Employment & Industrial Relations Law Newsletter of the International Bar Association Legal Practice Division

VOL 26 NO 2 SEPTEMBER 2016

IN THIS ISSUE Newsletter Editors

From the Co-Chairs 4 Mercedes Balado Bevilacqua MBB Balado Bevilacqua, Buenos Aires From the Co-Editors 5 [email protected] Aoife Bradley Committee officers 7 LK Shields Solicitors, Dublin [email protected] IBA Annual Conference Washington, DC, 18–23 September: Luca Massimo Failla Our committee’s sessions 8 LABLAW Studio Legale, Milan [email protected] Articles Rebecca Ford United States immigration options for employing Clyde & Co, Dubai lower-skilled foreign workers 10 [email protected]

Employment law challenges facing startup companies 13 International Bar Association Tel: +44 (0)20 7842 0090 www.ibanet.org Providing healthcare benefits in the United States: the affordable care act 16 © International Bar Association 2016. All rights reserved. No part of this publication may be reproduced New technology and work: robotics and its positive/ or transmitted in any form or by any means, or stored in any retrieval system of any nature without the prior permission of the negative impact on the labour force 20 copyright holder. Application for permission should be made to the Director of Content at the IBA address. Facing change – regulation and technology 23 Terms and Conditions for submission of articles The On-Demand economy and the impact on 1. Articles for inclusion in the newsletter should be sent to the Newsletter Editor. employment law 25 2. The article must be the original work of the author, must not have been previously published, and must not currently be under consideration by another journal. If it contains material which is someone else’s copyright, the unrestricted permission New technology and new forms of atypical work: of the copyright owner must be obtained and evidence of this submitted with ‘crowdsourcing’ and the challenges and risks for the article and the material should be clearly identified and acknowledged within the text. The article shall not, to the best of the author’s knowledge, contain multinationals 28 anything which is libellous, illegal, or infringes anyone’s copyright or other rights. 3. Copyright shall be assigned to the IBA and the IBA will have the exclusive right New technologies: corporate fraud and embezzlement to first publication, both to reproduce and/or distribute an article (including the abstract) ourselves throughout the world in printed, electronic or any other – corporate whistleblowing policies 31 medium, and to authorise others (including Reproduction Rights Organisations such as the Copyright Licensing Agency and the Copyright Clearance Center) New technology and work: robotics and its positive/ to do the same. Following first publication, such publishing rights shall be non- exclusive, except that publication in another journal will require permission from negative impact on the labour force 34 and acknowledgment of the IBA. Such permission may be obtained from the Director of Content at [email protected]. What are the employment law challenges faced 4. The rights of the author will be respected, the name of the author will always be clearly associated with the article and, except for necessary editorial changes, no by startup companies from conception to global substantial alteration to the article will be made without consulting the author. growth? 36

Robots in the workplace – Indian employment law This newsletter is intended to provide general information implications 39 regarding recent developments in employment and industrial relations law. The views expressed are not New technology: remote employment and cross- necessarily those of the International Bar Association. border employers’ compliance with the duty to provide a safe working environment, multinational risk and compliance with immigration rules 41 ADVERTISING Should you wish to advertise in the next issue of Proposed Equal Pay Act may complicate this newsletter, please contact the IBA Advertising remuneration issues 46 Department: [email protected]

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EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 3 FROM THE CHAIR

Johan Lubbe Littler Mendelson PC, Committee conferences New York [email protected]

am very pleased to submit our second In addition to the above six sessions, our newsletter to the members of the Committee will also participate in three IEmployment and Industrial Relations Law panels that examine refugees and workplace Committee since I assumed the role as Chair law, the employment of middle and low- in January 2016. skilled workers (including plumbers and This newsletter follows the very successful nannies), and also discrimination against two-day Employment and Discrimination Law ‘irregular staffers’. Conference that we held in Mexico City in Finally, we welcome the members of April 2016 in partnership with the members the following committees who graciously of the Discrimination and Equality Law agreed to join us as co-moderators, speakers Committee. The conference was attended or gave a valuable hand in planning our by approximately 300 members representing sessions: the Anti-Corruption Committee, the 42 countries. I again extend our gratitude Discrimination and Equality Law Committee, to our Former Chair Oscar de la Vega and and the Immigration and Nationality Law his charming wife Gabby for acting as local Committee (acting as co-moderators); the Conference Chairs. Banking Law Committee, the Closely Held and Based on feedback we received from Growing Business Enterprises Committee, and attendees, our conference in Mexico City the Taxes Committee (sourcing knowledgeable was successful, in part, because the sessions speakers); and the Technology Law Committee addressed cutting-edge workplace law issues. for excellent suggestions regarding planning of Building on this tradition, we will be closely our sessions. We value the contributions of all examining the impact of technology in the other committees. the workplace. To that end, each of the six Beside our sessions at the Annual sessions we will lead at Washington, DC will Conference in Washington, DC, we have explore and debate how technology affects chosen locations for our two-day conferences employee relations, drives the creation of over the next three years. In 2017, we will new forms of work, and also creates new meet in Lisbon, Portugal on 27–28 April. We compliance challenges. The theme of will then cross back over the Atlantic to meet technology is, therefore, central to each of the in Montréal, Québec in 2018. And in 2019, we following panel topics: will meet in the City of Light, Paris, France. • Technology stimulating growth: the hiring Please make a note of these upcoming and other employment challenges of start- conferences in your diaries. We look forward ups in the high-tech sector; to seeing you at each of them. • Enabling technology and defeating devices I am also pleased to inform you as members technology, crooks and . that the our committee officers met in Mexico The employer’s dilemma of alienating or City prior to the two-day conference for a embracing whistleblowers; planning retreat. We met effectively for about • New technology and work – robotics and how ten hours to examine and discuss the value it affects the (shrinking) remaining human proposition we offer to our members. We being at the workplace; examined the quality of panel presentations • New technology and new forms of atypical at conferences, discussed increasing work, including ‘crowdsourcing’: challenges diversity among our speakers, and discussed and risks for multinationals; extending opportunities for our members to • New technology and its impact on the participate in activities. Following our fruitful financial services industry – new challenges meeting, we are now working on extending for employers; and and improving communication platforms • New technology, remote employment for members, and potentially establishing relationships and the cross-border duty of subcommittees that will focus on specialised care obligations of multinational employers. topics such as executive compensation The thought-provoking articles in this edition and benefits and cross-border internal of our newsletter help prepare us for our investigations. We will keep you informed debates at the Annual Conference. about our action plan.

4 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION FROM THE CO-EDITORS

I extend a warm word of gratitude to our dedication and hard work in preparing for trio of Editors consisting of Co-Editors, Aoife our upcoming conferences, participating Bradley and Rebecca Ford, with Mercedes in regular teleconferences, and attending Balado Bevilacqua as our Senior Newsletter and contributing at the planning retreat. My Editor for producing this quality newsletter. special gratitude is also extended to each Officer Luca Failla has the oversight of our members who continue to submit responsibility for the newsletter, and I also excellent contributions for our newsletter thank him for his leadership. and attend our conferences. Without you, the Finally, a special thank you to each committee would not exist. Thank you. of the officers of the Employment and I look forward to seeing you all in Industrial Relations Law Committee for their Washington, DC!

Luca Massimo Failla LABLAW Studio Legale, Welcome to Washington, DC Milan [email protected]

Mercedes Balado e were very fortunate to hold a we may come across the oldest unchanged Bevilacqua successful and popular Committee’s building of the city, the Old Stone House. MBB Balado WConference in April in Mexico In addition, the majority of the foreign Bevilacqua, City. We would like to take this opportunity embassies are located there. Buenos Aires to thank all attendees. In particular, we were A multicultural city, it also hosts the lucky to enjoy the company of newcomers headquarters of many international mercedes.balado@ baladolaw.com.ar from all Latin America, who we hope will organisations, trade unions, non-profit continue to join us at future conferences. making organisations, lobbying groups, Aoife Bradley Mexico hosted us with a unique warm and and professional associations, all of which LK Shields Solicitors, cultural background; we are now looking makes this city a unique setting to welcome a Dublin forward to get together in the same worldwide group of interdisciplinary lawyers, continent, but heading north to enjoy the as we all represent. [email protected] always interesting historic city of Washington, In an attempt to honour such international Rebecca Ford DC, capital of the United States. importance, in this edition we are pleased to Named in honour of George Washington, present articles from talented contributors Clyde & Co, Dubai one of the US’s founding fathers and the of four continents, addressing topics that [email protected] leader of the American Continental Army will be of core discussion in the upcoming who won the Revolutionary War, the City Annual Conference in Washington, DC. On was founded in 1791 to serve as the new this occasion we count on the enormous national capital. support of labour and employment lawyers The centres of all three branches of the US from England, Italy, Spain, Germany, India, federal government are based in the District, Nigeria and many different US states, such including Congress, the President, and the as Boston, Atlanta, New York, San Francisco Supreme Court. Washington is also home to and Washington. many national monuments and museums, Leading the way is the US, with Diana which are primarily situated on or around the Nehro and Jay C Ruby from Ogletree National Mall. The Mall also works as an ideal Deakins with an interesting overview about stress reliever when walking or running across US immigration options for employing its beautiful scenery, it makes a peaceful lower-skilled foreign workers. Next, Devin J experience highly recommended to anyone. Doolan from Saul Ewing explores the topic The wonderful historic neighbourhood of employment law challenges facing startup of Georgetown situated along the Potomac companies with clear details of matters to River, home of the main campus of be addressed. Garry Mathiason and Natalie Georgetown University, offers a must- Pierce from Littler Mendelson tell us about have walk around exquisite gastronomy robotics and automation in the workplace, options and unique architecture where a topic with is of much relevance during the

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 5 FROM THE CO-EDITORS

current development of technology. Our Equal Pay Act and how it may complicate final US contributors, Gretchen Harders and compensation matters. Cassandra Labbees from Epstein, Becker Ekpemi Onaré Ekhabafe from Nigeria, Africa, & Green give their opinion on providing contributes with her view on new technology healthcare benefits in the US under the focussing on remote employment and cross- Affordable Act. border employers’ compliance with the From Europe, London is well-represented duty to provide a safe working environment, with Laura Lobb from Pinsent Masons multinational risk and compliance with addressing facing change – regulation immigration rules. Last but not least, Asia is and technology and Daniel Ornstein well-represented by our colleagues from India, from Proskauer Rose, who writes about Veena Gopalakrishnan from Azb & Partners on the on-demand economy and its and Debjani Aich from Kochhar & Company. impact on employment law. Italy has three While Veena provides us with her perspective of contributors from different cities, Vittorio new technology and robotics in the workplace, Torazzi and Marzia Galleano from Pavesio Debjani explores the employment law e Associati in Torino and Paola Pucci challenges faced by startup companies from from Toffeletto Da Luca Tamajo in Milan. conception to global growth. Vittorio and Marzia address the topic of We again thank our Newsletter Officer new technologies in the workplace, focusing for letting us co-pilot this wonderful task of on new forms of atypical work, and Paola compiling this newsletter and to our ever- provides us with an interesting article also supporting committee officers. about new technologies with emphasis We hope you enjoy this edition. We’d like on corporate fraud and embezzlement. to hear from you so do please send us your Spain also contributes an article on new comments and suggestions! technologies and robotics with Ignacio del We would like to express our deepest Fraile Lopez and Diego Rizo Trabucchelli gratitude to our contributors for delivering from Gomez Acebo & Pombo, Madrid. great work. We are sure this newsletter will be Andre Zimermman and Louisa Kallhoff more popular than the Washington Post. from Orrick, Herrington & Sutcliffe, We look forward to seeing you in Dusseldorf, Germany explore the proposed Washington!

6 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION COMMIITTEE OFFICERS

Committee officers

Chair Senior Newsletter Editor Johan Lubbe Mercedes Balado Bevilacqua Littler Mendelson PC, New York MBB Balado Bevilacqua Abogados, [email protected] Buenos Aires [email protected]

Senior Vice-Chairs Newsletter Editors Erika Collins Aoife Bradley Proskauer Rose, New York LK Shields Solicitors, Dublin [email protected] [email protected]

Peter Talibart Rebecca Ford Seyfarth Shaw (UK), London Clyde & Co, Dubai [email protected] [email protected]

Vice-Chairs Selvamalar Alagaratnam Membership Officer Skrine, Kuala Lumpur Veronica Raffo [email protected] Ferrere, Montevideo [email protected]

Marianne Granhøj Kromann Reumert, Copenhagen Membership Officer Europe [email protected] Olivier Kress Flichy Grangé Avocats, Paris [email protected]

Secretary Juan Bonilla Membership Officer, Asia Cuatrecasas Goncalves Pereira, Madrid Vikram Shroff [email protected] Nishith Desai Associates, Mumbai [email protected]

Treasurer Conference Quality Officer Patrick Benaroche Stikeman Elliott, Montreal Dr Björn Gaul [email protected] CMS Hasche Sigle, Cologne [email protected]

Communications Officer Luís Mendes Website Officer Pinheiro Neto Advogados, São Paulo Caroline André-Hesse [email protected] AyacheSalama, Paris [email protected]

Newsletter Officer Luca Massimo Failla LABLAW Studio Legale, Milan LPD Administrator [email protected] Susan Burkert [email protected]

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 7 IBA ANNUAL CONFERENCE WASHINGTON, 18–23 SEPTEMBER 2016 – OUR COMMITTEE’S SESSIONS

Employment & Industrial Relations Law Committee sessions

Monday 1045 – 1200 Monday 1430 – 1730 Technology stimulating job growth: the hiring and Welcome to our country! But please… put down other employment challenges of startups in the that job application high-tech sector Presented by the Human Resources Section Presented by the Employment and Industrial Relations Law Committee A debate over refugees, the Syrian/African diasporas, employment and the Closely Held and Growing Business Enterprises Committee opportunities and inclusion. Small business and, in particular, technology startups are the engines With the Syrian and North African crises, lots of countries in Europe for growth in job creation. New startups, however, face various and around the world finally got serious about accepting refugees workplace law challenges, ranging from alternative staffing models on a massive scale, offering humanitarian asylum. But the ‘dirty little to flexible benefits provided as the organisation grows. This session secret’ regarding refugee asylum is that many (not all) countries will examine the peculiar employment law and employment relations outlaw legally admitted refugees from working and, in practice, issues attended to the ‘startup’ phase of new businesses as they ‘go employers may be reluctant to hire newly admitted asylum seekers. global’ and provide good practices to ensure compliance. Are these regimes improperly discriminating against the refugees they claim to shelter? How sustainable is admission into a country that Monday 1045 – 1230 locks you in a camp and stops you from earning a living? Where will my nanny/plumber come from? Middle This special session will shine a light on the refugee right-to-work and low- shortages in light of the problem by featuring a spirited, extemporaneous moderated debate migrant currents in the EU and elsewhere over refugee right-to-work policy and address issues such as: Presented by the Immigration and Nationality Law Committee and • Asylum-seeking status and possessing a valid work authorisation the Employment and Industrial Relations Law Committee – is there a difference, and what records do employers need to legally hire asylum seekers? Corporate immigration mostly focuses on skilled workers and the • Dovetailing asylum and local government job placement means to ensure their international mobility in order to serve the programmes – what global employers should know best interests of companies. But which is the status of national • Hiring the best talent – assessing job skills and experience of legislations when it comes to the immigration of middle and low- asylum seekers when corroborating documentation is lacking – skilled workers? Are they ‘welcome’ or not? Who needs them? challenges for employers Who shall sponsor them? • Employers’ conundrum – acting as good corporate citizens The session will thus focus on the following topics: by promoting the hiring of asylum seekers and stepping in discrimination pitfalls • open systems v immigration quotas; • Integrating asylum seekers into the workforce – what to know, • definition of middle and low-skilled workers: when does a worker avoid and best practices for global employers ‘qualify’ as a ‘non-qualified’ worker? • Immigration discrimination: compliance and liability issues as to • immigration procedures and labour market test; rejecting asylee candidates • terms and conditions of employment for middle to low-skilled • Exploitation and : verifying that aslyee employees and other specifics from an employment law employees – both direct staff and employees of suppliers and standpoint, such as minimum etc, in order to make the contractors – are not improperly taken advantage of panel more inclusive; • the need for a local sponsor in order to initiate the immigration procedure versus a ‘do it on your own’ approach; • accompanying family members of middle and low-skilled workers: Tuesday 1045 – 1200 can they join the family? and Enabling technology and defeating devices • the impact on local legislations of the massive flows of migrants in technology, crooks and whistleblowers. The the world. employer’s dilemma of alienating or embracing whistleblowers Presented by the Employment and Industrial Relations Law Committee, and the Anti-Corruption Committee New technology may make it easier for corporate fraud and embezzlement to occur. However, when an employee reports detected corporate transgressions, the employer’s response becomes equally as

