutions will have to define “internal reporting and compliance systems” by 31 December 2015, in order to enable their employees to report acts or facts that might constitute a violation of the rules and regulations that govern banking activity.

Internal reporting and compliance systems should specify:

  • the individuals that can blow the whistle:
  • the facts and acts that might be reported;
  • how to report suspected wrongdoings, and the individuals in charge of receiving the reports;
  • how the reporting individual and the reported individual are to be informed about the progress of the procedure;
  • the obligation for the reporting individual to declare if he/she has a personal interest linked to the report;
  • in case the reporting individual is co-responsible for the violations, a privileged treatment for the latter in respect of the other co-responsible individuals, depending on the applicable discipline.

Moreover, the systems will have to:

  • ensure the privacy and protection of personal data of both the reporting and the reported individual;
  • be structured in order to guarantee that reports are received, examined and evaluated through specific, independent, and autonomous channels, different from the ordinary reporting lines. To this extent, it must be ensured that the person in charge of receiving, examining and evaluating the report:
  • is not hierarchically or functionally subordinated to the reported individual;
  • is not responsible of the alleged wrongdoing;
  • does not have a potential interest related to the report, which would compromise the impartiality and independence of the judgement;
  • does not participate in the adoption of any decisions;
  • has the duty to guarantee the confidentiality of the information received, also in respect to the identity of the reporting individual.

Credit institutions will be entitled to outsource the activity of reception, examination and evaluation of the reports. The systems have to be approved by the body having strategic supervisory functions and the correct execution of the procedure is supervised by the “Head of the internal reporting and compliance systems”, who refers the information reported - where relevant - directly and without delay to the relevant corporate bodies.

Credit institutions will have to illustrate the reporting procedures in a clear, precise and complete way to their employees, and to expressly clarify that the identity of the reporting person is to be disclosed only with his/her consent, or whenever such information is necessary for the protection of reported person.

The Head of the internal reporting and compliance systems is required to prepare an annual report on the proper functioning of such systems, containing information on the outcomes of the activity undertaken after reception of the reports, that will have to be approved by the corporate bodies and made available to the credit institution’s employees.


Worker Dispatch Bill approved

The proposed amendments to the Worker Dispatching Act - which we mentioned in our last edition - have gone through and came into force on 30 September 2015. The bill aimed to improve protections for dispatched workers and appropriately respond to illegal dispatching. Proposals included the removal of the three-year limit as the maximum worker dispatching period (ie the period for which a host company can receive a dispatched worker for a specific work assignment). This will enable the host company to receive a dispatched worker for the same work assignment without a time limit as long as the host company replaces the dispatched worker every three years (or a shorter period of time). Host companies and large staffing agencies generally appreciate the bill as it facilitates the use of dispatched workers’ skills. However, labour representatives strongly opposed the bill because of concerns that it would reduce employment opportunities as permanent employees.


The Work and Social Security Act

The second part of the Work and Social Security Act (Wet werk en zekerheid) entered into force as of 1 July 2015, leading to significant changes to the Dutch dismissal system and the rules applicable to consecutive fixed-term employment contracts. In short, the main changes are:

  • The “ketenregeling”, ie the rule whereby consecutive fixed-term employment contracts will at a given moment automatically be converted into an employment agreement for an indefinite period of time, now allows at maximum three consecutive fixed-term contracts (no change compared to the previous system) with a total duration of 24 months (previously 36 months). Consecutive fixed-term contracts for this purpose are contracts that have succeeded each other with an interval of less than 6 months (previously 3 months). 
  • The reason for termination of the employment will now determine the route that will have to be followed, ie ask a court to terminate an employee’s employment agreement or seek permission from the Dutch Labour Authorities (UWV). Under the previous dismissal system, employers could at their choice either go to court or to the Dutch Labour Authorities for a termination of the employment. 
  • Employees who have completed 24 months of service and whose employment agreement is (involuntarily) terminated or not renewed, regardless of the dismissal route that is followed, are entitled to a transitional compensation, which is significantly lower than the severance payable under the Cantonal Court Formula which was applied by courts before 1 July 2015.

The first part of this Act, resulting in changes to the regime applicable to fixed term contracts, already became effective as of 1 January 2015. Please refer to our Labour Market Reform Tracker for an elaborate summary of the most important changes that were introduced by the Act.

Increase of the retirement age for state pension benefits

The State Pension Age (Acceleration of Incremental Increase) Act (Wet versnelling stapsgewijze verhoging AOW-leeftijd) entered into force, pursuant to which as from 2016 the retirement age for state pension benefits (AOW) will gradually increase to 66 in 2018 and to 67 in 2021.


Russian citizens’ personal data to be processed through databases located on the territory

On 1 September 2015, amendments to Russian legislation on the protection of personal data entered into force which oblige personal data operators to collect and perform processing (including amending and updating) of Russian citizens’ personal data using databases located in the Russian Federation.

