Global Employer Horizon Scanner - North America Overview

NORTH AMERICA OVERVIEW The US-Mexico-Canada Agreement (USMCA) was signed at the G20 Summit in November 2018, intending to replace the North American Free Trade Agreement and marking a major step toward overhauling the three countries' economic relationship, boosting trade across the region and creating jobs. The deal also includes provisions that will encourage Mexico to make it easier for workers to join unions. However, the agreement is yet to be ratified. 2018 was another extraordinary year for employers in North America grappling with the continued rising tide of sexual harassment allegations in the workplace and beyond. Despite increased awareness of gender issues across the region, Mexico and the US saw an increase in sexual harassment claims as the #MeToo and #TimesUp campaigns continued their momentum. Employers across the US will need to come to grips with new laws aimed at training staff to prevent sexual harassment in the workplace, as well as local and state laws introduced to close the gender pay gap and increase gender diversity through "no ask" laws about salary history and gender quotas. Similarly in Mexico, internal audits, flexible work schemes and mentorship programs have all been implemented in 2018 by global companies in an attempt to address problematic gender imbalance. In Canada, however, Ontario’s proposed new Pay Transparency Act was set to come into force at the beginning of 2019 but has been delayed to allow governmental consultation on the legislation. While employers do not need to take immediate steps to achieve compliance with the act, a rise in claims from senior female professionals in Canada alleging systemic gender equality and pay issues is still anticipated. Managing contractor classifications challenges in the gig economy continued to prove difficult in 2018 across the US, as the flexible test for establishing whether workers should be treated as employees or independent contractors was scrapped by the California Supreme Court. This led to employers facing substantial fines for wilful violations, meanwhile, misclassification litigation in New York confirmed a more flexible and holistic approach to the test for classification of status. Contracting arrangements remain a hotbed for litigation across the region, and with joint employer liability posing a major risk in Canada and Mexico, companies are well-advised to proactively audit worker independent contractor classifications and to take steps to reclassify workers and redefine roles as needed. In Canada, the legalization of recreational cannabis was the predominant story of 2018, but employers will need to adapt to this law in 2019 and incorporate policies which set out expected standards of behavior. Case law is also likely to evolve and companies will need to be aware of the latest developments. Meanwhile in Mexico, proposed amendments to the Mexican Federal Law are likely to dominate 2019 and are expected to combat white union practices, bring changes to the registration of unions and CBAs and introduce tighter control of outsourcing laws. Use the navigational buttons below to skip straight to countries of interest. 1 THE GLOBAL EMPLOYER MAGAZINE | 2019 Horizon Scanner THE GLOBAL EMPLOYER MAGAZINE | 2019 Horizon Scanner 2 NORTH AMERICA REGIONAL OUTLOOK SPOTLIGHT ON: UNITED STATES The #MeToo movement had a momentous impact on the workplace in 2018, sparking a national dialog about what is and is not appropriate between colleagues. There was also a significant increase in harassment and retaliation claims, and enactment of new laws aimed at training and awareness in California and New York. Meanwhile, a wave of state and local legislation was enacted in response to the gender pay gap, including legislation aiming to correct the disparate impact of a seemingly innocuous interviewing practice of questioning a candidate about their salary history. The thorny issue of managing misclassification claims in the gig economy also continued to evolve in 2018, with the California Supreme Court upending decades of legal precedent by abandoning a multifactor test for determining employment status. Instead, it has adopted a rigid "ABC" test starting with a presumption that workers are employees. Mandatory arbitration agreements with class action waivers were made enforceable throughout the country following a US Supreme Court decision, while Department of Justice enforcement activity heightened concerns about no poaching agreements and other antitrust activities. From a compensation perspective, amendments to Internal Revenue Code Section 162 (m) made changes to the deduction allowance for compensation in 2018. Changes were also made to immigration laws, and the US–Mexico–Canada Agreement was signed in November 2018 with a view to replacing the North American Free Trade Agreement, although this has not yet been ratified. There was also higher scrutiny of all visa types, including H-1B and L-1 work visas, and a substantial increase in immigration worksite inspections resulting in significantly more audit notices being issued. Horizon Scanning in 2019: Contracting arrangements are likely to remain a hotbed for litigation, and companies would be wise to proactively audit independent contractor classifications, review their necessary agreements and take steps to mitigate exposure by redefining roles where needed. Diversity and inclusion programs will also continue to capture the attention of executive leadership and corporate boards, and employers will need to navigate new laws such as California's mandate for female directors and shareholder proposals demanding that companies address board diversity and increase pay transparency. Employers will also have to confront a host of new state-specific laws in 2019 on topics including sick leave, lactation accommodation, non-competes, medical marijuana, data privacy and much more. A tax bill is in the works which may introduce changes impacting tax-qualified retirement plans, and from an immigration