8 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION IBA ANNUAL CONFERENCE WASHINGTON, 18–23 SEPTEMBER 2016 – OUR COMMITTEE’S SESSIONS important as the substance of the charge. This session will focus on how thousands of dollars may be moved between accounts and bills paid. employers treat the whistleblowing employee. If the employer disagrees As a regulated industry, new technology also creates new workplace with the whistleblowing employee’s perception of what constitutes a challenges for employers in this industry. A number of jurisdictions corporate transgression, does the employer treat the employee as a rogue have increased compliance and transparency requirements for the employee? Or, is the more prudent approach to embrace the employee financial services industry, for example, new UK regulations concerning until the completion of a thorough investigation. This session will also individuals who perform controlled functions. This session will examine include as a speaker a former employee who was a . changing compliances challenges for employers in the financial services industry in light of technology driven operational changes and heightened regulatory enforcement. Tuesday 1430 – 1545 New technology and work – robotics and how it affects the (shrinking) remaining human being at Thursday 1615 – 1730 the workplace New technology, remote employment Presented by the Employment and Industrial Relations Law Committee, relationships and the cross-border duty of care the Banking Law Committee and the Technology Law Committee obligations of multinational employers Presented by the Employment and Industrial Relations Law New technology profoundly impacts the way of work. New technology Committee, the Environment, Health and Safety Law Committee may be enabling – allowing individuals to accomplish tasks previously and the Immigration and Nationality Law Committee beyond human reach/strength – or new technology also has a displacing impact by replacing human beings as workers. This panel Multinational increasingly utilise matrix or global virtual will examine the impact of the introduction of new technologies in teams to work on projects. Employees and independent contractors are the workplace on those employees who remain behind. The panel will engaged across the globe. While team members may be out of sight, discuss issues of , psychological impact of ‘my job may be next’ the employer’s obligations of duty of care ensuring a safe and healthy for automation and the increased pressure that technology places on workplace remain the same as if the entire team worked under one higher productivity by the human beings who utilise the technology. roof. Furthermore, multinationals may be subject to increased risks, including work permit immigration law compliance challenges. Tuesday 1615 – 1730 New technology and new forms of atypical work Thursday 1615 – 1730 including ‘crowdsourcing’: challenges and risks Market misconduct for multinationals Presented by the Employment and Industrial Relations Law Presented by the Employment and Industrial Relations Law Committee, the Insurance Committee, the Consumer Litigation Committee and the Taxes Committee Committee, the Environment, Health and Safety Law Committee and the Immigration and Nationality Law Committee New technology has indeed made the world flat. Employers may source workers from all over the world to participate in a project Multinational corporations increasingly utilise matrix or global without those individuals leaving their home countries. This panel virtual teams to work on projects. Employees and independent will examine the workplace and compliance tax challenges contractors are engaged across the globe. While team members employers face when global virtual teams work on a project consisting may be out of sight, the employer’s obligations of duty of care of both traditional employees, agency employees, independent ensuring a safe and healthy workplace remain the same as if the contractors and individuals engaged in different manners. entire team worked under one roof. Furthermore, multinationals may be subject to increased risks, including work permit immigration law compliance challenges. Wednesday 1430 – 1730 Providing and paying for healthcare: public, private or something in between? Obamacare and beyond Friday 0930 – 1230 Presented by the Healthcare and Life Sciences Law Committee, the Is discrimination against irregular staffers legal Employment and Industrial Relations Law Committee, the Insurance outside of Europe? Should it be? Committee and the Taxes Committee Presented by the Discrimination and Equality Law Committee and the Employment and Industrial Relations Law Committee Societies seek to achieve the goal of providing their people with high- quality, comprehensive and affordable healthcare in different ways. Law across the EU prohibits discrimination in benefits, pay and terms How many should be covered and for what conditions? At what of employment, against irregular staff such as temporary workers, cost? Who should pay? Who should provide? This session will explore part-timers and so-called ‘zero-hour’ employees. An EU directive some of the different approaches followed by different countries – flatly requires that all these irregular employees get (proportionately) from private/private to public/public and the variations in-between, everything their regular full-time colleagues get. But other countries including the impact of Obamacare on paying for and providing are not so accommodating to ‘irregulars’. Bosses in the US, for healthcare in the United States. example, tend to give vacation, paid holidays, insurance and other benefits only to their regular full-timers. US employers are actually accused of hiring part-timers and temps just to save costs. This Thursday 1430 – 1545 session will confront the fundamental public policy quandary: Do irregular staffers need and deserve special protection that elevates New technology and its impact on the financial them to a discrete protected class? The session will explore: how services industry – new challenges for employers the European protection of irregular staff works in practice; whether Presented by the Employment and Industrial Relations Law jurisdictions beyond Europe have or need similar rules; and alternative Committee and the Banking Law Committee legal theories for irregular status discrimination, ‘indirect/disparate Like in many industries, new technology has created a sea change in impact’ race and gender discrimination. how the financial services industry operates and services its customers, for example, total access to accounts via mobile phones through which

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 9 UNITED STATES IMMIGRATION OPTIONS FOR EMPLOYING LOWER-SKILLED FOREIGN WORKERS

Diana J Nehro Ogletree, Deakins, United States immigration Nash, Smoak & Stewart, PC, Boston options for employing lower- diana.nehro@ ogletreedeakins.com skilled foreign workers Jay C Ruby Ogletree, Deakins, Nash, Smoak & Stewart, PC, Atlanta Introduction are not available, and the employment of jay.ruby@ those foreign workers will not adversely Foreign nationals who are not otherwise ogletreedeakins.com affect the wages and working conditions of US workers (US citizens, lawful permanent US workers. The H-2A programme permits residents, asylees or refugees) require a the entry of low-skilled agricultural workers work-authorising status or visa classification into the US on a temporary basis when to legally perform productive work in the US. qualified US workers are not available. In For the most part, visas are 1943, the US government formed the H-2 employer-specific and require a sponsoring temporary visa programme to assist the US US entity to submit an affirmative application Sugar in obtaining permission to or petition to either the US Citizenship & import sugar cane cutters from the Bahamas. Immigration Services (USCIS) or, in some Because of the H-2B visa’s broader reach instances, the US Consulate/Embassy. The across multiple sectors, today, large and small US immigration regulatory framework employers in every state and in a wide variety provides for a veritable alphabet soup of of industries such as hospitality, landscaping, employment-based temporary work visa fishing/seafood processing, construction, classifications, most of which are limited to logging and horse racing turn to the H-2B professional occupations (ie, typically require programme when sufficient US workers are a baccalaureate degree). Nevertheless, there not available to meet the employers’ labour is one lesser-known temporary visa solution needs. Although the H-2B visa is available for for lower-skilled workers, the H-2A/H-2B both skilled and unskilled workers, it is more visa, which is available for US employers frequently utilised for lower-skilled workers with needs for the temporary services or and is the focus of this article. labour of skilled and unskilled agricultural and non-agricultural workers to cover short- term demands. Because of the US’s strong Temporary need requirement public policy against the displacement of An H-2B employer must meet a complex set US workers, to qualify, the need for the of procedural and substantive requirements services or labour must be temporary and including an extensive labour market test to the employer must test the labour market recruit qualified US workers before they can to prove the unavailability of minimally hire H-2B workers. First, it must prove to the qualified US workers. Thus, this temporary DOL that it has a defined temporary need for visa solution poses an interesting intersection the services or labour of the H-2B workers. It of US immigration laws with US and is the nature of the employer’s need for the hour laws, and involves regulatory oversight services or labour, and not the nature of the from not only the USCIS, but also the US duties, that determines temporary need. The Department of Labor (DOL). DOL’s Board of Alien Labor Certification Appeals (the ‘Board’) has provided an H-2B visa for skilled and unskilled non- administrative framework for determining agricultural workers permanence in connection with applications which require certification, including H-2B The H-2B visa programme allows employers visas. The Board’s definition of ‘permanent to sponsor high-skilled or unskilled foreign full-time work’ excludes employment workers for employment in the US to fill that by its nature is of seasonal or shorter temporary or seasonal in industry duration within a yearly basis, regardless of sectors, other than agriculture, on a whether it recurs annually. If an employer temporary basis when qualified US workers consistently needs the duties to be performed

10 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION UNITED STATES IMMIGRATION OPTIONS FOR EMPLOYING LOWER-SKILLED FOREIGN WORKERS on a full-time permanent basis and that permanent workers to perform the same need is ongoing by the employer, then the services, but that it needs to supplement its position is considered permanent, and thus permanent staff on a temporary basis due to the H-2B visa is not available under these short-term demand. The work must be above circumstances. However, if the occupation is and beyond the employer’s normal level of one where employers have seasonal layoffs operation and not expected to become a part each year, the position is temporary, not of the employer’s future regular operations. A permanent and thus, appropriate for an classic example of recurring peak-load need H-2B visa. To show that the nature of the is a resort hotel that needs to supplement its employment is sufficiently temporary, the workforce with additional housekeepers and employer must demonstrate to the DOL that other staff during the prime tourist season. its need for the type of duties fits into one of the four following categories: (1) a One-time Intermittent Need Occurrence; (2) a Seasonal Need; (3) a Peak- load Need; or (4) an Intermittent Need. An employer may demonstrate an intermittent need for a temporary employee by establishing that it has not employed One-time Occurrence permanent or full-time workers to perform An employer with a one-time occurrence the same services, but occasionally or need must prove it has not employed workers intermittently needs temporary workers to perform the services in the past and for short periods. This category could will not need them in the future, or that a apply where the employer does not employ temporary event of short duration has created permanent employees for a certain position. the need for a temporary worker(s) for an otherwise permanent position. An employer’s H-2B visa procedure/steps need for temporary workers to fulfil a specific project, such as the opening of a The USCIS processes the H-2B petition; new manufacturing plant in an area with low however, the employer must first undergo a population (eg, foreign workers completing DOL process known as ‘temporary labour a phase of a construction project), may also certification’ to show that no, or not be examples of a one-time occurrence need. enough, qualified US workers are available. Under the DOL regulations, an employer may To demonstrate this, H-2B employers must have a one-time need for a maximum period first recruit qualified US workers and offer of up to three years. 100 per cent of the prevailing wage. Prior to filing an application for temporary labour certification, the employer must first obtain Seasonal Need a ‘prevailing wage determination’ from In demonstrating a seasonal need for a the DOL. The purpose of the prevailing temporary worker, the employer must wage determination is to confirm that the establish that the service or labour is hiring of a foreign worker will not adversely traditionally tied to a season of the year, by affect the wages and working conditions an event or pattern, which is of a recurring of US workers comparably employed, and nature. The employment is not considered thus that the wages offered to a foreign seasonal if the period during which the worker are the prevailing wage rate for the services are needed is unpredictable, subject occupational classification in the area of to change or considered a vacation period employment. The prevailing wage rate is for the employer’s permanent employees. defined as the average wage paid to similarly The employer must specify the period(s) employed workers in a specific occupation of time during each year (‘off season’) in in the area of intended employment. which it does not need the services or labour. The DOL determines the prevailing A landscaping business that closes down its wage through a formal prevailing wage business for a particular time of the year application submitted by the employer. would have a seasonal need. Thereafter, the sponsoring employer files an Application for Temporary Labour Certification with the DOL. This application Peak-load Need (along with the employer’s prevailing wage A peak-load need may be established by a determination, proposed job order, proof of showing that the employer regularly employs temporary need and proof of the need for

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 11 UNITED STATES IMMIGRATION OPTIONS FOR EMPLOYING LOWER-SKILLED FOREIGN WORKERS

the number of workers being applied) must temporary labour certifications covering be filed no more than 90 calendar days, and 45,000 to 50,000 workers. no less than 75 calendar days, before the employer’s date of need. Thereafter, the H-2B employer obligations DOL will review the employer’s application and direct the employer to conduct The DOL’s Employment and Training , involving a two-day newspaper Administration and the Wage and Hour advertisement (including a Sunday) for Division enforce the H-2B employer’s US workers within 14 days of the DOL’s compliance with the required obligations Notice of Acceptance of the application. and attestations including the full payment H-2B employers are required to maintain of wages at 100 per cent of the prevailing the recruitment documentation, including wage. However, the employer also must the results, for three years. If the DOL make various certifications under penalty of issues the temporary labour certification, perjury demonstrating its efforts to ensure the sponsoring employer then files a non- that US workers are neither displaced nor immigrant visa petition, the H2-B petition disadvantaged as a result of the engagement and supporting documentation, with the of the H-2B employees. H-2B employers must USCIS. The employer may file a petition also, during the first pay period in the US, for unnamed workers in the event the reimburse H-2B workers for inbound travel workers to be sponsored have yet to be costs to the US, including daily subsistence. In identified (eg, a petition for ‘100 unnamed addition to these obligations, H-2B employees housekeeping cleaners’) and may seek are covered by most US employment laws expedited processing for an additional fee. while working in the US. In particular, the Upon USCIS approval of the employer’s US Fair Labor Standards Act (FLSA), which H-2B petition, the foreign workers may then governs wage and hour issues, including apply at the local US Consulate/Embassy and , applies. Most for the H-2B passport visa stamp, which H-2B employees, as mainly unskilled workers, is typically issued within a few days and is will qualify for overtime under the FLSA. Thus, valid for the duration of the approved H-2B it is critical that H-2B employers comply with petition, which is based on the employer’s the obligation to pay these employees the US length of need. minimum wage and overtime, if applicable, as such workers may bring claims for back wages for an employer’s violation of the FLSA H-2B visa bi-annual quota if they fail to receive the minimum US wage or The total number of H-2B visas available for overtime during the pay period in question. each US government fiscal year, 1 October to 30 September, is 66,000. If the USCIS and Conclusion State Department issue the allocated 66,000 visas in a given fiscal year, the employer will Although most US temporary work permit not be eligible to obtain H-2B visas until solutions are geared towards professionals, the beginning of the next fiscal year. 33,000 the H-2B provides US employers with an ‘new’ H-2Bs are available for the first half option to engage lower-skilled foreign of the government fiscal year, 1 October nationals. While it is available for both skilled to 31 March, and 33,000 ‘new’ H-2B visas and unskilled workers, in practice, the H-2B are available during the second half of is more commonly used to employ unskilled the government fiscal year, 1 April to 30 workers in a broad range of industries in September. Persons currently in the US with times of short-term US labour shortages. unexpired H-2B status are exempt from the Because of the strong public policy militating annual quota (eg, H-2B change of employer against the displacement of US workers, petitions and H-2B extension petitions). In the DOL, in addition to the USCIS, plays a the fiscal year 2016, the USCIS recognised large regulatory role in ensuring compliance ‘returning H-2B workers’ who had held H-2B with the H-2B programme requirements. visas during the past three fiscal years as Moreover, H-2B employees are protected by exempt from the annual quota. Typically, the applicable US wage and hour legislation, and annual quota for the particular half fiscal year cannot be used as a means to avoid employer is not closed out until the DOL has issued minimum wage and overtime obligations.

