1. Africa1: Prohibition of post-employment non-compete clauses in certain francophone jurisdictions

In the large majority of francophone countries in sub-Saharan Africa (i.e. those which are members of the ‘Organisation pour l’Harmonisation en Afrique du Droit des Affaires’ (OHADA)2, the labour codes and some collective bargaining agreements attach more importance to employees’ ‘freedom to work’ than to protecting a company’s legitimate business interests.

In most OHADA member states, any non-compete clauses cease to have effect upon the termination of the employee’s contract of employment and are deemed legally null and void. This is to enable the employee to work freely for any other business, including a competitor. It is likely that the employee could claim damages for any loss suffered as a result of his or her former employer seeking to enforce a non-compete provision following termination of the contract of employment.

Some labour codes, e.g. in countries such as Benin, Congo (Brazzaville) and Côte d’Ivoire, do not provide for any exceptions for employers. However, other countries enable an employer to enforce non-compete clauses in situations where:

  • the employee resigns, or the contract of employment is terminated due to his or her deliberate misconduct;
  • the need to safeguard the company’s legitimate interests justifies the restriction; and
  • the restriction is reasonably limited; both in geographical scope (usually a 5-50 mile radius in relation to employee’s former place of work) and a maximum duration of (generally) one year.

The latest draft of new OHADA employment-related legislation (the Uniform Act for labour matters), which was made publicly available in 2006, does not appear to offer employers any greater protection.

Action for employers

Employers in francophone sub-Saharan African countries should bear this in mind when entering into contracts of employment, particularly for key employees with access to confidential information.

2. Australia: Bystander actions – the next frontier for managing behaviour at work

The recent Federal Court of Australia decision in Richardson v Oracle [2013] FCA 102 emphasises how difficult it can be for employers to show that they are not liable for the actions of rogue employees. In that case, the court considered not only whether an employer had a policy and training, but also whether these were suitable. It found that the policy was inadequate.

So what else can an employer do to minimise the impact of liability?

In part, the answer lies in harnessing the efforts of ‘bystander’ colleagues to call out negative behaviour at an early stage, before it ‘snowballs’. Recent high-profile cases show that some situations, left unchecked, can lead to significant brand and bottom-line damage.

Research into the ‘bystander’ phenomenon (such as the Australian Human Rights Commission’s report ‘Encourage. Support. Act!’) is now being applied to the workplace. An effective bystander strategy involves motivating staff to intervene before, during or after they observe inappropriate behaviour. Staff training can address the factors which influence whether - and how - bystanders intervene to assist a victim. It can also encourage bystanders to speak out.

Negative behaviour in the workplace can impact upon bystanders as well as victims, with bystanders often taking sick leave or resigning. Bystanders therefore need to feel supported within the organisation and a shift in workplace culture may be needed to achieve that.

Action for employers

Employers should implement an effective bystander strategy to encourage staff to identify and deal with negative behaviour - and to enhance collegiality. This involves teaching staff to tackle myths associated with certain behaviour and to focus on the perpetrator’s behaviour, rather than the victim’s response.

3. China: Seconding employees to China and the creation of taxable establishments

New rules regarding international secondments to China and taxable establishments became effective on 1 June 2013. The new rules are set out in the Announcement on Collection of Enterprise Income Tax on Services Provided by Personnel Seconded to China by Non-resident Enterprises, issued by China’s State Administration of Taxation (SAT).

Under the new rules, a taxable establishment will be created in China if the non-resident enterprise which seconds employees to work in China (i) assumes part or all liability and risk for the work performed; and (ii) is responsible for performance reviews of seconded employees.

In making a determination, the SAT must consider a range of factors, including whether:

  • payments made by the China-based entity to the non-resident enterprise exceed reimbursement of costs for the seconded employees;
  • individual income tax has not been fully paid in China; or
  • the non-resident enterprise determines the number of seconded personnel, their qualification, salary and working place.

If any of the factors exist, the China-based entity will be subject to Chinese enterprise income tax on income derived from that establishment. Whether the income tax will actually be charged remains subject to China’s double-tax treaties.

Action for employers

Employers should carefully review secondment arrangements in light of the new rules.

4. EU: European Commission publishes employment sector guide on the corporate responsibility to protect human rights

Published in June 2013, the guide sets out practical steps employers should take to meet the requirement under the UN Guiding Principles on Business and Human Rights (UNGPs) for businesses to “know and show” a respect for human rights.

The guide is of relevance to all companies, globally, who rely on agencies to recruit direct hire employees or to supply workers.

A number of human rights risk areas are identified in the employment and recruitment sector. These include (i) the difficulty of identifying potential human rights breaches in the complex supply chain sometimes found in the context of agency work; and (ii) the challenges faced by migrant workers.

It is clear that responsibility for human rights is an evolving area of risk and compliance for companies. The European Union and a number of national governments (including the US and UK governments) have committed to the implementation of the UNGPs. Shareholders and business partners, as well as financial institutions providing funding to businesses, will increasingly require companies to demonstrate a respect for UNGP compliance as they take steps to limit their own exposure to human rights risk.

