Employment & Labour

EEmploymentmployment & LabourLabour LLawaw 2018 Sixth Edition

Contributing Editors: Charles Wynn-Evans & Emma Byford GLOBAL LEGAL INSIGHTS – EMPLOYMENT & LABOUR LAW 2018, SIXTH EDITION

Contributing Editors Charles Wynn-Evans and Emma Byford, Dechert LLP

Production Editor Andrew Schoﬁ eld

Senior Editors Suzie Levy Caroline Collingwood

Group Consulting Editor Alan Falach

Publisher Rory Smith

We are extremely grateful for all contributions to this edition. Special thanks are reserved for Charles Wynn-Evans and Emma Byford for all their assistance.

Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk

ISBN 978-1-911367-87-1 ISSN 2050-2117

This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualiﬁ ed professional when dealing with speciﬁ c situations. The information contained herein is accurate as of the date of publication.

Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY December 2017 CONTENTS

Preface Charles Wynn-Evans and Emma Byford, Dechert LLP

Angola Sandra Lima da Silveira & Inês Nobre, Cuatrecasas 1 Armenia Sedrak Asatryan, Janna Simonyan & Ani Varderesyan, Concern Dialog law ﬁ rm 8 Australia Leon Levine, Dan Williams & Gordon Williams, MinterEllison 12 Austria Hans Georg Laimer & Lukas Wieser, zeiler.partners Rechtsanwälte GmbH 23 Brazil Luis Antonio Ferraz Mendes, Mauricio Froes Guidi & Adolpho Julio C. de Carvalho, Pinheiro Neto Advogados 33 Bulgaria Radoslav Alexandrov, Boyanov & Co. 39 China Jiang Junlu & Zhang Hongyuan, King & Wood Mallesons 50 Finland Jani Syrjänen, Borenius Attorneys Ltd 58 France Lionel Paraire & Anaëlle Donnette-Boissiere, Galion Avocats 68 Germany Dr. Holger Meyer & Sophie Kuske, SCHRAMM MEYER KUHNKE 79 Hungary Dr. Ildikó Rátkai & Dr. Nóra Feith, Rátkai Ügyvédi Iroda 88 India Suhas Srinivasiah & Debjani Aich, Kochhar & Co. 94 Ireland Mary Brassil, Stephen Holst & Mary Kelleher, McCann FitzGerald 104 Italy Vittorio De Luca, Roberta Padula & Claudia Cerbone, De Luca & Partners 116 Japan Daisuke Mure & Ryotaro Yamamoto, Oh-Ebashi LPC & Partners 122 Korea Sean Hayes, S.J. Kook & Jeongha Lee, SJ Law Firm Int’l Practice Group (IPG Legal) 131 Malta Dr. M. Clara Galea Borg & Dr. Kristina Pavia, EMD Advocates 143 Netherlands Nils T.A. Zeeuwen, Ivo R. Boudrie & Maarten H. Stekelenburg, DingemansVanderKind 152 Oman Omar Al Hashmi & Syed Ahmad Faizy, Al Hashmi Law 163 Pakistan Aemen Zulﬁ kar Maluka & Pir Abdul Wahid, Josh and Mak International 174 Portugal Sandra Lima da Silveira, Cuatrecasas 183 Spain Enrique Ceca, Marta Montes & Sonia Manrique, Ceca Magán Abogados 191 Sweden Carl-Fredrik Hedenström, Karolin Eklund & Mary Ohrling, Magnusson Advokatbyrå 198 Switzerland Vincent Carron & Anne Roux-Fouillet, Schellenberg Wittmer Ltd. 206 Taiwan Paul Chu & Jill Hsu, Guo Ju Law Firm 216 Thailand Saroj Jongsaritwang & Sui Lin Teoh, R&T Asia (Thailand) Limited 226 Turkey Haşmet Ozan Güner, Dilara Doğan Güz & Murat Caner Çelebi, GUNER | legal 239 United Kingdom Charles Wynn-Evans, Emma Byford & Emma Zarb, Dechert LLP 251 USA Ned H. Bassen, Margot L. Warhit & Nathan W. Cole, Hughes Hubbard & Reed LLP 262 PREFACE

e are delighted to have been asked to act as Contributing Editors to Global Legal Insights – Employment & Labour WLaw , and very pleased that this book is now into its sixth edition, which addresses developments in labour and employment law across 29 countries worldwide. As can be seen from the variety and detail contained in this book, labour and employment law issues never stand still and businesses operating internationally need to maintain their awareness of trends and impending changes in employment law regimes in the jurisdictions in which they operate. The objective of this book is to provide general counsel, human resource practitioners, lawyers, advisers and managers with an overview of developments in employment and labour law in a variety of jurisdictions across the world. The authors were asked to provide their perspectives on those current and forthcoming changes to the labour and employment law regime in their respective jurisdictions which they considered to be particularly important in practice. We are very grateful to all the authors for their contributions and hope that this book provides a useful and interesting snapshot of the important current employment law issues in the jurisdictions which it covers.

Charles Wynn-Evans and Emma Byford Dechert LLP Angola

Sandra Lima da Silveira & Inês Nobre Cuatrecasas

Introduction The new General Labour Law (LGT), approved by Law No. 7/15, of 15 June, introduced some changes to Angola’s employment regime that resulted from the previous Law (Law No. 2/00, of 11 February), to respond to the necessities that resulted from the country’s economic evolution since the beginning of the century. Its publication had an evident material impact on the labour market, and the Government approved some complementary measures aimed at regulating in greater detail some situations that had not been properly considered in the LGT, and at creating or developing the conditions for certain, more innovative solutions set in the new Law to become fully operative. In this study, we aim to discuss some of the said innovations (regardless of whether they were already contemplated in the text of the LGT or were introduced by later legislation) which, by their nature or scope, seem to us to be especially relevant.

General labour market and litigation trends New rules for the hiring of workers for a fi xed time The LGT changed the labour paradigm by moving away from the general rule of contracting for an indefi nite period and allowing the employer and the employee to enter into fi xed- term employment contracts, setting the maximum duration thereof at fi ve years, for large companies, or 10 years for medium-sized, small and micro-companies. More recently, Presidential Decree No. 40/17, of 6 March, established the minimum mandatory content for each type of employment contract (for a fi xed term and for an indefi nite period). Reinforcement of the obligation to seek mediation in litigation The labour markets in Angola present a tendency for litigation, with labour disputes becoming ever-more complex due to the increasing dynamism of economic activity and social development. Within this framework, the use of conciliation procedures has gradually acquired growing importance as a method to avoid judicial litigation. In this sense, the LGT determines that a judicial labour confl ict must be preceded by the use of an extrajudicial means of confl ict resolution. The LGT introduced mediation – to be conducted by the Inspecção Geral do Trabalho (IGT) (the General Inspectorate of Labour) – and arbitration as extrajudicial mechanisms for the resolution of labour confl icts, while maintaining conciliation – which falls within the responsibility of the Ministério Público (Public Prosecutor) acting ex offi cio before the presentation of the fi le to the judge – which was already provided for in previous legislation.

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Should conciliation between the parties by the IGT fail to resolve the confl ict, the party requesting mediation may freely resort to judicial proceedings. In conciliation, in the event that the desired agreement between the parties is not reached, it is incumbent on the Ministério Público to forward the fi le to the court. Temporary use of manpower As a way to promote employment and contribute to the creation of conditions that encourage companies not to resort to redundancy, but only as a last resort, the Government has approved some measures aimed at allowing the use of manpower outside the more traditional schemes of exclusive attachment to a position in the employer’s organisation. The LGT refers in Article 21 (j) to the Temporary Work Contract. Temporary Work is characterised by the existence of an employment relationship involving the temporary worker, the temporary employment agency and the company employing the temporary worker. The Worker is hired by a temporary work company, in order to temporarily exercise his professional activity with a third party, the user company. This type of arrangement is truly on the rise because it allows companies to meet exceptional manpower needs, usually implying the use of highly qualifi ed and specialised professionals, without having to admit them as permanent workers, to positions in their organisation. The legal regime governing the temporary transfer of workers, as well as the activities of temporary employment agencies and their contractual relations with workers and users, is regulated by Presidential Decree No. 31/17, of 22 February.

Redundancies, business transfers and reorganisations Employment agreement assignment In contrast with what is described above in respect of the temporary use of manpower, there is nothing to prevent the employer from assigning his position in the employment contract to another company, whereby the employee acquires a work relationship with another entity under the same contract (and therefore retaining the seniority, pay and beneﬁ ts attached thereto), provided that the employee consents to that transfer. In case the speciﬁ c section or business unit is transmitted to another entity, the assignment of the employees that work in the concerned section or business unit occurs ope legis. In this case, the LGT provides for the automatic transmission of the said employees’ employment contracts, as a consequence of the transmission of the section or business unit and, therefore, the employee’s consent is waived. The new employer assumes the position of the former employer in the employment contracts, and is automatically subrogated to the original employer’s rights and obligations. However, the law recognizes to the concerned employees the possibility of, by giving prior notice, terminating their employment contract within 22 working days of the change of employer. The said employees may be entitled to compensation if they can demonstrate that the change of employer entails material damages.

Business protection and restrictive covenants Rules of conduct are increasingly important in employment relations. In effect, labour relations assume that the employer places absolute trust in the integrity and loyalty of the employee. Concerning the duty of loyalty, the LGT imposes on the employee an obligation of secrecy – Article 44 (g) – expressly forbidding the employee from disclosing any information related

GLI - Employment & Labour Law 2018, Sixth Edition 2 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Cuatrecasas Angola to the employer’s business, customers, organisation, methods and production techniques. This duty, in principle, applies only during the term of the employment contract. However, it is increasingly common to insert in employment contracts clauses, creating conﬁ dentiality obligations that will extend to the post-contractual period. Were secrecy not to be the soul of business! “If the employee discloses facts related to the employer that are not in the public domain and thereby causes damages to the employer, he will incur a disciplinary infraction that may constitute just cause for dismissal (pursuant to Article 206 h) of the LGT).”

Discrimination protection The principle of equality and non-discrimination, which results in a prohibition of discriminatory behaviour based on, among others, race, colour, sex, ethnic origin, social status, religious reasons and political opinion, is patent in the LGT. Article 157 (1) of the LGT stipulates that the employer is required to ensure equal remuneration for employees for the same work or work of equal value without discrimination. The LGT emphasizes equality of opportunity according to sex, establishing that the working woman is guaranteed equality of opportunity, treatment and non-discrimination. On the other hand, the LGT forbids contractual clauses that discriminate against the employee by reason of race, colour, sex, religious or political ideas. Any such clauses shall be deemed null and void. Likewise, dismissals that are found to be based on grounds that are discriminatory are null and void.

Protection against dismissal Labour law is particularly sensitive with regard to the protection of workers. One of the issues that is considered of particular relevance in this regard is job security, and dismissals without just cause are prohibited. According to the LGT, the employment contract may be terminated by: (a) objective causes beyond the control of the parties; (b) mutual agreement; or (c) unilateral decision of either party that can be upheld against the other. The latter concern includes the termination of the contract at the employer’s initiative – dismissal – based on just cause, which is defi ned as the practice by the employee of a serious disciplinary breach that renders the persistence of the employment relationship impossible. Disciplinary dismissal is only valid if it is preceded by the legally prescribed procedure. The employer may not decide to apply the sanction of dismissal without the employee having been given a prior hearing. It is the employer’s responsibility to ensure that, in the event that the disciplinary sanction to be applied is dismissal, a specifi c procedure is followed. The LGT also provides for the possibility of the employer to conduct a preliminary investigation lasting no more than eight (8) days, when the breach or the author thereof are not adequately identifi ed. The LGT states that if the employee cannot be contacted and this impossibility is due to reasons associated with the breach, the employer can, within ten (10) business days, apply the disciplinary measure regardless of the fact that the employee has not been heard. Some workers enjoy special protection against dismissal: trade union offi cers or representatives; women covered by the maternity protection scheme; children; and former combatants. Disciplinary procedure concerning the said workers is subject to special rules.

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Disciplinary dismissal does not give the employee the right to any indemniﬁ cation and/or compensation. The LGT also recognizes the employee’s right to terminate the employment contract when he can claim that the employer’s actions constitute just case, namely when the employer wilfully breaches the employee’s rights (indirect dismissal), provided that he does so in writing, describing the facts that justify the termination of the contract, within 30 days after said facts are known. Indirect dismissal entitles the worker to compensation.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Angolan labour legislation has gradually been introducing some solutions that are more commonly adopted in other countries regarding the consecration of certain social rights for the benefi t of workers. Weekly rest The workers’ right to rest is a fundamental right. In addition to daily rest, the worker is entitled to at least one day of rest per week, and may be granted a supplementary day of rest, according to the distribution of the weekly working hours by fi ve or fi ve days and a half. Work is mandatorily suspended on national holiday days. When a national holiday coincides with the mandatory weekly rest day (Sunday), it will be transferred to the next immediately following business day. Maternity and paternity protection Working women are entitled to pre-maternity leave (in the case of risky pregnancies) and to a three-month maternity leave, which is extended by a further four (4) weeks in the case of a multiple birth. Once the maternity leave is completed, the employee may further benefi t from a supplementary maternity leave, with a maximum duration of four weeks, to accompany the child, if she gives prior notice to the employer indicating the duration of the maternity leave. The supplementary maternity leave period is unpaid. The LGT provides for a day of paternity leave for the father on the occasion of the birth of the child. Parental leave is not yet regulated by the Angolan legal system. Payment of the maternity and pre-maternity allowance shall be made by the employer within 30 days of the start of the leave, and shall be reimbursed by the State social security system. Whistleblower protection Although efforts are being made to improve governance practices in companies and public sector entities with the aim of increasing transparency and combating corruption, Angolan law does not yet include specifi c mechanisms that effectively encourage and protect whistleblowing. However, it is to be expected that, as capital markets gradually develop according to the Government’s publicly stated intention, the requirements of the operators and the examples collected from other markets will encourage the adoption of measures with this purpose.

Worker consultation, trade union and industrial action In Angola, the right of the trade unions to freely organise and operate is guaranteed by the Constitution and the laws as a fundamental right.

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In addition to the right to work and the free exercise of the profession, the following are fundamental workers’ rights: (a) freedom of association and the right to organise and to exercise trade union activity; (b) the right to collective bargaining; (c) the right to strike; and (d) the right to meet and participate in the business of the undertaking. In general, trade union organisations are still relatively undeveloped, except for a few sectors of activity. Trade unionism as a worker culture is still in a developmental phase.

Employee privacy The LGT does not contain speciﬁ c provisions aimed at protecting the worker’s privacy. However, a person’s right to the privacy of his private life is a constitutional right, provided for in Article 32 of the Constitution, and is also enshrined as a personality right under Article 80 of the Civil Code. When entering into an employment contract, a worker does not alienate his personality right to the privacy of private life, so it is undeniable that the said right, which is legally qualiﬁ ed as a fundamental right, also applies within the labour relations. As a consequence, the employer is prohibited to access and disclose aspects related to the employee’s private life.

Other recent developments in the fi eld of employment and labour law There is often a need to resort to foreign labour, as a result of the fact that the Republic of Angola is a developing country. However, use of foreign labour must comply with the requirements imposed by the Angolan Government. This year, several diplomas were published that established new rules regarding the exercise by foreign workers of professional activities in Angola. Presidential Decree No. 43/17, of 6 March, which repealed the previous legal regimes on this matter – provided for in Decree No. 5/95, of 7 April (regulating the use of foreign labour force, as well as the employment of qualifi ed national workers in foreign companies based in Angola) and Decree 6/01, of 19 January (Regulation on the exercise of professional activities by non-resident foreign workers), has maintained many of the rules that were previously in force, but approved a number of relevant changes, in particular, concerning the remuneration of non-resident foreign workers, which caused some controversy. A little over a month later, Presidential Decree No. 79/17, of 24 April, revoked and amended Articles 2, 7 and 10 of the aforementioned Presidential Decree. This new law establishes that the value of the remuneration of non-resident foreign workers and the currency in which said remuneration is stated are freely agreed between the parties, and eliminated the obligation that the payment thereof be in Kwanzas. It also eliminated the provision that established that supplements and other benefi ts paid to non-resident foreign workers should not be higher than 50% of a worker’s basic salary, which had been created in March. Another provision that was altered was the one relating to the duration of the contract of employment concluded with a non-resident foreign worker, which had been set at a maximum of 36 months. Such limit was eliminated and it was stated that the duration of the contract is “freely agreed between the employer and the worker, and the contract may be renewed twice, in accordance with the legislation in force”.

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The interpretation of this provision caused some doubts, since the regime now foreseen needs to be articulated with the legal diplomas in force regarding the legal regime of foreigners in Angola, namely Article 75, paragraph 1, of Presidential Decree No. 108/11 of 25 May, which establishes that work visas may only be granted for a minimum of three months and a maximum of 36 months, which does not seem to be easily harmonised with the new legal regime. Presidential Decree No. 151/17, of 4 July, amended the wording of paragraph 1 of article 75 of Presidential Decree No. 108/11, of 25 May, to clarify that work visas may be granted for the duration that is stated in the employment contract, and may be renewed according to any renewals of said contract. Does this mean that the parties enjoy full freedom in stipulating the duration of the contract (although subject to the limitation of two renewals)? We do not think so. According to Law No. 2/07, of 3 August, which establishes the legal regime for foreigners in the Republic of Angola, the hiring of non-resident foreign workers is subject to: (i) the worker’s professional, technical or scientifi c qualifi cations; (ii) the contract being for a fi xed period; and (iii) the worker obtaining a work visa. It seems to us, therefore, that these contracts will have to be concluded for a defi nite time. Considering that there is no express rule on the maximum duration of employment contracts concluded with non-resident foreign workers, and applying the LGT to the contracts concluded with said workers, leads us to conclude that the maximum time allowed for the duration of these contracts is 10 years in the case of small, medium and micro-companies, and fi ve years for all other companies, in adherence to the provisions of the LGT that rule on the duration of fi xed-term employment contracts. It remains to be seen what position the authorities will adopt in implementing the new regime.

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Sandra Lima da Silveira Tel: +351 21 355 38 00 / Email: [email protected] Associate lawyer of Cuatrecasas since 1999. Her practice has focused on employment and social security law, particularly in advising on day-to-day employment matters, negotiating and preparing salary packages, allowances, beneﬁ ts and incentive plans, and disciplinary proceedings. She also has experience in advising on and planning for start-up companies, and advising on downsizing and company closures, transferring employees, drafting standard contracts at European and international level, negotiating the hiring and dismissal of managerial staff, and on preparing employment due diligences in the framework of company acquisitions. Member of the Portuguese Bar Association since 1996. Member of the International Bar Association and the European Employment Lawyers Association. Law Degree, University of Lisbon Law School, 1996. Post-graduation in Labour Law, University of Lisbon Law School, 2001.

Inês Nobre Tel: +244 939 378 652 / Email: [email protected] Associate lawyer of Cuatrecasas since 2014. In the last few years she has advised in the ﬁ eld of civil law, tax law, labour law and corporate law. Trainee lawyer at Luiz Gomes & Associados, Sociedade de Advogados, RL from 2001 to 2003, where she remained as lawyer until 2005. She had her own practice from 2005 to 2011. Associate lawyer of Manuel José Guerreiro & Associados, Sociedade de Advogados, RL from 2012 to August 2014. Member of the Portuguese Bar Association since 2004. Law Degree from Universidade Autónoma de Lisboa, 2001.

Cuatrecasas Praça Marquês de Pombal, nº 2, 1250-160 Lisbon, Portugal Tel: +351 21 355 38 00 / Fax: +351 21 353 23 62 / URL: www.cuatrecasas.com

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Sedrak Asatryan, Janna Simonyan & Ani Varderesyan Concern Dialog law firm

General labour market and litigation trends Recent developments in the fi eld of labour law include the adoption of alternative dispute resolution mechanisms for disputes concerning employment. The Republic of Armenia (RA) Code of Civil Procedure fi rst introduced mediation as a possible means of resolution of disputes regarding employment. Previously it was up to advocates to negotiate a settlement between employee and employer, whereas today legislation allows the assistance of a professional mediator to be sought. Accordingly, the court examining the lawsuit may leave the dispute to be examined by the mediator if the parties agree to that. Additionally, due to the amendment of the RA Labour Code, disputes concerning employment became arbitrable in the territory of the RA. The new provision regulates arbitration agreements between employer and employee. It provides, however, that the arbitration clause cannot limit the right of the employee to submit the resolution of the dispute that has arisen in connection with the employment contract to the court. The only exception is when the arbitration agreement has been concluded after the dispute has arisen and the parties have, without any reservation, agreed to submit their dispute to an arbitral tribunal. This development has not yet resulted in widespread recourse to mediation or arbitration in labour disputes, however, the practice is expected to gradually increase. As to expected directions of development, it should be noted that in recent years the courts, for the fi rst time, have started receiving claims based on allegations of violation by the employer of conditions of work, more particularly sanitary norms, space and furnishing of workplace, etc. The legal bases for these claims are regulations of labour legislation, which provide that if the conditions of work do not correspond to the requirements of law, the employees, besides the salaries envisaged in their contracts, are entitled to additional payment. Similarly, the courts have started receiving claims concerning the failure of employers to additionally remunerate their employees for overtime work. In the absence of case law on the subject matter, the outcome of these proceedings may bring clarity concerning the application of relevant provisions of labour legislation and, in particular, regarding the procedures for engaging an employee in overtime work. The same is true for cases of violations of conditions of work, where the existence of case law could allow uniform application of the provisions of labour legislation to be guaranteed. The decisions of courts on the aforementioned matters are expected to be adopted within a year.

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Protection against dismissal CEOs of joint stock companies In connection with the dismissal of the head of an executive body of joint stock companies, the Court of Cassation of the RA has recently adopted a decision underlining the specifi c status of head of an executive body and, in particular, regarding protection against dismissals. Through interpretation of relevant legislation, the Court has concluded that the status of director (CEO) of a joint stock company is fundamentally different from the status of employee as it is envisaged in the RA Labour Code. This is due to the scope of functions entrusted to the CEO and its role in the governing bodies of the company. From the analysis of legislation, the Court has deduced that the provisions of the RA Labour Code are applicable to the CEO as an employee, only when those provisions are in line with the status of CEO as it is envisaged in the law of the RA on Joint Stock Companies, and where specifi c relations are not otherwise regulated by the law of the RA on Joint Stock Companies. The Court has further referred to Article 88, paragraph 5 of the law of the RA on Joint Stock Companies, which prescribes the right of the shareholders to terminate the contract of the CEO at any time (this authority can be transferred to the board by the charter of the company). The Court has accordingly noted that this right of shareholders is based on special status of the CEO and is a form of protection of the interests of shareholders. This right, according to the Court, arises from economic necessity, freedom of business and competition. The Court of Cassation has further noted that the respective decision of an authorised body does not need to include any cause or motive. To conclude, the Court has affi rmed that the employment of CEO of a joint stock company does not qualify as a conventional employer-employee relation, and that a CEO can and should predict that their contract can be terminated by the company at any time. Participation in military activities Article 175 of the RA Labour Code, prescribing cases where the employee is released from the obligation to perform their functions and is entitled to maintain their position at work, has been amended to include a new provision. The scope of circumstances that fall under the regulation of this Article has been enlarged to include voluntary participation in military activities. The Article refers to employees who are not in military service but have voluntarily participated in military actions aimed at protection of the RA or other countries, with whom the RA or its authorised bodies have an agreement on mutual military assistance. The employee is released from their obligations based on a certifi cate issued by the RA Ministry of Defence. The remuneration of the employee for that period is decided by the parties or by collective agreement.

Other recent developments in the ﬁ eld of employment and labour law Work permit for foreigners Currently, foreigners do not require permission from any governmental body to work in the territory of the RA. The Government decree N493-N adopted 12 May 2016, which was intended to introduce work permits, has been suspended until 1 January 2018. The decree was long-awaited, since the law of the RA on Foreigners of 2007 had regulations concerning employment of foreigners which could not be implemented without a governmental decree regulating the procedure for issue of work permits.

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By the decree, the RA Ministry of Labour and Social Affairs has been appointed as the authorised body which receives applications and issues work permits to foreigners based on the procedure defi ned by the decree. The decree equally lists all those circumstances where foreigners are allowed to work in the territory of the RA without a work permit. Accordingly, if the employer hires a foreigner without residence or a work permit, they will face responsibility and be fi ned. The decree entered into force on 4 June 2016; however, as mentioned above, it was immediately suspended until 1 January 2018. Work book Article 90 of the RA Labour Code defi ned the work book as the “main document containing information on the labour activity of the employee”. Previously, the employer had an obligation to keep a paper work book for every employee. The book would contain information such as duration of employment, name of the employer, etc. The book may also contain, if the employee so requests, information about the position held by the employee, reasons for termination of the employment contract, etc. The obligation to present the work book has been revoked for employees who have been hired after 1 January 2017. The work books are expected to be fully pulled out of circulation during the two years following 1 January 2017. To achieve that, employers must submit work books they are currently keeping to the authorised governmental body, so that the information contained in those books can be fully entered into the data register of the pension system. Alternatively, the employer may transmit the book to the employee. This development is aimed at creating a digital database of employment history. The information that was previously stored in the work book of the employee will now be digitally collected from databases of tax and social authorities. Statute of limitations for claims of unpaid per diem and other business trip expenses The RA Labour Code prescribes that there is no statute of limitations for claims of unpaid salary. However, the Court of Cassation was recently faced with the question whether per diem and other business trip expenses also fall under this special guarantee as payments assimilated to salary. Based on the analyses of relevant legislation, the Court concluded that per diem and business trip expenses do not fall under the defi nition of payments assimilated to salary. This follows from the nature of those payments, which is to reimburse expenses of the employee rather than to remunerate the latter for work performed. Therefore, the Court has concluded that claims for unpaid per diem and business trip expenses are subject to the general statute of limitations, which is three years.

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Sedrak Asatryan Tel: +374 1057 5121 / Email: [email protected] Sedrak Asatryan has been the Managing Partner of Concern Dialog law fi rm since 2003. He practises in the areas of Labour Law, General Administrative Law and heads the Real Estate practice of the fi rm. In 2010, Mr Asatryan intensively researched law fi rm management as part of an exchange experience organised for managing partners in USA. Mr Asatryan co-authored The New Labour Code of the RA: Employment Contracts and The New Labour Code of the RA: Employer’s Internal and Individual Legal Acts. In 2013, another book co-authored by Mr Asatryan, Law Firm Management, an essential contribution to the Armenian legal reality, was published. Since 2014, he has led the employment law clinic for students, run jointly by Concern Dialog law fi rm with the French University in Armenia. In addition to his attorney practice, Mr Asatryan lectures at the School of Advocates. In 2017, Mr Asatryan was elected to the Board of the Chamber of Advocates of the Republic of Armenia.

Janna Simonyan Tel: +374 1057 5121 / Email: [email protected] Janna Simonyan has been a Partner at Concern Dialog law ﬁ rm since 2010. She is specialised in Labour Law consulting, as well as Employment Law litigation issues. Ms Simonyan has represented corporate clients of Concern- Dialog as well as individuals in numerous cases since 2009 and has more than 50 successful litigation cases involving Labour disputes. Ms Janna Simonyan regularly organises individual and group courses on the Labour Law and developments, seminars on issues related to Labour Law for HR department managers and employees of organisations, and discussions on Labour Law with law clinic students from universities in Armenia. Ms Simonyan periodically trains teams of students for moot court competitions in Armenia. Janna Simonyan is also author of many articles and co-author of publications on Employment and Labour Law.

Ani Varderesyan Tel: +374 1057 5121 / Email: [email protected] Ani Varderesyan joined Concern Dialog law ﬁ rm in 2016. She graduated from the French University in Armenia with a Bachelor’s degree and currently continues to pursue her Master’s degree at the same university. As a student she has participated in many competitions and conferences, and has represented the university team at the international round of Jessup moot court competition. She specialises in Comparative and Private International Law issues.

Concern Dialog law fi rm 1 Charents street, 2nd fl oor, 207 offi ce, Yerevan, Armenia Tel: +374 1057 5121 / Fax: +374 1057 4779 / URL: www.dialog.am

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Leon Levine, Dan Williams & Gordon Williams MinterEllison

Discrimination protection Australian federal and state equal opportunity and anti-discrimination legislation makes it unlawful to discriminate in all aspects of the employment relationship on the basis of various protected attributes. Those attributes vary between state and federal legislation, but generally include (among other things) sex/gender, martial or relationship status, pregnancy, breast feeding, age, race, impairment/disability and sexual orientation. Sexual harassment is also unlawful under anti-discrimination legislation. A signiﬁ cant recent development in this area has been the increasing preparedness of Courts and tribunals to award substantial amounts of compensation – in some cases, in the hundreds of thousands of dollars – to complainants in discrimination and sexual harassment cases, reﬂ ecting changes in community attitudes to discrimination and harassment. This is in contrast to previously modest damages awards in the thousands or low tens of thousands of dollars. This development makes it all the more important that employers implement appropriate policies and provide employees with appropriate training to reduce the incidence of unlawful behaviour by employees and to mitigate the risk of being held vicariously liable for such conduct if it does occur.

Protection against dismissal The federal Fair Work Act 2009 (FW Act), which covers the vast majority of private sector employees in Australia, is the key source of protection against dismissal. Under the FW Act, an eligible employee can apply to the national employment tribunal, the Fair Work Commission, on the ground that they have been unfairly dismissed. Subject to certain exceptions and qualiﬁ cations, an employee will generally be eligible to make an unfair dismissal claim if their salary is less than the relevant remuneration cap (currently $138,900 per annum) or they are covered by an industrial instrument. If the FWC determines that a dismissal was unfair, it may reinstate the employee and/or order compensation (capped at six months’ pay). Unfair dismissal is a relatively well settled area of labour law in Australia. A more recent, and less settled, area of legal protection commonly relied on by employees in the case of dismissal, is the general protections provisions in the FW Act (while claims can arise at any stage of the employment relationship, it is most common for general protections claims to arise as a result of dismissal). Those provisions prohibit a person taking ‘adverse action’ against another person (e.g. dismissing an employee) for particular prohibited reasons. Typically, this will involve an employer taking action against an employee – but this does not have to be the case. For present purposes, we will limit the discussion

GLI - Employment & Labour Law 2018, Sixth Edition 12 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London MinterEllison Australia to employees. Importantly, this jurisdiction is available to all employees, regardless of remuneration level or length of service. To be unlawful, the adverse action must be taken for a prohibited reason. The prohibited reasons include (among others): (a) because the employee has, or has exercised, a ‘workplace right’ – including having an entitlement under a workplace law or because the employee has made a complaint (including fi ling an internal grievance); (b) because the employee is (or is not) a union member or engages (or does not engage) in an ‘industrial activity’; or (c) because of a discriminatory reason – such as the employee’s race, sex, age, disability or carers’ responsibilities. There is a ‘reverse onus of proof’ – that is, the employer must establish that the adverse action was not taken for a prohibited reason. In effect, the employer must prove its innocence. Practically, this means the decision maker (often a very senior person) will need to be a witness in the defence. Important cases in recent years have clarifi ed, and narrowed down, the circumstances in which adverse action can properly be said to have been taken for a prohibited reason. A particular area of interest has been those cases where a permissible reason for taking adverse action has been ‘inextricably entwined’ with a prohibited reason. The seminal case involved a union representative who was suspended for circulating a communication to employees alleging improper conduct by the employer. The employee asserted that in sending the communication he was engaging in lawful union activities in his role as an offi cer of the union and, by suspending him, his employer was acting for a prohibited reason. The employer’s Chief Executive Offi cer gave evidence that the adverse action was taken not because of the employee’s union position or activities, but because of his breach of the employer’s code of conduct. The High Court of Australia ruled that the substantial and operative reason for the taking of the adverse action was the reason stated by the CEO and that it was not necessary for that reason to be completely dissociated from the prohibited reason. The next case in this line concerned an employee who, in the course of a union-organised protest in support of a work stoppage, held up and waved a sign with the words, ‘No principles SCABS No guts’, written on it. The sign was directed at other employees who were entering the employer’s premises. The employer dismissed the employee for breaching its code of conduct by holding up the offensive sign. The employee asserted he was dismissed for engaging in lawful industrial activity. A majority of the High Court held that the matter was to be determined by reference to the actual motive of the decision-maker in taking the adverse action. The decision-maker gave evidence, which was accepted, that the reasons for the dismissal did not include the employee’s industrial activity. Accordingly, even though there was a close connection between the reason for the adverse action and the prohibited reason, the Court held that the adverse action was not taken for a prohibited reason. A recent, and very fi nely balanced, case in this line involved an employee who was moved from a weekend roster to a weekday roster as a result of absences from work on authorised personal leave. The employee alleged that the action was taken because he exercised a workplace right, being the right to take paid personal leave. The employer maintained it changed his roster due to unpredictability in relation to his absences and not because he

GLI - Employment & Labour Law 2018, Sixth Edition 13 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London MinterEllison Australia exercised a workplace right to take leave. In a practical sense, the Court had to determine whether the unpredictability created by the employee’s absences could be divorced from the reason for the absences. The Federal Court (by majority) accepted the evidence of the decision-maker that the action was not taken because of the employee’s exercise of a workplace right and was not, therefore, for a prohibited reason. The current state of the authorities supports the position that if a decision-maker gives evidence that the reason/s for taking adverse action did not include a prohibited reason, and that evidence is accepted by the Court, that will generally be sufﬁ cient to discharge the reverse onus. Of course, where there is a close connection between the purported reason/s for the adverse action and a prohibited reason, the motives of the decision-maker are likely to be closely scrutinised. It is therefore essential for an employer to be clear about, and preferably to document, the (legitimate) reasons for taking adverse action so that it is in a position to discharge the reverse onus.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) A recent focus in the area of statutory employment protection rights has been the enforcement of minimum wage obligations, and proceedings in relation to ‘sham contracting’ arrangements, by the statutory regulator, the Fair Work Ombudsman (FWO). Perhaps the most high-proﬁ le recent case involved action against 7-Eleven in relation to the systemic underpayment of employees – especially migrant workers – by 7-Eleven franchisees. This has resulted in the establishment by 7-Eleven of a compensation scheme to address the underpayments. It is estimated that the total amount of underpayments could exceed $100m. Underpayment scandals such as these have prompted the vulnerable worker legislation referred to below. The FWO has also been actively targeting ‘sham contracting’ arrangements. The FW Act contains provisions which make it unlawful to misrepresent to a person that they are an independent contractor when they are an employee; to dismiss an employee in order to engage them as an independent contractor; or to make false statements to persuade a person to become an independent contractor. Sham contracting is common in low-paid industries, such as the contract cleaning industry, and often involves purportedly engaging workers as independent contractors in order to avoid minimum wage obligations. In a recent FWO case, a company and its director were ﬁ ned a total of $124,000 for underpaying a backpacker on a working holiday visa approximately $8,000 as a result of wrongly classifying him as an independent contractor. Approximately 90% of recent FWO cases have ‘roped in’ an accessory involved in contraventions by an employer. Under the FW Act, a person who has been involved in a contravention of the FW Act is also taken to have contravened the FW Act. Examples of the use of these accessorial liability provisions include action by the FWO against: • a master franchisor and a payroll company in relation to underpayments by their associated entities; • a supermarket chain in relation to underpayments by its trolley collection contractor; • a human resources manager in relation to sham contracting arrangements by his employer; and • company directors, including for the recovery of underpayments in circumstances where the company is insolvent.

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The FWO has indicated that those responsible for advising employers – including accountants, HR personnel and lawyers – may be the subject of enforcement proceedings in the event of contraventions by those they advise. Accordingly, advisers must be careful to ensure that the advice they give is consistent with relevant legal obligations.

Employment trends Recent ﬁ gures published by the Australian Bureau of Statistics indicate that part-time employment is increasing. Anecdotal evidence also points to an increasingly casualised workforce, something the Australian Labor Party has identiﬁ ed as a matter of concern and something it would potentially legislate to address if it wins the next Federal election (which must be held by November 2019).

Litigation trends Unfair dismissal applications remain the most popular type of application, with over 14,000 applications in FY17 (although this is a 4% reduction on the previous year), and continue to be a signiﬁ cant risk exposure for employers of all industries and sizes. There has been a marked increase in the past few years in successful arbitrated unfair dismissals. There is no clear indication as to why this success rate has risen, however, one line of thought is that the FWC has raised the bar in terms of its expectation of procedural fairness throughout the dismissal process. General protections applications (another type of employment litigation which focuses on actions by employers against employees for unlawful reasons) increased by about 14% from the previous year (totalling in excess of 4,000 claims). Applications under the Commission’s anti-bullying regime, which was introduced on 1 January 2014, remained static at about 700.

Redundancies, business transfers and reorganisations There are three key issues in business transfers and reorganisations: 1. whether there is a transfer of business which triggers the transfer of industrial instruments; 2. how an employee’s service with a previous employer is recognized; and 3. when statutory redundancy entitlements are payable. When does a ‘transfer of business’ arise? Employee entitlements are protected in business reorganisations by the transfer of industrial instruments (usually enterprise agreements) if a statutory ‘transfer of business’ arises. The ﬁ rst requirement for a transfer of business is that the employee’s employment with the old employer must terminate and within three months of the termination, the employee must become employed by the new employer. The second requirement is that the employee must perform the same or substantially the same work for the new employer as they did for the old employer. Thirdly, there must be a ‘connection’ between the old employer and the new employer. Connection between old and new employer The Fair Work Act 2009 (Cth) (Fair Work Act) sets out the connections that can exist between an old and new employer:

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1. Use of the same assets There is a connection if, in accordance with an arrangement, the new employer or an associated entity owns or has the benefi cial use of some or all of the assets that the old employer or an associated entity owned or had the benefi cial use of, that relate to or are used in connection with the transferring work. 2. Outsourcing or insourcing Outsourcing and insourcing will give rise to the required connection. Relevant examples include: • A service arrangement entered into as part of a joint venture, which involved providing labour and other things such as vehicles and IT services was found to amount to outsourcing which triggered a transfer of instruments (Thorne v Jura Australia Espresso Pty Ltd [2012] FWA 4954). • A company was found to have outsourced work when it engaged a worker from a labour hire agency to do work even though it had never done that work ‘in house’ before. When the company then directly employed that worker, that was considered ‘insourcing’ (Burdziejko v ERGT Australia Pty Ltd [2015] FWC 2308). • The Burdziejko decision is controversial and other cases have held that labour hire arrangements were not outsourcing or insourcing (Gausden v Silvan Pty Ltd [2014] FWC 5337). 3. Associated entities The fi nal connection arises if the old employer and new employer are associated entities as defi ned in the Corporations Act 2001 (Cth). Implications of a transfer of business Once a transfer of business arises, there are two key impacts: Industrial instruments An industrial instrument (usually an enterprise agreement) applying to the old employer transfers and binds the new employer and the transferring employees as though it were made between the new employer and transferring employees. Existing employees of the new employer are not affected. The Fair Work Commission has the power to modify this situation in certain circumstances. Continuity of service The new employer must recognize periods of service for all purposes, with the exception of annual leave accruals and redundancy entitlements (which the new employer may choose to recognize). Implications on employee entitlements Most statutory employee entitlements are calculated by reference to periods of service which the new employer is bound to recognize (with the exception of annual leave and redundancy). If an employee has already had the benefi t of an entitlement that was calculated based on service, that period of service is not counted again when calculating the employee’s entitlement with the new employer. This recognition of service is important because it can result in the new employer assuming signifi cant liabilities. These provisions have been criticised as negatively impacting on an employee’s ability to obtain employment with the purchaser of a business, and as placing signifi cant industrial

GLI - Employment & Labour Law 2018, Sixth Edition 16 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London MinterEllison Australia restrictions and complexities on new employers, particularly those with their own existing industrial arrangements. Recommendations made by the Productivity Commission in 2015 include amending the transfer of business provisions to: • Give the FWC more discretion to order that industrial instruments will not transfer. • Permit new employers to make conditional offers of employment on the basis that the old employer’s enterprise agreements will not transfer (following the order referred to above). • Provide a sunset date for transferred instruments of 12 months (which is similar to the regime under previous legislation). • Prevent the transfer of instruments between associated entities in situations where the employee is redeployed to avoid being made redundant. Entitlements on termination Employees are entitled to up to 16 weeks’ pay if made redundant (more if there is an enterprise agreement which provides for more generous beneﬁ ts, which is the norm in some industries). In a transfer of business, whether an employee is entitled to a redundancy payment depends on whether the employee accepts employment with the new employer and if so, on what terms. If the employee rejects an offer on comparable terms, no redundancy payment is payable provided that the offer recognized service with the old employer and the offer is on terms and conditions ‘substantially similar to and no less favourable than’ the employee’s employment with the old employer. If an employee accepts an offer and service is recognized by the new employer, no redundancy is payable, regardless of the terms of the offer. The employee can, however, apply to the Fair Work Commission for an order that redundancy be paid on fairness grounds. A good example is Mantra Hospitality (Admin) Pty Ltd [2013] FWC 1063. In this case, the employee was employed as a Housekeeping Attendant and she was then promoted to Housekeeping Supervisor. Mantra outsources its housekeeping. The employee was offered employment with AHS on identical terms, but without the supervisory duties (AHS claimed it had been told that the employee no longer wanted to be a supervisor). The employee rejected the offer from AHS and the issue was whether she was entitled to redundancy pay from Mantra. Mantra argued that that the AHS position was substantially similar to and no less favourable than her employment with Mantra because the work and role was identical, save for the supervisory obligations, there was no change to the location of work, the pay arrangements would still conform with the award, the employee had requested to give up her supervisory role and there was no question about whether she was able to perform the work. The FWC rejected these arguments. It found that whether the employee wanted to relinquish her supervising position was irrelevant because the focus had to be on what work the employee was actually doing and being paid for before the outsourcing. The FWC found that the employee would suffer a signiﬁ cant pay cut if she accepted the AHS position, making it not ‘substantially similar to and no less favourable than’ than her employment with Mantra. Therefore, she was entitled to a redundancy payment.

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Other recent developments in employment and labour law and enterprise bargaining Recent legislative developments As noted below, the Royal Commission into Trade Union Governance and Corruption concluded at the end of 2015. The report listed 79 recommendations to improve the governance of registered organisations, to improve the management of construction work-sites across the country, and to make unions more transparent and accountable to their members. Legislation addressing many of these recommendations has stalled in the Senate as the Coalition Government has been unable to get suffi cient support to pass it. In October 2017, legislation (referred to as the vulnerable worker legislation) took effect that makes franchisors and holding companies liable for breaches of certain workplace laws by their franchisees and subsidiaries if they knew, or ought to have known, that a breach would occur and they failed to take reasonable steps to prevent it. Signifi cant penalties can be imposed for serious breaches. A range of other legislation is currently before the Senate, including to require Banks and other fi nancial institutions to put in place an accountability regime for executives (similar to the schemes that operate in the UK and Hong Kong). Mental health The mental health and wellbeing of employees continues to be a key trend across Australia, with recent data indicating that mental health issues in the workplace have reached crisis point. A survey conducted by MinterEllison of 226 small, medium and large employers across a range of industries provided some important fi ndings in relation to mental health issues, including: • 81% of human resources professionals are spending around 25% of their time managing mental health issues in the workplace; • the majority of organisations do not have specifi c policies or procedures for identifying and managing staff mental health issues; • workload and stress are the biggest risk factors for staff mental health; and • there are opportunities in terms of managing risk factors inherent to both a staff member’s role and also in managing risk factors associated with the individual staff member. One area of concern that the survey exposed is how employers can appropriately discipline and performance-manage an employee with mental health issues. This is a complex matter and recent case law has demonstrated that employers can best protect themselves by being able to identify when mental health is a driving factor for that particular employee’s poor performance or conduct, and if it is, by managing the employee from a work health and safety perspective rather than by carrying out the process from a strict disciplinary or performance management perspective. There has also been an increased interest in mental health issues by various regulators, with auditing of workplace systems being carried out across the country. It is essential that employers turn their focus to this rapidly evolving workplace issue. Employer’s duty of care In Hayes v State of Queensland [2016] QCA 191, the Queensland Supreme Court found that an employer owes its employees a duty of care to take reasonable steps to prevent psychiatric injury, including employees who are named as respondents to workplace complaints. The duty is only engaged if psychiatric injury to a particular employee is reasonably foreseeable. This decision has reinforced the importance of employers ensuring that adequate support is provided to all employees during a workplace investigation (including the complainant, any witnesses and the respondents).

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Employee privacy Employers in New South Wales and the Australian Capital Territory (but not elsewhere yet) are subject to strict legislative requirements in relation to surveillance of their employees, including monitoring their use of email and internet (as well as camera and tracking surveillance). Relevantly, these obligations do not apply to independent contractors. If an employer wishes to conduct surveillance, an employee must be notifi ed, in writing, in advance in very precise terms that refl ect the legislation. In addition, where the surveillance involves a computer, it must be carried out in accordance with a surveillance policy that the employee has been notifi ed about in advance. If an employer conducts surveillance without following these steps (known as ‘covert surveillance’), it may not be able to use or rely on any information discovered from the surveillance. This can be particularly important if an employer has concerns about an employee misusing its confi dential information and wishes to check his or her emails for evidence. In addition, covert surveillance could also result in fi nancial penalties. Therefore, including relevant notifi cation wording in employment contracts for new employees, and adopting and communicating properly drafted polices, is key. Whist the employee surveillance rules are quite restrictive, Australia’s privacy legislation, as it applies to private sector employers and employees, is far less onerous. This is because none of the usual privacy principles (e.g., relating to collection, use, disclosure, etc.) apply to an employer’s practices in dealing with employee records. ‘Employee record’ is broadly defi ned to include records of personal information relating to the employment of the (current or former) employee. This means that it is rare for private sector employees to make formal complaints about breaches of their privacy. However, the exemption does not apply to applicants for employment, to independent contractors or to employees sourced from an agency or labour hire company. Also, things are different in the public sector, where there is no equivalent employee records exemption. As a result, workers like these do make privacy complaints from time to time, so Australian employers cannot afford to be too complacent. In a very recent case, a Victorian public sector employee made a privacy complaint about her employer collecting and using information obtained from Facebook as part of a disciplinary investigation against her. She claimed: her employer had ‘unfairly, intrusively and secretly’ collected personal information from her Facebook account; that it was not necessary for one of her employer’s functions; that her employer failed to notify her at the time of collection; and that it should have collected the information from her in the fi rst instance. The employer argued the employee’s Facebook posts were ‘generally available publications’ rather than ‘personal information’ and were therefore not subject to the relevant privacy obligations. The Court disagreed. It decided that the opinions expressed by the employee about her colleagues constituted ‘personal information’ and that they did not constitute a ‘generally available publication’ because the term only covers information which can be accessed by most of the general public. In this case, the employee’s privacy settings and certain other factors meant the information was only accessible by those with particular skills in searching for information on social media. Despite this, the Court ultimately decided the employer had not breached its privacy obligations. It said that in the circumstances, the collection of the employee’s personal information was ‘necessary’ for the employer to conduct the misconduct investigation. It was also reasonable for the employer not to attempt to collect the information directly from

GLI - Employment & Labour Law 2018, Sixth Edition 19 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London MinterEllison Australia the employee or to advise her (at the time) of the collection, as this would have compromised the effectiveness of the investigation process. In particular, if the employer had attempted to collect the information from the employee in the ﬁ rst instance, this may have ‘...defeated the purpose of the collection itself’. In relation to the obligation to take reasonable steps to notify an employee of the collection of information, the Court found the employer had met its obligations as it notiﬁ ed the employee of the collection as soon as practicable during the investigation process.

Trade unions Unions still play a signifi cant and important role in many industries – in particular, in the context of consultation, negotiating and making enterprise (collective) agreements and industrial action. Overall, Australian employers are subject to less onerous notifi cation and consultation obligations than their European counterparts. Generally speaking, such obligations are triggered where 15 or more redundancies are proposed, or in respect of certain changes impacting employees who are covered by a modern award or enterprise agreement. Modern awards, which set minimum employment conditions for employees in certain roles or industries, include a standard notifi cation and consultation obligation that is triggered where an employer makes a defi nite decision to introduce major changes that could have signifi cant effects on employees. Clearly, this will include restructures, redundancies and outsourcings. In addition, as a result of some recent amendments to modern awards, changes to hours and rosters will also trigger notifi cation and consultations obligations. There continue to be decisions by the Fair Work Commission which demonstrate the need for very strict compliance with the legislative requirements for enterprise agreement-making (bargaining). These decisions demonstrate how infl exible the administrative requirements in the bargaining process are. For example, the Notice of Employee Representational Rights (NERR) is a prescribed form under the Fair Work Regulations 2009 (Cth) that must be issued within 14 days of enterprise bargaining commencing. Recent decisions have established that any alteration or change to the NERR will invalidate the entire bargaining process. The key learning is that employers must not change the prescribed wording, staple other documents to the NERR, print the NERR on employer branded letterhead or explain the NERR as part of any other message about workplace matters. If they do, the entire process will fail even if the parties have successfully reached an agreement (often after signifi cant and extended negotiations). Legislation to allow the FWC to overlook minor technical breaches of these administrative arrangements is stalled in the Senate. Also in relation to enterprise agreements, the decision in May 2016 in which the Fair Work Commission further refi ned the ‘better off overall test’ (BOOT) (Hart v Coles Supermarkets Australia Pty Ltd [2016] FWCFB 2887) continues to have a signifi cant impact. In that decision, the Commission refused to approve an enterprise agreement for national supermarket chain, Coles Supermarkets. An enterprise agreement will only be approved where the Fair Work Commission is satisfi ed the agreement results in employees being better off overall than they would have been had the underlying modern award applied to them. The decision demonstrates that while the BOOT is a global test and all entitlements in the agreement are taken into account, the test has to be applied for every employee and every possible work confi guration. As a result of this decision, there has been a slowdown in the number of agreements being made and approved.

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Restrictive covenants It is fairly common for employers in Australia to include post-employment restrictive covenants in employment contracts. Of course, whether such restrictions are enforceable will turn on the particular facts of each case. The legal principles that apply in Australia to the drafting and enforcement of such restrictions are largely the same as in most other common law jurisdictions, particularly the UK. As a starting point, these restrictions will only be upheld if they are objectively reasonable and go no further than necessary to protect a legitimate business interest of the employer. Typical interests include confi dential information, customer or client connection and a stable workforce. Uniquely, in New South Wales, Courts have the power to modify the written terms of a restrictive covenant to make it enforceable (e.g., to reduce the restricted period from six to four months or limit its scope to cover only customers with whom the employee dealt). As a result, where there is an ability to choose the governing law of the employment contract, New South Wales is usually the obvious choice. In other States, the position is much like that in UK. Courts can only rescue a restrictive covenant that is too broadly drafted if it can delete the offending words and leave behind an enforceable restriction. For this reason, it is usually advisable to use cascading or ladder restrictions for employees who work outside of New South Wales. An interesting recent development is the increased use of liquidated damages clauses to support restrictive covenants. For example, in one case, an accountant was subject to a three- year restrictive covenant preventing him from soliciting, or performing services for, clients of his former employer. That restriction was held to be valid. In addition, the accountant’s solicitation of a client triggered a payment under a liquated damages clause in his employment contract – equal to 75% of the fees his former employer had received from that client in the previous fi nancial year. Another case saw an employer recovering signifi cant liquidated damages when its employee resigned before the end of a fi xed-term contract. Typically, such clauses would be challenged as an unenforceable penalty. However, a recent decision of Australia’s High Court (Australia’s fi nal Court of appeal) will make it much more diffi cult for a former employee to prove that a liquidated damages clause is a penalty (Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28). The reason for this is a move away from the traditional test that focuses, mainly, on whether the liquidated damages clause is a ‘genuine pre-estimate of loss’. In effect, the High Court said a clause will be a penalty in more limited circumstances – i.e., where it is intended to ‘punish’ and is ‘out of all proportion’ to the protection of the employer’s interests. Importantly, the High Court also acknowledged that those interests can extend beyond direct fi nancial losses – i.e., to include non-monetary considerations. It is clear that an effective liquidated damages clause can operate as a signifi cant deterrent to employees breaching their restrictive covenants, and this important High Court decision is likely to increase their use further.

* * *

Endnote 1. The word ‘scab’ is a derogatory term typically used ‘to demean those who choose to exercise their right not to join in concerted industrial action’.

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Leon Levine, Partner Tel: +61 3 8608 2712 / Email: [email protected] Based in Melbourne, Leon is an accomplished employment and industrial relations lawyer with a wealth of experience. He provides strategic, litigious and day-to-day advice on the full spectrum of workplace-related law in numerous sectors such as automotive, ﬁ nancial services, food, health, hospitality, manufacturing, retail, resources and transport. Leon’s expertise includes workplace restructuring and the consequences of mergers and acquisitions, executive and other employment contracts, incentive arrangements, dismissal and retrenchment advice, wrongful dismissal, equal opportunity and sexual harassment, and the enforcement of employer intellectual property and other rights. Leon has, over the past 12 months, conducted a series of restraint of trade cases, with very successful outcomes for the clients. Leon is consistently listed in Australia by Best Lawyers as leading lawyer in employment law. Dan Williams, Partner Tel: +61 7 3119 6340 / Email: [email protected] Based in Brisbane, Dan heads up MinterEllison’s Queensland Human Resources and Industrial Relations team. He specialises in employment, equal opportunity and discrimination law, industrial relations strategy and dispute management, work health and safety, superannuation, workplace privacy and workplace investigations. Dan is an expert in workplace restructuring and managing employment and industrial relations issues that arise out of corporate transactions. He is experienced in all stages of workplace bargaining. He has conducted a wide range of industrial proceedings, including managing strikes, unfair and unlawful dismissals, discrimination matters and contested union coverage proceedings. He also advises clients on executive employee issues, including remuneration and incentives, legal compliance and the management of executive terminations and executive litigation. A highlight of the past year was a successful application to terminate an expired enterprise agreement in the coal industry – the application was heavily contested and, when contested, termination applications are rarely granted. Gordon Williams, Partner Tel: +61 2 9921 4479 / Email: [email protected] Based in Sydney, Gordon advises on the full range of employment, human resources and industrial relations issues across a broad range of industries. He also has market leading expertise in employee incentives and related corporate governance issues. Building on his previous UK practice, Gordon has strong ‘project management’ skills in multi-jurisdictional employment matters, including international assignments and secondments. He travels frequently to the UK to visit law ﬁ rms and clients and is regularly sought out to present specialist training workshops in the UK and Australia. Gordon counts advising a European client on the Australian aspects of its global restructuring as being a particular highlight from the past 12 months, plus advising numerous ASX listed clients about remuneration and termination arrangements for key executives. He is recognized in International Who’s Who of Management Labour and Employment Lawyers and in Australia by Best Lawyers and Doyles’ Guide. MinterEllison Level 40, Governor Macquarie Tower, 1 Farrer Place, Sydney 2000, Australia Tel: +61 2 9921 8888 / URL: www.minterellison.com/

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Hans Georg Laimer & Lukas Wieser zeiler.partners Rechtsanwälte GmbH

General labour market and litigation trends In its statement of June 2016, the Austrian National Bank (c.f. Economic recovery in 2016 after four years of weak growth; https://www.oenb.at/en/Monetary-Policy/Economic- Outlook-for-Austria.html) predicted that the Austrian gross domestic product (GDP) growth would accelerate to 1.6% in 2016, after four years with growth rates below 1%. For both 2017 and 2018, GDP growth was then projected to reach 1.5%. The Austrian National Bank considered the factors behind these predicted increases in GDP growth – facing the very modest growth in the world economy – to be the income tax reform that took effect in early 2016 and the additional (defi cit-fi nances) public expenditure on refugees. Furthermore, the Austrian National Bank expected labour market growth for the years 2016 to 2018 to be marked by a steep rise in labour supply, refl ecting the growing number of recognized asylum seekers and other migrants as well as the rising share of older and female participants in the labour force. In 2015, the number of part-time employees reached a record historical high of 28.2% (the share of male part-time employees stood at 9.8% and the female share at 47.8%). Despite the persistently high employment growth, it was predicted that unemployment would continue to climb both in 2016 and 2017, and only to drop slightly in 2018. However, the recently published forecast of the IHS (Institute for Advanced Studies) predicts that economic growth in Austria is about to accelerate more strongly than envisaged last year. GDP in Austria is now projected to increase by 2.6% in 2017 and by 2.1% in 2018 (c.f. http://www.ihs.ac.at/fi leadmin/public/2016_Files/Documents/Press_info_September_ Forecast_2017.pdf). At the same time, exports are expected to grow further, the infl ation rate should reach 2% in each of the two years, and registered unemployment is expected to decline (Eurostat defi nition: 2016: 6%; 2017: 5.6%; and 2018: 5.4%) for the fi rst time in six years. Nevertheless, the OECD points out that the uncertainty in the run-up to the snap elections in October 2017 could undermine consumer and business confi dence and weigh on domestic demand, and that any additional electoral commitments could spur growth in 2018 at the cost of a higher public defi cit (c.f. http://www.keepeek.com/Digital-Asset-Management/ oecd/economics/oecd-economic-outlook-volume-2017-issue-1/austria_eco_outlook- v2017-1-6-en#.WakfebpuKUk).

Redundancies, business transfers and reorganisations Transfer of business – General Based on the rulings of the Austrian Supreme Court and the European Court of Justice, the transfer of an economic entity, which retains its identity, meaning an organised grouping

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• more than 20 and fewer than 100 employees and intending to make at least 5 employees redundant; or • between 100 and 600 employees and intending to make at least 5% of the employees redundant; or • more than 600 employees and intending to make at least 30 employees redundant; or • intending to make at least 5 employees older than 50 years redundant, within a 30-day term, must notify the local employment offi ce (Arbeitsmarktservice – AMS) at least 30 days prior to giving notice to the fi rst employee. At the same time, the employer has to submit evidence to the AMS that consultations have been held with the works council. Failure to comply with these obligations may render the redundancies invalid. A social plan may be required in respect of companies employing 20 or more employees in order to avoid, remove or alleviate the consequences resulting from collective redundancies. The social plan has to be negotiated with the works council and put into effect as a shop agreement. If the negotiations do not result in a social plan, the works council may address the special conciliation body at the competent labour court with it. In the case of collective redundancies, non-compliance with information and consultation obligations towards the works council may also trigger an administrative fi ne, currently in the amount of €2,180.

Business protection and restrictive covenants Confi dentiality and non-competition Employees are subject to a general duty of loyalty during the ongoing employment relationship. In general, an employee is therefore not allowed to compete with the employer during the employment, or to disclose business secrets. However, for the time after the end of employment, such restrictions have to be agreed with the employee to be applicable. Such restraint of trade provisions must not exceed one year and may only limit activities relating to the previous employer’s business. The restrictions further must not unreasonably restrict the employee. Liquidated damages may also be agreed for violations of confi dentiality and non-compete obligations. Liquidated damages are, however, subject to judicial discretion. This cannot be contracted out. The maximum amount of liquidated damages which currently may be agreed in case of a restraint of trade, is six net monthly remunerations, without taking into consideration special payments such as Christmas or holiday payments. If liquidated damages are agreed for a restraint of trade provision, the former employer can only claim the liquidated damages and not a specifi c performance or further damages. Intellectual property The patent right to inventions made by an employee during the term of the employment will belong to the employee. Employers may enter into written agreements with employees, conferring a right on the employers to future inventions or a right of use of future inventions. In such cases, the employee must receive adequate remuneration in accordance with the Austrian Patent Act (Patentgesetz). Respective provisions are provided for in various collective bargaining agreements.

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Discrimination protection The principle of equal treatment derives from different sources but, by reason of judicial decisions, is already incorporated into the Austrian labour law (arbeitsrechtlicher Gleichbehandlungsgrundsatz). Discrimination on the grounds of gender, ethnic afﬁ liation, religion or philosophical belief, age or sexual orientation is expressly forbidden by the Equal Treatment Act (Gleichbehandlungsgesetz). The law also requires equal pay for equal work. Moreover, discrimination on the ground of a disability is prohibited by the Disabled Persons Employment Act (Behinderteneinstellungsgesetz). Protection also exists for those involved in trade union activities. The Labour Constitution Act (Arbeitsverfassungsgesetz) expressly forbids discrimination against persons who exercise their statutory works representation powers. Moreover, employees may challenge terminations of employment based on such activities as being unwarranted.

Protection against dismissal Reasons for dismissal Generally, both parties have the right to terminate an employment without stating any reason. Restrictions on the employer derive from public policy aimed at the protection of employees from unwarranted dismissals. In such cases, the employee may challenge the termination of the employment relationship. A successful challenge to a termination leads to the retroactive re-instatement of the respective employee. General protection Given that the employer employs ﬁ ve or more employees permanently, a dismissal may be challenged for unlawful grounds and, if the employment has already lasted at least six months, for being socially unfair under the Labour Constitution Act. Such unlawful grounds are, for example, a termination due to membership of a trade union or due to a claim of entitlements by the employee against the employer. As a matter of general principle, only the works council is entitled to challenge dismissals covered by the general protection against termination but, if there is no works council or the works council does not act, the employee may contest his dismissal. Special protection It is recognized that certain groups of employees are vulnerable to unwarranted notice of dismissal. The law gives special protection, for example, to works council members, pregnant employees, employees on parental part-time, apprentices and disabled persons. Employment relationships of employees enjoying special protection against termination may only be terminated by prior approval of the labour court or the Committee for Disabled Employees (Behindertenausschuss). Individual protection The employee further may challenge a termination of the employment relationship by the employer under the Equal Treatment Act for being discriminatory. Moreover, a protection against termination of employment also exists, for example, in case of an educational leave (Bildungskarenz), care leave (Pﬂ egekarenz) or parental part-time. Which protection against termination may apply to an individual employee has to be assessed in every single case.

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Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Notice There are different notice periods for blue-collar and white-collar workers. The notice period in respect of blue-collar workers is generally 14 days. Collective bargaining agreements provide for different notice periods. In respect of white-collar workers, employers may terminate an employment on six weeks’ notice, expiring at the end of a quarter. Depending on length of service, this period increases to fi ve months after 25 years’ service. White-collar employees may terminate their employment on one month’s notice, expiring at the end of a month. Employees’ notice obligations of up to six months may be agreed subject to the overall requirement that it cannot be shorter than the notice required to be given by the employer. Notice of dismissal will only be effective if the relevant works council has been notifi ed in advance. The works council has one calendar week in which to consult about the intended termination and comment on it. Thereafter the employer can give notice to the employee. The works council has to be notifi ed about a given notice. If the works council agrees to the termination, the notice cannot be challenged for being socially unfair. An employment contract may be terminated without notice only for good cause. A good cause justifying the immediate dismissal of an employee exists, for instance, if the employee has caused serious harm to the employer’s interests and it is, therefore, unreasonable for the employer to employ the employee until the end of the applicable notice period. Severance An employee, whose employment is terminated, is entitled to severance pay (Abfertigung), provided he or she has completed three years’ service. No statutory severance pay falls due when the employment is terminated by the employer with cause (berechtigte Entlassung), the employee terminates early without cause (unberechtigter Austritt) or the employee terminates the employment by giving notice (Arbeitnehmerkündigung). This severance system is applicable to employment relationships that commenced before 1 January 2003. The amount of the payment depends on the length of service and ranges in general from two to 12 months’ remuneration. The Statutory Corporate Employee Retirement Schemes Act 2002 (Betriebliches Mitarbeiter- und Selbstständigenvorsorgegesetz) imposes a new severance pay regime in relation to all employees, whose employment commences after 31 December 2002. This regime replaced the old severance pay regime described above. In principle, the employer is obliged to make a contribution of 1.53% of the monthly remuneration (plus special payments) for each employee to a fund (Mitarbeitervorsorgekasse) and the employees are entitled to receive the balance of these contributions upon termination of their employment contracts, provided that certain conditions are satisfi ed. Termination levy (Aufl ösungsabgabe) Since 1 January 2013, the termination of an employment relationship has generally triggered a levy of currently €124 (2017; presumably €128 in 2018). The levy has to be paid to the respective statutory health insurance fund. This amount is adjusted annually. However, in certain cases (e.g. where the employee terminated the contract; termination by the employer for cause and with immediate effect; termination in the course of the one- month probationary period, etc.) the employer is exempt from paying the levy.

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Holidays Employees are entitled to paid absence from work on any public holiday, unless the public holiday falls on a Sunday in respect of which the employer has no obligation to provide regular pay. All employees are statutorily entitled to a minimum of 30 working days holiday a year (36 working days after 25 years’ service). Saturdays are counted as working days for this purpose. Parental leave Pregnant women are entitled to take maternity leave starting eight weeks prior to confi nement, and are entitled to a further period of eight weeks after having given birth. Throughout the maternity leave period, they receive full pay. Either parent also has the right to take unpaid parental leave for a period of up to two years. There are various statutory provisions regulating the type of work and length of working hours that can be undertaken by pregnant women. Illness Employers are liable to pay the employee full salary for the fi rst six weeks of sickness, with a further period of four weeks on half pay when the full pay period ends. The period of the full continued pay entitlement increases up to 12 weeks’ pay with the seniority of the employee. Different rules apply to white-collar and to blue-collar workers in the event they are repeatedly sick during the same calendar year. Other time off The applicable collective bargaining agreements, shop agreements or the employment contract may entitle the employee to request fl exible working arrangements. These agreements may also include provisions giving employees specifi ed time off on particular occasions.

Worker consultation, trade union and industrial action Trade unions Employees have a right of freedom of association and the right to engage in union activity. Since the establishment of the Austrian Trade Union Confederation (Österreichischer Gewerkschaftsbund), all political viewpoints and groups of employees have been represented in it. However, there is no direct trade union representation in the workplace. Instead, employees are represented by statutorily elected works councils. The Labour Constitution Act requires the creation of works councils in all establishments employing at least fi ve employees. The number of members of the works council depends on the number of employees it represents. Collective bargaining agreements The Labour Constitution Act gives legal authority for the conclusion of collective bargaining agreements. This authority is restricted to the statutory representatives of employees (such as Chamber of Labour) and employers (Chamber of Commerce). However, agreements concluded between voluntary organisations are effective if they receive recognition from the Federal Conciliation Offi ce (Bundeseinigungsamt), which often requires proof that the organisation’s activities extend over a signifi cant geographical and occupational area.

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Single employer agreements are uncommon, as it is extremely rare for individual employers to be given the authority to conclude collective bargaining agreements. Collective bargaining agreements are usually put in place for particular industries or branches of industries, and apply country-wide. The vast majority of employment relationships in Austria are covered by collective bargaining agreements. Trade disputes The negligible level of industrial confl ict and the relative neutrality of the state in industrial confl ict have led to a notable absence of specifi c statutory regulation of the conduct or resolution of industrial disputes. The general Austrian law does not explicitly recognize a right to strike, although Austria has ratifi ed various international conventions, which guarantee the right to strike. However, strikes aimed directly at the state are considered unlawful and some public sector workers are banned from striking. The “social partnership”, based on co-operation between Government, employers and unions, is the main method by which strikes and industrial confl ict are regulated. Co-determination rights Under Austrian law, employees’ co-determination rights are mainly limited to what are seen as social issues, in particular dismissals, and do not really exist in relation to commercial or economic matters. Employee rights are enhanced by works councils, which have rights of co-determination in respect of fundamental organisational changes and changes in working practices. A works council has the right of access to information regarding the fi nancial position of the company, and is entitled to one-third of the seats on its company’s supervisory board, if any. The works council can meet with management at least four times a year.

Employee privacy Employment records The collection, storage and use of information held by employers about their (prospective, current and past) employees and workers are governed by the Austrian Data Protection Act 2000 (Datenschutzgesetz 2000). Employee data may only be processed as far as the purpose and content of the data is justiﬁ ed by the statutory requirements imposed on the employer and provided the employee’s conﬁ dentiality is safeguarded. Generally, the processing of employee data is permissible to the extent necessary to operate an ordinary employer-employee relationship. As of 25 May 2018, the General Data Protection Regulation (Regulation (EU) 2016/679) will directly apply in Austria and will replace, together with a comprehensive amendment of the Data Protection Act 2000, the currently applicable law. Monitoring The monitoring of employee e-mail, internet and telephone use and Closed Circuit TV monitoring is governed by the Labour Constitution Act and the Data Protection Act 2000. Monitoring is permissible unless it affects a person’s dignity. Control measures introduced to protect the dignity of data subjects require a shop agreement between the works council and the employing company before any monitoring can take place. If a works council is not established, the consent of every individual employee is required. If no shop agreement can be concluded with the works council or consent of the employees can be obtained, the employer must not take the proposed measures.

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As of 25 May 2018, the General Data Protection Regulation (Regulation (EU) 2016/679) will directly apply in Austria and will replace, together with a comprehensive amendment of the Data Protection Act 2000, the currently applicable law.