12 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION EMPLOYMENT LAW CHALLENGES FACING STARTUP COMPANIES

Devin J Doolan Saul Ewing, Washington, DC Employment law challenges [email protected] facing startup companies

Introduction Non-disclosure, confidentiality and assignment of inventions agreements Most startup companies enjoy operating fluidly and focusing their time, effort and Although they come in many different money on their services and products, shapes and sizes, non-disclosure, rather than on (perceived) mundane confidentiality, and assignment of and cumbersome compliance measures. inventions agreements (‘NDAs’) generally: Unfortunately, by overlooking core (1) prohibit employees from misusing compliance measures, emerging companies or disclosing (outside the scope of their expose themselves to significant legal liability employment) their employers’ confidential and run the risk of scaring off potential information and trade secrets; and (2) investors who are looking for companies that provide that any inventions developed, in are well-positioned for growth due, in part, whole or in part, by employees within the to their stable foundations. Discussed below scope of their employment are owned by are several employment law challenges that (or assigned to) the employer. In addition, often confront startup companies, along with NDAs often include provisions calling for certain compliance measures that may be employees to affirmatively identify any taken to successfully address those challenges. prior inventions that are unrelated to their employment. Given the importance of their intellectual property and trade Protecting intellectual property, trade secrets, emerging companies should secrets and proprietary information require employees to execute NDAs upon Many startup companies (particularly in the commencement of employment, and they technology sector) develop and rely upon should also require third parties that will unique products and services, inventions have access to protectable information (eg, and intellectual property, which must contractors, collaborators) to sign NDAs. Of be protected in order to promote future course, it is equally important for startup viability and growth. However, a balance companies to maintain executed copies must be struck between guarding against of all of their NDAs, should enforcement external and internal misappropriation become necessary. and using the information to advance the business, as there are many circumstances Business protection agreements in which emerging companies may need to disclose their intellectual property and Non-competition and non-solicitation proprietary information. For example, agreements can provide startup companies disclosures might be necessary to solicit with significant protection against the investors, raise capital, attract partners, misappropriation of business information and recruit and hire employees, engage unfair competition and trade practices. contractors, work with collaborators, and provide services to clients. As the global Non-competition agreements reach of startup companies becomes the norm, the proprietary information of Non-competition agreements generally limit those companies tends to become more the ability of employees to compete with vulnerable to unauthorised access and their employers, both during and after their misappropriation. To achieve a balance employment. Although non-competition law between protecting and using confidential varies widely from jurisdiction to jurisdiction, business information, startup companies inside or outside the United States, courts should consider the following measures to generally require them to be narrowly protect themselves. tailored, in both geographic and temporal scope, to protect only legitimate business

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 13 EMPLOYMENT LAW CHALLENGES FACING STARTUP COMPANIES

interests (ie, confidential information and startup companies (and their counsel) to customer goodwill). Given how significantly review the non-compete and non-solicitation non-competition law differs depending laws of applicable foreign jurisdictions and on the jurisdiction, it is critical for startup consider including choice-of-law and venue companies (or their counsel) to become provisions in their agreements. familiar with the law in jurisdictions in which they operate and employ individuals. Properly classifying workers as employees For example, non-competition agreements or independent contractors are deemed void and unenforceable under California law, but they are permissible (if One of the most common mistakes that reasonable in scope) in the neighbouring startup companies make is misclassifying states of Oregon, Nevada and Arizona. workers as independents contractors (or consultants), rather than as employees. Many emerging companies mistakenly Non-solicitation agreements believe that classifying workers as contractors Non-solicitation agreements are generally is permissible if the workers agree with viewed more favourably by courts than non- the classification and the parties enter competition agreements, and thus can be into written independent contractor easier to enforce, as they simply restrict agreements. If that were true, startup former employees from soliciting clients companies could avoid significant costs and/or other employees of their former that would be incurred if the workers were employers, instead of barring former classified as employees, such as payroll employees from working for competitors or taxes, workers’ compensation insurance, engaging in competitive business activities. , taxes, Thus, before creating non-competition overtime and minimum wage, and other or non-solicitation agreements, startup expenses that are not required if workers companies should identify the particular are classified as contractors. However, interests they wish to protect (eg, clients, government agencies and courts do not employees, confidential information) permit workers to be classified as contractors through the agreements. Taking a one-size- simply because private parties enter into fits-all approach to restrictive covenants is not independent contractor agreements. Indeed, advisable, as that approach tends to result in the presumption in the US is that workers overbroad and unenforceable agreements. who provide services to businesses are For example, if an emerging company is only employees, not contractors. In July 2015, the interested in preventing its employees from US Department of Labor stated bluntly in taking clients with them after they resign or formal guidance on the Fair Labor Standard are terminated, non-solicitation agreements, Act (wage and hour law): ‘Most workers are alone (rather than non-competition employees under the FLSA.’ agreements), might offer adequate protection Prompted in large part by a desire to and would likely be easier to enforce. recover tax revenues that are lost when Regardless, non-competition agreements workers are misclassified as independent and non-solicitation agreements must be contractors, regulators have been narrowly tailored to protect the startups’ investigating misclassification issues with legitimate business interests (eg, confidential increasing frequency and vigour over the information, trade secrets, and customer past several years. Although many factors goodwill), as overly broad restrictive are considered in determining whether covenants will not be enforceable. workers should be classified as employees In our global economy, the place of or contractors, the most important factor in residence of employees – particularly in most countries throughout the world is the the tech sector – has become less relevant amount of control that a company has over to employers. Consequently, emerging the worker. Put simply, the more control, the companies frequently hire employees who more likely the worker is an employee rather reside in foreign jurisdictions far removed than a contractor. from the companies’ home base, which Another classification that presents potentially subjects those companies to problems from emerging companies is foreign employment laws. While this interns. For obvious reasons, classifying expanded talent pool offers numerous workers as unpaid interns can be desirable for benefits, it is more important than ever for startup companies operating on tight budgets.

14 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION EMPLOYMENT LAW CHALLENGES FACING STARTUP COMPANIES

However, the unpaid intern classification US Department of Labor unveiled new often runs counter to the wage and hour overtime regulations, which it estimated will laws of most jurisdictions, which require result in approximately 4.2 million workers companies to compensate workers (even who are currently exempt from overtime interns) for all time worked. Granted, certain because of their levels will no longer exceptions to this rule exist for interns, meet the minimum salary threshold and will but they are limited in scope and governed become eligible for overtime unless their by strict criteria, such as requiring that are increased. employers provide actual training or school credit to the interns, among other things. Personnel policies Lawsuits challenging ‘unpaid ’ have been gaining steam, so startup Startup companies often overlook the companies would be wise to consult with importance of creating written employment counsel before engaging unpaid interns. policies, viewing them as unnecessary The consequences of misclassifying workers and cumbersome – the antithesis of their as contractors or interns can be devastating nimble businesses. There is a perception for emerging companies that are operating that the small, tight-knit nature of startups on tight budgets and, for that matter, leads to a seamless (unwritten) exchange companies of any size. Potential liability of information concerning workplace includes payment of wages and overtime, standards, practices, and expectations. payroll taxes, interest, fees, and civil and However, this type of ad hoc approach risks criminal penalties. To avoid these risks, the inconsistent application of employment startup companies should create accurate job policies, which exposes companies to claims descriptions for their workers, which will help of discrimination and disparate treatment by them properly classify those workers at the employees who believe they have been treated outset of employment. differently than other employees. In addition, certain jurisdictions outside of the US require policies once companies meet varying Properly classifying employees as exempt employee thresholds. or non-exempt Accordingly, regardless of size, startup Failure to pay overtime is another problem companies should (at a minimum) establish area for startup companies. In the US, written and equal wage and hour laws distinguish between employment opportunity policies. In the (1) ‘exempt’ employees, who are not US, employers may use the existence of entitled to overtime because they make at written harassment and anti-discrimination least US$455 per week (US$970 per week, policies – with complaint procedures – as effective 1 December 2016) and whose job affirmative defences against claims of duties satisfy certain statutory exemptions, unlawful harassment and discrimination. including executive, administrative and These policies are necessary regardless computer professional categories; and of the size of the employer because anti- (2) ‘non-exempt’ employees, who are discrimination laws in many jurisdictions eligible to earn overtime at one-and-a-half cover employers with as few as one employee. times their hourly rate. Occasionally, start- It is also advisable for startup companies to companies believe that if they compensate create written policies summarising employee their employees on a salary basis, rather classification (eg, exempt, non-exempt, part- than hourly, they do not have to pay time, full-time), compensation (eg, overtime), overtime. This assumption is wrong and benefits (eg, leave, insurance), and work can result in significant liability, including hours. These policies should be implemented back pay, penalties and fines. To determine as early as possible in the life of a startup, whether an employee is exempt from and they should be reviewed and updated overtime pay, an employer must analyse as the company grows in size and expands whether the employee’s actual job duties its geographic footprint to jurisdictions that and responsibilities (and salary) fit within have their own unique employment laws. any statutory exemptions, many of which Of course, creating policies will do no good require that the employee have authority unless employees receive them, so startup to make independent decisions free from companies should ensure that their policies immediate direction or supervision in are provided to all employees and that the significant matters. On 18 May 2016, the employees sign acknowledgements of receipt.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 15 PROVIDING HEALTHCARE BENEFITS IN THE UNITED STATES: THE AFFORDABLE CARE ACT

Gretchen Harders Epstein Becker Green, Providing healthcare benefits New York in the United States: the [email protected] Cassandra Labbees affordable care act Epstein Becker Green, New York [email protected] n 23 March 2010, President Obama (the first 30 full-time employees are not signed into law the Patient Protection counted in the calculation). Oand Affordable Care Act (ACA), • Employers with 50 or more full-time which provided for significant changes in employees that do offer minimum essential the delivery and payment of health care coverage through an eligible employer- coverage. Many provisions of ACA have had sponsored plan for a month (and have a major impact on US employers, employees, at least one full-time employee who and their fully insured or self-insured group receives a premium tax credit or cost health plans. ACA imposes individual taxes sharing reduction in connection with against employees who fail to purchase or their enrollment in the Marketplace) will enrol in health coverage and corporate taxes be assessed a monthly penalty equal to on employers who fail to offer coverage, the lesser of: (1) one twelfth of US$3,000 or offer coverage that is not affordable or multiplied by the number of employees does not provide minimum value. Though receiving a premium tax credit or cost ACA also created state-based Health Benefit share reduction; or (2) one twelfth of Exchanges or Marketplaces for individuals US$2,000 multiplied by the number of and small employers to purchase health full-time employees (the first 30 full- insurance coverage (‘Marketplace(s)’), time employees are not counted in the employers are not required to offer the same calculation). group health coverage options that insurers On the employee side, ‘applicable individuals’ on a Marketplace must offer. US employers and their dependents must maintain must, however, offer ‘minimum essential ‘minimum essential coverage’, or be assessed coverage’ and meet other requirements or individual penalties on their incur various direct and indirect monetary individual federal tax returns. penalties. The following summarises some of the more significant provisions of ACA. Design and administration of group health plan Employer and individual shared ACA changed the design and administration responsibility mandates of group health plans, for example, by An employer’s failure to offer group health requiring certain mandated levels of coverage compliant with ACA can result in benefit coverage, providing coverage for adverse tax consequences. dependents until age 26, eliminating • Employers with 50 or more ‘full-time lifetime and annual limits, limiting waiting employees’ (ie, employees who work an periods to 90 days, and eliminating pre- average of 30 hours or more per week existing conditions and exclusions. Other regardless of how the employer defines full- changes included the requirement to time employee) that do not offer minimum limit cost-sharing for preventive care, essential coverage through an eligible prescription discounts for seniors, new employer-sponsored plan for a month conditions for enrolment materials and (and have at least one full-time employee communications, new electronic and security who receives a premium tax credit or cost requirements, new claims and appeals sharing reduction in connection with their procedures, and enhanced reporting and enrollment in the Marketplace) will be disclosure responsibilities. Some of the assessed a monthly penalty of one twelfth of design changes were grandfathered under US$2,000 multiplied by the number of full- group health plans in effect when ACA time employees employed by the employer was enacted. All the new changes were

16 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION PROVIDING HEALTHCARE BENEFITS IN THE UNITED STATES: THE AFFORDABLE CARE ACT implemented at different times and required to pay a copayment or coinsurance, or close monitoring by health insurers and deductible to receive recommended employers. These changes are described in preventive services, such as vaccinations, greater detail below. and counselling. The preventive services available may depend on the age and health of the individual. Based on recommended Lifetime and annual limits guidelines, there are currently approximately Group health plans and individual health 15 covered preventive services for adults, policies may not impose lifetime or annual 22 covered preventive services for women, limits on essential health benefits. In including pregnant women, and 26 covered the past, many plans set a lifetime dollar preventive services for children. Health limit on what participants can spend for insurance plans are only required to make covered benefits during the entire time these services available through an in- they were enrolled under the plan. Annual network provider. They can allow an insured limits on benefits were also imposed under to receive these services from an out-of- many plans. Under such rules, if any network provider for an additional fee. If the care exceeded those limits, the insurance preventive service is not the primary purpose holder was required to pay all excess costs. of the visit, or if the doctor’s office Group health plans are still permitted to bills the preventive service separately from impose annual and lifetime dollar limits, the office visit, the carrier but only for healthcare coverage that is not can require that an insured pay some of the considered an ‘essential health benefit’ costs of the visit. (defined below). Dependent care coverage up to age 26 Essential health benefits Prior to the ACA, many group health plans Starting in January 2014, ACA required would remove adult children from parental that all plans offered in the Marketplace, coverage because of their age, whether or not including individual and small group health they were a student or based on where they plans, cover important or ‘essential’ health lived, to avoid adverse tax consequences. Now, benefits. ‘Essential health benefits’ include: all group health plans that offer dependent (1) emergency services; (2) hospitalisation; coverage of children must make coverage (3) maternity and newborn care; (4) mental available until the adult child reaches age health and substance use disorder services, 26, and such coverage may be offered on a including behavioural health treatment; (5) pre-tax basis. Limitations cannot be placed on prescription drugs; (6) rehabilitative and dependent coverage because of marital status, habilitative services and devices (services enrolment in school, residency, or financial and devices to help people with injuries, dependency of the adult child. Once the disabilities, and chronic conditions gain adult child reaches age 26 and ‘ages out’, the or recover mental or physical skills); (7) adult child has several options for continued laboratory services; and (8) pediatric services, coverage under applicable federal or state including oral and vision care. Plans must continuation coverage laws. The adult child also include birth control coverage and may also be eligible for special enrolment breastfeeding coverage. These essential through the Marketplace if the adult child health benefits must be covered without enrols within 60 days of aging out. annual dollar limits, and must be provided to participants without a significant financial Elimination of pre-existing conditions or burden. States that are expanding their exclusions Medicaid programmes must also provide essential health benefits to people that are Since 1 January 2014, all group health newly eligible for Medicaid. plans and all health insurers, including Medicaid and Children’s Health Insurance Program (CHIP), are not allowed to impose Preventive care pre-existing conditions or exclusions on The creation of ACA has also allowed health coverage. They cannot limit or refuse preventive services to be made available at coverage, and/or charge more for any no additional cost. The result is that the condition an individual had prior to the start eligible insured should not be required of coverage (eg, asthma, diabetes, cancer).

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 17 PROVIDING HEALTHCARE BENEFITS IN THE UNITED STATES: THE AFFORDABLE CARE ACT

Waiting periods may not exceed 90 days has little bearing on health is not allowed to be a reason for cancellation of coverage. A group health plan cannot impose a waiting Coverage can still be rescinded if an insured period for an individual who is otherwise intentionally puts false or incomplete eligible to enrol in the plan of more than 90 information that is material to coverage, or calendar days. The waiting period starts on for failure to pay premiums on time. The the date the individual meets the plan’s other insurance company must provide notice at substantive conditions, such as membership least 30 days prior to cancellation of coverage in an eligible job classification or completion and give time for the insured to appeal the of a reasonable and bona fide employment- decision or find new coverage. If the plan based orientation period. is cancelled, special enrolment options may be available. An entity that wilfully fails to Required disclosures provide the information required will be subject to a fine or not more than US$100 for Under the ACA, participants must now each failure. be provided with an easy to understand summary of benefits and coverage (‘SBC’) that provides information about a group New claims and appeals procedures health plan’s benefits and coverage. The SBC The ACA gives an insured the right to appeal is intended to allow for more transparency so the decision by a group health plan to deny that individuals can make ‘apples-to-apples’ payment for a claim or to terminate coverage. comparisons when reviewing group health The plan’s decision can be appealed first plans and coverage. It outlines in detail through an internal appeal, in which the what costs a plan would cover in common plan is asked to do a full and fair review of medical situations. There are certain content its decision and give an explanation of its and language requirements for an SBC, and decision. The plan is required to start and there must be a Uniform Glossary listing complete the process in a timely manner commonly used terms in health coverage. and if the issue is urgent, must speed up The SBC must be provided in addition to the process. If payment or coverage is still any summary plan description requirements denied, the ACA gives the claimant the right under the Employee Income to have an independent third party decide to Security Act, and it must be easily accessible uphold or overturn the plan’s decision. This to individuals, plan sponsors, and participants is called an external appeal. Group health and beneficiaries via an internet address. plans should have provided participants with For the group health insurance market, information on how to file an appeal and the because the actual certificate of coverage appeals process when enrolled. Some states is not always available until after the plan may require more than one level of internal sponsor has negotiated the terms of coverage, appeals for insured group health plans before an issuer is allowed to post a sample SBC for a request for an external review can be made. each applicable product. Once the plan is executed, the insurance carrier must make the updated SBC easily available to plan Wellness programme incentives increased sponsors and participants and beneficiaries Effective 1 January 2014, the ACA increased via an internet address. Finally, the SBC and the maximum permissible award under Uniform Glossary can be requested in a an employer’s health-contingent wellness language other than English. programme from 20 per cent to 30 per cent of the cost of health coverage and further Rescissions of coverage prohibited increase the maximum reward to as much as 50 per cent for programmes designed to Insurance companies are now prohibited prevent or reduce tobacco use. from cancelling coverage just because of a mistake made by the insured or an employer on the application. Prior to the The Mental Health Parity and Addiction ACA, insurance companies could take away Equity Act of 2008 coverage, declare a policy invalid from the The ACA builds upon the Mental Health day it commenced, or ask an insured to pay Parity and Addiction Equity Act of back any money already spent on medical 2008 (MHPAEA). In general, MHPAEA care. An honest mistake or omission that requires that financial obligations, such