According to the Russian Ministry of Communications and Mass Media (the Ministry), the new requirements apply to all companies having operations in Russia, including those that do not have representative offices, branches or any other physical presence there (eg, foreign online retailers that have Russian versions of their websites and accept payments in Roubles or offer shipping to the Russian Federation), with the exception of Russian and foreign airlines’ collection and processing of passengers’ personal data for the purposes of booking and issuing flight tickets and other transport documents and other companies which process passengers’ personal data for the same purposes.The Ministry also clarified that the transfer of personal data outside the Russian Federation is, possible as it was previously, upon condition of compliance with legislation governing such transfer. We should note however that courts may develop a different interpretation of the laws.

Fines for personal data law breaches are still low, amounting to up to RUB 5,000 (approx. USD 70) for company officers and up to RUB 10,000 (approx.USD 140) for companies. In addition, access to the operator’s site containing the personal data which was processed in breach of the law may be blocked.

Fines for disclosure of commercial secrets increased

On 11 July 2015, amendments to the Russian Federation Criminal Code entered into force which significantly increased the fine for unlawful collection or disclosure of commercial, tax, or banking secrets by a person to whom such secrets were entrusted or who became aware of such secrets at work from RUB 120,000 (approx. USD 1,715) or the amount of a convicted person’s income for up to one year to RUB 1,000,000 (approx. USD 14,285) or the amount of such person’s income for up to two years. A fine up to RUB 1,500,000 (approx. USD 21,430) or the convicted person’s income for up to three years may now be imposed if the described actions resulted in large-scale damage (ie, damage exceeding RUB 1,500,000 (approx. USD 21,430)), or were committed in an attempt to get personal gain (previously, the criminal fine for such offence was limited to RUB 200,000 (approx. USD 2,875) or the amount of the convicted person’s salary or other income for up to 18 months).

Other sanctions which may be applied for the abovementioned crime (eg, disqualification from holding certain positions or undertaking certain activities, correctional or compulsory labour, imprisonment) have not been changed.

New requirements and liabilities for foreign employees

From 30 June 2015, foreign employees working in the Russian Federation in jobs that are not specified in their work permits may be held administratively liable in the form of a fine up to RUB 5,000 (approx. USD 70). Such foreign employees may also be deported from the Russian Federation.

The fines applicable to employers for said breach are up to RUB 50,000 (approx. USD 715) for the company officers and/or up to RUB 800,000 (approx. USD 11,430) for companies. Alternatively, the company’s business may be suspended from 14 to 90 days.

If the above violation is committed in Moscow, the Moscow Oblast, St Petersburg or the Leningrad Oblast, the employer will be exposed to a risk of greater liability: companies may be fined up to RUB 1,000,000 (approx. USD 14,285) or have their business suspended from 14 to 90 days, whereas company officers may be fined up to RUB 70,000 (approx. USD 1,000).


Unfair redundancy in the context of a transfer - Superior Court of Justice Resolution 942/2014

This court resolution deals with a dismissal claim brought by an employee of a company in charge of providing cleaning services to the government, claiming her dismissal was unfair due to lack of grounds.

The company was awarded the cleaning service in March 2013 and consequently took on all the relevant employees, including the plaintiff, by operation of law (TUPE Transfer). Prior to being awarded the cleaning services, the company suffered a decline in demand of services, which led to a workforce surplus. Thus, once the company acquired the cleaning services, it decided to carry out a restructuring of the workforce in order to adjust it to the needs of the activity.

Firstly, alternative measures to dismissals were suggested, however no agreement was reached on this front. Therefore, the company implemented the redundancies in April 2013 based on production reasons (i.e. decline of the volume of services).

In contrast to the decision of first instance, the Superior Court of Justice ruled that the dismissal was unfair, stating that it would have been possible to make the employees redundant only if the redundancies were based on a reason that rose after being awarded the cleaning services, otherwise - as the company knew about the cause for the dismissals in advance - dismissals should be declared unfair.

This judgment may serve as reference for further claims that employees may bring in case of a transfer of undertaking. Following this resolution, the purchaser of a business may not have sufficient grounds to implement redundancies based on objective reasons existing prior to the transfer if it can be proved that the purchaser was already aware of such reasons and still proceeded to acquire the business assuming the attached employees. 


FCA publishes policy paper on whistleblowing

On 6 October 2015, the FCA published its policy statement on “Whistleblowing in deposit-takers, PRA-designated investment firms and insurers” (PS15/24) within the framework of the introduction – together with the PRA - of a "package" of new whistleblowing rules designed to formalise the good practice in the financial services sector. For more information on the new rules, please read our recent client briefing.

Whistleblowing – what’s new?

Whistleblowing continues to be a high profile issue for businesses in the UK and globally. Our recent client briefing brings together a number of recent developments affecting the UK’s whistleblowing regime and considers potential new UK reforms which are in the pipeline. Please follow this link to read it.

Modern Slavery Act

The Modern Slavery Act came into force on 1 October 2015. Part 6 focuses on transparency in supply chains: commercial organisations must prepare a slavery and human trafficking statement for each financial year. This obligation applies to any organisation, wherever incorporated or formed, that (i) supplies goods or services; (ii) carries on a business, or part of a business, in the UK; and (iii) has an annual turnover above £36 million.