Other recent developments in the fi eld of employment and labour law Anti Wage and Social Dumping Act (Lohn- und Sozialdumping-Bekämpfungsgesetz) With effect from 1 January 2017, the Anti Wage and Social Dumping Act came into force. The Anti Wage and Social Dumping Act codifi ed the provisions which were previously implemented within the Act on the Adjustment of Labour Law (Arbeitsvertragsrechts- Anpassungsgesetz). Pursuant to the Anti Wage and Social Dumping Act, payment below the minimum wage to which the employee or comparable employees in Austria are entitled by law, regulations and collective bargaining agreement, is penalised. In case of such an “underpayment”, high fi nes, amounting up to €50,000 per employee and per infringement, may be imposed on the employer. Especially employers from other EU or EEA member states, who are posting or hiring- out employees to Austria, have to fulfi l complex reporting and documentation obligations before and during the whole activity of their employees in Austria. Infringements of these obligations may also lead to high fi nes for the employer, amounting to up to €50,000 per employee and per infringement. Moreover, a prohibition to provide services in Austria may also be imposed on foreign employers in case of an infringement of the Anti Wage and Social Dumping Act. Violations of the Anti Wage and Social Dumping Act are also registered in Austria and such a registration may lead to an exclusion of the employer from public tenders in Austria. Employment bonus (Beschäftigungsbonus) An employment bonus was newly introduced in Austria on 1 July 2017. The employment bonus is governed by the Austria Economy Service Act (Austria Wirtschaftsservice Gesetz) and the directive “employment bonus“ by the Federal Minister of Science, Research and Economy, the Federal Minister of Finance and the Federal Chancellor (Bundesminister für Wissenschaft, Forschung und Wirtschaft, Bundesminister für Finanzen und Bundeskanzler). The employment bonus shall encourage employers to create new jobs. Therefore, employers shall be refunded 50% of the incidental wage costs (Lohnnebenkosten) for each additionally created job for up to three years. The employment bonus is only applicable to employment relationships which are subject to Austrian Labour Law, to municipal tax (Kommunalsteuer) and to Austrian social insurance. Moreover, the employment has to last for at least four months. Further, the employee has to be among the eligible group of persons. These are persons who have been registered unemployed in Austria, who graduated from an Austrian school or university or who have been employed by another employer in Austria. Religious dress at the workplace (Austrian Supreme Court, OGH 9 ObA 117/15v) The Austrian Supreme Court ruled in a recent landmark decision that the general prohibition of Muslim face veils by an employer does not constitute unlawful discrimination. Thus, even the termination of employment based on the employee’s refusal to come to work unless she is allowed to wear a face veil, was considered lawful under the Austrian Equal Treatment Act. In this landmark decision, Austria’s Supreme Court expressed the view that an uncovered face is a prerequisite to proper communication. In this regard, the Supreme

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Court is in line with the European Court of Human Rights’ case law, which also upheld that an uncovered face plays an important role in social interaction (c.f. ECHR C-43835/11, S.A.S. – v – France). The Austrian Supreme Court further ruled that a unilateral change of the employee’s activities due to the fact of wearing a Muslim Headscarf constitutes unlawful discrimination under the Austrian Equal Treatment Act. In this regard, the Austrian Supreme Court was stricter than the European Court of Justice in a recent ruling soon after this Austrian judgment (c.f. ECJ C-157/15, G4S Secure Solutions). The European Court of Justice ruled that a unilateral change of the employee’s activities due to the fact of wearing a Muslim headscarf may not necessarily constitute an unlawful discrimination. In future cases, this position of the European Court of Justice will also have to be taken into account by the Austrian courts.

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Hans Georg Laimer Tel: +43 1 890 1087-81 / Email: [email protected] Hans Georg Laimer is a Partner at zeiler.partners Rechtsanwälte GmbH. He is a member of the Vienna Bar and specialises in labour and employment law. A graduate of the University of Vienna (Mag.iur. 2000; Dr.iur. 2002) and the London School of Economics (LL.M. in Labour Law, 2003), he is a regular speaker at national and international conferences on labour and employment law and the author of numerous publications in the ﬁ eld. Hans is an experienced litigator and advises clients in all areas of labour, employment and industrial relations law. He is recommended by Chambers and The Legal 500 as an employment expert.

Lukas Wieser Tel: +43 1 890 1087-72 / Email: [email protected] Attorney at law, Lukas Wieser is a member of the Vienna Bar and specialises in labour and employment law (advising clients and employment litigation), litigation and commercial arbitration. He is a graduate of the University of Vienna (Mag.iur. 2009) and the University of Barcelona (LL.M. 2015).

zeiler.partners Rechtsanwälte GmbH Stubenbastei 2 // Entrance Zedlitzgasse 7, Vienna, Austria Tel: + 43 1 8901087-0 / URL: www.zeiler.partners

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Luis Antonio Ferraz Mendes, Mauricio Froes Guidi & Adolpho Julio C. de Carvalho Pinheiro Neto Advogados

General labour market and litigation trends Brazil codifi ed a number of labour statutes back in 1943 under a single statute called consolidated labour statutes, known by the local acronym, ‘CLT’. It drew its inspiration from Mussolini’s Carta del Lavoro. While it provided a number of labour rights and protections to individual workers, it also granted the state power over organised labour, as unions needed government approval to be established. CLT was originally a paternalistic statute, as it limited the ability of individual workers and unions to contract terms and conditions if on worse conditions than originally set under the statutory text. It also provided that workers should be afforded protection from termination after 10 years of employment. Back in the day, the Brazilian economy was in transition to a more urban and industrialised economy. CLT addressed mostly those industrial workers. In 1966, the government passed a new statute (Law 5,107/1966), which repealed the CLT’s protection against termination. Severance requirements replaced protection. A severance fund called ‘FGTS’ was created. FGTS stands for Unemployment Guarantee Fund. It is still effective today. A public run bank called Caixa Econômica Federal manages the FGTS, organised in individual remunerated accounts to which employers are required to collect 8% of all remuneration paid to employees. The law authorises employees to withdraw the funds in situations like retirement, dismissal without cause, among others. CLT created a specialised branch of the Federal Courts, called Labour Courts. Workers can fi le claims in Labour Courts up to two years after employment termination. Once on fi le, such claims can reach facts and causes of action fi ve years back, counting from the fi ling of the claim. Access to the Labour Court was easy and risk-free. Labour Courts usually dismiss workers from paying court fees if they fi le a simple paper saying they cannot afford the court fees. There are no attorneys’ fees in Labour Court either. Workers usually pay their counsel only out of damages awarded in court, if any. Those Labour Courts rejected arbitration and other alternative dispute resolution methods and became the only way to resolve labour and employment disputes. All the above factors have led Brazil to see a signifi cant volume of labour disputes. In 2016, aggrieved workers fi led 3,957,179 new cases. Labour Courts fi nished 3,788,172 cases. This branch of the Judiciary spent almost R$18 billion of taxpayers’ money, whereas total damages received by plaintiffs added up to about R$25 billion. In an attempt to: (i) reduce the volume of litigation; (ii) modernise the legislation, to adapt to a more diverse/service-based economy; and (iii) create new jobs, the Congress passed a major reform to this legislation (Law 13,467/2017) which will become effective as of November 11, 2017. The revised CLT allows highly paid workers and unions to contract

GLI - Employment & Labour Law 2018, Sixth Edition 33 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Pinheiro Neto Advogados Brazil around some of the CLT terms and conditions, and mitigated various incentives that led to high-volume litigation (by making it more difﬁ cult for workers to be dismissed from paying court fees, by providing attorneys’ fees to the party who prevails, and by providing harder penalties in case frivolous claims are made).

Redundancies, business transfers and reorganisations Redundancies Legally speaking, there is no difference between an individual termination without cause or a termination of a large number of employees at the same time. Both would fall under the termination without cause rules (see section 6 below). Notwithstanding this, Labour Courts recognized that employers must consult with the union before a termination, depending on the number of employees terminated at the same time (rule of thumb is 10% of the workforce). On occasions, Labour Courts granted injunctions reinstating employees until the employer and the union reached agreement. New rules taking effect on Nov 11 will provide that consultation with the union is not required. But if these terminations are done under an agreement (usually known as incentivised termination plans, or PDVs), such agreement could provide a release from terminated employees. Business transfers and reorganisations Business transfers and reorganisations (change in control, spin-offs, transfer of assets, among others) have no impact on existing employments (CLT, arts. 10 and 448), nor on terms and conditions of employment (CLT, art. 468). When there is a change in control or a transfer of assets, the purchaser is subject to successor liability. This means that the employees would all keep the same status, remuneration and beneﬁ ts. Where some of these terms cannot be maintained, materially equivalent ones must be provided. Business transfers and reorganisations do not require preapproval or consultation with unions or employee representatives and do not trigger employment terminations, notice requirements or severance payments. In most types of these transactions (except certain types of asset deals), employees can be transferred from one company to another without consent from employees, unions or employee representatives.

Business protection and restrictive covenants Just causes CLT lists several situations where employers are authorised to dismiss employees with cause without any prior notice. These include: (i) fraud or wilful misconduct; (ii) misbehaviour or harassment; (iii) competition with the employer or confl ict of interest; (iv) defi nitive prosecution of the employee; (v) gross negligence; (vi) intoxication (alcohol/drugs) on the job; (vii) breach of employer secret; (viii) indiscipline (breach of employer policies or instructions); (ix) abandonment of job; (x) injury (physical or otherwise) to colleagues or supervisors; (xi) constant gambling; (xii) acts detrimental to national security; and (xiii) loss of a professional licence instrumental to the function exercised. Restrictive covenants Law 9,279/1996 (the Brazilian ‘IP Statute’) protects employers’ confi dential information. Under the IP Statute, use or disclosure of employer confi dential information may be punishable as a crime of unfair competition. Usually employers defi ne confi dential information in broad terms under employment agreements or internal policies.

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Further to IP, the statute IP provides three different rules in terms of IP rights ownership: (i) the employer is the sole owner of inventions and creations of the employee in the course of the employment and in the regular exercise of a creative job (R&D must be a part of the normal duties of the employee); (ii) the employee is the sole owner of inventions and creations if they are disconnected from her job and without the use of employer resources; and (iii) employee and employer will equally share ownership of inventions and creations of an employee while resources, data, equipment, facilities, materials and other means are made available by the employer, unless parties have agreed otherwise. Employers and employees usually govern this third rule under relevant IP ownership document or employment agreement. As to noncompetition, courts have set a test to determine whether or not a noncompetition agreement is valid. The test contains four prongs: (a) the agreement must be set for a fi xed term, one or two years being acceptable; (b) the agreement must provide a defi ned and clear scope (what service or activity the employee is not expected to perform, e.g. it cannot limit or impede any activity, business or work that is not in direct competition with the employer, cannot be too far-reaching or excessive in comparison to the relevant interests the noncompetition aims to protect); (c) a geographical limit (a state, region or country, some precedents held the whole country as being too broad); and (d) a cash consideration for the noncompetition, usually a month’s salary per month of non-compete. As in other countries, employers can seek specifi c performance, grounded either on a contract or under the statutory provisions set out above. Nevertheless, damages would be the default remedy, equitable relief being available only where damages would be inappropriate.

Discrimination protection Law 9,029/1997 forbids discrimination (in an employment setting) because of sex, national origin, race, colour, marital status, familiar situation, disability or age, among others. This catch-all, ‘among others’, means the judge may exercise some discretion in identifying other protected classes. The Brazilian Civil Code imposes a strict liability on employers concerning acts carried out by its agents. Based on this rule, employers are liable to discrimination carried out by one or more employees against other employees. Discrimination usually gives rise to: (i) severance pay damages as a result of a constructive dismissal, the hostile work environment forcing an employee out of the job; and/or (ii) reinstatement in the job or double front pay in case a dismissal is found to be discriminatory; or (iii) other damages, such as pain and suffering, emotional distress and the like. The existence of anti-harassment policies containing channels where employees can report harassment cases and investigations of cases reported may help reduce (but may not be enough to eliminate) the damages.

Protection against dismissal, termination Except for a few special conditions (pregnancy, maternity leave, sick leave, union leader or employee representatives) there is no employment protection in Brazil. Employers and employees can terminate the employment at any time. There are four types of employment termination: (a) without cause; (b) with cause; (c) resignation; and (d) mutual agreement. Each gives rise to different severance entitlements. In a termination without cause, severance entitlements include: (i) notice or pay in lieu of notice equal to 30 days plus three extra days per year of work; (ii) all accrued unused

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Statutory employment rights Basic statutory protections Under the Brazilian Federal Constitution and the CLT, certain basic employment rights are provided and are applicable to all employees, regardless of the employer activity or the employees’ position or seniority. These employment rights are: (i) minimum wage (R$937 effective on 2017); (ii) 13th month salary (paid half in November and half in December); (iii) annual paid vacation of 30 days; (iv) ⅓ bonus on the payment of vacation; (v) one day off per week, preferably Sundays; and (vi) FGTS (see section 1 above); Wage and hour rules A normal work day is eight hours long and a normal work week is 44 hours long (four hours are supposed to be worked on Saturdays). Work in excess of these limits is overtime and is paid at a minimum of 1.5 × the normal hourly rate. These rules do not apply to: (i) external employees (those working outside the employer, and whose working hours are diffi cult to track, e.g. sales employees); (ii) home offi ce employees (those working primarily from home or from outside, e.g. telecommuters); and (iii) employees who hold a position of trust (these are usually offi cers, managers and supervisors).

Worker consultation, trade union and industrial action Firms of a certain industry can and often do organise a union or association to represent their interests within a certain region or city. In the same vein, employees working in a certain industry can often form a union, which is a mirror image of the employer’s union. Employers or their unions and employees’ unions usually negotiate terms and conditions to be set under a collective bargaining agreement, the ‘CBA’. Often a CBA provides terms such as salary raises, overtime rates, rules governing shifts, breaks, beneﬁ ts and so on, A CBA binds all employees. Employees are not able to opt-out of a CBA unless the CBA itself carves out certain groups of employees, for instance, highly paid ones.

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Under the reformed CLT, companies counting on more than 200 employees must create a committee of employees of at least three employees. This committee has limited authority, having an advisory role in preventing disputes, receiving reports and ensuring compliance with labour law. The CBA may dispense its creation.

Employee privacy Albeit there are a few bills of law under debate, there is not yet a speciﬁ c regulation on data privacy in an employment context. Normally employers can obtain and store employees’ information as necessary to run payroll and beneﬁ t plans. In any event, the Brazilian Federal Constitution guarantees the right of privacy and, in Brazil, constitutional rights are applicable against private parties. This means that accessing of private and sensitive information may give rise to lawsuits based on violation of privacy. In view of this, having employees consent to storage and transfer of their information is highly advisable.

Other recent developments in the fi eld of employment and labour law As mentioned before, Law No. 13.467/2017 (the revised CLT) represents a relevant and profound change to labour relations in general in Brazil, shifting from a deeply regulated mindset to a more contract-based one. One can say that it grants both employers and employees a higher degree of fl exibility to negotiate such relationship, as well as, at the same time, limiting the infl uence and interference of the judicial system in such relationship. It is about to be seen how courts will decide cases based on the reformed labour statutes. We expect to see fewer cases in the long run but, for now, various aspects of the new statutes will be put to the test and courts should have a fi nal say on them. Some terms of the new statute may face some challenges in regard to their constitutionality, especially caps on certain damages, the ability of individuals to contract around some default rules under the statutes, some of the restrictions to access courts, and zero-hour contracts are the most likely ones to be targeted by these challenges. However, many of the concepts introduced by the new statute are common to other jurisdictions and particularly dear to companies investing in Brazil. Increased risks associated with labour claims, and uncertainty in connection with the rules are, so far, a partial consequence of an outdated set of rules dealing with many of the labour problems, which ultimately represented a disincentive to doing business in and with Brazil. The expected results of such reform are the fostering of new business activities, the creation of new jobs, a reduction in risks and legal certainty associated with labour litigation. Alongside tax risks, labour risks (the volume of claims, successor liability and others) have always played a relevant role in inhibiting business activities in Brazil. The new regulation, in theory, turns us into a more attractive jurisdiction from the standpoint of any investor and brings the country into a new era of less litigious and more consensual labour relations.

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Luis Antonio Ferraz Mendes Tel: +55 11 3247 8620 / Email: [email protected] Luis Antonio Ferraz Mendes has been partner and head of the Labour and Employment practice at Pinheiro Neto Advogados since 1998. He focuses his practice on all aspects of employment law, employment litigation, class actions, and collective negotiations with an emphasis on cross-border employment matters. Luis advises and represents clients in the manufacturing, hi-tech, retail and services industries, corporations and banks, and has been consistently named as leading lawyer in his ﬁ eld by renowned publications such as Chambers and Partners and Who’s Who Legal. Mr. Mendes has a LL.B. degree from the University of São Paulo Law School (1984) and a Specialisation degree in Labour Law from the same university. He is ﬂ uent in Portuguese, English and and also speaks Spanish.

Mauricio Froes Guidi Tel: +55 11 3247 8684 / Email: [email protected] Mauricio Froes Guidi has worked at Pinheiro Neto in São Paulo since 2001. His practice focuses on high-profi le employment with emphasis on corporate transactions, restructurings, dispute prevention and the design of incentive plans. Brazil has worked in the tailoring of many investment banks’ compensation policies to cater to new banking regulations. He holds a LL.B. from the Pontifi cal Catholic University of São Paulo Law School, a Master of Laws degree from the University of Pennsylvania Law School and the Wharton Law and Business Certifi cate from the Wharton School. Mauricio teaches in the FIA MBA Program in São Paulo, Brazil. Mauricio was named associate-to-watch by Chambers & Partners Latin America 2018.

Adolpho Julio C. de Carvalho Tel: +55 11 3247 8874 / Email: [email protected] Adolpho Julio C. de Carvalho has been a partner at Pinheiro Neto Advogados since 2005. Adolpho is a partner in the corporate group, focusing his practice on M&A transactions, with special emphasis in asset fi nance, and transport fi nance. He holds an LL.B. from the Pontifi cal Catholic University of São Paulo Law School, a Master of Laws degree from the London School of Economics and Political Science, and a Specialisation degree in International Business and Finance from the London School of Economics. Adolpho was a foreign associate with Allen & Overy, London for two years.

Pinheiro Neto Advogados Rua Hungria, 1100, São Paulo, SP, Brazil Tel: +55 11 3247 8400 / Fax: +55 11 3247 8600 / URL: www.pinheironeto.com.br

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Radoslav Alexandrov Boyanov & Co.

General labour market and litigation trends In the last several years, the labour market in Bulgaria has been thriving. While in 2013 the unemployment rate was 12.9%, it has started to fall since then, reaching 6.5% in September 2017. This was due to the political stability in Bulgaria as the new right-wing government regained trust at EU level, undertook vigorous measures against the black economy (which were benefi cial for the budget and spending for the public sector), and large infrastructure projects were put in motion again, all of this creating a more positive environment and opportunities for business. Businesses such as manufacturing, outsourcing and IT services were rapidly developing, and they boosted the employment and the economy as a whole. There is a recent trend of an increase in employment claims. Almost all major courts reported higher fi gures for employment litigation in 2015, and Sofi a Regional Court, which reviews at fi rst instance more labour-law claims than any other court in Bulgaria, reported an increase of more than 20% on an annual basis. This could be partially explained by the fact that employees are exempted from state fees and expenses for labour-law claims, and they have easy access to justice. Litigation seems to be the preferred route for resolving employment disputes. Although Bulgaria adopted its Mediation Act in 2004, mediation does not have broad application at all. One of the reasons could be the lack of tradition in this area, and the other could be that employment litigation is not expensive in Bulgaria.

Redundancies, business transfers and reorganisations The Labour Code enumerates the following hypotheses which may trigger automatic transfer of employees: 1. Merger of enterprises by the formation of a new enterprise (merger). 2. Merger by acquisition of one enterprise by another (merger by acquisition). 3. Distribution of the operations of one enterprise among two or more enterprises (split up). 4. Passing of a separate part of one enterprise to another (spin-off). 5. Change of the legal form of the enterprise (e.g., from LLC to JSC). 6. Change of the ownership of the enterprise or a separate part thereof (transfer of a going concern). 7. Assignment or transfer of business from one enterprise to another, including transfer of tangible assets (transfer of business). 8. Rent, lease, or concession of the enterprise or a separate part thereof.

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In addition to business transfers and reorganisations, the above hypotheses may result from legislative changes, specifi cally regarding public bodies, e.g., dividing of an agency. In its interpretative decision from 2011, the Supreme Cassation Court seems to take the view that the Labour Code exhaustively enumerates the cases which trigger automatic transfer of employees, i.e., there would be such transfer only if the transaction could qualify under any of above cases. The application of the hypotheses under points 1–5 and point 8 above generally do not raise diffi culties, as the legal fi gures which they refer to are well known and regulated by the laws (e.g., the Commerce Act, the Farming Lease Act, the Obligations and Contracts Act, the Concessions Act). The wording of the hypothesis under point 6 above is not quite clear, but the Supreme Cassation Court fi nds that it applies to a transfer of a going concern or a part thereof. These are transactions specifi cally regulated by the Commerce Act, where the going concern is defi ned as a “pool of rights, obligations, and factual relations”. Point 7 above seems to cover all other types of business transfers which are not covered by the other hypotheses. In the absence of any legal defi nition for a “transfer of business”, the concept of Directive 2001/23/EC should apply “a transfer of an economic entity which retains its identity, meaning an organized grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary”. The reference to tangible assets in the law is somewhat confusing, but it should be accepted that a business transfer could be present even without transfer of tangible assets (e.g., if tangible assets are not important for the transferred business). Automatic transfer of employees triggers obligations for the information and consultation procedure for both the transferor and the transferee, regardless of the number of their employees. At least two months before the transfer, they have to provide to (1) their trade unions, and (2) their employees’ representatives under Art. 7, Para 2 of the Labour Code, the following information: • the envisaged transfer and its planned date; • the reasons for the transfer; • any possible legal, economic and social consequences for the employees due to the transfer; and • envisaged measures in respect to employees. If there are no trade unions or employees’ representatives at the employer, the information must be delivered to the “respective employees” – the transferring ones, as well as any other employee who will be affected by the transfer. There is no requirement as regards the form of this communication, other than it must be made in writing. If there are any “envisaged measures” (this is any measure which would signifi cantly affect the employment status of the employee, e.g., possible redundancy, change of the organisation of work, professional training, etc.), then the employer must carry out a consultation with the trade union and employees’ representatives (or with the respective employees, as the case may be). This consultation is an exchange of views and opinions regarding the measures, with the aim of fi nding a mutually benefi cial solution. However, the employer is not obliged to reach an agreement with them, and they cannot veto or impede the transfer. Even the lack of an information and consultation procedure would not affect the validity of the transfer − the legal consequences (putting aside the ones for the employer’s reputation) would be that that the labour inspection authorities may impose penalties of up to €2,500 on

GLI - Employment & Labour Law 2018, Sixth Edition 40 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Boyanov & Co. Bulgaria the employer, and up to €500 on the accountable offi cial (commonly, the manager). As the individual employment contract passes on to the new employer “as is”, the latter is bound by it. In addition, the collective labour agreement (“CLA”) with the transferor continues to apply after the transfer, until a new collective agreement is concluded with the transferee, but not later than one year after the transfer. The general rule is that the new employer is to be bound by the contractual undertakings with the transferring employees. Its powers to amend the contractual arrangements are quite limited, as the general rule is that the employment contract may be amended only by the consent of the parties. It is common sense that the new employer may amend the line of reporting, or reorganise the department after the transfer, etc. However, it cannot unilaterally change the position of the employee or his/her core functions under the job description. The new employer is not bound by any of these undertakings that do not have a contractual nature. For example, if the employee was granted certain benefi ts under a programme implemented by the transferor (and there is no contractual obligation for such benefi t), the transferee is not obliged to continue providing such benefi ts. The transfer itself cannot be a ground for redundancies. However, redundancies are possible as a consequence of the transfer. This would be the case when, for example, the transferor needs to cut staff because of the new scale of its enterprise. Save the need for consultation in case such redundancies are envisaged before the transfer (see above), such dismissals would be regulated by the general rules.

Business protection and restrictive covenants Employees have the general obligation to perform their duties in good faith, not to abuse the employer’s trust, to refrain from dissemination of information which is confi dential for the employer, and to protect the employer’s reputation. Any failure to comply with these requirements is a disciplinary breach, punishable by a disciplinary sanction of up to disciplinary dismissal (in addition to any monetary, administrative or criminal liability of the employee). Usually, employers include confi dentiality clauses in employment agreements, which specify: (1) which information is confi dential; and (2) the obligations related to confi dentiality. It is permissible to extend the confi dentiality obligation forever after the termination of the employment agreement. Non-compete clauses are also common and recommended in an individual labour agreement. The individual contract may even prohibit any other employment under labour contract for the employee, regardless of whether it has a competitive nature or not. Non-compete clauses are valid only during the validity of the employment contract. According to the Supreme Cassation Court, they are invalid after the end of the employment because they violate the employee’s constitutional right to work. It does not matter whether there is any consideration incentive for that, or not. To address this issue, some employers conclude agreements with their (ex-) employees, granting them incentive payments if they do not engage in competitive activities for a certain period of time after the termination of the employment. In other words, the employees do not undertake an obligation not to compete (which would be invalid), but if they do not compete, they will receive certain additional compensation. Bulgarian law is not familiar with the concept of garden leave. The only hypothesis in which the employer may suspend the employee from work is when the employee is in a state which makes him/her unable to perform his/her duties (e.g., he/she is intoxicated).

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However, this regulation cannot meet the needs of employers, e.g., in cases where an investigation is pending against the employee, or there are other considerations which make the continuation of the employee at work counterproductive. If the reason for the garden leave is the required notice period (i.e., if the employer does not want the employee to be at work during the notice period), there is a quite simple resolution: the employer is entitled to terminate the employment contract with immediate effect by paying compensation in lieu of notice. However, if there is another reason, there is no easy solution, and the employer must weigh (1) the beneﬁ ts of a garden leave for the business, and (2) any possible penalties that may be imposed (up to €7,500 for the company and up to €5,000 to him/her personally). Putting the employee on a garden leave would not trigger problems in most cases, as long as the employer continues to pay his salary. If any restrictive covenant is incompatible with the law, the court may declare it invalid and refuse to recognize its effect. As regards penalties, the court may decrease their amount, if they are excessive.

Discrimination protection Both the Labour Code and the 2003 Protection against the Discrimination Act (the “PDA”) prohibit discrimination. The PDA prohibits discrimination based on the following protected grounds: gender, race, nationality, ethnicity, human genome, citizenship, origin, religion or belief, education, convictions, political affi liation, personal or social status, disability, age, sexual orientation, marital status, property status, or on any other grounds established by law or by an international treaty to which the Republic of Bulgaria is a party. The PDA defi nes direct and indirect discrimination. Direct discrimination occurs when a person is treated less favourably than other people in a similar situation because of a protected ground. Indirect discrimination occurs if, due to a protected ground, a person is put at a disadvantage compared to other persons by an apparently neutral provision, criterion or practice, unless this is (a) objectively justifi ed in view of a legitimate aim, and (b) the means of achieving that aim are appropriate and necessary. Any harassment based on a protected ground, as well as any instigation to discrimination, are also forms of discrimination. Specifi cally in the fi eld of employment, the PDA has a separate section entitled “Protection in Exercising the Right to Work”. It prohibits discrimination on any protected ground in the fi elds of recruitment, working conditions, pay, performance-evaluation criteria, vocational training, qualifi cation, career, disciplinary measures, and the most common types of unilateral dismissal. There is a rule that employees are entitled to equal pay for equal or equivalent work, and the employer has the obligation to apply identical work evaluation criteria, which must be set out in the collective labour agreement, the internal salary rules, or in the legislative acts. “Equal work” means work performed by different persons who have the same qualities (qualifi cation, skills, etc.), and “equivalent work” means different work which is performed by different persons, but which has equivalent value and usefulness. The concrete factors which will be taken into account in the assessment of the work are its specifi c features, required education, qualifi cation, as well as skills, volume and level of performance, results, etc. The requirement for equal pay encompasses all direct and indirect payments, in cash or in kind, regardless of the duration of the employment contract or the length of the working time. In certain circumstances, different treatment is permissible, e.g. if it is based on genuine occupational requirements. Other examples include special treatment of pregnant women or

GLI - Employment & Labour Law 2018, Sixth Edition 42 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Boyanov & Co. Bulgaria women in an advanced stage of in vitro treatment, disabled employees, etc. The employer is also obliged to promote employment as well as (all other conditions being equal) vocational development of a gender or an ethnic group which is less represented at the enterprise. Breaches of anti-discrimination legislation may trigger proceedings before the Commission for Protection against Discrimination or directly before the court. In such proceedings, the burden of proof is shifted. If the employee presents facts on the basis of which a hypothesis for discrimination may be drawn, the employer has the burden of proof to establish that equal-treatment rules were not breached. The penalties for breaches are up to €1,000 in a general case, and the awarded compensation for the employee in most cases is up to €2,000.

Protection against dismissal Labour agreements in Bulgaria can be terminated only on the grounds enumerated exhaustively in the Labour Code, i.e., the employer cannot freely terminate the employment. The grounds for termination can be classifi ed broadly into three main categories: (1) common grounds for termination; (2) termination by the employee (with and without notice); and (3) termination by the employer (with and without notice). The employer can carry out dismissals (unilateral termination) in the following cases: With notice: 1. upon closure of the enterprise; 2. upon closure of part of the enterprise or staff cut; 3. upon reduction in the volume of work; 4. upon suspension of business for more than 15 working days; 5. when the employee lacks qualities for effi cient performance of the work; 6. when the employee does not possess the required education or professional qualifi cation for the work performed; 7. when the employee refuses to follow the enterprise or its division in which he works, when it relocates to another city or location; 8. when the position occupied by the employee must be vacated for reinstatement of a wrongfully dismissed employee, who previously occupied the same position; 9. when the employee has acquired a right to a pension for social security length of service and age (there are specifi c rules for professors, associate professors or persons holding a doctoral degree); 10. when the employment relationship started after the employee exercised his right to a pension for social security length of service and age; 11. upon change of the requirements for the position, if the employee does not meet them; 12. when the performance of the employment contract is objectively impossible; or 13. (only for managerial positions) within nine months after conclusion of a management contract (between the company and its manager). Without notice: 14. when the employee is detained for enforcement of a sentence; 15. when the employee is deprived, by a sentence or according to an administrative procedure, of the right to exercise the profession, or occupy the position, to which he is appointed;

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16. when the employee is deprived of his academic degree, if the contract of employment has been concluded in view of this degree; 17. when the employee refuses to accept suitable work, if there is a ruling by the medical authorities that he should be reassigned to a lighter work; or 18. upon disciplinary dismissal. (There are also other grounds which apply to positions in public authorities (e.g. incompatibility, established confl ict of interest), or for medical professions (deletions from the registers of the respective professional organisation).) The procedure that must be followed for dismissal differs in each case. For example, in case of staff cuts, the employer must: (1) adopt a decision for staff cut; (2) collect information about whether the employee enjoys special protection against dismissal; and (3) serve the dismissal documents (if there is no special protection). The amount of compensation due varies depending on the type of dismissal, but in the most common cases the compensation is capped to two monthly salaries plus compensation for unused paid leave. The employee may fi le a claim for wrongful dismissal within two months after the dismissal. He may request from the court: (1) to establish that the dismissal was unlawful and to repeal it; (2) to reinstate the employee to the position occupied; and (3) to be awarded compensation for the time of unemployment that is equal to the employee’s salary and is due only for the fi rst six months after the dismissal (i.e., capped to six monthly salaries, if the employee remains unemployed). The speed of the employment litigation may vary signifi cantly depending on the court, but usually the case has to be fi nally resolved within a period of one to three years. The following categories of employees enjoy protection against dismissal on the most common grounds (points 2, 3, 5, 11 and 18 above): • mothers of children below three years of age; • employees assigned to a lighter position due to health-related reasons; • employees suffering from certain diseases (ischemia of the heart, active form of tuberculosis, an oncology disease, an occupational disease, mental illness, diabetes); • employees using permitted leave; or • any employees’ representatives (under Art. 7, Para 2 and 7a of the Labour Code, representatives in the Special Negotiation Body, the European Works Council, representatives on health and safety at work). In the above cases, the employer must obtain a prior permission from the Labour Inspectorate for the dismissal, and sometimes an opinion from the medical authorities is required. The procedure can last from seven days up to several months. Other categories of employees also enjoy protection against dismissal: members of trade union leaderships; pregnant women and women in an advanced stage of in vitro treatment; employees in the process of using leave for pregnancy, birth and adoption; and trade union members (if provided for in the CLA). The type of protection and the employer’s options in respect of these employees vary signifi cantly, so each case must be considered separately. It must be always remembered that the employer must ask the employee who is identifi ed for dismissal to declare the existence or lack of such protection before serving on him/her the notice/dismissal documents (if protection rules cover this type of dismissal). Otherwise, dismissal of a protected employee is unlawful per se.

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Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Notice entitlement applies only to certain types of dismissals (see point 5 above). The notice period varies depending on the duration of the employment contract. The statutory notice period for contracts of indefi nite duration is 30 days, but it can be extended to up to three months in the individual labour agreement. In addition, the collective labour agreement can also provide for an extended notice period for the most common types of dismissal. For fi xed-term contracts, the notice period is three months, but not extending beyond the remaining term of the contract (its duration cannot be amended by the parties). The employer may decide not to observe the notice period, but to pay the employee compensation in lieu of notice, calculated on the basis of the employee’s salary from the last calendar month before the month of dismissal. Working time in Bulgaria is eight hours per day (seven hours for night work), and fi ve days per week. The daily rest is at least 12 hours, and the weekly rest is at least 48 hours. Overtime is generally prohibited, except in several limited hypotheses (e.g., for completion of started work). However, the employer has tools for fl exible working time, some of which are: • Increasing the length of working time on some days and decreasing it on other days. • Implementation of an open-ended working day, meaning that certain employees could occasionally work after the end of the working time and this would not qualify as overtime (if the work is performed during work days). Such employees are entitled to at least fi ve days’ additional annual paid leave. • Implementation of summarised calculation of working time, meaning that working time is calculated in aggregate for certain periods (up to six months), and the average working time for these periods must meet the statutory requirement. In this case, the employer may extend the working time to up to 12 hours daily and 56 hours weekly. The basic annual paid leave in Bulgaria is 20 working days, but there are some categories of employees who are entitled to additional paid leave (working in hard or hazardous working conditions; working under open-ended working days; trade union leaders, etc.). There are detailed rules for the calculation of compensation for annual paid leave, but generally it is calculated on the basis of the salary received for the last calendar month before the month of the leave in which the employee has worked at least 10 days. The basis for the calculation does not include bonuses, overtime or night work payments, or any other payment which does not have a permanent character. For sick leave absence, the employer pays the employee 70% of his/her salary for the fi rst three days, and afterwards the employee receives compensation directly from the state in the amount of 80% or 90% of his/her salary depending on whether the sick leave is due to a general or an occupational incident/disease. The Labour Code also provides for family-friendly leave, and the most important ones are: • paid leave of 410 calendar days for pregnancy, childbirth and adoption; • parental leave of 15 calendar days for birth; • paid leave for raising a child until two years of age, if the child does not attend kindergarten; • unpaid leave of six months for both the mother and father for raising a child between two and eight years of age; and

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• paid leave of one year for adoption of a child who is over two years of age (but such leave cannot be used after the child becomes ﬁ ve).

Worker consultation, trade union and industrial action Employers must carry out consultations with: (1) the different categories of employees’ representatives; and (2) trade unions in the cases envisaged by the Labour Code. The most important types of consultations are related to: • automatic transfer of employees (see point 2 above); and • collective redundancies. Employers must start consultations with the trade unions and the employees’ representatives under Art. 7, Para 2 of the Labour Code in due time, but not later than 45 days before the redundancies. The consultations aim at avoiding or limiting the collective redundancies or their consequences. If the employer: (1) envisages any measures threatening the employment; (2) uses or contemplates using staffi ng agencies for lease of personnel; or (3) contemplates signifi cant changes in the organisation of work, the consultations are held with a special category of employees’ representatives – under Art. 7a of the Labour Code, but this is applicable only in companies with more than 50 employees. There are also other cases which require consultation with the trade unions and the employees’ representatives under Art. 7, Para 2 of the Labour Code: for increase of the length of the working day; for implementation of reduced working time or for introducing an open-ended working day; or for the adoption of the Internal Labour Order/Discipline Rules. It is evident that the role of the trade unions is important. Their recognition at national level is done by the Council of Ministers and must be renewed every four years. A National Union must cover certain criteria, the most important of which is to have at least 50,000 members. Currently, there are two trade unions which are recognized at national level: the Confederation of the Independent Trade Unions in Bulgaria, and Labour Confederation Podkrepa. Formation of trade unions at company level is done freely according to the statute of the respective trade unions (usually three employees will suffi ce to form a trade union section). Trade unions represent employees on matters of labour and social-security relations and cost of living through collective bargaining, participation in tripartite co-operation, organisation of strikes and other actions within the law. Collective bargaining is one of the most signifi cant activities of the trade unions. Collective labour agreements regulate labour and social security matters that are not regulated by the imperative provisions of the law. There are four levels for conclusion of a CLA: enterprise; branch (of an economic activity); an entire industry; and municipality. CLAs at branch or industry level are concluded between the trade unions and the respective employers’ representative organisations from the branch/industry. If all trade unions and employers’ organisations sign the CLA, the Minister of Labour and Social Policy can, upon their request, expand the application of the CLA, or some of its provisions, over the entire branch/industry. At company level, CLAs are concluded between the employer and the trade union(s). The usual duration of the CLA is one year, unless the parties agree otherwise, but it cannot have duration of more than two years. The parties may amend the CLA at any time, and they must start negotiations for a new CLA not later than three months before the expiry of the existing one. The CLA applies to all trade union members, but other employees may also

GLI - Employment & Labour Law 2018, Sixth Edition 46 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Boyanov & Co. Bulgaria join the CLA and benefi t from it according to rules specifi ed in the CLA (usually against payment of a joining fee). The Labour Code provides protection for trade union leaders and members. In addition to the general protection from discrimination on the grounds of trade union membership, there are specifi c provisions for protection against dismissal, for obliging employers to provide conditions for their work, etc. Trade unions are the main players when it comes to industrial action. According to the Settlement of Collective Labour Disputes Act, collective labour disputes are resolved through negotiations, at the start of which the employees must provide to the employer written information on their request and their representatives. If such negotiations fail, each party may request mediation or voluntary arbitration by the National Institute for Reconciliation and Arbitration, or appointment of arbitrator(s). If there is an arbitration decision, it is compulsory for the parties. However, if the parties fail to reach an agreement (with or without mediation), or the employer does not perform committed undertakings, a general meeting of employees may adopt a decision for a strike with a simple majority of all employees. There are cases in which a strike is not allowed, e.g., when negotiations have not taken place or if there is a settlement or arbitration decision on the issue, or for resolution of individual labour disputes, etc. Once a decision for a strike is adopted, the employees have to inform the employer about the strike at least seven days in advance. They must be at their working places during the strike, and they do not receive remuneration for this time. In addition, they may not hinder the work of the other employees who are not on strike. The striking employees do not have disciplinary or monetary liability against the employer, if the strike is legitimate. The law prohibits lockouts, but the employer may at any time fi le a lawsuit for the illegality of the strike before the respective District Court at its seat.

Employee privacy The Bulgarian Constitution establishes the principle of protection of a personal life, as well as of personal correspondence and all other communications. The Criminal Code, the Personal Data Protection Act (“PDPA”), and other pieces of legislation contain specifi c rules regarding privacy and the limits to interference into someone’s personal life. It is common sense that employees cannot have the same degree of privacy at the workplace as they have at home. The PDPA provides rules which help employers establish what is permitted and what is not. First, employers must observe the core principles that personal data is processed legitimately and in good faith, for specifi c and legitimate purposes; the data must be relevant and proportionate to such purposes; it must be correct; and it is to be deleted if its processing is not necessary anymore. Second, as the PDPA specifi es exhaustively the hypotheses which allow for processing of personal data, employers must ensure that the processing of each type of personal data qualifi es under at least one of them. The legality of monitoring at the workplace must be assessed on a case-by-case basis. For example, CCTV monitoring may be justifi ed based on the legitimate interests of the employer, or on a legislative requirement (e.g., in banks, casinos), when it is necessary to protect the life and health of people (e.g., in hospitals), or if it is based on the explicit consent of the employee − provided, however, that such processing meets the principles of legitimacy, proportionality and relevance. Regarding monitoring of email/internet use, employers should bear in mind the constitutional right to confi dentiality of correspondence, and that breach thereof is a crime under the Criminal Code. Some employers address this issue by prohibiting the use of the

GLI - Employment & Labour Law 2018, Sixth Edition 47 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Boyanov & Co. Bulgaria company’s IT structure for personal purposes, in which case they could monitor email/ internet use, because business correspondence does not fall under the protection of private correspondence. Others allow limited use of the IT structure for personal purposes, but require the employee’s consent to process such data. However, the latter approach is somewhat questionable. The scope of permissible background checks is also disputable, considering that the law enumerates the speciﬁ c documents to be produced for the conclusion of the labour contract, and forbids the employer from requesting other documents. Also to be considered are the anti-discrimination rules which forbid the employer from collecting information related to any of the discrimination-protected grounds, as well as the PDPA rules requiring proportionality and relevance for such checks. Generally, it should be accepted that the employer may request the employment history of the employee, and documents evidencing education and qualiﬁ cation. However, calling ex-employers without the employee’s consent, asking for credit history or for marital status would normally hardly meet the criteria for legitimate processing. Checks for criminal history could be performed only for positions for which a statutory act requires clear record. Testing (e.g. for alcohol or drugs, etc.) in the workplace can be done only with the employee’s consent. However, any employee’s refusal of such testing should not trigger negative consequences for him.

Other recent developments in the fi eld of employment and labour law The latest amendments in the Labour Code entered into force in 2017 and refer to: • The possibility of the employer to create and store as electronic documents only part (not all) of the documents included in the personal employment fi le of each employee. The types of documents (to be created electronically) and the requirements for their issue and storage have to be listed in an act of the Council of Ministers; however, to date they have not yet issued such an act. • New rules regarding the bridging of public holidays. As of January 2017, the government may no longer shift working and non-working days around holidays. The new rule is that if any of the public holidays (other than Easter) falls on a Saturday and/ or Sunday, the fi rst or the fi rst two business days following that public holiday shall be non-working days. • Certain changes in the entitlement to parental leave, in the cases of adoption.

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Radoslav Alexandrov Tel: +359 2 8 055 055 / Email: [email protected] Radoslav Alexandrov is a senior associate at Boyanov & Co. with more than 14 years of experience in employment and litigation. He works for both foreign and domestic companies. He advises on matters of collective and individual employment agreements, remuneration and benefi t schemes, individual and collective redundancies, disciplinary procedures, business transfers and reorganisations, automatic transfer of employees, individual and collective employment litigation, data protection, and discrimination. Radoslav Alexandrov was educated at Sofi a University St. Kliment Ohridsky, Legal Faculty (2002) and the Academy of American International Law, Dallas, USA (2011). In 2016, he completed a secondment at Freshfi elds Bruckhaus Deringer (Arbitration Practice).

Boyanov & Co. 82 Patriarh Evtimii Blvd, Soﬁ a, Bulgaria Tel: +359 2 8 055 055 / Fax: +359 2 8 055 000 / URL: www.boyanov.com

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Jiang Junlu & Zhang Hongyuan King & Wood Mallesons

General labour market and litigation trends China’s labour market consists of around 900 million employees. However, the number of employees dropped for the fi rst time in history in 2012, and this is the sixth consecutive year that this has happened. The reason behind it is the increasing number of people aged over 60 − China is quickly becoming an aging society. The Chinese government, reacting to this, changed its long-held one-child policy, hoping to mitigate the problem, although in the short term, the effect is hard to see. The unemployment rate in cities remains relatively low − it is approximately 4.02% at the moment. The number of employment and labour dispute cases in China climbed to approximately 1.77 million in 2016; a 2.9% rise compared to last year’s statistics. The current trend in China, with the development of employees’ sense of rights, is that more and more arbitration and litigation cases are being heard every year, albeit the number of disputes remains relatively small. It is almost certain that China’s employment and labour dispute cases, with the awakening consciousness of labour rights of employees and the further localisation of multinationals, will climb to no fewer than three million being heard every year in the next few years, which may conceivably lead to the restructuring of the arbitration and litigation system, and more importantly, infl uence the labour market. There are a few important factors which have impacted or will have an impact on the labour market, arbitration and litigation, and they are: • Slowed GDP growth. Echoing the recession in the current world economy, China’s GDP has slowed to a relatively low growth rate of below 7%, and this is certainly unprecedented since the opening-up in the 1980s. The relatively low rate of growth will have an impact on the employment rate as, in order to save costs and squeeze for profi t, the dismissal of certain highly paid individual employees, or even layoffs, has become popular among employers. More employees are being dismissed in the labour market, and more labour arbitration and litigation cases are surfacing. • Encouragement of the establishment of start-up companies. Due to the infl uence of the gloomy economy, it is diffi cult for many graduates to secure a job at graduation, and central government, acknowledging this social problem, has set out an array of policies to facilitate the development of start-up companies. The favourable policies have attracted a certain percentage of young people hovering between seeking job vacancies and creating new businesses, and more start-up companies were hence established. This booming trend may potentially reduce the number of job-seeking youngsters and mitigate the problem of a rising unemployment rate; however, its outcome remains to be seen.

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• Two-child policy change. The two-child policy released in late 2015 is, if not the most important policy change of China in over 30 years, a fundamental policy that is going to materially affect the structure of Chinese society. For a couple, being allowed to have two children may put female employees in a more adverse situation in the labour market than they are in now, in that prolonged maternity leave shortens their effective time of employment. The policy will nonetheless give rise to more new blood in the future labour market and it is an important inﬂ uence, considering that Chinese society is rapidly aging. Reﬂ ected in the above factors, China’s labour market, unlike those of developed countries, has been constantly changing and reshaping since the 1980s, and currently the demand for technology talent is rising quickly, accompanying the fast development of e-commerce. It can be said that more employment and labour disputes will likely arise for employers in e-commerce, due to an increasing number of employees.

Redundancies, business transfers and reorganisations Redundancy It is not uncommon to see employers in China have to carry out downsizing as a result of not coping well with the recession in the world economy. The law, however, provides strict conditions for downsizing and employers often have to produce solid evidence to convince relevant authorities, arbitrators and judges that downsizing is truly the only available choice. Employing Article 41 of the Employment Contract Law (2013 Amendment) to conduct layoffs for redundancy in China has proven to be a daunting task for employers to complete, due to its strict requirements of eligibility and potential consequences at arbitration and litigation. To invoke Article 41, employers have to prove that they are under one of the four following circumstances: • going through restructuring according to bankruptcy laws; • having serious difﬁ culties in business operations; • going through major technology innovation, adjustment of operational mode and after amending employment contracts, it is still necessary to carry out layoffs due to redundancy; or • other major changes in economic circumstances leading to an employment contract not being able to be performed. The standard of proving an employer’s eligibility to the above is very high in practice, and for an employer to meet any of them, a substantial amount of evidence will have to be produced. For instance, “other major changes in economic circumstances” mainly refers to economic crises in practice, such as the 2008 one. Sometimes even if an employer can successfully establish one of the grounds above and have its redundancy project proceed as planned, employees can still initiate labour arbitration and litigation to question the employer’s eligibility to the ground used. Arbitrators and judges sometimes do show compassion and rule in favour of the employees. Hence the basic idea is to avoid invoking Article 41 for workforce reduction, and instead adopt other legal grounds under Chinese law. The market did not see many cases of redundancy by Article 41 in 2016 and 2017 due to its complexity, however, and with the subdued development of the economy continuing, more cases can appear in the public eye, and the vague requirements within Article 41 will only gradually be unveiled.

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Business transfers and reorganisations Similarly to last year, internet ﬁ rms have continued to be active in M&A, and some major deals were landed successfully by the biggest Chinese names in the world. Business transfers and reorganisations were also most often seen in the hi-tech industry. Under Article 40(3) of the Employment Contract Law (2013 Amendment), when there is a major change in objective circumstances leading to an employment contract not being able to be performed any longer, an employer is entitled to terminate the employment contract at the cost of making the required statutory severance payment. Objective circumstances tend to be interpreted narrowly by arbitrators and judges and the scope of application is often limited to a move of location by an employer, M&A activities and transfer of assets. Business transfers can roughly ﬁ t in here within M&A activities and transfer of assets, and an employer can argue that by conducting business transfers, objective circumstances have occurred and Article 40(3) can therefore be invoked to legally reduce the workforce. Reorganisations, however, are often not regarded as a major change in objective circumstances, and it is risky to invoke Article 40(3) under such circumstances. Nevertheless, Article 41 can be tried under the circumstances of reorganisation.

Business protection and restrictive covenants Confi dentiality is vital for employers in the hi-tech industry. When employees start working for other competitors using technology obtained from a previous employer, the consequences so brought cannot be ignored. Chinese law acknowledges this and supports the protection of trade secrets with restrictive covenants. There are two areas under Chinese law where an employer may agree on liquidated damages with an employee, they are: liquidated damages under a non-compete obligation; and service period based on training. Non-compete obligation An employer may agree on a non-compete period after ending the employment of an employee who has an obligation to confi dentiality, and such obligation may either be stipulated in a separate non-compete agreement or in an employment contract. The stipulation of non-compete often encompasses clauses on the scope of confi dentiality, and the length and payment for the obligation. The length of the non-compete period, under Chinese law, should not be longer than two years for the same category of service to other employers, and an employer is obligated to pay an employee under non-compete monthly for the fulfi lment of the obligation. If, however, an employee breaches the duty of non- compete, stipulated compensation then has to be made. Service period agreement If an employer has provided an employee with special training for the purpose of the employee’s performance of the employment contract, the employer is then entitled to stipulate in an agreement with the employee that the employee must stay employed with the employer for a certain period of time. This can effectively prevent the loss of talents after training is provided by an employer. If an employee breaches the agreement and leaves prior to the expiry of the service period, an employer may then demand liquidated damages. The amount of liquidated damages asked for should not be more than the cost of providing training, and pro rata training expenses will apply in calculating the liquidated damages.

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Discrimination protection Discrimination is prohibited by Chinese employment law, albeit details are often insufﬁ cient for punishment of the violation. Articles 12 and 13 of the Employment Law (2009 Amendment) generally provide that people should not be treated unfairly due to race, sex, religion, etc., and women should enjoy equal rights of employment to those enjoyed by men. Article 3 of Employment Promotion Law of the People’s Republic of China (2015 Amendment) provides that workers are entitled to equal employment and have the freedom in choosing their own professions. Workers seeking employment shall not be discriminated for reasons such as ethnicity, race, gender or religious belief. Moreover, Chinese law offers more protection to female employees and prohibits employers employing female employees in certain areas entailing heavy labour. The law also prohibits termination of employment of female employees during pregnancy, parturition and lactation. The Special Provisions on Protection of Female Employees (2012) prohibit sexual harassment of female employees, though there are no other laws or regulations regulating this issue. Chinese employment-related laws are almost silent on sexual harassment aside from the above provision, and neither deﬁ nition nor punishment is clearly provided. The trend in trials regarding sexual harassment is still uncertain at this stage, and in practice, relevant case law may prove to be useful.

Protection against dismissal Chinese labour and employment law and its practice are pro-employee and many employers fi nd it diffi cult to dismiss an employee legally. The reasons behind it are manifold and the most important of them all is the existence of many protections available to employees in the Employment Contract Law (2013 Amendment). The high standard of requirements for termination Grounds of unilateral termination are provided mostly in Article 39 and Article 40 of the Employment Contract Law (2013 Amendment) and both of them require a set of strict conditions to be met for the purpose of a lawful termination. For instance, Article 39(1) provides that an employer may dismiss an employee for failing to meet recruitment conditions during the probationary period; however, in practice, the evidence required is not as easy as the law says. There are four conditions for a legal termination during a probationary period, and they are: • there are recruitment conditions in writing and the employee must have been notifi ed of such requirements before the execution of the employment contract; • suffi cient evidence needs to be provided to prove that the employee has failed to meet the recruitment conditions; • a performance review must be carried out on the employee during the probationary period to review performance and evaluate whether the employee meets the recruitment conditions, and the process must be fair and reasonable and the result thereof must be delivered to the employee; and • the conclusion of the employee not making it through the probationary period must be made before the expiration of probation. The evidence required hereof in practice has proven to be diffi cult to gather, as an employer generally does not pay attention to an employee’s performance until the end of the

GLI - Employment & Labour Law 2018, Sixth Edition 53 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London King & Wood Mallesons China probationary period when an assessment needs to be made, and in practice, it is often too late to seek evidence of the employee’s failure to meet recruitment conditions. Without suffi cient evidence, arbitrators and judges often fi nd the dismissal unfair and an employee can either require double statutory severance payment or reinstatement. Situations where an employer is not entitled to termination Aside from the high standard of termination requirements, Chinese law also provides situations where an employer is prohibited from unilaterally terminating employment by employing Article 40 and Article 41. Article 42 of the Employment Contract Law (2013 Amendment) provides fi ve situations preventing an employer from unilateral termination, with certain exceptions, and the situations are: • an employee working in a profession prone to developing work-related diseases has not received a health examination before leaving, or an employee with a suspected work- related disease is still being diagnosed or in a medical observation period; • an employee has developed a work-related disease or injury during employment with an employer and has been identifi ed with loss or partial loss of capacity to do work; • an employee has become ill or has sustained a non-work-related injury and is still in a medical treatment period; • female employees in pregnancy, parturition or lactation; • an employee has worked 15 years consecutively for an employer and will reach the age of retirement in less than fi ve years; or • other circumstances provided by laws and regulations. Article 42 provides an extra layer of protection to employees in special situations, and dismissal by Article 40 and Article 41 is not allowed by law. Chinese employment and labour law became extra-protective to employees in 2008 when the current Employment Contract Law (2013 Amendment) was introduced, and it invited much criticism from employers, especially foreign ones, for leaning too much toward employees and not being friendly to employers. There have been recent rumours on changes to the current law in favour of employers for the purpose of stimulating the growth of the economy, though the authenticity thereof cannot be tested. Changes to employment and labour law in favour of employers, on one hand, can help investors invest in China with lower HR costs and, on the other hand, it has an impact on the interests of employees.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Notice entitlement The law requires that in order to dismiss an employee, an employer is required to give 30 days’ notice in advance or make payment of one month’s salary in lieu of notice. Moreover, before the intended dismissal, an employer is also required to notify the employee’s trade union of the dismissal as a procedural requirement; the consent thereof is nevertheless not mandatory. Whistleblowing Unlike many developed countries such as the US and the UK, Chinese law is silent on employees’ behaviour of whistleblowing, and few cases have been seen on the topic. Although the law does not provide employees with protection for whistleblowing of an employer’s wrongdoing, terminating employment is still difﬁ cult based on an employee’s

GLI - Employment & Labour Law 2018, Sixth Edition 54 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London King & Wood Mallesons China reporting, in that unlike the US law, employment-at-will is not a concept under Chinese law, and termination demands legal grounds to complete. Paternity and maternity leave Since the implementation of the two-child policy in late 2015, many cities and provinces have made new rules on paternity and maternity leave. The original bonus maternity leave for late marriage and birth was cancelled and maternity leave is now also permitted for the second child of a couple. It is noteworthy, however, that having a third child is still unlawful for a couple, and maternity leave cannot then be given. The new policy only appeared in the public eye in late 2015, although it is expected that it will stay unchanged at least for the next couple of years. The quickly aging Chinese society will, however, certainly bring more changes in future. Responding to the change of maternity leave, paternity leave also changed in late 2015, and was increased in most cities to encourage couples to have a second child. Annual leave entitlement Annual leave is provided by Chinese law according to the total years an employee has worked, and for speciﬁ c entitlements please refer to the chart below:

Total Cumulative Working Years Days of Statutory Paid Annual Leave Less than 1 year No entitlement Over 1 year but less than 10 years 5 working days Over 10 years but less than 20 years 10 working days Over 20 years 15 working days Annual leave entitlement when sick leave is taken The rights to annual leave under Chinese law are also subject to the length of sick leave. If sick leave spans a certain period in a year when annual leave can be taken, an employee will not be entitled to take annual leave in that year. According to the Regulation on Paid Annual Leave for Employees (2008), an employee will not be able to take annual leave in that year if the employee has taken two months’ sick leave or more when the employee’s cumulative length of service is more than one and less than 10 years. Similarly, the restriction applies to three months or more sick leave and accumulated length of service of more than 10 and less than 20 years, and four months’ or more sick leave and accumulated length of service of 20 years or more.

Worker consultation, trade union and industrial action As mentioned above, when an employee is unilaterally dismissed, their trade union needs to be notiﬁ ed. Nonetheless, neither the employee nor the trade union should be consulted in this situation. There are not many requirements to consult employees or trade unions under Chinese law − below are two examples required by law: Democratic procedure When making or amending a policy inﬂ uencing employees’ core interests such as remuneration and annual leave under Chinese law, an employer has to consult employees for their opinions on the policy, otherwise the required democratic procedure is considered as having not been completed, and the effectiveness of the policy can be challenged in arbitration and litigation. Employees’ or trade unions’ consent is nonetheless not required during the democratic procedure, and an employer only needs to ask employees for their opinions. Similar to 2015,

GLI - Employment & Labour Law 2018, Sixth Edition 55 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London King & Wood Mallesons China the year 2016 has witnessed many cases where an employer’s internal policies were found to be invalid during arbitration and litigation for not completing the democratic procedure, and the employee was not found to have violated any policy. More employers are paying attention to this issue and the democratic procedure is becoming a priority in daily management. Article 41 redundancy As mentioned above, under Article 41 of the Employment Contract Law (2013 Amendment), where redundancy layoff is provided, an employer needs to consult all the employees or the trade union of the situation 30 days prior to the layoff for their opinions on the intended layoff. Similar to democratic procedure, employees’ or trade unions’ consent is not required for the layoff. Industrial action Industrial action may take many forms, such as strike, occupation of factories and slowdown. Article 27 of the Trade Union Law (2009 Amendment) provides that in the event of a strike or slowdown, the trade union should consult with the employer on behalf of the employees, and the employees’ opinions should be expressed. This is the only provision in Chinese law pertaining to industrial action and the law neither allows nor prohibits industrial action. Otherwise, the law is silent on this issue. Nevertheless, due to the social risks that industrial action can lead to, the Chinese government generally discourages it.

Employee privacy With the quick development of e-commerce, data protection has become an important employment issue for employers to deal with and there have been some nationwide measures made by relevant authorities. The Decision on Increasing the Protection of Online Information (2012) (“Decision”), promulgated by the Standing Committee of the People’s Congress, provides that organisations or individuals are prohibited from acquiring citizens’ electronic personal data by illegal means, or selling it to others. The liable party will be subjected to penalties such as warnings, fi nes and licence revocation, and civil or criminal liabilities, if applicable. The Decision has an infl uence on employees’ data privacy; an illustration is that when employees’ data is collected for the purpose of recruitment and then stored in a server, an employer is not allowed to share the data with any third parties or sell the data for profi t. If an employer intends to use the data collected or store it in a third party server, an employee’s prior consent needs to be obtained for the purpose of compliance.

Other recent developments in the fi eld of employment and labour law New work permit application system for foreigners A new work permit application system for foreigners began to be implemented nationwide on 1st April 2017, and the Foreign Expert Certifi cate and Foreigner Employment Certifi cate are no longer being issued. The new policy classifi es foreign employees into three categories and they are: foreign top- level talents; foreign professional talents; and other foreigners meeting the needs of the domestic labour market. The new policy employs a points-based system for application and if a foreigner obtains enough points, a work permit may then be given. Foreigners in the fi rst tier will be given priority for their applications, with second-tier talents controlled and the third tier strictly restricted.

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Junlu Jiang Tel: +86 10 5878 5055 / Email: [email protected] Dr Jiang is a leading partner at King & Wood Mallesons’s employment and labour practice and has advised the lion’s share of Fortune 500 with operations in China. Dr Jiang was appointed by the Legal Affairs Ofﬁ ce of the PRC State Council as the leader of a task force research team for the enactment of the Employment Contract Law, the fundamental law on employment in China, and is also the Deputy Chair of the Social Law Committee of China Law Society, Honorary Chair of Beijing Labour and Social Security Law Society and Guest Professor at the Law Faculty of Peking University, Tsinghua University and Renmin University. Dr Jiang writes extensively and contributes regularly to many prestigious publishers of the calibre of CCH, Law Business Research and such, and has been rated as a Band 1 employment and labour law lawyer for eight consecutive years from 2009–2016 by Chambers Asia. Dr Jiang obtained his LL.M. from the Law School of Renmin University of China, and his Ph.D. from the Law School of Peking University.

Hongyuan Zhang Tel: +86 10 5878 5717 / Email: [email protected] Dr Zhang is an associate at King & Wood Mallesons and his work covers all aspects of contentious and non-contentious employment and labour law matters. He consults multinationals operating in China in different areas of employment and labour law, such as employment-related compliance issues, dismissal risk assessment and layoffs due to redundancy or closure. Dr Zhang has successfully defended many clients before labour arbitration commissions and courts across China and he also writes regularly on employment and labour law issues for different journals. Dr Zhang obtained his LL.M. from King’s College London and Ph.D. in law from the University of Southampton.

King & Wood Mallesons 40th Floor, Ofﬁ ce Tower A, Beijing Fortune Plaza, 7 Dongsanhuan Zhonglu, Chaoyang District, Beijing, China Tel: +86 10 5878 5588 / Fax: +86 10 5878 5577 / URL: www.kwm.com

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Jani Syrjänen Borenius Attorneys Ltd

General labour market and litigation trends The competitiveness agreement In both 2016 and 2017, the most signifi cant topic on the Finnish labour market has been the so-called competitiveness agreement that was the result of the labour market settlement negotiated by Finnish central organisations. The competitiveness agreement seeks to improve the competitiveness of labour and businesses in Finland. As a result, the competitiveness agreement has brought about a great number of signifi cant changes at Finnish workplaces, some of which were temporarily implemented for the year 2017, while others will continue to have an impact in coming years as well. The competitiveness agreement allowed certain employers to extend their employees’ annual working time by 24 hours without affecting salary costs. The agreement concerned the year 2017, and for now, it would seem that the change was temporary and will not persist after the year 2017. The changes that will remain in force after 2017 are: the 30% cut to the holiday bonus of public sector employees for a fi xed term of three years; the gradual increase of the employee’s share of social insurance contributions, and the increase to the employer’s social security contribution; and the employer’s statutory obligation to pay for training and arrange occupational health care for employees who are made redundant. In addition, local bargaining continues to be an increasing trend in the Finnish labour market. The intention behind the competitiveness agreement and local bargaining is to improve the competitiveness of labour and businesses in Finland. It remains to be seen, however, what the true impact will be. Recent trends in litigation Recently, Finnish courts have been handling a large number of cases that somehow concern atypical employment relationships. During the past year, the courts have ruled on the rights of fi xed-term employees and the status of on-demand employees on several occasions. The rise of atypical employment relationships in litigation speaks of the transformation that is ongoing in Finnish working life and of the fact that Finnish employment legislation is in many cases open to interpretation when it comes to these kinds of employment contracts. In recent case law, the Finnish Supreme Court has given more protection to the rights of employees in atypical employment relationships and somewhat strengthened their status. Another observation concerning litigation trends would be the increase in the use of EU case law-related arguments by the employee side. This may be a sign of the fact that

GLI - Employment & Labour Law 2018, Sixth Edition 58 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland employees and their representatives are becoming more aware of EU case law and the rights it grants for employees. The mobility of workers – the implementation of the ICT Directive Finland is currently in the process of implementing the European Intra Corporate Transfer Directive (the “ICT Directive”) with a national act. The ICT Directive outlines the conditions of entry and residence for third country nationals transferring to the EU under an intra-company transfer. An intra-company transfer is a transfer that occurs within the same undertaking or group of undertakings. The Finnish Government issued its proposal on 28 June 2017, and the act is intended to enter into force on 1 November 2017. However, the schedule and the contents of the national act may still undergo alterations. It is currently expected that, as of 1 November 2017, managers, specialists, and trainee employees could apply for an ICT residence permit that can be obtained for the duration of the transfer. The maximum duration of the transfer is three years (one year for trainee employees). The ICT residence permit is granted as soon as possible but no later than 90 days from the date on which the complete application was submitted. Regular residence permits are usually granted as temporary residence permits and, at fi rst, for a period of one year. However, according to the government proposal, the ICT residence permit would be granted as a continuous residence permit for the duration of the transfer. The maximum duration of the transfer is, however, limited to three years (one year for trainee employees). It is also indicated that the process may be slightly faster than with regular residence permits. In addition, the ICT residence permit application must be processed within 90 days whereas the regular permits must be processed within four months. One of the benefi ts of the ICT residence permit is that third-country nationals who hold a valid ICT residence permit issued by one member state may, if certain conditions are fulfi lled, enter, stay, and work in one or several other member states. • If the employee is transferring to Finland for a maximum of 90 days in a 180-day period, a mere notifi cation process along with certain documentation is required. • In the case of longer assignments, the employee should apply for a mobile ICT permit. This permit is granted on less stringent conditions when compared to a standard residence permit process. The implementation of the ICT Directive is expected to somewhat facilitate the mobility of non-EU employees interested in coming to Finland, and possibly to expedite the process of granting residence permits in certain cases.

Redundancies, business transfers and reorganisations Employers’ consultation obligation The past year has not seen any large-scale amendments regarding the employers’ consultation obligation. As previously, under the Finnish Act on Co-operation within Undertakings, a company that permanently employs at least 20 employees must consult with the employees or their representatives before any radical changes, which affect or might affect the employees, are made in the company. For example, the employer has a consultation obligation regarding changes in business operations that would affect the personnel. This obligation also applies to business transfers and to reductions in personnel.

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In respect of considering personnel cutbacks, the consultation obligation, more commonly referred to as co-operation negotiations, is designed to ensure that the reasoning behind any potential redundancies is discussed and alternative solutions are presented before the company makes any fi nal decisions. However, even if the employers are not bound by the results of these negotiations, it is highly important that they follow correct procedure. A failure to do so will result in signifi cant compensation liability and damage to the company’s reputation. From 4 July 2016 onwards, the current maximum indemnifi cation is €34,519. Some of the most signifi cant co-operation negotiations held in 2017 occurred at companies such as Transval Services, Tieto, Nokia and TeliaSonera Finland. According to a recent survey regarding the labour force conducted by Statistics Finland, the number of unemployed in August 2017 had risen by more than 7,000 when compared to the previous year. Despite this development, the number and size of lay-offs has decreased in late 2016 and early 2017, and the number of so-called positive reorganisations has increased correspondingly. The reversal of the economy is expected to have a positive impact on employment rates. It is, however, still not possible to say what the future will hold since it is uncertain if there are other upcoming announcements confi rming new co-operation negotiations, which might lead to more redundancies. The ability of the employer to change the terms of employment In Finland, the employer can change essential contractual terms of employment only with the consent of the specifi c employee or if legal grounds exist for the termination of that employee’s employment. If grounds exist for the termination of a specifi c employee, any changes must be made following the applicable term of notice. The employer will also need to clearly indicate the grounds for the right of termination, what employment contract terms and conditions will be changed and also what the consequences will be if the employee refuses the change. In general, those terms and conditions of employment that are not considered essential contractual terms (often various company policies) may be altered unilaterally by virtue of the employer’s right to manage and supervise work. However, in some cases, non- contractual terms of employment may also be considered as essential contractual terms that cannot be altered unilaterally. For example, in Finnish Supreme Court decision KKO 2016:80, the Finnish Supreme Court ruled that even if there is no provision in the employment contract regarding the place of work, the employer might not have the right to change the employee’s place of work based on the right to manage and supervise the work. This is because the place of work may have become established practice during the employment relationship, and it will therefore be considered a contractual term of employment. If the employee has spent a number of years working solely on the same premises, the employer might no longer have the right to move them elsewhere, for example, for the purposes of training or based on job rotation. Consequently, employers should note that non-contractual conditions and practices affecting employment may also become established practice and therefore equivalent to a contractual term of employment. In the event that the employer wishes to avoid this, it is recommended that they agree on this separately with the employee and that they regularly indicate that the terms are not meant to be contractual terms affecting that specifi c employee’s employment. However, the wording of, for example, employment contracts is not decisive, and it is actual practice that determines the outcome. This means, for example, that even if the employer and employee do agree on a change in the place of work in the employment contract, a certain place of work may still become established as contractual practice if the employee

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Business protection and restrictive covenants There are no recent developments regarding business protection and restrictive covenants. However, the discussion around the need for more speciﬁ c reasons for using post- employment non-competition restriction is increasing, which might have some relevance in coming years.

Discrimination protection In 2017, there are no recent developments regarding discrimination protection.

Protection against dismissal The past year has not seen any large-scale amendments regarding employees’ protection against dismissal. However, the Finnish Supreme Court has issued several judgments regarding the employer’s obligation to offer work to employees that are under the risk of redundancy. Finnish employment legislation states that an employment contract shall not be terminated if the employee can be placed in or trained for other duties. This means that even though there are suffi ciently proper and weighty reasons for the planned redundancies, the company may not terminate any employees before it has assessed the possibility of offering other vacant positions within the company to the applicable employees or the possibility to provide reasonable training for the said employees in order to have them take up a new vacant position within the company. Employees shall primarily be offered work that is equivalent to that defi ned in their employment contracts. If no such work is available, they shall be offered other work equivalent to their training, professional skill or experience. The company shall provide the employees with training required by new work duties that can be deemed feasible and reasonable from the point of view of both parties. In recent case law, the Finnish Supreme Court has confi rmed in two judgments (KKO 2017:38 and KKO 2017:39) that – even though the other duties that are offered to the applicable employees should primarily be positions leading to permanent employment – the employer must also offer fi xed-term or part-time positions to the employees under the risk of redundancy if there are no permanent or full-time positions vacant. This does not apply if the work is very short-term or occasional. The law states that the obligation to offer other work specifi cally applies to redundancies. In a recent case (KKO 2017:55), the Finnish Supreme Court, however, extended the scope of the obligation also to repeated fi xed-term employment contracts in certain situations. The Finnish Supreme Court stated that if the need for labour is deemed to be permanent, the employer has an obligation to offer other work to the employee even in a situation where the employee is not made redundant but the term of his/her repeated fi xed-term employment contracts ends. In its reasoning, the Finnish Supreme Court invoked the employer’s statutory obligation to treat its employees equally and to the prohibition to apply less favourable employment terms to part-time or fi xed-term employees than those applied to other employment relationships, unless there is a proper and justifi ed reason to do so.