18 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION PROVIDING HEALTHCARE BENEFITS IN THE UNITED STATES: THE AFFORDABLE CARE ACT as copayments, care management, care Cadillac Tax effective 2020 tax year requiring pre-authorisation, and treatment In 2020, the ACA will impose a 40 per cent limitations (such as visit limits), imposed on non-deductible excise tax (‘Cadillac Tax’) on mental health and substance abuse disorder insurance companies and plan administrators benefits cannot be more restrictive than of self-insured plans for any health-related the ‘predominant financial requirements coverage if the combined employer/ and treatment limitations’ that apply to employee premiums exceed the threshold of substantially all medical/surgical benefits. US$10,200 for single coverage and US$27,500 ACA states that MHPAEA services are in family coverage (as adjusted). The excise now one of the ten essential health tax on high-cost health plans applies to the benefits categories and health plans in the amount of the premium in excess of this individual and small group markets that are threshold. The thresholds will be subject required to comply with the MHPAEA parity to cost adjustment increases based on a regulations to satisfy the essential health comparison against the cost for providing benefits requirements. coverage under the Blue Cross/Blue Shield standard benefit option under the Federal Health Flexible Spending Account (FSA), Employees Health Benefits Plan. Higher Health Saving Account (HSA), and Archer thresholds will be applied to workers in high Medical Savings Account (MSA) risk jobs and retirees age 55 and older if certain requirements are met. FSAs, HSAs, and MSAs, allow for distributions for qualified medical expenses. The ACA now increases the tax Conclusion for distributions for expenses that do not In the US, the provision of healthcare benefits classify as qualified medical expenses to to employees is subject to extensive new 20 per cent. Except for insulin, the ACA regulation under the ACA. As the ACA rules will not permit reimbursement of over- continue to evolve, US employers must keep the-counter drugs without a prescription a close eye on regulatory updates and actively from a doctor. Under the ACA, employees communicate those changes to employees. currently can contribute up to US$2,550 The increased cost of group health plans and (for 2016) to their FSA per year. This the design of group health plans to comply limit does not apply to employers. Also, with the mandates and contain costs are employers can permit their employees to the greatest challenges to US employers in carry over into the next year up to US$500 providing the best healthcare benefits for of their unused health FSA amounts instead specific needs their employee populations. of forfeiting the unused amount.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 19 NEW TECHNOLOGY AND WORK: ROBOTICS AND ITS POSITIVE/NEGATIVE IMPACT ON THE LABOUR FORCE

Garry Mathiason Littler Mendelson, New technology and work: San Francisco [email protected]

robotics and its positive/ Natalie Pierce Littler Mendelson, negative impact on the San Francisco labour force [email protected]

evelopments in robotics and probability that 47 per cent of current automation, wearable and American jobs are at risk of automation Dperformance-enhancing devices, within the next two decades. Already, we are telepresence and telemanipulation, and seeing apps replace call centres, travel agents cognitive computing are affecting consumer and assistants. With Amazon continuing expectations, production and jobs. Venture to improve product delivery speeds, and firms alone put US$923m into robotics states competing to attract more Amazon startups last year, up from US$341m in investment by loosening local regulations 2014 and US$194m in 2011. The global on drones, companies are seeking to robotics industry is expected to grow to over competitively provide enhanced shopping US$150bn worldwide by 2020. Combining experiences through artificial intelligence robotics with cognitive computing and and big data, combined with robotics. We big data has exponentially increased the have witnessed retail and service robots introduction of transformative technologies such as Pepper, Savioke, and Oshbot replace in the workplace. This will be a trillion dollar individuals while enhancing productivity and industry by 2025. As we experience what customer experiences. has been appropriately labelled the ‘Fourth Take, for example, SoftBank Robotics’ and Industrial Revolution’ and ‘Second Machine Aldebaran Robotics’ Pepper robot. Pepper Age’, what will distinguish this revolution is combines a touchscreen, microphones, that businesses and their workforces will have HD cameras, 3D depth sensor to allow a fraction of the time to adjust. There will be it to communicate verbally (in multiple massive job displacement along with massive languages) and by touch. Most impressively, new and downstream job creation. Experts it reads and responds to human emotion. divide regarding whether job creation will While the maintenance infrastructure exceed job elimination. However, it is certain does not currently exist to support large- that more employees will be displaced, hired, scale deployment in the United States, retained, and re-educated than at any other Pepper staffs numerous retail operations time in human history. The international in Japan and parts of Europe. As a brand bar will be increasingly called upon to guide enhancement tool, Nestlé Japan is using employers to comply with decades-old labour Pepper in approximately 1,000 stores to help and employment laws designed for workforces sell Nescafé machines. It is just a matter of and workplaces that are increasingly being time before Pepper or its rivals will find home transformed by technology in a global 24-7 in American retail operations as Pepper on-demand economy. hits the US market later this year. With For those curious about the likelihood capacity for reading, learning and adapting of jobs in their organisations becoming appropriately to customers’ emotions, replaced by automation and robotics in the feedback from consumers is largely positive next 10–15 years, the BBC and NPR websites and the enhanced retail experience will lead provide eye-opening online tools. These to larger integration of this technology once tools in a customised fashion highlight the the infrastructure for servicing is in place. well-published Oxford Martin study of a few To create an infrastructure capable of years ago – The Transformation of the Workplace supporting a company’s ability to integrate Through Robotics, Artificial Intelligence, and new technologies into its workplace, the Automation – which predicted with high right skill sets must exist, and this is a big

20 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY AND WORK: ROBOTICS AND ITS POSITIVE/NEGATIVE IMPACT ON THE LABOUR FORCE part of the problem. STEM majors such as the first quarter of 2016, setting a new record engineering and engineering technology and among opening quarters. computer and information sciences are in The speed with which this current high need and in high demand. According revolution will affect labour is unprecedented. to the US President’s Council of Advisors Renown futurist Ray Kurzweil, whose many on Science and Technology, economic predictions over the last decades have already projections point to a need for one million come to fruition, has explained that in this more STEM professionals than the US will 21st century, we will live 20,000 years’ worth produce at the current rate in this decade of progress measured in historical terms. if it is to retain its historical pre-eminence This century’s achievements in technological in technology. In addition, in 2014, the progress and significant improvements will Workforce Innovation and Opportunities be a thousand times greater than the pace of Act was signed into law with the support the 20th century. What this warp speed means of the Robotics Industry Association and for net job creation is highly debatable. A several other employer groups focused on new report from the World Economic Forum technology. The new law seeks to impose suggests the robot revolution could wipe out more accountability on the federal-state 5.1 million jobs by 2020. Another recent study training partnerships by requiring a ‘job- by the International Robotics Federation driven checklist’ to ensure that federal found that three to five jobs are created for money is used effectively and by providing each robot in use. ‘data-driven tools’ to give workers better Realistically, regulations, legislation and information about prospects. case law have no chance of keeping up Companies, indeed societies, must with the introduction of new technologies recognise how unprepared we are today. Many into our society. As such, integrating employers preparing for the new economy transformative technologies in the will want to carefully analyse whether early workplace will take compliance predictions communication and transitioning of skills regarding the ‘future norm’. Employers and opportunities can transform an existing must take existing law and at least issue spot workforce. Take for example, Whippany employment law risks. To assist employers Actuator Systems, a company that recently making decisions today that will be judged chose to introduce collaborative robots to its in the future, we formed our robotics, AI, existing workforce. While some employees and automation practice group focused on were sceptical that the robots could injure or employment and compliance. replace them, by involving employees in the The greatest challenges we foresee for communication and training involved with employers in robotics and automation include the integration of the new technology, the workforce displacement resulting from company has strengthened its workforce by mass automation which might trigger notice increasing capacity, while freeing employees requirements, severance benefits and retraining to work in more highly skilled areas rather obligations and can likely implicate collective than the routine tasks now performed bargaining obligations in unionised workforces through robotics. Amazon.com purchased because implementing robotics usually is a Kiva Systems, the maker of the bright mandatory subject of bargaining absent a clear orange robots that fill warehouse orders, for and unequivocal waiver of the right to bargain US$775m and is since then well on its way to over the subject. Potential varying technological becoming the second largest employer among proficiencies across different demographics Fortune 500 employers. will challenge employers attempting to retain For each of the prior industrial revolutions, a technologically capable workforce while there was major job displacement. Farmers were complying with anti-discrimination laws, about 70 per cent of the US labour force in including protections based on age. Another 1840 and only ten per cent by 1950. Today they challenge facing employers in this area will remain at about two per cent of the workforce. be the integration of robotic systems in Through each technological revolution, close physical proximity to human workers, however, greater prosperity and opportunity for potentially raised compliance challenges under more people followed. In the last 30 years, as Occupational Safety and Health Administration robotics manufacturing has grown, so have jobs. (OSHA), and various industry standards such as According to the Robotic Industry Association, International Organisation for Standardization over 7,400 robots valued at over US$400m were (ISO) and American National Standards ordered from North American companies in Institute (ANSI).

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 21 NEW TECHNOLOGY AND WORK: ROBOTICS AND ITS POSITIVE/NEGATIVE IMPACT ON THE LABOUR FORCE

Wearable and performance-enhancing artificial intelligence systems such as Watson. devices pose unique compliance challenges In addition, other forms of ‘Information and opportunities under workers’ Age’ artificial intelligence systems, including compensation, OSHA, wage and hour, and several startups and Google, are developing disability legal regimes. Take for example personal assistants in smart phone apps that exoskeletons aimed at enhancing human use predictive search techniques to anticipate performance. Over a million units will be what users need before they ask for it. in use during the next decade. Aside from To support wellness programmes, employers reducing the reliance on muscle power to may require employees to use smart phone perform tasks, such robots will greatly improve applications, like MyFitnessPal and Azumio, to workers’ speed, efficiency and productivity, track their medical information, such as blood as well as increasing their ability to perform pressure, weight, heart rate, activity counters, tasks that are heavier and more repetitive with and stress levels. Private sector employers a reduced risk of injury. Shipyard workers in are also increasingly using global positioning South Korea are using exoskeletons, giving satellite (GPS) systems to track their employees’ them super-human endurance and strength. whereabouts. However, such employers should Many disabled applicants or employees will be provide notice to employees that technology able to perform the essential duties of the job is tracking their location, allowing employees with the use of exoskeletons. to deactivate location tracking when they The increasing sophistication of telepresence are ‘off the clock’ and to avoid locations that and telemanipulation technology and the would reveal private information about them large-scale adoption of crowdsourcing when being tracked. In addition, technologies implicate questions about the extraterritorial that collect biometric information, such as application of state and national law. Recent fingerprints or facial scans, also present hidden controversies over the extraterritorial risks for employers. New York, for example, application of wage and hour law and the prohibits employers from requiring employees question of independent contractor standards to provide fingerprints. California’s Attorney for remote global workers are already legal General has claimed that app developers challenges in this space. These technologies and platform providers must comply with may also raise potential challenges to the California’s On-Line Privacy Protection Act viability of the current models of taxations and (COPPA), which requires that commercial social welfare and significant privacy concerns. website operators post a privacy policy on their The robotic technology’s audio and video website regarding mobile apps. COPPA does not recording functionality also may over-collect or appear to apply to employers that develop or collect information in a way that is not lawful. provide mobile apps for business purposes, only By way of illustration, California prohibits because the statute applies exclusively to online recording communications without the services offered for sale or lease by consumers consent of all parties to the communication if ‘for personal, family, or household purposes’. the subjects reasonably believe that they would However, COPPA arguably would apply if an not be recorded. Individuals in a location employer sold mobile apps to employees for subject to the use of telepresence technology personal purposes, such as to participate in a may not realise that the robotic technology wellness programme. is recording their communications, let alone As robotics, artificial intelligence, and consent to such recordings. automation become increasingly integrated Turning to another area, artificial into the everyday workplace, legislatures, intelligence, cognitive computing, and the regulators, and courts will face pressure to increasing use of ‘big data’ will raise first-of- reinterpret existing requirements or create their-kind issues relating to workplace privacy, new regulations that better reflect the impact discrimination and electronic discovery. IBM of these technologies. This will translate in a has created the ‘IBM “Watson” Engagement need for attorneys to become familiar with Advisor’, with a self-service mode that the new technology and the legal compliance permits customers who contact call centres issues created. For at least the immediate future, to interact directly with Watson by typing the unstoppable march of technology into the questions into a web browser or by speaking workplace will displace human workers, create to a speech recognition program. Call centre new jobs, and challenge the imaginations of operations that were once outsourced to the international legal community to define India and the Philippines may return to and protect human rights as man and machine the US, only to be handled by robots and increasingly work together.

22 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION FACING CHANGE – REGULATION AND TECHNOLOGY

Laura Lobb Pinsent Masons, London Facing change – regulation laura.lobb@ pinsentmasons.com and technology

New challenges for employers in the Impact of change financial services industry There are two types of change and the impact Innovation and change within business of each looks very different. The first has is unavoidable. It can lead to improved been happening for some time within the service delivery for customers, and increased financial sector: small developments and productivity and for automation allowing businesses to carry out employees. However, change invariably also the same tasks faster, better and cheaper. The leads to uncertainty and the financial services second is significant disruption, changing the industry in particular is subject to significant very essence of the service and the products and competing changes creating just such provided, such as crowd funding and peer-to- problems and challenges. peer lending. Financial services providers have been The prevailing opinion is that while the subjected to increased levels of regulation as changes will be substantial, the institutions a result of intense public scrutiny following are likely to survive. They may survive because the financial collapse which began in 2007/8. they are too big to fail, or because customers The drivers behind this amplified regulation ultimately prefer the security offered by an are increasing personal accountability within instantly recognisable brand name, but this is financial institutions and restoring public unlikely to provide significant protection. The confidence in their badly damaged reputations. more interesting questions revolve around Alongside this change in the regulatory what those institutions will look like as the landscape, ‘disruptive technology’ is on changes unfold and what steps will they need the march, with its sights firmly set on the to take to evolve. financial sector. As always, we have the The first challenge is recognising that the advantage of hindsight and have witnessed institutions may not be sustainable in their the impact of disruptive technology in other current form. The second will be deciding industries: the apparently unavoidable demise how to react to this challenge, and the third of hard copy newspapers and the power will be implementing change. How the shift from traditional broadcasters to online institutions react to these changes will have a streaming services. Airbnb and Über are significant effect on the workforce from the grabbing the headlines and looking to change top to the bottom. markets that have been left untouched for decades. What lies ahead for the financial Wider workforce implications services sector? In the early 2000s I wrote my university A key issue is whether the current workforce dissertation on the impact of emerging online is up to the job at hand. Research into the music distribution on the music industry impact of further integration of technology and tried to understand the possible legal, carried out within the sector has produced social and economic impact that it may have. varying results, but all studies predict a Working now with financial institutions and marked decrease in the workforce size within tech companies, I can see many parallels the sector. Automation will lead to a large between the music industry in 2000 and the proportion of the more basic processes that financial services sector in 2016. are currently performed by employees to The combined effect of regulatory and become software-based/driven. Widespread technological change will be significant for use of outsourcing has led to certain the incumbent providers in the financial elements of financial services already being services industry in many ways, but I will be commoditised, but further change and focusing on the challenges that they will face development is inevitable. as employers, and the possible responses to The historic response to a reduced need for those challenges. employees is redundancy and restructuring.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 23 FACING CHANGE – REGULATION AND TECHNOLOGY

In the current circumstances, there will be Is the leadership model fit for purpose? particular challenges to this approach. The The historical ideal of the visionary, but first will be cost – the number of employees solitary, CEO leading an organisation appears affected and the likely demographic of the increasingly out of synch with the new world. impacted workforce have significant cost Driving meaningful transformation in an implications. Those employees that cannot be organisation, changing values, objectives, redeployed may have substantial continuous methods and skills, is not an easy task. It service behind them with the enhanced is multifaceted and requires expertise in a redundancy entitlements that it brings. number of different disciplines. A leadership In addition, the cost of terminating the team faced with the sort of disruption which employment of large swathes of the workforce is on the horizon will need people who are will not be an isolated cost; the replacement skilled at spotting the relevant developments technology will come with its own associated and able to accurately assess how those costs and necessary supporting workforce. It changes will affect the business. A successful may be possible to retrain and redeploy some team will be able to quickly evaluate how of the affected staff, but the different skills best to react to change, judge the potential required and the speed of change could make risk and be able to push forward. Crucially, this extremely challenging. Slimming down the leadership will have to be able to do all the workforce also cannot be the solitary this while having the ability to motivate and aim of financial services firms and will need mobilise the workforce as a whole. In order to be balanced against the loss of historical to make a success of any change, a positive knowledge – long-serving employees will approach to engagement with the workforce hold critical business information and will is indispensable. form part of the corporate memory. There The leadership will need to move fast will also be a high number of employees with and demonstrate its willingness to embrace finance-specific skills that cannot be readily change. One element of this may be replaced with technology and this part of the de-stigmatising failure. One of the key workforce will need to be kept onside. One of features of successful tech companies is the challenges facing management is to weigh their ability to develop in a much more up the costs and benefits of redundancies organic way than the more lumbering versus large-scale up-skilling of the existing incumbent institutions. Their attitude workforce, and to decide upon the most cost towards trying, failing, learning and moving effective and operationally efficient path. on is notably different to the approach There is also a wider issue of cultural of large organisations which historically change. A generation ago, the sharpest invest significant time and resources in risk and most entrepreneurial minds would be assessing, planning and mobilising. The drawn to the financial sector as the freedom risk is that such an approach may result in and rewards on offer were very attractive. falling behind the more agile innovators. There are now a number of factors working against recruitment of these individuals in the market – the reputation of banks Working with the disruptors is at an all time low, the new regulatory To keep up with customer demand and the environment means scope for innovation changing market, it seems inevitable that the and autonomy is limited and the financial big institutions will therefore need to engage rewards are not as obviously forthcoming with the new ‘fintech’ businesses. There are as they have been in the past. In addition, a number of options available to established the career objectives for millennials also firms ranging from acquisition to partnership apparently have changed – work/life working. As always, with these solutions come balance, interests outside of the workplace, a number of challenges. family life and travel are more explicitly The simplest solution for large institutions balanced with financial reward. To this may be to acquire the startup organisations generation of employees, the financial displaying the skills and technology they sector appears to be relatively unattractive need. But startups may not be looking in comparison with, for example, tech firms. to be acquired – they value autonomy, Unless these issues can be addressed, these flexibility and speed. Once integrated into talented individuals with the necessary a large financial institution, the regulatory skills may not be there to take the financial framework may kill those key values. There services industry forward.