perspective, workplace enforcement is likely to continue at the same pace as in 2018 and strict adjudications are likely to continue into 2019, particularly for H-1B visas. The US Citizenship and Immigration Services also continues to signal plans to rescind regulations allowing H-4 visa holders to seek employment authorization. For employers with significant operations in the US, please see our US Employment Law Digest 2018/2019 here. 3 THE GLOBAL EMPLOYER MAGAZINE | 2019 Horizon Scanner Throughout 2018, Mexican companies with a global presence have been implementing policies to address the gender imbalance through internal audits, flexible work schemes and mentorship programs. There was also an increase in claims for harassment and discrimination in the workplace, in spite of the increased awareness of gender issues. Employers have also been taking steps to ensure compliance with new outsourcing rules. In 2018, the obligation to pay employees 10% of the profits led to an increase in employees pursuing claims for profits from the employer's operative company. Most companies doing businesses in Mexico have a double corporate structure, meaning an operative company without employees, in charge of the business operation and generating the profits, and a services company in charge of hiring all employees. As employees are entitled to the profits generated by their employer of record (the services company), employees have been bringing claims against both the service company and the operative company arguing that both entities are an economic unit and that the operative company was the final beneficiary of their services. Horizon Scanning in 2019: There is a proposal to amend the Mexican Federal Labor Law, due to changes to the Mexican Constitution in 2017, which will include the following changes: • The Conciliation and Arbitration Labor Boards will be replaced by local and federal courts. • An independent entity will be created to take charge of the pre-conciliation stage to prevent litigation. • Obligations for unions to prove that they represent the interests of employees covered by a CBA. • Freedom of association and strict rules for the registration of unions and CBAs. • Companies in Mexico can execute non-operative CBAs with amicable "white unions" to prevent a strike call from another union and the new administration has vowed to combat this practice in 2019. • All CBAs currently in effect will be reviewed by the authority at least once in the four years following the amendment of the Mexican Federal Labor Law. • The new government will carry out inspections to verify compliance with outsourcing laws. CANADA MEXICO Sweeping legislative changes proved challenging for employers in 2018, including seesawing employment standards and labor relations legislation in Ontario (Bills 66, 47 and 148) and broad changes to workplace legislation in the federal jurisdiction, Quebec and Alberta, as well as legislative reform initiated in British Colombia. New federal pay equity legislation was introduced. Federal accessibility legislation was also proposed, aimed at ensuring the full and equal participation in society of Canadians with disabilities. Significant claims alleging systemic gender equality and pay issues, particularly by female partners and partner-track employees in professional services firms, are predicted in 2019. It is also likely to be a year of adjustment to the legalization of recreational cannabis; in particular, watch for: • evolving implications for employers to take shape with the development of case law in this area. • US entry issues as a result of the legalization. • the need to carefully adapt workplace policies to reflect legalization and specified prohibitions on cannabis use. Horizon Scanning in 2019: Despite the legalization of cannabis, employers can continue to expect employees to adhere to appropriate standards of workplace behavior, but policies will need to clearly define prohibitions on its use, for example, during and prior to work, in and around the workplace, and at company events. Ontario employers should approach changes to their legal commitments outlined above with caution, as widespread changes are likely to damage morale and may lead to constructive dismissal claims. THE GLOBAL EMPLOYER MAGAZINE | 2019 Horizon Scanner 4 NORTH AMERICA TOP TIPS CANADA Adapt policies to clearly set expected standards in relation to the use of cannabis. Be alert to current requirements and tread carefully when implementing widespread changes to employment standards and labor relations as a result of legislative developments. Be prepared for increased gender/equal pay litigation, particularly in professional services firms. UNITED STATES Companies without arbitration agreements and class action waivers should consider implementing new agreements with their employees and draft the various procedural terms to fit their business and workforce. Employers should work closely with their counsel to fashion a national strategy for addressing the fast-changing legal landscape of restrictive covenants. Employers should implement strong internal training programs for supervisors, management and employees geared toward eliminating future harassment claims. Companies with independent contractors in California should consult counsel to weigh options for mitigating increased misclassification risks following the California Supreme Court’s adoption of the rigid "ABC" test. Companies subject to Internal Revenue Code Section 162 (m) should develop protocols to identify expanding lists of "covered employees" and review executive compensation arrangements. As workplace enforcement remains a priority, immigration record-keeping should be maintained and updated ahead of any government action so employers can take proactive and corrective action to avoid costly penalties. MEXICO Employers should review practices to ensure compliance with outsourcing rules. Prepare for changes to the Mexican Federal Labor Law, in particular, in rules relating to registration of unions and CBAs.