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In practice, this judgment means that, in the future, employers will have to assess their obligation to offer work or training not only to employees at risk of being made redundant but also to ﬁ xed-term employees whose repeated contracts are coming to an end.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Whistleblowing In Finland, there is no comprehensive legislation regarding whistleblowers and internal investigations, and therefore practices have been somewhat varied. During the last couple of years, however, several authorities and NGOs have begun to pay increasing attention to and conduct research on the subject. Consequently, certain steps have been taken in order to clarify the position of whistleblowers and the requirements for assessing reports of wrongdoing. As a result, certain industry-specifi c tools have been introduced. For example, the Finnish Financial Supervisory Authority (Finanssivalvonta, “Fiva”) has established a whistleblower tool that came into effect on 1 January 2016. Whistleblowers may use it to report violations of supervisory provisions. Together with the labour protection authorities, Fiva has an obligation to co-operate and exchange information in order to ensure the protection of the whistleblowing employees. There are no specifi c regulations regarding whistleblower protection, but Fiva will have the authority to give more specifi c orders in the future. In addition, Finland’s Ministry of Justice published a report (25/2016) on 17 June 2016 regarding the protection of persons reporting suspected corruption. The report recommends, for example, that an anonymous online whistleblowing tool be established for the disclosure of suspected corruption. Many bigger companies have voluntarily introduced their own internal whistleblowing tools and guidelines, and overall, it is expected that more legislation regarding whistleblowers will be introduced and further developed in the near future.

Worker consultation, trade union and industrial action Finnish employment law is characterised by the strong position of trade unions and employers’ associations. In practice, this means that in addition to the minimum terms of employment set out in legislation, most sectors of work are also subject to an industry- specifi c collective agreement, which obliges unorganised employers to comply with the minimum terms and conditions set out in the industry-specifi c, generally applicable, collective agreements. A signifi cant number of the applicable collective agreements will expire at the end of 2017. This means that trade unions and employers’ associations are currently negotiating the terms of the upcoming collective agreements. The most signifi cant terms under negotiation concern generally applicable raises in pay. Other provisions agreed-to in the collective agreements include, for example, arrangements concerning working hours, holidays, and rules pertaining to employee representatives. If the parties do not reach a consensus in the negotiations before the expiry of the current agreements, employee strikes are possible. Generally, it is expected that wages will be raised, but as the negotiations are currently ongoing, it is not possible to provide any further comments on the contents of the new collective agreements at this stage.

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Employee privacy The past year has not seen any large-scale amendments regarding employee privacy. Finnish employment legislation is already well in line with the European Union’s Data Protection Regulation, which will begin to be applied in May 2018, and therefore no signiﬁ cant legislative changes are expected in that regard.

Other recent developments in the fi eld of employment and labour law The pension reform The reformed Finnish pensions system came into effect on 1 January 2017. In brief, the pension reform brought about the following changes: • The grounds on which pension accrues have changed. Pension begins to accrue as early as at the age of 17, and pension will also accrue from pension insurance contributions. The annual accrual rate is 1.5% of income for everyone. However, there is a transition period for people aged 53–62 until the end of 2025, during which their accrual rate is 1.7%. • After reaching the lowest general retirement age of a certain age group, continuing to work will increase the pension by 0.4% each month (deferment increase). • From 2018 onwards, the retirement age will be gradually raised from 63 to 65 years. • The individual target age for retirement compensates for the effect of the life expectancy coeffi cient. • A new type of pension, the years-of-service pension, has been introduced. This pension type allows persons turning 63 the opportunity to retire before the offi cial retirement age if they have held a physically strenuous and taxing job for at least 38 years. • The part-time pension option has been abolished and replaced by a partial early retirement pension. • The pension reform concerns employees, entrepreneurs and employers. The reform does not apply to those already retired, nor to pension accrued before 2017. • The public sector pension reform has already complied with the pension reform in the private sector. • As mentioned earlier, the employee’s share of the social insurance contributions will also increase gradually. • In addition, the compulsory retirement age for employees working in municipalities and for the government was raised from 68 years to 70 years. This reform came into force on 1 April 2016. Extension of the maximum length of the trial period As of 1 January 2017, the maximum length of the trial period has been increased from four months to six months. The extension aims to lower the employment threshold by reducing the risk of hiring employees who are not suitable for the positions to be fi lled. By extending the maximum length of the trial period, employers have more time to ensure that the new employee is suitable for the job. This is considered to be important, especially in positions requiring special expertise. Furthermore, the extension aims to increase the fl exibility of the labour market, which is expected to improve productivity and employment in turn. The negative impact of the extension would be, however, a risk that the extension of the trial period could increase uncertainty for employees, which could then affect well-being at work.

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Additionally, the employer is now entitled to extend the trial period if the employee has been absent from work during the trial period due to family leave or due to being incapable of working. This amendment aims to improve the purpose of the trial period in situations where the employee is absent from work for a longer period of time and is thereby prevented from performing his or her duties. This amendment could avoid confl icts that may arise when an employee goes on family or sick leave before the employer has properly assessed if the employee is suitable for the job. Furthermore, the extension of the trial period could reduce situations where it is unclear whether the employee’s employment was terminated as a result of the employee’s illness. The extension of the trial period may also reduce discrimination against women in the labour market. As mothers use the vast majority of family leave, the continuation of the trial period for employees on family leave could increase incentives for employers to hire pregnant women, since the employer would not have to worry about losing the right to apply a trial period due to family leave. However, although the possible maximum length for the trial period has been increased, the length of the trial period should be in line with its purpose. In the same way as the previous legislation, the total length of the trial period may not exceed half of the length of a fi xed- term employment. The duration of the employer’s re-employment obligation will be decreased As of 1 January 2017, employers’ re-employment obligation has been decreased to four months from the previous nine months. However, in situations where the employment relationship has lasted for 12 years, the re-employment obligation is six months. The employer’s re-employment obligation means that once the notice period of a termination based on fi nancial and production-related grounds has come to an end, the employer is bound by an obligation to re-employ the terminated person for the next four months. If the employer requires new employees for the same or similar work during this period of re- employment obligation, it must offer the work in question to its former employees. The reduction in the duration of the employer’s re-employment obligation has several aims. Firstly, the amendment aims to facilitate employment by lowering the threshold for employment after the dismissal of employees on fi nancial and production-related grounds. Secondly, the amendment is considered to reduce the administrative burden on companies and increase employers’ freedom of choice when making decisions on who to employ after the fi nancial and production-related grounds no longer exist. This, in turn, may increase productivity as the employer is able to choose the person best suited to the job more freely. Thirdly, the reduction aims to ameliorate other jobseekers’, especially fi xed-term employees’, situation in relation to those whose permanent employment has been terminated and to facilitate the transition from fi xed-term employment to permanent employment. This is likely to increase the turnover rate of labour. On the other hand, it might slightly diminish permanent employees’ job security and increase their risk of unemployment. The long-term unemployed may be hired for a fi xed term without a justifi ed reason As of 1 January 2017, the long-term unemployed can be employed for a fi xed term without any specifi c justifi ed reason, which was previously required by law. In this context, a long- term unemployed is a person who, according to the records maintained by the Employment and Economic Development Offi ce, has continuously been an unemployed jobseeker for the previous 12 months. In this regard, short-term employment relationships that last a maximum of two weeks do not disrupt the continuity of the relevant person’s unemployment.

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A fi xed-term employment agreement to which the requirement of a justifi ed reason is not applied can be concluded for a maximum of one year. Alternatively, the employer and employee can agree on a maximum of three shorter fi xed-term agreements as long as their total duration does not exceed one year. The aim of the amendment is to make hiring more fl exible for businesses as well as to encourage employers to hire the long-term unemployed and thereby improve their employment opportunities on the free labour market. It is likely that the lowering of the employment threshold will have a positive effect on employment and, at least for some of the long-term unemployed, a fi xed-term employment period could serve as a springboard to permanent employment. According to a comparison made by the OECD, it is relatively easy to move from fi xed-term employment to permanent employment in Finland. For example, half of the fi xed-term employees in 2008 were permanently employed in 2011. Upcoming reform of the Working Hours Act In Finland, a reform of the Working Hours Act is under progress. The background of the reform is the ongoing transformation of working life that increasingly imposes new demands on working time regulation: • Work is carried out more and more round-the-clock and on every day of the week, and the forms and ways of working have changed over the last few decades. • It is more common that employees’ duties consist of searching for and processing information, and work is no longer strongly tied to a certain time and place. • Managing and supervising the employee is focused not so much on the time spent on the work as on the results of the work. The aim of the reform is to ensure fl exible working time arrangements for the needs of different companies and employers’ organisations and, on the other hand, to facilitate the balancing of work and the private life of workers. The intention is also to anticipate the changes to which working time regulation will have to respond in the future. In addition to the reform of the Working Hours Act, a reform of so-called zero-hour contracts is also being planned. Zero-hour contracts are employment contracts where the employer is not obliged to provide any minimum working hours, while the worker is not obliged to accept any work offered. Currently, there is no specifi c legislation regarding zero-hour contracts. The purpose of the reform is to improve the position of workers with varying working hours and to ensure the effective implementation of the provisions on employment protection. In practice, this means that the use of zero-hour contracts will likely be limited to some extent. The government bill regarding the new Working Hours Act and the reform concerning zero-hour contracts is planned for the spring of 2018. As for now, it is not possible to comment on the schedule and the contents of the new law in detail. In any case, the effects of the new law will only affect collective agreements entered into after the law comes into force.

Conclusion In summary, Finland remains a strong welfare state, which attaches great importance to protection of the legal rights of employees. Such an approach is clearly demonstrated by factors such as the continued importance of adhering to the provisions of employment legislation, the recent case law regarding protection against dismissals, and the unique Finnish collective labour law. Such measures are also a reﬂ ection of the Finnish working

GLI - Employment & Labour Law 2018, Sixth Edition 65 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland culture, which traditionally operates on the basis of empowering and protecting employees at all levels and promotes a management style with low hierarchy. At the same time, Finland continues to face the challenges of making spending cuts. Developments such as the competitiveness agreement are clear consequences of the downturn. However, the Finnish government and the central labour organisations are working to ﬁ nd solutions that help to improve the competitiveness of Finnish labour and businesses and boost economic growth, while reducing the unemployment rate and thus overcoming the downturn. Recently, the economy has gradually begun to grow, and it seems that no drastic measures will be necessary in the near future. As a consequence, the focus seems to have shifted from economy-related measures more towards updating employment legislation to meet the challenges of today’s versatile and international working environment.

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Jani Syrjänen Tel: +358 50 547 3339 / Email: [email protected] Partner Jani Syrjänen advises clients on all employment law and pension & beneﬁ ts-related matters, including occupational safety, discrimination, and business immigration matters. Jani has extensive experience in litigating employment law matters, negotiating and drafting top management agreements, company policies and procedures as well as advising employers confronting a wide range of employment law issues including, inter alia, outsourcing, reorganisations and redundancies. Jani is an accredited mediator of the Finnish Bar Association and a frequent speaker on employment law issues at domestic and foreign seminars. Jani heads Borenius’ Employment team.

Borenius Attorneys Ltd Eteläesplanadi 2, 00130 Helsinki, Finland Tel: +358 20 71 333 / Fax: +358 20 71 33499 / URL: www.borenius.com

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Lionel Paraire & Anaëlle Donnette-Boissiere Galion Avocats

The Orders dated 22 September 2017 reforming Labour law As part of the ‘fl exisecurity’ movement and pursuing the dynamics of revision of the Labour code initiated by the previous government, no less than fi ve orders adopted on 22 September 20171 are trying to take up the challenge of modernising and securing both the social dialogue and work relationships in France. The social dialogue Pursuing the previous reforms aimed at a contractualisation of labour law, Order No. 2017-1385 relating to the reinforcement of collective bargaining facilitates company- level bargaining, for a greater adaptability of the social norm, while Order No. 2017-1388 relating to the collective bargaining scope redefi nes the conditions for extending and broadening collective agreements. But if more weight is to be given to company-level bargaining, then companies should be given the means for effective and fair bargaining, carried out by competent and consistent actors. This is the objective of Order No. 2017- 1386 relating to the new organization of the social and economic dialogue within a company and facilitating the carrying out and valuation of trade-union responsibilities, which clarifi es the scope and facilitates the conditions of the social dialogue. Reinforcement of company-level bargaining Order No. 2017-1385 relating to the reinforcement of collective bargaining provides for the transformations necessary to promote company-level bargaining. First, the Order redefi nes the rules of articulation between branch agreements and company agreements. The primacy of the company agreement becomes the principle, pursuant to article L. 2253- 3 of the Labour code. The branch agreement applies only as an alternative, namely in the absence of a company agreement. We already knew about the primacy principle, which appeared in 20082 and which was recognized in 20163 with respect to working hours. The principle now applies to all agreements, irrespective of the themes dealt with. It is thus well generalised. Such generalisation addresses the concern of making the social norm more effi cient and more effective. This is a known reasoning: the norm adopted at the most local level, directly by the actors who are responsible for, and the benefi ciaries of, its application, within the very scope of its implementation, is necessarily an adapted norm; thus effi cient, but also accepted and, as such, effective. However, a limit to the primacy principle of the company agreement is to be noted. Indeed, the branch agreement is relegated to a subsidiary role, except for certain matters where it

GLI - Employment & Labour Law 2018, Sixth Edition 68 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France still has priority. The branch agreement may also prevail if the law so decides. This is the case in 11 subject-matters expressly referred to in article L. 2253-1 of the Labour code: • minimum salaries and classifi cations; • mutualisation of professional training funds; • mutualisation of gender mainstreaming fi nancing funds; • additional collective guarantees referred to in article L. 912-1 of the social security code; • measures relating to working hours, hours allocation and adjustment; • measures relating to fi xed-term contracts; • measures relating to temporary work assignments; • measures relating to open-ended project contracts; • equal professional opportunities between women and men; • trial periods’ conditions and renewal terms; and • conditions of contractual company transfer. The branch agreement may also prevail because it has primacy on subjects in which the law authorises any default within the company to be prevented. Such is the case, according to article L. 2253-2 of the Labour code, regarding prevention of the impact of being exposed to professional risk factors; professional integration and employment retention of handicapped workers; the number of staff beyond which union representatives may be appointed, their number and the assessment of their trade-union experience; along with the premiums for dangerous or squalid works. Finally, even where it loses its primacy, a branch should always negotiate for companies that will not. By the way, the branch agreement must from now on include specifi c clauses for small companies before they can expand. Then, in order to give companies the means to implement the new social model based on company-level bargaining, the Order recognizes a universal right to bargaining by facilitating its conditions in the absence of union representatives4. In companies with fewer than 11 employees without any elected representatives, it is now possible to negotiate directly with employees, on all subjects. However, in order to be valid, the agreement must be approved by a two-thirds majority. In companies with fewer than 50 employees, it has always been possible to negotiate with an employee appointed by a trade union, but signifi cantly, it is now possible to negotiate with one or more elected representatives, even not appointed, again on all subjects. An agreement entered into with an appointed employee must be approved by the majority of the employees through a consultation, whereas an agreement entered into with one or more elected representatives is valid if it/they represent/s the majority of the valid votes at the last professional elections. In companies with more than 50 employees without union representatives, an agreement is negotiated with an appointed member of the staff delegation of the social and economic committee and is valid only if it is approved by the employees by a majority of the valid votes. If no member of the delegation has expressed a wish to be appointed, the employer may negotiate with one or more non-appointed member/s of the delegation, but the validity of the agreement is then subject to its being signed by members of the delegation representing the majority of the valid votes at the last professional elections.

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If no member of the delegation wishes to negotiate, the employer may negotiate with an appointed employee; the agreement must then be approved by the employees by a majority of the valid votes. Additionally, if the company agreement is to be given more prescriptive weight, then its legitimacy and security must be ensured. The Order sees to it. In order to reinforce the legitimacy of the company agreement, the reform generalises the majority agreement as of 1 May 2018 (instead of 1 January 20195): as of this date, all company agreements, whatever their object, must be signed by one or more trade unions that have received at least 50% of the valid votes at the last professional elections. Moreover, to ensure the legitimacy of the norm adopted in the company, the reform generalises the use of the referendum for minor agreements. Since 2016, trade unions signing the agreement could take the initiative in this referendum. From now on, the employer may also initiate it6. To secure the agreements, the Order provides two new mechanisms: the creation of a presumption of compliance with the law on the one side; and the reduction to two months of the time frame to bring an action on grounds of invalidity, on the other. Pursuant to article L. 2262-13 of the Labour code, the agreements complying with the validity rules applicable on the date of their conclusion are presumed negotiated and concluded according to the law. This presumption concerns the content of the agreement, its conditions of validity along with the bargaining process. It is for whoever wishes to contest the agreement to prove that it has not been negotiated or concluded according to the law7, save in case of legal provisions modifying the burden of proof, as in the case of discriminations. Regarding the time frame for contestation, article L. 2262-14 of the Labour code provides that it is now two months. For a company agreement, this period runs from the notifi cation resulting from article L. 2231-5 of the Labour code or from the publication of the agreement realised by the application of article L. 2231-5-1 of the same Code. For a branch agreement, the period runs from its publication and is without any impact on the application of specifi c time frames provided for by certain texts8. The new time frame to bring an action on grounds of invalidity applies to proceedings initiated after the promulgation of the Order, and when a judge determines the invalidity of the whole or part of an agreement, he may from now on, pursuant to article L. 2262-15 of the Labour code, not only prevent the retroactivity of the invalidity but also modulate the effects of his decision over time, if “the retroactive effect is likely to have consequences manifestly excessive because of both the effects of this act and the situations that may have been constituted when it was in force, and of the general interest that may be related to a temporary maintaining of its effects”. Finally, the Order simplifi es not only the compulsory negotiations but also the different competitiveness agreements. Concerning the compulsory negotiations, their periodicity and their content may be determined by branch or company agreements9. At the branch level10, the law requires serious and loyal negotiations. The branch agreement may, for a term that cannot exceed four years, defi ne the timetable, the periodicity and the content of the negotiation themes along with the conditions thereof. Failing an agreement, the themes and the periodicity fi xed by the law shall apply: • the annual negotiation concerns the salaries; • the three-yearly negotiation deals with equal professional opportunities between men and women, work conditions and the GEPC (provisional management of employment and skills), handicapped workers, professional training and learning; and

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• the quinquennial negotiation relates to classifi cations, employee savings and part-time work. At the group, company or establishment level11, the law forbids any unilateral measure taken by the employer as long as the negotiations are ongoing, and requires serious and loyal negotiations, the failure of which shall result in minutes stating the disagreement. An agreement may, for a maximum four-year term, specify the timetable, the periodicity, the themes and the conditions of the negotiation. Failing an agreement, the themes and periodicity are those fi xed by the law: the annual negotiation concerns the remuneration, working hours and splitting of the added value in the company, professional equality and quality of life at work; whereas the three-yearly negotiation deals with the GEPC. Concerning the different competitiveness agreements (reduction of working hours, mobility, employment retention, employment preservation and development), their regime is unifi ed by the creation of an economic and social adaptation agreement, the purpose of which is to address the necessities related to the functioning of the company, or to preserve or develop employment by an adjustment of the working hours and/or the remuneration. To ensure the effectiveness of this new agreement, it is quite logically provided for that its provisions shall automatically substitute clauses contrary to or incompatible with the employment contract, including in terms of remuneration, working hours and geographic or professional mobility. The employee retains the right to refuse the amendment of his employment contract resulting from the application of the agreement, said refusal having to be expressed within a month of his being informed of the existence and content of the agreement. In case of a refusal, the employer may notify a dismissal, not on economic grounds, but for a real and serious cause. An employee so dismissed is entitled to unemployment benefi ts. To take into account the development of the collective bargaining and trade-union background, Order No. 2017-1388 relating to the collective bargaining scope redefi nes the conditions for extending and broadening collective agreements. Hence, the minister of Employment may, pursuant to article L. 2261-25 of the Labour code, exclude the extension of clauses likely to excessively undermine free competition or, on the contrary, extend incomplete clauses subject to subsequent complements. According to article L. 2261-27-1 of the Labour code, the minister may also refer to a group of experts in charge of assessing the economic and social effects likely to result from the extension. In addition, the minister of Employment may broaden an agreement in case of absence or failure of the organisations, making it impossible to conclude in an activity branch or a determined professional or territorial sector12. Moreover, the Order accepts the consequences of the constitution of the U2P (Union of local community-based companies) resulting from the merger of the UPA (craftsmen’s professional union) and the UNAPL (National union of liberal professions), by disestablishing the fi eld of activity of the liberal professions of the sectors open to a national interprofessional representation. Finally, the Order modifi es certain functioning rules of the joint fund provided for at article L. 2135-9 of the Labour code. Specifi cally, the condition to sit on the approved collective joint bodies to benefi t from the credits of the fund is removed, the entitlement to credits being from now on subordinate to the sole representativeness of the organisations. Simplifi cation and valuation of social dialogue within the company The reinforcement of company-level bargaining has also been transformed for the simplifi cation of social dialogue within the company. It consists in making this dialogue possible and making all voices audible, winning for all. The reinforcement of company- level bargaining also requires the setting-up of systems which make it attractive to carry out

GLI - Employment & Labour Law 2018, Sixth Edition 71 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France a trade union mission, in order to encourage employees to get involved in representation and bargaining. It is Order No. 2017-1386 relating to the new organization of the social and economic dialogue within a company and facilitating the carrying out and valuation of trade-union responsibilities, which aims at this double objective. To simplify the social dialogue and make it more operational, the Order seeks to facilitate the conditions of trade-union presence by laying down the rule of staff representation uniqueness. The unique staff representation is made possible by the merger of the staff representatives, the employee representative committee and the health and safety committee into a new body, the Social and economic committee (CSE)13. In this respect, the reform is radical: the setting-up of the CSE is imposed on all companies and shall be effective on 31 December 2019 at the latest. The CSE, which is compulsory for companies with more than 11 employees, is not a legal entity up to 50 employees, but becomes one beyond. Set up for four years unless an agreement fi xes the term of the mission between two and four years, the CSE comprises the employer and a staff delegation, and performs the duties which were up until now allotted to elected institutions. Precisely, in companies of 11 to 49 employees, the CSE has the competence of the staff representatives, with the exception of the right of alert regarding health and safety, and to be informed/consulted on the use of the tax credit by the employer, which disappear from its prerogatives. In companies of at least 50 employees, the CSE regains the area of responsibility of the staff representatives, of the employee representative committee and of the health and safety committee, it being specifi ed that the powers of the latter may be – or shall be, for companies with more than 300 employees and at nuclear or sensitive sites – be exercised by a “health, safety and work conditions” committee. In addition to this committee, the CSE shall create in companies with at least 300 employees a “training” committee, an “information and housing assistance” committee, a “professional equality” committee and, in companies with at least 1,000 employees, an economic committee. The creation of these committees with thresholds conditions results from the law, which is supplementary in this respect. Indeed, beyond 50 employees, a majority agreement may provide for the creation of committees, and legal committees shall be imposed on companies with at least 300 or 1,000 employees only if no agreement is reached. Furthermore, a more complete form of the CSE, the company council14, may be put in place by a majority company agreement or by an extended branch agreement. Composed of the CSE elected members, the company council enjoys, in addition to the triple competence of the staff representatives, the employee representative committee and the health and safety committee, that of collective bargaining. It must be noted that this arrangement facilitates co-decision-making and co-management, but that by signing the agreement setting up the company council, trade unions give up their bargaining monopoly, and the frequent constitution of such a council can thus seriously be doubted. Finally, on the occasion of the setting-up of this new unique body, the CSE, the use of expert assessments was harmonised and its cost reduced for the company15. Indeed, numerous expert assessments are no longer paid for by the company alone. The following expert assessments remain to be paid by the company: those on the economic and fi nancial situation of the company; those relating to the social policy of the company, to work and employment conditions, to employment safeguard schemes; and those ordered when a serious risk is noted, identifi ed and current, made known or not by an accident at work or a work-related illness. Other cases of use of an expert assessment (economic right of alert,

GLI - Employment & Labour Law 2018, Sixth Edition 72 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France merger, purchase offer received by the company, professional equality, etc.) are borne by the CSE on its operating budget up to 20%. Also to simplify and reinforce the social dialogue, especially within the company, the Order redefi nes certain conditions for the performance of trade union duties in order to highlight them. By which systems does the Government hope to better highlight trade union experiences? First, the end-of-mission meeting is generalised in companies with more than 2,000 employees, without any condition of term of the mission16. The economic, social and management skills acquired upon expiry of the mission/s must be reported and recognized for a better reconciliation between trade union commitment and professional development. Then, the rights to training of the employees made available for trade unions or employer associations are reinforced17. Finally, a fairer bearing of the remunerations and costs of employees who are negotiating is provided for, specifi cally for very small companies, by joint fund-fi nancing the employers’ and trade unions’ organisations. At the same time, the employer must maintain the remuneration of employees benefi ting from economic, social and trade-union training leave18. Moreover, elected members of the CSE shall not be able to carry out more than three successive missions, unless the pre-election agreement provides otherwise and except in companies with fewer than 50 employees19. Just like political democracy, social democracy can function only if does not get stuck in representative functions… it is thus easy to understand the objective of the measure at a time of labour law contractualisation, aiming to avoid any risk inherent to the professionalisation of elected representatives. Work relationships After the fl exibility of the norm, the fl exibility of employment. It is Order No. 2017- 1387 relating to the predictability and securing of work relationships which deals with this objective, by loosening the management features of the work relationship. This same Order, along with Order 2017-1389 relating to the prevention and the taking into account of the effects of being exposed to certain professional risk factors and to the prevention professional account, also try to improve a certain number of measures relating to the taking into consideration of the employee’s state of health, by providing some detail on incompetence and by confi rming certain changes with respect to the taking into account of arduous occupations. Softening of the work relationship management features The Order reinforces the fl exibility of the work relationship, particularly by facilitating telework and the use of CDDs (fi xed-term contracts), which refl ects the will of the government to soften the execution features of the work relationship, but also by facilitating dismissals, be they individual or collective, expressing here the will of the government to soften the termination features of the work relationship. Regarding the softening of the execution features of the work relationship, it should be noted that the Order seeks to promote the use of more supple forms of work relationship organisation, especially telework, special contracts and supply of personnel. Regarding telework, it now results from a collective agreement or, failing that, a charter drawn up by the employer without it being necessary that the employee’s employment contract provides therefor. Especially, the reform has confi rmed temporary or occasional telework by removing the expression “regular telework” from article L. 1222-9 of the Labour code, which may be put in place by simple agreement between the employer and

GLI - Employment & Labour Law 2018, Sixth Edition 73 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France the employee whenever required. Any accident occurring on the place and at the time of the telework is, from now on, deemed an accident at work. Regarding special contracts, it must fi rst be noted that the conditions to use fi xed-term contracts may from now on be adapted, to a large extent (term, number of renewals, waiting period, etc.), by branch collective agreement20. Then, failure to communicate the contract within two days of its conclusion does no longer entail, alone, requalifi cation into an open-ended contract21. Furthermore, the Order encourages the use of open- ended project contracts, the conditions of which must be defi ned by an extended branch agreement, specifying in particular that the end of the project constitutes a specifi c ground for termination of the contract22. Regarding the supply of personnel, the reform seeks to facilitate its use, in particular to assist with the development of young and small and medium-sized companies23. Hence, a group or a company with at least 5,000 employees may provide, temporarily, its employees to a young (less than eight years), a small or a medium-sized (250 employees and more) company, to allow it to qualify its labour, promote professional transitions or constitute a business or common purpose partnership. Such a supply, the duration of which may not exceed two years, is a non-profi t supply, even when the amount billed by the supplying company is less than the salaries paid and relative charges. Regarding the softening of the termination features of the work relationship, both individual dismissal and collective redundancies are made easier and/or less costly, at least in theory. Regarding individual dismissal, several important changes must be noted. A standard model letter must be proposed by the social partners and its content must be fi xed by decree24. If the meaning of the measure is to be understood in light of the objective of labour law simplifi cation, especially for small companies, it is worth remembering that any standard model is limited due to the peculiarity of each work relationship and of the powers of control and assessment of the judge who, undoubtedly, shall continue to be demanding in terms of dismissal notifi cation. However, on a point, the judge is required to moderate his intransigence. Indeed, the Order provides that the lack of stated reasons alone, which may be rectifi ed subsequently even during the proceedings, no longer prevents the dismissal of a real and serious cause25. Here is a major upheaval of our law, calling into question a case law well-established for nearly 30 years26. Two safeguards are provided for, however: if the employee asks the employer to specify the reason for the dismissal and if the latter does not reply, the dismissal is deprived of any real and serious cause; and a lack of stated reasons, which does refer to the idea of imprecise grounds and not to that of incomplete grounds, remains compensated as it gives rise to a compensation that may not exceed one month’s salary. In addition, in case of plurality of reasons, one of which infringes on a freedom or on a fundamental right, does not prevent the judge from examining the other reasons to assess the legitimacy of the dismissal27. Furthermore, except in case of an invalid dismissal28, damages owed in case of a dismissal without a real and serious cause are subject to a scale, fi xing fl oors and ceilings29. In exchange of this ceiling, the severance pay is increased by 25% in respect of the 10 fi rst years of seniority, while the condition of seniority to benefi t therefrom is lowered from 12 to 8 months30. Finally, the time frames to take action are reduced and harmonised to 12 months, except in case of discrimination or harassment31. Regarding collective redundancies, here again there are many innovations intended to, according to the French president’s report, give companies the ability to anticipate and adapt in a simple, quick and secure way to imperative changes. Based on the rule in

GLI - Employment & Labour Law 2018, Sixth Edition 74 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France force in numerous neighbouring countries, the reform revises the fi eld of the obligation of redeployment and that of the assessment of economic grounds, applying it to French national territory32. The scope of the application of mobility leave is extended to all companies with at least 300 employees and may be proposed to employees, in the absence of economic diffi culties33. Moreover, the possibility to set up an employment safeguard scheme prior to transfer is offered to companies with more than 50 employees (against 1,000 previously)34 so as to promote takeover offers. Finally, following the model of individual contractual termination, a collective contractual termination is established35 for which an attractive social and tax regime must be proposed by the fi nance and social security fi nancing law for 2018, while the voluntary redundancy scheme established by majority agreement is subject to consultation of the social and economic committee and to a validation, within 15 days, of the administrative authority. Improvement of the consideration of an employee’s state of health Regarding incompetence, Order No. 2017-1387 relating to the predictability and securing of work relationships considers the criticisms expressed following the reform carried by the law El Khomri, especially as regards its provisions relating to the contestation of incompetence. Hence, the Order specifi es that when a contestation on the medical elements justifying the decisions of the occupational doctor is referred to the labour court for a summary order, the occupational doctor, “informed of the contestation, is not part to the dispute”. The summary proceedings formation may, by the way, entrust a labour inspector doctor territorially competent with any investigative measure, the said labour inspector doctor being able to request the assistance of a third party to enlighten them on questions of fact within their competence. The decision of the judge takes the place of the contested decisions and the fees and expenses related to the investigative measure are to be borne by the losing party36. In addition, at the employer’s request, the medical elements having justifi ed the decision of the occupational doctor may be notifi ed to the doctor appointed by the employer for this purpose, and the employee must be informed of this notifi cation. Finally, the parameters of redeployment of an employee declared incompetent following an accident or an illness, work-related or not, are reduced to national territory when the company belongs to a group37. Employment fl exibility is not the end of protections. As a proof and beyond the protective measures included in the other orders, Order 2017-1389 relating to the prevention and the taking into account of the effects of being exposed to certain professional risk factors and to the prevention professional account simplifi es the steps to be taken by employers as regards arduousness, while preserving employees’ rights through a new account, the prevention professional account, and increasing the number of benefi ciaries of the early retirement scheme for arduousness38. From 1 October 2017, the arduousness prevention personal account (C3P) becomes the prevention professional account (C2P). Only the professional risk factors related to an aggressive environment or to certain rhythms of work (night work, working in alternating successive teams, working in a hyperbaric environment, noise, extreme temperatures and repetitive work) must be the object of a declaration from the employer and grant rights to employees. In exchange, the other risk factors removed from the new account (manual load handling, awkward postures, mechanical vibrations and hazardous chemical agents) are better taken

GLI - Employment & Labour Law 2018, Sixth Edition 75 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Galion Avocats France into consideration within the early retirement scheme for arduousness, and victims of an accident at work, or of a work-related illness suffering from a permanent incapacity (the rate of which must be speciﬁ ed by a decree), shall beneﬁ t from a contribution to their training personal account. To conclude, it must be noted that Order No. 2017-1387 relating to the predictability and securing of work relationships provides for: • The setting-up, as from 1 January 2020 at the latest, of a clear digital Labour code, accessible and understandable, addressing employers’ and employees’ concrete questions, in order to secure work relationships, especially within small companies. • A reorganisation of the labour court procedure, in particular by providing that a case shall be directly referred to a decision-making judging formation, in the case of two councillors not reaching a unanimous decision before the conciliation and orientation board, to avoid going back and forth between the labour court formation and the decision-making formation, which has uselessly extended procedural time frames in the past39.

* * *

Endnotes 1. JORF (Ofﬁ cial Journal of the French Republic) No. 0223 of 23 September. 2. Law No. 2008-789 dated 20 August 2008 renovating social democracy and reforming working hours, JORF No. 194 dated 21 August. 3. Law No. 2016-1088 dated 8 August 2016 relating to work, the modernisation of the social dialogue and the securing of career paths, JORF No. 0184 du 9 August. 4. Art. L. 2232-21 et seq. of the C. trav. (Labour code). 5. Law No. 2016-1088, prev. 6. Art. L. 2232-12 C. trav. 7. Art. L. 2262-13 C. trav. 8. Spec. by articles L. 1233-24 (method agreements), L. 1235-7 (validation of redundancy) and L. 1235-7-1 (agreements on the employment safeguard scheme) of the Labour code. 9. Art. L. 2222-3 C. trav. 10. Art. L. 2241-1 et seq. C. trav. 11. Art. L. 2242-1 et seq. C. trav. 12. Art. L. 2261-17 C. trav. 13. Art. L. 2311-1 et seq. C. trav. 14. Art. L. 2321-1 et seq. C. trav. 15. Art. L. 2315-78 et seq. C. trav. 16. Art. L. 2141-5 C. trav. 17. Art. L. 2135-7 C. trav. 18. Art. L. 2145-6 and L. 2232-8 C. trav. 19. Art. L. 2314-33 C. trav.

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20. Art. L. 1242-8 et seq., L. 1243-13 et seq., L. 1244-3 et seq., L. 1251-12 et seq., L. 1251- 35 et seq. C. trav. 21. Art. L. 1245-1 C. trav. The same goes for the temporary employment contract: art. L. 1251-40 C. trav. 22. Art. L. 1223-8 et seq. C. trav. 23. Art. L. 8241-3 C. trav. 24. Art. L. 1232-6 C. trav. 25. Art. L. 1235-2 C. trav. 26. Cass. soc., 29 Nov. 1990, No. 88-44308. 27. Art. L. 1235-2-1 C. trav. 28. Art. L. 1235-3-1 C. trav. 29. Art. L. 1235-3 C. trav. 30. Art. L. 1234-9 C. trav. 31. Art. L. 1235-7 and L. 1471-1 C. trav. 32. Art. L. 1233-3 and L. 1233-4 C. trav. 33. Art. L. 1237-18 et seq. C. trav. 34. Art. L. 1233-61 C. trav. 35. Art. L. 1237-19 et seq. C. trav. 36. Art. L. 4624-7 C. trav. 37. Art. L. 1226-2 et L. 1226-10 C. trav. 38. Art. L. 4161-1 et s. C. trav. 39. Art. L. 1454-2 C. trav.

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Lionel Paraire Tel: +33 1 76 77 33 00 / Email: [email protected] Admitted to the Bar in 1997, Lionel Paraire founded Galion in 2008. He worked for six years with Cabinet Jeantet Associés and then at Baker & McKenzie, followed by Mayer Brown, where he became Of Counsel. He is a senior lecturer at the University of Montpellier I (DJCE and Certiﬁ cate of Special Studies in Labour Law), where he teaches employment litigation. Lionel has developed an acknowledged expertise in the area of individual employment relations and (high-risk) litigation and dispute resolution. He regularly assists companies with restructuring, and the labour and employment law aspects of corporate transactions. His activity extends towards Alternative Dispute Resolution (ADR), notably as a mediator. He is a member of various national and international organisations: Avosial (Association of French Employment Lawyers Association); EELA (European Employment Lawyers Association); and IBA (International Bar Association). He is also an active member of IR Global.

Anaëlle Donnette-Boissiere Tel: +33 1 76 77 33 00 / Email: [email protected] Holder of a Master’s degree in Working Relationships Law and Practice (Master 2 Droit et Pratique des Relations de Travail) (University of Montpellier) and of a Doctorate in Private and criminal law (Doctorat en Droit privé et sciences criminelles), Anaëlle is a lecturer at the University of Montpellier. As such, she teaches International and European labour law and working relationships in struggling companies. Anaëlle is also in charge of the co-direction of the Master 2 Droit et pratique des relations de travail, of the direction of the university degree in Labour law and struggling companies (DU Droit social et entreprises en diffi culté), of the direction of the university degree in Labour law and international companies (DU Droit social et entreprises à dimension internationale) and of the co-direction of the university degree Certifi cate of specialised studies in Labour law (DU Certifi cat d’études spécialisées en droit social). Anaëlle is the author of numerous publications in Labour law. She also carries out various scientifi c and educational activities, both within the University of Montpellier and at a professional level. Anaëlle joined Galion as a consultant in June 2017 to give the Firm her scientifi c and doctrinal take.

Galion Avocats 11 bis rue de Moscou, 75008 Paris, France Tel: +33 1 76 77 33 00 / Fax: +33 1 76 77 33 01 / URL: www.galion-avocats.com

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Dr. Holger Meyer & Sophie Kuske SCHRAMM MEYER KUHNKE

General labour market trends The German labour market continues its constant positive trend this year. Despite the ongoing immigration and associated diffi culties, there has been a general decline in the rate of unemployment in the period of the last 12 months. Due to the general economic growth in Germany and in the European Union as well as in the light of the increasing export demand, the number of unemployed went down by 60,000 in October 2017 (151,000 less compared to October 2016) to the total amount of 2,389,000 (5.4%), compared to 5.5% in the previous months. The success of the German labour market can be attributed to the real gross domestic product (Reales Bruttoinlandsprodukt), which continued to grow in the fi rst half of this year, due to greater investment as well as increasing consumption. Furthermore, the low unemployment rate is favoured by the rising German export trade, which has not (yet) been impaired by the current strength of the euro. When it comes to the issue of migration, progress as well as setbacks can be recorded. While on the one hand, the total number of insurable employment contracts (Sozialversicherungspfl ichtige Beschäftigungsverhältnisse) among people from the major non-European refugee countries in August 2017 rose by 14% compared to the same month of the previous year, the unemployment rate among this group increased by 22% over the same period of time. Particular attention should furthermore be paid to the emerging lack of national skilled labour in Germany (Fachkräftemangel). Although such a lack cannot (yet) be identifi ed nationwide, there are several fi elds (e.g. technical professions, building professions and health care) in which an increasing demand for skilled labour is being observed due to demography and developing digitalisation.

Business transfers and reorganisations With regard to business transfers, there has been one major decision of the European Court of Justice, dated 27 April 2017 (Case No. C-680/15, C-681/15), which conﬁ rmed a long- settled employee-friendly case law of the German Federal Labour Court. In the following, on 30 August 2017 the German Federal Labour Court conﬁ rmed that it is going to uphold this case law in accordance with the ruling of the European Court of Justice (Case No. Ca 4 AZR 95/14). The decision of the European Court of Justice was based on a reference for a preliminary ruling from the German Federal Labour Court on the question of whether its interpretation

GLI - Employment & Labour Law 2018, Sixth Edition 79 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London SCHRAMM MEYER KUHNKE Germany of Section 613a German Civil Code (BGB) in regard to so-called dynamic reference clauses is compliant with EU law. Dynamic reference clauses are very common provisions in German employment contracts, which stipulate that a certain collective bargaining agreement applies to the employment relationship in its respective current version. In the event of a business transfer which leads to the transfer of the employment relationship within the meaning of Section 613a German Civil Code, the acquirer generally assumes all rights and obligations under the transferred employment relationship and is therefore also bound by the dynamic reference clause. According to the case law of the German Federal Labour Court, those dynamic reference clauses retain their dynamic applicability after such a transfer of business. This means that the acquirer is bound by all subsequent changes of the collective bargaining agreement, even if he is not a party of the collective agreement itself. Thereby, dynamic reference clauses bear great unforeseeable risks for the acquirer. Hence, a change of this settled case law by the European Court of Justice would have substantially reduced the risks for acquirers of business units from an employment law perspective. But to the disappointment of the employers in Germany, the European Court of Justice has found the interpretation of the German courts of the scope of dynamic references clauses in the course of a business transfer to be compliant with EU law. According to the court, European law, in particular the entrepreneurial freedom of the acquirer provided by Art. 16 EU Charter of Fundamental Rights, is not violated by this case law. The reasoning of this decision is not persuasive from a practical point of view. The European Court of Justice justiﬁ es its decision by pointing out the acquirer’s legal ability to change the terms of the employment relationship with the employees. According to the court, there are consensual as well as unilateral measures for the new employer to change the transferred terms of employment under German employment law. Whereas it is, of course, true that there are legal means to change the employment contract by amendment agreements with the respective employee or unilaterally by giving termination with the option of altered conditions (Änderungskündigung). The decision ignores, however, that in practice it is not usually possible to implement this possibility of change in a way that is legally effective.

Discrimination protection In Germany, the pay gap between men and women still amounts to 21%. Whereas three-quarters of the gender pay gap can be explained by structural differences, e.g. the different industries and professions men and women work in, there is a remaining gap of 6%, which cannot be explained by external factors. In order to address this issue and to promote equal pay in Germany, the German Federal Parliament (Bundestag) passed the Transparency of Remuneration Act (Entgelttransparenzgesetz), which has been in force since 6 July 2017. As the title of the new law already shows, the purpose of the act is to increase the transparency of companies’ remuneration systems. The Transparency of Remuneration Act contains a general provision prohibiting all gender discrimination in regard to any remuneration components. Further, and more importantly from a practical point of view, the act stipulates the following (compared to the rather moderate and less bureaucratic ﬁ rst draft) measures to advance transparency in remuneration:

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• In companies with more than 200 employees, each employee has a right to be informed about the statistical median of all salaries of the employees in their company who exercise a comparable working activity. • Companies with more than 500 employees, who are obliged to provide a status report according to the provisions of the German Commercial Code (Handelsgesetzbuch), need to draw up a report in which they outline their measures to promote equality and equal pay. The report has to be drafted regularly: every ﬁ ve years if a collective agreement applies, otherwise every three years. Further, all companies with more than 500 employees can voluntarily implement certain procedures to review their salary structure and adherence to the principle of equal pay. To sum it up, the obligations and risks for employers, which can be derived from this new legislation, are relatively limited, in particular as no sanctions in case of violations of the Transparency of Remuneration Act have been included. However, non-compliance with this act will likely lead to damage to the image of the company. Whether the Transparency of Remuneration Act will actually lead to a fairer remuneration of men and women, remains to be seen.

Worker consultation, trade union and industrial action In the fi eld of collective labour law in Germany, there have been two major court decisions in the last year: Constitutionality of the Collective Bargaining Unit Act (Tarifeinheitsgesetz) A recent decision of the German Federal Constitutional Court (Bundesverfassungsgericht) has fi nally ended the long-lasting discussions on the principle of tariff plurality (Tarifpluralität) versus the concept of tariff unity (Tarifeinheit). By declaring that the Collective Bargaining Unit Act is for the greater part compliant with the German Constitutional Law (Grundgesetz), the German Federal Court has decided this dispute in favour of the concept of tariff unity. According to this principle, statutorily determined by the Collective Bargaining Unit Act, there can only be one applicable collective bargaining agreement per company. Therefore, in the event of a confl ict between different collective agreements within the same company, only the collective agreement shall apply that serves the greater number of members. This juridical maxim of “one company, one collective agreement’’ was a long- established principle of German labour law built up over many years of case law, until the German Federal Labour Court decided in July of 2010 that different collective agreements can apply within the same company (tariff plurality). This change in case law strengthened the importance of small craft unions (Spartengewerkschaften), which focus on certain professions instead of representing a whole industry branch like the bigger unions. As a result, however, many companies suffered economic losses caused and aggravated by the plurality of labour unions in respect of associated long-standing industrial actions by such unions. As a reaction, the German legislature fi nally enacted the aforementioned Collective Bargaining Unit Act in July of 2015 to statutorily determine the principle of “one company, one collective agreement’’. Several small craft unions, however, felt that this principle violated their constitutional right to freedom of association according to Article 9 (3) of the German Constitutional Law, because it would always work to the advantage of the bigger labour unions.

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Therefore, they fi led a constitutional complaint with the German Federal Constitutional Court. In this context, the German Federal Constitutional Court now reaffi rmed the principle of tariff unity in its judgment of 11 July of 2017 (Case No. BVR 1571/15). Neither does Article 9 (3) of the German Constitutional Law ensure a guarantee of existence in respect to any labour unit (rather than the existence of labour units as such), nor does it grant the power to impose blockades for sectional interests. However, the Federal Constitutional Court pointed out that the German legislature is obliged to improve the law within the next year in order to assure that the interests of minorities are not being neglected. In the light of the above, the judgment of the German Federal Constitutional Court is correct. Nonetheless, practical diffi culties may occur due to the fact that the Federal Constitutional Court clarifi ed that labour units, which are driven out by the majorities, still preserve the freedom to strike. However, as long as there is no liability risk for the minority labour units in connection with unjustifi ed strikes, the protective purpose of the norm cannot suffi ciently be achieved. Conformity of the German Co-determination Act (Mitbestimmungsgesetz) with EU law The German Co-determination Act (Mitbestimmungsgesetz) is compatible with Article 45 of the Treaty on the Functioning of the European Union (TFEU). This is the answer to the question referred to the European Court of Justice by the Higher Regional Court of Berlin (Case No. C-566/15). Subject to the question submitted was the action of a shareholder of the TUI AG against the composition of the Supervisory Board in Germany. According to the German Co- determination Act, in certain types of companies such as the German Aktiengesellschaft (AG, stock corporation) or Gesellschaft mit beschränkter Haftung (GmbH, limited liability company), 50% of the members of the supervisory board are employee representatives, who are elected by the employees or delegates, if the company employs more than 2,000 employees. The shareholder initiated a so-called status procedure, in which he claimed that the provisions of the German Co-determination Act violate European law. Specifi cally, he argued that the provision whereby only employees working in Germany have the right to vote and stand as a candidate in elections to the supervisory board constitutes a breach of Article 45 TFEU as well as the principle of non-discrimination stipulated in Article 18 TFEU. In this context, he considered the provision at issue to be an unjustifi ed restriction on the free movement of workers. The European Court of Justice, however, did not follow his arguments. It confi rmed the decision of the Regional Court at fi rst instance that employees working in an European country outside Germany are not being discriminated against by the provisions of the German Co-determination Act. The European Court of Justice stated that with respect to employees who work for TUI AG in a country of the European Union outside Germany, in this case Article 45 TFEU shall not apply, as there is not even a cross-border situation. A cross-border situation, however, is a prerequisite for national law to be compared with Article 45 TFEU, whereas Article 45 TFEU takes precedence over the general principle of non-discrimination. Although the European Court of Justice clarifi ed that the legal assessment in terms of a cross-border situation is to be seen differently if an employee is (later) sent from Germany to a country of the European Union, however, such an event would not cause a violation of Article 45 TFEU either, since the Freedom of Movement for workers does not guarantee general equal treatment in terms of labour and social law aspects.

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The judgment of the European Court of Justice is both reasonable as well as consequent. It does not seem comprehensible how an employee should be restricted in his freedom of movement by being excluded from the right of co-determination of a different European Member State. In addition, many German companies would have otherwise been obliged to organise new supervisory board elections, which would have meant a massive organisational effort and unforeseeably high costs for those companies.

Employee privacy In April 2017, the German Federal Parliament introduced a new Data Protection Act (Bundesdatenschutzgesetz, BDSG) to comply with the respective European regulations (DSGVO). The new version of the act, which will come into force on 25 May 2018, includes several signifi cant modifi cations, which will also affect the relationship between the employer and its employees. Employee privacy is now regulated in Section 26 Data Protection Act, which replaces Section 32 of the Federal Data Protection Act 2003. As was already the case in accordance with Section 32, processing of personal data is permitted in an employee context as long as the processing is necessary for the formation, performance, or termination of the employment relationship. More interesting for employers is the new explicit provision on consent in the employment relationship in Section 26 (2) Federal Data Protection Act. This provision emphasises that the employer must ensure that the consent is submitted voluntarily despite the dependent employment relationship. In accordance with Section 26 (2) Federal Data Protection Act, a voluntary consent of the employee can particularly be assumed if the employee gains an advantage from the consent, e.g. private use of IT systems, or the interests of the parties are similar. Further, the consent must generally be obtained in writing and the consent form must always clearly state the purposes of the processing and contain information regarding the right of withdrawal. In addition, the bill clarifi es that collective agreements are generally a suffi cient legal foundation for data processing. However, like employment contracts, such collective agreements have to comply with the regulations of the Data Protection Act. Another important aspect of the implementation of European data regulation is the special protection of particular sensitive personal data, which also has to be observed by companies in regard to employee data protection. These sensitive data are personal data that reveal racial or ethnic origin, political opinions, religious or philosophical beliefs, or genetic data, biometric data, data concerning health, or data concerning a natural person’s sex life or sexual orientation. Apart from these provisions on employee privacy, particular attention must be given to companies’ increased liability risks. Under the new Federal Data Protection Act, violations of data privacy can be associated with heavy fi nes up to the amount of €20 million or (depending on which amount is higher) up to 4% of global total revenue. Further, every individual (therefore also every employee), whose data protection rights have been violated, can now sue the respective company for damages. To sum it up, even though the new Data Protection Act will not bring a substantial change in the area of employment law, as the employee data protection rules under the new Act widely correspond to the existing rules, employers will, nevertheless, be required to make an even greater effort than before not to violate personal data protection rights, given increased liability risks.

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Other recent developments in the fi eld of employment and labour law Act on Strengthening Occupational Pensions (Betriebsrentenstärkungsgesetz) In the fi nal phase of the current legislative period, the Grand Coalition has passed another bill, which will affect employment relationships in Germany, the Act on Strengthening Occupational Pensions (Betriebsrentenstärkungsgesetz). The aim of the new law, which will come into force on 1 January 2018, is to extend the coverage of occupational pensions. Most importantly, according to the new law on occupational pensions, pure defi ned contribution schemes (reine Beitragszusagen) are legally permissible. These are also referred to as “pay and forget” schemes, because in these cases the employer only has to pay the promised contribution during the active phase of the employment relationship and can then “forget” about the occupational pension, because he cannot later be held liable for a certain pension amount. Consequently, in case of a pure defi ned contribution scheme the employee, not the employer, bears the capital market risk. As many employers have been shying away from offering pension plans because of the long-term liabilities, this legislative change might give new incentives for companies to offer their employees occupational pensions. Further, the entitlements accrued under pure defi ned contribution schemes are immediately non-forfeitable (unverfallbar). Until now, an employee could only keep an employer- fi nanced pension entitlement when he left the company prior to retirement, if a certain period of employment (“vesting period”) had elapsed. This change should, therefore, make this pension scheme more attractive for employees. Another interesting point is the new possibility for employers to implement an opt- out system for deferred compensation (Entgeltumwandlung). Thereby employers can regulate that all employees, who do not object until a certain point of time, automatically take part in the pension scheme. Reform of German Temporary Agency Worker Act (Arbeitnehmerüberlassungsgesetz) In Germany, the number of temporary workers is increasing with every year. Whereas 10 years ago there were around 700,000 temporary workers in Germany, by the end of 2016, the number had grown to nearly one million. Consequently, the last reform of the German Temporary Agency Worker Act (Arbeitnehm erüberlassungsgesetz), passed in April 2017, is of great practical relevance. The purpose of the reform is to regulate the use of temporary workers more strictly, in order to prevent misuse and to limit the use of temporary workers to its original core function. The most important changes are as follows. From now on, a temporary worker can only be hired for a maximum period of 18 months, and periods of interruption of less than three months must be added to the calculation. It is, however, permissible to deviate from this period by a collective bargaining agreement. Further, the “Equal Pay Principle” for temporary agency workers is strengthened by the new bill. According to this principle, temporary workers have to be paid the same wages as comparable employees of the hiring company they are temporarily working for. However, since it is legally valid to agree on lower wages if a collective bargaining agreement applies to the relationship between the temporary worker and the hiring company, in practice the majority of the temporary workers are still not remunerated at the same hourly wages as comparable employees of the hiring company. To counteract this practice, the legal option to not comply with legal pay by way of collective bargaining agreement, is now time-limited. After nine months it is mandatory for the temporary

GLI - Employment & Labour Law 2018, Sixth Edition 84 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London SCHRAMM MEYER KUHNKE Germany work company to actually pay their temporary workers the same wages as the comparable employees of the hiring company earn. In case a collective bargaining agreement provides for an increase of the tariff rate within six weeks, the respective rise of the salary of the temporary worker according to equal pay has to be reached within 15 months. Finally, the bill intends to put an end to the practice of so-called reserve licence (Vorratserlaubnis). Until now, many service providers utilised such a precautionary temporary work licence to eliminate the risk that a provision of services to another company could be classifi ed as illegal temporary work. As the line between temporary work and services provided on the basis of a service or works agreement (Dienst- oder Werkvertrag) is often very hard to draw, this practice of reserve licence was a very convenient and common way for both the service company and the client company not having to fear the consequences of illegal “hidden temporary work” (verdeckte Arbeitnehmerüberlassung). Under the revised Temporary Agency Worker Act, this is no longer possible. From now on, temporary work has to be expressly named as such in the respective agreement. Lastly, the consequences in case of violations of the laws on temporary work have been extended. Until now, the hiring company only had to fear involuntarily establishing an employment relationship with the temporary worker if the temporary work company did not have the necessary licence. Whereas now, under the revised Temporary Agency Worker Act, violation of the aforementioned maximum hiring period or cases of hidden temporary work can also lead to the legal consequence of establishing an employment relationship with the temporary worker unless he expressly declares that he intends to stay with the temporary work company (Festhaltenserklärung). In addition, the requirements of such a declaration have been increased, in that now the statement has to be declared towards the Employment Agency in order to prevent the temporary work companies obtaining the declaration in advance. Minimum wages Since its implementation in 2015, the German Act on Minimum Wage (Mindestlohngesetz) has kept the courts and lawyers in the fi eld of employment law busy, as many important questions have been left unanswered by the legislative act itself. For this reason, the decision of the German Federal Labour Court on the components of the minimum wage, dated 22 March 2017 (Case No. 5 AZR 424/16) has been very welcome. With this ruling the Federal Labour Court continued its case law on the components of the minimum wage by answering the much-debated question of whether supplements to the base salary amount to the minimum wage. The court, fi rst of all, stated that, contrary to the claimant’s view, the Act on Minimum Wage does not require that the base salary alone equals the minimum wage. Whether a certain supplement is a component of the minimum wage, on the other hand, depends on whether the supplement can be classifi ed as a consideration for the work performance. Therefore, all obligatory and transparent considerations, e.g. in this case shift and performances bonuses, paid to the employee, are components of the minimum wage. This means that an employer generally fulfi ls the claim to the statutory minimum wage if the amount of the gross monthly salary, divided by the monthly working hours, equals the statutory minimum wage of currently €8.84 per hour. This ruling of the Federal Labour Court can be evaluated as very positive from an employer’s point of view. Not only does it bring much-needed clarifi cation on this matter, but it also signifi cantly reduces cost risks for adherence to the Act on Minimum Wage.

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Right of instructions of the employer Another change in case law can be noted on an issue affecting the daily employment law relationship: the question of whether an employee has to follow unreasonable instructions (unbillige Weisungen) of the employer. So far, the case law on this issue was very clear-cut. Except for evidently unreasonable instructions, an employee always had to follow the orders of its employer until the unlawfulness of the instruction had been fi nally determined by the labour courts. On a request ruling (Anfragebeschluss) of the 10th Senate (Case No. 10 AZR 330/16), the 5th Senate of the German Federal Labour Court has now declared that it no longer intends to stick with this long-settled case law. From now on, there is no obligation for employees to follow unreasonable instructions. If the instruction of the employer is actually unreasonable, the employee does not have to fear any consequences when he objects to fulfi l the instruction. Even though this change in case law appears to be very employee-friendly, it actually bears great risks for employees. Until now, the employee had to follow a potentially unreasonable instruction until the court decision. If the instruction turned out to be lawful in the opinion of the courts, the employee did not have to fear any disciplinary actions, as he had fulfi lled the instruction anyway. Under the new case law, however, the burden of assessing whether an instruction is actually unreasonable is shifted to the employee, who is now entitled to object to the instruction while at the same time risking that the labour court will take a different opinion on this matter.

* * *

Endnotes 1. See the statistics published on the homepage of the German Employment Agency (https://www.arbeitsagentur.de/presse/2017-23-der-arbeitsmarkt-im-oktober-2017). 2. See the statistics published on the homepage of the German Federal Government (https:// www.bundesregierung.de/Content/DE/Artikel/2017/08/2017-08-31-arbeitsmarkt- august-2017.html). 3. See the statistics for the year 2016 published on the homepage of the German Federal Statistics Ofﬁ ce (https://www.destatis.de/DE/PresseService/Presse/Pressemitteilungen/ 2017/03/PD17_094_621.html). 4. See German Federal Law Gazette (Bundesgesetzblatt) 2017, Part I, No. 44, p. 2152. 5. See German Federal Law Gazette (Bundesgesetzblatt) 2017, Part I, No. 44, p. 2097. 6. See German Federal Law Gazette (Bundesgesetzblatt) 2017, Part I, No. 58 p. 3214. 7. See the statistics published on the homepage of the German Employment Agency: (https://statistik.arbeitsagentur.de/nn_31950/SiteGlobals/Forms/Rubrikensuche/ Rubrikensuche_Form.html?view=processForm&resourceId=210368&input_=&p ageLocale=de&topicId=973712&year_month=201612&year_month.GROUP=1 &search=Suchen). 8. See German Federal Law Gazette (Bundesgesetzblatt) 2017, Part I, No. 8 p. 258.

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Dr. Holger Meyer Tel: +49 40 27 88 537 11 / Email: [email protected] Holger Meyer completed his legal education at the Christian-Albrechts University Kiel. Before founding SCHRAMM MEYER KUHNKE, Holger worked from 2001 until 2010 in the employment, pensions and beneﬁ ts practice group of the leading international law ﬁ rm White & Case LLP, since 2006 as partner. One of Holger’s main areas of expertise is the legal and strategic preparation of restructuring and outsourcing projects as well as carrying out related negotiations of collective bargaining agreements, the reconciliation of interests and social compensation plans with labour unions and works councils, and the conclusion of transfer agreements. Furthermore, he advises clients on labour law issues in connection with the sale of companies (or parts of companies), amongst others in crisis or insolvency. Holger has been recommended as a leading German employment and business lawyer for many years in numerous rankings, e.g. JUVE handbook (“proven track record in restructuring”, “pre-eminent expertise” – handbook 2016/2017), Handelsblatt / Best Lawyers, The Legal 500.

Sophie Kuske Tel: +49 40 27 88 537 19 / Email: [email protected] Sophie Kuske studied law at the University of Passau and at Cardiff University in Wales, focusing on employment and company law. After completing her postgraduate legal training in Hamburg (inter alia at Latham & Watkins LLP), she joined the law ﬁ rm SCHRAMM MEYER KUHNKE in June 2017.

SCHRAMM MEYER KUHNKE Caffamacherreihe 8, 20355 Hamburg, Germany Te l: +49 40 27 88 537 0 / Fax: + 49 40 27 88 537 20 / URL: w ww.SchrammMeyerKuhnke.de

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Dr. Ildikó Rátkai & Dr. Nóra Feith Rátkai Ügyvédi Iroda

The practice of the “posting” rules in Hungary Background of the “posting” legislation A fundamental principle and a purpose of the European Union is to abolish obstacles to the free movement of persons and services between its Member States. The creation of a single internal market enabled businesses to provide services transnationally; this necessarily implied the fact that employees of a service provider are temporarily employed in another Member State. However, the advantages of the single market had raised practical problems as well: in particular, companies operating in economically underdeveloped Member States – due to lower wages of their employees – had a signiﬁ cant competitive advantage compared to enterprises that had settled in more developed Member States. Therefore, in the 1990s, the European legislation set itself the objective of maintaining fair competition, which simultaneously shall also be a guarantee of employees’ rights. Following such precedent, Directive 96/71/EC of European Parliament and of the Council concerning the posting of workers in the framework of the provision of services (the “Posting Directive”) was adopted on 16 December 1996. The Posting Directive applies to an enterprise established in a Member State of the Union which, in the context of the transnational provision of services, is sending workers to the territory of another Member State. It is therefore essential that, ﬁ rstly, the employer’s action (posting) shall be based on the service provision of the undertaking and, secondly, that the posting is cross-border. The Posting Directive shall be applied to undertakings established in a Member State which, in the framework of the transnational provision of services, post employees to the territory of another Member State, namely: • if companies post employees to the territory of a Member State on their account and under their direction, under a contract concluded between the undertaking making the posting and the party for whom the services are intended, operating in that Member State, provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting; or • if companies post employees to an establishment or to an undertaking owned by the group in the territory of a Member State, provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting; or • being a temporary employment undertaking or placement agency, companies hire out an employee to a user undertaking established or operating in the territory of a Member

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State, provided there is an employment relationship between the temporary employment undertaking or placement agency and the worker during the period of posting. According to the Posting Directive, whatever the law applicable to the employment relationship is, the undertaking providing transnational services shall guarantee the so-called minimum working conditions according to the law (collective bargaining agreements) of the host country. Such minimum working conditions are especially: the maximum work periods and minimum rest periods; the minimum paid annual holidays; the minimum rates of pay (including overtime rates); the conditions of hiring-out of workers; health, safety and hygiene at work; the protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; furthermore, the principle of equal treatment between men and women and other provisions on non-discrimination. It is to be considered that the above minimum working conditions shall be based on the applicable legislation and/or generally applicable collective bargaining agreements; in the latter case only, if such collective agreement covers the business activities related to building construction works (repair, maintenance, transformation or demolition of buildings). The practical application of the Posting Directive has not completely fulﬁ lled expectations: in practice, there were several misuses by applying “postbox” companies and ostensible posting situations. Therefore, a new Directive had been adopted, namely Directive 2014/67/ EU of the European Parliament and of the Council of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System (“the IMI Regulation”) (the “Posting Enforcement Directive”). The EU Member States were obliged to implement the provisions of the Posting Enforcement Directive by 18 June 2016 at the latest. The Posting Enforcement Directive aimed to reduce the fraudulent misuses of posting of employees and to strengthen the exchange of information between the various Member States. In addition, with regard to subcontracting chains, the Posting Enforcement Directive required Member States to set up a system of enhanced employer liability rules for workers. In this chapter we summarise the applicable employment law rules related to the posting of employees with an emphasis on the Hungarian legislation and practice, but also with a view to the problems practitioners must face when a Hungarian employer wishes to post its employees abroad. However, we do not refer to the social security aspects of the posting of employees.

Implementation of “posting” rules in Hungary The Posting Directive was implemented in Hungary with effect from 1 July 2001 (Act XXII of 1992 on the Labour Code) and the latter (current) Labour Code (Act I of 2012 on the Labour Code) also contains the implemented rules on posting. The Posting Enforcement Directive was implemented in June 2016, partly in the Labour Code but also in the Act on Labour Inspections (Act LXXV of 1996) and in the Work Safety Act (Act XCIII of 1993). In terms of the employment law rules, the minimum working conditions are set out in the Labour Code (hereinafter referred to as ‘the LC’): although the territorial scope of the LC basically does not cover foreign employers, if a foreign service provider employs an employee temporarily in the territory of Hungary, certain minimum working conditions shall be applied to the employment relationship, even if Hungarian labour law is otherwise not applicable to that employment relationship. (The minimum working conditions are not applicable if the law applicable to the employment relationship guarantees most favourable conditions.)

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The most important provisions of the LC shall be applicable in case of posting of employees: if a foreign employer employs an employee in the territory of Hungary – under agreement with a third party – in an employment relationship that is not covered by the LC, or if the employment is provided at the Hungarian branch of a foreign employer, or of an employer that belongs to the same group of companies as the foreign employer. The Hungarian law shall be applied to such employment relationships in terms of: • maximum working time and minimum rest periods; • minimum duration of annual paid leave; • the amount of minimum wages; • the conditions for temporary agency work; • occupational safety; • the conditions of employment or work by pregnant women or women who have recently given birth, and of young people; furthermore • the principle of equal treatment; including the provisions of a collective agreement with extended scope as pertaining to the employment relationship in question. From the above-mentioned minimum work conditions, it is worth emphasising the regulation of maximum working time and minimum rest periods, the minimum duration of annual paid leave, and the amount of minimum wage. In Hungary, the regular daily working time in full-time jobs is eight hours. It is possible in a few cases specifi ed by law that employees work more than eight hours on a day, such as an irregular work schedule or overtime work. Even in these cases, the daily scheduled working time of employees shall not exceed 12 hours. In terms of the daily minimum rest period, employees shall be afforded at least 11 hours of uninterrupted rest period after the conclusion of daily work and before the beginning of the next day’s work. Although it is possible to assure less daily rest period time than 11 hours by the employer in a few cases, such as shift work or seasonal work, rest time cannot be less than eight hours for a day and must total 22 hours over a period of two days. According to the LC, the base amount of vacation shall be 20 working days per calendar year. Besides the base vacation, employees are entitled to extra vacation days; the number of additional vacation days may depend on the employee’s age, number of his/her children and other personal circumstances. The amount of the minimum wage is amended almost every year by the Government of Hungary regarding the actual economic conditions, therefore employers should keep up with the constantly changing regulations. For instance, in 2017 the amount of minimum wage is 127,500 HUF; in 2018 will be 138,000 HUF. Employers should also keep in mind, if the employee is employed in a job which requires intermediate qualifi cation, he/she shall be entitled to higher remuneration as minimum wage (to the so-called guaranteed wage minimum). However, the LC also refers to other special wage supplements within the “minimum payment”, such as overtime payment and additional supplements regarding stand- by and on-call duties, work on a bank holiday, work on Sunday, etc. As referred to above, the Posting Enforcement Directive was implemented into the Act on Labour Inspections and in the Work Safety Act as well. The Act on Labour Inspections – in accordance with the Posting Enforcement Directive – prescribed the duty of notifi cation if a foreign service provider posts employee(s) to Hungary;

GLI - Employment & Labour Law 2018, Sixth Edition 90 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Rátkai Ügyvédi Iroda Hungary furthermore it strengthened the cooperation among the employment authorities. In addition, the scope of the Act was extended to the duties of foreign service providers with regard to posting issues. The Act on Labour Safety was also harmonised with the Posting Enforcement Directive. According to the work safety legislation, if a work accident of a Hungarian employer happens abroad, it shall be investigated by the Hungarian company. However, the work safety authority has no competence to execute any investigations abroad due to its limited territorial scope, therefore in case of such investigations, the authority should only rely on facts revealed by the employer. (This legal “gap” was overruled by the Hungarian Curia [the Supreme Court] by its decision in which the Curia established that work safety provisions are imperative rules and any work accident that happens abroad shall be investigated by the authority of the host country.)

Administrative duties related to posting of employees The implementation of the Posting Enforcement Directive – just in other Member States of the EU – resulted in special administrative duties in Hungary. One part of such duties shall be fulfi lled by the foreign service provider, and the other part by the host company (benefi ciary). Duties of the foreign service provider The foreign service provider is obliged to notify the national authorities about posting of an employee/employees to Hungary. The notifi cation duty covers the main data of the service provider, the facts about the business activity/ies to be fulfi lled by the service provider within Hungary, and the data about the work performed during the transnational service – among others, the number of the posted employees, the planned period of posting, the place of work and the nature of the service fulfi lled during the posting. The notifi cation duty shall be completed via an electronic form. In addition, the foreign service provider shall delegate an offi cer for implementation of communication with the designated authority related to employment issues and for sending and receiving the employment law documents (employment contract, working time registry and payroll sheets). The foreign service provider shall forthwith notify the employment authority about the person of such delegated offi cer, including any changes in the person of him. Furthermore, the foreign service provider shall designate a contact person for the purpose of negotiations between social partners and the service provider in the interest of collective bargaining for the duration of the service. If the contact person does not permanently reside in Hungary, he/she must be available upon a reasonable and justifi ed request. (The designated offi cer in charge of handling the employment documents and the contact person in charge of social discussions may be the same.) Duties of the host company The burden of some specifi c administrative duties prescribed by the Labour Code shall be borne by the host company, in other words the benefi ciary company. The benefi ciary shall inform the foreign service provider in writing concerning the applicable minimum working conditions, prior to the conclusion of a services contract. In the event of failure to provide the information described above, the benefi ciary shall be subject to a full fi nancial liability for the employee’s claims based on the minimum working conditions. In addition, if the host company knew, or should have been aware given reasonable care, that the foreign service provider (as employer) failed to comply with the obligation of payment of wages and contributions in connection with the posted employee’s employment, the host

GLI - Employment & Labour Law 2018, Sixth Edition 91 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Rátkai Ügyvédi Iroda Hungary company shall be jointly and severally liable with the foreign service provider for the payment of wages and other payroll costs otherwise payable by the foreign employer. Furthermore, the benefi ciary shall ensure – for the purpose of verifying compliance with the minimum working standards – that the employment contract or equivalent other document of posted workers, the working time registry of posted workers, and the proof of payment of the wages of posted workers (in hardcopy or in electronic format) are available during the whole duration of posting, at the place where the work is carried out and for a period of three years after the end thereof at the benefi ciary’s registered seat or branch for the purpose of verifi cation by the labour inspectorate.