24 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION THE ON-DEMAND ECONOMY AND THE IMPACT ON EMPLOYMENT LAW

are also big challenges with integration with be unacceptable to individuals used to the existing workforce. The typical bank working in an environment in which they employee and the typical start up employee can move from project to project and look and think very differently (at least in company to company unrestrained. In an popular imagination). How does leadership era where many of the skilled individuals get all of these employees to engage with have often used open source coding, the a common goal? A traditional ‘one size fits ideas of restricting employees may be all’ approach to employee engagement outdated. For example, in California there might not work. Integration and change is strict ban on non-compete clauses in of this nature can lead to an upward employment contracts on the basis that trend in employee relations issues which they curb innovation and investment – should be carefully managed as businesses the UK government has just commenced frequently make the mistake of focusing on a consultation to collect opinion as the practicalities of the integration process to whether a similar model should be and miss the warning signs of bigger introduced in the United Kingdom. A looser employment issues. approach to confidential information and An alternative to acquisition is to engage client conflicts is a major cultural challenge with the other organisations on a project- to financial services institutions. by-project basis. Contractor arrangements, Notwithstanding the merits of increased partnership working and joint ventures are flexibility, this level of freedom looks all potential options. However, the usual unrealistic (and potentially dangerous) in the commercial arrangements underpinning these financial services industry. However, there models may not be feasible or appropriate with are certainly lessons to be learnt from the smaller tech firms, as they may be unwilling or technology industry in terms of the working unable to provide standard indemnities or ill- environment for employees. Implementing equipped to deal with lengthy legal documents these lessons could be key to financial recording the arrangements. institutions integrating disruptive technology The ‘proprietorial’ approach to staff into their businesses and attracting the is also unlikely to work – the usual non- brightest and most innovative employees who compete and restrictive covenants may will deliver the future to their companies.

Daniel Ornstein Proskauer Rose, London [email protected] The On-Demand economy and the impact on employment law*

Introduction transportation to live entertainment, is provided at the click of an app. In most The ‘On-Demand’ economy is growing cases, the service provider engages an and will continue to grow exponentially. individual from a pool of workers on standby This was starkly illustrated by a 2015 report to carry out those services for the end-user. by Pricewaterhousecoopers (PwC) which For many workers, becoming part of the on- concluded that the five key On-Demand sectors demand pool is becoming the new normal. – travel, car-sharing, finance, staffing and However, a feature of this new model is that entertainment – had the potential to increase the core elements of the typical employment global revenues from roughly US$15bn in 2015 relationship that have traditionally been to around US$335bn by 2025.1 inseparable, such as fixed hours, fixed Under the ‘On-Demand’ model, holidays, a single place of work and a certain just about every service imaginable, wage, are being fragmented and repackaged from cleaning to graphic design, from in an array of combinations.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 25 THE ON-DEMAND ECONOMY AND THE IMPACT ON EMPLOYMENT LAW

This article assesses whether employment The difficulty for current legislation to laws are able to keep up with the workplace deal with atypical workers disruption created by the on-demand economy. In most jurisdictions, most legislation dealing with the worker relationship is based on a The challenges with current legislation conceptual framework that assumes a typical and addressing on-demand workers employer employee model rather than the less rigid model that is prevalent in the on- There are a number of challenges with the demand economy. current legislative framework when it is applied For example, European legislation such as to the on-demand workforce. These include: the Directive that legislates • the difficulty in knowing where the the seemingly simple issues of pay, hours, boundary lies between an employee and rest breaks and holiday, has difficulty an independent contractor, which in grappling with questions that a non-lawyer turn creates uncertainty as to the rights would assume to be straightforward. By way enjoyed by on-demand workers (who of illustration it has taken many years of so often occupy the no man’s land of litigation to resolve the following: the independent contractor employee • the holiday entitlement of offshore oil continuum) and the obligations owed to and gas workers whose working shifts are them by the service provider; spent between a number of weeks’ offshore • the inability of current legislation to deal followed by time between shifts onshore with workers traditionally classified as (Russell and others v Transocean International atypical but who are increasingly the norm Resources Ltd);2 in the on-demand economy; • the time an on-site residential carer spends • the need to balance the desire to promote working (see Davies v London Borough flexibility against the need to protect the of Harrow, MacCartney v Oversley House vulnerable against exploitation; and Management, and Hughes v G and L Jones (t/a • the need for certainty, especially to ensure Graylyns Residential Home));3 businesses have certainty as to their costs • the paid holiday entitlement of those on and obligations and workers have certainty long-term sick (see cases including Stringer as to their entitlements. and others v HM Revenue & Customs, Pereda v Madrid Movilidad SA and KHS AG v Schulte);4 The independent worker employee and distinction • how to incorporate commission and overtime into holiday entitlements (see Bear For many years and in many jurisdictions Scotland Ltd and others v Fulton and others, defining the boundary between employees Lock v British Gas, and Patterson v Castlereagh (who enjoy multiple benefits and rights by Borough Council).5 reason of their employment status) and If the legislation already has difficulty independent contractors (who in most applying itself to these relatively jurisdictions enjoy fewer rights) has often straightforward atypical situations, the been complex and uncertain. proliferation of the on-demand economy is This difficult distinction has become all the only going to amplify these difficulties when more problematic with the rise of the on- existing legislation is applied to on-demand demand economy. This is due to the increasing workers whose working arrangements take fragmentation of the core elements of the atypicality to new heights. Examples of issues working relationship and the way in which that existing legislation is ill-equipped to this fragmentation blurs the lines between address with clarity include: employment and contractor status like never • Are on-demand workers entitled to holiday before through creating ever-more complex pay and if so, how is it calculated and when fact patterns. That this is the case is starkly must it be paid? borne out by litigation around the world • In what circumstances is the time between where workers, who provide services in the finishing one job and starting another on-demand economy and have been treated ‘working time’ and does this depend on as independent contractors, are asserting their the willingness of the worker to work right to be treated as employees. Moreover, this between jobs? issue will become increasingly significant as • How is calculated for a worker the on-demand economy, with its reliance on whose intention is to take a holiday atypical workers, continues to grow. between jobs?

26 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION THE ON-DEMAND ECONOMY AND THE IMPACT ON EMPLOYMENT LAW

• What notice of termination is an on- of dependent self-employed workers varies demand worker entitled to? enormously…. Despite dependent self- • In what circumstances are on-demand employed workers being more easy targets workers covered by legislation protecting of abuses in working hours and facing fixed-term workers, part-time workers, or greater difficulties in organising their task even agency workers? (As to agency workers, , this is not necessarily the case… it should be noted, for example, that under Dependent self-employment may represent a the UK’s Agency Workers Regulation 2010, better solution than being unemployed or in a ‘temporary workers agency’ is defined as ‘a irregular employment. Particularly in creative person engaged in the economic activity, occupations, perceived job satisfaction can public or private, whether or not operating occur despite a precarious status and/or low for profit and whether or not in conjunction or unstable income.’ with others of either of: supplying individuals Achieving the right balance between to work temporarily for and under the flexibility and exploitation is complex. Careful supervision and direction of hirers; or paying thought is required to create effective criteria for, or receiving or forwarding payment for, that can distinguish between, on the one hand, the services of individuals who are supplied the genuine freelancer who accepts, whether to work temporarily for and under the tacitly or otherwise, a ‘new bargain’ where supervision and direction of hirers…’. It is they trade in their historic employment rights not at all clear whether or not certain service for true flexibility and, on the other hand, an providers would fall within this definition.) on-demand worker who has made no such • Is an on-demand worker entitled to bargain and is most in need of protection. The compensation on termination of a scale of the task is illustrated by the difficulty particular job? of distinguishing between employees and self- While it is possible to construe current employed contractors in the analogue world legislation to derive answers for all of these and accepting that the complexity of the on- questions, those answers are not clear and it demand working relationship compounds the is easy to envisage that they will be subject to difficulty of finding criteria capable of drawing litigation and therefore uncertainty. This is a workable distinction between the happy symptomatic of the fact that the legislation freelancer and the exploited worker. was not drafted with the atypicality of on- demand workers in mind. The need for certainty of costs and rights Perhaps the most unsatisfactory results of The need to balance flexibility and the current legislative inadequacy is that on- exploitation demand service providers have no certainty For some workers, the new way of working as to how much it will cost to engage workers. through the on-demand economy and in The additional cost to a business of an particular the flexibility it brings is liberating. individual being classified as an employee The worker can work for multiple businesses, can be up to 40 per cent greater than the enjoy flexible hours, work from where they cost of an individual being classified as an want without wasting time on travel and take independent contractor. Given that many on- long breaks between projects rather than demand businesses are in their early stages, being confined to a fixed amount of holiday this uncertainty can be a major obstacle every year. to raising capital and literally can become However, the flip side of this flexibility is a business killer. Moreover, given that the that the relationship between workers and on-demand economy is an area where there service providers is often structured in such is enormous scope for economic growth a way that workers are presumed not to be and the costs of engaging workers make employees; and sometimes in circumstances up a significant proportion of business where workers within the pool are those most overheads, this uncertainty is a factor that in need of employment rights. may be severely impeding global economic That such a range of workers exists growth at a time when it is needed. within the on-demand economy was noted The corollary of this uncertainty is that in a paper entitled Social protection rights of those engaged in the on-demand sector economically dependent self-employed workers lack certainty as to their entitlements published by the European Parliament in and rights which in turn can destabilise 2012,6 which stated that ‘the actual situation working relationships.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 27 NEW TECHNOLOGY AND NEW FORMS OF ATYPICAL WORK: CHALLENGES AND RISKS FOR MULTINATIONALS

Is legislative action required? freelancer who tacitly accepts the bargain of flexibility in lieu of employment rights can be By reason of the factors set out above, there treated as they are now without undermining is a growing body of both workers and the economic basis for the bargain)? reasons that militate against standing-by • What rights would an on-demand worker passively as the workforce changes, while enjoy? Would new legislation need to the framework for legislating the rights of be created setting out their rights, or workers remains static. Despite this, very could their rights be based on expressly few jurisdictions have made any substantive including or excluding on-demand progress in creating a framework that workers from existing legislation? captures the new realities of the on-demand Without addressing these and other similar economy. There needs to be serious debate issues in a cohesive and coherent manner, as to whether the current framework for the very real concern is that we will sleepwalk employment law will be fit for purpose as through the digital age reliant upon more and more workers join the on-demand inadequate analogue legislation. economy. In particular, consideration needs to be given to the following: • Does a new class of ‘on-demand worker’ Notes need to be recognised? * I would thank each of Salvador del Rey of Cuatrecasas, • How would that class be defined? For Gonçalves Pereira, Astrid Helston of Stibbe and Stefan example, could there be certain criteria Lingemann of Gleiss Lutz for their valuable insights on this topic. that need to be satisfied that create a 1 See: www.pwc.co.uk/issues/megatrends/collisions/ rebuttable presumption that an individual sharingeconomy/the-sharing-economy-sizing-the-revenue- is an ‘on-demand worker’ and could this opportunity.html. be combined with requirements for service See: www.europarl.europa.eu/RegData/etudes/etudes/ join/2013/507449/IPOL-EMPL_ET(2013)507449_EN.pdf. providers to be registered as an entity that 2 [2011] UKSC 57 engages on-demand workers and/or for 3 [2006] UKEAT 0500_05_3101; [2008] UKEAT workers to agree to be classified as on- 0159_08_0310. demand workers? 4 [2009] ICR 932; Case C-277/08 [2009] ECJ; Case C-214/10 [2011] ECJ. • Could on-demand workers elect to opt out 5 [2014] UKEATS/0047/13/B1; Case C-539/12 [2014] ECJ; of their rights and if so how (so that the [2014] NIIT 1793_13IT.

Vittorio Torazzi Studio Legale Pavesio e New technology and new forms Associati, Torino vittorio.torazzi@ of atypical work: ‘crowdsourcing’ pavesioassociati.it Marzia Galleano and the challenges and risks for Studio Legale Pavesio e Associati, Torino multinationals marzia.galleano@ pavesioassociati.it

Background forms of the so-called ‘by-project work’. The aim of the law was primarily to reduce the forms of Starting from 1995 and to a greater degree unregulated work by granting a certain degree from 2003, the Italian legal system has of protection (appropriate salary, leave and struggled to find new forms of employment in case of termination) and social to differ from the two traditional types of security coverage in terms of funds and contract, that is, self-employed as opposed to minimum welfare solutions. Needless to say that standard employment. This was originally done the level of protection granted to those workers through the introduction of atypical forms of was lower than the regular protection that the employment, by self-employed workers who employment law system offered to standard have a long-lasting and coordinated relationship employees and, likewise, the social security cost with a specific employer ‘collaborazioni( coordinate was far reduced. e continuative’) which was then amended in the

28 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY AND NEW FORMS OF ATYPICAL WORK: CHALLENGES AND RISKS FOR MULTINATIONALS

The experience of the first few years of The labour law system has been largely implementation of these types of contracts influenced by this trend and, in particular, showed that they were widely used, though industrial relations have been heavily engaged not always in compliance with the legal in trying to update traditional organisational requirements imposed by the system. systems. Trade union associations and Particularly, the great success of these employers’ organisations have negotiated, forms is to be seen in the employer’s at different levels of the contractual system, interest in staffing positions – especially new ways to combine workers’ rights with the in the service providing companies’ need to stay competitive through – to create a lower social cost and a technological development. The companies’ higher degree of flexibility (specifically incorporation of IT systems to their daily for termination procedures and costs). business will cause: (1) material investments; However, de facto these workers were widely (2) a great amount of time to be spent by treated as standard employees in terms of the corporate functions; and (3) a totally hierarchical relations, working hours and new approach to work activities that requires control over their activity. In brief, while the appropriate training for employees. relationships were formalised as contracts These dramatic changes in recent years with independent contractor collaborators, have been coupled with the drawbacks of the the true relationship put in place was that economic crisis. This is mostly true in mature of standard employees. This has resulted in markets like continental western Europe massive litigation based on misclassification where – in order to ensure the sustainability of employment relationships, mostly when, of well-developed welfare states funded upon termination, the collaborators seek by public agencies – the working age for the same level of protection granted to employees has been and is being constantly standard employees (severance indemnity, increased and it is about to hit the age of 70. indemnification in case of wrongful It is self-evident that the longer the [over] , pension, etc). aged employees remain in the workplace, the more burdensome the introduction of new working methods will be and which The 2015 Jobs Act are characterised by fast-moving and always Throughout the years, Parliament’s attempt more sophisticated technologies. This to discourage the use of these new types development on the one hand implies the of contract by way of reducing the social need to recruit new employees with new skills charges gap with standard work and better and qualifications into the labour market, compliance with employment law was but on the other hand this need clashes with not achieved. Based on such reasons the the rigidity of the system, where employees’ recent extensive reform of employment has been significantly delayed. law introduced by the Renzi Government – generally known as ‘The Jobs Act’ – adopted The impact of new technologies on a new approach. The Jobs Act significantly employment law reduced the forms of atypical employment (for example, the so-called ‘by-project The challenges brought by the widespread work’ was cancelled) by introducing greater use of technology have compelled national flexibility and lower costs for standard parliaments to reconcile more traditional employment, especially with regards to unfair legal systems with the new needs of fast- termination. Therefore we have come back moving economies. This has involved not to a situation where standard employment is only private corporations, but also legal seen as the main type of contract as opposed and the public administration to self-employment. sector. The Italian Government is facing this challenge through a number of measures aimed at developing the use The impact of new technologies on the of technology in all environments of our labour market lives. The interaction between lawyers and For many decades, the introduction and the courts is now predominantly held with development of new technologies in the online communication, which includes the workplace has caused employers to rethink filing of pleadings and defences; people are the overall organisation of their business and, now encouraged to keep their relationship consequently, its impact on the workforce. with public authorities through dedicated