What this means in practice is that businesses must prepare and publish a statement on their website. If the business does not have a website it must provide the statement within 30 days to anyone who makes a written request. Furthermore, the statement must be approved by the board and signed by a director. The Modern Slavery Act does not impose a rigid checklist outlining what and the way in which information is selected or presented. Instead it indicates that a statement may include information on:

  • structure, business and supply chain;
  • policies on slavery and human trafficking;
  • due diligence processes in relation to slavery and human trafficking;
  • assessment and management of the risk of slavery and human trafficking taking place in its business and supply chains;
  • effectiveness in ensuring that slavery and human trafficking is not taking place in the business or supply chains, measured against appropriate performance indicators; and
  • relevant staff training.

Supplementary legislation has provided some clarity relating to the determination of annual turnover, which includes the turnover of the organisation and any of its subsidiary undertakings. However, there remains some uncertainty as to how exactly these provisions will apply to companies with complex group structures. It is anticipated that guidance will prove useful to businesses not only in this regard.

Solicitors negligent for not advising on jurisdiction when dealing with employment contract

The High Court has ruled that solicitors who were advising on the employment contract for the CEO of an Indian Premier League cricket franchise (W) were in breach of their duty of skill and care in not advising on jurisdiction.

After he was dismissed from his post, W brought proceedings against the holders of the franchise in England but there were challenges to service and jurisdiction and it took several years before he obtained judgment for approximately £10 million. He then faced difficulties enforcing the judgment in India.

The judge assessed the value of the loss of chance of recovering the principal judgment sum as 20% and awarded W damages of £2 million plus a sum to be determined or agreed in relation to the costs which would have been saved in the English proceedings as a result of avoiding a jurisdictional dispute.

New Trade Union Bill published and related consultation period closes

Particularly relevant in light of the recent London tube strikes in response to the proposals for the ‘night tube’ - the government has published the Trade Union Bill 2015-2016 which aims to reform various aspects of the law on industrial action and trade union obligations and activities. The proposed reforms include increasing ballot thresholds, extending the notice of industrial action required to be given to employers and a new expiry date for action to be taken following a ballot. The Bill would also introduce more stringent requirements for unions to supervise picketing.

There are also proposals to require public sector bodies or bodies which are publicly funded to publish information about union facility time in the organisation, and a power in the Bill for the government to introduce regulations restricting the right of union officials to paid facility time in the public sector.

The government’s consultation on industrial action ballot thresholds in important public services closed on 9 September 2015. The purpose of the consultation is to define the public service roles and occupations which would be subject to the proposed new ballot threshold in clause 3 of the Trade Union Bill 2015-16, which would require at least 40% of balloted workers to vote in favour of the strike or industrial action.

Closing the Gender Pay Gap: government consultation

Following a consultation period ending on 6 September, the government has concluded a consultation on the implementation of gender pay gap reporting for large private and third sector employers under section 78 of the Equality Act 2010. Key questions covered the type of information that ought to be required, how frequently the information should be updated, and whether the size threshold of 250 employees is appropriate. We await the government’s response to the consultation submissions - no draft regulations have yet been produced.Guidance on the “Think, Act, Report” framework (which Freshfields has signed up to) has also been re-published. This is aimed at encouraging voluntary action by employers to identify and act transparently to address gender pay gap issues.

Fair dismissal for derogatory comments against employer on Facebook

With social media sites such as Facebook showing no signs of slowing in popularity growth, we are seeing more and more related cases: the EAT has held that it was fair to dismiss an employee that made derogatory comments about his employer on Facebook. It did not matter that the misconduct had taken place two years before dismissal or that the employer had been aware of the misconduct throughout that period. (The British Waterways Board v Smith [2015] UKEAT/0004/15)

Fluent English a legal requirement for customer-facing public sector employees 

Language barrier for migrants within the EU - currently the law permits some health regulators to ask for evidence of English language competence from job applicants who have trained in the EU.

In September, legislation was introduced to make fluent English a legal requirement for all public sector employees who work in a customer-facing role. This includes social workers, police officers, teaching staff and assistants, Jobcentre Plus workers and local government employees. The requirement is an ability to communicate effectively in English at an equivalent of a “C” or above at GSCE. A higher level of competence may be required depending on the nature of the role and the profession of the employee.

The legislation together with a new code of practice will be produced following a consultation and will apply to both new and existing public sector employees.


SEC proposes rules on clawback policies

The SEC have proposed new rules on clawback policies for public companies. The legislative text covers the disclosure of a company’s clawback policy and recovery from current or former executive officers of incentive-based compensation (granted, earned or vested), excluding bonuses based on strategic or operational measures and those tied to non-financial reporting measures. The policies will apply if a company is required to restate previously issued financial statements to correct a material error, and set a 3 financial year look-back period from the date that a company is required to prepare a restatement. The amount able to be clawed back will be equal to the excess of what would have been paid to the executive under the accounting restatement.

To see the press release click here.