Challenges of employers posting Hungarian employees to abroad The legislation on posting affects not only foreign service providers posting employees to Hungary but also Hungarian employers posting employees abroad. Both legal practitioners and companies face problems when planning a transnational service. Regarding the minimum working conditions, the main diffi culty for multinational enterprises and undertakings providing transnational services is how to get information about the applicable rules. The situation is even more diffi cult if a minimum working condition is set out in a local collective bargaining agreement (for the construction sector). The current fact is that the information on working conditions is piecemeal; there is no single source containing all the applicable and effective rules, country by country. (We have to add that it is also very disadvantageous for the posted workforce, besides the fact that the Posting Enforcement Directive prescribes that “Member States shall take the appropriate measures to ensure that the information on the terms and conditions of employment (…) which are to be applied and complied with by service providers is made generally available free of charge in a clear, transparent, comprehensive and easily accessible way at a distance and by electronic means, in formats and in accordance with web accessibility standards that ensure access to persons with disabilities and to ensure that the liaison offi ces or other competent national bodies (…) are in a position to carry out their tasks effectively”. The absence of transparent sources on minimum working conditions, especially “minimum rates of pay”, causes problems for practitioners, as the term of the Posting Directive refers not to the statutory minimum wage, but also means overtime allowances and may mean wage supplements (such as in Hungary). In practice, it means that employers providing transnational services must invest signifi cant energy to fi nd out the applicable rules if they wish to comply with the legislation of the EU.

* * *

Endnotes 1. Articles 56-61 of the Treaty on the Functioning of the European Union. 2. Curia, decision Nr. Mfv.I.10.824/2016. 3. http://www.ommf.gov.hu/?akt_menu=547&set_lang=123. 4. Article 5 of the Posting Enforcement Directive. 5. Currently (end of 2017) no transparent and accessible ofﬁ cial website in Hungary is operating showing the precise amount of the minimum wage and wage supplements.

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Dr. Ildikó Rátkai LL.M. Tel: +36 1 792 3904 / Email: [email protected] Dr. Rátkai (1977), LL.M. in HR law, employment lawyer, attorney at law, is the head of the Law Firm. In the past decades she acquired professional experience in supporting multinational clients’ employment issues and established her law ﬁ rm specialised in employment law, social security and HR law (2004). She also graduated as an economist (Manager of International and EU Affairs). She is co-founder of HR Lawyers Network and a member of the Hungarian Labour Law Association, the European Employment Lawyers Association (EELA), the American Bar Association Labor and Employment Law Group (ABA). Having wide practical experience in individual and collective employment law issues, she regularly gives lectures on employment law conferences and in-house training. She is the author/co-author of numerous professional books and articles related to employment law. She is ﬂ uent in English and in German.

Dr. Nóra Feith Tel: +36 1 792 3904 / Email: [email protected] Dr. Feith (1991), employment lawyer, works as a legal associate at the Law Firm. She graduated as a lawyer in 2016. Besides her legal studies she acquired a certifi cate of business and fi nancial studies (accounting and management, statistics, tax advice and SPSS software management) at the Heller Farkas Institute for Economic Sciences of Pázmány Péter Catholic University. During her studies she worked as a legal trainee at the public administration and later at the Rátkai Law Firm. During her work she mainly focuses on discrimination cases, EU legislation/practice of the ECJ, employment litigation procedures and social security issues. She is the co-author of professional articles related to employment law. She is fl uent in English.

Rátkai Ügyvédi Iroda Damjanich u. 25/C., H-1071 Budapest, Hungary Tel: +36 1 792 3904 / Fax: +36 1 788 7670 / URL: www.ratkai-legal.com

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Suhas Srinivasiah & Debjani Aich Kochhar & Co.

General labour market and litigation trends Labour laws generally Employment laws in India are mostly federal, with pan-India application. The applicability of laws varies depending on the categorisation of the employer and the employee. Certain laws apply only to manufacturing establishments, which stand more regulated. A key criterion to consider is whether an employee is held to be a “workman” under the Industrial Disputes Act, 1947 (“ID Act”) or not. Under the ID Act, a workman is generally any employee inter alia engaged to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, but would not include an employee engaged in: (a) a managerial or administrative capacity; or (b) a supervisory capacity and drawing wages more than Rs. 10,000 a month. Typically, all employees who are not in a managerial or supervisory role would be considered as workmen. The ID Act prescribes various conditions to be followed in relation to the working relationship of a workman with his employer. Most states in India have a Shops and Establishments Act (“SEA”) which deals with general working conditions such as hours of work, leave, overtime, etc. SEAs are broadly similar in scope, with some variation between States. India also requires employers and employees to contribute to provident and pension funds (a form of social security benefi t) and requires employers to pay eligible employees who have completed the prescribed threshold of fi ve years of continuous employment a gratuity benefi t upon cessation of employment. Payment of compensation for death or disability suffered at the workplace is also applicable across industry sectors. Labour market and reforms Given the huge population, availability of labour is per se not considered a problem. It is estimated that more than 50% of the population is below the age of 25 years, with a vast majority of this population having completed secondary school graduation. In the hi-tech industry, India enjoys a highly skilled workforce comprising engineers, researchers, etc., who have contributed to the tremendous growth of this industry. As a general approach, Indian employment laws are pro-employee and place a high level of compliance on employers. An employer is required to comply with multiple regulations relating to registrations, fi ling returns, maintaining registers, etc. With several labour laws dating back to the 1930s, it is often quite diffi cult for an employer to be fully compliant with all legal requirements. Generally, fi ring employees at will is also diffi cult as Indian laws

GLI - Employment & Labour Law 2018, Sixth Edition 94 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Kochhar & Co. India place restrictions/compliances prior to termination of employees. In the manufacturing sector, it is diffi cult to fi re employees if an employer employs workmen over a prescribed threshold and it is also diffi cult to close establishments without taking prior approval of the concerned Government. Trade unions are quite common in the manufacturing sector but rarely seen in the services sectors (especially, the IT and ITES sectors). One of the main standing demands of the business community within and outside India is unifi cation of the various labour statutes and simplifi cation of the compliances. In response, the Government has drafted various labour codes, such as the Industrial Relations Bill and the Code on Wages Bill, which seeks to consolidate various important federal labour laws. In particular, the Industrial Relations Bill seeks to amend and consolidate provisions relating to termination of workmen mentioned below. It is expected that the drafts will become laws in the next few years. Labour litigation Litigation in India can be expensive, long-drawn and cumbersome. Employee litigation in India also factors in whether an employee is a workman or not under the ID Act. Litigation in the form of industrial disputes in relation to workmen and the employer usually falls under the ID Act, which has specifi c adjudicatory bodies. The decision of these bodies can be appealed to the State High Courts and the Supreme Court of India. The dispute process varies for non-workmen employees, where the cause of action is usually for breach of the employment agreement / employment policies. In such cases, the parties would approach a civil court of competent jurisdiction for relief.

Redundancies, business transfers and reorganisations Redundancies Indian employment law does not use the term “redundancy” for employee terminations. In India, the termination of employees, whether large-scale or of a single employee for convenience (and not for cause, such as termination on disciplinary grounds) is held to be either “retrenchment” or “termination of services”, depending on the category of the employee, under applicable Indian law. As mentioned above, the ID Act is the main federal law that regulates industrial relations, including the termination of employees who qualify as “workmen”. Under the ID Act, termination of a workman inter alia for any reason other than as a punishment by way of disciplinary action is termed as “retrenchment”. A company (not being a factory, mine or plantation with 100 or more workmen) needs to follow a speciﬁ c process and timeline for retrenchment of a workman who has completed one year of service (which is generally considered to be 240 working days) under the ID Act, viz.: (i) provide the workman with written notice of one month with the reason for the retrenchment and wait until the notice period has expired or provide the workman with wages in lieu of the notice period; (ii) pay the workman retrenchment compensation calculated at the rate of 15 days average pay for each year worked or part thereof in excess of six months; (iii) serve notice of the retrenchment on the concerned State Government/other speciﬁ ed labour authorities in the prescribed State form and as per the stipulated timelines. It is important to note that if the employment contract contains better termination provisions

GLI - Employment & Labour Law 2018, Sixth Edition 95 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Kochhar & Co. India than provided under the ID Act (such as a longer notice period or higher severance compensation), the employer would be bound to follow the same while retrenching workmen. The ID Act has various other compliances in relation to retrenchment, such as requiring the employer to ordinarily follow the principle of ‘last in, fi rst out’ for the workmen being retrenched, and giving a retrenched workman the right to priority in case of any re-hiring. Termination of a non-workman would take place as per the specifi c employment contract and factoring in the SEA. The employer would need to provide the required notice period or payment in lieu of notice (as stipulated in the employment contract) and further comply with other contractual termination-related obligations. There are no statutory reporting requirements in case of termination based on an employment contract for non-workmen. The SEA would typically apply once an employee has completed a certain time period of employment with the company, pursuant to which termination (other than in case of established misconduct) would need to be on some form of reasonable grounds along with due notice or payment in lieu of notice. In practice, employers frequently offer the “voluntary resignation” route to employees, mainly to avoid the perceived stigma of a termination. Even if an employer offers such route, it should still comply with all compensation requirements, statutory or contractual, such as those due under the ID Act. In the case of a factory, mine or plantation employing 100 or more workmen, if a workman has completed one year of service (again, 240 working days), the employer needs to comply with the following process for retrenchment: (i) provide the workman with written notice of three months with the reason for the retrenchment and wait until the notice period has expired or provide the workman with wages in lieu of the notice period; (ii) obtain prior permission of the concerned State Government for the retrenchment; and (iii) once the Government permission has been obtained, pay the workman retrenchment compensation calculated at the rate of 15 days’ average pay for each year worked or part thereof in excess of six months. Termination due to misconduct Termination due to misconduct would occur in the event of a breach of the rules of the employer or some objectionable conduct. An employer would typically provide details of acts which constitute misconduct or prohibited conduct in its employee manual / standing orders / appointment letter. There is no specifi c defi nition of “misconduct” under Indian employment law, with a federal law, the Industrial Employment (Standing Orders) Act, 1946, referring to certain acts and omissions which will be treated as misconduct. These include: (a) wilful insubordination or disobedience, whether alone or in combination with others, to any lawful and reasonable order of the employee’s superior; (b) theft, fraud, or dishonesty in connection with the employer’s business or property; (c) wilful damage to or loss of employer’s goods or property; (d) taking or giving bribes or any illegal gratifi cation; (e) habitual absence without leave, or absence without leave for more than 10 days; or (f) habitual negligence or neglect of work.

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An employer may include further acts which it would hold as misconduct under company policy. There is no prescribed notice period in such a termination but the employer would need to follow a formal disciplinary process and comply with the principles of natural justice to establish the misconduct. Broadly speaking, in order to prevent the possibility of an employee challenging the termination before a court of law on the grounds of mala fi de intentions, victimisation, etc., it is recommended that an employer follow the procedure below: (i) issue a charge sheet to the concerned employee; (ii) hold a domestic enquiry (a single individual may be appointed as an enquiry offi cer to conduct the internal domestic enquiry) – the person conducting the enquiry and taking the decision should not be directly involved in the conduct in question and preferably, not the immediate superior of the employee; (iii) give the employee the chance to provide his defence at the enquiry; (iv) peruse the report of the enquiry offi cer; and (v) issue the disciplinary action. Usually, in the case of termination due to established misconduct, the employee is not eligible for any severance compensation and would forfeit the right to receive benefi ts such as gratuity payment. Business transfers and reorganisation Generally speaking, if the business, the assets constituting the business and persons substantially involved in the business are transferred, then it would constitute a transfer of undertaking. Under the ID Act, where the ownership or management of an undertaking is transferred, whether by agreement or by law, from the employer to a new employer, the new employer is required to ensure that: (i) the service of the workmen is not interrupted by such transfer (i.e., continuity of service must be maintained, which is relevant for the provision of certain statutory welfare benefi ts); (ii) the terms and conditions of service applicable to the workman after the transfer cannot be less favourable than those applicable to him immediately before the transfer; and (iii) under the transfer terms or otherwise, in the event of future retrenchment, the new employer is legally liable to pay to the workman severance compensation on the basis that his service has been continuous and not interrupted by the transfer. If the new employer does not agree to comply with the above conditions, the workmen who have been in continuous service of one year immediately before the transfer are entitled to notice and compensation from the previous employer as if they were being retrenched. Similar principles will apply in case any employees are being transferred in a business reorganisation. It has been established through judicial precedent that transfer of employment is not automatic and the employer has to obtain the consent of the workmen. If a workman does not agree to the transfer, the employer would either need to retain him or terminate him as discussed above.

Business protection and restrictive covenants Under Indian contract law, contractual obligations which restrain free trade or profession beyond the tenure of the contract are generally considered void (with the exception of non- compete on the seller of a business).

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Thus, a non-compete clause on an employee, restricting his right to join a competitor company post-termination of employment, is viewed as restrictive and void under contract law. However, such clauses are frequently included in employment contracts for their deterrent value. If challenged by an ex-employee, it would be diffi cult for an employer to defend any such post-termination restrictive clause. Indian courts have upheld, however, that employees can be restrained from breaching trade secrets and confi dential information of the previous employer when they start working with a third party / competitor. The decisions of Indian courts on enforceability of non-solicit clauses in employment contracts are varied. Based on existing case law, there seems to be a reasonable possibility to restrain an ex-employee from soliciting the previous employer’s customers. From a practical perspective, it would be diffi cult to implement a non-solicitation of employee clause, since an employee cannot be restrained from joining a competitor. As in the case of non-compete provisions, non-solicit clauses in relation to both employment and customers are often included in employment contracts. The position is different for a non-solicitation clause amongst two business entities, which are held to be on somewhat equal footing as compared to an employer-employee relationship where the employee is perceived to be in a lower bargaining position. Courts have upheld non-solicitation clauses amongst two employers while at the same time holding that the employees cannot be restrained from joining a third party for better employment opportunities even if the employers are subject to a non-solicit agreement. Companies sometimes ask employees to sign retention bonds where the employee agrees to remain with the company for a specifi ed time period. The key factor to consider in such a case is reasonableness, where the employer has incurred costs in providing the employee with some benefi t or advantage, such as specialised professional training, in the course of employment, on the premise that the said benefi t will be used for the advancement of the employer’s business. Again, courts would examine any such restraint carefully to ensure that it is not a blanket restriction on the employee’s right to seek alternative work, and the employer would face signifi cant damage if the employee breached the bond. Even in such cases, courts have been careful not to force employees to serve the remaining bond period but have upheld return of the costs incurred by the employer for the training, etc.

Discrimination protection There are specifi c laws applicable to private sector companies which prohibit discrimination on various grounds. While the majority of the laws are aimed at non-discrimination against women employees, there is also some protection against disability-based discrimination. Laws providing protection to women include: (i) the Equal Remuneration Act, 1976, which requires an employer to ensure equal treatment for women at the workplace; (ii) the Maternity Benefi t Act. 1961, whereunder an employer cannot discriminate against a woman employee on maternity leave, including terminate her services while on such leave; and (iii) the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which aims at protecting women from sexual harassment at the workplace. The Rights of Persons with Disabilities Act, 2016 provides protection to persons with specifi ed disabilities, where a private sector employer is inter alia required to have an equal opportunity policy. There is also some protection against discrimination based on medical grounds, such as under the National AIDS Control Organisation, where the Government of India has stipulated that mandatory HIV testing cannot be imposed as a precondition of employment or of providing healthcare facilities during employment. As a general rule

GLI - Employment & Labour Law 2018, Sixth Edition 98 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Kochhar & Co. India of thumb, there should not be discrimination based on medical grounds other than a case where the medical issue is a deﬁ nite impediment to the job proﬁ le. The Constitution of India guarantees certain fundamental rights to Indian citizens, including protection against discrimination on the grounds of race, religion, caste and gender. While this protection is available only against the State and its agencies, and does not apply to private companies, as a matter of good corporate practice, most companies have inclusion and diversity policies and do not discriminate on any of the foregoing grounds.

Protection against dismissal Employees in India are provided with certain rights with regard to protection against dismissal, the ID Act being a prime example. As mentioned above, under the ID Act, in order to retrench a workman who has been employed in continuous service for a period longer than one year, the employer has to follow specifi c conditions, including provision of notice and payment of retrenchment compensation. The Maternity Benefi t Act is another law that provides protection against termination to the woman who is on statutory maternity leave. Under the ID Act, any dispute or difference between a workman and his employer in relation to any dismissal, discharge, retrenchment or termination of the workman is held to be an “industrial dispute” under the said law. An aggrieved workman has the right to approach the specifi ed judicial authorities under the ID Act to seek specifi c redressal in relation to such an industrial dispute. Remedies include requiring the employer to follow the concerned ID Act compliances, possible reinstatement of the workman, and payment of damages. The ID Act also prescribes penalties on an employer for breach of the applicable provisions. A non-workman employee has the right to approach a court of jurisdiction seeking relief in terms of civil damages for wrongful termination. Case law exists to suggest that civil courts will not pass orders regarding reinstating the dismissed employee but may offer relief in terms of monetary damages.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Working hours and leave are regulated in India through the State SEA for most private sector commercial establishments or through legislation such as the Factories Act, 1948, which applies to factories. The SEA usually applies to an “employee”, without distinction – this would cover any type of employee, full-time, part-time or on probation. Some SEAs have specifi c exemptions to certain classes of employees, including senior management employees. The State Government usually specifi es opening and closing hours for an establishment. Companies are typically required to be closed for one day a week, which is generally Sunday. Some SEAs have provided exemptions to the said requirements where the service sector requires 24×7 operation, such as the IT/ITES sector. This will entail specifi c permission to be obtained from the State Government. A SEA would stipulate the working hours for an employee, averaging between eight to nine hours a day. A break of 30 to 60 minutes is usually provided after four or fi ve hours of work. Any work beyond these limits requires payment of overtime, usually computed as twice the average wages paid to an employee. The SEA may also prescribe overtime caps based on a time period, such as daily or monthly.

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Women employees are generally not permitted to work at night (8pm to 6am) for safety reasons. Again, certain State Governments have provided an exemption to specifi c service sectors, which is granted based on Government approval and is subject to safety and security conditions. The Factories Act provides for working conditions for factory workers, including aspects such as working hours (a maximum of 48 hours a week or nine hours a day or both), overtime, leave, health and safety compliances, etc. General leave in private sector establishments is typically regulated by the SEA, wherein an employee is entitled to 15 to 20 days of regular leave and about 10 national or public holidays a year. Some SEAs also allow for sick or casual leave not exceeding 10 days in a year. Carry-forward of the unutilised leave to the next year is also permissible subject to certain prescribed thresholds. Maternity leave in India is required to be provided in private sector companies under the Maternity Benefi t Act, 1961 (“MB Act”), while paternity leave is not mandated under law. There has been an increasing trend in India to now also provide some form of paternity leave. The MB Act inter alia provides for paid maternity leave between 12 to 26 weeks to a female employee who has worked for 80 days in the preceding 12 months with the employer. The period of this leave depends on the number of children the female employee has. Paid leave of 12 weeks also needs to be provided to a female employee who is adopting a child less than three months old and to a “commissioning mother” who uses a surrogate for the child. The MB Act also envisages paid leave to be provided in other specifi ed cases, including a medical termination of pregnancy, a miscarriage or pregnancy-related illness, along with payment of a medical bonus in case the employer is not providing any free prenatal confi nement or post-natal care. The MB Act provides for various other employee benefi ts, including the employer setting up a crèche facility and allowing a female employee to visit her child at such a crèche four times a day. The concept of “work from home” also exists depending on mutual agreement between the employer and the female employee once her statutory paid maternity leave period has ended. Indian employment law requires an employee to be provided with some form of notice and a reason for the dismissal prior to termination, other than in case of established misconduct. These aspects have been discussed in “Redundancies, business transfers and reorganisations”, above. Under current Indian legislation, whistleblower protection is available only in relation to complaints made against Government agencies, subject to various conditions and exemptions. The Whistleblower Protection Act, 2014 provides protection against victimisation of persons who make complaints relating to disclosures in relation to corruption, wilful misuse of power or wilful misuse of discretion against any public servant, or the attempt to commit/commission of a criminal offence by a public servant. The position is quite different in the private sector, where there is no single codifi ed umbrella legislation for whistleblower protection. Possible disclosure requirements and related protections have been provided through various laws and guidelines, such as under Indian securities laws, which prescribe a voluntary whistleblower protection policy for listed companies. Such a policy would specify a mechanism which allows the employee of a listed company to report any unethical behaviour, fraud or violation of law and would provide adequate safeguards against victimisation of employees who use the mechanism. However, it is not mandatory for companies to implement the same, which reduces the effi cacy of the requirement.

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The Companies Act, 2013 has various provisions which deal with the reporting of concerns within the company, such as having a vigil mechanism for speciﬁ ed companies, including listed companies. Such a vigil mechanism is operated through a company’s audit committee in case of listed companies. Under the Companies Act, the mandated auditor, cost accountant or company secretary of a company also has a duty to report to the Government in case of any fraud committed against the company by its employees or ofﬁ cers. India’s federal bank, the Reserve Bank of India, has a scheme whereby private sector and foreign banks need to implement a whistleblower policy that will protect employees from retaliation (public sector banks are covered under the guidelines of the Central Vigilance Committee).

Worker consultation, trade union and industrial action Under the ID Act, if an industrial establishment employs 100 or more workmen, the Government (state or central) may require the establishment to constitute a works committee with a maximum of 20 members. The works committee would promote measures for security and good relations between the employer and workmen and mediate or facilitate any material difference of opinion between the said parties. A trade union may be formed in accordance with the Trade Unions Act, 1926 for regulating relations between an employer and employees. Such a trade union would also work as a collective bargaining mechanism. A trade union can enter into binding contracts and settlements with an employer. In practice, trade unions usually exist in labour-intensive sectors such as manufacturing, with trade unions not being active in the services sector. The last few years have, however, seen some move towards forming trade unions in the IT sector, which will be an interesting development to watch. Certain States in India also have laws dealing with trade unions, such as the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 and the Kerala Recognition of Trade Unions Act, 2010.

Employee privacy While an individual’s right to privacy is a fundamental right ﬂ owing from Indian constitutional law, as mentioned above, fundamental rights apply only against the State. From an employer- employee perspective, an employee’s rights to privacy are covered by the Information Technology Act, 2000, which is the main Indian law dealing with individual privacy. Under the said law, an employer is obligated to keep “sensitive personal data or information” (“SPDI”) safe and secure though reasonable security practices and procedures (“RSPP”). From an employer’s perspective, SPDI includes an employee’s personally identiﬁ able information such as biometric information, medical records, sexual orientation and bank account details. If an employer is negligent in complying with the requirements of keeping an employee’s SPDI secure through RSPP, the employer may be liable to penalties in the form of compensation. The Information Technology Act also places various other compliances on an employer in relation to an employee’s SPDI, such as: obtaining consent for transfer to third parties; the employee’s right to modify the SPDI or not provide it; having a privacy policy in place, etc. The IT Act allows parties to agree on the mode of RSPP and accordingly, by way of practice, companies usually have comprehensive privacy policies in place which also provide for the security measures implemented to secure the SPDI.

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Other recent developments in the fi eld of employment and labour law Indian labour laws have witnessed signifi cant changes over the course of the last one year. Certain key amendments have been highlighted below. The Maternity Benefi t (Amendment) Act, 2017 increased the duration of maternity leave from 12 to 26 weeks (also mentioned above), with the option to avail of maternity leave eight weeks prior to the expected delivery. Establishments are also required to provide crèche facilities within a prescribed distance of their premises if they employ more than 50 employees, which is a signifi cant development. However, as of date, the Government has not provided details on the modalities of establishing such a crèche, which is causing some confusion for employers. In December 2016, the Employee’s State Insurance Act, 1948 (“ESI Act”) was amended, whereby the salary or wages threshold for coverage of an employee was increased to Rs. 21,000/- (approx. US$ 309) or under per month from the earlier wage cap of Rs. 15,000/- (approx. US$ 221) per month. The ESI Act inter alia applies to factories and commercial establishments and provides for social security insurance for employees in case of sickness, maternity and employment injury. The amendment led to inclusion of more employees under ESI Act. In 2015, the Payment of Bonus Act (“PB Act”) was amended, which Act applies to factories and establishments which employ 20 or more persons. This law provides for payment of a statutory bonus to eligible employees, which bonus is determined on the basis of profi ts or on the basis of production or productivity of the establishment. The eligibility limit of an “employee” was amended whereby an employee who earns a salary or wages of Rs. 21,000 (approx. US$ 323) per month is eligible for payment of statutory bonus. This was a steep increase for the earlier salary/wage cap of Rs. 10,000 (approx. US$ 153) per month, thereby widely increasing the extent of coverage of the PB Act. Other changes were made to the said Act, leading to a greater fi nancial implication on an employer. The Child Labour (Prohibition and Regulation) Amendment Act, 2016 amended the Child Labour (Prohibition and Regulation) Act, 1986. One of the main features of the amendment was the ban on a child working in any occupation, as compared to the earlier prohibition preventing a child from working in specifi ed employments. A child is generally a person less than 14 years old. The penalties for employing a child have been substantially increased. The concept of an “adolescent” has been introduced as a person between 14 and 18 years of age. An adolescent is prohibited from working in specifi ed hazardous occupations and processes (including mines). This amendment law was well-received because of the overriding restriction on employing a child, with the Government’s position that the exceptions are required to ensure that India’s artisanal and farming work continues while giving a child the right to education. The Ease of Compliance Rules, 2017 were notifi ed by the Ministry of Labour and Employment earlier this year in February 2017 to ensure the ease of doing business in India. These rules introduced the maintenance of combined registers, thus alleviating the burden on employers and ensuring effective compliance with labour laws by organisations.

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Suhas Srinivasiah Tel: +91 4030 8000 / Email: [email protected] Suhas Srinivasiah is a senior partner in the Bangalore ofﬁ ce of Kochhar & Co. His main areas of practice include general corporate and regulatory, with special focus on employment law. He has assisted more than 75 multinational companies (including several Fortune 100 companies) in setting up business operations in India, including supporting on employment law aspects such as drafting employment contracts, employee handbooks, various policies relating to the workplace, etc. He has undertaken training for client companies on Indian employment laws and practices, compliance with the Foreign Corrupt Practices Act (USA), Anti-Bribery Act (UK) and the Indian Prevention of Corruption Act. Suhas is a ranked and recommended lawyer in both Chambers & Partners and Asia Legal 500 for the past several years.

Debjani Aich Tel: +91 4030 8000 / Email: [email protected] Debjani is a partner with the Bangalore ofﬁ ce of Kochhar & Co. She is one of the main lawyers responsible for the ﬁ rm’s employment law practice and she represents some of the world’s largest information technology companies in relation to their India operations. Debjani has a special interest in laws dealing with prevention of sexual harassment in the workplace and EEO matters and also serves as the external member of the anti-sexual harassment committees of several clients. She regularly conducts workplace training on employment laws and is a frequent speaker on employment issues at international and national conferences and events. Debjani is a ranked lawyer in the Legal Who’s Who of Employment Law.

Kochhar & Co. Kochhar & Co., # 201, Prestige Sigma, No. 3 Vittal Mallya Road, Bangalore – 560 001, India Te l: +91 80 4030 8000 / Fax: + 91 80 4112 4998 / URL: w ww.kochhar.com

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Mary Brassil, Stephen Holst & Mary Kelleher McCann FitzGerald

General labour market and litigation trends Ireland’s economy continues to enjoy robust economic growth since exiting the EU/ IMF programme in December 2013. GDP growth of 5% is predicted for 2017, and a further 4% for 2018. This growth is having a direct impact on the labour market and the unemployment rate fell to an average of 6.1%, the lowest rate since 2008, and is expected to fall to 5.4% in 2018, while the Eurozone average fell to 8.9% in September 2017. In October 2017, the Irish government delivered its budgetary policy. The budget has continued the trend of reducing personal taxation levels while also introducing a new tax- advantaged share option scheme known as the Key Employee Engagement Programme (“KEEP”). The scheme is a share-based remuneration incentive for qualifying employees of qualifying unquoted small and medium enterprises who are granted options at market value between 1 January 2018 – 31 December 2023 (subject to EU approval). Gains arising to a key employee on the exercise of qualifying share options under the KEEP incentive will be exempt from income tax, USC and employee PRSI contributions. The Workplace Relations Act 2015 introduced signifi cant reforms for the resolution of employment and industrial relations disputes. The Workplace Relations Commission’s (“WRC”) fi rst full-year annual report demonstrates the strength of employment ligation in Ireland, with a total 6,863 complaints received. The WRC has indicated that 75% of adjudication complaints are now heard within fi ve months. The WRC Inspectorate Division carried out a total of 4,830 inspections largely targeted at lower-wage sectors. 37% of employers inspected were found to be in breach of employment legislation and a total of €1.5m in unpaid wages was recovered for employees during 2016. The WRC is also working closely with the Garda National Immigration Bureau on reporting potential immigration and human traffi cking issues. The Protected Disclosures Act 2014 continues to be an important trend, with an increase in both claims as well as protected disclosures issues arising in the workplace. The introduction of the General Data Protection Regulation (“GDPR”) in May 2018 is another issue being encountered by Irish employers, with most prudent employers having their GDPR compliance plans well under way. On 29 March 2017, the UK government served formal notice to terminate UK membership of the EU, following the June 2016 referendum on European Union membership. The UK government published a White Paper this year in which workers’ rights are specifi cally referenced as an area where it is intended existing EU law will be preserved in the UK. However, ‘BREXIT’ continues to represent uncharted waters for the EU and, post- BREXIT, businesses in Ireland, in particular multinational businesses, will no longer be

GLI - Employment & Labour Law 2018, Sixth Edition 104 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London McCann FitzGerald Ireland able to assume that a similar employment law regime applies in the UK. A key impact of BREXIT has been a signiﬁ cant increase in immigration work for Irish employment lawyers. 2017 saw an amount of industrial relations activity in Ireland, particularly in the transport sector, in response to the slow but steady recovery of the economy. Employees at Irish Rail engaged in strike action in October and November seeking a 3.75% increase in pay over three years, to match wage increases recently given to employees at other transport companies, Luas and Dublin Bus. Earlier in 2017, problems at Bus Éireann culminated in three weeks of strikes which shut down public travel in much of the country. Workers ultimately voted to accept the Labour Court recommendations aimed at ending the Bus Éireann dispute in May. Elsewhere, a series of strikes by crane drivers over the summer were suspended recently to allow for talks at the WRC.

Redundancies, business transfers and reorganisations Redundancy Redundancies in 2017 have been at the lowest level in over 20 years, with just 2,302 in the fi rst nine months of the year. Meanwhile, fi gures show that the Department of Social Protection is set to write off €345 million owed by companies for unpaid redundancy and insolvency payments. When employees cannot secure a redundancy payment from their employer, the redundancy payment is funded by the Social Insurance Fund, which then becomes a preferential creditor of the employer in any liquidation process. A recent WRC case acts as a reminder that an employer is at risk of an unfair dismissal claim where there is no well-documented business case for a redundancy and a comprehensive redundancy process is not followed. In A Teacher v A School (ADJ-00005454), a teacher (teaching English as a foreign language) was awarded approximately one year’s salary in circumstances where she had been “treated shabbily” and dismissed by reason of redundancy “with no regard to the requirements of law”. In that case, the teacher attended a meeting at which she was told that her role was being made redundant fi ve days later, and the redundancy was confi rmed in writing later that same day. The school submitted that there was a genuine redundancy, that there were no appropriate alternative vacancies and that no-one had been employed in the role since her departure. The adjudication offi cer (“AO”) held that no genuine redundancy situation existed and that other matters were at play, including a grievance previously raised by the complainant. The AO stated that if a genuine redundancy was being contemplated by the school in the months prior to notifi cation of redundancy, it was incumbent on the school to open a dialogue with those who might be impacted and it could not rely upon the need for confi dentiality as an excuse for not doing so. The AO held that the teacher had been treated dismally, given that there had been no notice of redundancy, no consultation, no discussion on alternative positions and no proper process whatsoever. While the teacher had sought to be reinstated, the AO awarded compensation due to the deterioration in the parties’ relationship and the lack of a suitable alternative position. In addition to discharging an employee’s statutory and contractual entitlements, in circumstances of redundancy, there continues to be a strong practice, both in the private and the public sector, of employers paying additional ex gratia severance payments ranging from three to six weeks’ pay per year of service. Where an employer’s redundancy package provides that ex gratia payments are subject to a cap or ceiling, recent authority from the WRC shows that the employer is at risk of age discrimination claims. In

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2 Named Complainants v A Catering Company (DEC-E/2017/054), the Complainants alleged that they had been subjected to discriminatory treatment by their employer on the grounds of age, contrary to the Employment Equality Acts 1998 to 2015 in relation to the redundancy terms offered to them. The Complainants had worked in the Respondent’s Finance Department for 31 and 27 years respectively and their roles were made redundant. The redundancy package originally offered to the Complainants consisted of two weeks’ wages per year of service, capped at €600 plus one additional bonus week; an additional two weeks’ wages per year of service ex gratia; and payment in lieu of notice. Crucially, the total sum calculable was then subject to a cap of 1.25 times the Complainant’s basic salary. The Complainants argued that the very existence of the cap on the ex gratia element of the redundancy package resulted in discrimination, as it was designed to ensure that employees with long service who necessarily were of a more advanced age, never received the full ex gratia offer. The payment cap had the effect of diluting the complainants’ yield from circa €90,000 and €80,000, to circa €50,000. The AO held that a prima facie case of indirect discrimination had been established; the Complainants’ ex gratia payments were proportionately less favourable vis-à-vis their younger comparators on account of their considerable length of service which is inextricably linked to age. The onus shifted to the Respondent to establish that the capping of redundancy payments was objectively justifi ed by a legitimate aim and the means of achieving it are appropriate and necessary. The Respondent had argued that the rationale for the cap included costs and budgetary considerations as well as a desire to ensure an equitable distribution amongst the Respondent’s workforce regardless of age or length of service. The AO considered this to constitute a legitimate aim, but held that the Respondent had failed to provide evidence that it considered any less discriminatory means of achieving that aim. The AO was also mindful of the “comparative diffi culty of loss of employment suffered by older employees” and ordered the Respondent to provide equal treatment to place the Complainants in the position they would have been in had discrimination not occurred. The Complainants were also awarded €5,000 for the effects of the said discrimination. Reassignment In 2017, the Irish Court of Appeal in Earley v Health Service Executive [2017] IECA 158 overturned a High Court decision in fi nding that the re-assignment of the plaintiff within the HSE constituted a breach of contract. The re-assignment was as a result of a decision by the HSE to commission a review of its Mental Health Services in Roscommon, where the employee was Area Director of Nursing, Mental Health Services for the area. This followed a number of complaints and a protected disclosure to the HSE alleging that incidents had not been dealt with appropriately by senior HSE staff, including the employee. The Court of Appeal found that there was no basis upon which the employee could have been lawfully re-assigned from her position as her contract contained no express contractual right allowing the HSE to re-assign. To imply a term allowing reassignment would be inconsistent with the express wording in the contract of employment. The Court of Appeal accordingly held that in re-assigning the plaintiff from an operational and clinical role to a non-operational role, the HSE had breached its contract of employment. Business transfers The WRC recently confi rmed that where, contrary to Regulation 8 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003

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(“TUPE”), a transferor fails to inform and consult with its transferring employees, liability for such failure passes to the transferee and there is no recourse against the transferor. In Elizabeth Collins v J Donohue Beverages Limited (ADJ-00007777), no consultation with the transferring employees had taken place. Under TUPE, all rights and obligations of the transferor to employees, including both contractual and statutory obligations, automatically transfer by operation of law to the transferee as at the date of transfer. The AO held that liability could not be imposed on the transferor post-transfer in respect of its failure to comply with the TUPE Regulations pre-transfer. Effectively, all liability for any failure to comply with statutory obligations passes to the transferee employer. This is a very useful case in terms of also demonstrating the principle of transfer of liability under TUPE, an area where there had been limited cases in Ireland.

Discrimination protection Discrimination Mandatory retirement ages were in the spotlight throughout the year. 86% of the members of Ireland’s Citizens’ Assembly this year voted in favour of abolishing mandatory retirement ages. The vote came after the publication of the Employment Equality (Abolition of Mandatory Retirement Age) Bill 2016, which proposes to prohibit employers from setting or contracting for a mandatory retirement age and is intended to apply retrospectively to pre-existing contracts of employment. Certain employees, such as members of An Garda Síochána or the Defence Forces, would still be subject to mandatory retirement ages. The Bill does, however, allow for an employer to set a voluntary retirement age or to provide ﬁ nancial incentives for the voluntary retirement of an employee at a particular age. While the Bill is a private members’ bill, which would be typically expected to fail, the Irish Government has indicated that it supports the bill in principle. Under the current law, while an employer can provide for a contractual retirement age, this is subject to the employer establishing an objective justiﬁ cation for same. This is likely to be a highly litigated area for the foreseeable future, as many employers are still relying on a historic retirement age provided for in employment contracts, or established through custom and practice, without there being any legitimate objective basis to justify a particular age as a retirement age. In Connaught Airport Development Limited v John Glavey (EDA1710), the employer argued that it was an express term and condition of the employee’s employment that his employment would not continue past his 65th birthday. The employer argued that, although the contract did not contain a mandatory retirement clause, such a clause should be implied as it had been the accepted custom and practice of the employer for employees to retire when they reached the age of 65. However, the Court noted that the employer had numerous opportunities to include an express provision and had provided no evidence to demonstrate that the employee had been informed of the retirement age or provided with any documentation from which this could be discerned. Evidence was adduced that two employees had worked beyond the age of 65. Accordingly, the Court did not accept that a retirement age of 65 had been implied or incorporated into his contract of employment. It held that the employee had been dismissed because of his age and the complainant was awarded a sum of €6,500. In Transdev v Michael Chrzanowski (EDA1632), a retirement age of 65 was established on the basis of custom and practice in circumstances where the complainant had signed up to a pension scheme which explicitly referenced such a retirement age, where all

GLI - Employment & Labour Law 2018, Sixth Edition 107 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London McCann FitzGerald Ireland workers retired at the age of 65, and also where the complainant had sought to extend his employment beyond his 65th birthday. The retirement age for the complainant tram driver was objectively justifi able on the basis of health and safety concerns for drivers, passengers and the general public given that this was a safety critical role. A recent decision of the Court of Appeal in Culkin v Sligo County Council & Anor [2017] IECA 104 held that any plaintiff who is unsuccessful in a claim of discrimination or harassment before the WRC is not precluded from pursuing a personal injuries claim to the High Court arising out of those same alleged acts. In the High Court, it had been held that bullying proceedings taken by a former employee of a local authority should be dismissed because they represented a duplication of the plaintiff’s equality case against the local authority such as to amount to an abuse of process. Hogan J held that section 101 of the Employment Equality Acts 1998 to 2015 (the “EEA”) serves to bar complementary claims for discrimination before the Equality Tribunal (now the WRC) and at common law in respect of claims based on failure to comply with an equal remuneration term or an equality clause. However, it did not apply more widely to bar subsequent personal injuries claims per se where an earlier discrimination claim before the Tribunal has failed. The Court stated that it was simply not possible for Culkin to have brought forward his whole case before the Equality Tribunal because it had no jurisdiction to entertain the personal injuries claim in any event. However, it remains open to the court of trial to determine that the personal injuries claim or parts thereof should fail on the ground that it amounts in substance to a collateral attack on the decision of the Equality Tribunal. In Byrne v Minister for Defence & Ors [2017] IEHC 453, a female Army Captain was awarded €824,794 by the High Court for the Defence Force’s discriminatory exclusion of her from a promotion process while she was absent on maternity leave, contrary to the Equal Treatment Directive. The applicant went on maternity leave whilst holding the rank of Captain, during which leave she became eligible for a fi xed promotion. However, she was not informed of this or given the opportunity to present her case to the interview board. Four male Engineer Offi cers were subsequently promoted to the rank of Commandant. Furthermore, during the applicant’s leave, and without her knowledge or consent, she was transferred to an alternative barracks. Eagar J held that it was reasonably foreseeable that the applicant would leave her employment in circumstances where she was treated in a different manner to her work colleagues, all of whom were men. The amount of €412,397 was calculated as the applicant’s total loss of earnings, which award was then doubled in order to place the applicant within the net fi gures. The case highlights the importance of ensuring that any promotion processes apply the principle of equal treatment, by ensuring the inclusion of employees on maternity leave. A decision by the Labour Court this year found that a policy requiring employees to speak English in the workplace was discriminatory on the ground of national origin, but was objectively justifi able. In Aer Lingus v Lukasz Kacmarek, Marcin Turczyk & Rafal Wilczkiew (EDA1712), three Polish employees of Aer Lingus challenged the legality of its policy requiring that they speak English while in the workplace. They were, however, allowed to speak in any language during their offi cial breaks. The Labour Court accepted that the policy was indirectly discriminatory against workers, like the claimants, whose fi rst language was not English. However, it was objectively justifi ed on the basis of preventing members of the workforce from different cultural backgrounds from feeling excluded or isolated. On this basis, the Court found the policy to be reasonable and proportionate, and dismissed the claimants’ appeal.

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Reasonable accommodation Employers’ obligations to reasonably accommodate employees with disabilities were also the subject of adjudication during the year. In Worker v Manufacturing Company (ADJ-00000557), the claimant had been a shift worker with the respondent company before taking ill with depression, having felt “constantly jetlagged” as a result of the shift cycle. The respondent’s physician recommended that the claimant could return to work provided that she could be accommodated by working day shifts. However, the respondent insisted that any vacant day shifts would have to be competed for by the claimant in the same manner as her co-workers without any priority given to her disability. The WRC reiterated that reasonable accommodation includes, for example, adaptation of patterns of working time and distribution of tasks or the provision of training. The WRC concluded that a Labour Court recommendation and collective agreement could not be afforded more weight than the claimant’s statutory rights. The WRC held that an employer cannot pick and choose whether or not they should implement adaptations for a disabled employee, unless it would come at a disproportionate cost to the employer. Not having shown that there was a disproportionate cost to accommodate the claimant, the WRC found the claimant had been discriminated against on the grounds of disability and awarded her compensation of €20,000. In Dunnes Stores v Mulholland (EDA179) the employee argued that no reasonable accommodation had been provided by her employer upon her return to work post sick- leave due to a hearing impairment. While the employer provided reduced hours on a phased basis as an accommodation upon her return to work, the complainant had been medically certifi ed as fi t to work with no restrictions regarding her ability to perform her role. On this basis, the Labour Court concluded that no entitlement to reasonable accommodation arose for the complainant, who was fi t and competent. Both an agency and an end-user are expected to consider whether reasonable accommodation can be offered before taking steps to terminate a contract of employment. In Arravasc v Cahill (EDA1634/5), the claimant worked for Arravasc, having obtained this position through an agency. Shortly after the claimant suffered a heart attack and went on long- term sick leave; Arravasc then dismissed him. In a claim for discriminatory dismissal before the WRC, the claim against the agency failed. However, the claim against the end-user was successful, the latter having “substantially and materially contributed to the circumstances which brought about the termination of the employment with the agency”. On appeal to the Labour Court, the claimant was successful against the agency which, it was found, had not adequately considered all available options. The Labour Court awarded compensation of €15,000 against the agency. It held that a failure to consider how a person with a disability can be accommodated is a breach of an employer’s duty to that worker. It held that this requirement applies equally to companies who provide work to agency workers. The Court held that liability cannot be avoided by simply directing blame for the decision to terminate the employment to the agency.

Protection against dismissal In a High Court decision earlier this year, the Court appeared to support the proposition that employees are entitled, as of right, to have legal representation during workplace investigations. In Lyons v Longford Westmeath Education and Training Board [2017] IEHC 272, an external investigator had been engaged by the employer to investigate allegations made against the employee teacher. The High Court decided that “proceedings”

GLI - Employment & Labour Law 2018, Sixth Edition 109 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London McCann FitzGerald Ireland adopted by a third party investigator were in breach of the employee’s constitutional rights to fair procedures and the protection of his good name, in particular, as the employee was not permitted to have legal representatives act on his behalf and there was no provision for cross-examination of the complainant by the employee’s legal representatives, even though the complaints may lead to dismissal. It was held that “in circumstances where a complaint is made which could result in an individual’s dismissal, or where it impinges on the individual’s right to a good name, the individual is entitled to fair procedures”. The Court held that the procedures adopted by the external investigator “failed to vindicate the good name of the applicant, in their refusal to hold an appropriate hearing, whereby the applicant through solicitor or counsel may have cross-examined the complainant”. Equally, the complainant ought to be entitled to then cross-examine the applicant, and the Court reiterated that “it is clear that as a matter of law and as a matter of fair procedures, an individual whose job is at stake and against whom allegations are made would be entitled to challenge and cross-examine evidence”. The decision in Lyons was taken to mean, in some quarters, that where a complaint is made which could result in an employee’s dismissal, the employee is entitled to fair procedures at the initial investigation stage. This included the right to legal representation and the right to cross-examine witnesses. Arguably, however, Lyons should be confi ned to its own facts, as the investigator went beyond merely gathering facts and upheld the allegations against the employee. This view has been borne out by more recent cases. The key principle of E.G. v The Society of Actuaries in Ireland [2017] IEHC 392 and N.M. v Limerick and Clare Education and Training Board [2017] IEHC 588, both recent cases post-dating Lyons, is that the level of fair procedures required at investigation stage depends on the nature of the investigation. The Court held that where the investigation could result in disciplinary action, then the person who is the subject of investigation should be afforded the full benefi t of fair procedures. However, where the investigation was just a fact-fi nding exercise and the investigator could not make fi ndings of misconduct or impose sanctions, then less formal procedures may be adequate and appropriate. The Labour Court case of DHL Express (Ireland) Ltd. v Michael Coughlan (UDD1783) is a recent reiteration of the high threshold that must be met by employers seeking to summarily dismiss employees for gross misconduct. The Labour Court reiterated that the threshold for behaviour amounting to gross misconduct is very high. It stated that gross misconduct applies only to cases of “very bad behaviour of such a kind that no reasonable employer could be expected to tolerate the continuance of the relationship for a minute longer”, for instance violent assault or theft. The employee driver’s inadvertent misjudgment, having essentially misjudged the width of the gap he was attempting to drive through, necessitating some €2,500 of repairs, could not be said to amount to gross misconduct. The Court noted that the failure of the employer to suspend the employee, meaning he was free to drive for two weeks after the accident, undermined the company’s contention that the matter was one of gross misconduct. The Court was also critical of the Company’s approach of viewing the complainant’s most recent accident as part of a continuum of behaviour which included his prior warnings for disciplinary infractions, in circumstances where its disciplinary policy provided that disciplinary warnings were to be expunged once they had expired. Mr Coughlan was awarded a sum of €75,000, the equivalent of two years’ wages, the maximum fi nancial award available under the Unfair Dismissals Acts. The Court also ordered that Mr Coughlan be re-engaged by the company, noting the need to rebuild trust between the parties.

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Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Whistleblowing The Protected Disclosures Act 2014 (the “PDA”) sets out robust statutory protections for workers to raise concerns regarding potential wrongdoing that has come to their attention in the workplace. In the fi rst ruling of its kind under the PDA, the WRC in Complainant v Respondent (ADJ-00000456) awarded two years’ salary to a nurse, on the basis that her unfair dismissal was linked to a protected disclosure made to HIQA. The nurse in question had found a nursing home resident “tied with a walking belt into an ordinary chair in her room with the door closed and in a very distressed state”. She subsequently made written reports of the incident which, she discovered soon afterwards, had been removed from the relevant records. She submitted that following the disclosure, she perceived a marked change in attitude from management and was left uninformed about policy changes and other relevant information communicated to other members of staff. Due to her ongoing concerns, the nurse later made a protected disclosure to HIQA. Three months later, the nurse was requested to attend a disciplinary hearing at which various allegations in respect of breaches of procedure were made against her and she was notifi ed of her dismissal shortly after. Despite the employer’s submission to the WRC that the nurse’s dismissal for gross misconduct was solely based on serious and dangerous breaches of procedure made by her, the AO found the nursing home had commenced and instigated the disciplinary procedure in an attempt to dismiss the nurse in advance of her reaching her 12 months of service with the company as a result of her protected disclosure to HIQA. It was therefore found that, had it not been for the protected disclosure made by the employee, she would not have been dismissed. Her dismissal was deemed unfair and she was awarded two years’ salary (amounting to €52,416) in compensation. However, while the PDA provides strong protection to whistleblowers, employees still must discharge the burden of proof in cases such as this, as seen in A Senior Offi cial v A Local Authority (ADJ-00001721). The Claimant gave evidence that a year after making a protected disclosure, he was transferred to another department in the county council, which constituted a demotion and therefore penalisation under the PDA because, whereas in his previous role he managed 82 staff, he now managed just six. The AO held that there was insuffi cient evidence to conclude that the transfer of the Claimant was in retaliation to the protected disclosures. The CEO of the Respondent was entitled to re-organise and re-assign senior managers such as the complainant within the organisation, and given its perspective on the work needs of the respondent, this was diffi cult to second-guess. The decision follows recent Labour Court guidance on the “but for” test, which states that in order for a penalisation claim to be successful, it must be determined that the act comprising the alleged penalisation would not have occurred “but for” the protected disclosure. An interim relief injunction was also granted by Cork Circuit Court in Catherine Kelly v AlienVault Ireland Ltd. The Plaintiff raised a number of health and safety matters with the head offi ce in Texas regarding the offi ce in which 40 people were employed and was subsequently dismissed by telephone. While the employer alleged that the decision to terminate her employment was reached before her complaints were made, the Judge was satisfi ed that Ms Kelly had made a stateable case that she was dismissed because of

GLI - Employment & Labour Law 2018, Sixth Edition 111 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London McCann FitzGerald Ireland her protected disclosure. The Court granted the plaintiff injunctive relief restraining her employer from dismissing her or stopping her pay, pending a full determination of the matter. This case further emphasises that employers must exercise extreme caution if they seek to dismiss an employee who has made a protected disclosure. Paternity leave The Paternity Leave and Benefi t Act 2016 provided long-awaited statutory paternity leave, with an entitlement to receive the same rate of social welfare payment as maternity benefi t provided the parent satisfi es the requisite PRSI contributions. However, the latest fi gures from the Department of Social Protection show that just one in four new fathers is applying for the benefi t, a much lower uptake than the three out of fi ve expected to avail of the scheme when it was fi rst announced. In Area Manager v A Transport Company (ADJ-00005771), the complainant sought to take paternity leave but did not have the relevant social insurance contributions, having only Class D1 contributions. He argued that, as females with D1 contributions received their full salary from the respondent employer during their maternity leave, he had been treated less favourably, contrary to the EEA. The AO found that the complainant had failed to raise a prima facie case and considered the equation of paternity leave with maternity leave to have been misplaced, as the special protection afforded to maternity leave was embedded in European law and entitled the respondent to make special provision for women at the time of maternity leave under the EEA.

Worker consultation, trade union and industrial action The Sectoral Employment Order (Construction Sector) 2017 (the “2017 Order”) took effect on 19 October 2017. A Sectoral Employment Order (“SEO”) sets minimum rates of remuneration and other terms and conditions applying to employees in a particular sector. The 2017 Order is the fi rst of its kind to be given effect under amending provisions of the Industrial Relations (Amendment) Act 2015 (the “2015 Act”) and replaces the previous Registered Employment Agreement (“REA”) in the sector, which became ineffective following the decision in McGowan & Ors v Labour Court Ireland & Anor [2013] IESC 21 in which the Supreme Court held that the REA system was unconstitutional. The 2017 Order relates to the general construction industry, which is widely defi ned and includes operatives and craft workers but excludes electricians and plumbers. It approximates to a 10% increase in pay for workers as against the last existing REA applying to the sector. It also provides for other mandatory terms and conditions including pensions and sick leave, as well as the introduction of a new dispute-resolution procedure. The terms of the 2017 Order are now binding on employers in the general construction industry. There is currently a proposal before the Labour Court for an SEO applying to mechanical craft workers (mostly plumbers and fi tters). An application for an SEO in the electrical contracting sector, which is the subject of a High Court judicial review challenge, was recently withdrawn from the Labour Court. The judicial review proceedings taken by National Electrical Contractors Ireland (“NECI”) are, however, continuing as they seek to examine the procedures adopted by the Labour Court in relation to the application more generally. NECI has said that it is fearful that the procedural protections of the 2015 Act had not been met in relation to the application. NECI also argues that hearings of the Labour Court in relation to SEOs should be heard in public, rather than in private.

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Other recent developments in the fi eld of employment and labour law Preconditions Withdrawing an offer of employment can be fraught with risks. However, the recent High Court case of Genockey v Bank of Ireland [2017] IEHC 498 illustrates that the level of risk is greatly reduced where an employer can show the prospective employee failed to satisfy pre-conditions which were clearly brought to the attention of the employee in any oral offer, any written offer and in the contract of employment. In this case, the employer was able to successfully defend a claim for negligent misrepresentation arising from the withdrawal of an offer due to a candidate’s non-compliance with an employment pre-condition, in circumstances where the pre-conditions for the role were made clear to candidates at all stages of the recruitment process. The plaintiff sought damages for, amongst other things, breach of contract and misrepresentation. In the High Court, however, Eager J found that at all stages of the hiring process (i.e. on the application form signed by the plaintiff; at the interview stage; when the plaintiff was offered the job by telephone; and when the plaintiff was sent a written offer), it was made clear that the job offer was conditional upon the plaintiff meeting certain requirements. In these circumstances, the Court concluded that it could not fi nd in favour of the plaintiff, and her claim for damages failed. Employment status Irish law continues to preserve the traditional dichotomy of employees and independent contractors. In England, an additional classifi cation exists whereby an individual can be an employee, a worker (enjoying limited employment entitlements) or an independent contractor. It is notable, however, that the Competition (Amendment) Act 2017 (the “2017 Act”) introduces the concepts of “false self-employed” and “fully dependent self- employed” categories of workers. The 2017 Act allows for collective bargaining among certain categories of “self-employed workers” by providing for exemptions for those workers from limited aspects of competition law. Bullying and harassment The Supreme Court decision in Ruffl ey v The Board of Management of Saint Anne’s School [2017] IESC 33 provides important clarifi cation in the law regarding claims for bullying and harassment, specifi cally in relation to distinguishing between fair procedures and bullying and, indeed, robust disciplinary action and bullying. In this regard, the Supreme Court has given useful guidance on the characteristics of a bullying claim. The Court emphasised the need to ensure an appropriate balance is struck between deterring damaging behaviour and compensating victims of serious wrongdoing. As such, the Court was alive to the risk of the law relating to bullying leading employers to avoid pressing disciplinary matters. In this case, the plaintiff had been a Special Needs Assistant in a school since 1999. The Board concluded following an investigation that she should receive a disciplinary sanction. She went on sick leave due to work-related stress which she claimed arose as a result of being bullied throughout the disciplinary process. In the High Court, she was awarded €255,276 for psychiatric injury and loss of earnings on the basis of “persistent inappropriate behaviour”. The Court of Appeal, however, determined that while the disciplinary process was “hopelessly fl awed”, it did not come “anywhere close to the defi nition of bullying”. The Supreme Court agreed that while “the procedure was clearly defective and liable to be so declared by any court”, the appellant had not satisfi ed the test for bullying and harassment.

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In coming to its judgment, the Supreme Court applied the established test in Quigley v Complex Tooling & Moulding Ltd [2009] 1 IR 349 and stated that to succeed in a bullying claim a plaintiff must establish repeated incidents of inappropriate behaviour each of which, on the basis of an objective standard, could be reasonably regarded as undermining the plaintiff’s right to dignity at work. However, the Court cautioned against viewing the components of the Quigley test as separate and self-standing issues as if in a statutory defi nition. O’Donnell J noted that in relation to the term ‘repeated’, it is not enough to point to two different events, but rather the focus is on a pattern of behaviour. Emphasis was also placed on the meaning of the term ‘dignity at work’, and the Supreme Court held that this is “behaviour which is inappropriate at a human level”. Charleton J remarked that conduct is to be judged according to “the standard of human beings, and not of angels”. While the Court acknowledged that denial of fair procedures is never a trivial matter, it could not in this case be said to undermine human dignity. The Court emphasised the importance of maintaining a distinction between a breach of procedures and a claim of bullying entitling a party to substantial damages, holding that it should not be assumed that there is a logical connection between the two. The Court acknowledged that there may be cases in which disciplinary procedures are invoked mala fi des such that a claim of bullying might be sustained on the facts, however, such a case would have to be explicitly made and then should be the subject of an express fi nding. Whilst signifi cant, Ruffl ey will not spell the end for claims of workplace bullying and employers must remain vigilant in managing potential claims and dealing with incidents of workplace bullying. The approach of the Supreme Court will assist employers in dealing with what might be described as retaliatory allegations of bullying and harassment in response to unwanted, but genuine, criticisms by managers for work performance. As such, Ruffl ey will give employers greater confi dence in moving forward carefully with fair and reasonable performance and disciplinary procedures. More recently, the High Court in Hurley v An Post [2017] IEHC 568 found the employer liable for the injuries suffered by an employee as the result of workplace bullying in circumstances where her colleagues systematically ostracised her and the employer was aware of the tensions in the workplace but failed to remedy them, having advised her to “give it time”. Physical symptoms, including neck spasms, could be traced to the PTSD caused by isolation at work. While the Company had relied on the failure of the plaintiff to engage its Dignity at Work Policy, the Court held the Company could not rely on this in circumstances where she was directed “to ride out the storm in the hope that it would pass” in relation to the alleged bullying complaint, which the Court determined was completely ineffectual and damaging to her. National minimum wage The Minimum Wage in Ireland increased to €9.25 an hour from 1st January 2017 and will increase further to €9.55 per hour on 1st January 2018.

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Mary Brassil Tel: +353 1 607 1279 / Email: mary.brassil@mccannfi tzgerald.com Mary is a Partner in McCann FitzGerald, specialising in employment, equality and industrial relations law. She has considerable experience in advising domestic and international clients on the employment law aspects of corporate transactions, including cross-border mergers, outsourcings, restructuring and redundancy programmes. Her practice includes representing employers in contentious employment law disputes. She advises on all matters arising out of the employer-employee relationship (such as drafting and negotiating contracts of employment, advising on the implementation of appropriate HR and IR policies and procedures and advising on termination of employment and restrictive covenants). Mary has signifi cant experience of advising clients in the fi nancial sector on executive remuneration. Mary writes and lectures widely and is a member of the International Bar Association (IBA) and European Employment Lawyers Association (EELA). Stephen Holst Tel: +353 1 511 1517 / Email: stephen.holst@mccannfi tzgerald.com Stephen is a Partner in McCann FitzGerald and advises on critical workforce, transactional and contentious issues in the workplace; in particular, on executive appointments and terminations; investigations; employee engagement; and the negotiation of employment documentation. Stephen’s dual-qualifi cation as a Chartered Tax Adviser provides an additional perspective in employee remuneration matters. Stephen has substantial experience before the employment law tribunals and the High Court (including the Commercial Court), as well as through mediation. He also advises on complex employee investigations, with a particular focus on whistleblowing. Stephen has signifi cant expertise in the employment and industrial relations aspects of acquisitions, outsourcings and restructurings, including on TUPE. Stephen advises employers establishing in Ireland and has particular expertise in Irish employment permit and immigration matters.

Mary Kelleher Tel: +353 1 607 1493 / Email: mary.kelleher@mccannﬁ tzgerald.com Mary is a Senior Associate in McCann FitzGerald specialising in both contentious and advisory work. Mary lectures and writes on employment related issues and is a member of the Law Society’s Employment and Equality committee and the Employment Lawyers Association Ireland. Mary co-authored the Irish chapter of The International Comparative Legal Guide to Employment and Labour Law 2017. Mary has considerable experience advising clients in both the public and private sector, both domestic and international, in respect of complex disputes, as well as in an advisory context. Mary advises extensively on equality and discrimination issues, issues arising under Fixed-Term legislation, workplace investigations related to complaints of bullying and harassment and disciplinary/ performance issues, enforceability of restrictive covenants, jurisdiction issues and the management of employee sickness absence. McCann FitzGerald Riverside One, Sir John Rogerson’s Quay, Dublin 2, Ireland Tel: +353 1 829 0000 / URL: www.mccannﬁ tzgerald.com

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Vittorio De Luca, Roberta Padula & Claudia Cerbone De Luca & Partners

General labour market and litigation trends The Organization for Economic Cooperation & Development (“OECD”), in its economic survey of Italy 2017 presented in Rome on 15th February 2017, stated that: “Structural reforms are starting to pay off: Italy has made remarkable progress on structural reforms; this has helped Italy to emerge from a deep and long recession” (Rome, OECD Economic Survey of Italy 2017). As a matter of fact, the last statistic published on 12th September 2017 by ISTAT (the Italian National Institute of Statistics), the main supplier of offi cial statistical information in Italy, revealed that, in the second quarter of 2017, there was neither new growth of the employment rate or a decrease of the unemployment rate. In particular, based on ISTAT researches, in the second quarter of 2017, employment‘s growth on a quarter-on-quarter basis has been +78,000 units, equal to +0.3%, due to a further increase of employees (+149,000, +0.9%) – in more than 8 out of 10 cases – with a fi xed-term contract (+123,000, +4.8%). The self-employed continued to decrease (-71,000, -1.3%). The employment rate grew by 0.2 points compared to the previous quarter. In July 2017, ISTAT registered an increase of employed persons (+0.3% on June, corresponding to +59,000 units), involving both employees and freelances. From an employment law standpoint, a few deep reforms have been implemented in the current decade. The most signifi cant steps of the reform are: • Law 183/2010 which has introduced very strict limitation periods for – inter alia – objection to dismissals, thus limiting substantially the uncertainty for employers and the duration of court proceedings; • Decree Law 138/2011 which has introduced the possibility for trade union agreements to derogate in pejus to National Collective Agreements, thus allowing general industry provisions to adapt to specifi c exigencies of companies; • Law 92/2012 (so-called “Riforma Fornero”) which has dramatically reduced the cases in which reinstatement applies to unfair dismissals and introduced defl ationary tools of litigation; • Decree Law 38/2014 which has liberalised fi xed-term contracts, by cancelling the need to have or to specify in employment agreements the reasons for the term; and • the “Jobs Act”, a wide reform including eight decree laws implemented in 2015 concerning most areas of employment law (Decree Laws 22, 23, 80, 81, 148, 149, 150 and 151). It is not therefore by chance that, since 2011 (before the “Riforma Fornero”) until 2014, the number of pending labour proceedings at fi rst instance collapsed by more than 50%:

GLI - Employment & Labour Law 2018, Sixth Edition 116 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London De Luca & Partners Italy from 599,306 in 2011 to 249,578 in 2014, and the number of proceedings that ensued was reduced by half: from 247,425 in 2011 to 120,720 in 2014. It is also not therefore by chance that the duration of employment court litigations is impressively reduced as, on average, in Italy, it takes one year and three months to get to a ﬁ rst degree decision; today reduced to eight months in Milan (annual ranking published in March 2017 by Mr. Fabio Bartolomeo, in charge of the statistics and analysis ofﬁ ce of the Ministry of Justice).

Protection against unfair dismissals Under Italian Labour Law, any dismissed employee who deems his/her termination not properly grounded is entitled to bring an action before the Labour Court in order to challenge it. The Jobs Act reform – in particular, Legislative Decree no. 23/2015 – has introduced a new regime for individual and collective unfair dismissal, aimed at reducing the circumstances of reinstatement and making the consequences, in cases of unfair dismissal, more certain and assessable. The mentioned Decree introduced into the Italian labour market the open- ended employment contract, with protection increasing based on seniority (so-called “Increasing Protection Contract”). The Jobs Act provision is applicable to: • employees hired under an undetermined time contract starting from 7th March 2015; • employees hired before 7th March 2015, under a ﬁ xed-term employment contract converted into an undetermined time contract after 7th March 2015; and • apprentices hired before 7th March 2015 with an apprenticeship contract converted into an undetermined time contract after 7th March 2015. Moreover, the dismissal of employees who are already in employment on 7th March 2015 will be subject to the new rules if the employer’s workforce exceeds the legal threshold set out under Art. 18 Law no. 300/1970 (i.e., more than 15 employees in the business unit or in the same municipality, or more than 60 in the entire company) as a consequence of any new employee hiring. Finally, the Jobs Act has deﬁ nitively abolished the protections stemming from Article 18 of Law 300/1970 removing reinstatement for employees enrolled from the Jobs Act onward, unless the lay-off is served in some residual circumstances described below.

Consequences for the employer in case of unfair dismissal In the event of void, oral and discriminatory termination, the employer would be sentenced to the following consequences: (i) reinstatement of the dismissed employee in the previous job position. In this case, the employee may waive the right to reinstatement, electing to receive (in lieu of reinstatement) an additional compensation equal to 15 monthly instalments; (ii) payment of the remuneration accrued from dismissal to the reinstatement (plus social security due thereon) to an extent, however, not less than ﬁ ve monthly instalments. In addition to the cases described above, according to the Jobs Act, reinstatement (which also may be replaced by compensation in lieu equal to 15 months’ salary, at the request of the employee) will be applicable for dismissal for subjective reasons or for just cause, where it has been proven that “the complained material fact is inexistent”. In this case the employee,

GLI - Employment & Labour Law 2018, Sixth Edition 117 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London De Luca & Partners Italy along with the reinstatement, is entitled to the payment of an indemnity which cannot exceed 12 months’ pay, plus the relevant social security contribution due for the entire period. In any other case of unlawful dismissal, employees’ protection only consists in the entitlement to an indemnity. In particular, when the dismissal – whether for subjective or for objective reasons – is declared unlawful by the Court, employees are entitled to an indemnity equal to two months’ salary for each year of service, with a minimum of four months and a maximum of 24 months. The Law speciﬁ es that the mentioned indemnity is not subject to social security contributions. Moreover, when dismissals have been notiﬁ ed in breach of the procedure provided by the law, the employee is entitle to an indemnity amounting to one month’s salary for each year of service, with a minimum of two months and a maximum of 12 months. Also in this case, the mentioned indemnity is not subject to social security contributions. For companies staffed with up to 15 employees, the amount of the indemnity is halved, and in any case it cannot exceed six monthly instalments. Reinstatement is foreseen only for discriminatory or void dismissals.

Termination settlement offer To employees hired as of 7th March 2015 a special termination settlement procedure introduced by the Jobs Act is applicable, having the purpose to settle any possible dispute arising from the dismissal. Based on this procedure, the employer has the opportunity to offer, within 60 days from the day on which the dismissal is served (for any reasons), a settlement compensation to the employee equal to one monthly salary per each year of service, with a minimum of two and a maximum of 18 months. This amount is halved – and it cannot exceed six monthly instalments – for employers staffed with up to 15 employees. It is worth noting that the settlement compensation is exempted from income tax (so-called “IRPEF” in the Italian tax law) and social security contributions and shall be immediately paid to the employee by cashier’s check within one of the so-called “protected ofﬁ ces”, set out under law (i.e. union associations, the local public labour ofﬁ ce, agencies provided for under the collective bargaining agreements, etc.). The acceptance of the offer entails the termination of the employment relationship and the waiver of whatsoever claim related to the dismissal. Additional compensation paid as part of the settlement deal (i.e. for the employee to waive all rights in relation to the former employment such as, for example, non-paid overtime and alleged demotions) will be subject to the ordinary tax treatment.

Collective dismissal As well as for individual dismissal, by means of the Jobs Act reform, reinstatement is no longer a remedy also for unlawful collective dismissal – unless for collective dismissal served in oral form – and the employer is subject to pay only an economic indemnity, depending on the employee’s length of service. Pursuant to Article 24 of Law 223/1991, the dismissal of ﬁ ve or more employees in the same business unit, within a period of 120 days, due to a reduction/reorganisation/shutdown of the company’s business, amounts to a collective dismissal.

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The collective dismissal can be lawfully implemented only once a mandatory procedure has been properly fulfi lled in accordance with Articles 4 and 24 of Law no. 223/1991. The procedure begins with the employer submitting a written notice to the works councils (if any) or to the Trade Unions to inform them of its intention to carry out a collective dismissal. The Jobs Act reform provided that for the fi rst time, executives have to be included in the calculation that triggers a collective dismissal, and that employers will need to set up a separate negotiation with the Trade Unions for the executives. Unless a termination agreement is reached, employees dismissed can individually or collectively challenge the dismissals given within 60 days from receipt. Failing a settlement after such challenge, the employees can trigger a court procedure within 180 days following such challenge. As anticipated, as well as for individual dismissal, also in case of collective dismissal, should the dismissal be deemed as unfair by the Court, the consequences for the employer depend on the date of hiring (before or after the enforcement of Jobs Act). Therefore, after the enforcement of Jobs Act (i.e. for employees hired after 7th March 2015), pursuant to Article 5, co. 3, Law no. 223/1991, in case of breach of the mandatory procedure and/or non-compliance with the selection criteria, the only consequence for the employer is the payment of an indemnity equal to two monthly instalments per each year of service, with a minimum of four and a maximum of 24 months. As for the individual dismissal, the restatement (or payment equal to 15 months’ pay) is always granted in case of discriminatory dismissal or if the dismissal is not notifi ed in writing. In such case the Labour Court nullifi es the unfair dismissal and the employer is also obliged to compensation for the damage suffered from unfair loss of job, in any case not less than fi ve months’ pay, and to pay social contribution and compulsory insurance.

Fixed-term employment contracts The fi xed-term contracts are disciplined by the Legislative Decree no. 81/2015, implementing the Jobs Act. Fixed-term contracts can last up to 36 months, including any extension. It is worth noting that periods of mission concerning duties of the same level and legal category, performed by the same parties, within a fi xed-term staff supply contract, are taken into account in the calculation of the maximum duration of 36 months. Fixed-term contracts are not allowed in the following circumstances: (a) to replace employees exercising the right to strike; (b) to replace employees affected by a collective dismissal in the past few months; (c) to replace employees suspended from work (or subject to a working time reduction) due to temporary lay-offs; and (d) for employers who are not compliant with work safety obligations set under Legislative Decree no. 81/2008. Quantitative limits are normally set by national collective agreements; otherwise, failing such provision in the national collective agreements, the law states that the overall number of fi xed-term contracts may not exceed the 20% threshold of the workforce hired with an undetermined time employment contract at 1st January of the year of hiring (of the fi xed- term employee).