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 29 NEW TECHNOLOGY AND NEW FORMS OF ATYPICAL WORK: CHALLENGES AND RISKS FOR MULTINATIONALS

telecommunication systems. This is a in the 1940s, the grounds of the system complete innovation for individuals in their have to be thoroughly reconsidered. By relationship with public authorities. The way of an example, under the Italian Civil public clerks are also required to change Code the definition of employee implies their day-to-day working activity, by availing that an individual makes his/her working themselves of the new technological tools. energies available for the benefit of the Specific legislation has been recently passed employer (section 2094). No focus is in order to reform the public administration put on the outcome of the activity and sector, also through the reduction of therefore, performance for many years bureaucratic procedures and through the was not considered by the Italian courts adoption of an almost complete IT, online as an essential element of the obligations and paper-free approach and procedures. arising from the employment relationship. Nevertheless, this approach has changed throughout the years due to foreign cultural Smart work influence and the presence and interaction The Italian Parliament is also considering with multinational corporations. the private sector and these days a draft While performance has so far been statute is under discussion in the Assembly. addressed mainly as an incentive for variable Smart-work regulation is envisaged to be compensation, the introduction of smart work passed shortly. The main goal of this draft would entail a significant change. A new system, law is to reshuffle the traditional categories which is mainly focused on the attainment of of employment law, considering that new specific goals rather than on the activity which is technologies would allow employees to performed for a certain number of fixed hours adopt more flexible ways of working, and at and for a fixed salary, places employment the same time facilitate the personal work- under a totally different perspective and life balance. This is especially true for white requires that the main aspects of the collar workers. Through the application employment relationship are reshuffled. of sophisticated intranet systems they will no longer be required to work at their own Crowdsourcing desk at the company premises, nor will they be required to comply with fixed working In the scenario described, crowdsourcing hours. Remote working would therefore be appears to be a new frontier of the working encouraged but this of course entails new relationship. The experience so far is not challenges for the coordination of this new nationally based; rather it originates from the way of working as opposed to the traditional international interaction opportunities that categories of employment law. This would, are offered by newly developed technologies in particular, influence how the employer and principally by the internet. The legal provides directions to its workforce, investigation of the phenomenon has not monitoring procedures, compensation been developed yet in Italy and therefore, systems, health and safety compliance, each project would need to be carefully regulation of working schedules, leave evaluated and the classification of the various and holidays, interaction of working teams relationships would need to be reconciled and coordination of their tasks, personal with the existing legal categories. presence at the company premises if needed As it is conceived so far, it seems that or requested, etc. These measures focus crowdsourcing should fall within the scope on a different interpersonal relationship of self-employment, rather than a standard with employees and imply a higher degree employment model. The voluntary approach of trust and confidence by employers on of the collaborator, the implied high skills of employees’ approach vis-à-vis corporate the contributor, the economic reward for the needs with the aim to achieve more efficient contribution (which normally occurs only if results, rather than to focus on the working certain conditions are met), may imply that activity itself. the activity is carried out by professionals, This matter might turn out to be a rather than by simple workers or employees. well-known issue in the jurisdictions This is particularly true if one considers that where technology has developed earlier. the most relevant crowdsourcing experiences Nevertheless, it shall be considered that are developed in the scientific environment. in countries such as Italy, where the Nonetheless, future crowdsourcing principles of employment law were set developments will certainly raise the need for

30 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGIES: CORPORATE FRAUD AND EMBEZZLEMENT – CORPORATE WHISTLEBLOWING POLICIES

the players in the legal – and in Although, at this , we may not be able particular for those engaged in HR areas – to to predict how crowdsourcing will impact address a number of new issues. More precisely the Italian legal system, we may nonetheless we will have to face a significant degree expect that employment law will likely of challenges such as defining, inter alia, continue to react positively and adjust to reciprocal obligations, grounds and conditions the organisational and production changes for compensation, economic reward for time arising from the technological innovations and effort spent on the project, the tax regime, by increasing the level of flexibility of the applicable social security and welfare rules. employment law system.

Paola Pucci Toffoletto De Luca Tamajo e Soci, Milan New technologies: corporate [email protected] fraud and embezzlement – corporate whistleblowing policies

Economic growth, company fraud and the reality of fraud and wrongdoings (for capitals: a peculiar triangle procuring or managing business) is an issue that is very much at the core of the Italian Statistics indicate that on average in 2014, public debate and public conscience. We privately owned companies lost five per cent often hear of missed opportunities because of of their revenue to fraud. A 2014 Global a lack of trust in proceedings; we often read Fraud Study carried out by the Association of in the papers about service contracts being Certified Fraud Examiners reports that the bought, procedures being ignored, friends cost of corporate fraud worldwide amounts to and family being thrust forward without €3.7tn per year. reason or merit. Figures and estimates aside, corporate fraud It is hard to tell where the truth lies, if it and related cases have increased in the recent is reality or perception that takes the lead past. It can be argued that a growing market here. What is beyond doubt is that there is an is more likely to be plagued by fraud than one issue that needs to be addressed. Companies, in difficulty. On the other hand, the presence employees, regulators and the government (and amount) of fraud has a direct effect itself have been taking note of this. It seems on the dynamics of the market: an economy like now is the time to take action. considered vulnerable to embezzlement and fraud does not attract investments given that any money invested may not be repaid The camera never lies if the market is influenced by crime. Fair Italian employment law has been profoundly competition cannot easily compete with amended, reformed and discussed over the unfair practices. last few years. Starting with an extensive Is fraud the cause or effect of the economic employment and pension reform in 2012, situation? It is neither easy nor particularly the Italian Parliament has passed a series useful to assess where the problem begins. of new laws, which have touched upon What is important to state is that fraud the fundamentals of employment and (committed by both employees and agents in represented a turning point for the labour general) is a major problem for companies market (and for all related players, including and corporations across the globe. employment lawyers). The series of reforms reached an ending of sorts at the end of 2015, The Italian job: fraud, embezzlement and although the process can still be considered foreign investments as ongoing. For the purpose of our reasoning here, one provision in particular has been Italy is not immune from the situation briefly significant. In September, the general rule outlined above: both the perception and

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 31 NEW TECHNOLOGIES: CORPORATE FRAUD AND EMBEZZLEMENT – CORPORATE WHISTLEBLOWING POLICIES

on long-distance was policies. IT managers are needed to explain reformed; the provision in question was a how tools work, how systems are connected long-standing one: the rule of law (Article 4 and how monitoring could be carried out. of the Workers Statute) dated back to 1970. Legal experts are needed to translate the More importantly, the provision, which dealt policy in a direct manner, to help employees with employee monitoring, was passed with to understand what is asked of them and to wording that made reference to surveillance make the rules simple and understandable. cameras. The very same wording was then All relevant functions are needed to actually interpreted by case law to apply to all devices implement the change. Comprehension is the forming the core of modern company life: key word here. From now on, there will be no computer networks, smartphones, MDM hidden or covert monitoring of employees systems, clouds and instant messengers. The in Italian workplaces. No one will be able to new law – which has been in full effect since claim: I didn’t know! September but is still in the early stages of Of course it is not that simple: it never being interpreted and applied by all relevant is. There are systems and tools that are players – gave employers a new possibility: subject to union agreement or public office to police and regulate the immaterial space authorisation before being installed (in occupied by devices and data in order to general: those devices not used to perform manage employment relationships. the duties covered by the ), there is still a ban on direct and continuous monitoring (spy software, non- Codes and compliance: not just corporate stop recording of logs and data), there is a words found on the company intranet new balance to strike. What can already be The reform on company devices, systems said is that it is possible to organise, share and IT infrastructures opened a door that and implement a new and more productive had been formally closed for nearly 50 environment, also with reference to IT tools years. Under the previous rule of law, long and places, which were only hinted at before distance monitoring through electronic under Italian employment legislation. It is devices was prohibited, but now the general a place in which the war against corporate prohibition is gone. In its place is a new set fraud can be fought: much of the fraud of requirements, which was likewise unknown committed by employees start, end or at least to Italian employment law up until this point. touch upon data stored and managed in The main one is information: the employer company systems. has a duty to inform its employees of the tools they are using, how they work and how Data protection and protection form they may be monitored. The information data leaks: digital forensics and has to be substantial and, above all, clear. employment law There is no room for vague, complicated, or misleading codes of conduct. The new policy Any act carried out on data stored in on tools and monitoring required by Italian company systems amounts to data processing employment law must fulfil very specific under privacy law. Data protection is the requirements, and will serve a very substantial second pillar considered by the new law on purpose. Any action taken without having monitoring for defining the requirements for an adequate policy in place will be null and lawful action on the employers’ part. There is void (and could even result in sanctions for a direct provision that imposes the respect of the employer). This means, for starters, that data protection laws for employee monitoring the policies should be drafted in Italian. This and subsequent action to be deemed also means that the content must be tailored legitimate. At the same time, data protection to the actual systems or tools operating in is at the core of an EU-wide reform process the company, which, in turn, calls for the (the new General Data Protection Regulation performance of a due diligence process on is in force and will be applicable in all systems and tools; something that will likely be member states in May 2018). All of this calls difficult if left only to HR or legal functions. for special attention (and strict discipline) when it comes to gathering data for evidence of misconduct (or fraud) by the employee. Drafting the policies: a real group effort Wrong, hurried or non-documented processes The new law calls for all company functions may end up in the acquisition of data that to cooperate in the drafting (and enacting) of is clear but cannot be used in a procedure

32 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGIES: CORPORATE FRAUD AND EMBEZZLEMENT – CORPORATE WHISTLEBLOWING POLICIES to discipline an employee or in a court of protection of whistleblowers (‘disegno di legge’) law. Therefore, a new set of possibilities and is being discussed in Parliament (and has requirements has emerged for employment been for a while). The debate goes on but no lawyers assisting in these matters: on one final steps are being taken so far. hand, data protection has become a necessary What is certain is that the future Italian law tool (and area of expertise) for assisting on whistleblowing will have to factor in EU employers (or defending employees); on the laws on data protection, the recently approved other hand, processing data and ensuring that EU Directive on the protection of trade it will not be challenged (or refuted) in court secrets, and the law and policy requirement has called for a new awareness of technical on employee monitoring discussed above. procedures for data storage, retention and preservation. In cases that have been built on Policies versus frauds: the new battlefield data sourced from company IT systems, the for companies and advisors evidence submitted during employment trials will be a crucial point for all parties involved There are few very clear points when it comes in the near future. to corporate fraud and corruption. The first is that fraud committed by employees is a critical problem (as a result of its cost, the associated Human (re-) sources: blowing the whistle losses and the negative effects on the system) in Italy and a serious misconduct (that could justify Of course, evidence of fraud does not dismissal). The second is that fraud can be derive only from data stored in computers prevented with appropriate procedures and or smartphones. There is one other major the cooperation of all relevant company source of potential insight on wrongdoings: functions: security, IT and HR. The third is the employees themselves. The whistleblower that policies, information and data flow will is a common figure in many jurisdictions; play a major part in building a positive setting their protection has long been subject to for monitoring and protecting company specific rules and, more importantly, their secrets, activities and goods. activity is recognised both by the legal and the However, there are a few unclear points national system at large. The Italian situation when it comes to corporate fraud and is slightly different. In Italy there is no general corruption. The first is that it is hard to legislation on whistleblowing. The protection prevent and regulate something that is, in of employees reporting wrongdoings or essence, illicit and hidden. The second is that illicit activities is either contractual (internal time and resources must be allocated carefully policies, often coming from the headquarters to prevention and analysis. of multinational companies) or left to The new framework emerging from Italian general employment law provisions. The employment law offers possible solutions and only mention of whistleblowing in an Italian aims at a comprehensive overview of possibilities piece of legislation deals with public sector and procedures. Today, a well-drafted policy, a employees and was enacted in 2012. It is a good due diligence process on company systems very general provision that was approved and tools and a clear communication issued to within the context of anti-bribery legislation. the workforce are the requirements for effective This law does not cover private sector HR action, both with regard to day-to-day and employees, who can currently blow the whistle crisis management. without expecting to benefit from specific It is now a matter of building a new system. legal protection. A reform proposal for the The rest is (or might be) plain sailing.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 33 NEW TECHNOLOGY AND WORK: ROBOTICS AND ITS POSITIVE/NEGATIVE IMPACT ON THE LABOUR FORCE

Ignacio del Fraile López New technology and work: Gómez Acebo & Pombo, Madrid robotics and its positive/negative ifraile@gomezacebo- pombo.com

impact on the labour force Diego Rizo Trabucchelli Gómez Acebo & Pombo, Madrid Introduction itself makes it possible to anticipate that drizo@gomezacebo- one of the main consequences which We currently live in an economic time of pombo.com infers from the integration of robotics in globalised markets in which companies the company’s production process is the – irrespective of their size – are obliged substitution of traditional manpower for on a daily basis to face up to cut-throat electronic mechanisms, capable of carrying competition. This is the reason why obtaining out operations ‘which could only be done competitive advantages against entities before by people’. that operate in the same sector has been It is undeniable that, in certain market converted into one of the main concerns of sectors – especially in those aimed at industrial all entrepreneurs. production – the use of machinery and other How can one achieve the aforementioned technologies configured to take over certain advantages over competitors? If we look at mechanical, routine or even dangerous or the remarkable evolution that companies hazardous tasks for employees, could report have experienced in the last few decades, high profits for the employer, among which we one of the answers to this question seems feel it advisable to highlight: very clear: by means of investing in new • optimisation of processes and production technologies and implementing them in techniques; normal business operations. • increase in productivity; Thus, as a consequence of the search • savings in costs and therefore, attainment of for competitive advantages, the method of a higher profit; organising the work and the production • achievement of a stable production model; techniques have been the object of constant and modernisations in the last few years, which • decrease in the accident rate of those has derived in a clear transformation of procedures which are potentially vulnerable the working market, of employment and of to working accidents. labour relationships. Likewise, even though it is obvious, it The purpose of this article is to carry out a is nonetheless noteworthy to point out brief but complete analysis of the implications that machines/robots do not give rise to derived from the introduction of new employment disputes. technologies in the usual dynamics of the Ultimately, those companies that introduce company (focusing our study on the increased robotics in their production line will be use of robotics) and its impact – both positive capable of improving their position in and negative – on manpower. Although the the market to obtain certain, competitive opinions, statements and comments are advantages in comparison with those generally drafted from a local perspective (that companies whose activity is sustained by is, at a national level), many of them could be classical or traditional production systems. extrapolated to other legal systems.

Impact on the staff General considerations on robotics The Dictionary of the Royal Academy of Measures based on technical causes that could the Spanish Language states that a robot is negatively affect the employment conditions of a ‘machine or programmable electronic the staff ingenuity capable of handling objects and The Spanish legislator, conscious of the carrying out operations which before could constant evolution of business, has tried only be done by people’. The definition to introduce certain legal mechanisms in

34 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY AND WORK: ROBOTICS AND ITS POSITIVE/NEGATIVE IMPACT ON THE LABOUR FORCE the employment legal system that allow the focused on facilitating the adaptation to employer to adapt to the changing times. the modifications and the termination Thus, the Spanish Workers’ Statute could not be agreed by the employer (Royal Decree 2/2015, dated 23 October until, at least, two months had lapsed 2015, hereinafter ‘WS’) foresees different since the modification had been made or flexible or restructuring measures to which since the end of the formation. an employer could resort as a consequence – Termination of the employment contract of the introduction of new technologies in due to technical reasons, in which the business. These measures will be valid case the decision would be based on provided that they are based on the existence the substitution of manpower for new of technical causes (amongst others) and production tools. For this, it would be obviously respect the formal requirements sufficient for the company to justify foreseen by law. For clarification purposes, that the measure taken is reasonable the WS states that there are technical causes and contributes to the prevention of a ‘when changes occur, amongst others, in the negative evolution of the business, to media or production tools’ field’. improve its situation, to favour its position The main measures that companies could in the market or to give a better answer to introduce, provided that there are grounds or the market demands. a reasonable cause, are the following: For example, a recent judgement from • Functional mobility: the employer would the High Court of Justice of Catalonia be authorised to entrust employees with considered the dismissal of seven duties that are different from those employees to be fair for the following inherent to their positions (whether at reasons: the affected employees rendered a higher or lower level), provided that services in a company which makes corks said decision is taken bearing in mind for wine and cava bottles. The production the employee’s professional capacity or process consisted of a machine that academic qualifications and respecting his/ carried out a first selection of corks and her dignity. then in phase two the employees detected • Geographical mobility: the employer would and rejected those corks that did not fulfil have the power to transfer an employee to the required quality standards. render services in a work centre different The company acquired three new machines from the usual one. capable of carrying out a greater number of • Substantial modification of the working the employees’ tasks, in less time and at less conditions: another option would be the cost. This lead to the concurrence of the possibility of modifying certain employment technical cause that justified the company’s conditions of the employees, such as the decision, because by means of the working day, the timetable and distribution introduction of new technology they were of working time, the remuneration system, able to reduce the cost of verifying corks, the salary amount and the duties of the improving the company’s competitiveness employees. (it was capable of offering the same • of the contract: there is also a products in the market at a lower cost) and specific procedure to suspend employees’ its circumstantial situation. employment contracts in which case both parties’ obligations – work and remuneration Favourable consequences for the staff of the work – would be left on standby. • Termination of an employment contract: Having said the foregoing, it is not illogical to in this point it is necessary to differentiate conclude that the use of robots (to carry out between various cases: tasks that, up until then, had been carried out – Termination of the contract based on by people) could imply the amortisation of the employee’s inability to adapt to the job positions and other flexible/restructuring technical modifications in the working measures that negatively affect the staff of a position. Said decision would only be company (in the sense that their employment fair if the changes carried out in the job conditions could be diminished). position are reasonable (that is, that they However, it is also reasonable to state that are directed at improving the work factor the introduction of robotics in the production in the company). In this specific case, line necessarily implies that qualified the employer would be obliged to offer personnel must exist to supervise, handle or the employee the option to do a course repair said technology.

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 35 WHAT ARE THE EMPLOYMENT LAW CHALLENGES FACED BY STARTUPS FROM CONCEPTION TO GLOBAL GROWTH?