Action for employers

Develop staff policies clearly setting out how to respect human rights.

Conduct regular human rights impact assessments in relationships with business partners and address any human rights impacts identified.

Engage in consultation with trade unions/employee bodies to address human rights impacts in the employment and recruitment supply chain.

Consider formal reporting on human rights performance (e.g. in annual reports or investor updates), even if this goes further than the minimum requirements of national state law.

5. France: New law gives employees the right to board representation and increases work council powers

A new law (Loi sur la sécurisation de l’emploi), passed in June 2013, has introduced a number of important new measures for employers to be aware of, including those summarised below.

Representation of employees at board level

Larger companies (those meeting certain thresholds) will be required to nominate one or - on boards with 12 or more members - two employee representatives to the board of directors.

Maximum time limits for opinions from works councils during consultation

Employers and works councils may now agree maximum time limits for the works council to provide its opinion on matters subject to employee consultation. The minimum period that can be agreed is 15 days. If no opinion is given by the end of the agreed period, the works council is deemed to have given a ‘negative opinion’. This is a significant change for employers which (once a maximum period has been agreed with the works council) may help to reduce uncertainty and delay.

Consultation of the works council on the strategic direction of the business

Works councils must now be consulted annually on the strategic direction of the business and its impact on certain matters, including employment.

Provision of additional information to works councils

With effect from 17 June 2014 (for companies with 300 or more employees) or 17 June 2015 (companies with fewer than 300 employees) works councils must be provided with additional economic and social information, to be updated on a regular basis and included in a permanently accessible information database.

Action for employers

Employers need to be aware of these changes and other important changes introduced by the new law, in order to implement the new requirements and/or adapt policies and procedures accordingly.

6. Hong Kong: Ggovernment paves the way for draft bill on pay during paternity leave

In a bid to promote family-friendly employment practices, the government promised last year to look into paid paternity leave for employees in Hong Kong. In April 2012, an initiative was introduced granting all government full-time male employees with at least 40 weeks’ continuous service immediately before the date of childbirth eligibility to apply for paternity leave of five working days on full pay.

A recent Legislative Council briefing paper of 28 May 2013 confirmed that the government is preparing to draft a bill legislating three days’ paid paternity leave for male employees at the same level as statutory maternity leave (80% of the daily average of wages earned by the employee during the 12 preceding months). The government’s aim is to introduce a bill at the beginning of the 2013-2014 legislative session - likely October 2013 - and further information should be available then.

Action for employers

Employers should consider amending their current policies to incorporate the proposed paternity leave provisions, taking into account number of leave days, eligibility criteria, remuneration arrangements for the leave period, time limit for applying for and taking the leave and any supporting documents.

7. Japan: Removal of the option to refuse to re-employ retirees under the statutory minimum retirement age

Recent amendments to the Act of Stabilization of Employment of Aged Persons (SEAP Act) will gradually remove the option for an employer to refuse to re-employ retirees under the statutory minimum retirement age of 65 where they do not meet agreed re-employment requirements upon reaching an early retirement age set by the employer (Conditional Re-Employment System).

From 1 April 2013, employers with an existing Conditional Re-Employment System have until 31 March 2025 to phase-out existing post-retirement re-employment requirements in their Labour Management Agreements (LMA) which exclude some under 65s from being re-employed.

Employers who do not already have a Conditional Re-Employment System will be unable to establish one.

During this transition period re-employment requirements in existing LMAs can only be applied to employees eligible to receive the earnings-related component of Japan’s national pension.

Action for employers

Employers with LMAs containing a Conditional Re-Employment System should amend them now to detail how the phase-out will be implemented.

Employers should immediately stop applying the requirements of a Conditional Re-Employment System to employees who are not eligible to receive the earnings-related component of Japan’s national pension.

8. Russia: Employees can now work from home

Changes to the Labour Code of the Russian Federation (Labour Code) which allow employees to work from home are effective from 19 April 2013.

Working remotely is defined in the Labour Code to mean working outside of the employer’s place of business, using networks (e.g. the internet) to interact with the employer and entering into a special remote employment agreement (REA).

To facilitate remote working, the law provides for employers and employees to exchange documents electronically. However, a ‘protected qualifying electronic signature’ should be used for an REA and certain other document exchanges. Certain documents, such as the copy of the REA executed by the employer or the employee’s employment record book should still be provided in hard copy. The REA may include requirements for specific hardware or software to be used by the remote employee. It may also provide for additional grounds for dismissal to those set out in the Labour Code.

Given that the changes to the Labour Code contemplate that there will be no ‘fixed’ places of work for remote employees, we believe that employers would not be obliged to register with the tax authorities separate ‘subdivisions’ for the remote employees (as Russian companies are generally obliged to do for employees based at fixed locations outside the company’s headquarters). In our view, the same applies in relation to foreign companies employing Russia-based remote employees, provided that the foreign employer is registered in at least one location and therefore is able to pay Russian payroll taxes.

Action for employers

Employers with a presence in Russia who are considering alternative working methods to keep apace with global trends and satisfy the demands of the Russian labour market will welcome these amendments. Employers should familiarise themselves with the Labour Code requirements for remote working and REAs.  