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Fixed-term contracts are exempted from quantitative limits, in specifi c cases provided by the Law (e.g. in the start-up phase of new activities or performance of seasonal activities). The extension of the contract is possible for employment relationships not exceeding 36 months, up to a maximum of fi ve times over a 36-month period. If the number of extensions exceeds the fi ve times, the contract is deemed to be an undetermined time contract from the date on which the sixth extension commenced. Renewal of a fi xed-term contract between the same parties is allowed, but a timeframe between the old contract and the new one has to be observed: in particular, (a) 10 days, for employment contracts up to six months; and (b) 20 days, for employment contracts of over six months. In case of violation of the above-mentioned terms, the law states that the new contract shall be considered an undetermined time contract. The new rule confi rms that the employment can continue beyond the period originally established between the parties: (a) for 30 days, for employment contracts up to six months; and (b) for 50 days, for employment contracts of over six months. In this case, the employee is entitled to a supplementary wage. In case of exceeding the above-mentioned terms, the contract is deemed to be an undetermined time contract starting from the expiration of the terms above. Finally, for 12 months after termination of a fi xed-term contract, individuals employed for at least six months have preferential rights to re-employment under an undetermined time contract with reference to the same duties performed during the fi xed-term employment relationship.

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Vittorio De Luca Tel: +39 02 3655 6532 / Email: [email protected] Managing Partner, Vittorio De Luca advises corporations and private equity funds, in conjunction with law fi rms within the framework of international transactions involving multiple jurisdictions both in restructurings and in M&A transactions. Thanks to his degree in Jurisprudence and Economics, he is highly skilled in understanding business needs. He is regularly involved in primary reorganisations, M&A, restructuring and private equity transactions. He collaborates regularly with “Il Sole 24 Ore” and he is author of articles in the specialist press. He is interviewed in mass media journals and is a regular contributor to conventions. He is member of AGI (Italian Employment Lawyers Association), EELA (European Employment Lawyers Association), ABA (American Bar Association) and IBA (International Bar Association). He was shortlisted for Lawyer of the year for Industrial Relations by Legalcommunity Labour Awards 2017 and was recognized among Leaders in their Field by Chambers and Partners 2016. He was awarded with the international recognition award “Le Fonti” as Employment Lawyer of the year 2015 for Labour Law and Industrial Relations and has been mentioned among “Top Management” employment lawyers by Legalcommunity Labour Awards 2013. Roberta Padula Tel: +39 02 3655 6528 / Email: [email protected] Associate, Roberta Padula graduated magna cum laude in Law from the University of Palermo in 2009 and has been admitted to the Palermo Bar since 2013. She joined De Luca & Partners law fi rm in 2016, after having gained experience working in an important law fi rm specialised in Labour and Employment Law and, subsequently, in an important international law fi rm. Roberta specialises in all the most important matters dealing with Employment Law and Industrial Relations, supporting Italian and foreign companies on day-to-day advice, and on both contentious and pre-contentious matters. She is author of several articles on Employment law topics issued on legal magazines. She speaks English fl uently. Claudia Cerbone Tel: +39 02 3655 6526 / Email: [email protected] Associate, Claudia Cerbone graduated from the Cattolica University in Milan in 2013 and she is a member of the Bar Association of Milan since 2017. Claudia began her professional career at Pavesio & Associati in association with Allen & Overy, in the labour law department, and then she joined De Luca & Partners. Over the years Claudia has gained experience in all the most important matters dealing with Employment Law, by providing advice and assistance to Italian and foreign clients, both in extrajudicial and judicial legal activities, and providing advice on individual or collective dismissals and on consensual resolution of the employment relationship. She is author of several articles on Employment law topics issued on legal magazines. She speaks English fl uently. De Luca & Partners Largo A. Toscanini, 1 Milan, Italy Tel: +39 02 3655 651 / Fax: +39 02 3655 6505 / URL: www.delucapartners.it

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Daisuke Mure & Ryotaro Yamamoto Oh-Ebashi LPC & Partners

Introduction Japan is facing various labour-related issues associated with its aging society which is producing fewer children. Among other things, the low productivity of labour, the difference in working conditions between full-time and non-fi xed-term employees (the “Regular Employees”) and part-time and/or fi xed-term employees (the “Non-Regular Employees”), infl exible workstyles, and lower employment mobility, are some of the major issues currently being discussed. Prime Minister Shinzo Abe and his Cabinet have vigorously promoted “workstyle” reforms, which are expected to tackle the social issues mentioned above, and are currently in the process of amending several aspects of the relevant regulations. As of the date of this article, although the relevant bills have not yet been passed by the Diet, the basic objectives of the reforms have already been presented and the relevant bills are expected to be passed by the Diet in fall 2017. Therefore, among other topics, in this article, we would like to cover the following, which will have a signifi cant impact on the labour market and are directly related to the reforms: 1. Development of the legal system for equal pay for equal work. 2. Overtime limits on working hours. Additionally, fi ve years after the enactment of an important amendment to the Labour Contract Act (the “LCA”), fi xed-term employees will now become entitled to convert their labour contracts to contracts without a fi xed-term contract starting on April 1, 2018. As most employers employ fi xed-term employees and will thus be facing this conversion, we will provide an explanation on this topic as well: 3. Conversion of a fi xed-term labour contract to a labour contract without a fi xed term.

Development of the legal system for equal pay for equal work Background and timeline of the discussion on the issue The decline in the number of children in Japan is a serious social problem. The current tendency to pay lower wages to Non-Regular Employees has been considered as one of the causes of this social problem, since Non-Regular Employees account for around 40% of Japan’s total worker population. The low income, with little hope to increase salaries, has denied the younger generation the option of having children. The Japanese government aims to raise the salary levels of Non-Regular Employees and balance them with those of Regular Employees in order to tackle this social problem. The government thus declared the principle of giving equal pay for equal work as one of the objectives of its policy in 2016.

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On June 16, 2017, the Labour Policy Council proposed the “Development of the Legal System for Equal Pay for Equal Work” (the “Equal Pay for Equal Work Proposal”) to the Minister of Health, Labour and Welfare. As a matter of practice in Japan, in amending labour- related laws, a bill is usually drafted based on the proposal of the Labour Policy Council, composed of representatives from public interest groups, employees and employers. Thus, although the bill may still be subject to revisions through the deliberations at the Diet, the Equal Pay for Equal Work Proposal already outlines the scheduled amendment to the labour-related laws that will enhance equal pay for equal work by improving the working conditions of Non-Regular Employees. On December 20, 2016, the Japanese government issued the “Draft Guidelines for Equal Pay for Equal Work” (the “Draft Guidelines”). The Draft Guidelines provide the administrative interpretation on whether the difference in the working conditions between Regular Employees and Non-Regular Employees is considered reasonable or unreasonable. The Equal Pay for Equal Work Proposal mentions that the Draft Guidelines will be amended and fi nalised by the Labour Policy Council to refl ect the discussions at the Diet in order to ensure the effectiveness of the fi nalised guidelines. Prior to the announcement of the Equal Pay for Equal Work Proposal, on March 8, 2017, the study panel at the Ministry of Health, Labour and Welfare (“MHLW”), composed of experts (the “Study Panel”), issued the “Study Panel Report on the Implementation of Equal Pay for Equal Work” (the “Study Panel Report”). The Study Panel has met 14 times since the administrative policy speech by Prime Minister Shinzo Abe on March 23, 2016. Soon after the publication of the Study Panel Report, on March 28, 2017, the government’s Council for the Realization of Work Style Reform announced the “Action Plan for the Realization of Work Style Reform” (the “Action Plan”), and one of the two main issues in the Action Plan is equal pay for equal work. As the timeline above implies, the Equal Pay for Equal Work Proposal is based upon the discussions at the Study Panel and refl ects the Action Plan above. In terms of the schedule, the Japanese government is planning to draft an outline of the bill and submit it to the extraordinary Diet to be held in the fall of 2017, after the second consultation of the Labour Policy Council. Outline of the Equal Pay for Equal Work Proposal Although the Equal Pay for Equal Work Proposal covers various aspects, in this article, we will introduce the contents of the Equal Pay for Equal Work Proposal in relation to: (i) the working conditions of part-time employees and fi xed-term employees; and (ii) the working conditions of dispatched employees. Under the current regulations, the difference in the working conditions between Regular Employees and Non-Regular Employees should not be unreasonable, taking into consideration the following items, set forth under Article 8 of the Act on Improvement, etc. of Employment Management for Part-Time Workers (Act No. 76, 1993) (the “Part-Time Workers Act”) and Article 20 of the LCA (Act No. 128, 2007), both as amended from time to time (the “Proportionate Treatment Provision”): (i) scope of work and responsibility; (ii) range of change in the scope of work and job assignments by the employer; and (iii) others. In interpreting the Proportionate Treatment Provision, the following two distinct approaches have been set forth in recent lower court cases:

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(i) The fi rst approach is to determine whether the difference in the working conditions is deemed unreasonable by looking at the working conditions of the Regular Employees and Non-Regular Employees entirely and wholly. (ii) The second approach is to determine the unreasonableness by considering the specifi c working conditions and their nature and purpose. The Equal Pay for Equal Work Proposal clearly supports the second approach above and suggests that the existence of unreasonableness should be determined based on the particular working conditions and by considering the nature and purpose of such working conditions. Further, the Equal Pay for Equal Work Proposal mentions that the nature and purpose of the working conditions should be judged not by what they are called but by how the working conditions are implemented in reality. The Equal Pay for Equal Work Proposal also requires employers, upon the request of a Non-Regular Employee, to explain why their working conditions are different from those of a Regular Employee and the reason for such difference. The same obligation is already provided in the Part-Time Workers Act, and the Equal Pay for Equal Work Proposal requests that the same obligation be applied to fi xed-term employees. In addition to the Proportionate Treatment Provisions, the Part-Time Workers Act prohibits any discriminatory treatment against part-time employees if (a) their scope of work and responsibility, and (b) the range of change in their scope of work and job assignments by the employer are the same (the “Same Treatment Provision”) as Regular Employees. As there is no Same Treatment Provision currently applicable to non-fi xed-term and fi xed-term employees, the Equal Pay for Equal Work Proposal requests that full-time and fi xed-term employees should also be covered and protected by the Same Treatment Provision. Compared with the issues relating to the working conditions between Regular Employees and Non-Regular Employees, the situation of dispatched employees is different, as dispatched employees are legally employed by a dispatching company and not by the company where the dispatched employees are working (the “Receiving Company”). Under current regulations, a dispatching company is obliged to take proper care in determining the compensation of the dispatched employee by considering the scope of work, the work achievements, motivation, experiences, ability and level of compensation of an Regular Employee hired by the Receiving Company who is engaged in the same sort of work, as well as the level of compensation of employees who are engaged in the same sort of work at the Receiving Company. Due to the characteristics of the current regulations mentioned above, the regulations are not supported by sanctions and the Equal Pay for Equal Work Proposal stipulates the following two different approaches to improve the working conditions of dispatched employees, depending on which of the following approaches is chosen by an employer: (i) The fi rst approach is to establish the same provisions as those under the Proportionate Treatment Provision and Same Treatment Provision, which may be applied to the differences in the working conditions between dispatched employees and employees at the Receiving Company. (ii) The second approach is to execute a labour management agreement in order to ensure improvements in the working conditions. In terms of the fi rst approach, the Equal Pay for Equal Work Proposal also stipulates that in order to ensure proportionate and same treatment, which are required in the newly established provisions, the Receiving Company is obliged to provide information on the working

GLI - Employment & Labour Law 2018, Sixth Edition 124 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Oh-Ebashi LPC & Partners Japan conditions, including wages of employees at the Receiving Company. The dispatching company is prohibited from executing a dispatching agreement with the Receiving Company prior to receiving such information. However, it is important to note that the new obligations mentioned above will only be applicable if the fi rst approach is chosen. Regarding the second approach above, the labour management agreement between an employer and a representative of the majority of the employees needs to satisfy the following three conditions: (i) It must specify a wage level equal to or higher than that given to ordinary employees having the same work. (ii) It must correctly evaluate the scope and results of the dispatched employees’ work, the ability and the experience, etc. of the dispatched employees, and refl ect such results in their wages. (iii) The working conditions, other than wages, should not be unreasonable when compared with those of the Regular Employees employed by the Receiving Company. The Equal Pay for Equal Work Proposal suggests that provisions that will ensure enforcement by the administration, such as reporting obligations, administrative advice and guidance, should also be included. It also requires that Alternative Dispute Resolution should be made available to Non-Regular Employees so that they can easily seek a legal remedy at a lower cost burden. Regarding the schedule of implementation of the amended act to be drafted based on the Equal Pay for Equal Work Proposal, the Equal Pay for Equal Work Proposal requires a suffi cient preparation period so that employers can analyse the reason for the differences in the working conditions between Regular Employees and Non-Regular Employees, and perform the necessary actions. Therefore, even though the new act will be passed by the Diet in autumn 2017, the possible date of entry into force will be April 2019, at the earliest. At the time of writing of this article, the draft amendment act has not yet been released. Due attention should therefore be given to the draft amendment act, as well as the discussions at the Diet and the possible revisions to the act that will refl ect those discussions.

Overtime limits on working hours Generally speaking, one of the social issues of Japanese labour is the long working hours compared to other countries, especially European countries, and the number of working hours of full-time work has not changed for over 20 years. For employees to achieve a balance between work and life, and to increase labour productivity, it is critically important to change such practice of long working hours. In particular, following the suicide of an employee of an advertising giant, which has been attributed to overwork, and which has been covered and reported by various news media, the absence of overtime limits on working hours has been one of the major controversial labour issues in Japan. In order for readers to understand the issue accurately, we would like ﬁ rst to illustrate the current regulatory outlines of working hours in Japan before moving on to explain the proposed amendment to the overtime limits on working hours. Current regulatory framework of working hours in Japan Under the Labour Standards Act (Act No. 49 , 1947) (“LSA”), the maximum regular working hours is forty (40) hours per week and eight (8) hours per day under Article 32, and at least one day per week must be provided as a statutory rest day. The LSA is not only a civil law that sets the minimum terms and conditions of employment, but it is also a criminal

GLI - Employment & Labour Law 2018, Sixth Edition 125 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Oh-Ebashi LPC & Partners Japan law. It prohibits employers from requiring employees to work in excess of the legally prescribed working hours and on rest days. Employers are subject to the penalty of a fi ne for violations of the LSA. Offi cers and directors in charge of human resource management are also subject to the penalties of fi nes and imprisonment for violating the LSA. However, as an exception to this general prohibition, pursuant to Article 36 of the LSA, employers may extend working hours or have employees work on rest days if the employer (1) enters into a labour-management agreement to permit overtime work (“Overtime Agreement”) with the representative of the majority of the employees, and (2) submits the Overtime Agreement to the labour standards inspection offi ce. In terms of the overtime limit on working hours, the MHLW may and has established standards for administrative guidance pursuant to paragraph 2 of Article 36 of the LSA (the “Current Overtime Standards”). The Current Overtime Standards are as follows: (i) 15 hours per week; (ii) 27 hours per two weeks; (iii) 43 hours per four weeks; (iv) 45 hours per month; (v) 120 hours per three months; and (vi) 360 hours per year. It should be noted that working hours on rest days are not included in the calculation of the above hours. The important point to bear in mind is that the Current Overtime Standards have no legally binding power that is derived from imposing penalties and, by establishing special clauses, which has no ceiling hours even in the administrative guidance, for temporary and special situations (the “Special Clauses”) together with Overtime Agreements, employers can lawfully and effectively make their employees work overtime without any limit. In other words, to date, no specifi c legal upper overtime limits have been imposed on companies that have concluded Overtime Agreements. Proposed amendments on overtime limits on working hours Upon the conclusion of the historic agreement on overtime limits between the Japan Business Federation or “Keidanren”, which is a powerful business lobby group in Japan, and the Japanese Trade Union Confederation or “Rengo”, which is the largest national trade union centre, on March 13, 2017, the Labour Policy Council proposed the “Maximum overtime regulations and other guidelines” (the “Proposed Overtime Regulations”) to the MHLW on June 5, 2017. The Proposed Overtime Regulations provide for an amendment to the current regulatory framework, and recommend that the Current Overtime Standards be made into law with legally binding power. If adopted, the amended standards will set regulatory limits on working hours, which cannot be exceeded even by establishing Special Clauses. The Proposed Overtime Regulations clearly state that, in principle, the overtime limits should be 45 hours per month and 360 hours per year, which are the same as the Current Overtime Standards, and a breach of these limits shall be subject to criminal penalties except for cases falling under the exception. The exception will apply where a labour-management agreement is established for temporary and special situations, however, even in the case of an exception, overtime working hours should not exceed 720 hours per year.

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In addition to the above limitation, the Proposed Overtime Regulations recommend that within the 720-hour limit, the following limits shall apply: (i) not more than 80 hours per month (including working hours on rest days), on average, for any 2, 3, 4, 5 or 6-month period; (ii) less than 100 hours (including working hours on rest days) per month; and (iii) less than six times when the working hours may exceed 45 hours per month, which is the principal limitation. In addition to the limits on working hours stated above, the Proposed Overtime Regulations recommend that new administrative guidelines be issued based on and in accordance with the LSA to make extensions of working hours as short as possible, and the relevant administration should have the necessary authority to advise and direct employers. Timing of the implementation The Proposed Overtime Regulations request employers to strengthen their system of monitoring the health of employees to spot those with a high risk of becoming ill with a serious disease due to long hours of work. Since the proposed amendments will especially have a huge impact on mid- to small-size companies because they are suffering from a shortage of employees more than the big companies, the Proposed Overtime Regulations require a suffi cient preparation period before the amendments are implemented, and that the enactment date be on the fi rst date of the fi nancial year (April 1 in Japan). Advanced Professionals System At the same time as the implementation of the new strict overtime limitation on working hours explained above, it is proposed that a Specifi c Highly Specialised Work and Results Type Labour System (the “Advanced Professional Labour System”) be established in order to meet the needs of employees who wish to be rewarded based on their performance instead of on the basis of the length of time spent in their work. Under the Advanced Professional Labour System, the relevant employees are exempted from the regulations on overtime and overtime and rest day payment, subject to some conditions. The purpose of the Advanced Professional Labour System is to break the link between wages and the length of time spent working, while achieving healthy work-life balance for the employees who have specifi c job scopes and advanced vocational skills and meet a certain annual income requirement (e.g., no less than 10 million yen).

Conversion of a fi xed-term labour contract to a labour contract without a fi xed term The LCA was amended in 2012. Article 18, which is one of the Articles added through the amendment, was enacted in April 1, 2013. Article 18 grants employees the right to convert their fi xed-term labour contracts to labour contracts without a fi xed term. The reason why Article 18 was enacted is explained as follows: in Japan, the LSA and other related labour laws contemplate that, in principle, an employment contract should not have a fi xed term. This means that an employment contract with a fi xed term should be the exception, although the LSA does not prohibit fi xed-term employment. In fact, there is no rule on the minimum length of a fi xed-term contract; therefore, it is possible to hire people for only one (1) day. On the other hand, there is a regulation on the maximum length of a fi xed-term employment, which is three (3) years, subject to some exceptions.

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Traditionally, Japanese companies have hired employees without a fi xed term on a full-time basis. Such employees are regarded as Regular Employees, who may continue to work for their employer until they reach retirement age, which is usually sixty (60) years old. This was stipulated in the employment rule. After the ‘bubble’ era, which was in the late 1980s and early 1990s, companies started to increase their ratios of employees with fi xed terms to Regular Employees, in order to reduce human resources costs. As a result, the ratio of Regular Employees versus Non-Regular Employees has decreased. This Article 18 is one of the judicial measures to make the principle of labour laws prevail again and protect the interests of Non-Regular Employees. Section 1, Article 18 states that: If a Worker, whose total contract term under two or more fi xed-term labour contracts (excluding any contract term which has not started yet; the same applies hereinafter in this article), which are concluded with the same Employer (referred to as the “total contract term” in the next paragraph), exceeds fi ve years, applies for the conclusion of a labour contract without a fi xed-term before the date of expiration of the currently effective fi xed-term labour contract, to begin on the day after the said date of expiration, then it shall be deemed that the Employer accepts the said application. In this case, the labour conditions for the said labour contract without a fi xed-term will be the same as the labour conditions (excluding the contract term) of the currently effective fi xed- term labour contract (excluding parts separately provided for in the said labour conditions (excluding the contract term)). Typically, the term of a Non-Regular Employee’s contract is one (1) year starting from April 1st and ending on March 31st. As explained above, the amendment was enacted in April 2013, and this coming April 1, 2018 will be the fi rst day when a conversion may be executed under Article 18. In case the conversion is executed by the Non-Regular Employees, employment contracts without a fi xed term are deemed agreed, and their employment contracts will become employment contracts without a fi xed term no later than the expiry of the original fi xed term. This means that the employer will then have to employ them until they resign voluntarily or reach retirement age (if any). This could have a signifi cant long-term effect on the employer’s human resources policy and/or system. Thus, currently, most employers are urged to prepare for the commencement of the conversion to employment contracts without fi xed terms. Article 18 allows the employer to alter the employment conditions applicable to converted employees without fi xed terms. If the employer establishes employment rules (“shugyo- kisoku”) for the converted employees without fi xed terms beforehand, then such a rule will be applicable to the employees after the conversion. Without such employment rules, the employment conditions will be the same as those under the fi xed-term employment contract. Considering it is probable that converted employees without fi xed terms will continue to work for the employer for quite a long term, the employment conditions should be more fl exible than they were before the conversion. In most cases, a Non-Regular Employee’s job description and work location, etc. are not expected to be changed during their employment. However, if they are converted to employees without fi xed terms, such infl exibility will become a burden on the employer’s management. Therefore, the employer should have the authority to alter the job description, work location, and so on in accordance with the necessities of its business and surrounding circumstances, in the same way as with its other Regular Employees. In addition, it is necessary to include a retirement age in the employment rules for converted employees without fi xed terms since, without such provision, the employer may end up

GLI - Employment & Labour Law 2018, Sixth Edition 128 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Oh-Ebashi LPC & Partners Japan having too many elderly employees who will remain employed until death and/or disease prevents them from working. This new entitlement is a threat to employers, since it may deprive them of fl exibility in their head count, resulting in an increase in human resources cost over a long period. Such threat has urged employers to convince their Non-Regular Employees to give up and/or waive the execution of a conversion in advance, and sometimes such employers have used a revised form of employment contract with a fi xed term into which a waiver clause is inserted. Please note, however, that any waiver executed in advance is deemed to be null and void due to a violation of public order and morality. Article 18 of the LCA is a mandatory rule of employment. Nevertheless, employees may still choose to abandon and not exercise their right of conversion, as this remains as a privilege in favour of employees. Is it possible for employers to create some negative incentive to be provided in the employment rule for converted employees without fi xed terms? For example, wages will become lower if a Non-Regular Employee converts to an employment contract without a fi xed term. The answer to this will be negative. Employers have to keep in their minds that Article 7 of the LCA requires employment rules to be reasonable in order to be valid and binding on the employees. Decreasing wages, without a reasonable reason, will be deemed invalid and will not bind employees who convert to contracts without fi xed terms. There are three special categories that are excluded from this fi ve (5)-year rule of conversion. The fi rst category is a professor and/or a lecturer who is engaged in research and/or educational activities in universities. The next category is a researcher or engineer engaged in science and technology (including those in human resources assisting in the study, research or development of science and technology) and who works for the Research and Development Agency or University, etc. with a fi xed term. This second category also includes a person who engages in the planning of the popularisation or practical application of results, securing funding, acquiring and utilising intellectual property rights concerning science and technology studies, research or science and technology development; or administration and management of the popularisation or practical application of results (limited to those that require expert knowledge and capability), and works for the Research and Development Agency or University, etc. as an employee with a fi xed term. If any employees fall within those two categories, it will take them ten (10) years, not fi ve (5), to obtain the right of conversion of their employment contracts. The last exception is elderly employees. Employers should hire retired employees, at least until they reach the age of sixty-fi ve (65). Ordinarily, elderly employees are rehired as employees with fi xed terms after they reach retirement age. This continuous hiring obligation, which was developed to cure the defi cit in the public pension fund, imposes a burden on the employer. Therefore, the Special Act allows the employer to avoid the application of Article 18 of the LCA, but only if the employer fi les a plan and application with the government and obtains an approval from the Minister of Health, Labour and Welfare. Such a plan should include the consideration for the job assignment, the job description, and the working environment for the retired and rehired employees with fi xed terms.

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Daisuke Mure, Partner Tel: +81 6 6208 1419 / Email: [email protected] Daisuke Mure is a partner in charge of labour and employment law at Oh- Ebashi LPC & Partners. He has provided various employers with legal advice on a variety of issues and projects relating to labour and employment law in Japan, as well as in foreign countries. The industries that his client-companies are involved in cover a broad area (pharmaceutical, telecoms, electronics, trading, transportation, airlines, energy, real estate, food and entertainment, educational enterprises, medicine, etc.), and include Japanese subsidiaries of global enterprises. He was admitted to practice in Japan in 2000 and joined Oh-Ebashi on the same year. He graduated from the University of Tokyo (LL.B.) in 1998 and received his LL.M. degree at the University of Michigan Law School in 2007. He is also admitted in the state of New York, since 2008. He has taught as an adjunct instructor on employment law at Kyushu University, LL.M. Program since 2010, and is a member of the Japan Labour Law Association, Management Lawyers Council, and International Bar Association (IBA).

Ryotaro Yamamoto, Senior Associate Tel: +81 3 5224 5556 / Email: [email protected] Ryotaro Yamamoto is a senior associate at Oh-Ebashi LPC & Partners. He has a wide range of experience in HR matters, advising both domestic and international clients. The employment matters he has engaged in include, among others, the major restructuring and consolidation of Japanese subsidiaries of foreign clients, litigation on the validity of the dismissal and non-compete clause of a foreign management ofﬁ cer, and providing advice on how to establish a Japanese subsidiary both from an employment and contractual perspective. He graduated from the University of Keio (B.A. (Policy Management)) in 2004 and Nagoya University Law School in 2007. Prior to joining Oh-Ebashi in 2015, he worked for Linklaters and White & Case, Tokyo. He has taught as an adjunct instructor at the Faculty of Policy Management, Keio University (Laws related to ventures) and School of International and Area Studies, Tokyo University of Foreign Studies (Business laws) since 2016.

Oh-Ebashi LPC & Partners Nakanoshima Festival Tower 27F, 2-3-18 Nakanoshima, Kita-ku, Osaka 530-0005 / Kishimoto Building 2F, 2-2-1 Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan Tel: +81 6 6208 1500 (Osaka) / +81 3 5224 5566 (Tokyo) / URL: www.ohebashi.com

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Sean Hayes, SJ Kook & Jeongha Lee SJ Law Firm Int’l Practice Group (IPG Legal)

General labour market conditions & litigation trends Election of progressive President Jae-in Moon The election of progressive President Jae-in Moon, after the impeachment and imprisonment of the conservative former president, led to, among other progressive proposals, pledges from the President Moon Administration of sweeping changes to Korea’s Labour & Employment Law. The following are the major changes proposed by the Moon Administration: 1. 810,000 new jobs via enlarging Korea’s public sector President Moon vowed to create over 340,000 new government social service jobs and over 140,000 new government jobs in public safety and security, while converting 300,000 non-regular workers to permanent workers. A non-regular worker, in Korea, is a worker without employment security. Thus, the conversion of these workers from non-regular status to regular status shall provide for these workers the protection of Korea’s Employment Security System and, likely, increase the salary of these workers. 2. Imposition of limitations on the utilisation of non-regular workers President Moon has, additionally, vowed to propose a bill that some have named the “Special Act on Preventing Discrimination Against Non-Regular Workers”. This bill would, among other things, according to the President Moon Administration: a) impose limits on the use of part-time and fi xed-term workers to work that is only seasonal or temporary; b) mandate that all workers are paid an equal sum for equal work; c) impose fi nes on employers that employ too high a percentage of non-regular workers; and d) impose joint employer liability on companies using in-house contractors. 3. Expansion of childcare leave and benefi ts President Moon has promised to expand paid paternity leave and increase monetary benefi ts for childcare leave, along with other measures to improve living conditions for working parents. 4. Reduction of working hours in Korea The maximum weekly working hours, in most cases, under the present Korean law, is 52 hours. However, the lack of adequate documentation of hours, among other things, has led some labour lawyers to believe that workers involuntarily work, in

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many cases, far in excess of 52 hours each week. President Moon has pledged to require employers to adequately document hours worked, while promising to reduce overtime exemptions. Additionally, for parents with children under the age of eight years old, working hours are proposed to be reduced to six hours per day for up to 24 months without any pay cut by employers. 5. Imposition of a KRW 10,000 minimum wage by 2020 The present minimum wage is KRW 6,470. An annual minimum wage increase has been set until the KRW 10,000 minimum wage is met in 2020. Many employers are considering efforts, especially in the F&B industry, to reduce headcounts. 6. Expansion of the youth employment quota to non-government entities A youth employment quota, under present law, exists. However, this youth employment quota only applies to the government and government-controlled organisations. President Moon may expand the 3–5% quota to larger non-governmental entities. 7. Expansion of labour protection to insurance planners, delivery drivers and private teachers President Moon has vowed to expand labour law protections to workers that have been perceived to have been provided less protection under present law. These workers include insurance planners, delivery drivers and at-home private teachers. The details of this plan are not yet known. 8. Limitation or prohibition of the use of contracted workers for dangerous activities Outsourcing of dangerous activities is a common activity in Korea that has recently gained attention because of workplace safety issues. President Moon has vowed to ban the practice via added compensation and stricter protocols and the prohibition of contracting out certain dangerous activities. Labour market and economy (OECD statistics) The following are statistics from the OECD and the Ministry of Employment & Labour. A full statistical profi le for Korea may be found at: https://data.oecd.org/korea.htm and http://www.moel.go.kr/english/pas/pasMajor.jsp. • Korea’s population stands at 50.4 million (2016). • There is a 0.4% decrease in the population per year. • GDP is US$ 35,751 and rising (2016). • There is a 3.1% unemployment rate (may not capture the true picture because of calculation irregularities concerning youth unemployment) (2017). • Korea has the highest gender wage gap recorded by the OECD. • Korea has one of the lowest percentages of workers working for fi rms with over 300 employees recorded by the OECD. • There is a rapidly rising GDP per hour worked. • Korea ranks fi rst among the OECD countries in student mathematics scores. • Korea has one of the highest educated populations in the OECD. • Korea has low service sector effi ciency. • Korea has a high manufacturing effi ciency. • There has been a stable growth rate of around 3% per year. • There is low labour fl exibility in Korea. • Recent recorded labour disputes: • 2014: 111 labour disputes, with over 650,000 lost working hours. • 2015: 105 labour disputes, with over 440,000 lost working hours.

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• 2016: 120 labour disputes, with over 2,000,000 lost working hours. • Korea has low youth employment: • 2014: 40.7%. • 2015: 41.5%. • 2016: 42.3%. • 950,000+ Koreans receive unemployment beneﬁ ts (2016). Laws and regulations The basic source of Korea’s Labour & Employment Law derives from the Labour Standards Act of Korea (“LSA”) and enforcement decrees and regulations. The LSA, however, must be considered in consultation with the basic rights embodied within the Korean Constitution. Korean citizens have successfully challenged government regulations in cases concerning the freedom to work and similar protected labour law rights. Additionally, the Korean Labour & Employment Law embodies a large body of related laws, enforcement decrees, court judgments, the Korean Ministry of Employment & Labour’s guidelines and decisions rendered by the Korean Labour Relations Commission. Relations between an employee and an employer may be governed by collective bargaining agreements, employment agreements, employment rules, and the working relationship between the respective employer and the employee. What follows is a non- exhaustive list of the laws of the Republic of Korea related to the Korean Labour & Employment Law. Other relevant laws • Basic working standards: • Constitution of the Republic of Korea. • Labour Standards Act. • Minimum Wage Retirement Beneﬁ t Security Act. • Minimum Wage Act. • Act on the Protection of Dispatched Workers. • Industrial Safety & Health Act. • Protection of Fixed-Term & Part-Time Workers Act. • Wage Claim Guarantee Act. • Various health, environment and safety acts. • Various food and sanitation acts. • Numerous enforcement decrees and regulations for these acts. • Employment social insurances (four insurances): • National Pension Insurance Act. • Employment Insurance Act. • Industrial Accident Compensation Act. • Wage Claim Guarantee Act. • National, teacher, private and other pension acts and regulations. • Employee Welfare Fund Act. • Enforcement decrees and regulations for these acts.

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• Collective bargaining/unions: • Act on Promotion of Employee Participation and Cooperation. • Labour Union and Labour Relations Adjustment Act. • Establishment and Operations of Public Offi cials Trade Unions Act. • Enforcement decrees and regulations for these acts. • Employee administrative adjudications and basic policy: • Labour Relations Commission Act. • Framework Act on Employment Policy. • Enforcement decrees and regulations for the following: • Contracts. • Civil Act. • Commercial Act. • Discrimination, hiring guidelines and affi rmative action: • Prohibition of Age Discrimination in Employment and Aged Employment Promotion Act. • Vocational Security Act. • Equal Employment Opportunity Act. • Work-Family Balance Assistance Act. • Honourable Treatment and Support of Persons of Distinguished Service Act. • Act on the Promotion of Employment and Vocation Rehabilitation of Disabled Persons. Courts, Ministry of Labour & Employment and Korean government agencies Employees challenging actions by an employer may elect to bring cases concerning, in general, unjust dismissal by employers, disciplinary actions by employers, employer actions related to union activities, and complaints concerning discrimination to the Labour Relations Commission or to a court of law. The Labour Relations Commission is a branch of the Ministry of Labour & Employment. The Labour Relations Committee has an internal appeals process within district and central committees. The Labour Relations Commission has broad powers of investigation and may make decisions on matters under its jurisdiction. Appeals of Labour Relations Commission decisions may be brought to the Korean Administrative Court and, then, to the Supreme Court. For an employee fi ling directly to court, the process is threefold. The fi rst court is a Trial Court of First Instance (District/Branch Court), the second is a Trial Court of Second Instance (District Court or High Court), and the third is the Supreme Court. Some specifi c cases may be referred or brought directly to the Constitutional Court if a law or government action is being challenged which is based on protections under the Constitution. Additionally, some actions by an employer may be referred to the Korean Prosecution Services based on criminal sections in labour and related laws. Furthermore, the Ministry of Labour & Employment has broad investigative powers, including: the power of inspection of workplaces and records; interview of employees; and even limited prosecutorial powers under the Labour Standards Act. The Ministry of Labour & Employment also has substantial power in shaping law and resolving major, publicly reported labour disputes.

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Litigation trends in Korea Numerous landmark decisions have been handed down by the Supreme Court and lower courts over the past few years. We have chosen what we believe is the most noteworthy for readers. 1. Defi nition of “Ordinary Wage” Background The defi nition of “Ordinary Wage” was clarifi ed by the Korean Supreme Court in two decisions handed down on December 18, 2013. The calculation of an Ordinary Wage is important, since it is utilised to calculate statutory entitlements, and thus has an impact on the aggregate amount of contributions necessary to be paid to an employee. For example, according to Article 56 of the Korean Labour Standards Act, an employer must pay 50% of the “Ordinary Wage” plus the Ordinary Wage for overtime, night and weekend work performed by the employee. Because of the potential for a large unknown future liability, this became the most signifi cant issue in the last few years among domestic and foreign employers in the labour and employment law space. The basic test is that an Ordinary Wage is a payment that is “regular, uniform and fl at”. Obviously this “test” leaves much unanswered. The vagueness of this test has led to considerable litigation over the past few years. Additionally, the Korean courts have inconsistently interpreted the defi nition, thus leading to much confusion among practitioners. This confusion, coupled with the signifi cant burden on companies that may be imposed, led to a major lobbying drive by foreign and domestic companies to defi ne an “Ordinary Wage” in a consistent and regular manner. The test is unchanged with these decisions as described; however, the Supreme Court has made a useful list for lower courts. However, lower courts have continued to inconsistently apply the test. On December 18, 2013, the Supreme Court of Korea, in a case that we will call the Regular Interval Bonus Case, has delivered a couple more clear examples, as compared to the past, of cases where compensation was considered an “Ordinary Wage” under the Korean Labour & Employment Law. These cases, in this regard, are a great development in making the Korean Labour & Employment Law more consistent. In the Regular Interval Bonus Case, the employer in the case was providing a “regular bonus” every two months to employees. Seemingly, the major reason was in order not to increase the “Ordinary Wage”. Supreme Court Regular Interval Bonus Case The Court in the Regular Interval Bonus Case opined, in part, that: a) any collective bargaining agreement (labour management agreement or similar agreement) that deems a certain type of payment as not an Ordinary Wage is void and, thus, unenforceable under law. An exception is available for companies that have implemented this practice in particular limited situations based on the vague principle of “good faith and trust”; and b) payments paid at regular intervals are an Ordinary Wage. The specifi c examples below are key in understanding the decision. The Supreme Court remanded the Regular Interval Bonus Case to the High Court to determine if the “good faith” exception is applicable.

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Supreme Court Allowances Case The second case, which we will call the Allowances Case, utilised the Ordinary Wage defi nition and rationale given in the Regular Interval Bonus Case to opine that these allowances, when paid just for being employed for a certain period of time, shall not be considered “fl at” under the Ordinary Wage “regular, uniform, and fl at” defi nition. The Allowances Case was also remanded to the High Court to determine if the payments were only made because employees were employed for a certain period of time. These cases are important in Korean Labour & Employment Law jurisprudence, as they detailed situations that can and cannot be considered Ordinary Wage payments. Examples of payments to be considered an Ordinary Wage according to the Supreme Court Examples of payments that should be considered an “Ordinary Wage” include: a) Instalment Payments (e.g. payments made every other month/quarterly or otherwise regularly); b) Prior Year Incentive Pay (e.g. incentive pay based on work performed in the previous year); c) Present Year Incentive Pay if Not Based on Performance (e.g. all employees receive payment even if they rank at the lowest performance); d) Prorated Daily Wages; and e) Wages Based on Years of Employment. Example of payments not to be considered an Ordinary Wage according to the Supreme Court a) Present Year Incentive Pay Based on Performance; b) Non-Negotiated Wages (e.g. wages determined by future negotiations); c) Wages Paid Based on Working at a Fixed Date; and d) Wages Paid Based on Working for a Certain Number of Days. The Supreme Court ruled that the decision should not be applied by lower courts retroactively if: (a) the employer and the employee agreed not to include the disputed sum in the calculation of the Ordinary Wage (implicit or explicit agreement); and (b) the sum would cause “serious fi nancial diffi culty” or an “unexpected burden” to the employer. An agreement coupled with fi nancial hardship, the Supreme Court held, would equate to the employee not acting in “good faith”. The lower courts have inconsistently interpreted the test. Some court have placed a more signifi cant emphasis on “fi nancial hardship”, while others have placed a more substantial emphasis on “unexpected burden”. 2. Director as an employee for employment security purposes Background Employees may only be terminated for “fault attributable to the employee” or “urgent managerial necessity”. Article 27 of the Labour Standards Act also stipulates that all “employees” must be notifi ed in writing of the reason for the dismissal. In most cases, 30 days’ notice or 30 days’ pay in lieu of notifi cation is required. The burden is on the employer to prove the “justifi able grounds for termination”. Non-compliance by the employer shall lead to reinstatement of the employee and the payment of back pay. Directors are typically not deemed “employees” under Korean law. However, exceptions exist. Decisions by the Supreme Court/High Court The Supreme Court has noted that a director may be deemed an employee subject to the Employment Security Protection and other protections afforded under the Labour

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Standards Act. The Supreme Court has noted the following multi-factor test: a) Does the company have decision-making power over the work of the worker? b) Are the company’s work rules applied to the worker? c) Does the company have considerable control over the work processes of the worker? d) Does the company set the time and date and other specifi c work for the worker? e) Does the company own the work assets of the worker? f) Can the worker delegate to a third party the work of the worker? g) Does the worker have business risks associated with the tasks performed for the company? h) Are earnings based on work – not merely success? i) Does the worker near exclusively depend on work from the company? j) Is the work with the company continuous and thus not temporary? k) Is the worker deemed an employee under the Social Security System? The Seoul High Court ruled in favour of the “employee” Plaintiff in a recent case, noting that: “Although [the worker] and the others were in executive positions, they received instructions and approval from the Representative Director, Head Manager and so forth in order to carry on the business . . . [the worker] and the others received remuneration and retirement benefi ts, and vehicle and entertainment money and so forth . . . so in the circumstances it could not be denied that these workers were of the nature of employees. Therefore, without written notice, the dismissal of these people is invalid, so TongYang Group is ordered to pay unpaid wages for the period of the invalid dismissal in the amount of 1.1 billion won in salary until the date of reinstatement.” The Seoul High Court looked to these factors and, specifi cally, emphasised the fact that these workers’ “decision-making powers” were controlled by the company and “earnings” were based on work and “not merely success”. These “employees” under the Labour Standards Act received back pay and were reinstated. If not terminated properly under Korean law, payments will need to be paid to these employees until their retirement or lawful dismissal. 3. Legality of an employer lockout Background Because of a labour strike at a major automobile parts manufacturer and the physical blocking of the use of replacement workers and employer machinery, the employer implemented a partial unpaid lockout of certain employees (employees were employed by a unit of the employer), thus disallowing certain workers to enter the workplace in order to prevent further disruption of the manufacturing process. The employees physically blocked production and thus did not allow certain orders to be fulfi lled by the employer, thus affecting the employer’s business. Following the lock-out, the locked-out employees, on several occasions, expressed the desire to return to work while requesting that the lock-out be lifted. However, the employer determined that since the request was not made in good faith, the Defendant refused such request. However, the employer lifted the lock-out based on a provisional injunction nullifying the legality of the lock-out. This led the Plaintiffs, on the grounds that the lock- out was unlawful, to seek payment from the Defendant equivalent to wages they could have received had they been able to continuously work during the lock-out period.

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Decision by the Supreme Court The Supreme Court noted that: “As prescribed under Article 46 of the Trade Union and Labor Relations Adjustment Act, a lock-out can be acknowledged as a lawful industrial action by an employer only if there is reasonable ground (i.e., countermeasure against industrial action by workers), in light of the details of circumstances such as the negotiating stance and process between the employer and workers, the purpose and method of industrial action by workers, the impact on the employer therefrom, etc. However, lawfulness cannot be acknowledged in cases where a lock-out goes beyond the purpose of countering a trade union’s industrial action and constitutes a preemptive and aggressive lock-out for the purpose of weakening the union’s organizing ability. In such cases, an employer is not exempt from the duty of paying wages to workers during the lock-out period. Moreover, even if a lock-out conducted by an employer is deemed lawful in light of the details of the circumstances such as workers’ strike, in cases where the lock-out continues — albeit the workers having discontinued their strike after a certain point in time and expressed their genuine desire to return to work — and becomes aggressive with the purpose having shifted from countering the industrial action by workers to weakening the trade union’s ability to organize, lawfulness of the subsequent lock-out is lost and accordingly, the employer cannot be exempt from the duty of paying wages during the lock-out period.” Based on this rationale, the Supreme Court reversed the decision of the lower court, because, inter alia: “ . . .based solely on its stated reasoning, the lower court acknowledged the lawfulness of the Defendant’s lock-out, rather than conﬁ ning it (the lawfulness to the period prior to the promise of the employees to return to work) to the lock-out after March 2010. . . In so determining, it erred by misapprehending the legal principles as to the lawfulness of a lock-out, which led to a failure to exhaust all necessary deliberations, thereby affecting the conclusion of the judgment. The allegation contained in the grounds of appeal assigning this error is with merit.” Thus, the Supreme Court imposed the afﬁ rmative duty of an employer to “exhaust all necessary deliberations” even if it has indications that the representations of the employees are not in good faith.

Layoffs and dismissals based on the fault of the employee Under Article 24 of the Labour Standards Act, employees, in most cases, may only be dismissed for “just cause”. Just cause is defi ned, in short, as: “fault attributable to the employee” or an “urgent managerial need”. Layoffs: urgent managerial necessity Employers that intend to lay off workers must, fi rst, as an initial step, successfully assert that there is an urgent managerial necessity. The Supreme Court has noted that lower courts must consider the total situation of the company and that exhibition of fi nancial distress that is likely to lead to insolvency is not necessary in some cases. All employees must be notifi ed of the specifi c reasons for the layoff and be provided with 30 days’ notice or payment in lieu of the 30 days’ notice prior to the layoff. After the establishment of an “urgent managerial necessity” in cases where a certain defi ned and varying threshold is met, the employer must consult the Ministry of Employment.

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In all layoffs, an employer must “make every effort” to minimise the effects and scope of dismissals by considering, among other things, alternatives to dismissals including the payment of early retirement packages, a reduction of working hours, attempts at labour concessions, and the institution of a freeze on hiring new employees. Also, the criteria for layoffs must be “fair and reasonable” and within 50 days of the layoff the employer must consult with the employee(s) or their representatives. At-fault dismissal: fault attributable to the employee An employer must have a justifi able reason to dismiss a worker. Dismissal without a justifi able reason is a violation of the Labour Standards Act and may lead to reinstatement of the employee and an order for the payment of back pay by the employer. All employees, with the exception of certain employees not deemed as such for Labour Standards Act Security Protection purposes (e.g. probationary workers/short-term contract workers) shall be notifi ed of the specifi c reasons for their termination and provided with 30 days’ notice or payment in lieu of the 30 days’ notice. Even with a justifi able reason, an employee may not be terminated: • within 30 days of their return from maternity leave; or • within 30 days of their return from medical leave. The Supreme Court has not developed a specifi c one-size-fi ts-all defi nition of “justifi able reason”; however, it has noted that a “justifi able reason” must mean that it is impossible for an employer to maintain an employment relationship with the employee. This vague test has been applied to numerous cases and the following list details the most noteworthy cases detailing terminations that were deemed justifi able and thus in compliance with law: a) failure to follow the specifi c instructions of management; b) frequent unauthorised leaves of absence, leaving work early or coming to work late; c) grossly poor performance; d) physical violence at work; e) criminal offences outside the workplace that may harm the reputation of the employer; f) frequent violations of company rules; g) intentionally or recklessly causing fi nancial/reputational damage to the employer; h) causing fi nancial damages to the company; and/or i) falsifying documents in order to obtain employment.

Restrictive covenants and trade secrets Non-compete agreements Korean courts have invalidated numerous, non-compete agreements, reduced the amount of time of the non-compete period and/or have reduced liquidated damage amounts for violation of non-compete agreements. Courts typically balance the freedom to work (an ability to work outside the specifi c fi eld) with the signifi cance of the interest in the employer to enforce the covenant not to compete. The primary factors courts utilise in determining whether to enforce a non-compete agreement are: a) if compensation was paid in exchange for the covenant not to compete; b) if the interest being sought protection over includes valuable trade secrets and other valuable intellectual property; c) if the position of the employee was such that the employee would be able damage the future of the employer; d) if the employee was terminated for justifi able reasons; e) if the industry practice is to enforce covenants not to compete; and

GLI - Employment & Labour Law 2018, Sixth Edition 139 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London SJ Law Firm Int’l Practice Group (IPG Legal) Korea f) if the employee is harmed by the covenant not to compete (i.e. an inability to fi nd alternative employment). Trade secrets Trade secrets, in general, are protected under the Unfair Competition Prevention and Trade Secret Protection Act. This Act protects, generally, trade secrets including customer lists, manufacturing methods, marketing materials, sales materials and other valuable confi dential information of an employer. The Act protects, in short, all company information: a) that has independent economic value; b) that is not publicly known; and c) for which substantial efforts are made to maintain its secrecy. Criminal and civil liability may be imposed on an employee for violation of the Unfair Competition Prevention and Trade Secret Protection Act if the employee: 1. acquired the trade secrets via theft, deception, coercion or via other similar means; 2. utilised the trade secret to the benefi t of the employee or detriment of the employer while under a contractual duty to not disclose the trade secret; or 3. acquired the trade secret intentionally or via gross negligence.

Other employment protections Severance payments Severance payments to all employees working for more than one year at a company are guaranteed under the Employee Retirement Benefi t Security Act. This Act mandates employers to either pay severance payments or establish a retirement pension system. If a retirement pension system is chosen, it must be approved by the employees prior to its implementation. Severance payments for employees working for one year or more must be equal to 30 days’ “average wages” per year of employment (pro rata after the fi rst year). Averages wages are calculated by averaging the wages of the three-month period prior to the termination of the employment (severance must be paid for termination based on either retirement or even on fault attributable to the employee). The consent of the labour union representing the employees, or if there is no labour union, the consent of the majority of the employees of the employer, is required to establish either a “fi xed payment” or “fi xed contribution” system. Childcare leave An employer must grant an employee unpaid childcare leave. Any employer must grant a male or female employee childcare leave if the child of the parent is taking care of a child and the child is under the age of eight (Western/Legal Age). The employer is required to give the employee a maximum of one year’s unpaid leave per child, the employer may not dismiss the employee or otherwise disadvantage the employee during this leave period, and the employer must include this period in the employee’s “continuous employment” and must pay the employee at least the same wage amount as when the employee commenced the leave as when the employee returns to work. The employer is not obligated to pay the employee; however, the government provides a partial subsidy of the wages equal to 40% of the salary up to approximately KRW 1,000,000. The Equal Employment Opportunity and Work-Family Balance Assistance Act Art. 19, notes:

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“(3) No employer shall dismiss or take any disadvantageous measure against a worker on account of childcare leave or dismiss the relevant worker during the period of childcare leave.” (4) After a worker completes childcare leave, the employer shall reinstate the relevant worker in the same work as before the leave or any other work paying the same level of wages.” Thus, employers must grant childcare leave and must, in short, reinstate the employee after the childcare leave to a job of the same pay. Employers, however, are not required, in most cases, to return the employee to the same position as when the employee departed for the childcare leave. Maternity leave (females) Female employees must be granted, if requested, 90 days (120 days if twins) of maternity leave (60 days paid and 75 days paid if twins). The days unpaid by the employer are paid by taxpayers. 45 days of leave (60 days of leave if twins) must be given after the birth of the child(ren). Paternity leave (males) Male employees must be granted at least ﬁ ve days of paternity leave (three paid days) if the employee so requests the leave within 30 days of the birth of a child by the wife of the employee. Annual leave All employees that work a full year and that have an attendance record of over 80% are entitled to 15 days of annual paid leave. For employees that have not completed a full year of work or have less than 80% attendance, the employee is entitled to one day of annual leave per month of full-time employment. An employee that has been employed for over three years is entitled to one additional day of paid leave per two years up to a maximum of 25 days. Untaken leave may be accumulated unless the employer’s rules of employment do not allow for the accumulation of annual leave.

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Sean Hayes Tel: +82 2 596 0053 / Email: [email protected] Sean is a U.S. and Irish National that is a permanent resident of Korea. He received his legal education in Korea, the U.S. and the U.K. His blog may be found at: www. TheKoreanLawBlog.com. Sean Hayes is the fi rst non-Korean employed by the Korean Court System (Constitutional Court of Korea) and one of the fi rst non-Koreans to be a full-time member of a Korean law faculty. He has taught law to Korean justices, judges, prosecutors, government offi cials and at Seoul National University, Kookmin University and for Santa Clara University. Sean is known, over his 16+ years in Korea, for his aggressive advocacy and candid NY-style street-smart advice. Sean and his fi rm as often retained when non-confl icted, aggressive and proactive advice and representation are necessary for success. Sean works with a cadre of experienced and connected retired judges, prosecutors, in-house attorneys, government offi cers and former international law fi rm attorneys. Sean has been recognised by numerous legal publications and ratings agencies for outstanding and effi cient service to clients. Sean and IPG have successfully brought into Asia and North America numerous brands, oil & gas, manufacturers, real estate companies, franchises, entertainment companies and new-tech companies. Sean Hayes is a member of the New York Bar.

SJ Kook Tel: +82 2 596 0053 / Email: [email protected] Judge Kook is a retired judge who is a leading Korean litigator in criminal, civil and administrative court cases. He litigates labour and employment law cases, complex civil cases and criminal defence matters for major international companies and company ofﬁ cials. He has assisted clients in a broad range of industries, including defence companies, ﬁ nancial companies, insurance companies, tech companies, online shopping malls, chemical companies and basic manufacturing companies. Judge Kook was a top graduate of Seoul National University College of Law and he received an LL.M. from Columbia University. Judge Kook has served for a variety of courts as a military prosecutor and as a research judge for the Constitutional Court of Korea. He retired from the bench after serving as a presiding judge for the Incheon District Court and after working at the High Court. Judge Kook is a renowned litigator who has successfully obtained over 50 not-guilty verdicts for executives of corporations and individuals. Judge Kook has also successfully litigated and arbitrated a broad range of civil matters for domestic and international clients. Judge Kook is a member of the Korean Bar. Jeongha Lee Tel: +82 2 596 0053 / Email: [email protected] Jeongha Lee is an experienced litigator with over 15 years’ experience, working on labour, employment and general civil disputes for companies and entrepreneurs. He is known for his ability to organise and digest complex bodies of evidence and frame arguments with this evidence for busy judges in a concise and strategic fashion. Jeongha has worked for leading international and domestic defence, franchise, manufacturing, chemical and IT companies. He has also had the pleasure of assisting some of the most entrepreneurial start-ups in the Korean market, including one of Korea’s largest online retail markets. SJ Law Firm Int’l Practice Group (IPG Legal) 5th Floor Seungbo Building, 5 Seocho-daero 49gil, Seocho-Gu, Seoul, Korea Tel: +82 70 7847 9050 / URL: www.ipglegal.com / www.TheKoreanLawBlog.com

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Dr. M. Clara Galea Borg & Dr. Kristina Pavia EMD Advocates

General labour market and litigation trends General labour market trends The Maltese economy has grown by 6.3% in the fi rst six months of 2017, which is an increase on the 5.5% noted during 2016.1 According to statistics published by the Malta National Statistics Offi ce (NSO)2 in 2016, the National Employment rate was 69.6%, which is almost equivalent to that of the national European target of 70%. As of August 2017, Malta was recorded as having one of the lowest unemployment rates in the EU, that of 4.2%.3 Germany and Czech Republic also registered low unemployment rates with 3.6% and 2.9% respectively.4 However, it is also noted that the rate of unemployed youths under 25 is relatively high, recorded at 11.9%.5 Having said this, when one compares this rate to other EU Member States it is still relatively low; for example, in Italy it is 35.1%.6 In the second quarter of 2017, the rate of persons in employment increased to 2.5%. This increase in employment was predominantly seen in the private sector; in fact, almost 90% of all new employees were employed in the private sector.7 An important addition to this statistic is the increase in the rate of female employees joining the workforce, which has been on the rise in recent years. ‘Over the past fi ve years, the rate of growth among females was double that estimated for males.’ 8 This increase in female employment trends can be attributed to the different incentives being offered to female employees to allow them to continue in the workforce even after giving birth. These incentives shall be discussed later on. However, even though the rate of females joining the workforce has increased steadily over the years, the gender gap has remained relatively higher when compared to our EU counterparts, especially in the following age groups: 15–24 and 55–64.9 With regard to part-time work, the gender gap is even higher. The percentage of female part- time workers is 25.7%, while the percentage of male part-time workers is 6.2%. However, these aren’t signifi cantly lower levels than in the EU 28 projection, having a percentage of 32.8% and 9.3% for these sectors respectively. The reason behind this gender gap is most likely due to the fact that female employees are encouraged to re-enter the work force after birth or child-rearing, and part-time employment may be seen to provide more fl exibility. It is interesting to note that the services sector employed approximately 52% of all employees in 2016, having the highest rate of employment when compared to other sectors; in fact, 13% were employed in industry and 1% were employed in the agriculture sector.10 Litigation The impartiality and independence of the Industrial Tribunal An interesting development in litigation in Malta relates to the question of the impartiality

GLI - Employment & Labour Law 2018, Sixth Edition 143 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London EMD Advocates Malta and independence of the Industrial Tribunal. The constitutional reference made in Raymond Spagnol vs. Board of Management tat-Teatru Manoel11 before the First Hall Civil Court in its Constitutional Jurisdiction asked the said court to consider whether the composition of the Tribunal infringes the fundamental right to a fair hearing by an independent and impartial Tribunal in view of (i) the way the Chairpersons of the Board are appointed, and (ii) the Chairpersons’ security of tenure. Facts: Mr. Spagnol was employed with the Board of Management of the Manoel Theatre as a stage-hand in July 2013 with a defi nite contract. On 27th January 2016, the Industrial Tribunal was appointed to hear the case brought forward by Mr. Spagnol in which he alleged that he was unfairly dismissed. The Tribunal ruled in favour of the Employer by stating that the action was not brought within the pre-established time period and it was therefore time- barred. On appeal, the Employee contested the dismissal and in addition alleged that his fundamental right protected under Article 39(2) of the Maltese Constitution and Article 6(1) of the European Convention for the Protection of Fundamental Rights and Freedoms had been infringed. The Court in turn referred a constitutional reference to the First Hall, Civil Court in its Constitutional Jurisdiction. The Court reiterated the principle that an adjudicating authority (such as the Tribunal) must not only be independent but must also appear to be independent. In fact, it made reference to the case Micallef v. Malta,12 which in turn referred to the fact that ‘justice must not only be done, it must also be seen to be done’.13 The Court referred to Article 73(2) of the Employment and Industrial Relations Act (Chap. 452 of the Laws of Malta) (‘the Act’) which provides that the Prime Minister, after consultation with the Malta Council for Economic and Social Development, has the power to appoint the panel, which shall consist of not more than 15 persons, to act as Chairpersons of the Industrial Tribunal.14 Article 73(6) of the same Act provides that the Prime Minister, after consultation with the Employment Relations Board, may remove a Chairperson for reasons of proved misbehaviour, manifest ineffi ciency or inability to perform his/her duties. The Court considered that, although the renewal of the appointment or the removal of a Chairperson are subject to consultation with the aforementioned Council, it is the Prime Minister who takes the fi nal decision. It further added that the Prime Minister does not require consensus as to his fi nal decision.15 Therefore, the Court concluded that since the Tribunal is made up of persons who are subjected to the “unfettered discretion”16 of the Prime Minister, the Tribunal cannot be seen to be independent and this may, in turn, prejudice the rights of the person appearing before the Tribunal – even more so in the present case, since the Board of the Manoel Theatre (the Employer) is also appointed by the Government. The Court therefore held that the composition of the Industrial Tribunal infringed the right to a fair hearing. It will be interesting to see how this will impact the decision of the Court of Appeal, which is scheduled to resume proceedings on 9th November 2017.

Business protection and restrictive covenants Restrictive covenants In various cases decided by the local tribunal and courts in the past year, one of the key issues being discussed was that relating to the validity of non-compete clauses in employment contracts. This has been a long-standing debate, however, the general position is that such clauses are invalid unless reciprocal. One of the recent cases on this issue was Cutrico

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Services Ltd. v. Josef Penza.17 This case looked at a speciﬁ c aspect of the non-compete clause. Facts: Mr. Penza had been in employment with Cutrico as from 25th May 2001. Clause 7 of his employment contract provided that upon termination of the employment, the Employee was not permitted to “...solicit or interfere or endeavour to entice away from the Company any person, ﬁ rm or company who... were customers of, or in the habit of dealing with, the Company...”18 His employment was terminated on 10th June 2013. Following termination, the Employee was approached by a client of the Employer and subsequently started working for him. The Court made reference to a case19 which had quoted Norman Selwyn in his book Law of Employment (16th Edition 2011 – Oxford University Press), which provided that: “A restrictive covenant that prevents an employee from soliciting or accepting business from his former employer’s customers will be unenforceable if it extends to customers with whom the employee personally had no dealings (WRN Ltd vs. Ayris – 2008 – EWHC 1080 (QB) – 2008 IRLR 889 152 (23) SJLB 29).”20 The Court held that the clause included in the employment contract was wide in scope and also included clients which the employee had no dealings with during his employment. And therefore, it concluded that clause 7 of the employment contract was null and without effect. Therefore, in order for such a clause to be considered, it must be limited in scope and additionally, it must be limited to those clients with which the Employee was in contact or had dealings.

Discrimination protection The Equality Bill On 10th December 2015, the then Minister for Social Dialogue, Consumer Affairs and Civil Liberties, Helena Dalli, presented for public consultation a draft Bill proposing an Equality Act. This Equality Bill (‘the Bill’) proposes to increase the protection afforded in various spheres of life, including employment. The Bill was envisaged to be enacted in February 2017, however, discussions about the Bill are still ongoing. The Bill seeks to protect the following characteristics: “age; belief, creed or religion; disability; family responsibilities; family or marital status; gender expression or gender identity; HIV status; maternity; pregnancy; race; colour or ethnic origin; sex or sex characteristics and sexual orientation.”21 It includes a wider spectrum of protected characteristics than those at EU level. However, discussions in parliament are still ongoing as a consensus cannot be reached. The Bill imposes duties on the employer: Article 22, in fact, provides that it is the duty of the employer to ‘take effective measures to prevent all forms of discrimination, in particular harassment and sexual harassment in the workplace, in access to employment, vocational training and promotion’.22 However, this Bill goes further than just making sure that no such acts are carried out in the workplace. It provides that upon the request of a person claiming to have been sexually harassed or discriminated against, or upon the request of the Commissioner acting upon a complaint, the employer has the obligation to provide a report on the allegation made or the procedure which the employer has in place with regard to matters concerning discrimination and harassment. It is important to note that the Act already provides for the responsibility of the employer to prevent discrimination and harassment,23 however, the Bill would go a step further. Harassment is deﬁ ned in the Bill as any ‘unwanted conduct related to one or more of the protected characteristics...’24 having the ‘effect of violating the dignity of a person and

GLI - Employment & Labour Law 2018, Sixth Edition 145 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London EMD Advocates Malta of creating an intimidating, hostile, degrading, humiliating or offensive environment’.25 Article 29(1) of the Act defi nes harassment as ‘any unwelcome act, request or conduct, including spoken words, gestures or the production, display or circulation of written words, pictures or other material, which in respect of that person is based on sexual discrimination and which could reasonably be regarded as offensive, humiliating or intimidating to such person’.26 Thus, in the Bill, ‘harassment’ is not limited to sexual discrimination but has a wider scope. It is important for the employer to have in place a Code of Conduct defi ning sexual harassment and outlining the procedures to be followed.27 This must be made known to the employees as from the fi rst day of work. One of the most controversial items to be introduced by the Bill is the reversal of the burden of proof. If this Bill is enacted, it is the defendant who must prove that there has been no breach of the principle of equal treatment, or that the less favourable treatment is justifi ed. If the person is found guilty of a breach of any of the provisions of the Bill, he shall be guilty of an offence and shall be liable to a fi ne (multa) of not more than €5,000 or to imprisonment for a period not exceeding six months, or to both the fi ne and imprisonment.28 As can be seen, the sanctions imposed are quite substantial. Furthermore, the Bill also provides for obligations to be imposed on Employers’ Associations and Employment Agencies. With regard to the former, it provides that it shall be unlawful for any organisation registered under the Act or any governing body to subject any person to discriminatory treatment, either by refusing to accept membership or discriminating in the terms and conditions of membership.29 This protection also extends to members of such organisations. Members cannot be subjected to discriminatory treatment by being deprived of access to any benefi t, depriving membership of the organisation or subjecting the member to any other detriment. The Bill also imposes obligations on Employment Agencies defi ned as a ‘person, an association of persons, organisation or institution related to the purpose of fi nding employment for workers or for supplying workers to employers, and includes guidance on careers and other services related to employment but excludes educational establishments’.30 It is unlawful for such agencies to subject persons to discriminatory treatment by refusing to provide services to them or providing discriminatory terms and conditions in the provision of services. This also extends to the manner in which such agencies provide their services. However, Employment Agencies will not be deemed to have acted discriminatorily if when taking into account the qualifi cations, training and experience relevant for the work and all other relevant factors, such a person would not be able to carry out the work sought.31

Protection against dismissal Termination of employment In March 2017, in David Calleja v. Peak Leisure Limited,32 the Industrial Tribunal was presented with a case of unfair dismissal. Notwithstanding the fact that the Tribunal found the dismissal to be just, the employee was awarded compensation for the manner in which his employment was terminated was held to be degrading for a person employed in a managerial position. The Employer decided to appeal and the appeal was decided on 12th December 2016. Facts: Mr. Calleja’s employment was terminated due to repeatedly failing to follow procedures relating to leave, break and recruitment. The Industrial Tribunal decided that the termination was just, however, it still awarded the employee compensation due to the

GLI - Employment & Labour Law 2018, Sixth Edition 146 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London EMD Advocates Malta fact that the procedure for termination was deemed to be degrading towards the employee, especially one who occupied a managerial position. The Tribunal thus ordered the payment of compensation. The Tribunal’s decision was appealed by the employer, arguing that since the Tribunal found that the termination was justiﬁ ed, it could not then order compensation to be given to the employee. The Court of Appeal upheld the appellant’s claim, holding that the Tribunal incorrectly ordered compensation to be paid to the employee. The employee would have been entitled to compensation on the basis of Article 81(2) of the Act only if the dismissal was unjust. The same was argued in the case Ashraf Jarbo vs. Peak Leisure Limited33 decided by the Court of Appeal in December 2016.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Leave for Medically Assisted Procreation On 30th May 2017, by virtue of L.N. 156 of 2017, the Leave for Medically Assisted Procreation National Standard Order came into force. The National Standard Order lays down the minimum requirements which are designed to grant a period of paid leave to employees to undergo the process of medically assisted procreation, whether in Malta or not. Interestingly, this law allows both prospective parents to make use of such leave. This entitlement allows for a period of 100 hours of leave shared between the prospective parents with full pay.34 The leave entitlement may be used at any time during the process. However, it is important to note that the prospective parent who is acting as the receiving parent is entitled to 60 hours,35 while the other parent is entitled to 40 hours of leave.36 It is important to note that the leave entitlement may also be utilised in a non-continuous manner.37 This leave shall be granted for a maximum of three treatments (AI/IVF), and is independent from any other leave entitlement. Adoption Leave National Standard Order On 10th October 2016, a new regulation came into force, the Adoption Leave National Standard Order, laying down the minimum requirements to safeguard the employment rights of employees who have adopted a child.38 However, this Order does not apply in cases where the person adopted is the natural offspring of either of the parents.39 A parent of an adopted child is entitled to 18 weeks’ adoption leave whenever a child is adopted.40 This period will commence when the child passes into the care and custody of the adoptive parent or parents by means of a judgment of a court of law in the country of origin. It is important to note, however, that if any one of the parents is on any other leave, adoption leave is postponed until the other leave expires.41 An employee on adoption leave is entitled to 14 weeks of leave on full pay; however, if the employee decides to avail of the additional adoption leave, the employer is not obliged to pay any wages for the period exceeding the 14 weeks.42 These provisions are intended to mirror the maternity leave provisions. The interesting development of this leave entitlement is the fact that both parents are entitled to part of the adoption leave. If both parents are in employment with the same or different employers, each parent may, by written agreement, decide which share of the adoption leave to avail of.43 Where an employee has availed himself of adoption leave and does not resume work, or if he resumes work but abandons the services of the employer within two calendar months from the date of resumption, he is liable to pay the employer a sum equivalent to the basic wages he received during the adoption leave. If only part of the two- month calendar period is worked by the employee, such equivalent sum shall be reduced by a proportionate amount, taking into account the period worked.44

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Vacation leave The Budget for 2018 has introduced an extra day of vacation leave starting from 2018,45 thus the total number of days of leave is 25. This was done by way of a gradual implementation of the electoral promise to restore public holidays which fall on weekends. This entitlement will increase gradually every year until all public holidays falling during the weekend have been accounted for. Increase in the National Minimum Wage The Budget for 2018 also increased the minimum national wage. It was raised by €1.75 weekly as from next year in order to be in line with the Cost of Living Adjustment Mechanism.46 In addition to this, L.N. 144 of 2017 which came into force on 18th May 2017 amended the provisions regulating the minimum wage. The main principles of this amendment provide that: 1. Any employees who are paid the current minimum weekly wage, or a weekly wage which is equivalent to the current minimum weekly wage, are entitled to the following wage supplements:47 a. at the start of the second year of employment, €3 per week; this means that the employee will be paid the current minimum weekly wage with an additional €3 per week;48 and b. at the start of the third year, a further €3 per week will be added to the minimum weekly wage. Therefore, the minimum wage will be increased by an additional €6 per week.49 2. The National Standard Order also provides that employees who receive more than the current weekly minimum wage or its equivalent, upon the completion of the ﬁ rst year with the employer, shall be entitled to a portion of the mandatory supplements referred to above, as long as their current weekly minimum wage with the additional supplements does not exceed the minimum weekly wage or its equivalent topped up with these supplements.50 Decrease in employment tax Another measure announced in the 2018 Budget which is likely to attract employment is that every worker who earns less than €60,000 will receive a partial tax refund.51 However, tax brackets will remain unchanged. In addition to this, workers will receive a one-time cheque between €40 and €68.52 This refund is calculated on the amount of gross income the employee would have earned in the previous year. The details of this refund are yet to be published.