Likewise, it is possible for new technologies Forum in Davos calculated that, due to and traditional manpower to ‘live together’ the growth in the use of robotics and in the same company without it being artificial intelligence, more than five million detrimental for the staff, in fact quite the jobs would be amortised in the 15 most opposite. A specific example of this could industrialised countries in the world. be the case of the multinational Amazon: At the other extreme, we have the a company that has modern premises, that International Robotics Federation (IRF), has made huge investments in cutting-edge who states that the interaction between technology, whose production processes humans and robots will be the key to future are practically totally automated, and employment as they are not exclusive rivals, who employs more than 200,000 people but colleagues. In certain sectors (especially worldwide (a figure which increases in the services’ sector), people’s efficiency exponentially each year). is valued far more than that of machines, as Along the same lines, the evolution of certain human skills are irreplaceable. technology also favours entrepreneurship, In our opinion, it is possible that the the creation of startups and the appearance impact on traditional manpower could of new professions, all of which encourage be negative in the short term: those jobs the employees’ capacity to adapt, the (manual and repetitive) that can be updating of their skills and an increase in expressed in an algorithm will be those that investment in training. will suffer most from the arrival of robots. However, history has shown us that each of the industrial revolutions has finished Conclusions generating new jobs and opportunities in the To date, the experts are unable to come to an medium- to long-term. agreement over whether the introduction of What we can affirm is that the legislators robotics in production processes entails more are responsible for adapting employment positive or negative consequences for the regulations to the changes produced in the labour force. heart of companies and should be especially Many voices claim that we are facing the careful and look for adequate mechanisms commencement of the so-called ‘Fourth to avoid the possible generation of Industrial Revolution’, after the appearance discrimination (especially due to age, given of steam energy, electricity and electronics. A the difficulty of parts of the population to study presented at the last World Economic adapt to new technologies).

Debjani Aich Kochhar & Co, What are the employment law Bangalore debjani.aich@ challenges faced by startup bgl.kochhar.com companies from conception to global growth?

ndia loves startups. As one of the BRIC startup and also provided various employment economies (Brazil, Russia, India and China), law incentives to eligible startups. Given the IIndia has a dedicated startup initiative burgeoning environment and continued buzz policy, aiming at ‘fostering entrepreneurship around startups globally, this article deals with and promoting innovation by creating an certain key challenges from an employment ecosystem that is conducive for growth of and labour law perspective for startup startups’. At the beginning of 2016, the companies. India has seen a major startup Indian Government issued its initiative plan, boom in the past few years, with some reports which included a formal definition of a mentioning Bangalore as one of the top six

36 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION WHAT ARE THE EMPLOYMENT LAW CHALLENGES FACED BY STARTUPS FROM CONCEPTION TO GLOBAL GROWTH?

startup destinations in the world. process is very important as the venture expands. Often, the startup will not have well-documented termination procedures Employment documentation in place, both from a contractual and One of the biggest challenges faced by a statutory perspective. For example, in India, startup is employee documentation – either termination of an employee is regulated by they choose to ignore it at the beginning of law (federal and state), mainly depending business operations or else the venture may on the classification of the employee as a choose to use publicly available or non-robust workman or a non-workman. The scope documentation sourced on an ad hoc basis. of a ‘workman’ is quite broad under the This approach is often due to a combination (federal) Industrial Disputes Act 1947, to of circumstances – the startup is hiring people include almost any type of employee other on the go, there is no time to deal with than one engaged in a (1) managerial or proper contracts and policies and frequently, administrative role; or (2) an administrative there are budgetary constraints to engage a role and earning more than INR 10,000 professional attorney and have the documents per month (approximately US$170). The properly drafted. law prescribes for a specific process to be Without proper employment agreements, followed for termination of workmen, which employment policies and intellectual property is often overlooked and which can result agreements in place, eventually, the startup in contentious litigation by the terminated finds itself challenged in various situations. workman. It is thus important that the During the course of employment, as the startup has a proper termination process venture grows and increases its number in place, including having the concept of of employees, it would need to revisit and a release/waiver letter to be provided by amend the existing employment contracts the employee on separation (whether by and policies, which is sometimes not well termination or ), to mitigate the received by the old employees. Employee chance of claims against the employer for separations are another critical area, where unlawful or irregular termination. termination terms (such as severance) may become contentious in the absence of defined Employee classification terms for the same. Employee policies are critical to any At conception, a startup’s focus is on business operation, as these are required getting the business up and running and from both a business perspective and getting the right people on board. Related also often from a statutory compliance to the employment agreement aspect, perspective. An example from an Indian startups frequently do not determine context is where specified companies are how the working relationship will be with required to have ‘standing orders’ which its on-boarders and can sometimes leave are certified by government authorities. this aspect ambiguous. This then creates Not having such a document is a breach the issue of whether the individual is an of a statutory obligation. The employee employee or an independent contractor. policy would typically cover other legal/ If the relationship continues in the form quasi-legal matters, importantly aspects on of a contractor relationship, there is some discrimination and sexual harassment. It room for the individual to subsequently is thus strongly recommended that some challenge the arrangement on grounds thought (and budget) be allocated by a of it being mala fide and a method to startup into these documents at the outset, as deny the individual it can minimise future employee relationship benefits (such as insurance, gratuity, health issues and business continuity as the venture benefits, etc) and also, paying him less grows in size. Employee policies can also than what a ‘regular’ employee may be pose a challenge for lawyers. Startups want entitled to. It is therefore quite important less rules and more freedom and possibly, that the relationship and classification more creative plans. Lawyers have to draft of all individuals engaged by the startup these policies differently as well as think be established in a formal documented through the manner in which the law applies manner at the earliest possible opportunity. to these policies. Another interesting challenge faced by While not a key factor at the time the startups is the engagement of foreigners startup takes off, the employee separation as employees. This has legal implications

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 37 WHAT ARE THE EMPLOYMENT LAW CHALLENGES FACED BY STARTUPS FROM CONCEPTION TO GLOBAL GROWTH?

under immigration law across jurisdictions (in India, for example, overtime is provided and may also have financial implications to all employees other than those in very on the employer. In India, for example, if a senior management, which is a very small startup wants to hire a foreigner, there are percentage of the workforce), startups (and reporting and registration requirements with even established companies) are frequently the local regulatory office if the employee is unaware of the same. This is usually because staying in India for a specified time period. the general layman’s understanding is that Another important aspect is the type of visa overtime is for employees engaged in a the individual uses to enter India – if he/ specific role, rather than across the board. she is being employed by the startup, they It is therefore quite important that a startup should hold a valid ‘Employment’ visa and examine employee classification at the not a ‘Business’ visa. Non-compliance with conception stage and ensure that statutory these requirements can have a significant overtime is paid, so as to avoid employee implication on the startup, as the employer. claims and possible labour inspections As mentioned, there may also be financial subsequently. There is a significant risk that implications on the hiring of a foreign an employee can work extremely long hours employee in some countries. In India, a for extended time periods and after leaving, foreigner is held to be an ‘International can sue the startup for overtime dues. Worker’ under a statutory welfare law, the Employees’ Provident Funds and Incentive plans Miscellaneous Provisions Act 1952. This law requires contribution of monies by the ESOPs (Employee Stock Ownership Plans) employer and employee into a regulated ‘fund’ are one of the biggest incentives a startup for use of the employee on superannuation, offers to its founders and employees. The etc. An International Worker, however, is documentation for any such plan is therefore restricted from withdrawal of funds until they one of the biggest challenges that the venture are 58 years old. From a practical perspective, faces, including aspects such as the number of once a foreigner leaves India, it will be difficult shares to be granted to the employee and the for them to then access these funds at a later vesting periods. stage, which is something the startup would While the startup may decide on a very need to factor in. generous incentive plan based on the employee’s ‘rating’ and also to offset a lower starting salary, this has implications Leave and overtime in the future, including in cases where Leave or is usually a statutory there is an acquisition of the startup or if requirement in every country and, this the employee wants to leave the venture. may differ locally, as seen in India, where It is quite important that all incentive plan leave is generally regulated locally in non- documents undergo legal review, as this establishments. This also holds true will help the startup ensure that it retains for overtime. Startups face tremendous enough equity to be able to grant shares to pressure to provide the best incentives to future employees and to make sure that its their employees, which include time off, investors’ rights are secured. preferably unlimited! While providing a good The structuring of the equity incentive leave policy, the startup should factor in legal plan is also important as the startup grows requirements for the same. Generally, in and there is a potential acquisition. Vesting India, an employee’s depends schedules and retention of the share on how many days they have worked for the documents then become a critical aspect, company, with sick or casual leave coming as there have been cases where a buy-out under a separate bracket, frequently pre- has been stalled for these reasons, where an specified. In case the employee leaves the employee refuses to transfer their shares. company, the employer is required to pay out It is also important that ESOP plans are statutory accrued but unavailed of annual properly drafted to deal with acquisitions and leave. This is a critical aspect for startups to restructurings. Most startups look to be acquired consider at the outset, so that it does not face at some point. The acquirer must have maximum large financial outlay issues as it grows in size. flexibility to issue their own options or purchase A similar approach needs to be taken by the options. Further, the plan needs to deal with the startup for overtime. While overtime is how options are purchased and cancelled in usually provided as a statutory requirement case the options have not vested.

38 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION ROBOTS IN THE WORKPLACE – INDIAN EMPLOYMENT LAW IMPLICATIONS

Statutory compliances venture may choose to be somewhat lax in complying with the statutory requirements, It is very important that the startup obtains which may lead to repercussions in the all the required licences and registrations event of a formal labour inspection. under the applicable employment laws. By way of illustration, in order to do business in India, a startup would typically require Analysis a registration under a local (state) shops Non-compliance with labour laws have far and establishment act, which also requires reaching consequences, monetary or penal. the venture to follow specific working In conclusion, startups need to focus on not conditions for most of its employees. only getting the right individuals on board This law further requires the start up to as employees but also ensure that their comply with specific requirements, such as employment policies and procedures are maintenance of statutory registers, display well-drafted and robust, which will help them of notices in the business premises, etc. going forward. Again, due to budgetary constraints, a

Veena Gopalakrishnan AZB & Partners, Robots in the workplace Bangalore veena.gopalakrishnan@ – Indian employment law azbpartners.com implications

Robotics and its emergence in the workplace Redundancy and reduction in force (RIF) World over, the use of robots and artificial As witnessed during the industrial revolution, intelligence (AI) to rationalise and redundancy and unemployment is a natural modernise the labour force is on the rise. consequence of technological advancement. While traditional mechanisation sought The concept of at-will employment is not to replace assembly line tasks that were recognised in India and employment can only low-skill and mechanical, modern robots be terminated by an employer on reasonable and AI systems are being taught to ‘think’, grounds or for misconduct. empowering them to enter the ‘creative’ The Industrial Disputes Act 1947 (‘ID Act’), and ‘cognitive’ spheres of the labour force. India’s most prominent legislation regulating Robots are being used in industries as employer-employee relationships, prescribes diverse as ground transportation, energy the notice and compensation requirements generation, food and hospitality, nursing in case of RIF. As per the ID Act, an employer and elder care, financial and legal services is required to give every workman, who has and entertainment.1 been in continuous employment with the Through this article, we attempt to establishment for not less than one year: (1) identify and analyse, from an Indian one month’s notice in writing indicating employment law perspective, the key issues reasons for retrenchment or payment in and implications that an organisation is lieu of such a notice; and (2) retrenchment likely to face while integrating robots/AI compensation amounting to 15 days average into the workplace. pay for every year of continuous service or any part thereof in excess of six months. The legislation also obligates the employer to Key Indian employment and law issues notify the appropriate government about the Key issues and implications that an retrenchment (Industrial Disputes Act 1947, organisation is likely to face while working section 25E). with and integrating robots/AI into the In case the employer is an industrial workplace are: establishment (defined to be a mine,

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 39 ROBOTS IN THE WORKPLACE – INDIAN EMPLOYMENT LAW IMPLICATIONS

plantation or a factory) employing more the introduction of printing machines has than 100 workmen, prior permission from been held to amount to ‘rationalisation, the appropriate government is required standardisation or improvement of plant before retrenching any workman. Also, in or technique which is likely to lead to such establishments, workmen are entitled retrenchment’ hence requiring the to longer durations of notice (Industrial employer to provide the impacted workmen Disputes Act 1947, section 25N). with the notice of change.3 Courts in India, recognising the consequences of industrialisation, have Workmen’s compensation allowed employers to retrench workmen on account of the labour force becoming Robots and AI systems are not only being surplus due to modernisation and used to rationalise the labour force but are mechanisation, provided that the due also being developed to assist the human process prescribed under law is followed.2 labour force in performing arduous physical Protection under the ID Act is available tasks, thereby enhancing productivity and only to individuals classified as ‘workmen’. preventing injury. Robotics and AI systems ‘Workman’ has been defined to mean any are also being developed to enable the person employed in an industry to do integration of physically disabled individuals any manual, unskilled, skilled, technical, into the mainstream workforce. operational, clerical or supervisory work With regard to employment injuries, for hire or reward, excluding employees the Employees’ Compensation Act 1923 employed in a managerial or administrative mandates the employer to pay compensation capacity; or in a supervisory capacity to eligible employees in case of death or drawing wages exceeding INR 10,000 per personal injury caused to the employee by month (Industrial Disputes Act 1947, accident (1) arising out of, and (2) in the section 2 (s)). Termination of employment course of, employment. It is anticipated of individuals other than workmen is that the introduction of robotics and AI in governed by the terms of employment, work environments that involve hazardous standing orders and applicable state or manufacturing techniques could result in industry specific legislations. reduced workers’ compensation claims and potentially become a safety requirement for various dangerous occupations. Change in conditions of service On the other hand, risks related to injuries As per the ID Act, an employer who proposes caused by robots cannot be ruled out. The to change the conditions of service applicable International Labour in its 1989 to any workman, in respect of matters guidelines on ‘Safety in the use of industrial specified under the statute, shall implement robots’ has documented various hazards such change only after giving at least 21 related to industrial robots.4 Such hazards days notice, in the prescribed manner, to may be caused due to errors in software, the workmen who are likely to be affected unauthorised access, electrical interference, (Industrial Disputes Act 1947, section 9-A). radiation, etc. In such situations, it will be Changes triggering the 21 day notice interesting to see the development of law requirement include: (1) rationalisation, on employer and manufacturer liability, standardisation or improvement of especially in case of cognitive robots. plant or technique which is likely to lead to retrenchment; and (2) increase Data privacy or reduction in the number of persons employed or to be employed in any Companies engaging robots and AI systems occupation or department or shift, that have access to sensitive personal not occasioned by circumstances over information of employees and customers, which the employer has no control. The such as bank account details, biometric introduction of robotics or AI systems into information, sexual orientation, etc will the workplace with a view to rationalise need to ensure that such data is protected and standardise processes is likely to adequately. The Information Technology be a change in condition of service (Reasonable Security Practices and leading to retrenchment and, therefore, Procedures and Sensitive Personal Data or a change warranting the 21 day notice. Information) Rules 2011 (‘IT Rules’), may Redundancy due to computerisation and apply to companies that collect sensitive

40 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY: REMOTE EMPLOYMENT AND CROSS-BORDER EMPLOYERS’ COMPLIANCE

personal information, whether directly including risks of unauthorised access, or indirectly, through robots/AI.5 The accidents in relation to human error in collection of such information is regulated programing, and consequential redundancy. under the IT Rules, which requires the Therefore, the economic and practical realities company to obtain written consent from the of the industry must be harmonised with the provider of sensitive personal information.6 laws that govern and regulate industries and Further, the duration of storage, purpose of employees. Against this backdrop, it may be use as well as disclosure of such information fitting to consider and evaluate employment is also regulated.7 The IT Rules also obligate law implications in light of the emerging companies collecting sensitive personal technology, especially in India, where information to have in place reasonable campaigns like ‘Make in India’, that encourage security practices and procedures.8 the growth of the manufacturing sector, are gaining momentum. Conclusion One of the results of industrialisation and Notes mechanisation in India was the enactment 1 See: http://documents.jdsupra.com/d4936b1e-ca6c-4ce9- 9e83-07906bfca22c.pdf. of the ID Act. The ID Act sought to balance 2 Lokmat Newspapers Pvt Ltd v Shankarprasad 1999 (6) SCC the needs of employers, that is, productivity 274. and efficiency with the needs of workmen 3 See n2 above; and Pradeep Kumar Gupta v PO Labour Court and Anr, Delhi High Court (2013). and the country’s socialistic goals. With the 4 See: www.ilo.org/public/libdoc/ilo/1989/89B09_262_ proliferation of robots and AI, the world engl.pdf. today is at a juncture of what may be another 5 The Information Technology (Reasonable Security revolution for industries, employers and Practices and Procedures and Sensitive Personal Data or Information) Rules 2011, Rule 3. workmen. Employers introducing robotics 6 Ibid, at Rule 5 (1). and AI into the workplace should do so 7 Ibid, Rule 5 to 7. with complete cognisance of the legal risks, 8 Ibid, Rule 8.