9. Spain: Proposed amendments state pension system

On 7 June 2013, a committee of experts appointed by the Spanish government was asked to prepare a report on the “sustainability factor” of the social security system. The report was commissioned pursuant to Act 27/2011 regarding the modernisation and adequacy of the social security system and was put before Spanish Congress on 18 and 19 June 2013. Following consultation with businesses and trade unions, which is due to start this September, the report’s findings could be implemented by law.

The report establishes a dual formula, aiming to secure the future of the state pension system. This formula is based on the “inter-generational equity factor” (FEI) and the “annual revaluation factor” (FRA).

The FEI factor introduces a mechanism for adjusting the initial value of the state pension in line with increased life expectancy. The FRA factor is calculated using the ratio of retirees to active employees (i.e. expenses to income) and replaces the current revaluation mechanism (which is linked to the Spanish Consumer Price Index).

Experts recommend implementing this formula as soon as possible rather than waiting until 2027 (which is the date envisaged by the Act). They also recommend granting access to higher pensions to those able to contribute for longer.

Action for employers

The proposed revisions could impact employees in both the public and private sector. Employers should be prepared for employees (i) to request to work for longer; and/or (ii) to exert pressure (through collective bargaining) to obtain supplementary private pension schemes at the employer’s expense.

10. Thailand: Government extends a deadline for the registration of migrant workers

The Cabinet has agreed to another four-month extension to a deadline for the registration of undocumented foreign workers from Burma, Cambodia and Laos. The measure will take effect from April 14, 2013. This resolution follows a series of extensions previously issued by the government in an effort to ensure that migrant workers have completed the proper immigration procedures.

The government’s efforts also stem from human rights concerns regarding undocumented migrant workers. They are at risk of unfair and poor treatment in comparison with other legal migrant workers and Thai workers, such as receiving lower pay and little or no benefits.

The Cabinet resolution allows undocumented migrant workers from Burma, Cambodia and Laos, and their children aged under 15 years, to stay in Thailand for a further period of 120 days (provided that their employers file an application for registration). The extension was agreed because of the large number of applications for registration. Following the period of extension, penalties will be imposed on employers who have not cooperated and illegal migrant workers could face deportation.

A number of migrant workers have flocked into Thailand due to the increase in the minimum wage and the shortage of Thai labour in certain industries (primarily in agriculture, fishing and construction). It is hoped that the registration process will facilitate identification and security control. However, some say that the registration process is cumbersome, expensive and slow, and as a result, many migrant workers are reluctant to enter the process despite their desire for a legal immigration status.

Action for employers

Employers need to legalise their undocumented migrant workers by applying for work permits. Failure to do so within the relevant time period can result in a fine of between 10,000 and 100,000 baht per undocumented employee.

11. UAE: Mandatory health insurance for UAE employees

The UAE federal government has prepared a draft law which will make it mandatory for all UAE employers to provide health insurance to employees. Currently, the only emirate with mandatory health insurance is Abu Dhabi.

Under the draft law a new federal authority will be established to oversee its implementation. Insurance companies and health care providers will be required to be licensed by the new authority and employers will be required to submit proof electronically to the relevant federal authority, confirming that cover has been provided for each employee.

While the draft law has not yet been made publicly available, it reportedly imposes fines on employers of up to AED10,000 for each employee without health insurance and fines of up to AED30,000 on employers who seek to pass on charges to employees for providing them with health insurance.

Significantly, the draft law is said to contain provisions stating that in the event of a dispute between the insurer and the healthcare provider, health insurance coverage must be continued.

Action for employers

Employers should review the draft law when it becomes available in order to analyse potential costs associated with the mandatory health insurance.

12. UK: The ‘auto-enrolment’ pensions regime

From 1 October 2012, starting with the largest employers (by PAYE size) and working down over five and a half years, all employers have to automatically enrol certain employees (assessed by age and earnings) into a pension scheme meeting prescribed standards.

Employers must enrol a further category of employees if the employee requests it. Where employers provide a money purchase scheme, minimum contributions apply. For defined benefit schemes, minimum benefits apply.

Before the reforms, there was no auto-enrolment obligation, and apart from in limited circumstances, no obligation to pay contributions on behalf of employees. The additional costs therefore may be significant.

Action for employers

A survey dated May 2013 (‘Auto enrolment countdown: The clock is ticking to avoid uncapped fines’) by a leading professional services firm demonstrates that over 50% of employers are oblivious to their auto-enrolment obligations. This puts employers at risk of onerous financial penalties from the Pensions Regulator.

Employers must be aware of their ‘staging date’ (when the requirements apply) and assess how the requirements affect their workforce. Where employers want to use existing schemes, rule changes may be required. HR procedures, payroll administration and contractual arrangements may be impacted.

The Department for Work and Pensions has recently issued a consultation to simplify some requirements. A key challenge therefore lies in complying with the requirements while the legislation is changing.

Auto-enrolment may impact on commercial transactions and buyers of companies and businesses may need to factor the cost implications into overall negotiations.