Other recent developments in the ﬁ eld of employment and labour law Work on Sunday On 10th January 2017, amendments to the Wholesale and Retail Trades Wage Council Wage Regulation Order (‘WRO’) came into effect relating to the reforms made to shop opening hours, which include work on Sundays. The new Article 6A of the WRO provides that Employees may be obliged to work on Sundays only if they have given their express consent to the Employer in writing.53 It is important to note that Employees working on the Sunday are paid double-time.54 The WRO also provides that an Employee who has not given his consent to work on a Sunday cannot be subject to any disadvantage, threat or active dismissal by the Employer.55 * * *

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Endnotes 1. Hon. Edward Scicluna, Budget Speech 2018, ‘The economic and fi nancial context’ published by the Ministry of Finance, pg. 4 https://mfi n.gov.mt/en/The-Budget/ Documents/The_Budget_2018/Budget_speech_English_2018.pdf – as accessed on 30th October 2017. 2. NSO, ‘Key Indicators on the Labour Market: 2012–2016’, News Release, 18th October 2017, 166/2017 https://nso.gov.mt/en/News_Releases/View_by_Unit/Unit_C2/Labour_ Market_Statistics/Documents/2017/News2017_166.pdf accessed on 27th October 2017. 3. Eurostat, News Release, ‘August 2017 – Euro area unemployment at 9.1%’, 145/2017, 2 October 2017, http://ec.europa.eu/eurostat/documents/2995521/8266821/3-02102017- AP-EN.pdf/be6fb31a-cc00-44fa-9944-39b4616ebe81 – accessed on 2nd November 2017. 4. Ibid. 5. Ibid. 6. Ibid. 7. Hon. Edward Scicluna, Budget Speech 2018, ‘The economic and fi nancial context’ published by the Ministry of Finance, Pg. 5 https://mfi n.gov.mt/en/The-Budget/ Documents/The_Budget_2018/Budget_speech_English_2018.pdf – as accessed on 30th October 2017. 8. Ibid, pg. 2. 9. Ibid. pg. 3. 10. NSO, ‘Key Indicators on the Labour Market: 2012–2016’, News Release, 18th October 2017, no. 166/2017 https://nso.gov.mt/en/News_Releases/View_by_Unit/Unit_C2/ Labour_Market_Statistics/Documents/2017/News2017_166.pdf, pg. 7 accessed on 27th October 2017. 11. First Hall, Civil Court (Constitutional Jurisdiction), No. 7/16 MH, decided 14th July 2017. 12. Court of Appeal, Appeal No. 17056/06, decided 15th October 2009. 13. Reference to De Cubber, cited in the Micallef v. Malta, Court of Appeal, Appeal No. 17056/06, decided 15th October 2009 paragraph 26. 14. Article 73(2) of the Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta. 15. First Hall, Civil Court (Constitutional Jurisdiction), No. 7/16 MH decided on 14th July 2017, pg. 35. 16. Ibid. pg. 37. 17. First Hall, Civil Court, Reference No. 524/2014 SM decided on 23rd February 2017. 18. Reference No. 524/2014 SM decided on 23rd February 2017, paragraph 11. 19. First Hall Civil Court, FirstUnited Insurance Brokers Limited vs. Farrugia Wismayer Reference No. 765/2009, decided on 30th November 2010. 20. Referenced in case Reference No. 765/2009, decided on 30th November 2010. 21. Article 2 of the proposed Equality Bill. 22. Article 22(1) of the proposed Equality Bill. 23. Article 29(1) of the Employment and Industrial Relations Act, Chapter 452. 24. Article 2 of the proposed Equality Bill. 25. Ibid. 26. Article 29(1) of the Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta. 27. Court of Magistrates (Criminal Judicature), Il-Pulizija v. Owen Calleja, Reference No. 1/2016, decided on 11th January 2016. 28. Article 25 of the proposed Equality Bill.

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29. Article 11 of the proposed Equality Bill. 30. Article 2 of the proposed Equality Bill. 31. Article 12(2) of the proposed Equality Bill. 32. Court of Appeal (Civil, Inferior), Appeal No. 10/2015, decided on 12th December 2016. 33. Court of Appeal (Civil Inferior), Appeal No. 9/2015, decided on 12th December 2016. 34. Article 3(1) of the Leave for Medically Assisted Procreation National Standard Order, S.L. 452.114. 35. Article 3(2) of the Leave for Medically Assisted Procreation National Standard Order, S.L. 452.114. 36. Ibid. 37. Ibid. 38. Article 1(2) of the Adoption Leave National Standard Order, S.L. 452.111. 39. Ibid – proviso. 40. Article 3(1) of the Adoption Leave National Standard Order, S.L. 452.111. 41. Ibid. 42. Article 3(2) of the Adoption Leave National Standard Order, S.L. 452.111. 43. Article 3(3)(b)(ii) Adoption Leave National Standard Order, S.L. 452.111. 44. Article 7 of the Adoption Leave National Standard Order, S.L. 452.111. 45. Hon. Edward Scicluna, Budget Speech 2018, ‘2. Distribution of Wealth – 2.2 An additional day of vacation leave’ published by the Ministry of Finance, Pg. 14 https://mfi n.gov.mt/ en/The-Budget/Documents/The_Budget_2018/Budget_speech_English_2018.pdf – as accessed on 31st October 2017. 46. Hon. Edward Scicluna, Budget Speech 2018, ‘2. Distribution of Wealth – 2.1 The Cost of Living Adjustment’ published by the Ministry of Finance, Pg. 14 https://mfi n.gov.mt/ en/The-Budget/Documents/The_Budget_2018/Budget_speech_English_2018.pdf – as accessed on 31st October 2017. 47. Article 4(1) of the National Minimum Wage National Standard Order, S.L. 452.71. 48. Article 4(1)(a) of the National Minimum Wage National Standard Order, S.L. 452.71. 49. Article 4(1)(b) of the National Minimum Wage National Standard Order, S.L. 452.71. 50. Article 4(2) of the National Minimum Wage National Standard Order, S.L. 452.71. 51. Hon. Edward Scicluna, Budget Speech 2018, ‘Further reduction in taxed for all employees’ published by the Ministry of Finance, Pg. 5 https://mfi n.gov.mt/en/The- Budget/Documents/The_Budget_2018/Budget_speech_English_2018.pdf – as accessed on 30th October 2017. 52. Ibid. 53. Article 6A(1) of the Wholesale and Retail Trades Wage Council Wage Regulation Order, S.L. 452.63. 54. Article 6A(2) of the Wholesale and Retail Trades Wage Council Wage Regulation Order, S.L. 452.63. 55. Article 6A(3) of the Wholesale and Retail Trades Wage Council Wage Regulation Order, S.L. 452.63.

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Dr. M. Clara Galea Borg Tel: +356 220 30000 / Email: [email protected] Dr. M. Clara Galea Borg graduated as Doctor of Laws in 2006, following which she furthered her studies at the University of Sussex, where she obtained a Masters in Contemporary European Studies. She joined EMD Advocates in 2007 as a trainee lawyer and was called to the Bar in 2008. She was promoted to Partner in 2016 and heads the General Legal Department within the Firm. Her practice covers queries of a general civil and commercial law nature, with a particular focus on employment, intellectual property, data protection, EU law and corporate affairs.

Dr. Kristina Pavia Tel: +356 220 30000 / Email: [email protected] Dr. Pavia joined the ﬁ rm in 2016 as a Legal Trainee within the General Legal Department. She graduated as Doctor of Laws from the Faculty of Law at the University of Malta in the same year. Her main areas of practice are employment and industrial relations law, intellectual property law, aviation law and human rights law.

EMD Advocates Vaults 13 -15, Valletta Waterfront, Floriana, FRN 1914, Malta Tel: +356 220 30000 / URL: www.emd.com.mt

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Nils T.A. Zeeuwen, Ivo R. Boudrie & Maarten H. Stekelenburg DingemansVanderKind

General labour market and litigation trends Labour market developments Following the entry into force in July 2015 of the Work and Security Act, Dutch employment law has fundamentally changed. The Act aimed to simplify dismissal law and to reduce the disparity between permanent and fl ex workers. General elections in 2017 resulted in a coalition agreement, again meaning changes in employment law. Thanks to stable economic growth, the number of jobs will increase over the next two years to around 10.2 million in 2018. In a number of sectors, such as care and construction, the labour market is tightening. In the ICT sector there is already a shortage. Unemployment has fallen to 4.7% of the labour force in September 2017, according to Statistics Netherlands. The proportion of employees with a fl exible contract has risen sharply in recent years. In the fi rst quarter of 2017, the number of fl ex workers increased even more than the number of permanent jobs. Employment claims Dismissal cases for business-related reasons or long-term sickness are brought before the UWV, the Dutch labour offi ce. Dismissal cases for other reasons such as performance are brought before the Court. The number of dismissal cases has dropped. This is partly due to the improving economy. Another reason is found in new legislation: strict conditions are applicable and many dismissal cases based on performance issues or a ‘disturbed relationship’ are being rejected. For the most part, employment cases are settled amicably through a settlement agreement. Although not frequently invoked, employees have the right to revoke their consent to the settlement agreement within two weeks after the agreement has been signed. This right should be mentioned in the settlement agreement itself, failing which the right to revoke the consent is extended to a three-week period. Mediation as a means of amicable dispute resolution is popular in the Netherlands, also in employment disputes. There is no legal requirement to mediate before litigation. Also, courts may refer cases to mediation only on a strict voluntary base, of course. Advantages are found in the informal setting and the procedure being less time- consuming and costly. Since July 2015, UWV decisions have been subject to appeal to the Court, and subsequently to the Court of Appeal, and further to appeal in cassation to the Supreme Court. Also, cases brought before the Court are subject to appeal and cassation. As a result, the number of appeal cases has increased.

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Issues surrounding mobility of the workforce At the end of 2016, the provisions of the EU Intra-Corporate Transfer (ICT) Directive were implemented. Partly overlapping the highly-skilled Knowledge Migrant programme, the new rules will harmonise the Dutch system with the EU Directive and the other nations implementing it. The goal is to increase intra-EU mobility for multinational corporations and, once implemented throughout the EU, the avoidance of duplicate administrative procedures and costs. Recent changes in legislation contain measures aimed at increasing the fl exibility of the Dutch workforce. The employer is obliged to inform the employee at least one month before a fi xed-term contract of six months or more ends, whether or not the contract will be continued, and if so what conditions will apply. The total number of employment contracts entered into may not exceed three, and the total duration of these fi xed-term employment contracts may not exceed two years. In case of more than three fi xed-term employment contracts at intervals not exceeding six months, or in case the total duration exceeds two years, the last employment contract will qualify as an employment contract for an indefi nite period. Further proposals to amend Dutch employment laws, amongst others regarding the total maximum duration of a fi xed-term contract and also regarding the maximum duration of the probationary period (now one month, in case of a fi xed-term employment agreement exceeding six months) are expected.

Redundancies, business transfers and reorganisations Collective dismissal In a collective dismissal scenario (a restructuring which involves the redundancy of at least 20 employees within a three-month period in a certain geographical area), the employer is required to send a collective dismissal notifi cation to the UWV (which is a government body) and the relevant trade unions based on the Dutch Collective Dismissal Notifi cation Act (“CDNA”). Under the CDNA, the dismissal of any employee based on redundancy cannot take place until the UWV has been notifi ed of the envisaged redundancies and consultation with the relevant trade unions has taken place. The trade unions should be informed in writing about the envisaged restructuring and provided with details on the reason for the restructuring and the consequences for the employees. Further, the employer should invite the trade unions for a consultation meeting and try to conclude a social plan. There is no obligation as such to reach an agreement with the trade unions. However, the employer must be able to demonstrate that it did its utmost to try to come to an agreement with the trade unions and in practice, trade unions may threaten strikes to force the employer back to the negotiation table. In a redundancy situation, employment contracts can only be terminated unilaterally by observing notice after the employer has obtained the prior approval of the UWV. The UWV will also take into account whether or not the works council has been involved properly, according to the regulations of the Dutch Works Council Act. Transfer of undertaking Any transfer of a part of an undertaking within the Netherlands may fall within the scope of Dutch law implementing the European Directive Transfer of Undertakings (Protection of Employment) Act (“TUPE”). In determining whether TUPE applies, the Courts look

GLI - Employment & Labour Law 2018, Sixth Edition 153 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands at the type of undertaking (or part of undertaking) involved, whether ﬁ xed assets are being transferred, whether the majority of employees dedicated to the activity are taken over, and whether the business/activities disposed of can be regarded as a going concern. In other words: the identity of the undertaking or part of the undertaking should remain more or less intact for TUPE to apply. The answer to the question whether TUPE applies strongly depends on all the actual facts and circumstances. Pursuant to TUPE, all rights and obligations from the employment contracts remain intact in case of a transfer. Those rights and obligations transfer to the transferee by operation of law (for pension rights, special provisions may apply). Dutch regulations provide for joint and several liability for the transferor and the transferee for the duration of one year for claims in respect of employees’ employment arising before the date of transfer.

Business protection and restrictive covenants Any employee is obliged by Dutch law not to disclose trade secrets or other confi dential information. Failing to observe this obligation will be considered an unlawful act, tort or even, in material cases, a criminal act. This would make the employee liable for damages suffered by the employer. Nevertheless, most employment contracts contain as standard a confi dentiality clause, including a penalty clause for any breach of said obligation. This is to raise awareness amongst staff, broaden the scope of the confi dentiality obligation and send a strong signal to the employees that they should take the confi dentiality obligation seriously. Restrictive covenants – such as non-compete and business relationship – are generally used in the Netherlands, although mainly for commercial and business-sensitive positions within the company. Non-compete and business relationship clauses will only be valid under Dutch law if agreed with an adult and if agreed in a document that is signed by both parties. Due to changes in Dutch employment law, restrictive covenants in fi xed-term contracts are void. An exception is possible only if from a written motivation, forming an integral part of the covenant, it follows that the company has compelling business reasons that make the covenant necessary in the specifi c individual employment agreement. If such a written motivation is lacking or if the motivation is not well-motivated, the restrictive covenants are not enforceable. For restrictive covenants in indefi nite-term contracts, this specifi c additional rule does not apply. Apart from the formal legal requirements that can be contested in Court, any validly agreed restrictive covenant is still subject to moderation by a Court. In these procedures, Courts will normally weigh both the interest of the employer and the employee. Courts generally look at the type of position of the employee within the company, seniority, access to confi dential information, the possibility of a step in career or salary, and the ability to fi nd alternative employment in another type of industry. As such, the generally acceptable duration of non-compete provisions is a maximum of 12 months after termination, and business relationship clauses tend to be acceptable up to a maximum of 24 months. The employee can request the Court to allow fi nancial compensation for the period of restriction by the covenants, however case law shows that Courts only grant such compensation under special circumstances.

Discrimination protection The Dutch Equal Treatment Act prohibits (both direct and indirect) discrimination in general, but speciﬁ cally on the following grounds: religion, personal beliefs, political

GLI - Employment & Labour Law 2018, Sixth Edition 154 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands opinion, race, sex, nationality, sexual orientation and civil status. This act also determines some specifi c provisions concerning the employment relationship. These provisions determine that discrimination is prohibited under the following circumstances: when offering a job; in job placement services; when entering into and terminating an employment relationship; in employment conditions; and in working conditions. Furthermore, there are some specifi c employment-related discrimination acts which prohibit discrimination on the following grounds: handicap or chronic disease; age; temporary/permanent employment contract; and part-time/full-time working hours. The Dutch discrimination legislation only permits direct discrimination when it is explicitly allowed by law (e.g. certain genuine occupational requirements). Indirect discrimination – or direct discrimination based on age – is only permitted when there is an objective justifi cation for the difference in treatment. This requires a legitimate aim and the means for achieving this aim must be proportionate and necessary. The Dutch discrimination legislation provides several exceptions on the general prohibition of discrimination meant to favour certain disadvantaged groups, such as women, ethnic minorities and people with a chronic disease or handicap; so-called positive discrimination. Concerning the burden of proof, it is required that an employee who feels discriminated needs to state (and prove) the relevant facts which give rise to the suspicion that the employee is discriminated against. If the employee succeeds in this, the burden of proof will shift to the employer and the employer needs to prove that the employee was not discriminated against. An employee can choose to fi le a complaint with the Dutch Institute for Human Rights or (directly) fi le a request at the Court. Judgments by the Dutch Institute for Human Rights are not legally binding, so employers can choose to ignore them. In that event, an employee has to go to the Court. The recent coalition agreement, presented in October 2017, states that discrimination on the labour market is unacceptable, and requires a fi rm approach. The so-called ‘Plan of action labour market discrimination’ gives attention to combating discrimination in selection procedures, pregnancy and a fi rm enforcement role of the Dutch Labour Inspectorate.

Protection against dismissal and fi nancial compensation The basic dismissal requirements are that permanent employment contracts can only be terminated unilaterally through the Court or with the prior permission of the UWV. Exceptions apply for dismissals: i) during a validly agreed probation period; ii) for justifi ed urgent cause for dismissal (e.g. theft, fraud, embezzlement, etc.); and iii) because the employee reaches the pensionable age as meant in the Dutch Old Age Pensions Act. For clergymen, clerics, homeworker and statutory directors, further exceptions apply. The UWV forms a decision pre-dismissal as to whether there is a so-called reasonable ground for dismissal. A comparable test is applied by the Court. This also means that under Dutch law it is possible that the employment contract cannot be terminated unilaterally because the permission of the UWV, or the dissolution by the Court, is denied. There are eight reasonable grounds defi ned in statute: (a) long-term sickness, 104 weeks or longer; (b) redundancy for business economic and/or (work) organisational reasons; (c) frequent sickness;

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(d) underperformance after an improvement plan (and training); (e) culpable actions or omission of the employee; (f) conscientious objections; (g) a disrupted working relation to such an extent that continuation of the relationship cannot be expected of the employer; or (h) other circumstances. Dismissal for personal/individual reasons such as underperformance or a disrupted working relation must be brought before the Court. ‘Neutral reasons’ such as reorganisations, or termination after two years of illness, have to be dealt with through the UWV procedure by requesting permission to give notice. Apart from the need to prove at least one valid ground for dismissal, an employer must also substantiate that it is not possible to redeploy the employee (even after training) elsewhere in the organisation or in a vacancy at an affi liated company within the group. Only in the event that the employee is terminated based on culpable actions or omission of the employee does this redeployment obligation not apply. The UWV does not deliver its decision until it has heard the employee’s view, although this is mostly done on paper and without an oral hearing. The process following a permission application lasts between one and two months from the date that the full application is fi led at the UWV. If the permission is granted by the UWV, the employer can serve notice to terminate with due observance of the applicable notice period, minus the time the UWV procedure took. However, a minimum of one month’s notice must always be observed. Also, the Court does not deliver its decision until it has heard the employee’s view. The Court will invite both parties to explain their position during an oral hearing. The oral hearing is planned within four to eight weeks from the date the dissolution request is fi led with the Court. If the Court dissolves the employment contract, it will observe the applicable notice period minus the time the dismissal procedure with the Court took; however, again a minimum of one month’s notice must always be observed. An employment contract can be terminated at any time by mutual consent. This is also the most popular way of terminating the employment contract. In practice, an employee generally only cooperates with a mutual consent termination if the reasoning behind the termination is convincing enough (and it is therefore likely that the UWV or the Court will ‘approve’ the termination) and in exchange for a reasonable severance package. A termination by mutual consent will not jeopardise the entitlement of the employee to unemployment benefi ts as such. Termination bans Some specifi c groups of employees are protected by means of a prohibition to give notice of termination. This statutory ban applies, for example, during illness shorter than 104 weeks, pregnancy and during a membership of the works council. Furthermore, it is not allowed to terminate the employment contract due to trade union membership and due to taking parental leave. There are specifi c exceptions to this rule. It is, for example, possible to give notice of termination in specifi c circumstances if the employer is able to prove that the termination is not in any way related to the statutory ban on termination. Financial compensation and other remedies In principle, every employee who has been employed for at least 24 months and whose employment contract is terminated or not extended at the employer’s initiative is entitled

GLI - Employment & Labour Law 2018, Sixth Edition 156 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands to a statutory transition fee: 1/6th monthly salary for every six months of employment during the 10 years of employment and 1/4th monthly salary for every successive six- month period. The transition fee is capped at €77,000 gross (2018: €79,000) or any higher gross annual salary. For small companies and employees older than 50 years, different rules may temporarily apply. If the employee is dismissed for a justifi ed urgent cause, he is not entitled to a statutory transition fee as such. A Court may award additional fair compensation in the event of misconduct on the side of the employer. The Supreme Court ruled in 2017 that this additional compensation does not have a punitive damages character. The compensation is, however, related to the degree of culpability and will be established based on all facts and circumstances, including the consequences of the dismissal for the employee. No specifi c calculation formula is applicable. If the employment agreement is, for instance, terminated without a justifi ed urgent cause for dismissal or based on a false dismissal ground, this will automatically lead to a situation where the employee can request the Court to award additional fair compensation. Another option for the employee in this event is to request the Court to reinstate the employment agreement with retroactive effect.

Statutory employment protection rights Notice periods Under Dutch law, the employee must observe a notice period of one month. For the employer, the length of service determines the length of the notice period: • up to fi ve years of service: one month; • fi ve to ten years of service: two months; • 10 to 15 years of service: three months; and • 15 years of service or more: four months. A longer notice period for the employee can be agreed upon if this is agreed in writing. In this event, the notice period for the employer must be twice the notice period for the employee (e.g. two months’ notice for the employee and four months’ notice for the employer). Some further divergences from the statutory notice period are possible if it is included in the applicable collective labour agreement (CLA). For example, a CLA allows the notice period for the employee to be reduced to less than one month. Employees in the Netherlands are entitled to a statutory minimum number of vacation days, equivalent to four times the weekly working hours (e.g. a full-time employee (40 hours per week) is entitled to 20 holidays per year). Moreover, the employee is statutorily entitled to a holiday allowance of 8% of the annual salary, however only calculated on the basis of the salary that does not exceed an amount equal to three times the statutory minimum wage. However, in practice this cap is not frequently used by employers. Normally, the holiday allowance is based on the full monthly basic salary without the cap, however excluding any bonus or profi t-sharing schemes. Additional entitlements are possible, if included in the applicable CLA. Rules for working hours can be found in the Dutch Working Hours Act and the Working Hours Decree. The number of working hours may vary by sector and depend on the kind of labour performed when stipulated in a CLA. In general, an employee is allowed to work a maximum of 12 hours per day, for a maximum of 60 hours per week. Over a period of four weeks, an employee is allowed to work no more than 55 hours per week,

GLI - Employment & Labour Law 2018, Sixth Edition 157 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands on average. Over a period of 16 weeks, the number of working hours may be a maximum of 48 hours per week, on average. Family-friendly rights Female employees have the right to 16 weeks of maternity leave. This period shall be increased by two to four weeks in the case of a multiple birth. During the leave, the Employee Insurance Agency will pay 100% of the salary of the employee, but no more than the maximum daily wage (as of July 2017: €207.60). Currently the partner of the new mother is entitled to only two days of fully paid leave. The recent coalition agreement states that the full paid parental leave for partners will be extended to one week. Furthermore, there are plans for an additional parental leave of ﬁ ve weeks, during which the employee is entitled to 70% of his salary. The proposed changes are expected in 2019 and 2020. Further, new legislation was implemented to provide the employee with more possibilities to work from home.

Worker consultation A company is obliged to install a works council if more than 50 persons are working at the company. All employees fall under the scope of the deﬁ nition of employee. Companies with at least 10 but fewer than 50 employees are required to establish a staff representation upon request of the majority of the workforce. Election of the works council members takes place via list of candidates. Trade unions may submit candidates for the list if they have members among the workforce of the company. The number of members of the works council varies between 3 and 25 members depending on the size of the company. The consultation rights of the works council pertain to two major areas with a different legal framework: (1) advice procedure on strategic decisions, as mentioned in article 25 of the Dutch Works Council Act (“DWCA”); and (2) consent procedure on regulations regarding (secondary) employment conditions, as mentioned in article 27 DWCA. Furthermore, the works council has a more general right to information, and advice is required in the event of an appointment or involuntary dismissal of a managing director of the company. Advice procedure The works council must be consulted at a point in time when the advice of the works council may still have considerable inﬂ uence on the decision. In the request for advice, the company has to provide information regarding: (i) the reasons for the intended decision; as well as (ii) the consequences of the intended decision for the employees of/employment within the company; and (iii) the measures that will be taken in this respect. The company must also hold at least one consultation meeting with the works council. The works council should render its advice within a reasonable period. There is no period set by law. The timing of the advice procedure depends on the exhaustiveness of the information and motivation given in the advice request, the complexity of the intended measures, the consequences for the employees and the reasonableness of the questions from the works council. Furthermore, the works council must be put in a position to advise on the execution of the decision, provided this has not happened in the initial request for advice. If the works council does not consent (“negative advice”) to the intended decision and the company does not act in accordance with the works council’s advice, the company must notify the reasons for deviation to the works council in writing. In that case, the execution of decision must be delayed by a one-month waiting period. During this waiting period, the company

GLI - Employment & Labour Law 2018, Sixth Edition 158 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands is prohibited to execute the decision and the works council may start legal proceedings at the Enterprise Chamber of the Court of Appeal in Amsterdam. As such, the Court of Appeal can actually overturn the decision of the company if, after consideration of all relevant interests, the decision to proceed with the decision is one which the management could not reasonably have made. Consent procedure For the topics mentioned in article 27 DWCA, the intended decision should have an impact on all employees or a group of employees. From case law of the Supreme Court it follows that the list is exhaustive, and the topics mentioned in this article should not be interpreted too broadly. The works council must consent to the changes. If the works council does not consent to the changes, the company can request the Court to grant consent to the changes. Changing employment conditions Changes to primary employment conditions (e.g. salary, number of holidays) are not subject to consent of the works council. If such employment conditions are regulated via an applicable collective bargaining agreement, changes should be effected by the relevant trade union organisations. Under Dutch law, the Minister of Social Affairs and Employment can declare certain collective bargaining agreements partially or fully generally binding for the whole industry for a certain period of time. All employers within the relevant industry are, in that event, obliged to apply at least the employment conditions as laid down in the collective bargaining agreement to their employees. The approval of the employee is required for amendments to the employment contract that are not regulated via a collective bargaining agreement. On the other hand, a unilateral amendment clause may entitle the employer to amend an employment condition included in the employment contract. According to law, the employer may only invoke this amendment clause if it has agreed such with the employee in writing, and the employer has such a weighty interest in that amendment that the employee’s interest would be damaged as a result, must take second place in accordance with standards of reasonableness and fairness. If no unilateral amendment clause is involved, the employer will be able to amend an employment condition in the employment contract unilaterally by invoking the requirements of reasonableness and fairness. Good employee practice and being a good employee may also constitute a basis in this respect. In that context, the Supreme Court of the Netherlands has stipulated that in general, an employee should respond positively to reasonable proposals by the employer relating to changed circumstances in the workplace, and may only reject such proposals if the acceptance of such under the given circumstances cannot reasonably be expected from the employee. From Dutch case law it follows that the consent of the works council to amend or withdraw certain employment conditions does not bind the individual employee. On the other hand, the consent of the works council will be an important element that a Court will look at when balancing the interest of both the employer and employee when amending employment conditions.

Employee privacy Data protection rights for employees and obligations for employers are laid down in the Dutch Personal Data Protection Act (DPA). On May 25th, 2018, the General Data Protection Regulation (GDPR) will enter into force and replace the DPA. The current DPA determines that if an employer processes data of employees, the employer must

GLI - Employment & Labour Law 2018, Sixth Edition 159 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London DingemansVanderKind Netherlands notify this to the Dutch Data Protection Authority (DP Authority). In the accompanying Exemption Decree, multiple forms of data processing data are exempted from notifi cation, for example, data processing in the context of a staff and salary administration. Processing data is only allowed when one of the limitative conditions of the DPA is applicable. Most relevant for the employment relation are the necessity of processing data for the execution of a contract, or the necessity of processing data to take care of a legitimate interest. Processing sensitive personal data, such as health data, is only allowed on the basis of some very restricted limitative grounds. Based on the GDPR, employers in the Netherlands will as of May 25th, 2018 be confronted with additional obligations to secure gathered personal data of employees against loss or any form of unlawful processing. Large companies (with 250+ employees), companies that are processing data on a large scale (e.g. recruitment fi rms, employment agencies) and companies that are processing sensitive personal data (e.g. Arbo services companies or hospitals) will also be required to register all data-processing operations for their own administration. Insight into this administration can be requested by the DP Authority and the employee at any time. The Dutch Data Protection Authority (“DP Authority”) will be provided with extra means to keep oversight, including the possibility to impose steep penalties in the event of a breach of the GDPR obligations of €20 million, or 4% of the worldwide yearly revenue of the company. Monitoring/surveillance in the workplace Monitoring in the workplace is only allowed when it is necessary to protect the legitimate interest of the employer or in the event of health or safety risks and the aim cannot be achieved by less drastic means. Furthermore, it is important to determine whether the interest of the company of monitoring outweighs the interest of an employee’s right of privacy. An employer can restrict internet use during working hours by stating clear rules about the use of internet and email, for example, in a code of conduct or a guideline. However, an employer cannot completely prohibit the private use of email during working hours, considering the right to privacy of employees, which right also extends outside the work place. The employer needs to inform the employees about these internet and email rules. If there is a works council within the company, it has the right of prior consent to any such regulations. Controlling employees’ social media is only allowed when an employer has a legitimate reason and control is therefore necessary. Vetting and background checks Screening potential employees is only allowed when an employer has a legitimate aim and the legal conditions of the DPA are met. Important to note is that unambiguous consent of the potential employee is not a legally valid basis for processing data, because of the relationship of dependence. An employer must carefully weigh whether a background check is necessary for the position, and which data is relevant in that respect. Furthermore, an applicant needs to be informed that he or she will be screened, for example, in the job application text. Recently, the DP Authority stated that employers cannot screen social media accounts of applicants without reason. Only when there is a legitimate aim and the legal requirements are met, can a company check an applicant’s social media accounts. Drug testing and other forms of testing in the workplace In principle, applicants or employees are free to do whatever they want in their own time, as long as it is not infl uencing their performance or the legitimate business interests of the

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Other recent developments in the fi eld of employment and labour law Atypical workers The Dutch labour market is seeing increasingly varied forms of employment, with particularly strong growth in temporary employment relationships. A signifi cant proportion of the Dutch workforce consists of workers who work for companies other than their formal employer; for example, agency workers. Employers frequently choose to use these three-party arrangements, because of the fl exibility to hire and fi re employees. For instance, the CLA for agency workers provides for more fl exibility relating to the amount of consecutive temporary employment contracts and to the total duration of consecutive temporary contracts. Training Since 2015 the Dutch Civil Code expressly provides that an employer should allow an employee to attend necessary training for the performance of his/her duties. This obligation also implies that if the position of the employee will become redundant or the employee is no longer able to fulfi l his/her role, the employer must allow the employee to follow training for the continuation of the employment contract (if this can reasonably be required). National minimum wage levels All employees of 22 years and older are entitled to the statutory minimum wage. The amount of minimum wage as of 1st January 2018 and based on a full working week (40 hours) for an employee of the age of 22 or older is €1,578 per month. The net amount the employee will receive depends on the taxes and social insurance contributions withheld from their wage. Younger employees (15 to 21 years) are entitled to the statutory minimum youth wage, which is determined solely by the age of the employee. The government adjusts the amount of the minimum wage and the minimum youth wage twice a year, on 1st January and 1st July. As of 1st July, 2019, it is intended to reset the minimum age for the statutory minimum wage from 22 years to 21 years. On the same date, it is also intended to raise the percentages on which the minimum youth wage for 18, 19 and 20 year-olds is based.

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Nils T.A. Zeeuwen Tel: +31 20 344 6453 / Email: [email protected] Nils Zeeuwen has been practising law since 2001, starting his career in the Employment Law and Employee Participation Practice Group of a large international law ﬁ rm. In 2008 Nils joined DingemansVanderKind, where he specialised further in employment law and was made partner. His key areas of focus include individual dismissal law, privacy law, the employment law aspects of transfer of undertaking and international transactions, and advising and assisting companies in reorganisations and employee participation issues. Nils is a permanent contributor to professional labour law handbooks and gives lectures for clients and colleagues.

Ivo R. Boudrie Tel: +31 20 344 6452 / Email: [email protected] Ivo Boudrie has been practising law since 1994 and was admitted to the Bar in 1999. In previous years he worked in the Employment Law and Employee Participation Practice Group of a large international law ﬁ rm. Ivo joined DingemansVanderKind as a partner in 2004. Ivo specialises in individual dismissal law and collective employment law, supervising corporate restructuring and reorganisation processes. He frequently represents company directors in dismissal cases. In addition to his work as a lawyer, Ivo offers courses to HR ofﬁ cers and gives lectures for colleagues.

Maarten H. Stekelenburg Tel: +31 20 344 6482 / Email: [email protected] Maarten Stekelenburg advises and litigates on almost all aspects of employment law, including dismissals, atypical employment relations, non- compete clauses and work-related investigations. He started his career as a lawyer at a large international law ﬁ rm and joined DingemansVanderKind in 2016. During his Masters at the University of Amsterdam, Maarten worked as a student assistant at the Labour law and Social security law chair group. Maarten frequently publishes in professional labour law journals and he is a permanent contributor to the Case law Employment magazine.

DingemansVanderKind Sarphatistraat 9, (1017 WS) Amsterdam, The Netherlands Tel: +31 20 344 6454 / Fax: +31 20 344 6455 / URL: http://en.dvdk.nl

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Omar Al Hashmi & Syed Ahmad Faizy Al Hashmi Law

Background Oman is one of the fastest-growing economies in the Middle East, with its government undertaking many development projects to modernise the economy, improve the standard of living, and become a more active player in the global marketplace. Oman became a member of the World Trade Organization in October 2000, and continues to amend its ﬁ nancial and commercial practices to conform to international standards. Consequently, and as part of the government’s endeavours towards betterment of its workforce and economic atmosphere, Oman introduced an enhanced Labour Law in 2012 to regulate the employment relationship for private employees. The Labour Law is considered to be a strong law, providing for a balanced relationship between private employers and employees, while laying strict conditions for the timely payment of wages, mandatory leaves, protection against unfair termination, medical insurance and workmen compensation of employees on the one hand, and regulating the employees’ code of conduct on the other hand. The Omani Labour Law does not apply to Omani civil servants, security forces personnel and domestic servants, which are governed by separate laws like the Civil Services Law, the Military Service Law, and Ministerial Decisions issued from time to time by the Ministry of Manpower (“MOM”), the government authority for implementing and enforcing the Labour Law. The Oman Labour Law stipulated by Royal Decree 35/2003 is the primary source of law dealing with labour and employment-related issues in the Sultanate of Oman. Many amendments have been carried out to this Royal Decree through various royal decrees and ministerial decisions. The private sector workforce is regulated by the Constitution, Labour Law, Ministerial Decisions issued by the Ministry of Manpower and the Social Insurance Law of Oman. The Oman Labour Law comprises Royal Decree 35/2003 which laid the foundation of a dedicated labour law in Oman, with its amendments and the various related Ministerial Decisions that are issued from time to time to regulate the workforce atmosphere in Oman, as per the then prevailing economic and security policies of the government.

Oman Labour Law – General overview & analysis The Oman Labour Law applies to all private sector employees (other than domestic workers, Omani civil servants and security forces personnel), whether Omani or non- Omani, employed by local or foreign companies having an ofﬁ ce in Oman.

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The Labour Law governs employment contracts, leave entitlements, working hours, overtime pay, annual leave pay, worker passage, industrial safety rules, the labour disputes resolution mechanism, medical coverage, gratuity/end of service benefi ts, etc. The expatriate employees must: (i) be professionally/academically competent for the post – The MOM, for most job categories, examines the educational records of the foreign national for whom a clearance is sought by his prospective employer; (ii) have a contract with an employer who has a valid licence to conduct its business; (iii) have a valid work permit; and (iv) be medically fi t – the Royal Oman Police requires a certifi ed medical fi tness certifi cate, conforming to the criteria it publishes in accordance with the Ministry of Health policies, to be submitted along with the other documents for visa issuance. In Oman, it is illegal for expatriates to work without an employer and without a work visa, as per the Foreigners Residence Law of Oman, failing which, the employer and the employee both suffer the risk of penalties that may include jail and deportation of the employee at the cost of the employer, and jail, monetary penalties and sanctions on labour clearances on the employer, etc. If an employer: (i) allows its employees to work for another person, (ii) employs a person residing illegally in Oman, or (iii) employs a non-Omani in a position reserved for Omanis without an exemption, then, such employer may be subject to a one-month imprisonment or/and a fi ne as may be determined by the MOM.

Employment contracts All private sector employees are required to have an employment contract, which must contain minimum provisions of: the names of the parties; the employee’s date of birth, qualifi cations, place of residence, nationality, job description, entitlements; duration of the contract – whether limited or unlimited; salary and notice period (for termination), etc. In addition to the other terms and conditions of the contract, the employee is required to respect the laws, customs and traditions of Oman, including the religion of Islam; and refrain from involvement in any activities deemed prejudicial to the country’s security. An employment contract should be executed in duplicate originals, with each of the employer and the employee retaining an original for their records. Employment contracts may be either of a limited (specifi ed) duration, or unlimited (unspecifi ed) duration. It is pertinent to mention here that the specifi ed duration of the employment contract determines the employer’s ability to terminate the employee, if a notice period is otherwise not stated in the contract. If the employment contract does not specify its duration, then it is deemed to be unlimited, however, the employment visa is normally issued for a renewable two-year period, irrespective of the duration of the contract. The Oman Labour Law has also dealt comprehensively with probationary periods for an employment relationship. It provides that if the employment contract specifi es a probationary period, then such period may not exceed three (3) months, as per the Labour Law. It is also pertinent to mention here that either party may terminate the contract during the probationary period on short written notice of seven (7) days to the other party.

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In the case of indefi nite-duration employment contracts and where the notice period is not specifi cally mentioned, either party may terminate the contract by giving 30 days’ written notice to the other party. However, the notice period may be waived if compensation equivalent to the employee’s wage for the said notice period is paid to the party waiving the notice period. Such notice must also specify the reason for such termination. The courts in Oman have been very strict against unfair terminations and have laid down that in the absence of suffi cient reason of termination, such termination may be considered to be arbitrary, and have in many cases awarded a compensation equal to a minimum of three (3) months’ gross salary to an unlimited amount, depending on various factors, in addition to any other entitlements otherwise owing to the employee as per his contract or the law.

Remuneration Under the Labour Law, employees are entitled to certain minimum benefi ts like basic salary and various allowance; however, an employer may provide greater benefi ts than those required under the law, in which case if there is a confl ict in interpretation of benefi t, the employee will be entitled to claim the superior benefi t. Salary The minimum salary for Omanis working in the private sector is currently set at RO 325/-, of which RO 225/- applies to the minimum basic salary and RO 100/-, as the minimum allowance. The law does not prescribe a minimum salary for expatriate workers. The gross salary includes basic salary in addition to allowances. The employer must deposit the employee’s wages into the employee’s designated bank account within seven (7) days from the end of period in which such wages become due. There have been some reports of non-payment of due wages by employers to some workers and as such, the MOM has been taking steps to mandatorily deposit the employee’s salary to the employee’s bank account, failing which, there are provisions for penalising the employer. Working hours The law provides for a maximum 45-hour work week or nine hours in a day. However, during the Holy month of Ramadan, working hours for Muslim employees are reduced to six hours a day or a maximum of 30 hours per week. This, however, does not apply in cases where the work requirements are based on rotational basis or shift systems. In such cases, precedence is given to the agreement between the Parties and the policies of the MOM in effect. Overtime The Labour Law provides that an employee cannot be compelled to work overtime. However, if an employee agrees to work additional hours that exceed the working hours provided for in the Labour Law, then he will be entitled to additional compensation. Such additional compensation will depend on whether the overtime is performed during weekly working days or weekly rest or national holidays. Overtime compensation may either be in the form of additional time-off from work or additional wages equal to 1.25 to 2 times the employee’s hourly rate of compensation, based on his basic salary.

Other beneﬁ ts and entitlements The Labour Law prescribes certain other entitlements that the employee is to receive:

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• An employer must provide medical coverage for its employees either in the form of insurance or a monetary allowance. • The employer is also obliged to bear the visa costs and travel costs of the employee from his home country to Oman. • The employer is further obliged to provide repatriation costs of the employee to his home country on termination of the employment contract, unless there is a transfer of sponsorship to another employer in Oman. The above are the benefi ts ensured by the Labour Law, and are in addition to any other benefi ts as may be agreed between the parties otherwise. End of service benefi ts/gratuity Except under those circumstances where an employer may be entitled to terminate an employee without benefi ts, the employer is obligated to pay certain end-of-service benefi ts to expatriate employees upon termination of their employment contract. End-of-service benefi ts are calculated on the employee’s last drawn basic salary and accrue as follows: For the fi rst three (3) years of service, the employee is entitled to receive the equivalent of fi fteen (15) days’ basic salary for each year worked; and for each subsequent year, the employee is entitled to receive the equivalent of one (1) month’s basic salary. Social security The Social Security Law requires the employer to register an Omani employee with the insurance fund administered by the Public Authority of Social Insurance or “PASI” as it is popularly known, within one (1) month of the employee joining the company. With effect from 01/07/2014, the contributions to the said insurance fund are increased as follows: By the employer: 11.5% of gross salary (prior to 1/7/2014 this was calculated on only the basic salary); and By the employee: 7% of gross salary (prior to 1/7/2014 this was calculated on only the basic salary). Sick leave Subject to the provisions of the Social Insurance Law, an employee whose sickness is proved has the right to sick leave not exceeding ten (10) weeks in the aggregate in any one- year period, whether such weeks are continuous or separate. Sick leave must be granted as follows: • First (1st) and Second (2nd) week, with full gross salary. • Third (3rd) and Fourth (4th) week, with three-quarters of the gross salary. • Fifth (5th) and Sixth (6th) week, with half the gross salary. • Seventh (7th) week to the tenth (10th) week, with one-quarter of the gross salary. Emergency leave The Ministerial Decision 567/2011 provides emergency leave and entitles the employee to time off where an emergency situation beyond the employee’s control has suddenly arisen. The employee is, however, required to provide proof of the emergency to the employer wherever possible. Maternity leave A female employee is entitled to fi fty (50) days of maternity leave covering the periods before and after delivery with full salary; provided, such leave entitlement is limited to three occurrences during her service with the employer. An employer may not dismiss the female employee for her absence from work due to illness (confi rmed by a medical

GLI - Employment & Labour Law 2018, Sixth Edition 166 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Al Hashmi Law Oman certifi cate) attributable to her pregnancy, or delivery which prevents her from resuming her work, provided that the total period of such absence may not exceed six (6) months. Special leave The Oman Labour Law recognizes that there are situations where an employee may reasonably require additional leaves, and hence it lays down provision for special leaves, as follows: An employee is entitled to special leave while according him full gross salary under the following circumstances: • Three (3) days in case of his marriage (shall not be granted more than once during the period of service). • Three (3) days in case of the death of a son, daughter, mother, father, wife, grandfather, grandmother, brother or sister. • Two (2) days in case of the death of an uncle/aunt. • Fifteen (15) days for the performance of Al-Haj pilgrimage once throughout the period of his service, provided that the employee has completed one (1) year of service with the employer. • Fifteen (15) days during the year for purpose of sitting for an examination in the case of an Omani worker who is an associate student with one of the schools, institutes, colleges or universities. • One hundred and thirty (130) days for a working Muslim wife in the event of her husband’s death. Weekly rest days/Offi cial holidays Weekly rest days and offi cial holidays are also to be paid with full gross salary, and any work done by an employee on any such days is considered to be overtime, to be compensated with double the salary for the period worked as overtime or with another day off in lieu thereof. Annual leave An employee is entitled to annual leave upon completion of a minimum of six (6) months’ continuous service with the employer. The grant of the leave is, however, subject to the business needs of the employer. The employee is entitled to receive his full gross salary during annual leave periods. The annual leave entitlement is thirty (30) days per year and is transferable by one year. Human resources policy & redressal of grievance An employer having fi fteen (15) or more employees must have a human resource policy (including penalty regulations). Such policy must be approved by the MOM and placed in a conspicuous place in the offi ce premises, accessible to the employees. In case there is a grievance redressal procedure mentioned in such policy manual, the employee is required to adhere to such procedure in case of a grievance. However, in case the grievance isn’t addressed to his satisfaction after following the procedure as per the human resources manual, the employee may fi le a complaint as per his employment contract, which is generally through the MOM unless a different mechanism is provided in the employment contract. The Labour Law provides that the complaint should be fi led within fi fteen (15) days in case he wants the termination to be revoked, and within one (1) year from the date of his right for such entitlements.

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Other employment considerations Secondment Secondment is not expressly recognized under the Labour Law, however, secondment agreements are commonly entered into between companies whereby the employees of a company are hired by another company. This is a popular mechanism in Oman for employers, especially those who are either new establishments or are embarking on new projects. Through secondment, the employers can hire an expert without going through the due procedure of obtaining visa clearances and the employment visa. Ban of two years on employment visa The Foreigners Residence Law stipulates through its Article 11 that: “For two years it is prohibited to grant entrance visa for the foreigners labourers, who have previously worked in Oman. From the date of last leaving, and the general inspector may make an exception for such period in the case of the public interest.” Accordingly, in order to change employment within Oman, the employee must obtain a no-objection certifi cate, popularly termed as the “NOC”, from his previous employer. Although favoured by some employers, this rule has attracted some criticism from various sectors and there is speculation that the government may introduce an amendment to this rule in the near future. Immediate termination for gross misconduct While safeguarding the employees against any unfair conditions in the workplace and arbitrary dismissal, etc., the Oman Labour Law also addresses the situation where an employee may be dismissed with immediate effect and without any end-of-service benefi ts for some specifi ed gross misconduct of the employee. Article 40 of the Labour Law, “Termination of Employment by the Employer (Without Benefi ts)” provides that the employer may terminate the employment contract without notice and without having to pay end-of-service benefi ts, if the employee: • assumes a false identity or commits forgery; • commits an error resulting in heavy fi nancial loss to the employer (provided the MOM is informed within three days of the date on which the employer becomes aware of such occurrence); • despite notifi cation, does not comply with instructions for worker/workplace safety (such instructions must be posted in a conspicuous place) and contravention of which is likely to cause grievous damage to employee/work place); • is absent from work for ten (10) days without reasonable cause during one (1) year, or for more than seven (7) consecutive days (provided such dismissal is preceded by a written notice from the employer after the employee has been absent for fi ve days in the fi rst case); • discloses any secret relating to the employer’s company; • is subject to a fi nal judgment entered against him for an offence or felony for breach of trust/honour or felony committed in the workplace or during the course of work; • is determined to be drunk, intoxicated or under the infl uence of drugs during working hours; • assaults the employer/manager/superiors in the course of work, or strikes a colleague resulting in sickness or delay from work for period exceeding ten (10) days; or

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• commits a grave violation of the duties imposed under his employment contract. At the same time, the Oman Labour Law also provides a termination provision where the employer can terminate the employee but with end-of-service benefi ts. Article 43 of the Oman Labour Law, “Termination by the Employer (with benefi ts)” provides that the employer may terminate the employment contract, while paying the benefi ts, under the following circumstances: • on expiry of contract or completion of work agreed upon; • death of the worker; • disability of the worker to perform his works; • resignation or dismissal of worker or abandonment of work in accordance with law; • sickness of an employee to an extent that compels him to discontinue work for a continuous or interrupted period of not less than ten weeks in one year. This sickness shall be substantiated by medical certifi cate; or • if the employee reaches the age of 60. On the other hand, the Oman Labour Law also caters to the abandonment of the work by employee under several specifi ed circumstances. Article 41 of the Labour Law, “Termination by Employee (with benefi ts)” provides that an employee may abandon work before the end of his contract period while retaining full rights, if: • the employer defrauded him in respect of terms of employment at the time of entering the employment contract; • the employer does not perform substantial obligations towards the employee as per law or contract; • the employer or its representative commits an immoral act against the employee or the employee’s family; or • despite knowing of grave danger threatening the employees, the employer did not implement any measures prescribed by the relevant authorities. Labour disputes redressal mechanism in Oman Unless there is a different labour disputes resolution agreed between an employer and employee, such as arbitration, labour disputes are fi rst addressed before a designated body established for this purpose, the Department for Settlement of Labour Disputes, at the MOM. The complaint is fi rst fi led online on the portal at the MOM website. Immediately upon registering the complaint at the website, the system automatically sends a text message and email to the employer’s phone number and email address registered with the MOM in the complaint, specifying the name of the complainant, the date & time of the meeting, etc. It is also pertinent to mention here that once a labour complaint is fi led before the MOM, the employer’s right to cancel the employment visa of the employee is suspended until the fi nal settlement of the complaint. The parties are called for hearings before the designated labour offi cer, who mediates between the Parties and then issues an award. Such award is not binding upon the Parties, unless they agree with it. If either Party does not accept the award, the case is then marked for transferral to the Primary Court, and the regular court’s procedures follow after that. However, if at some point the Parties wish to enter into a settlement out of court, they can withdraw the case and register their settlement before the court.

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Minimum and maximum ages for employment The minimum employment age of national employees is 18 years, except for juveniles as explained elsewhere in the note, whereas an expatriate shall not be below 21 years of age at the time of his application for the employment visa. The retirement age of all employees, irrespective of nationality is 60 years. However, there are several instances where the authorities have extended the employment visa of expatriate employees beyond 60 years of age, on a case-by-case basis. Protection from discrimination under the Labour Law The Omani Constitution guarantees Omani nationals the right to work and prohibits compulsory labour, except in extraordinary circumstances, and that for a fair wage, prohibits discrimination between citizens, and generally addresses all employment issues. The workers may form from among them labour unions, subject to registration with the appropriate Ministry, to safeguard their interests, defend their rights and improve their social status related to the employment. Formation and operation of trade unions Article 108 of the Labour Law accords employees the right to form a trade union to safeguard their interests, defend their rights and to represent them on matters relating to their employment affairs. Article 112 of the Labour Law provides that an employer who prevents its employees from carrying out their labour union activities, or hinders the formation of labour unions or the general federation of employees, shall be punished by imprisonment for a period not exceeding one month, and a fi ne of not more than RO 500, or one of the two penalties. The employer’s role in the formation and operation of trade unions Whilst there is no statutory provision that defi nes employer’s rights and the formation and operation of trade unions, it is important to note the following: 1. The Labour Law and Ministerial Decision 570 of 2012 provide that a trade union has the right to freely practise its activity without interference in its affairs or exerting infl uence over it. 2. No employer may dismiss or otherwise punish a worker’s representative in the trade union by reason of exercising trade union activities. 3. In the event of collective bargaining or negotiations between an employer and the trade union, the employer is obliged to provide necessary information to conduct the negotiation. 4. Whilst the negotiation between an employer and the representatives of a trade union are ongoing, any measures or decisions taken by the company shall be considered unlawful. 5. In the event that a collective labour agreement is concluded between a company and trade union in accordance with Article 5 of Ministerial Decision 294 of 2006, it is the employer’s responsibility to display the collective labour agreement prominently at the work place. Restrictions of trade union activities Article 17 of the Ministerial Decision 570 of 2012 sets out restrictions that prohibit trade unions from engaging in the following activities: 1. investments of the trade union’s fund in fi nancial speculations, in unsafe investments, or in investments contradicting its objectives or purposes;

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2. for engaging in political activities or any activity which is not specifi ed in its statute; 3. accepting gifts and donations, unless with the MOM’s approval, in which case gifts and donations must be unconditional and not contradictory to the objectives and purposes of the trade union’s activity and to the laws in force in the Sultanate; 4. assigning its assets whether in rem or in cash; or 5. Ministerial Decision no. 575/2013 prohibits call to, or participation in, a strike at institutions that offer essential or public services, as well as oil refi neries, petroleum establishments, harbours and ports. Special provisions for juveniles Article 75 of the Omani Labour Law establishes that the minimum age for employment is 15 years, while minors (between the ages 15 to 18 years) are not permitted to work between the hours of 6 p.m. and 6 a.m. Minors are also prohibited from working overtime or in certain hazardous occupations, and employers are barred from requiring minors to work on offi cial days of rest or offi cial holidays or for more than six hours per day, which is in accordance to Article 76 of the Labour Law. Workplaces that employ minors are required to post certain items for display at a conspicuous place of employment, including a copy of the rules regulating the employment of juveniles, the current log with the details of the minors like their names, ages and dates of employment, as well as a work-time schedule detailing work hours, weekly holidays and rest periods, etc. Additionally, in parallel to the Labour Law, Ministerial Decision 217/2016, Article 1 mandates that the employers must obtain prior written approval from the person responsible for the juvenile’s care and upbringing. Furthermore, it is understood that the juveniles are at the development stage physically, as compared to adults, and also that the children seeking employment at this age might more commonly be from poorer backgrounds. Article 3 mandates that they must be provided with a medical check before, during and until six months after the termination of service, at sole expense of the employer. Special rights of female employees Oman Labour Law accords a special treatment to women and provides them some extra benefi ts as compared to the male employees. Such provisions include: non-discrimination in the work place; non-assignment of women for work between 9 p.m. and 6 a.m.; non- dismissal of a woman employee during her absence due to an illness confi rmed by a medical certifi cate; as well as statutory maternity leave. An employer who employs one or more women workers must keep in the workplace a copy of the regulations on employment of women. The Ministerial Decision no. 286/2008, promulgated in 2012, provided for Regulation of Occupational Safety and Health for Establishments Governed by the Labour Law. Those regulations also dealt with specifi c health and safety needs related to women and people with special needs. Employers, for instance, must not expose women to materials or occupational practices which could adversely impact the safe delivery of children, or the health and safety of the foetus.

Omanisation The government understands the importance of the inclusion of Omanis in private sector employment and hence has been, over time, introducing policies for the training and

GLI - Employment & Labour Law 2018, Sixth Edition 171 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Al Hashmi Law Oman development of Omanis for the sustainable future and overall growth of the country. The Omani workforce is comparatively young, and is generally more inclined towards taking public sector jobs, which makes the government keen to introduce policies to encourage Omanis to pursue job opportunities in the private sector. “Omanisation” is essentially a set of guidelines specifying the proportion (quotas) of Omani nationals that are required to be employed by private companies operating in various sectors (and as a percentage of the overall work force). The “Omanisation” percentages are updated from time to time based on further directives issued by the MOM, and certain specifi ed categories of employment are reserved exclusively for Omani nationals. Offi cially known as “Omanisation”, this policy can be a hurdle for multinationals and foreign companies looking to establish a business presence in Oman, as the inability to attract and retain the requisite numbers of Omani nationals can have adverse consequences. However, as part of the incentive package to attract foreign investment into the Free Zones, Omanisation quota requirements have been lowered. Nevertheless, the MOM will normally not issue expatriate labour clearances for companies that fail to hire qualifi ed Omanis to meet the labour targets. If qualifi ed Omanis are not available, the MOM may issue labour clearances pending future availability of qualifi ed Omanis to fi ll such positions. Non-fulfi lment of the prescribed percentage of Omanisation may attract penalties on the employers, such as suspension of their right to obtain additional employment clearances for expatriate employees or fi nancial penalties, etc. Further, an employer seeking to hire an expatriate for any given position must obtain a prior Labour clearance from the MOM, which requires the employer to demonstrate that: (i) qualifi ed Omanis are not suffi ciently available for the relevant post; and (ii) the employer has achieved the minimum Omanisation percentage for its sector. On the other hand, companies that exceed the target Omanisation percentage for their sector are entitled to preferential treatment when it comes to obtaining Labour permits for additional expatriate employees.

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Omar Al Hashmi – Senior Legal Adviser Tel: +968 9934 9958 / Email: [email protected] Mr Omar Al Hashmi is the founding Partner of Al Hashmi Law. He is a senior legal consultant and an acclaimed lawyer in Oman, and manages a team of over 14 professionals.

Syed Ahmad Faizy – Senior Legal Director Tel: +968 9121 5261 / Email: [email protected] Mr Syed Ahmad Faizy is the Chief Legal Director at Al Hashmi Law. He is a senior legal consultant and jointly manages Al Hashmi Law’s team of professionals.

Al Hashmi Law Suite no. 42, Al Ghoubra Plaza, Al Ghoubra, Muscat, Sultanate of Oman Tel: +968 24 493 112, +968 24 493 121 / Fax: +968 24 493 120 / URL: www.ohlaw.net

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Aemen Zulfikar Maluka & Pir Abdul Wahid Josh and Mak International

General labour market and litigation trends The Pakistani labour market’s litigation matters pertain mainly to blue-collar issues, including termination, unfair dismissal, discrimination, as well as disputes involving trade unions and workers’ rights organisations. With the infl ux of multinational companies and NGOs in the region during the past two decades, we have seen courts give much more importance to what is agreed between the employer and the employee in the employment agreement. The most recent case which confi rms the unwillingness of the courts to interfere with an employment agreement’s terms is Muhammad Rasheed vs. H. Ohashi Chief (Representation) Of Toyota Tsusho Corporation,1 where a grievance petition was dismissed on the basis that the appellant had already agreed in writing to the terms of the appointment letter, stating that the employee could be terminated by giving three months’ notice, or three months’ gross salary in lieu thereof. Also the fact that there were only seven (hence fewer than 20 employees) at the workplace, the operation of S.33 & 47---Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 1968), S.1 (4)(a) & S.0.12 which pertain to termination of service, was excluded. In Shaukat Ali vs. Chief Executive PESCO,2 the question of legal and economic justice in labour laws arose with regard to the operation of S.O.13 (3)---Khyber Pakhtunkhwa Industrial Relations Act (XVI of 2010), S.37. The matter involved the withholding of back benefi ts, and it was argued that such an action amounted to discrimination. The court upheld this view, stating that the Industrial Relations Act, 2010 was basically a benefi cial legislation, which provided for protection of rights of labour classes; its object amongst others was to ameliorate the conditions of workers; such legislation had to be construed liberally and benefi cially. It was also stated that a narrow interpretation of the meaning and metaphor of the Industrial Relations Act, 2010 would defeat the manifest objective of legislation, hence time-barred de novo proceedings and withholding of back benefi ts were held to be illegal and unlawful, and an appeal was allowed on this basis. This is a positive trend as far as workers’ rights are concerned and the fact that the weaker party was the ‘worker’ in this regard meant their rights had to be balanced against the legal arguments by the state entity that was the employer. 2015 has been the year when constitutional rights were raised with regard to labour matters. In the case of SAKHAWAT vs. FEDERATION OF PAKISTAN through Secretary, Ministry of Law and Justice and Parliamentary Affairs,3 the appellant sought to invoke S. 5---Constitution of Pakistan, Arts.199, 141 & Item No.32 of the Fourth Schedule in a constitutional petition involving reemployment after retrenchment of disabled persons. The petitioners sought to contend that benefi t of the 2% quota allocated to disabled persons in view of the provisions

GLI - Employment & Labour Law 2018, Sixth Edition 174 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Josh and Mak International Pakistan of the Disabled Persons (Employment and Rehabilitation) Ordinance, 1981 that was promulgated to rehabilitate disabled persons through employment. The court held that the appeal be allowed because this is a type of benefi cial legislation seeking to compel public and private sector organisations to maintain quotas for employing special/disabled persons. Even though this Ordinance could not be strictly called a law for workmen only, its real purpose was to provide employment to disabled persons. The court agreed that if the employees’ termination was on the ground of retrenchment, had not left any stigma on their service record and if the law entitled them to be retained in employment on certain conditions, and they fulfi lled the requisite criteria, their services could not be retrenched. Based on this, the High Court directed the authorities to fi rst apply the quota under the said Ordinance to the petitioner’s case and, after maintaining the 2% quota in case petitioners’ services remained protected, the petitioners should be re-employed. This judgment seems like a welcome change, with the judges taking the initiative to protect the rights of disabled persons. Most of the recent cases involving labour disputes also centre on the status of a workman, that is, to determine the real status of a worker, by delving into questions such as: • whether he was an employee of an establishment or a contractor (the criteria was whether the establishment had administrative control over the worker); • whether the worker was based at the establishment for the work done; • whether the establishment had the power to reinstate and dismiss the worker; • whether the work required to be performed by the worker was of a permanent nature and the same was related to the process of manufacturing before the fi nished goods were sent into market; • whether payment for the worker’s service was made by the establishment; • whether the goods that the worker helped to manufacture, when marketed, brought proceeds to the establishment itself; • whether the worker had been performing his duties and providing labour in connection with the manufacturing process; and • whether the contractor was a genuine person and had not been set up merely to deny the worker of the benefi ts under the labour laws . A recent example of such a case4 was Allied Precision Engineering Products (Pvt) Ltd. vs. J. Handa Khan Maree.5 Finally, where on the one hand the courts have been playing a dynamic role in helping counter unfair labour practices, they are also likely to dismiss such a claim where the alleged allegation of unfair labour practice committed against the appellant on account of his lawful trade union activities, is diffi cult to discern (M. Shafi . vs. United Bank Limited 20116).

Redundancies, business transfers and reorganisations Redundancy and business reorganisations are also a major legal issue in the Pakistani labour market, as a lot of problems can arise when employees are faced with unexpected budget cuts or organisational changes at their workplace. While the majority of such claims are settled out of court, when the matter does go to court, it is because of a failed negotiation of any redundancy package, and the court also advises on Compromise Agreements which employees are usually required to sign. Important recent cases in this regard include Muhammad Jan vs. Nasim Gul, General Manager Shaheen Airport Services, Peshawar,7 in which case we saw an interesting application of the retrenchment/redundancy rule: ‘the last come had to go ﬁ rst’, which had been provided by S.O.13 of West Pakistan Industrial and Commercial Employment (Standing orders) Ordinance, 1968. In this case the employer,

GLI - Employment & Labour Law 2018, Sixth Edition 175 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Josh and Mak International Pakistan having failed to show that the employee was the last person appointed and in case of retrenchment/redundancy, he should be fi rst to go, that contention of the employer was liable to be rejected. The appeal of the employee against termination of his service was rightly accepted, with direction that he would be reinstated in service with back-benefi ts, while the appeal fi led by the employer against the order of reinstatement of the employee, was dismissed.8 By contrast almost two decades ago, the courts were much more likely to uphold industrial disputes involving retrenchment in the favour of the employer. In one such case back in 1983, Naseebuddin vs. Rehman Agricultural Manufacturers Company,9 the court showed that it was much more likely to allow such decisions to occur at the ‘discretion’ of the employer. In many cases, a ‘demotion’ or offering of a lower post was also not seen as a problem, where the higher post had become redundant. (See Utility Stores Corporation of Pakistan Ltd. vs. Abdus Sattar.10)

Business protection and restrictive covenants Non-disclosure, non-compete and non-circumvention agreements have become fairly common here in the last two decades, as more and more foreign companies set up base in Pakistan. The courts, however, do not take too kindly to restrictive covenants, which affect the bread and butter of an unemployed person, especially if the appellant is seeking to enforce a rather vague and generalised clause. A key example of the same is the case of Exide Pakistan Limited vs. Malik Abdul Wadood.11 In this case, while seeking to invoke Ss. 54 & 57--- of the Contract Act (IX of 1872), S.27 and the Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2 in order to get an interim injunction for the grant of such a restrictive covenant on the ground that the defendant had executed an agreement undertaking not to work for a period of two years with any competitor of the plaintiff once he left the job, the plea raised by the plaintiff was that during employment with the plaintiff, the defendant had acquired confi dential information. The court struck down the plea, stating that the restrictive covenant between the parties was too vague, generalised and hence void. The so-called Agreement did not specify what particular, specialised information had been divulged to the defendant, which he would be prevented to use directly or indirectly in employment with another employer. As the plaintiff had failed to particularise what confi dential information was acquired by the defendant or to disclose what particular trade secret or secret formula or information was specially acquired by the defendant, other than in his normal course of employment, the restrictive covenant could not be enforced. However, a different decision was reached in Al Abid Silk Mills Limited vs. Syed Muhammad Mudassar Rizvi,12 where a suit for specifi c performance of a negative or restrictive covenant contained in a letter of appointment, and injunction to the effect that after leaving employment with the plaintiff, the defendant would not join another organisation of similar trade for period of 11 months, was sought to be enforced. The defendant’s plea was that such restrictive covenant was obtained under coercion, but the court dismissed this claim and said that the contract on such plea would be voidable and not void, as the defendant during employment had not elected to get such covenant declared as voidable, hence such a restriction could not be termed to be unreasonable as to time and scope, i.e. for 11 months in a home textile unit. However, a key deciding factor here was also that the plaintiff had offered three months’ salary to the defendant − the court allowed the injunction, subject to the deposit in court of the salary. In essence, it is common practice for employment contracts (especially those used by multinational companies and INGOS in Pakistan) to contain a variety of post-termination

GLI - Employment & Labour Law 2018, Sixth Edition 176 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Josh and Mak International Pakistan restrictions prohibiting the departing employee from soliciting former colleagues, clients and customers, and sometimes prohibiting them from competing for a deﬁ ned period following the termination of employment. However, precedent suggests such a covenant will be successful in Pakistan only if it is clearly drafted and reasonable in duration and terms.

Discrimination protection The case law on discrimination is rather complicated in this regard. On the one hand, the court is willing to give the employer the prerogative to decide as they like whether to retain an employee or retire them at the age of superannuation, ‘in the absence of any statute, rule or agreement, it was a latitude or liberty’,13 as was the case in Abdul Majeed vs. Dandot Cement,14 where the employer was clearly going through a fi nancial crisis and had negotiated contracts after the age of superannuation with some, but not all of the employees. It was held that in the light of fi nancial crises of the employer establishment, the settlement was rescinded and as a consequence beyond 60 years, no extension would be allowed for the petitioners. It was justifi ed that when the services of some of the employees were extended, the said agreement had ceased, and there was no agreement in the fi eld, so the extension in the services of some employees could not be termed as DISCRIMINATION; rather it was the discretion of the employer to extend the services of some of the employees on attaining the age of superannuation. In the circumstances, the aggrieved employees therefore could not rely upon and seek the benefi ts of the old Agreement between employees and the employer. In another recent case, Government of Punjab vs. Abdul Sattar Hans,15 a case involving Arts. 3 & 25 of the Constitution, it was argued that Federal Government employees and Provincial Government employees should receive the same emoluments and perquisites if they were performing the same type of duties; that if two different pay scales were given to Federal Government employees and Provincial Government employees, it could amount to extracting LABOUR and exploitation under Art. 3 of the Constitution, and that although the Provincial Government would have to bear an extra fi nancial burden, service structure and fi nancial constraints could not stand in the way of the Constitution. However, the court struck down this claim, saying that different employers with different fi nancial and other resources employed both sets of employees, and this did not amount to discrimination. In a 2013 case, the court took a more lenient view against an individual state employee who claimed that no impartial enquiry was held against him to prove an allegation of accepting illegal gratifi cation, and allowed the appeal on the basis that the employee had been discriminated against, as another employee against whom a similar allegation of tampering with a meter was levelled, was removed from service, but subsequently reinstated with all benefi ts. It was argued that the facts of said other employee’s case and the employee were identical (MEPCON vs. Arshad Aziz16), and it was discrimination to give the appellant a lesser legal right of appeal. Article 25 & 27 of the Constitution are an oft-pleaded provision of the constitution in discrimination cases and is often used when pay scales are discriminatory or unfair (see 2013 PLC 262). Equal pay is governed by s15 of the West Pakistan Minimum Wage Rules, 1962, which requires employers to give regard to the principle of equal remuneration for work of equal value between men and women when it comes to fi xing wages. However, there is no specifi c law in the country to deal with equal remuneration. The Pakistan

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Regulations on Fair Treatment involve the Constitution of Pakistan, 1973 (as amended in 2012), the West Pakistan Minimum Wage Rules, 1962, and the Protection Against Harassment of Women at Workplace Act, 2010.

Protection against dismissal Termination of employment can involve resignation, dismissal or redundancy. The main law governing termination of employment in Pakistan is the Industrial and Commercial Employment (Standing Orders), 1968. Other relevant legislation in the fi eld includes the Industrial Relations Act, 2012; Provincial Industrial Relations Acts; and the Shops and Establishments Ordinance, 1969. The Standing Orders Ordinance is applicable to all industrial and commercial establishments employing 20 or more workers now or on any day during the preceding 12 months. This ordinance may be extended to other classes of establishments (employing even less than 20 workers) by provincial governments through notifi cation. An exemption to the above rule is granted in the case of smaller industrial establishments (employing between 20–49 workers) in the following four provisions. As discussed liberally under ‘General labour market and litigation trends’ above, a frequent issue of litigation is whether a person comes under the ambit of the ordinance to be able to benefi t from these provisions. This has generated interesting case law refl ecting on the nature of temporary and ad hoc workers and their rights. As per the law, for termination simplicity, a notice of termination is mandatory for permanent employees. A notice of one month must be served before severing the employment relationship, or payment of one month’s wages in lieu of notice may be provided (Section 12.1). A common cause of confl ict and litigation is when the termination initiated by an employer is based on fair or unfair grounds. The law requires a written employment termination letter, stating explicitly the reasons for termination. This is applicable to both termination simplicity (under S.O. 12) and dismissal on the ground of misconduct (as the Standing Orders Ordinance S.O. 15). Precedent shows that some acceptable and valid reasons for employment termination (other than misconduct) can be “serious illness, ineffi ciency to perform the job, fi nancial and economic needs of establishment”. Another heavily litigated ground is serious misconduct; provided that the employee is given an opportunity to respond to the charges levelled against him, this is suffi cient enough reason for dismissal. As per the Standing Orders Ordinance, a worker whose employment has been terminated for any reason other than misconduct is entitled to a “severance pay or gratuity” or a provident fund (type of pension) for gratuity. However, in the case of NGOs (which are technically not commercial establishments), the application of these rules is still vague.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave) Recent case law like Zainul Abedin vs. Al Abid Silk Mills17 shows that the courts are more likely to set aside notice entitlements when the employee shows gross misconduct and a blatant disregard for cooperating in the ofﬁ ce enquiry following a dismissal. Holidays, maternity leave and whistleblowing policies are governed by contractual agreements between employers and employees. However, precedent shows that maternity leave is an issue employers tend to skip upon, until the matter is pushed in the courts. There is no speciﬁ c law on whistleblowing, although it would seem that if such a matter were brought in front of a court, appropriate relief would be provided. The following laws govern the area of holidays, gratuity, maternity leave and other rights/entitlements:

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• The Industrial and Commercial Establishments (Standing Orders) Ordinance, 1968 (applicable in ICT, Sindh & Baluchistan). • Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (adapted by the province of Punjab through Amendment Act of 2012). • The Khyber Pakhtunkhwa Industrial and Commercial Employment (Standing Orders) Act, 2013. • Payment of Wages Act, 1936 (applicable in ICT, Sindh & Baluchistan). • Payment of Wages Act, 1936 (adapted by the province of Punjab through Amendment Act of 2014). • The Khyber Pakhtunkhwa Payment of Wages Act, 2013. • Factories Act, 1934. • Factories Act, 1934 (adapted by the province of Punjab through Amendment Act of 2012). • The Khyber Pakhtunkhwa Factories Act, 2013. • Shops and Establishments Ordinance, 1969. • Shops and Establishments Ordinance, 1969 (adapted by the province of Punjab through Amendment Act of 2014). • Khyber Pakhtunkhwa Shops and Establishments Act, 2015.