Ekpemi Ekhabafe University of Helsinki, Helsinki New technology: remote [email protected] employment and cross-border employers’ compliance with the duty to provide a safe working environment, multinational risk and compliance with immigration rules

Introduction environment with no borders. International Outlook has evolved into a success factor for In a world saturated with new forms of many companies and competition overflows employment, unanticipated by previous from the national level into the global realm. economic or employment and immigration Globalisation has caused, on one hand, a policies, arguably, as a result of globalisation growing number of employees to be deployed it has become imperative for traditional overseas by multinational enterprises to act employment and labour migration policies as a link between the parent enterprise and to avoid obsolescence by constantly evolving foreign business operations; and on the to meet the needs of a globalised work other hand, more businesses to lean towards

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 41 NEW TECHNOLOGY: REMOTE EMPLOYMENT AND CROSS-BORDER EMPLOYERS’ COMPLIANCE

the virtual workforce when hiring for a imposed by common law to ensure that position or project, in the form of remote a work site is reasonably safe, while the employment. Recognising that technological employer’s duty to provide a safe work system advances have enabled people to develop relates to the responsibility to ensure that the superior technical skills and talent in the actual mode of conducting the work is safe. comfort of their homes, companies are now Is the duty to provide a safe working using social media and internet forums to environment expunged by virtue of the invite them to participate on specific projects. peculiar nature of remote employment? An Remote are considered employer continues to have a duty of care jobs carried out in places other than the to employees even in a remote employment physical work place. A survey of business relationship, and an employer must be able leaders at the Global Leadership Summit in to prove that they have discharged these London, in 2014, found that up to 59 per duties. In the United Kingdom, for example, cent of all companies’ full-time workforces all normal health and safety legislations (eg, would be working remotely by 2020. Remote the Health and Safety at Work Act 1974, employment relationships can take many Display Screen Equipment Regulations, and forms, including teleworking and crowd- the Provisions and Use of Work Equipment sourcing. Teleworking for instance is the Regulations) remain relevant to remote use of information technology as part of an employment relationships. employment contract in order to enable an Multinational enterprises and companies employee to regularly work remotely from are advised to organise health and safety home or any other location to carry out inspections, and at regular intervals and duties that would usually be done at the require home-based employees to complete employee’s office or workplace. self-assessment forms which are reviewed by A study carried out by Kaplan, an American a health and safety officer, or by a manager company, and Ctrip, a Chinese company, trained in health and safety. In order to strongly puts forth the argument that remote discharge the duty of care for safe work work allows companies to expand its talent system, employers need to assess the suitability pool, improve retention, increase productivity of the working environment at home by and reduce office space costs, which are conducting a workplace risk assessment and invested in training and technology to improve ensuring that employer’s liability insurance client and employee experiences. However extends coverage to home working. Likewise, these new trends can pose challenges for thought should be given to the peculiarity employers in terms of fulfilment of their duties of human factors and ergonomics associated to provide a safe working environment for with remote employment. Useful guidance their employees, and in complying with tax notes, leaflets and electronic support and immigration rules. should be made available to remote workers and such resources should be supported with appropriate training, in order for an Duty to provide a safe working environment employer’s legal duty to be discharged. In an employment relationship, both the Employers are well advised to flag these worker and the employer have duties and potential implications to homeworkers and to legal obligations, owed to each other. At clearly communicate that it is the individual’s common law, employers have a duty to responsibility to understand the impact on take reasonable care for the safety of their their property and related obligations. employees in all the circumstances of the In a cross-border remote employment employment. In most civil law jurisdictions relationship, in principle the employee the common law duty of care, is constantly will be subject to the employment law being refined and given meaning and content of the country in which the employer is by the courts through their judgments. This established. However some mandatory general duty has been elaborated upon by employment principles of the employee’s courts of different jurisdictions, to include: home residence state may apply whether in the duty to provide competent staff; the civil or common law jurisdictions. duty to provide proper work appliances and In terms of cross-border employment, apparatus; the duty to provide a safe work globalised businesses, companies and place; and the duty to provide a safe work organisations accept and promote frequent system. The duty to provide a safe workplace mobility among their key employees, through relates to the employer’s responsibility international assignments or business travel.

42 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY: REMOTE EMPLOYMENT AND CROSS-BORDER EMPLOYERS’ COMPLIANCE

Cross-border employment is on the rise, as Multinational risk and compliance with business and companies seek out foreign immigration rules markets. This exposes more employees to potential threats to their health, safety and Immigration implication security. In the instance of cross-border The question of the implication of cross- employment relationships, the corporate border and remote employment for a liability of employers in terms of legal, company lies squarely at the intersection of fiduciary duty of care becomes essential. The employment, immigration and tax law, as well obligation often extends to employees and as ‘conflict of laws’. However, these statutes their dependents who are abroad as short- or have each been enacted for distinct purposes, long-term assignees. and one legal regime does not necessarily In 2009, a white paper published by inform the other. International SOS entitled Duty of Care To comply with relevant immigration of Employers for Protecting International laws, the employer should ensure that the Assignees, their Dependents, and International employee has the right to legally work in Business Travellers, explores employers’ the country of their residence. Using the duty of care obligations as it applies to United States as an example, a foreign employees on cross-border assignments. national without work-authorised visa status The paper focuses on duty of care from a to work remotely from a home located in global rather than a specific geographic the US for an employer located abroad, may viewpoint and emphasises the diversity of be working illegally. It could be argued that treatment in multiple countries, whether any income from services performed for a they are developed or emerging markets. foreign employer by someone present in the Secondly, it pulls together and connects US is deemed ‘US source income’ unless duty of care responsibilities from different that income meets all three of the following business areas, functions and roles in an conditions: (1) total annual earnings from organisation. And, it brings attention to such services is less than US$3,000; (2) the the topic from both a legal and cost-benefit non-resident alien is physically present in the analysis perspective, and also points out US for not more than 90 days in the year; that duty of care is a moral and ethical (3) the services are performed under contract matter, and therefore an integral part of a with a non-resident alien individual, foreign company’s corporate social responsibility partnership or foreign corporation. It may (CSR) framework. be argued to be unauthorised employment Several countries have developed under US immigration and employment legislation and derivative case laws that law if it is considered that the salary paid for reflect employers’ expanded duty of care the employment is active, earned income responsibilities, and courts are increasingly characterised by a combination of three favouring employees. Although there is factors – provision of services for hire by the some legal communality, the treatment foreign national, physical presence in the of the subject is very diverse in terms of US that is not brief nor intermittent and US application. Internationally, the legal issues source income in exchange for provision of become more complex – and the legal those services. outcome more unpredictable as a result of On the contrary, it may also be argued the lack of clarity in regard to jurisdiction that, assuming the agreement specifies that and choice of law. To a greater extent, the required activities will involve creating stakeholders insist that it is the employer’s and saving work product, strictly through corporate social responsibility to recognise the use of the internet and a cloud with the and fulfil the duty of care. As with all cloud’s servers located on foreign soil. Also material business decisions, it is incumbent assuming, the agreement allows the foreign upon senior management to take their duty citizen to work from anywhere in the world, of care responsibility into account, conduct and is made before the individual enters the cost-benefit analysis of complying with the US, and provides that salary payment their duty of care, and make the appropriate shall be in a foreign (non-US) currency with business decisions. direct deposit into a foreign bank account and provides that the law of the foreign state and the courts of that state where the employer has its headquarters shall govern

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 43 NEW TECHNOLOGY: REMOTE EMPLOYMENT AND CROSS-BORDER EMPLOYERS’ COMPLIANCE

any disputes that may arise between employer this, countries are examining more closely and employee. On these assumed facts, there the social security contributions of these is a very low probability of violating American categories of employees and taking measures immigration law, considering that the mere to impose stricter regulatory mechanisms. fortuity that the work is performed from The United Kingdom is a case in point in within the US is simply not sufficient to give this instance. Multinational enterprises with rise to a conflict of laws – relying onEEOC v operations in or relations with the UK must Arabian American Oil Co1 where the Court held be advised of the UK tax authority’s new that US immigration law cannot be applied regulation governing short-term assignments extraterritorially to prohibit that which is in the UK. The Short-Term Business lawful on foreign soil. Visitors Agreement requires that wage tax Having said this, the circumstances may must be withheld and payments reported differ and give rise to varying degrees of on a monthly basis unless the company legal obligations under national immigration has a signed short-term business traveller laws. It is clear that in cross-border agreement with the UK tax authorities. employment relationships, work permits This means the home companies will have need to be obtained for the employees. The to implement systems to monitor their line is, however, more blurred for remote employees’ travel to the UK otherwise they employment relationships but the principles could be liable to tax withholding payments stay the same. Companies or businesses or financial penalties. should avoid immigration law violations and Cross-border employment relationships actively promote compliance with national could raise the question of double taxation. laws. Employers are therefore advised to To avoid double taxation in a host country consider obtaining work permits for their as well as the home, the Organisation for remote employees, especially in instances Economic Co-operation and Development where they would be long-term residents (OECD) model convention, Article 15 is in a particular country. Employees who instructive. The convention sets the right to work habitually in a particular country will tax income from dependent employment as be obliged to comply with a number of allocated to the country of residence of the mandatory legal provisions in the country employee on assignment, unless the place of where the employee works remotely from, work or source state principle applies. Once including immigration rules and principles. a home and host a country has been defined, The question can be posed in two ways a review is performed in a second step to with two different answers. It is imperative determine which country is attributed the for an employer to consider whether the right to taxation for which income. Pursuant immigration law of the residence of the to Article 15 of the OECD model convention, employee prohibits a foreign citizen from the right of taxation may only revert to the fulfiling an employment agreement with a country of residence if the employee does company incorporated and doing business not spend more than 183 days in the host abroad, or may a foreign national without country within a given 12-month period, work-authorised visa status to work remotely remuneration is paid by, or on behalf of, from a home located in the residence for an an employer that is not a resident of the employer located abroad? host country; and the remuneration is not borne by a permanent establishment of the employer in the host country. Tax implications Companies with international operations Expatriation is one of the most common ought to be mindful that foreign forms of international labour mobility. assignments of employees give rise to the Nowadays, there is increasing popularity risk of employers establishing permanent among other forms of labour mobility, usually establishment in the host country. Especially for shorter term international employment in emerging economies, the tax authorities relationships, projects or assignments. These are increasingly attempting to constitute forms of cross-border employments overlap permanent establishment of the assigning with the tax and immigration regime of many company from the activities of the host countries as they become more aware of the country. Even if there is already a foreign regulatory loopholes that may be exacerbated subsidiary in the place, additional permanent by these modern and precarious forms of establishment for tax purposes may arise. international employment. In addition to It is imperative to clarify whether work

44 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION NEW TECHNOLOGY: REMOTE EMPLOYMENT AND CROSS-BORDER EMPLOYERS’ COMPLIANCE performed by employees abroad constitutes in this form of employment relationship permanent establishment as defined by the must be aware of their obligations in the relevant double tax treaty. The assumption event of redundancy or dismissal. While of the existence of a foreign permanent working practices may no longer depend establishment has considerable tax on geography, legal rights and obligations implications. The assigning company becomes largely still do. Redundancy is a location subject to the limited tax liability under the specific concept; it occurs where a particular respective national tax law with regard to site closes or where an employer’s need for the income attributable to the permanent work of a particular type ends or reduces in establishment from an economic perspective. the place where the employee was employed. Any profit generated by the permanent The place of work also affects pooling and establishment in this country must be taxed selection and, for larger scale restructuring, in the host country. it will also be relevant which ‘establishment’ It is equally possible that an employee who the mobile worker is assigned to. For works from home in a different country to mobile workers, their place of work will be that of the employer and who has authority determined by reference to the facts but to legally bind the employer could be judged also to what their contract says. Employers as holding a permanent establishment in the can improve their position by ensuring that country which the employee resides. If so, contracts specify not just the employee’s both the employee and employer could be place of work but also to which base or HQ liable to pay tax in that country. Moreover, they are assigned. remote employment or teleworking across Most importantly, mobile workers must be borders could also have an effect on the considered at an early stage of redundancy tax of the employee giving planning, to pre-empt challenges over rise to a tax liability in a country in which pooling and consultation. they do not reside or in which they have not Particular care is also needed with considered themselves to be a tax domicile. employees who are working remotely from For example, the European Commission’s overseas. In the recent case of Lodge v Dignity Recommendation (94/079/EC) on the & Choice in Dying (UKEAT/0252/14/LA), taxation of certain items of income received an employee was held to have UK unfair by non-residents in a Member State other dismissal and discrimination rights despite than that in which they are resident states that not having set foot there for 15 years. A key non-resident persons should benefit from the factor was simply that her work supported a same tax treatment as residents, if they obtain UK business. the major part of their total income in one Member State. In such situations, the Member Conclusion State of residence would be allowed to reduce the personal tax advantages correspondingly It is needless to say that multinational in order to avoid personal allowances enterprises have to be fully aware of the tax, being enjoyed twice. The principles of the social security and immigration implications recommendation were largely confirmed of cross-border and remote employment by the Court of Justice in its judgment of relationships to avoid national law violations 14 February 1995 in the Schumacker case and consider the appropriateness of such (C-279/93). This case suggests that non- employment relationships. Permitting remote residents obtaining 90 per cent or more of and cross-border employment relationships their total income in the state of employment opens an array of consequences for both should normally be entitled to the same tax employees and employers. treatment as residents. In addition to the immigration and tax implications for cross-border and Note remote employment, companies involved 1 499 US 244, 111 S Ct 1227, 1230 (1991)

EMPLOYMENT & INDUSTRIAL RELATIONS LAW SEPTEMBER 2016 45 PROPOSED EQUAL PAY ACT MAY COMPLICATE REMUNERATION ISSUES

André Zimmermann Proposed Equal Pay Act may Orrick, Herrington & Sutcliffe, Dusseldorf complicate remuneration issues [email protected] Louisa Kallhoff Orrick, Herrington & Introduction Legal enforcement of equal pay Sutcliffe, Dusseldorf [email protected] Statistics reveal a difference of seven per The employer must respond to an inquiry cent between the remuneration paid to in text form within one month. If they do men and that paid to women with the same not meet the employee’s request or do not qualifications in Germany. The average hourly answer it properly, the employee may enforce wage even shows a difference of 22 per cent, the claim by filing a lawsuit. Alternatively, making pay discrepancy in Germany one of the employee may file a complaint with the the highest in the European Union. In order works council first which will influence the to adjust these wage injustices, the German employer to rectify the situation if it considers Federal Ministry for Family Affairs, Senior the complaint justified. Citizens, Women and Youth submitted a first It is important that employers take preliminary ministerial draft of the German care not to satisfy a claim for information Equal Pay Act (Entgeltgleichheitsgesetz) on 9 incompletely, as otherwise, in case of a December 2015. According to the Minister, lawsuit, the burden of proof will be reversed the act can be expected to be adopted in in favour of the employee. 2016. So far, it awaits interdepartmental In case of unequal pay without objective consultation in the Federal Chancellery. justification, the employee is entitled to supplementary payments for the last three years. New information rights for employees and works councils Rights of the works council The draft mainly provides for transparency Besides the aforementioned information within the company. Both employees and rights, works councils obtain further co- the works council will be entitled to be determination rights. They are also supposed informed by the employer about the salary of to support the employer in questions of co-workers in similar positions. Specifically, equality and wage-setting and control the the information right covers the average establishment of an equal wage structure. remuneration of a group of at least five The works council may force the employer employees performing the same or the same to conduct a company review procedure if type of work. It includes information about several cases of discrimination indicate that a certain pay group and about work that the wage structure is generally discriminatory is performed mainly (ie, 60 per cent and with respect to remuneration. more) by the other gender. Furthermore, the employee may obtain information about the Changes for employers criteria and the procedure for determining his or her own salary. The Equal Pay Act will bring many changes Accordingly, confidentiality clauses in for employers. For example, they will have employment contracts covering salary are to comply with numerous information invalid. However, with a view to data and requirements. privacy protection, the employer may not Furthermore, in a job advertisement disclose any information about the specific employers must indicate the minimum remuneration of individual employees. wage for the advertised position as provided Consequently, the data on the basis of which for under applicable collective bargaining the average remuneration is calculated agreements or by law or other norms of must be rendered anonymous. However, it collective legislation. There is reason to fear appears doubtful whether the maintenance of that an employer will also have to subject anonymity is possible in smaller companies. positions that are not covered by collective bargaining agreements to a job in order to bring about equal pay.

46 INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICE DIVISION PROPOSED EQUAL PAY ACT MAY COMPLICATE REMUNERATION ISSUES

There are additional requirements for large relevant remuneration arrangements must companies with more than 500 employees. be eliminated without delay. These companies have to introduce an internal company procedure by way of which Practical impact for businesses pay equity is to be reviewed. This procedure has to be certified by the Federal Anti- Potential subsequent wage payments will impose Discrimination Agency. an additional financial burden on companies. Companies within the scope do not Furthermore, considerable internal capabilities only have to publish the results of will be needed to meet obligations to provide their company procedures, but will information and – in case a works council also be required to report about the exists – to exercise the new co-determination implementation of the procedures and rights. Especially for large companies with their own compliance with the principle more than 500 employees, the procedural of equal pay. If the report reveals gender rules to be complied with will tie up internal discrimination with regard to pay, the operating resources.