Worker consultation, trade union and industrial action In Pakistan, workers are entitled to join a union without previous authorisation; however, they can become members of only one union at a time. If a worker joins more than one union at a time, his earlier membership will get cancelled. Trade unions and their involvement have also produced interesting case law. A recent case18 in this regard shows that courts are willing to recognize trade union membership as a right, which could also be formed in a non-profi t organisation. There have also been consistent decisions of superior courts that there may not be more than one Collective Bargaining Agent in an establishment or group of establishments on the basis of a certifi cate of National Industrial Commission, on an all-Pakistan basis; and accordingly in a recent case,19 it was held that a certifi cate of Collective Bargaining Agent, issued by Provincial Registrar trade unions, giving the status of Provincially registered trade union as collective bargaining agent, was illegal and without lawful authority. In another recent case,20 the court gave a very good decision pertaining to labour unions and petitioners who challenged the constitutionality of the Industrial Relations Act, 2012. The court criticised the appellants, saying that they had lost sight of the welfare and interest of workers, whose interest they were supposed to be protecting. It was stated that a number of companies and statutory corporations had establishments in more than one province throughout Pakistan, thus the underlying assumption of a central bargaining agent and industrial relations was that workers were dealt with in a uniform manner in respect of such companies and statutory corporations. The court was not prepared to allow ‘scattered trade unions’, whereby the negotiating power of workers, and also their interest, would be undermined, if they were dealt with separately or there was more than one collective bargaining agent, and different terms of employment and conditions of work were negotiated. It was reasoned that because of such scattering of unfair labour practices on the part of employers, it would become diffi cult to contest or to redress worker grievances and it would also become diffi cult, if not impossible, to negotiate differences between employers and

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Other recent developments in the fi eld of employment and labour law We can see two different trends in Pakistan, as more multinationals and international NGOs set up base here. It would be fair to say that the employment law trends will also be affected by the incoming China-Pacifi c Economic Corridor (CPEC) investment, which will create new jobs and new types of contracts. The fi rst trend is that of organisations preferring to treat workers as independent contractors, which allows them to outsource services and give their marketers, legal or business advisers, or even those dealing with social media and advertisements, recruiters, and even receptionists, work on an independent contract basis. This trend also includes contracts with cleaners and lower-ranking staff including cooks and repairmen. A key question faced by international NGOs is whether a gratuity, severance or any end- of-service or provident fund applies to them, as they are non-commercial undertakings/ establishments. In this regard, one recent law allows a gratuity to be claimed by NGO employees working in the KPK region (see the Khyber Pakhtunkhwa Industrial And Commercial Employment (Standing Orders) Act, 2013) and Khyber Pakhtunkhwa Shops and Establishments Act, 2015. There is a grey area here with regard to the application of such an act to the rest of Pakistan as, while international NGOs consider it best practice to provide such benefi ts, the majority of the local NGOs here are not paying such benefi ts. From a legal perspective, and in any case, an employer is bound to offer only one retirement benefi t out of pensions, gratuities and provident funding. The logic often provided is that NGOs should focus their limited funding on poor and deserving people, rather than offering such benefi ts to employees. Also, many local labour studies in Pakistan have shown that severance pay (particularly where multinationals or NGOs are involved) tends to tempt employees to abuse the benefi t, as they are aware of the large amounts of money they will be getting when the contract has ended.

* * *

Endnotes 1. 2016 PLC 147 Punjab Labour Appellate Tribunal. 2. 2016 PLC 16 PESHAWAR-HIGH-COURT. 3. 2015 PLC(CS) 385 KARACHI-HIGH-COURT-SINDH. 4. See also 2011 PLC 292 Ss. 2(xxix) & 25---Industrial and Commercial employment (Standing Orders) Ordinance (VI of 1968), S.2(1)---Constitution of Pakistan, Art.199- --Constitutional petition---Status of ‘workman’, determination of---Full Bench of National Industrial Relations Commission had held petitioner not to be a ‘workman’ because he was occupying the post of Branch Manager of the Bank.

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5. 2011 PLC 286 Quetta-High-Court-Baluchistan case involving Ss. 2(x)(xxx) & 46---Industrial and Commercial employment (Standing Orders) Ordinance (VI of 1968), S.2(c)(i) & S.O.12---Constitution of Pakistan, Art.199---Constitutional petition- --Termination of service---Grievance petition---Status of worker/determination of. 6. PLC 226 NATIONAL-INDUSTRIAL-RELATIONS-COMMISSION. 7. 2006 PLC 444 PESHAWAR-HIGH-COURT. 8. See also 1992 PLC (CS) 981 where Appellant’s termination was in accordance with S.O.12 (3)---Appellant did not allege any mala ﬁ des against employer---Retrenchment order passed by employer was bona ﬁ de and did not call for any interference by labour Court or Appellate Tribunal---Appeal against said termination of service was dismissed. 9. 1983 PLC 328 LABOUR-COURT-SINDH. 10. 1981 PLC 95 LABOUR-APPELLATE-TRIBUNAL-PUNJAB. 11. 2008 CLD 1258 KARACHI-HIGH-COURT-SINDH. 12. 2003 MLD 1947 KARACHI-HIGH-COURT-SINDH. 13. 2016 PLC 93. 14. Ibid. 15. 2015 SCMR 915 Supreme Court. 16. 2013 PLC 417. 17. 2016 PLC 488. 18. 2016 PLC 160. 19. 2015 PLC 125. 20. 2014 PLC 351.

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Barrister Aemen Zulﬁ kar Maluka Tel: +92 518 442 922 / +92 304 873 4889 / Email: [email protected] Barrister Aemen Zulﬁ kar Maluka (a member of Lincoln’s Inn) has an LL.M. in Oil and Gas from the University of Aberdeen in Scotland, and another LL.M. in Corporate and Media Law from the University of London. She is a member of the Islamabad Bar Association and an advocate of the High Court, Punjab Bar Council UK. She has drafted and advised several local and international companies and organisations regarding hydrocarbon, mining and energy projects. Her area of expertise is the vetting, editing and drafting of legal and technical energy and mining documents.

Pir Abdul Wahid Tel: +92 300 507 5993 / Email: [email protected] Mr. Pir Abdul Wahid (Advocate High Court) is a Senior Lawyer heading the Islamabad (Pakistan) ofﬁ ce of Josh and Mak International. He has extensive and international experience advising on a broad range of matters. Mr. Wahid has vast experience in representing clients in trade remedy investigations (anti- dumping and countervailing) in Pakistan as well as before various international trade regulatory bodies. Mr. Wahid has advised clients on corporate matters and has regularly represented clients before various regulatory authorities of Pakistan. His areas of expertise include Employment Laws, Trade Remedy Laws, Project Finance & Corporate Finance, Banking, Energy and Power, Constitutional law, Corporate and Civil Litigation. His practice is currently focused on dealing with multi-jurisdictional transactions, and dispute resolution and mergers and acquisitions in the energy and corporate sector.

Josh and Mak International GF-13, Tower A, The Centaurus, Plot 1 Jinnah Avenue, F-8 Islamabad, Pakistan, 44000 Tel: +92 518 442 922 / URL: www.joshandmakinternational.com/

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Sandra Lima da Silveira Cuatrecasas

General labour market and litigation trends Employment relations in Portugal are highly regulated and in the past there has been criticism that the extent of regulation has led to a certain amount of infl exibility in the labour market. Collective bargaining is well established with some 80% of Portuguese employees being covered by some form of collective agreement. Collective agreements are legally binding and it should be noted that there is a high degree of government intervention in the conduct of collective negotiations. Disputes are resolved by a highly developed system of Labour Courts but the system is still extremely cumbersome and it can take one to two years between an aggrieved individual making an application and a fi nal decision being given at fi rst instance, and four to fi ve years if the case goes to appeal. Over the last few years employment legislation has gone through signifi cant changes such as the reform of the Labour Code on 2009 and the amendments to the Labour Code required under the Memorandum of Understanding Agreement between Portugal, the International Monetary Fund and the European Central Bank of 3 May 2011 that introduced relevant alterations in the following areas with the aim of introducing more fl exibility in employment relations: • overtime work payments; • compensation for termination of employment contracts; • fl exible working hours regimes; • reduction of administrative communications to the Labour Authority; and • extension and expiry of collective bargaining agreements. Following this period of signifi cant changes to employment legislation, more recent changes have focused on specifi c areas and employment issues where protection of employees was reinforced. In this context, reinforcing employees’ protection in less protected employment relations (i.e. temporary employment and fi xed term employment relations) and fi ghting the use of alternative types of relation to avoid employment-related obligations and liabilities (i.e. service-providing agreements, subcontracting, fake independent work) was the aim of different amendments to employment legislation. Finally, the most recent alterations to the Labour Code require a more active role of the employer in protection against any type of harassment in the workplace.

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Alternative types of relation and liability for compliance Reinforcing previous changes to employment legislation which established a special judicial action to recognize the existence of employment contracts and the procedural mechanisms to fi ght fake independent work, recent amendments in the legal framework have extended the material scope of the special action to recognize the existence of employment contracts to all situations where the relationship between the person providing an activity and other(s) who benefi t from it has the characteristics of an employment contract (i.e. false internships and false volunteering). Mechanisms to reduce complexity and make the procedure more effective were also implemented: • The ruling given in the special judicial action of recognition of the existence of an employment contract is now communicated by the Court of its own motion to the Labour Authority and the Social Security Institute with a view to regularising contributions from the date on which the employment relationship was established in such action. • Whenever the employee is dismissed between the date of notifi cation to the employer of the Authority for Working Conditions’ infraction notice and the date when the judicial decision becomes res judicata, the Public Prosecutor is now competent to bring of its own motion a preliminary injunction for the suspension of the dismissal, it being suffi cient that the Public Prosecutor is given notice of the dismissal, by any means. The legal framework of exercise and licensing of private placement agencies and temporary employment agencies was amended, and liability for employment breaches and penalties was signifi cantly extended. In the past, users of temporary employment agencies were secondarily liable with the temporary employment agency for employees’ credits and respective social charges referring to the fi rst 12 months of relation. The time limit was removed and this secondary liability now applies to employees’ credits and social charges for the entire duration of the relation, and to the payment of related employment penalties. This increased liability, together with the fact that it extends to administrators, directors and managers, and companies with reciprocal corporate interests, in a controlling relation, or affi liated companies, of both the temporary employment agency and the benefi ciary, has been a factor of concern for companies using these type of employment relations, and very much criticised. As regards general compliance in the employment area, outsourcing and subcontracting services (when the services are performed partly or in whole at the benefi ciary’s premises or under the benefi ciary’s responsibility) now imply the joint liability of the benefi ciary with the provider (contractor and main contractor) for compliance, breaches and payment of employment-related penalties. As in the previous situations, the company’s representatives and group companies will also be liable. Although the legal wording also includes reference to “compliance with legal rules”, there are restrictive interpretations limiting this to joint liability for administrative infractions and not for the effective compliance with the rules. In fact, a literal application of this new liability regime implies an excessive responsibility of the companies in relation to labour relations that are not under their control, and in matters that are diffi cult to control and supervise. In any case, the alterations are recent and there are still no fi xed doctrinal or jurisprudential positions on the scope of the norm and its interpretation. The developments of the application and interpretation of this provision will have a signifi cant impact on the labour market.

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Business transfers and reorganisations The Labour Code implements the revised Acquired Rights Directive that regulates employees’ acquired rights in the event of a transfer of a business. As a general rule, a transferee will take over the contracts of employment on the transfer of a business and assume the position of the transferor, unless the employee was transferred elsewhere (e.g. to a different location or department) before the transfer of the business occurred. The regime in force establishes obligations to inform and consult employees before the transfer takes place, under which the transferor and transferee must provide written information to the employees, or their representatives, stating the date and reasons of the transfer, its legal, economic and social consequences as well as any specifi c employment measures to be implemented as a result of the transfer. Ten days after compliance with the information obligation, the transferor and transferee must consult the employees, or their representatives, in order to obtain their agreement on specifi c measures to be implemented as a result of the transfer. There are currently no specifi c obligations to notify authorities in the event of a transfer of business. However, general rules in relation to the notifi cation of the labour authorities or social security services concerning the admission of new employees or the termination of the company’s activity will apply. Also, there is no established right of the employees to oppose the transfer. Failure to comply with the information and consultation obligations is classifi ed as a light labour law infraction punishable with fi nes of up to €1,440, though such failure will not invalidate a transaction. For a period of one year after the transfer, the transferee is jointly liable with the transferor for any obligations vis-à-vis the employees that arose prior to the date of the transfer. Any dismissals or redundancies prior to or after the transfer that are made in connection with the transfer itself are unlawful. Failure to comply with the obligation in relation to the automatic transfer of employees is classifi ed as a very serious labour law infraction. This is punishable with fi nes and will entitle the employees to bring proceedings to be reinstated or to receive compensation for unlawful dismissal. Legislation proposals from different political parties were recently submitted to the Parliament but at the time of writing have not yet been approved and are under public discussion. The most relevant changes included in the different proposals foresee the obligation to notify and request previous approval by authorities, the right of the employee to oppose the transfer and the reinforcement of protection against dismissals as a result of the transfer.

Discrimination and workplace harassment The Portuguese Constitution enshrines the basic right to be treated equally regardless of sex, race or nationality. The Labour Code guarantees equal pay, equal opportunities, equal conditions at work and equal treatment for both men and women and outlaws discrimination on the grounds of parentage, age, sex, sexual orientation, marital status, genetic heritage, disability, chronic illness, nationality, ethnic origin, religion, political or ideological convictions and trade union membership. The Portuguese Government intends to introduce new rules governing gender equality regarding remuneration.

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The envisaged system establishes information, evaluation and correction mechanisms aimed at implementing the principle of equal pay for equal work or of equal value, in order to correct the situation of women’s generalised and structural disadvantage in the labour market. Annual statistical information will be available in order to signal wage differences, by sector and by company. Furthermore, companies will have an obligation to ensure the existence of a transparent remuneration policy, based on the evaluation of the components of the functions based on objective criteria, common to men and women. In case of claims by an employee, the employer will have to submit a plan for the assessment and correction of discriminatory remuneration differences found after notifi cation by the Employment Conditions Authority (ACT). Furthermore, the employee will be entitled to request from the Commission for Equality in Work and Employment (CITE) the issuance of an opinion on the existence of pay discrimination based on gender in any specifi c situation. At the time of writing, full details of the intended changes are not yet available. However, it is expected that initially the new obligations apply only to companies with 250 employees or more, and after two years to companies with 100 employees or more. The Labour Code already included provisions concerning protection and reaction against harassment. However, very recent alterations to the Labour Code require a more active role of the employer in protection against any type of harassment in the working place and provide for additional protection of the employees. The most signifi cant amendments were: • The victim of harassment is entitled to compensation. • The employer must adopt codes of good conduct for preventing and combating workplace harassment, when the company has seven or more employees. Breach of this obligation is considered a serious infraction. • The employer must initiate disciplinary proceedings whenever the employer is aware of alleged harassment at work. Breach of this obligation is considered a serious infraction. • The employer will be liable for compensation for damages arising from occupational diseases caused by harassment. • The presumption that the dismissal, or other disciplinary sanction allegedly imposed to sanction an infraction, is abusive when it occurs within one year of complaint or other form of exercise of rights relating to equality, non-discrimination and harassment. • The inclusion in the list of just cause for termination of the employment contract by the employee of the practice of harassment by the employer, provided that it is reported to the Labour Authority.

Protection against dismissal Prior to dismissing an employee who is benefi ting from specifi c parental protection rights (pregnant, breast-feeding on maternity or paternity leave), a prior favourable opinion must be issued by the Employment Department. Dismissal of employees who benefi t from such protection is always rebuttably presumed to have been without just cause. Dismissal of employees who are or have been part of an employees’ representation body or, following recent changes to the legal framework, who have presented claims of discrimination or harassment, is also rebuttable presumed abusive.

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Statutory employment protection rights Under the amendments to the Labour Code approved in 2016, there are currently 13 national public holidays and various local and municipal holidays. Permanent employees are entitled by law to 22 working days holiday per annum and, unless the contrary is agreed with an employee, the employer is obliged to permit an annual vacation in the period between May and October. Family leaves and other parental and maternity entitlements and protections were last revised signifi cantly revised in 2015 with a focus on promoting the father’s participation and entitlements, joint leaves and fl exible working hours entitlements. The initial parental leave is 120 to 150 days and may be enjoyed simultaneously by both parents (where the employer is a micro company, it must give consent). The leave may be increased by 30 days if each parent individually takes a period of 30 consecutive days, or two periods of 15 consecutive days after the mandatory leave of six weeks for the mother. In the event of multiple births, the 120 days of maternity leave will be increased by an additional 30 days leave for each additional child. A mandatory six-week period of parental leave applies to the mother and must be taken after the birth. The father is required to take 15 days (which may be increased by 10 days) consecutively or non-consecutively in the 30 days following the birth of the child, although fi ve consecutive days must be taken immediately after the birth. The initial parental leave allowance is 100% of the employee’s average wage for 120 days or 80% for 150 days (unless each parent individually takes a period of 30 consecutive days, or two periods of 15 consecutive days on a non-simultaneous basis – in that case, the allowance is 100%) and the cost is met by the social security system. Where both parents share the parental leave giving rise to leave of 180 days, the employee will be entitled to receive a monthly allowance corresponding to 83% of her/his average salary. All rights regarding job security and seniority are protected during the parental leave. Either the mother or the father may take unpaid leave of up to three months, extendable to up to two years, after the birth of a child to look after that child until the child is six years old. Employees have the right to return to their previous job on expiry of parental leave. In the case of the birth of a third child or more, leave may be extended for up to three years. Either the mother or the father will also be entitled to take unpaid leave of up to four years to take care of their children in cases where they are handicapped or have a chronic disease until the child is 12 years old.

Employee privacy The EU General Data Protection Regulation (GDPR) that will come to force in May 25, 2018 replaces the Data Protection Directive 95/46/EC and was designed to harmonise data privacy laws across Europe, to protect and empower all EU citizens’ data privacy and to reshape the way organisations across the region approach data privacy. The GDPR will also impact companies in the employment area since this area involves the processing of personal data of the employees for a variety of purposes and may imply the adaptation of current Human Resources procedures to conform to GDPR requirements; namely in regard to the consent of the employees regarding data processing. In fact, the conditions for consent have been strengthened by the GDPR, and companies will no longer be able to use long, illegible terms and conditions or obtain general consents

GLI - Employment & Labour Law 2018, Sixth Edition 187 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Cuatrecasas Portugal by the employees, as the request for consent must be given in an intelligible and easily accessible form, with the purpose for data processing attached to that consent. Consent must be clear and distinguishable from other matters and provided in an intelligible and easily accessible form, using clear and plain language. It must be as easy to withdraw consent as it is to give it. The Portuguese legal framework for data protection, Personal Data Protection Legislation (PDPL), still in force, establishes the right of information, the right to be forgotten, the right of opposition, the right of correction, the right to portability and the right to limitation of personal data processing, as well as the right of the employees, as data subjects, to access their personal data. The right of access entitles them, subject to certain limited exceptions, to be told, among others, what data are held about them, the purposes of the processing, to whom it is disclosed, and to be provided with a copy of their personal data. Data subjects may also request the rectifi cation, deletion or blocking of their personal data, where the processing of their data does not comply with the provisions of the PDPL and of the GDPR, and that any such rectifi cation, deletion or blocking should be notifi ed to any third party to whom their personal data had been communicated, except where the employer demonstrates that it is impossible to do so. The exercise of these rights of access is subject to certain conditions, particularly in the case of data processing, as provided by the PDPL and in the GDPR. Employees also have the right to object to the processing of their data in the circumstances specifi ed by the PDPL and in the GDPR, namely in the case of processing for direct marketing purposes or for any other form of advertising. An employer who wishes to provide employee data to third parties must do so in accordance with the PDPL and GDPR’s principles and processing conditions. In many cases, it may be necessary to obtain express consent to such disclosure in the absence of a legitimate business purpose for the disclosure and depending on the nature of the information in question and the location of the third party. Personal data can be transferred within the EU subject to general compliance with the PDPL and the GDPR. Where the third party is based outside the EEA it should be noted that the PDPL and GDPR prohibit the transfer of data to a country outside the EEA, unless that country ensures an adequate level of protection for personal data, or one of a series of limited exceptions apply. The monitoring of employee email, internet and telephone usage and closed circuit TV monitoring is regulated by the Labour Code. Monitoring is permissible provided that it is carried out in accordance with the principles and processing conditions prescribed by the Labour Code. All fi les and systems used by the employer to process employees’ data must satisfy the PDPL’s and GDPR’s provisions. Express employee consent to monitoring is not usually required, however, employees shall be made aware that monitoring is being carried out, the purpose for which it is being conducted and to whom the data will be supplied. The recording of communications is expressly prohibited, except if made for the exclusive purpose of proving a commercial transaction or if made in the context of a contractual relationship, as established by the Law related to Personal Data Processing and Privacy Protection in Electronic Communications. In the case of legally authorised recordings, employees involved in such communications must be made aware of the recording and they must give their express consent to the recording in addition to any other data subject involved in the communication. The CNPD must grant prior authorisation for the recordings at least until the date of application of the General Data Protection Regulation.

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The employer is entitled to establish rules for the use of the company’s communication systems (e.g. email). These rules must be made clear to the employees. The evolution of Portuguese Labour Court decisions in this area, conﬁ rms that clear and express rules regarding personal use of companies’ communications systems are essential for the success of disciplinary actions in this area.

Other recent developments in the ﬁ eld of employment and labour law Under the special social agreement entered into by the Government, unions and employers representatives, the statutory minimum national wage was ﬁ xed at €557 per month up to 31 December 2017, and is expected to increase to €580 in 2018 and €600 in 2019.

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Sandra Lima da Silveira Tel: +351 21 355 38 00 / Email: [email protected] Associate lawyer of Cuatrecasas since 1999. Her practice has focused on employment and social security law, particularly in advising on day-to-day employment matters, negotiating and preparing salary packages, allowances, beneﬁ ts and incentive plans, and disciplinary proceedings. She also has experience in advising on and planning for startup companies, and advising on downsizing and company closures, transferring employees, drafting standard contracts at European and international level, negotiating the hiring and dismissal of managerial staff, and on preparing employment due diligences in the framework of company acquisitions. Member of the Portuguese Bar Association since 1996. Member of the International Bar Association and the European Employment Lawyers Association. Law Degree, University of Lisbon Law School, 1996. Post-graduation in Labour Law, University of Lisbon Law School, 2001.

Cuatrecasas Praça Marquês de Pombal, nº 2, 1250-160 Lisbon, Portugal Tel : +351 21 355 38 00 / Fax: +351 21 353 23 62 / URL: www.c uatrecasas.com

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Enrique Ceca, Marta Montes & Sonia Manrique Ceca Magán Abogados

Legislative developments which have impacted on the labour market and legislation 2016 was a year of political uncertainty in Spain. Although general elections were held in November 2015, it was not until November 2016 that a new government was ﬁ nally formed. Therefore, last year we had little parliamentary activity, and hence 2017 has brought new projects and reforms. Amongst the developments regarding labour legislation, we would like to highlight the following: Paternity leave A key legislative development has been the extension of paternity leave. As of January 1, 2017, the four-week duration of the voluntary paternity leave established in the Second Final Provision of Law 9/2009 came into effect, which modiﬁ ed Article 48.7 of the Statute of Workers. This enhanced leave for paternity is recognized with respect to births, adoptions and foster care as of January 1, 2017. Until this reform came into force, paternity leave had a 13-day duration. Labour inspection-work time The Supreme Court has exempted companies from keeping a record of the days of their staff, thus changing the previous criterion of the National Court, based on the judgments of December 4, 2015, February 9, 2016 and May 6, 2016, applied by the Labour Inspectorate. According to the judgments of the Supreme Court of February 23, 2017 and April 20, 2017, companies are not required to keep a record of the daily work of the entire workforce to verify compliance with the working day. The only obligation arising from the Statute of Workers is to account for overtime work performed. These judicial decisions exempt companies from the obligation to implement systems that guarantee control, since they reject “carrying out an extensive interpretation of Article 35.5 of the Statute of Workers imposing obligations that limit a right such as the principle of freedom of business”. Despite the rejection of the registration requirement, the Supreme Court admits that “a legislative reform would be needed to clarify the obligation to keep a time register and provide workers with proof of the performance of overtime.” Self-employed work The most recent reform of self-employment should be highlighted, since self-employed workers represent 21.25% of the active population in Spain. Self-employed work in Spain has a prominent role in wealth generation and productive activity.

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Even though during the economic crisis self-employed work experienced a signifi cant decline, it has shown an important resilience and great potential in terms of job creation. On October 25, 2017, Act 6/2017 on Urgent Reforms of Self-employed Work was published in the Offi cial Gazette of the State (BOE). This act includes relevant developments regarding these workers, including measures addressing the following: • reducing red tape affecting self-employment; • promoting self-employment; • fostering a balance between family and working life; • clarifying taxation of self-employment; • participation of representative intersectional organisations of self-employed work in the economic and social council; • compatibility of the performance of self-employment or third-party work with the receipt of a contributory retirement pension; • improvement of the prevention of health and safety risks of self-employed workers by the Foundation for the Prevention Health and Safety Risks (Fundación Estatal para la Prevención de Riesgos Laborales); • acknowledgment of professional accidents “on the way to work” (accidente in itinere) to self-employed workers; • enhanced protection of economically dependent self-employed workers (TRADES); and • development of the concept of regularity (habitualidad) for the purposes of inclusion in the Special Social Security Regime of Self-Employed Workers. Work accidents and professional illnesses Effective January 1, 2017, Royal Decree 231/2017, of March 10, has modifi ed the Royal Decree 625/2014 of July 18, which regulates certain aspects of management and control of the processes for temporary disability in the fi rst 365 days of its duration. The Royal Decree 231/2017 of March 10 establishes a system for reducing contributions for professional contingencies to companies that have decreased their labour accident rate signifi cantly. With this modifi cation, the doctors of collaborating companies in the management of the Social Security (mutual collaborators with the Social Security) are entitled to issue medical leave authorisations and leave confi rmations, and to discharge employees due to recovery.

Discrimination protection: Nullity due to temporary disability Based on a preliminary ruling issued by the Court of Justice of the European Union (Daouidi case), a Spanish Social Court stated that dismissals carried out during an employee’s sick leave may be declared null and void due to a discrimination based on disability. According to the CJUE, the concept of disability must be understood as referring to a limitation which results in a long-term impairment. In this respect, it should be noted that Article 55 of the Workers’ Statute states that any dismissal on one of the grounds of discrimination prohibited by the Constitution or by law, or occurring in breach of the fundamental rights and public freedoms of workers, shall be void. The nullity of a dismissal shall entail the immediate reinstatement of the worker, with payment of unpaid wages or salary. Therefore, during this year, many employees have brought actions seeking a declaration that their terminations were null and void, alleging this judgment.

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However, we do not expect more judicial claims based on this debate, despite the fact that some social courts have declared these dismissals to be null and void. Based on our Supreme Court’s case law, Catalonia’s Courts of Appeal has overturned the mentioned judgment and it has stated that the dismissal of an employee during a temporary incapacity procedure may be declared unfair if there is not a legal ground, but not null and void.

Thresholds of collective redundancies. Judgment of the Supreme Court dated 13 June 2017 This ruling deals with the existence of a collective redundancy when a company terminates 12 employment contracts in a workplace, even if the company has more than 20,000 employees. The court analysed whether the company should have followed the statutory procedure for collective redundancies in those circumstances. The works council ﬁ led an appeal before the Supreme Court claiming that, according to the Workers’ Statute and the European Directive 98/59, the statutory procedure should have been followed. Therefore, they claimed that the dismissals should be declared null and void. Firstly, the Supreme Court analysed if, according to Article 51 of the Workers’ Statute, the collective redundancies thresholds were exceeded. Given that this company employed more than 20,000 workers, a collective redundancy should be carried out if 30 employees are dismissed. However, in that case, only 12 employees were made redundant. Secondly, the Supreme Court understood that the thresholds stated in Article 1.1 of the aforementioned Directive were not exceeded. Even though the affected employees belonged to a differentiated workplace, the rule clearly restricts its application to those workplaces that employ at least 20 workers. Finally, the Court referred to the provisions of paragraph 5 of Article 51.1 of the Workers’ Statute, which includes the possibility of a collective dismissal in the event of termination of employment contracts that affect the entire workforce of a company, if more than ﬁ ve employees are dismissed. This rule did not apply to the case either. Therefore, the Supreme Court concluded that there was no collective dismissal, so it rejected the appeal. This is an interesting judgment to be taken into account because it links the interpretation of both the European and Spanish legislations regarding collective redundancies thresholds.

Declaration of the nullity of the dismissal of an employee undergoing a fertility treatment. Judgment of the Supreme Court dated 4 April 2017 The Supreme Court applies more ﬂ exible criteria in the interpretation of the requirement of contradiction, as it is a judgment of the Court of Justice of the European Union. By this judgment, the Supreme Court has declared the nullity of the dismissal of a worker subject to an in vitro fertilisation treatment in which the ovules had already been fertilised, but had not yet been transferred to the woman’s uterus. In order to reach this conclusion, the Court held that, while the prohibition of dismissal of pregnant workers did not apply to the alleged case, the principle of equal treatment between men and women regarding employment prohibits dismissals carried out on the grounds of fertility treatment. In that case, the Court veriﬁ ed the existence of indications of the violation of the employee’s fundamental right, but the company did not prove that the grounds of the dismissal were not related to that situation.

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Nature of health insurance premiums and contributions to pension plans in relation to compensations for dismissals. Judgment of the Labour Chamber of the Supreme Court dated 3 May 2017 The Supreme Court confi rms the criterion maintained by the Basque Country’s Employment Court of Appeal on September 16, 2014, and overturns doctrine, rejecting the traditional interpretation made by our courts regarding the legal nature of life and health insurance premiums and contributions to pension plans. According to this traditional view, life and health insurance premiums and contributions to pension plans are extra-salary benefi ts, and therefore, they should not be added to the total salary when calculating compensations for dismissals. Until this Supreme Court’s ruling, these contributions were considered enhancements in Social Security benefi ts and therefore were excluded from the computation of dismissal compensation according to a misinterpretation of Article 26.2 of the Workers’ Statute. This Article states a series of concepts that are not salary: compensation for expenses; Social Security benefi ts and compensations; and compensations paid to employees due to transfers, suspensions or terminations. In particular, the Supreme Court bases its argument by making a parallel between life insurance and contributions to pension plans, declaring the following: 1. The payment of the insurance (as well as the contributions to pension plans) is a direct consequence of the employment relationship because it is a consideration for the work performed by the employee. 2. Even though the payment of the insurance and the contributions to the plan may be considered an improvement of Social Security benefi ts, only the benefi ts and compensations that employees will receive may be excluded from the salary for compensation purposes. This is what, according to the Court’s criterion, should be understood from the wording of Article 26.2 of the Workers’ Statute. To the contrary, the premiums and contributions effectively paid by the company are salary in kind and, consequently, the amounts paid should be taken into account in dismissal compensations. 3. The legal system forms a unitary and full whole, allowing the principle of analogical application. Therefore, it will be possible to attend to the qualifi cation made by the tax regulations regarding the insurance, which is considered as compensation in kind. In this sense, the Spanish personal income tax (Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Personas Físicas y de modifi cación parcial de las leyes de los Impuestos sobre Sociedades, sobre la Renta de no Residentes y sobre el Patrimonio) also states that contributions to pension plans are income arising from work in kind. Given that the exclusion provided by article 26.2 of the Workers’ Statute is numerus clausus, all the items that are not included in it are deemed salary. Therefore, life and health insurance premiums, as well as contributions to the pension plan, are considered compensation in kind, so they must be computed for the purposes of compensation for dismissal.

Recording of daily work schedule. Judgment of the Labour Chamber of the Supreme Court dated 23 March 2017 In this case, although the company does not have a system for recording the daily work schedule, it does oblige the workers to register any breach of their working day on the company’s Intranet.

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The Supreme Court understands that the provisions of Article 35, paragraph 5, of the Workers’ Statute, “for the purpose of calculating overtime, the day of each worker shall be recorded day by day”, shall be interpreted as follows: under the obligation to register day by day, the day should be calculated only with respect to overtime, so that the record must be carried out for each day on which overtime is performed. The Court considers that whenever the legislator wants to register every working day each day, regardless of whether extra hours are made or not, it has to be arranged in each particular case. Therefore, having been able to do so, the legislator has not done so and therefore the content of Article 35, paragraph 5 of the Statute of Workers should not be interpreted extensively. The Court considers that this interpretation coincides with the one followed by European Union legislation. The Judgment concludes that the given solution does not leave the worker defenceless when it comes to proving the performance of overtime, because at the end of the month, the company will notify him/her of the number of overtime hours performed, or their non- completion. Therefore, employees will be able to challenge this communication and at the time of proving the overtime hours carried out, they will beneﬁ t from the rule of Article 217 of our Civil Procedural Law (Ley de Enjuiciamiento Civil), regarding burden of proof.

Joint liability of companies within a chain of contracts according to our regulations regarding business transfers. Judgment of the Labour Chamber of the Supreme Court dated 11 May 2017 The Supreme Court has confi rmed the extension of liability for wage debts of the last of the awarded companies within a chain of contracts, regardless of whether or not the immediately preceding assignee had generated such debt. The factual assumption of this judgment refers to an “A” company that was awarded a municipal service which was terminated after entering into bankruptcy. During said contract, company “A” had incurred various wage debts that were assumed by the incoming transferee (“B”) by virtue of the business subrogation produced. However, this second contract (“B”), given its interim nature, did not meet these obligations with the result that when the third contracting party (“C”) was subrogated in its position, the debt had not yet been paid. After the lawsuit fi led by the workers, the judgment of the court condemned the City Council and the fi rst contractor jointly and severally, absolving the second and third. This decision was challenged by the City Council, claiming the declaration of the existence of subrogation between the fi rst contractor and the second and between this and the third, were all in accordance with the provisions of article 44.3 of the Workers’ Statute. However, the Employment Court of Appeal of Las Palmas concluded the opposite, considering that, by virtue of the literal content of said article, no liability could be attributed to the last of the contractors (“C”): the last company just provided the service after B, which was the one that was subrogated in “A”’s debt. However, “C” did not generate any new debt. Therefore, given that article 44.3 of the Workers’ Statute refers to the responsibilities arising prior to the transfer, the appeal (recurso de suplicación) was partially upheld and the joint liability of “B” was declared, but not affecting “C”. The third contractor appealed this decision before the Supreme Court, alleging that the concurrence of the phenomenon of business transfer implies the obligation of the assignee

GLI - Employment & Labour Law 2018, Sixth Edition 195 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Ceca Magán Abogados Spain to assume salary debts of the assignor. However, the liabilities that have been acquired by the previous transferor cannot be excluded of such liability. Said appeal was upheld by the Supreme Court, stating that the phenomenon of the transfer of undertakings implies the assumption of all liabilities, regardless of whether they were generated or not by the previous contractor. The key issue is the persistence of the unfulﬁ lled obligation. The Court therefore annulled the Court of Appeal’s judgment and condemned the third contractor, which was obliged to pay jointly the total outstanding debt.

The validity of video surveillance as evidence for disciplinary dismissals. Judgment of the Labour Chamber of the Supreme Court dated 31 January 2017 The judged case concerns the dismissal of a worker who provided services in a work centre that had a system of video surveillance for security purposes. The worker was aware of this system. By means of this system, the company found out that the employee had manipulated receipts and stolen money. Regarding the information received by the worker, the company had only informed staff about the location of the cameras and that they recorded images. However, the employee was not informed about the use that was going to be made of the images regarding monitoring of compliance with the employment contract. The Court, after making a description of its doctrine regarding video surveillance (DIA supermarkets and Bershka – Inditex – cases), indicates that the employer does not need the consent of the worker to process the images obtained through the cameras. It also states that the application of this doctrine leads the Court to conclude that the installation of cameras was a justiﬁ ed measure for security reasons; suitable, necessary and proportionate to the purpose pursued. Therefore, the Court accepted the validity of this evidence within the trial. However, the Court stated that if the staff only know that the cameras are used for security reasons, the company is not entitled to use the recordings for dismissing employees due to certain misconducts not related to security (for example, absence). To this respect, it should be noted that, if a certain evidence infringes fundamental rights, the court will not accept such evidence. Therefore, in many cases, courts have rejected video surveillance evidence because the recordings did not respect employees’ constitutional right to data protection. Regarding non-compliance with information obligations, the Court declared that the employee may have requested more information from the company or he may also have reported the situation to the Spanish Agency of Data Protection (AEPD), so that the company could be sanctioned for the infractions committed. Therefore, unlike previous judgments, the Court seems to exclude the importance of compliance with AEPD’s obligations when judging the validity of the evidence within a dismissal judicial procedure.

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Enrique Ceca Tel: +34 91 345 4825 / Email: [email protected] Labour lawyer, specialist in dealing with individual and collective dismissals, “top management”, transfers, employee’s resignations, “unfair loan of employees”, substantial changes in employment conditions, union elections, Social Security matters, TRADE, negotiation of collective agreements and collective disputes, among others, for National and International Companies, from different sectors such as Banking, Logistics, Energy, Industry, Insurance and Distribution. Main operations: i) management of collective dismissals of 300 employees in the banking sector (€16m); ii) negotiation of a collective agreement for an airport services provider; iii) process of TUPE Regulations within a multinational in the materials sector (€4m); iv) representation of an audiovisual sector company in the challenge of a collective dismissal which affects a staff of more than 1,600 employees (€150m). Co-Managing partner of the ﬁ rm, and head of the labour department. Recommended lawyer by Chambers & Partners Europe, 2017.

Marta Montes Tel: +34 91 345 4825 / Email: [email protected] Graduate in Law and Business Administration from Universidad de Navarra, Marta also holds a Master’s Degree in Labour Law from CEF/UDIMA. Marta is a practising member of the Honorable Bar Association of Madrid and part of our Labour Department. Her job at the ﬁ rm involves preparing briefs and pleadings, challenging infraction notices from the Employment Inspectorate, providing preventive advice and solving queries on Social Security matters. She is a lecturer on the Employment Litigation Course of the Madrid Bar Association.

Sonia Manrique Tel: +34 66 191 7671 / Email: [email protected] Sonia holds a Bachelor’s Degree in Law by Universidad Complutense de Madrid and a Postgraduate Course of Employment Law by Madrid Bar Association. Prior to CMA, Sonia has developed her professional career in Freshﬁ elds Bruckhaus Deringer, where she dealt with cross-border employment matters. She has experience in advising companies on senior executive employment, termination of employment and changes to working conditions, amongst other matters. Sonia also advises national and international clients on labour and social security compliance, review of company policies and handbooks, due diligence procedures and transfer of undertakings. She regularly represents clients in court and in out-of-court proceedings. She is a lecturer at the Employment Litigation Course of the Madrid Bar Association.

Ceca Magán Abogados C/ Velázquez, nº 150, 28002, Madrid, Spain Tel: +34 91 345 48 25 / Fax: +34 91 359 49 30 / URL: www.cecamagan.com

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Carl-Fredrik Hedenström, Karolin Eklund & Mary Ohrling Magnusson Advokatbyrå

General labour market and litigation trends The “Swedish Model” is a phrase used fairly often in different contexts to describe what we in Sweden consider to be typical Swedish systems and functions. In the area of Labour Law, the Swedish Model refers to how legislation has stepped aside to make room for collective agreements and strong union presence. A current concern is that the Swedish Model may be threatened or at least greatly affected by increasing globalisation and the harmonisation of EU legislation. Even so, the Swedish Model stands relatively intact as political efforts work continuously towards strengthening the atypical Swedish Models, one of the latest examples being the consideration of employment conditions in public procurement. Another oft-recurring topic of discussion is gender quotas on corporate boards. Last year, the government put forward a proposal of legislation regarding gender quotas which would have forced companies to incorporate at least 40% women into their boards of directors. The proposal fell through at the beginning of this year, even before it was presented in Parliament, due to the lack of support from the other political parties. Implemented or not, the issue of gender quotas seems to be a continuous trend and constant topic of discussion within Swedish society.

Redundancies and reorganisations As a general rule, an employer in Sweden has the right to reorganise its business as it sees fi t. A reorganisation may have an impact on the workforce and as a result, employers may need to dismiss redundant employees. A redundancy situation as a result of a reorganisation is generally considered a so-called “just cause” (a legal requisite) for termination of employees under Swedish labour law. There is generally no burden of proof on the employer to prove redundancy. The right is, however, not without certain conditions. Firstly, there cannot be a “just cause” for dismissal due to redundancy if it is reasonable to require that the employer offers potentially redundant employees other work within the company. In other words, the employer must consider whether there are other positions within the company that the employee in question could be transferred to and if so, give the employee a replacement offer. The replacement offer should typically be for a position within the company for which the employee is already qualifi ed. Adequate qualifi cations imply that the employee should be able to perform in accordance with the demands of the new position within four to six months after moderate, on-the-job, training. A rule of thumb is that the employee’s capabilities when commencing the replacement position should be what one would expect from a new hire for that same position.

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If there are no vacant positions, or if it is not reasonable to require the employer to offer any positions available, the employer may proceed to dismiss the redundant employees. When doing so, the employer must adhere to a certain order of dismissal. This order is called the “last-in-fi rst-out” principle, and means the last hire is the fi rst to be dismissed in the case of a reorganisation. The purpose of the principle is to protect employees with seniority and to prevent the employer using a restructuring of the company as a pretext to terminate certain employees. Please note that there are exceptions to this principle, for example, for employees with special competences as well as for smaller businesses. Recently, there have been some clarifi cations from the Labour Court regarding what implications a replacement offer may have. Recent developments have shown a shift from strong employment protection to a focus on the right for companies to reorganise the business at their own discretion. In the Labour Court’s judgment AD 2016 no 53, an employee had accepted a replacement offer for a position with a lower salary, but argued to keep the previous salary until the notice period, as set forth in the employee’s employment agreement, had expired. The argument was that the acceptance of being transferred had been involuntary and as such, it was to be seen as a de facto dismissal with a subsequent notice period. The employer, on the other hand, wanted to implement the conditions attached to the new position directly after the transfer into the replacement position had taken effect. The Court stated that the objective of replacement offers is to protect the employee’s rights to keep their employment, and not to protect the rights to certain conditions attached to a position which has been made redundant. A replacement offer to a position with a lower salary cannot automatically be considered as a dismissal. The only time when a replacement offer may be considered to be a de facto dismissal is when there is no objective, just cause for the dismissal in the fi rst place. This was the case in the Labour Court’s judgment AD 2012 no 16, in which a municipality gave youth workers the alternative of either taking a 25% leave of absence for a period of two years, or to accept an employment rate of 75% of full-time. The employees were notifi ed that they would be dismissed if they did not accept either alternative. The Court found that since the municipality had not given the employees replacement offers to other full-time positions within the area, there was no just cause for the dismissal. In this regard, it is important to note that public entities almost always have the possibility of transferring employees, and propose reasonable replacement offers. The same high threshold would probably not apply to private companies, especially not smaller businesses. There have recently been some cases regarding not only a change of salary, but a change of the type of employment. In a controversial judgment, AD 2016 no 69, the court assessed whether a replacement offer of a half-time position instead of a redundant full-time position was acceptable, and found that it was. This judgment has been highly criticised by the Swedish workers’ unions. Further, the Labour Court also recently ruled that a reorganisation which effectively meant that all the employees’ full-time positions would become temporary employments were within the company’s right to reorganise its business (The Labour Court’s decision no 56 [not yet given an offi cial record number] of 1 November 2017). The employees had been told that if they would not accept the change of type of employment, they would be dismissed. The employees argued that there was, in fact, no actual replacement offer and that the company had de facto dismissed them. The Labour Court found that it was within the company’s discretion to decide what type of employment they wanted to have and to subsequently change the form of employment as long as the company complied with any provision in the collective agreements.

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In redundancy cases, a terminated employee who has been employed by the company for at least 12 months, has the right to re-employment should a new position become available. The right to re-employment lasts for a period of nine months after the date of termination. Regarding the right to re-employment, a question which has yet to be tried in court is whether an employee keeps the right to re-employment if he/she has previously declined a replacement offer. Some argue that the employee should not be able to decline a replacement offer, only to have the right to re-employment when a better job offer comes along. Others argue that since the right to re-employment only materialises when there has been a dismissal, the right to re-employment is intact even for employees who decline replacement offers. It should be further noted that redundancy always takes precedence over termination for personal reasons, meaning that if there is a redundancy situation, the employee cannot protect himself by claiming that this is just a way to terminate because of previous personal reason issues that the employer has had with him. Nevertheless, the circumstances must show that redundancy was the actual reason for the termination. As exempliﬁ ed in AD 2017 no 7, in which a company terminated an employee due to redundancy only four days after he had applied for paid paternity leave, an employer cannot simply state redundancy to avoid the requirement of “just cause”. The Labour Court stated that if there is a suspicion of so-called forged redundancy, the employer must provide evidence that there was actual redundancy. This is particularly the case when the employee, as was the situation in this case, has requested a leave of absence to which an employee has the legal right. Consequently, this was regarded as a forged redundancy and the company had to pay damages to the employee.

Business protection and restrictive consent With effect as of July 2017, whistle-blowers in the publicly funded private sectors of health care and education are protected by law (Sw. Lagen om meddelarskydd i vissa enskilda verksamheter). The employees in such publicly funded private sectors have been given the same rights as employees in the public sector regarding whistleblowing. Since January 2017 a law protects against reprisals for employees who report serious misconduct (Sw. Lagen om skydd mot repressalier för arbetstagare som slår larm om allvarliga missförhållanden). The aim of the legislation is to make it easier and safer for employees to alert authorities in cases of misconduct, as employees previously have been deterred from doing so fearing the consequences. Inter alia, employees may now be awarded damages in cases where their employer has penalised them for whistleblowing. A recent judgment covers questions of copyright infringement, trade secrets and loyalty between employees and employer. In the case AD 2017 no 12, two employees had started a new, competing, company whilst still employed. Before leaving, they gathered information from their employer’s database. The question for the court was whether they, by bringing with them the information to their new company, had violated the Copyright Act (Sw. Upphovsrättslagen), the Trade Secrets Act (Sw. Lagen om företagshemligheter) and the general, underlying principle of loyalty obligation in employment relationships. As the information had been gathered and catalogued and was the result of a substantial work effort, the information was protected by the so-called catalogue protection of the Copyright Act. It was further concluded that the information was to be regarded as a trade secret and that the former employees must have realised this when they brought the information with them. Subsequently, the former employees had to pay damages to the company in the

GLI - Employment & Labour Law 2018, Sixth Edition 200 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Magnusson Advokatbyrå Sweden amount of SEK 3 million for copyright infringement, unlawful use of trade secrets and for breaking loyalty, as well as general damages of SEK 1 million, amounting to a total of SEK 4 million in damages.

Discrimination protection The Swedish Discrimination Act (Sw. Diskrimineringslagen) is a fusion of several previous acts concerning various forms of discrimination, as well as the product of several EU Directives. As such, judgments by the EU Court regarding the various discrimination Directives must be taken into account whilst reading and applying the Discrimination Act. The Discrimination Act protects individuals from both direct and indirect discrimination. Whilst direct discrimination usually is quite straightforward, indirect discrimination is more diffi cult to establish. Indirect discrimination is discrimination that comes from a rule, a policy or a practice which seems neutral but de facto results in certain groups of people being discriminated. A recent example of this is an EU judgement regarding a height requirement for becoming a police offi cer. As the height requirement meant that fewer women were able to apply, the rule was indirectly discriminatory. In the workplace, there are several measures employers have to undertake to avoid discrimination to take place. Most notable is the recent legislation which increased the demands of the active actions the employer must take against discrimination. This legislation came into effect on 1st January of this year. Before, such active actions were only connected to certain types of discrimination, namely; gender, ethnicity and religious beliefs. Now the employer has to take active actions regarding all seven grounds for discrimination set out in the Act; gender, gender identity, ethnicity, religion, disability, sexual orientation and age. Other news includes a responsibility for the employer to establish and keep a pay survey to ensure the workplace is not discriminatory. Basically, a pay survey is a list of the employees’ respective salaries which should be kept as a record regarding equal pay. Furthermore, the requirement of active actions also includes that documentation must be kept of how the employer is working to ensure that there are no discriminatory elements in the workplace. This documentation is to be ongoing and updated. If an employer fails to adhere to the documentation obligations of the Act, the employer will be sanctioned with a fi ne. Formerly, such sanctions were under the discretion of the Discrimination Ombudsman (Sw. Diskrimineringsombudsman) or the employee’s union. This development will have the effect that employers will be subjected to a much higher standard regarding actions against discrimination and the legislation will demand that more resources be put into such measures. Effects of the Act are, among others, that the employer may have to arrange that the employees have vacation during certain religious holidays, and use formal and open recruitment channels. The rules also include instructions of how the active actions against discrimination should be carried out: explore, analyse, amend and follow-up.

Protection against termination for personal reasons Redundancy and termination for personal reasons are the only “just causes” for dismissal under Swedish law. Termination for personal reasons, however, covers a broader spectrum than redundancy and includes all possible issues relating to the employee. Unlike redundancy, termination for personal reasons or immediate dismissal demand that the employer present evidence to establish a just cause. Under Swedish law, legislation differentiates between “termination” and “immediate dismissal”. Immediate dismissal means that the personal

GLI - Employment & Labour Law 2018, Sixth Edition 201 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Magnusson Advokatbyrå Sweden reasons for which the employer no longer wishes to have the employee employed are so serious that the employee is dismissed without a notice period. Immediate dismissal is a very serious matter under Swedish labour law and such an action requires the employer to show that the employee is guilty of grave misconduct. Termination for personal reasons is also only allowed in a situation of misconduct on behalf of the employee, but the misconduct is not so grave that the employee should not be allowed to continue to work during the notice period. Both termination and immediate dismissal must, regardless of what issues the employer has with the employee, be based on objective reasons. A case which demonstrates the threshold between a termination and an immediate dismissal is AD 2017 no 1. The situation was as follows: an employee had been hired as a security guard but did not comply with the instructions given by the employer, despite receiving a warning regarding his conduct. The employee, according to the employer, also turned up late for work and displayed aggressive behaviour towards his employer. The Labour Court tried the case and found that there was no just cause for the employer’s immediate dismissal of the employee, although there was just cause for termination. As a result of the wrongful immediate dismissal, the former employee was awarded damages from the employer in the total amount of SEK 86,200. For both terminations and immediate dismissals, the personal reasons that constitute the ground for the termination must have been known to the employer for less than two months. This means that a termination or immediate dismissal can never be based solely on events which occurred more than two months prior to the employer taking actions. If the reason for the termination is reoccurring (frequently arriving late, for instance) and at least one of these events has taken place within the two-month time frame, then the employer may also base its decision on such misconduct that has taken place outside of the two-month limit. For example, grounds for termination may be lack of cooperation, serious lack of competence, criminal actions in the workplace and similarly disruptive behaviour. In these cases, it is important for the employer to keep a record of the employee’s behaviour, as the employer carries the burden of proof that misconduct actually has taken place. In regular termination cases, the employee must be given at least a one-month notice period. Please note that this period may be longer depending on the duration of employment; one month is the minimum, and six months the maximum. If the employee is a member of a workers’ union, the union must also be given notice of the dismissal. If either the employee or the union objects to the notice, the employer must engage in negotiations before the termination. It is further relevant to discuss the diffi culties related to the termination or immediate dismissal of an employee within the public sector, even when they give voice to less than democratic opinions. There are several cases exemplifying this. In the case AD 2007 no 20, a police offi cer had, through email correspondence with two people working in the municipality, made statements which included both political and racist content. The police offi cer in question was dismissed, yet the Labour Court found that there had been no objective ground for dismissal as the offi cer had only made use of his constitutional right to freedom of speech. Please note that the rules and regulations regarding termination for personal reasons are complex under Swedish law and usually require legal advice.

Statutory employment protection rights The Co-Determination in the Workplace Act (Sw. Medbestämmandelagen) celebrates its 40th anniversary this year. The Act provides protection and transparency for employees in

GLI - Employment & Labour Law 2018, Sixth Edition 202 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Magnusson Advokatbyrå Sweden relation to their employers. Some of the Act’s most distinctive principles can be summarised as follows: • The employer has a responsibility to initiate negotiations with the workers’ union, so- called primary negotiations, before any decision which may have an impact on the employees is taken. In the event of a dispute, there are rules regarding the employee’s prevailing interpretation regarding their work duty and/or pay. • Another notable aspect is the existence of workers’ representatives on the board of directors in companies with more than 25 employees, which is regulated by the Representation for Employees in the Private Sector Act (Sw. Lag om styrelserepresentation för de privatanställda).

Employee privacy Personal data is any data that can, directly or indirectly, identify a person. The General Data Protection Regulation will replace the Swedish Personal Data Act (Sw. Personuppgiftslagen) which is based on an older EU Directive. The Swedish Personal Data Act largely correlates with the new Regulation, but there are signifi cant differences which should be taken into consideration. In addition, the sanctions and fi nes for not adhering to the new Regulation are far more serious than they previously were under the Directive. The processing of personal data must always have legal ground. In the context of employment, the legal ground is mostly the employment agreement itself. It is important to bear in mind that human resource departments should start paying more attention to how they process the employees’ personal data and be more cautious with their data-processing routines. Special consideration should be given to personal data regarding matters such as health or union affi liation, as such type of information is deemed as “sensitive information” by the GDPR and must be handled with special care. All processing must be done in accordance with the general principles listed in Article 5 of the Regulation. Furthermore, information regarding former employees must be limited and records should not be kept without a legal basis for it. In light of the GDPR coming into effect in 2018 and the rather signifi cant consequences the new Regulation will have, it is recommended to consult with expert legal counsel.

Other recent developments in the ﬁ eld of employment and labour law As initially mentioned, there have been some recent developments regarding the procurement procedure, namely that from 1st June 2017 procurement entities may have to (“if it is deemed necessary”) make demands regarding the supplier’s employee terms such as salaries, work hours and vacation. There have also been extensive amendments to the Posting Act (Sw. Utstationeringslagen) with effect from 1st June 2017. The amendments give the unions further opportunities to reach collective agreements with companies posting employees in Sweden. A case that gained much media attention is the ﬁ nal judgment regarding the highly publicised midwife case. The circumstances in the case were as follows: a midwife refused to perform abortions due to her religious convictions. As a result, no hospital or facility wanted to hire her. She subsequently sued for discrimination. The midwife had argued that not hiring her because she refused to perform abortions violated articles 9 and 10 of the European Convention of Human Rights. The court concluded, however, that the women who came to the clinics for abortions had the right to do so in accordance with Swedish constitutional

GLI - Employment & Labour Law 2018, Sixth Edition 203 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Magnusson Advokatbyrå Sweden law, and that this was a case of two conﬂ icting human rights. Further, the court stated that in such cases, the margin of appreciation had to be used in order to decide which of these two conﬂ icting rights would have precedence over the other. In this case, the rights of the women seeking to have abortions were considered to have priority over the midwife’s right to her religious convictions. The midwife’s lawsuit was, in other words, unsuccessful. Lobbyist groups have said they plan on taking the case to the European Court of Human Rights.

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Carl-Fredrik Hedenström, Advokat / Partner Tel: +46 8 463 75 00 / Email: [email protected] Carl-Fredrik Hedenström is a Swedish advocate based in Stockholm and a partner at Magnusson. Carl-Fredrik is responsible for the ﬁ rm’s labour law practice and also works with international commercial transactions. He has considerable experience working with international companies establishing in Sweden and especially with Chinese and American companies (being a graduate from Duke Law School). His employment law practice includes many industrial sectors and he and his team provide general labour law advice as well as participation in trade union negotiations and human resource matters. Dealing with a lot of international restructuring matters, he has worked with numerous global companies such as AIG, Nike, Tesla, Savills, Bank of China and ZTE. According to a recent Chambers report: “Department head Carl-Fredrik Hedenström advises on a wide range of employment matters, including reorganisation and terminations.”

Karolin Eklund, Advokat / Partner Tel: +46 8 463 75 00 / Email: [email protected] Karolin Eklund is a Swedish advocate based in Stockholm and a partner at Magnusson. Karolin has planned, managed and executed mergers, acquisitions, company restructurings, asset purchases and joint ventures for international clients. She has directed all aspects of cross-jurisdictional transactions. Karolin advises clients in complex cases on commercial contracts, including the drafting and negotiation thereof. Karolin further advises clients on employment law matters, such as negotiation and drafting of employment contracts, union negotiations and dismissals. Karolin is also a lecturer in employment law for graduate students at the Stockholm Faculty of Law.

Mary Ohrling, LL.M. / Associate Tel: +46 8 463 75 00 / Email: [email protected] Mary Ohrling works as an associate at Magnusson in Stockholm, Sweden. She has international experience from University of Sydney and Jiao Tong University and assists Carl-Fredrik Hedenström in both China and employment matters.

Magnusson Advokatbyrå Hamngatan 15, P.O. Box 7413, SE-103 91 Stockholm, Sweden Tel. +46 8 463 75 00 / Fax: +46 8 463 75 10 / URL: www.magnussonlaw.com

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Vincent Carron & Anne Roux-Fouillet Schellenberg Wittmer Ltd.

Introduction – General labour market and litigation trends Overall, the economic situation in Switzerland is good. Swiss GDP is high and has increased by 0.3% in the second quarter of 2017. The unemployment rate is low at around 3.2%. Despite these fi gures, economic challenges continue to arise from the strong appreciation of the Swiss franc, as well as the weakening of banking secrecy. Swiss employment law has not been considerably amended in recent years and remains relatively liberal. Nevertheless, there have been signifi cant developments regarding bonuses, the termination of employment contracts and the protection of employees’ personality rights. This article aims at covering signifi cant recent developments in Swiss employment law and case law.

Legislative framework The Swiss legal system is mostly based on statutory law. Employment matters are mainly regulated at a federal level, by the federal Constitution, federal laws and federal ordinances. Cantonal legislation (Switzerland is comprised of 26 cantons) covers limited employment law issues. Case law interprets and clariﬁ es statutory provisions. Swiss citizens may inﬂ uence legislation through popular initiative (a way for citizens to amend the Constitution) or via referendum (decisions of the parliament submitted to the vote of citizens). As Switzerland is not part of the European Union (hereinafter: “EU”), EU law does not bind Swiss Courts and has no direct effect on Swiss law. However, the European law and case law can be taken into account when interpreting Swiss law.

Recent laws, regulations and ordinances Minimum wage In Switzerland, minimum wages have traditionally only been raised through collective employment contracts and were therefore negotiated between social partners. Moreover, the Swiss authorities have the possibility to set minimum wage standards in sectors that suffer from wage dumping (and use it, for instance, in the sectors of domestic economy and agriculture). However, there is no general national minimum wage in Switzerland. In 2014, the Swiss Federation of Trade Union proposed to establish a minimum wage of CHF 22.- across the country. Swiss voters massively refused it, with 76.3% of the popular vote.

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However, an hourly minimum wage will soon enter into force in the Canton of Neuchâtel. This measure follows a cantonal popular initiative for the introduction of the minimum wage. The Swiss Supreme Court recently confi rmed the admissibility of this measure, explaining that the minimum wage is in compliance with the constitutional principle of economic freedom and with federal law. The minimum wage in the Canton of Neuchâtel will be CHF 20.- (approximately €17.38) per hour. Similar initiatives are ongoing in the cantons of Jura and Ticino. Those procedures are still pending. Recording of working time Swiss law requires most employers to record employees’ working time. There are few exceptions to this obligation for certain categories of business and limited categories of employees, such as employees who hold a high leading position. Therefore, most employers have an obligation to be able to provide to the relevant authorities records or any other documents that enable the authority to check that the employer has complied with his obligations regarding working time, rest days, breaks and period of additional rest and wage supplement. The employer has to document not only the daily hours of work but also the beginning and end of each work period as well as breaks of at least half an hour. Each employer is free to adopt a recording system that suits the business activity and organisation of work within their company. As of January 2016, the law provides for the possibility, under very restrictive conditions, of waiving or simplifying the recording of working time. A full waiver of the recording of working time is possible with respect to employees with a high level of autonomy if a collective bargaining agreement is signed between the employer (or an association of employers) and the majority of organisations representing employees in the company or sector (amongst other conditions). A simplifi ed recording of working time is possible with respect to employees who can decide a signifi cant part of their work schedule if an agreement is entered into between the employer, on the one hand, and the employees’ representatives within the company or sector (or, failing that, the majority of employees in the company), on the other hand. This agreement should in particular stipulate that there is no longer an obligation to record the exact time the employee started work and fi nished work every day, but the employer can just record the total amount of hours the employee performed during that day. Special rules apply in companies with fewer than 50 employees. In such cases, it is not necessary to enter into a collective agreement. It is suffi cient to simply sign an individual agreement in writing with each employee, who can determine for himself/herself a signifi cant part of his/her working schedule. The individual agreement must include the applicable provisions relating to working time and rest, and the companies must hold a discussion with the employee regarding the work load situation at the end of each year and document the content of the discussion. Agreement on the free movement of persons When Croatia joined the EU on 1 June 2013, the bilateral agreements between Switzerland and the EU were automatically extended to Croatia, with the exception of the Agreement on the Free Movement of Persons (AFMP). On 16 December 2016, Switzerland ratifi ed protocol III to the AFMP, extending the free movement of persons to Croatia. Croatian citizens have benefi ted from the free movement of persons since 1 January 2017.

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Current bills, popular initiatives and referendum Initiative against mass immigration On 9 February 2014, the popular initiative “Against mass immigration” was accepted by Swiss voters. The initiative proposed to add an article 121a to the Swiss Federal Constitution stating that the country “independently manages the immigration of foreigners”, by setting annual quotas according to the needs of the economy “in accordance with the principle of national preference”. In December 2016, the parliament adopted the necessary laws to implement the new constitutional article. The main aim of the reform was to promote the return of Swiss unemployed persons to work instead of hiring foreigners. The parliament strived nevertheless to ensure that the new laws are compatible with the agreement on free movement of persons in force between Switzerland and the European Union. In June 2017, the Swiss Federal Council decided how it intends to implement article 121a of the Constitution and the new laws in the relevant ordinances. The Swiss Federal Council is expected to adopt the fi nal ordinances in early 2018. In a nutshell, the new provisions contained in the laws and the future ordinances shall provide that the job vacancies in professional groups, fi elds of activity or economic regions with an above-average unemployment rate of 5% must be reported by employers to the public employment service. For a limited period of time of fi ve business days, access to information concerning the positions communicated shall only be granted to persons registered with the Swiss public employment service. The new provisions shall provide some exceptions to the reporting duty. It should also be noted that the Swiss Cantons shall have a right of proposal in order to expand in their territory the scope of professions concerned by the reporting duty. Data protection On 15 September 2017, the Swiss Federal Council published a draft of the new Data Protection Act (DPA). The revised Swiss Data Protection Act builds on certain aspects of the EU General Data Protection Regulation in order to ensure that the EU will consider Switzerland as providing for an adequate level of data protection. To this end, the draft sets out new regulations regarding controllers and processors. In particular, when collecting personal data, the controller will be subject to more extensive information obligations than under the current law. In some cases, the controller will have to conduct a privacy impact assessment. Just as under the current law, the controller will have to ensure data security, but he will now be subject to a fi ne if he neglects to implement the necessary measures. The revised law expands the scope of criminal sanctions for the controller as well as the processor. For instance, the information obligations, the duty to provide information on request made by the data subject, as well as the documentation obligations, are all subject to fi nes. The processor will also be subject to new obligations, as well as corresponding criminal sanctions. The draft also contains certain changes affecting the data subject whose data are being processed. On the one hand, under the revised DPA only data pertaining to individuals shall be protected, while on the other hand, the scope of sensitive data shall be extended and the right to information shall be strengthened. The draft will be discussed in the parliament in the winter session of 2017 and possibly in the spring session of 2018. Most likely, the revised Act will be passed by parliament by the end of the spring session 2018, which will trigger the three-month referendum period. All

GLI - Employment & Labour Law 2018, Sixth Edition 208 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Schellenberg Wittmer Ltd. Switzerland in all, the revised DPA (and the corresponding ordinance) will not be expected to enter into force before the summer of 2018. Whistleblowing In Switzerland, whistleblowing is not yet regulated by specifi c provisions. In labour law, the admissibility of whistleblowing is currently judged from case to case in the light of the general obligations of the employee, in particular the duties of loyalty and discretion. In 2013, the Swiss Federal Council proposed issuing legal provisions determining more precisely how and on what conditions an alert can be given by an employee. In 2015, the parliament requested the Swiss Federal Council to amend and clarify some points, as the provisions drafted by the Swiss Federal Council seemed too complicated. The initial draft is currently being revised. Paternity leave Under Swiss law, mothers benefi t from a maternity leave of at least 14 weeks (some cantons provide 16 weeks maternity leave). However, Swiss federal legislation provides no paternity leave. Instead, new fathers may benefi t from one or two days of leave based on general provisions of law. Some employers grant a few more days on a contractual or discretionary basis. Many new fathers use vacation days after the birth of their children. An initiative will soon trigger a national vote on paternity leave. The initiative’s text requires paid paternity leave of 20 days, which can be taken any time within one year of a child’s birth. The payments would amount to 80% of the individual’s salary. As of October 2017, the initiative had not yet been discussed in parliament.

Recent case law developments Bonuses Swiss law does not contain any provision that specifi cally defi nes and deals with the question of bonuses. Depending upon the agreement between the parties, as well as the nature and circumstances of the payment, a bonus will be legally defi ned either as a gratuity or as a part of the salary. The legal characterisation of the bonus is important, since the legal regime applicable to gratuities is much more fl exible than the one applicable to salary components, which are subject to numerous protective rules and regulations. In order to characterise a bonus as a salary or as a gratuity, one needs to go beyond the use of either term by an employer in the contract, staff regulations, or any other document. One needs to take into account the distinguishing criteria developed by the case law, which include the employer’s discretionary power, the incidental nature of the payment, the principle of legitimate expectation, the principle of equality of treatment, etc. In recent case law, the Swiss Supreme Court clarifi ed the conditions under which an employee may assert a right to a bonus and the system of variable remuneration. In particular, the Court ruled that the principle of subsidiarity, under which a bonus can only be considered as a gratuity if it remains secondary when compared with the base salary, does not apply to employees whose annual remuneration is already fi ve times greater than the median Swiss salary in the private sector (currently around CHF 370,000). Therefore, an employee already receiving CHF 400,000.- cannot have an additional bonus of CHF 1,000,000.- recharacterised as an element of salary, based on the subsidiarity principle. As a rule, to determine if the remuneration is fi ve times greater than the median Swiss salary, the income actually received by the employee during the year will have to be taken into account.

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Inability to work – professional secrecy of the doctor mandated by the employer Medical certifi cates are important in employment law, since they can prove an inability to work, which has an impact on the employees’ rights and obligations (such as the payment of the salary during the inability and the protection against dismissal). In particular, employees very frequently provide their employer with medical certifi cates when they are dismissed (which may provoke the suspension of the notice period) or before a potential dismissal (which would render a termination void). If the employer has reasons to doubt the truth of a medical certifi cate signed by the employee’s doctor, he may request the employee to submit himself to the medical examination of another practitioner. The employer is only entitled to ask information regarding the ability to work of the employee (the employer cannot request to obtain the whole medical fi le and the diagnosis). If the employee refuses the counter-examination requested by the employer, it makes it easier for the employer to challenge the conclusive force of the medical certifi cate delivered by the employee’s doctor. The Swiss Supreme Court recently stated that the doctor mandated by the employer is also subject to an obligation of professional secrecy towards the employee. This doctor is only entitled to give information to the employer to the extent that he is released from his medical secrecy. This release may be deduced from conclusive acts. The employee may implicitly consent that the doctor communicates a usual report regarding his professional ability (level of disability, foreseeable duration, sickness or accident). However, if the doctor communicates additional information without the express “informed consent” of the employee, he might violate his professional secrecy. In the case at hand, the doctor mandated by the employer violated his obligation of professional secrecy in drafting a report of seven pages for the attention of the employer mentioning, in particular, information given by the employee related to the employer’s personality. Flexible working hours In October 2016, the Federal Supreme Court issued a decision regarding the distinction between overtime and the positive balance of working hours accumulated under the regime of fl exible working hours. In exchange for the autonomy granted under fl exible working hours, the employee must spontaneously compensate the positive balance of working hours freely accumulated by time off. If the employee allows this positive balance to increase to a signifi cant extent, he bears the risk of not being able to compensate it in the event of termination of the contract, which may occur at any time. A compensation of the work accomplished can only be taken into account if the employer’s needs or the employer’s instructions prevent the employee from recuperating his hours outside compulsory hours (“blocked” hours) within the fl exible schedule; in such case, these hours are no longer a positive balance in the fl exible schedule but are overtime. While it may seem tricky to differentiate overtime and the positive balance of working hours accumulated under the regime of fl exible working hours, it should be borne in mind that overtime is imposed by the needs of the enterprise or the employer’s instructions, while the positive balance of working hours is freely accumulated by the will of the worker. Reasons for the termination of the employment contract – termination based on suspicions Swiss private law provides for two types of termination of employment contracts: (i) termination with effect at the end of the notice period; and (ii) termination with immediate effect for good cause.

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With regard to termination with effect at the end of the applicable notice period, an employer or an employee who wishes to terminate an employment contract may do so without special justifi cation. The protection given by Swiss law to employees against dismissal is limited. An employee enjoys special protection if the termination constitutes a misuse of rights (for instance, if the termination is given because of quality inherent to the personality or because the other party asserts claims under the employment relationship in good faith, etc.) or if notice of termination is given at an improper time (for instance, during the employee’s absence from work due to illness or accident; during the pregnancy of an employee, etc.). Notice of termination with immediate effect can be given by the employer or the employee at any time for good cause, i.e. circumstances which render the continuation of the employment relationship in good faith unconscionable for the party giving notice. Such termination must be pronounced without delay after discovering the facts justifying it. Recent federal case law clarifi ed the preliminary duties of an employer before terminating employment agreements based on suspicions, with a notice period or with immediate effect. In January 2016, the Swiss Supreme Court assessed the dismissal with immediate effect of an employee suspected of participating in a money laundering network. In October 2012, the employee was arrested in Geneva and was placed in pre-trial custody. In Mid-November 2012 (only), the employer terminated the employment agreement with immediate effect. The employer later justifi ed the termination insisting on the following elements: the arrest of the employee for his alleged participation in a large-scale money laundering operation; the fact that the press recounted the matter and was still publishing articles on it; the fact that the bank had to send documents pertaining to several clients’ accounts to the Public Prosecutor; as well as the seizure of several clients’ bank accounts – with all these elements leading to a loss of the trust relationship. In this case, the Swiss Supreme Court restated that as a rule, a termination with immediate effect must be pronounced within a two or three business-days period after discovering the facts justifying it. Nevertheless, the Court considered that an extension was admissible when the facts required clarifi cation. The time needed to shed light on the facts must be taken into account. The employer must then immediately and without delay take all measures that can reasonably be expected from him to clarify the situation. The employer must sometimes investigate secretly and act cautiously in order to avoid condemning the employee in advance. Therefore, the employer must be able to carefully establish the facts, or at least in a way which withstands a judicial procedure examination, taking care not to breach the employee’s reputation with hasty condemnation. It should be noted that in this case there was no concrete emergency to act, as the employee was not working since he was on pre-trial custody (the employer was not deemed to have accepted the continuation of the employment relationship during a proper ordinary notice period by having the employee continuing to work in its premises during the investigations). In the case at hand, the Swiss Supreme Court considered that the termination with immediate effect was not belated. In February 2016, the Swiss Supreme Court assessed the situation of an employee who worked in a hazardous storage zone where pictures were forbidden. The employee had been dismissed with immediate effect based on information given by another employee. The latter asserted that the dismissed employee asked him to take pictures of the storage zone. As a preliminary statement, the Federal Tribunal ruled that a suspicion of serious offence or serious breach could justify a termination with immediate effect, even if the accusation was later proven unfounded or remained unproven. Depending on the circumstances, such suspicions could indeed make the continuation of the employment relationship impossible.

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However, generally, other elements exclude the validity of a termination based on suspicions, either because the alleged breach, even if proven, would not be serious enough to justify a termination with immediate effect without previous warning, or because the employer did not undertake all that was expected of him in order to verify the suspicions before dismissing the employee. The Swiss Supreme Court observed that the termination was solely based on the assertions of an employee, neither with any verifi cation, nor any discussion with the employee concerned. The Swiss Supreme Court ruled that the sole suspicion that the concerned employee had requested the taking of pictures of a sensitive zone did not justify a termination with immediate effect, and that the statement of the employee concerned had at least to be canvassed. The employer could only then assess the seriousness of the potential fault of the employee after verifying if he was aware of the prohibition to take pictures, and after enquiring about the reasons for such a request. In May 2016, The Swiss Supreme Court judged a case where an employee of a medico- welfare establishment was dismissed in compliance with her notice period because she was accused of stealing CHF 9.- by a patient. The employee considered her termination to be abusive. The Swiss Supreme Court ruled that the employer must strive to verify the allegations made against the employee. The steps to be undertaken by the employer to clarify the facts depend on the concrete circumstances of each case. Moreover, the employer must protect the employee’s personality rights (which include reputational rights) and give the opportunity to the employee to defend his position when his honour is compromised. In the present case, the investigation measures taken by the employer were insuffi cient. In addition, the modalities of the interview with the employee were debatable because it took place bluntly and because the employee could not be assisted before and during the interview, as opposed to the director who was accompanied by two members of the personnel. The employee was taken by surprise by the accusation, then by the termination, without really being able to defend her honour. Consequently, the Swiss Supreme Court ruled that the termination of the employee based on a serious accusation of theft, in turn based on a debatable statement, without undertaking all necessary verifi cations and without allowing the employee to effectively defend her position and her honour, constituted an abusive termination. Termination with immediate effect As explained above, termination with immediate effect can be given by the employer or the employee at any time for good cause and such termination must be pronounced without delay after discovering the facts justifying it. In August 2016, the Swiss Supreme Court provided clarifi cations regarding the possibility to invoke an additional alternative reason for termination with immediate effect. The employer cannot a posteriori invoke facts which he knew at the time of the dismissal with immediate effect, if he had renounced relying on them at that time. On the other hand, the employer may use reasons at a later date which are different from the ones indicated at the time of the immediate dismissal, if these reasons are based on facts which arose before the dismissal but were then ignored. As a result, it is possible to rely afterwards on an additional/alternative ground for a termination with immediate effect, which was not known and which could not be known at the time of the dismissal, provided that this ground can lead to a breach of trust, even if it relates to facts of a different nature than the facts triggering the immediate dismissal. In February 2017, the Swiss Supreme Court ruled that the temporary suspension of work without salary does not correspond to any termination of employment under Swiss private

GLI - Employment & Labour Law 2018, Sixth Edition 212 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Schellenberg Wittmer Ltd. Switzerland law. In the absence of the employee’s agreement with this measure, this should be viewed as termination with immediate effect. The Swiss Supreme Court pointed out that once the employer decides to terminate the employee’s contract with immediate effect, he then loses the right to the ordinary termination with effect at the end of the notice period; thus, even if the employer subsequently realises that there is no proper cause for the termination with immediate effect, he cannot unilaterally invalidate his statement. The termination with immediate effect is a formative act and the judge cannot convert it a posteriori into an ordinary termination. Termination agreement In October 2016, the Swiss Supreme Court made a decision regarding the consequences of a termination agreement, which subsequently proved to be void. The Court fi rst recalled the conditions under which termination agreements may be concluded. Swiss law prohibits a unilateral waiver of the employee of his mandatory entitlements. However, it does not prohibit an agreement between the employer and the employee involving reciprocal concessions of comparable importance, insofar as it is clearly a transaction case. The parties remain free to terminate the contract by mutual agreement for a specifi c date, provided that they do not seek to circumvent mandatory provisions of the law. The will of both parties to terminate the contract must be proved unequivocally. If the agreement is drafted by the employer, the employee must have been granted a suffi cient period for refl ection. The employee must not have been caught by surprise at the time of signature. A termination agreement that does not meet the above requirements is not binding on the parties. When the employment relationship was terminated by an ineffective termination agreement, the question arises whether the employer would have terminated the contract ordinarily at the end of the notice period (for instance, with a garden leave) or with immediate effect, in the event that the termination agreement had not been signed. Depending on the answer to this question, the employee may either have claims related to an ordinary termination (for instance, his salary until the end of the ordinary termination period and claims for abusive dismissal) or claims related to a termination with immediate effect (for instance, damages and penalty for unjustifi ed immediate dismissal); the onus is on the employee who argues that his employer would have dismissed him with immediate effect to prove it. Communication of employees’ salaries during proceedings The Swiss Supreme Court recently stated that the employer may have to communicate the salaries of his employees in judicial proceedings with a specifi c employee. In the case at hand, the employee brought a claim for unquantifi ed payment, arguing that he lacked various documents to determine precisely the bonus to which he was entitled. A request for the communication of salary certifi cates of other employees, and letters certifying the amount of their bonuses and their method of calculation, is justifi ed even concerning employees who are not members of the employee’s team, if it allows better understanding of how bonuses are calculated within the company. If the employee is entitled to a share in the profi ts, the employer must allow the employee to consult his books to the extent necessary. Although the employer must protect and respect the personality of his other employees, this obligation does not preclude the disclosure of their income; the employer cannot refuse to provide such data in judicial proceedings with a specifi c employee to the extent that the income of other employees is relevant to the judgment to be rendered.

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Non-competition clauses The restraint prohibiting competition based on knowledge of the clientele implies that such knowledge is potentially harmful to the employer. A non-competition clause based on knowledge of the clientele is only justifi ed if the employee, due to his knowledge of the regular clients and their habits, could easily have offered them the same services as the employer and thereby have poached them. However, the situation is different when employees create a personal relationship with clients by providing services that are essentially based on their own individual abilities. If the damage potentially suffered by employers is largely due to the personal abilities of employees, the non-competition clause is invalid. For instance, non-competition clauses are generally not admissible within the framework of liberal professions. In a recent case, the Swiss Supreme Court considered that the non-competition clause of an advisor working for a temporary work agency was valid, because he was not able to demonstrate that he created a personal relationship with the clients by providing services that were essentially based on his own individual abilities. Posted workers – sanctions in case of violation of working time regulations In May 2017, the Swiss Supreme Court issued a decision concerning a case of posted workers and, more specifi cally, the prohibition on providing services in Switzerland. Such prohibition may be the sanction imposed on a foreign company seconding workers in Switzerland, if this company does not respect the working conditions under Swiss law. The Swiss Supreme Court considered that the failure to respect the limitation on the weekly working hours and the prohibition of working on Sundays constituted a breach of the Law on posted workers. In particular, the infringement is not of “little seriousness” if the foreign company contemplates accepting a possible violation of the working conditions before the performance of its service in Switzerland, even if this is a fi rst offence. A repeated and gross violation of safety regulations is not necessary in order to be prohibited from offering its services in Switzerland. The Swiss Supreme Court pointed out that the sanction of the prohibition on offering services in Switzerland is not contrary to the Agreement on the free movement of persons; moreover, even if such a prohibition only sanctions foreign companies and does not apply to Swiss companies, it is justifi ed and does not infringe the principle of non-discrimination.

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Vincent Carron Tel: +4122 707 80 00 / Email: [email protected] Vincent Carron is a partner at Schellenberg Wittmer’s Geneva offi ce, where he heads the employment law group. He has extensive experience in representing clients before the labour courts and advising them on all employment law matters. He also advises clients in matters related to pension funds. He regularly publishes within his fi elds of specialisation. Vincent Carron graduated from the University of Fribourg in 1998 and was admitted to the Swiss bar in 2004. He obtained his Master of Laws at New York University in 2006 and was admitted to the New York Bar in 2007. In 2008, he became a SBA certifi ed specialist in employment law. He is recognized by international legal directories, for his work in Employment and Labour law such as Chambers & Partners, The Legal 500 and Who’s Who Legal.

Anne Roux-Fouillet Tel: +4122 707 80 00 / Email: [email protected] Anne Roux-Fouillet is a senior associate in the employment law group of Schellenberg Wittmer in Geneva since 2011. She advises and represents clients in all aspects of employment law. In 2005, Anne Roux-Fouillet graduated from the Universities of Geneva and Zurich. She was admitted to the Swiss Bar in 2008. She became a SBA certiﬁ ed specialist in employment law in 2016. Anne Roux-Fouillet is recognized by Who’s Who Legal for her work in Employment and Labour law.

Schellenberg Wittmer Ltd. 15bis rue des Alpes, 1211 Geneva 1, Switzerland Tel: +412 270 78000 / Fax: +412 270 78001 / URL: www.swlegal.ch

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Paul Chu & Jill Hsu Guo Ju Law Firm

General labour market trends and latest/likely trends in employment litigation Based on statistics compiled by the Ministry of Labour of Taiwan, the size of the labour force from January 2017 to August 2017 on average was 11,779,000 persons, which represents 58.79% of the total population. It further shows that the labour force consists of 67.10% of the male population and 50.87% of the female population, and the majority of the labour force is aged between 25 and 44, with most of it in the service industry, and then the manufacturing industry. During the same period of time, the unemployment rate of Taiwan remained approximately 3.78%. During the ﬁ rst half of Year 2017, the number of labour dispute cases was 13,363, and 23,035 employees got involved. In comparison with the same period of Year 2016, the number of cases grew by 9.8%, and the number of employees by 34.03%. One of the reasons to account for this increase may be the newest amendment of the Labour Standards Act on days off, overtime working, and overtime wages.

Redundancies, business transfers, and reorganisations Business transfers Within a M&A transaction, any surviving company, newly incorporated company or transferee company shall, no later than 30 days before the delivery date of the transaction, serve a written notice which expressly describes employment terms to any employee who will stay after the transaction according to the negotiation between the existing and the new employers. Any employee, within 10 days upon receiving such notice, shall notify his/her decision of whether to accept the terms to the new employer in writing. The absence of such notice sent by the employee shall be deemed as consent to stay in the new company after the transaction, and the service period of the staying employee covered by the prior employer before the transaction shall be recognized by the new employer after the transaction. In addition, for any employee not retained or declining the continued employment, including any employee who accepted the continued employment but later refused to stay with the company before the delivery day of the transaction, the prior employer shall terminate the employment contract with such employee after the transaction, and such employee shall be entitled to a prior notice of termination of employment or paid a wage payable during that prior notice in accordance with Article 16 of the Labour Standards Act, and be duly paid the pension or awarded severance pay pursuant to the laws.

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Redundancies 1. Defi nition According to the Act for Worker Protection of Mass Redundancy of Taiwan, “Mass Redundancy” means that a business entity has a need to lay off its employees on account of any of the conditions set forth in Article 11 of the Labour Standards Act, merger, or reorganisations, and is under any of the following circumstances: • Where the business entity hires fewer than 30 employees in the same location and intends to lay off over 10 employees within 60 days. • Where the business entity hires more than 30 employees but fewer than 200 in the same location and intends to lay off one third of the total employees within 60 days. • Where the business entity hires more than 200 employees but fewer than 500 in the same location and intends to lay off one quarter of the total employees within 60 days, or more than 50 workers within one day. • Where the business entity hires more than 500 employees in the same location and intends to lay off one fi fth of total employees within 60 days, or more than 80 workers within one day. • The business entity intends to lay off over 200 employees within 60 days, or more than 100 employees within one day. 2. Process Carrying out mass redundancy, the business entity fi rstly shall, at least 60 days prior to the occurrence of any of the aforementioned circumstances, inform the competent authorities and other relevant agencies of its redundancy plan by a written notice, and publish an announcement. The written notice shall be given in the following order: 1. the labour union of the business entity to which the employees involved in the mass redundancy belong; 2. the labour representatives of the labour-management conference in the business entity; and 3. the employees involved in the mass redundancy in the business entity, apart from foreign employees with fi xed-term employment contracts and stipulated in the Article 46 of the Employment Service Act. The employees and the employer shall enter into negotiations within 10 days from the notice and announcement of the redundancy plan. In the event that the employees and/or the employer refuse(s) to enter into negotiations or cannot reach an agreement, the competent authority shall, within 10 days, invite the employees and the employer to form a Negotiation Committee to negotiate the terms of the mass redundancy plan, and propose possible alternatives if appropriate. The Negotiation Committee shall be formed by 5 to 11 members, including one representative designated by the competent authority, as the chairman, and an even number of representatives designated by both the employees and the employer. The agreement reached by the Negotiation Committee shall bind each employee concerned. 3. Signifi cant case As a professional expert in employment and labour law, in the lead author’s career, one case of a signifi cant mass redundancy happened at the end of Year 2016. This was a case where an airline suddenly announced it was shutting down its operation and planning to lay off nearly 1,800 its employees, which would be the biggest mass

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redundancy case in Taiwan in recent years. The employer and the labour union of the disbanding airline negotiated directly but failed to reach consensus, and the labour union staged several rallies to protest the employer. Accordingly, the competent authority formed the Negotiation Committee and designated the author as the representative of the competent authority and the chairman of the Negotiation Committee. Through the author’s patiently mediating and providing several workable proposals beneﬁ cial for both sides, after the four-month negotiation period (eight rounds of compulsory negotiations included), the employer and the labour union ﬁ nally reached an agreement and the social tension that had arisen from the case was then gradually released.

Business protection and restrictive covenants In the past, apart from some court judgments and explanations of the Central Competent Authority, there is no stipulation of the requirement and limitation of the non-competition agreement between employers and employees. In Year 2015, the Legislative Yuan passed the amendment of the Labour Standards Act which stipulated the majority opinion of the courts regarding putting the non-competition agreement into law. Since then, the legal requirement and limitation of the non-competition agreement are clearer than before and employers and employees may easily review whether a non-competition agreement is legal. Under the amendment and the relevant enforcement rules, the legal non-competition agreement shall meet all the following conditions: • The employer has proper business interests that shall be protected. • The position or the job of the employee entitles him or her to have access to or be able to use the employer’s trade secrets. • The period, area, scope of occupational activities and prospective employers with respect to the non-competition limitation shall not exceed a reasonable range. • To be specifi c, the reasonable range shall have a different evaluation in different kinds of non-competition limitation as follows: • The period shall not exceed the trade secrets or the lifecycle of technological information protected by the employer, but with a maximum up to two years. If such a period is more than two years, then it shall be shortened to two years. • The area shall be limited to the area of the employer’s actual business activities. • The scope of occupational activities shall be concretely specifi ed and shall be identical or similar to the scope of the employee’s current occupational activities. • The prospective employer shall be clearly indicated and have business activities that are identical or similar to and competitive with those of the employer. • The employer shall reasonably compensate the employees for the losses incurred by not engaging in competing activities. The reasonable compensation shall not include the remuneration received by the employee during employment, and shall be agreed to be paid to the employees in a lump sum upon resignation or on a monthly basis to the employees after resignation. • The reasonable compensation shall be considered based upon the following matters: • The amount of compensation per month shall be no less than 50% of one month’s average wage of the employees upon resignation. • The amount of compensation shall be suffi cient to support the resigned employees during the period of non-competition limitation.

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• The amount of compensation shall be equivalent to the loss incurred by the employees in compliance with the period, area, scope of occupational activities and prospective employer of the non-competition limitation. • Other matters relevant to the consideration of reasonable compensation criteria.

Discrimination protection For the purpose of ensuring equal opportunity in employment, the employer is prohibited from discriminating against any job applicant or employees. In the event of discrimination, the employer would be ﬁ ned by the competent authorities. Maternity leave and parental leave According to the Act on Gender Equality in Employment, female employees are granted maternity leave before and after childbirth or after miscarriage, and during the pregnancy, female employees may be granted leave for prenatal examination. The wages during maternity leave shall be the same as regular wages if the female employee has been employed for more than six months; if she has been employed less than six months, she shall be paid wages at half of the regular payment. If the female employee’s spouse is in labour, the spouse shall be granted paternity leave before and after childbirth of the female employee. After being employed for six months, employees may apply for parental leave without pay before any of their children reach the age of three, but the parental leave shall not exceed two years. When employees are raising more than two children at the same time, the period of their parental leave shall be computed aggregately and the maximum period shall be limited to the youngest child who has received care for two years. The government would grant the employee an allowance equal to six months’ average wages of the employee prior to the parental leave. Prevention of sexual harassment For an employer hiring over 30 employees, measures for preventing, correcting sexual harassment-related complaint procedures and disciplinary measures shall be established. All these measures mentioned above must be openly displayed in the workplace. When an employer learns of the occurrence of sexual harassment, immediate and effective correctional and remedial measures must be implemented.

Protection against dismissal Without the factors below, an employer may not terminate an employment contract without advance notice: • Where an employee misrepresents any fact at the time of signing of the employment contract in a manner which could mislead the employer and cause the employer to sustain damage therefrom. • Where an employee commits a violent act against or grossly insults the employer, employer’s family member or agent of the employer, or a fellow employee. • Where an employee has been sentenced to temporary imprisonment in a ﬁ nal and conclusive judgment, and is not granted a suspended sentence or permitted to commute the sentence to payment of a ﬁ ne. • Where an employee is in serious breach of the labour contract or in serious violation of work rules. • Where an employee deliberately damages or abuses any machinery, tool, raw materials, product or other property of the employer or deliberately discloses any technical or

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confi dential information of the employer, thereby causing damage to the employer. • Where an employee is, without good cause, absent from work for three consecutive days, or for a total of six days in any month. Except where the employee has been sentenced to temporary imprisonment in a fi nal and conclusive judgment, and is not granted a suspended sentence or permitted to commute the sentence to payment of a fi ne, once the employer decides to terminate the employment contract because of the other factors above, he/she shall do so within 30 days from the date the employee becomes aware of the particular factors above. No employer shall, even by advance notice to an employee, terminate an employment contract unless one of the following factors arises: • Where the employer’s business is suspended, or has been transferred. • Where the employer’s business suffers operating losses, or business contractions. • Where force majeure necessitates the suspension of business for more than one month. • Where the change of the nature of business necessitates the reduction of workforce and the terminated employees may not be reassigned to other suitable positions. • A particular employee is clearly not able to perform satisfactorily the duties required of the position held. An employer may not terminate a contract with an employee who is on maternity leave or is receiving medical treatment for being injured, incapacitated or sick due to occupational accidents, unless the employer cannot continue operating the business due to an act of God, catastrophe or other force majeure and prior approval has been obtained from the competent authorities.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Notice Where the advance notice for an employer to terminate a labour contract is requested by law, the minimum period of advance notice shall be: • Where an employee has worked continuously for more than three months but less than one year, the notice shall be given 10 days in advance. • Where an employee has worked continuously for more than one year but less than three years, the notice shall be given 20 days in advance. • Where an employee has worked continuously for more than three years, the notice shall be given 30 days in advance. After receiving the advance notice above, the employee may, during hours of work, ask for leave of absence for the purpose of ﬁ nding a new job. Such leave of absence may not exceed two work days per week. Wages shall be paid during such leave of absence. Where an employer terminates the employment contract without serving advance notice meeting the minimum period requirement above, the employee shall pay the employee wages for the advance notice period. Limitation of transferral An employer who plans to transfer an employee shall not violate the provisions of the employment contract and shall also satisfy the following principles: • The employee shall be transferred based on the needs of business operation and without

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improper motives or purposes, and shall not violate other requirements governed by other applicable laws. • The wages and other working terms shall not be unfavourably changed to the employee concerned. • The employee shall still be able to satisfactorily perform the duties required in terms of physical ability and skills after the transfer. • The employer shall provide necessary assistance to the employee concerned if the relocated workplace is too far away from the employee. • The livelihood interests of the employee concerned and his or her family shall be considered. Holiday and annual leave Employees shall be entitled to national holidays, holidays, and Labour Day which are designated as holidays by the Ministry of the Interior, and holidays designated by other Central Competent Authority. When an employer has obtained the consent of an employee to work on holiday, the employer shall pay the employee double the regular wage for such work. An employee who has worked continually for the same employer for a certain period of time shall be granted annual paid leaves on an annual basis based on the following conditions: • 3 days for service of 6 months or more but less than 1 year. • 7 days for service of 1 year or more but less than 2 years. • 10 days for service of 2 years or more but less than 3 years. • 14 days for service of 3 years or more but less than 5 years. • 15 days for service of 5 years or more but less than 10 years. • 1 additional day for each year of service over 10 years, up to a maximum of 30 days. Annual paid leaves may be arranged by employees. However, in the event of urgent needs of the business operation or personal factors of an employee, the employer and the employee may consult together and make adjustments of the annual paid leaves with each other. Wages must be paid for annual paid leaves not used by workers after the end of each year or because of the termination of employment contracts. The employer shall record the dates of annual paid leaves of employees, and the total amount of the wages paid for annual paid leaves that have not been taken in the worker payroll roster and shall inform each employee in writing every year on a regular basis.

Worker consultation, trade union and industrial action Union According to the Labour Union Act of Taiwan, labour unions can be classiﬁ ed into three types: • Corporate union: a labour union organised by employees of the same factory or workplace of the same business entity, of enterprises with a controlling and subordinate relationship between each other in accordance with the Company Act, or of a ﬁ nancial holding company and its subsidiaries, in accordance with the Financial Holding Company Act. • Industrial union: a labour union organised by workers in the same industry. • Professional union: a labour union organised by workers with the same professional skills.

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A labour union shall be organised by the signatures of no less than 30 workers. A preparatory committee shall be set up to openly recruit members, draft a union charter, and convene the inaugural general meeting. The preparatory also shall, within 30 days following the convention of the inaugural general meeting, submit the union charter and name lists of its members, members of the board of directors and members of the board of supervisors, to the competent authority of the municipal city or county where the labour union is located, to apply for a registration certifi cate. For a confederate labour union organised on a national basis, it shall register with the Central Competent Authority and apply for a registration certifi cate. However, the number of corporate unions of the same scope organised shall be no more than one, and the number of professional unions of the same type organised in the same municipal city or county, shall be no more than one. Unfair labour practices According to the relevant Taiwan laws, if the employer improperly takes actions to affect or limit the employees’ freedom of association, such actions would be regarded as “Unfair Labour Practices”. There are three types of Unfair Labour Practices: Disadvantageous Treatment; Domination Intervention; and Breach of Good Faith Negotiation. The specifi c actions of these three types of unfair labour practices are as follows: • Disadvantageous Treatment • Refusing to hire, dismiss, demote, reduce the wage of, or render other unfair treatment to an employee who organises or joins a labour union, participates in activities held by a labour union, or assumes the offi ce of a labour union. • Refusing to hire, dismiss, demote, reduce the wage of, or render other unfair treatment to an employee who requests collective bargaining or participates in related activities concerning collective bargaining. • Dismissing, demoting, reducing the wage of, or rendering other unfair treatment to an employee who participates in or supports industrial action. • Filing or threatening to fi le an unequal civil lawsuit against an employee who participates in or supports industrial action. • Domination Intervention • Requiring an employee or job applicant not to join a labour union or assume the offi ce of a labour union as a condition of hiring (see preceding paragraph). • Improperly infl uencing, impeding or restricting the establishment, organisation or activities of a labour union. • Breach of Good Faith Negotiation • Both the labour and the management shall proceed in good faith when negotiating a collective agreement; no party may reject the collective bargaining proposed by the other party without justifi able reasons. • When the other party proposes collective bargaining to one party with bargaining qualifi cation, such party’s actions below would be regarded as rejecting the collective bargaining without justifi able reasons: • Refusing to bargain when the contents, time, place and methods of bargain proposed by the other party are reasonable and proper. • Failing to offer counter-proposal within 60 days after receiving written notice of bargaining from the other party and proceeding to bargain. • Refusing to provide necessary information and materials for bargaining.

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Employee privacy According to the Employment Service Act of Taiwan, when recruiting or employing employee(s), the employer shall not withhold any job applicant or employee’s identifi cation card, work certifi cate, or any other certifying documents, nor request them to surrender any other personal information unrelated to the employment concerned against his/her free will. The abovementioned personal information includes: • Physiological Information: genetic test, medication test, medical treatment tests, HIV tests, intelligence quotient tests and fi ngerprints. • Psychological Information: psychiatric tests, loyalty tests and polygraph tests, etc. • Personal life style information: fi nancial records, criminal records, family plans and background checks. When employers ask applicants or employees to present the said personal information, the personal interest of the applicants or employees concerned shall be respected, and shall not go beyond the mandatory and specifi c economic necessities, or public interest protection. In addition, such request shall have appropriate and decent relation to the purposes.

Other recent developments in the ﬁ eld of employment and labour law At the end of 2016, the Taiwan Government amended the clause of the Labour Standards Act regarding the day off, overtime, and overtime wages. The main contents of the new laws are as follows: Day off Employees shall be entitled to two days off per seven days, including one regular leave and one rest day. However, for industries designated by the Central Competent Authority, and upon the prior consent of the labour union, or if no labour union exists in a business entity, with the approval of a labour-management conference, an employer may distribute the regular leave and rest day as follows: When the employer distributes the regular working hours of any two work days in every two weeks to other work days in the same two weeks, provided that no more than two hours shall be distributed to each of such other workdays and the total number of working hours does not exceed 48 hours every week, employees shall have a minimum of one day of regular leave every seven days and a minimum of four days of day-off, consisting of the regular leaves and rest days every two weeks. When the employer distributes the regular working hours in every eight weeks, provided that the regular working time does not exceed eight hours a day and the total number of working hours does not exceed 48 hours every week, employees shall have a minimum of one day of regular leave every seven days and a minimum of 16 days of day-off, consisting of the regular leaves and rest days every eight weeks. When the employer distributes the regular working hours of work day(s) within four weeks to other work days in the same four weeks, but they do not exceed two hours a day, the employees shall have a minimum of two days of regular leaves every 14 days and a minimum of eight days of day off, consisting of the regular leaves and rest days every four weeks. Working overtime on day off An employer may not ask employee(s) to suspend regular leave and perform work without the occurrence of an act of God, an accident, or an unexpected event and the employer decides the continuance of work is necessary, and the employer shall, within 24 hours after the end of the

GLI - Employment & Labour Law 2018, Sixth Edition 223 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Guo Ju Law Firm Taiwan suspension, ﬁ le a report stating the details and reasons with the local competent authorities for the approval and record of the suspension, and shall grant leave to make up for the suspension of regular leave to the employee(s). When an employer needs employee(s) to perform work on a rest day, the employer shall receive the prior consent of labour union, or if there is no labour union, the approval of a labour-management conference, and the prior consent of the speciﬁ c employee. The working hour in the rest day shall be added into the overtime working hours, and the overtime working hours combined with the regular working hours shall not exceed 12 hours a day and the total number of overtime shall not exceed 48 hours a month. However, if there is an act of God, an accident, or an unexpected event and an employer needs the employee(s) to work in addition to regular working hours, then the working hours are not subject to the restrictions above. Overtime wages Work overtime beyond regular work hours:

Overtime Formula Example hour(s) (Assuming the monthly wage of the employee is NT$ 36,000; the daily wage is NT$ 1,200; the hourly wage is NT$ 150) 1 to 2 hours 1 and 1/3 of the regular hourly wage. Assuming overtime work for 2 hours: 150 x (1+1/3) 1 and 1/3 of the regular hourly wage for Assuming overtime work for 4 hours: x 2= 400 the ﬁ rst 2 overtime hours, and 1 and 2/3 of 150 x (1+1/3) x 2+ the regular hourly wage shall be payable 150 x (1+2/3) x 2 = 900 per hour from the 3rd overtime hour. Work overtime on days off: In the case the overtime hours are less than four hours on days off, the overtime pay shall be calculated as four overtime hours; in the case of more than four hours but less than eight hours, the overtime pay shall be calculated as eight hours; in the case of more than eight hours but less than 12 hours, the overtime pay shall be calculated as 12 hours.

Overtime Formula Example hour(s) (Assuming the monthly wage of the employee is NT$ 36,000; the daily wage is NT$ 1,200; the hourly wage is NT$ 150) 1 to 4 hours 1 and 1/3 of the regular hourly wage for the fi rst 150 x (1+1/3) x 2+ 2 overtime hours, and 1 and 2/3 of the regular 150 x (1+2/3) x 2 = hourly wage shall be payable per hour from the 3rd 900 overtime hour. 5 to 8 hours 1 and 1/3 of the regular hourly wage for the fi rst 150 x (1+1/3) x 2+ 2 overtime hours, and 1 and 2/3 of the regular 150 x (1+2/3) x 6 = hourly wage shall be payable per hour from the 3rd 1,900 overtime hour. 9 to 12 hours 1 and 1/3 of the regular hourly wage for the fi rst 150 x (1+1/3) x 2+ 2 overtime hours, and 1 and 2/3 of the regular 150 x (1+2/3) x 10+ hourly wage shall be payable per hour from the 150 x 4 = 3rd overtime hour. In addition, the employer shall 3,500 pay the regular hourly wages for the 9th to 12th overtime hour. Working on regular leave: The employee needs to pay double the regular daily wages to employees’ work on regular leave, and shall then also grant leave to make up the suspended regular leave.

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Paul Chu Tel: +886 2 2577 6123 / Email: [email protected] Paul Chu, as a practising lawyer in Taiwan, has expertise in areas of human resources, e-commerce, personal data protection, and tax. He is also a senior partner and co-founder of Guo Ju Law Firm in Taipei. Mr. Chu was the Senior Manager, Tax and Legal Dept. of Pricewaterhouse Coopers (“PwC”) Taiwan and senior attorney of PwC Legal Taiwan before he co-founded Guo Ju Law Firm in 2008. As an expert in the human resources area, Mr. Chu is the counsel of the Ministry of Labour and the Chief Arbitrator of the Mediation Committee of Labour-Management Disputes of different local governments. This year, he was appointed by the government as a chairman of the negotiation process of a mass redundancy case (more than 1,800 employees involved) from the dissolution of an airline company in Taiwan. Through his patiently mediating, both parties successfully reached a settlement and further relieved the social tension aroused by this case. In addition, he has assisted many multinational enterprises, including SONY, in compliance with the relevant labour laws of Taiwan.

Jill Hsu Tel: +886 2 2577 6123 / Email: [email protected] Jill Hsu, as a practising lawyer in Taiwan, has expertise in human resources, general corporate, and business dispute areas. She is also a junior partner of Guo Ju Law Firm in Taipei. Ms. Hsu began her legal career in 2006 and has devoted years to the area of human resource protection. She is a certiﬁ ed immigrating professional, and the labour dispute mediator of Taipei City and New Taipei City. In addition, she has assisted many multinational enterprises to amend working rules to meet the requirements of laws and the competent authorities, and provided her professional opinions to clients in relation to compliance with the relevant labour laws of Taiwan.

Guo Ju Law Firm 9F., No.30, Sec. 3, Bade Rd., Taipei, Taiwan Tel: +886 2 2577 6123 ext. 310 / Fax: +886 2 2577 6133 / URL: www.gjlaw.com.tw

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Saroj Jongsaritwang & Sui Lin Teoh R&T Asia (Thailand) Limited

General labour market and litigation trends Thailand has experienced a period of economic slowdown as a result of the continuing disruption in the world’s major economies. The unemployment rate in Thailand is generally low, but it rose to 1.2% in the fi rst quarter of 2017 from 0.97% on a year-over-year basis. In absolute terms, in the fi rst quarter of 2017, 460,000 persons were reported to be unemployed. Private sector investment has seen a slight decline of 0.06% since last year. In recent years, the manufacturing and services sectors have seen high levels of recruitment. There is a high demand for skilled professionals, particularly in the areas of science, technology, engineering and mathematics (STEM) as the world becomes more digital and increasingly interconnected. Demographically speaking, Thailand is transitioning into an ageing society. By 2024, one-fi fth of the population will be over 60 years old. While studies have indicated that more people continue to be employed well past the age of 60, such employment is typically associated with unfavourable working conditions, insecure income and limited social protection. Furthermore, the employment incomes reported by the elderly are generally much lower than the population at large. These demographic changes are likely to have a signifi cant impact on the country’s productivity and socio-economic development. The presence and management of illegal foreign workers (who are mainly low and unskilled workers from neighbouring countries) continues to pose a challenge for Thailand. The role of migration policies toward foreign workers in Thailand has, therefore, become essential. The Thai Government has issued the Emergency Decree on the Management of Foreign Workers B.E. 2560 (2017) (please see the sub-section entitled “Management of Foreign Workers” under section 9 for more information) in order to control the number of foreign workers and to address issues arising from the presence of illegal foreign workers in Thailand. The penalties under the Emergency Decree for certain foreign worker-related offences are now more severe and this may have the effect of reducing the infl ux of foreign workers, particularly low-skilled and unskilled workers. In the longer term, this could potentially result in a labour shortage in industries reliant on this type of labour. In the months following the issue of the Emergency Decree, numerous employers dismissed illegal foreign workers and a substantial number of foreign workers returned to their country of origin. The Thai Government has also decided to suspend penalties for certain offences under the Emergency Decree until 2018, and this is likely to have been aimed at reducing labour shortage and economic impact on employers. The number of labour dispute cases increased by almost 60% from 10,000 cases in 2015 to almost 16,000 cases in 2016. Most cases related to disputes on the obligation to pay statutory severance pay, payment in lieu of advance notice, claims for reinstatement or damages due

GLI - Employment & Labour Law 2018, Sixth Edition 226 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London R&T Asia (Thailand) Limited Thailand to unfair termination, and working condition employment issues. This dramatic increase indicates that employees nowadays are increasingly aware of their rights and have shown a greater willingness to initiate court proceedings to enforce them. Possibly in response to this, the Thai Labour Court has been increasingly encouraging employers and employees to settle their disputes out of court. Some conﬁ rmation of this trend can be found in court statistics, which show that the number of labour cases which were successfully settled (whether in- court or out-of-court) or by the plaintiff’s withdrawal of the cases are almost double that of the cases which went to trial. Additionally, as the provisions of the Emergency Decree are fully enforced in the next few years, this may lead to increased litigation as legal foreign workers become more familiar with their rights under Thai laws and resort to litigation to seek protection.

Redundancies, business transfers and reorganisations Redundancy/Reorganisation Generally, Thai employment law allows an employer to terminate employment at its discretion and does not impose specifi c legal requirements on employers terminating employees as part of a redundancy or reorganisation. Similarly, such termination does not exempt employers from their obligations to pay statutory entitlements (e.g. statutory severance payments under the Labour Protection Act B.E. 2541 (2008), the “LPA”) or contractual entitlements (e.g. payment in lieu of notice or for unused annual leave) and due regard must be had to all statutory protection and procedures regarding termination.1 The key concern will be for termination to be structured such that it is not considered as being an unfair termination.2 Generally, an employer will have to establish, to the satisfaction of the Thai Labour Court, that the termination was necessary and that the selection procedure was fair to avoid a fi nding of unfair termination and a consequent award of damages. • Necessary termination A termination can be deemed to be “necessary” if it can be shown that such termination was to reduce the labour costs of a loss-making enterprise in fi nancial diffi culties and that such termination was necessary to ensure the maintenance and survival of its business in Thailand. A “necessary” termination may also be established if there has been a loss of market share or reduction in orders. Generally, the employer would be required to show that there is no other option to decrease costs or reduce losses in the employer’s business in Thailand for the purposes of maintaining the employer’s business. • Fair selection procedure To avoid a fi nding by the Thai Labour Court that the selection procedures were unfair, employers should implement and adopt certain defi nite criteria or the same criteria among other employees whose employment would also be terminated, such as years of service, annual evaluation grading, or skills and experience. In any event, the negotiations between an employer and employees to reach a mutual separation arrangement would be a good solution to avoid the risk of an unfair termination claim subsequently being brought by the employee. Business transfer • No automatic transfer of employees Under Thai law, there is no procedure for an automatic transfer of employees from one employer to a new employer following a business transfer. The transferring employer is not entitled unilaterally to transfer an employee without consent from the employee.

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The new employer must accept both the rights and duties of the transferring employer in all respects, and the new employer must continue to provide the employee with the same rights which he/she had against the transferring employer (e.g. the new employer must recognize the employee’s years of service with the transferring employer and grant the same benefi ts). Where the employee does not consent to the transfer of employment, the transferring employer has the option to continue to employ the employee or terminate employment (with payment of the necessary statutory and contractual compensation). • Protection against termination arising from business transfer Thai law does not provide specifi c protection in respect of or specifi c procedures to deal with a termination of employment that results from the transfer of a business. However, an employee who considers that the termination was made without reasonable grounds or was unfair would be entitled to fi le a claim against the transferring employer at the Thai Labour Court for damages for unfair termination.3 In terminating employment, the transferring employer is required to pay the relevant statutory severance pay and other contractual entitlements to the employee as required by law, and due regard must be had to all statutory protection and procedures regarding termination.4 • Harmonisation of employment terms The general rule is that upon transfer of employment, the transferee of the business (i.e., the new employer) must continue to provide the employee with the same rights which the employee had against the existing employer. Any changes to the terms of employment may be negotiated among the employee, the transferring employer and the new employer, and where the new terms and conditions will give fewer benefi ts to the employee than the employee had previously enjoyed, the employee’s consent would be required in order for the new conditions to be effective.

Business protection and restrictive covenants Confi dentiality Under Thai law and guidance from Thai Supreme Court judgments, there is generally an implied duty imposed on employees to protect the confi dentiality of the employer in respect of the employer’s business and know-how. It is also common for employment agreements to include an express contractual obligation of confi dentiality. Certain statutory obligations may also be applicable, depending on the circumstances: • Section 323 of the Criminal Code of Thailand protects against the disclosure of any secret, but only if disclosed by a competent offi cial or members of certain professions (namely medical practitioners, pharmacists, druggists, midwives, nursing assistants, priests, advocates, lawyers, auditors, and assistants in any of the aforementioned professions). • Section 324 of the Criminal Code of Thailand protects against the disclosure or use of secrets relating to industry, discovery or scientifi c inventions. • The Trade Secrets Act B.E. 2545 (2002) protects “Trade Secrets” (defi ned as trade information not yet publicly known or not yet accessible by persons who are normally connected with the information, the commercial values of which derive from its secrecy, and that the controller of the trade secrets has taken appropriate measures to maintain

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the secrecy) and potential remedies include damages (both compensatory and punitive), interim injunctions, permanent injunctions and orders for the destruction of infringing materials. In certain circumstances, the disclosure of a Trade Secret can be a criminal offence (e.g. where a Trade Secret was disclosed with malicious intent to cause damage to the business of the controller of the Trade Secret). Duties of honesty Under Thai law and court precedents, there is generally an implied duty imposed on employees to perform their duties honestly. Although not expressly phrased as a duty, Section 119 of the LPA provides that employees may be dismissed without notice or compensation in certain situations, such as where the employee performs his duties dishonestly or causes serious damage to the employer as a result of his negligence.5 Restrictive covenants Thai law does not prohibit an employer from restricting an employee’s activities during and after termination of employment. For example, it is possible for an employer to prohibit an employee from working or operating a business that is the same as or in competition with the employer’s business. It is also possible to prohibit an employee from soliciting former or existing employees or clients of the employer after termination. Guidance from the Thai Supreme Court indicates that non-competition and non-solicitation clauses are considered to be reciprocal agreements aiming to protect commercial rights and benefi ts of the parties (mainly, in this case, the employer who may suffer loss if the employee breaches the restrictive covenant) to the contract, provided that the restriction: 1. must not entirely prohibit or obstruct the employee from making a living; and 2. is enforced on specifi c restricted businesses and/or for a restricted time period which is considered as being fair. A restriction can be either geographical (by prohibiting the carrying-out of the restricted business in a certain area) and/or for a specifi ed time, provided that the geographical area and time specifi ed is deemed to be fair. In any event, the court has the power to reduce the restrictions at its discretion (i.e. the court is not obliged to fi nd an unreasonable restriction wholly unenforceable) if the court takes the view, under the terms of the Unfair Contract Terms Act, B.E. 2540 (1997), that the restriction imposes too much of a burden on the employee.

Discrimination protection Protection from discrimination • Constitution Under the Constitution, discrimination based on nationality, age, gender, language, physical or social status, religion, education and political afﬁ liation is restricted. • LPA Under the LPA, gender discrimination is speciﬁ cally prohibited. The LPA requires that an employer treat male and female employees equally in their employment unless the nature or conditions of the work do not allow the employer to do so. For example, in one case, where an employer set out different retirement ages for

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employees, the Supreme Court of Thailand ruled that, in respect of work with the same job description and nature, differentiation of retirement ages based on gender is a violation of the LPA and is not enforceable. However, if the retirement ages are varied based on positions, and not on the basis of gender, such differentiation would generally be permitted. Protection from harassment • LPA The LPA provides that it is prohibited for an employer or a person who is a chief, supervisor or inspector to perform an act of sexual harassment against an employee. The LPA is silent on sexual harassment in other situations. • Criminal Code Sexual harassment can also be a criminal offence under the Criminal Code of Thailand, provided that all elements of the offence are satisﬁ ed. Criminal penalties for sexual offences under the Criminal Code of Thailand vary depending on the severity of the offence. • Civil and Commercial Code An employee who was sexually harassed could claim compensation for any damage caused by the wrongful act (i.e. unlawful injuring the body and liberty of other persons) under Section 420 of the Civil and Commercial Code of Thailand.

Protection against dismissal Unfair termination Although an employer may terminate the employment of an employee whose employment term is not specifi ed (either (i) by giving advance notice and paying severance pay under Section 118 of the LPA or (ii) without notice and/or severance pay pursuant to Section 119 of the LPA, as discussed below), the employer must consider whether or not such termination of employment would be considered as being “unfair” under Section 49 of the Act Establishing the Labour Courts and Labour Procedure Act B.E. 2522 (1979) (“LCLPA”). Pursuant to Section 49 of the LCLPA, the Thai Labour Court has the discretion to grant a remedy if it considers that the termination of employment was ‘unfair’. There is no exhaustive defi nition of the meaning of ‘unfair’ – some examples of circumstances that the Thai Labour Court has considered to amount to unfair termination include: • Termination without reason. • Termination without any fault on the part of the employee. • Termination as disciplinary action, in circumstances where the penalty imposed was not in accordance with the employer’s work rules. • Termination where the employer cannot produce witnesses or evidence to prove default by the employee. • Discrimination. If the Thai Labour Court fi nds that the termination is unfair, it has a power to order reinstatement of the employee on the same terms and conditions of employment (i.e., at the same salary and position prior to termination). However, if the Thai Labour Court decides that the parties are no longer able to work together, then the Thai Labour Court may order payment of compensation for unfair termination. The amount of compensation ordered is

GLI - Employment & Labour Law 2018, Sixth Edition 230 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London R&T Asia (Thailand) Limited Thailand at the sole discretion of the Thai Labour Court, and in exercising its discretion, the Thai Labour Court takes into consideration the age of the employee, the length of employment, the hardship of the employee resulting from the termination, the reasons for the termination and the compensation that the employee is entitled to receive. Procedural requirements for dismissal A termination notice is not required to be in writing; an oral notifi cation by the employer or authorised person of the employer is considered as a valid notice of termination. Additionally, there is no requirement to state the reason for termination within the notice. However, if an employer needs to rely upon one of the grounds under Section 119 of the LPA to terminate employment without paying any statutory severance pay and/or notice under Section 118 of the LPA or to protect an employer from a claim for unfair termination, it is highly recommended that a written notice be issued, which specifi es clear and suffi cient reasons for termination in the termination notice. Upon termination of employment, an employer is required to notify the Social Security Offi ce of the termination and in the case of foreign workers, the employer has an additional duty to return the employee’s work permit to the Department of Labour Protection and Welfare. Employee’s entitlement upon termination of employment Upon termination of employment, an employee is entitled to receive the following payments: • Statutory severance pay under Section 118 of the LPA. • Payment in lieu of advance notice (where the employer did not give advance notice, unless the termination was pursuant to Section 119 of the LPA). • Payment in lieu of unused holidays entitled in the year of termination and accumulated unused holidays from the previous year. • Any entitlements to which the employee is contractually entitled pursuant to the employment agreement. • Any outstanding salary or other expenses. Severance payments under Section 118 of the LPA Subject to the exceptions below, an employer is required to make payment of statutory severance pay to the employee upon termination. The amount of statutory severance pay to which an employee becomes entitled is calculated according to the employee’s length of service, as set out in the following scale:

Years of Service Severance Pay 120 days but less than 1 year 30 days' of the latest wages 1 year but less than 3 years 90 days' of the latest wages 3 years but less than 6 years 180 days' of the latest wages 6 years but less than 10 years 240 days' of the latest wages 10 years and more 300 days' of the latest wages Exceptions for Severance pay (Section 118 of the LPA) An employer is not required to pay statutory severance pay to an employee in one of the following cases: • Termination of employment where the employee has been employed for a continuous period of less than 120 days. • Where the employment is considered to be a ﬁ xed-term contract (as deﬁ ned under the

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relevant law and according to Thai Supreme Court guidance) and the termination of employment occurs on the expiry date of the contract. • Where the termination of employment is on or more of the grounds under Section 119 of the LPA (mentioned in the section below). Special severance pay Separately, the LPA also provides that an employer is required to make payment of Special Severance Pay to an employee if the termination of employment is made for one of the following reasons. • Relocation of the employer’s place of business Where an employer wishes to relocate its place of business which may affect the ordinary course of living of its employees or their families, the employer is required to notify the employee at least 30 days in advance of the relocation. If the employee does not agree to work at the new location, the employee is entitled to terminate the employment contract within 30 days from the date of the employer’s notice or relocation date (as the case may be), and would still be entitled to receive special severance pay of an amount not less than the rate of statutory severance pay under Section 118 of the LPA. If the employer fails to give advance notice as specifi ed in the preceding paragraph, the employer must also pay special severance pay in lieu of the advance notice in an amount equal to 30 days’ wages (calculated at the employee’s latest wage rate). • Replacement of machinery or technology advancement If the termination of employment occurs as a result of an improvement in the department, production process, distribution or service arising from the use of machinery or the change in machinery or advancement in technology and results in the reduction of employees, the employer is required to give 60 days’ advance notice of termination to the employee and to the Labour Inspection Offi ce. If the employer fails to give the required 60 days’ advance notice, the employer is required to pay 60 days’ special severance pay (calculated based on the latest wage rate of the employee) in addition to the statutory severance pay under Section 118 of the LPA. In addition, where the employee whose employment is terminated has over six years of service with the employer, the employee would be entitled to receive an additional ‘special compensation’ of 15 days’ wages for each year of service, up to a maximum payment of 360 days’ wages (once again based on the latest salary rate of, or rate per piece produced by, the employee). Other contractual entitlements Subject to the terms of the employment contract, work rules or handbook relating to employee benefi ts announced by the employer, the employer would also be required to make available and pay any benefi t or specifi c arrangement agreed between the employer and the employee in addition to the statutory entitlements mentioned above (for example, compensation under the terms of any undertaking, contractual retirement scheme and employer provident fund contributions). Retirement Please see the sub-section entitled “Statutory Retirement” under Section 9 for more information on the proposed imposition of a statutory retirement age and protection for retiring employees.

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Statutory employment protection rights Notice periods When an employment contract for a fi xed-term period has expired, the employment will end without the requirement to give notice, provided that such fi xed-term contract does not contain provisions allowing parties to the contract to extend the employment terms from those earlier agreed. In the case where the employment contract does not specify the period of employment, Thai law considers that such employment contract has no expiry date and either the employer or employee may terminate the employment contract by giving prior notice to the other party. The minimum statutory notice period is at least one actual prospective pay period for the employee concerned, but no more than three months’ notice needs to be given (if the actual pay period is more than three months). For the avoidance of doubt, an agreement providing for a notice period in excess of three months is enforceable. A termination notice is therefore usually issued on or before the agreed or usual salary payment date, to expire or take effect on the next due date for payment of the employee’s salary. In the case where an employer would like the employment to be terminated with immediate effect, the employer is entitled to make payment in lieu of advance notice. Under the LPA, advance notice of termination is not required if the employment is terminated under one of the following grounds in Section 119 of the LPA, as follows: 1. The employee performs his duties dishonestly or intentionally commits a criminal offence against the employer. 2. The employee intentionally causes the employer to suffer losses. 3. The employee commits an act of negligence, which causes the employer to suffer serious losses. 4. The employee violates the employer’s work rules, regulations or orders which are legal and fair, and the employer has issued a written warning to the employee (save for a serious violation, in which case the employer would not be required to issue a written warning). (Note that a warning is effective for one year from the date of the violation.) 5. The employee neglects his duties for a consecutive period of three days without a reasonable cause, regardless of whether or not there is a holiday in the intervening period. 6. The employee is subject to imprisonment by a fi nal court judgment. Protected classes of employees The LPA and the Labour Relations Act B.E. 2543 (2000) (“LRA”) protect certain categories of employees from dismissal. These include: • A pregnant employee by a reason of pregnancy (Section 43 of the LPA). • An employee who is a member of an employee’s committee, unless permission is obtained from the Thai Labour Court (Section 52 of the LRA). • Any employees, representatives of employees, committee or sub-committee members of a labour union or labour federation involved in a demand for an agreement relating to conditions of employment or an amendment of such agreement, during the period in which the demand submitted to the employer is being considered. Employment can, however, be terminated in certain exceptional circumstances (e.g., where the employee performs his duties dishonestly or intentionally commits a criminal act against the employer (Section 31 of the LRA)).

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Worker consultation, trade union and industrial action Worker consultation Thai employment law has no consultation requirement imposed on an employer when deciding to proceed with a redundancy programme. However, where an employer or employee (including an employee’s association and labour union) wishes to establish or amend an agreement on conditions of employment, a written request for negotiations must be submitted by that party. Where the request is submitted by an employee’s association or labour union, the agreement will be considered as being binding on the employer and: (i) any employee who participates in the request; (ii) all employees who are members of the labour union (provided that more than two-thirds of the members participated in the request); and (iii) all employees who work in the same function (provided that more than two-thirds of total employees who work in the same function participated in the request). Industrial action Industrial action may take many forms, such as a strike by employees or a lock-out by the employer. Section 34 of the LRA provides that in the case that negotiation on the employment conditions cannot be reached, the party wishing to exercise the right to lock- out or strike must give notice to the Conciliation Ofﬁ cer of the relevant Labour Protection Department and notify the other party at least 24 hours before the commencement of such action.

Employee privacy Employees’ data protection rights While the Constitution generally recognizes that individuals enjoy the right of privacy, Thailand does not currently have in force a general personal data protection law. As such, employees do not have specifi c rights on data protection, except where such data is specifi cally protected by other laws, such as the Criminal Code of Thailand and the Computer Crimes Act B.E. 2550 (2007) (“Computer Crimes Act”). More generally, where injury arises from the infringement of a right of privacy of an employee amounting to a “wrongful act” within the scope of Section 420 of the Civil and Commercial Code of Thailand, the employee may be entitled to compensation. In particular, if any disclosure or use of personal data of the employee is made without the consent or approval of the employee and there is damage to the employee’s liberty, property or right, such conduct could be considered as a “wrongful act”, and the owner of the personal data may be entitled to claim for compensation of actual damage incurred. Employers’ data protection obligations There is no specifi c provision regarding the obligations of the employer to protect the personal data of employees, unless it is provided for in the employment contract. Apart from provisions in the employment contract, the employer is also subject to the general provisions of law on certain protected classes of information, for example: • Section 322 of the Criminal Code of Thailand prohibits breaking open or making away with any document belonging to another person in order to ascertain or disclose its contents in a manner likely to cause injury to any person. • Section 7 of the Computer Crimes Act prohibits the undue access of computer data, which has specifi c preventive procedures against access and is not available to such person. Furthermore, Section 8 of the Computer Crimes Act prohibits any undue act

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by electronic means in order to intercept another person’s computer data while being transmitted through a computer system.

Other recent developments in the fi eld of employment and labour law Increased penalties for child labour offences On 23 January 2017, the LPA was amended by Labour Protection Act (No. 5) B.E. 2560 (2017) to increase penalties for certain offences relating to child labour. Employing a person under the age of 15 (or such other age as may be prescribed) is now punishable by up to two years’ imprisonment and/or a fi ne of between 400,000 to 800,000 Baht per employee (increased from a one-year imprisonment term and/or a fi ne of up to 200,000 Baht). Ordering an employee under the age of 18 to engage in prohibited jobs or work in prohibited locations is now punishable by: • up to two years’ imprisonment and/or a fi ne of between 400,000 to 800,000 Baht per employee (an increase from six months’ imprisonment and/or a fi ne of up to 100,000 Baht); or • if the offence causes the employee to suffer physical or mental harm or death, up to four years’ imprisonment and/or a fi ne of between 800,000 to 2,000,000 Baht per employee (increased from a one-year imprisonment term and/or a fi ne of up to 200,000 Baht). These amendments came into force on 23 February 2017. Statutory retirement On 1 September 2017, the Labour Protection Act (No.6) B.E. 2560 (2017), which made certain amendments to the LPA (“LPA Amendments”), came into force. The LPA Amendments provide statutory confi rmation of the view of the Thai Labour Court that retiring employees are entitled to specifi ed severance pay and other termination payments (i.e. retirement is not considered to be voluntary resignation). They also provide for a statutory retirement age of 60 (an employer’s work rules or an employee’s employment agreement may contractually provide for a higher or lower retirement age) and that on reaching such age (notwithstanding any retirement age that may be provided for in the employer’s work rules or employment agreement), employees will have the right to retire (with 30 days’ notice) and be entitled to be paid severance pay in accordance with the LPA. The failure to make payment of severance pay to a retired employee will be an offence punishable with a term of imprisonment of not more than six months and/or a fi ne not exceeding 100,000 Baht. Work rules On 4 April 2017, the National Council for Peace and Order issued Order No. 21/2560 (“NCPO LPA Order”) pursuant to Section 44 of the 2014 Constitution. The NCPO LPA Order amended the LPA to remove the requirement that a copy of an employer’s work rules be submitted to the Director-General of the Department of Labour Protection and Welfare (or his delegate) within seven days of the announcement of such work rules. Further, there is no longer an express provision authorising the Director-General (or his delegate) to order employers to amend work rules that are inconsistent with the law. Employers are still required to issue work rules once they employ 10 or more persons, and to disseminate and conspicuously post such work rules in an accessible manner in the workplace.

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Minimum wage • Differential Rate proposals As currently drafted, the LPA provides for the constitution of a Wages Committee with the power to determine minimum wage rates, and the Wages Committee is entitled to specify different rates for different types of business, work or occupation, or localities. The LPA Amendments provide that the Wages Committee will now be permitted to specify different rates for specifi c classes of employees, in addition to the other factors currently prescribed under the LPA (e.g. different rates can be specifi ed for the differently abled, senior citizens and minors). • Changes in Minimum Wage Rates From 1 January 2017, the Notifi cation on the Minimum Wage Rate No. 8 (“Wages Notifi cation 8”) issued by the Wages Committee specifi es increases of between 5 to 10 Baht per day in the daily minimum wage rates in most provinces. Wages Notifi cation 8 did not change the daily wage rate of 300 Baht for the provinces of Chumphon, Trang, Nakhon Si Thammarat, Narathiwat, Pattani, Yala, Ranong and Singburi. Separately, from 24 April 2017, the Notifi cation on Wage Rates According to Skills Standards No. 6 (“Skilled Wages Notifi cation 6”) entitles skilled workers from certain professions as set out in the Skilled Wages Notifi cation No. 6 to higher minimum wages, with the new minimum wages ranging from 370 to 600 Baht per day, depending on the profession and skill level of the worker. Management of foreign workers On 17 June 2017, an Emergency Decree on the Management of Foreign Workers B.E. 2560 (2017) (“2017 Emergency Decree”) was issued. The 2017 Emergency Decree took effect on 23 June 2017 and repealed the Emergency Decree on the Sourcing Foreign Workers to Work With Employers in Thailand B.E. 2559 (2016) and the Aliens’ Working Act B.E. 2551 (2008) (collectively, the “Preceding Legislation”). The 2017 Emergency Decree largely adopts the provisions of the Preceding Legislation. Some of the key changes are set out below: • substantial increases in penalties for employers and foreign workers for certain foreign worker offences under the 2017 Emergency Decree, some of which have been temporarily suspended (as set out in the table below); • the Minister of Labour is now authorised to issue notifi cations setting out types of work as being work that is prohibited to be carried out by foreign workers; and • a new offence of seizing a work permit or identifi cation document of a foreign worker.

Increased penalties under the 2017 Emergency Decree

Employer Offences S/N Offence Penalty References Notes 1 Employing a foreign worker to engage in Fine of 400,000 to S9 read Suspended prohibited work 800,000 Baht per with S102 until 1 foreign worker and S72 January 2 Employing a foreign worker who does not read with 2018 – see have a valid work permit S122 note below 3 Employing a foreign worker who holds a work permit of another employer

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4 Employing a foreign worker to do work Fine not exceeding S73 read and provide services different from those 400,000 Baht per with S123 described in his/her work permit foreign worker 5 Failure to notify the Registrar within seven Fine not exceeding S74 read days of the effective termination date of 100,000 Baht per with S124 the termination of employment of a foreign foreign worker worker 6 Seizure of a foreign worker's work permit Fine not exceeding S131 or identiﬁ cation documents 100,000 Baht, up to six months’ imprisonment, or both 7 Where an offence is committed by a juristic n/a S132 person, if the commission of the offence by the juristic person results from the direction or act of any person, or omission to direct or omission to act (which is part of the duty of the director, manager or any person responsible in the operations of such juristic person), such person would also be subject to the penalty provided for such offence Foreign Worker Offences 8 Working without a valid work permit or Fine of between S8 read Suspended engaging in prohibited work 2,000 to 100,000 with S101 until 1 Baht, up to ﬁ ve January years’ imprisonment, 2018 – see or both note below 9 Working or providing services different Fine not exceeding S70 read from those described in his work permit 100,000 Baht with S121 10 Working or providing services on an Fine of between S59 read Suspended urgent or necessary basis without notifying 2,000 to 100,000 with S119 until 1 the Labour Authority Baht January 2018 – see note below Note: On 4 July 2017, the National Council for Peace and Order issued Order No. 33/2560 (“NCPO Foreign Worker Order”) which provides that four offences under the 2017 Emergency Decree (as set out in Sections 101, 102, 119 and 122 of the 2017 Emergency Decree) would only come into effect on 1 January 2018.

* * *

Endnotes 1. Please see sections, ‘Protection against dismissal’ and ‘Statutory employment protection rights’ for more information on these statutory protections and procedures. 2. Please see section, ‘Protection against dismissal’ for more information on unfair termination and its consequences under Thai employment law generally. 3. Please see section, ‘Protection against dismissal’ for more information on unfair termination and its consequences under Thai employment law generally. 4. Please see sections, ‘Protection against dismissal’ and ‘Statutory employment protection rights’ for more information on these statutory protection and procedures. 5. Please see section, ‘Statutory employment protection rights’ for more information on termination pursuant to Section 119 of the LPA.

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Saroj Jongsaritwang Tel: +66 2 656 1991 / Email: [email protected] Saroj is a Partner in the Corporate & Commercial Practice of R&T Asia (Thailand) Limited, the Bangkok offi ce of Rajah & Tann LLP. Saroj graduated with a Bachelor of Law from Thammasat University in 1999, and is a licensed Thai lawyer. Prior to joining Rajah & Tann, Saroj was a legal counsel (AVP) at a leading Thai consumer fi nance business, and before that he was in private practice at a local Thai law fi rm. Saroj has several years’ experience in advising on employment, corporate, commercial and consumer fi nance matters (including personal loans, credit cards and insurance) and agreements relating to the consumer fi nance business. He is also recommended by The Legal 500 from Year 2015–2016 and Chambers Asia Pacifi c (2016–2017) as a recommended lawyer in TMT and Banking practice.

Sui Lin Teoh Tel: +66 2 656 1991 / Email: [email protected] Sui Lin is the Deputy Managing Partner of R&T Asia (Thailand) Limited (Bangkok offi ce of the Rajah & Tann Asia network of law fi rms). Sui Lin graduated with a Bachelor of Laws from the University of London, and is a solicitor qualifi ed in England & Wales. Before joining Rajah & Tann, Sui Lin was Of Counsel in the dispute resolution group of an international law fi rm in Thailand. Prior to that, she was a partner in a leading local law fi rm. She has more than 23 years of experience in Thailand, advising on general corporate and commercial matters, including regularly advising clients on contentious and non-contentious employment matters. Sui Lin is fl uent in spoken Thai.

R&T Asia (Thailand) Limited 973 President Tower, 12th Floor Units, 12A–12F Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: + 662 656 1991 / URL: th.rajahtann.com

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Haşmet Ozan Güner, Dilara Doğan Güz & Murat Caner Çelebi GUNER | legal

General labour market and litigation trends Developments which have impacted the labour market/legislation According to June 2016 data, the number of unemployed people above age 15 across Turkey has reached 3,127,000 with an increase of 247,000 compared to the previous year. The unemployment rate reached 10.2%, with an increase of 0.6% in the past year. The unemployment rate among the young population (aged 15–24) reached 19.4%, an increase of 1.7%. The number of employed people reached 27,651,000 in June 2016 with an increase of 390,000 compared to the previous year. Within the same period, the number of people working in the agricultural industry decreased by 421,000, while the number of people working in industries other than agriculture increased by 811,000. While 20.2% of employed people took positions in the agricultural industry, 19.3%, 7.5% and 53.1% took positions in the trade industry, construction industry and service industry respectively. Compared to the previous year, the ratio of people employed in the service industry increased by 2.1% and in the construction industry by 0.2%, while those in the agricultural industry decreased by 1.8%, and those in the trade industry decreased by 0.4%. With the purpose of preventing unregistered employment, the below administrative fi nes have been regulated against unregistered employment: (i) for employers who do not submit the employee’s employment declaration to the Social Security Institution, a fi ne equal to the gross monthly minimum wage (currently TRY 1,777.50) for each employee; (ii) in case the above is discovered due to a court order, or a governmental inspection, a fi ne equal to twice the gross monthly minimum wage for each employee; and (iii) in case of a repetition of (ii) above, fi ve times the gross monthly minimum wage for each employee. Regulations on the appeal procedure With the Code of Civil Procedure that came into force in 2011, the right to appeal to the regional courts of appeal was introduced. Before this new law, the High Court of Cassation was available for appeals against local court decisions. Regional courts of appeal, however, became functional in mid-2016. As of 2017, the appeal threshold is TRY 3,110 while the threshold for applying to the High Court of Cassation is TRY 41,530 for labour disputes. Parties, however, are entitled to apply to the High Court of Cassation irrespective of these thresholds in disputes arising from damages due to work accidents or occupational diseases and mobbing (see below), re-employment claims and lawsuits for uninsured employment.

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Changes in the statute of limitations With the recent changes to the Labour Courts Law, the statute of limitations is set as ﬁ ve years for annual leave payment, severance and notice pay, damages due to terminations of malignity or failing to comply with the equal treatment principle. Previously, the statute of limitations was 10 years except for annual leave payments. These changes entered into force on 12.10.2017. Mandatory mediation With the recent changes to the Labour Courts Law, applying for mediation, which was previously optional, has now become mandatory in labour disputes except for those arising from work accidents or occupational diseases. If the parties have not gone through a mediation period but the claimant has directly applied to the courts, the claimant will be given one week to apply for mediation. The parties will be able to continue the dispute before the courts only if the mediation process has not been successful. So far, 13,138 issues were taken to mediation in Turkey and 12,227 resulted with an agreement. 89% of them were labour disputes. (Source: Ministry of Justice Mediation Statistics)

Redundancies, business transfers and reorganisations Temporary employment Temporary employment can be formed, for instance, through “private employment offi ces” or by making an assignment within the group companies. A temporary employment relationship through private employment offi ces can be made when a private employment offi ce makes an agreement with an employer for procurement of temporary employees and when they transfer their employees temporarily to that employer. (Within a temporary employment relationship, the private employment offi ce is the employer.) This relationship can be formed for limited durations and in limited circumstances listed in the law (e.g. when an employee is on military duty, in seasonal agricultural works, domestic service, or when the production capacity of the workplace has unpredictably increased). The number of temporary employees cannot exceed ¼ of the number of permanent employees, except for workplaces where there are less than 10 employees, where up to fi ve temporary employees can be employed. Employers cannot employ their former permanent employees as temporary employees within the six months following the termination of their employment contract. Temporary employment relationships can also be formed within the group companies, by assigning one group member’s employee(s) to another. In this case, the initial term of the temporary employment should be limited to six months, renewable twice. Remote employment and on-call employment Remote employment is the employment type where the employee carries out their duties outside the workplace. Remote employees should be treated equally to regular workers except for material reasons. On-call employment is described as a type of part-time employment contract in which it is agreed that the employee will perform their duties when they are needed by the employer for the tasks that they undertake. Unless otherwise agreed, for on-call employees, the working hours are 20 hours per week and four hours per day. Unless otherwise agreed, the employer must make the call at least four days prior to the working day.

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Change of workplace, job description and other working conditions In principle; job description, workplace and working conditions must be express in the labour contract. Material changes thereto are deemed substantial alterations. In these cases, the employee’s consent is required. Employee transfer In case of the transfer of the workplace in whole or in part, employment contracts of the employees working therein are also automatically transferred to the transferee. In this case, the employee’s duration of employment and the rights in connection thereto are calculated starting from his/her ﬁ rst employment by the transferor. Additionally, the transferor is liable jointly with the transferee to the employee for the employee’s rights that originate from the period before the transfer. The transferor’s liability, however, is subject to a statute of limitations of two years as of the date of transfer.

Business protection and restrictive covenants Post-termination non-compete provisions Employees may undertake not to compete with the employer (or to not work for its competitors) after the termination of the employment contract. Post-termination non- compete agreements are valid if: (i) made in writing; (ii) the employee’s position enables him/her access to the employer’s client base, production secrets or the employer’s activities, and the employee’s use of this information will damage the employer; (iii) reasonably limited in terms of geography and industry; and (iv) reasonably limited in terms of its duration taking into account the employee’s position, however, with a maximum period of two years in any case. If the non-compete obligation does not include the limitations listed in (iii) and (iv) above, the courts may revise the scope of this obligation to restrict it therewith. A contractual penalty can be stipulated in employment contracts for employees breaching this obligation. Protection of employer’s trade secrets Those who have access to others’ trade secrets due to their profession or duty and who disclose them to third parties are subject to imprisonment of one to three years and a judicial ﬁ ne up to TRY 500,000 days. This also applies to employees illegitimately disclosing the employer’s trade secrets. Additionally, the employer may immediately terminate the employment contract and claim damages. Contractual penalties Contractual penalties in employment contracts are valid if: (i) they are proportional with the linked breach; (ii) they are not contrary to general legal principles, moral values or individual rights; (iii) the employment contract is executed for an indeﬁ nite period; and (iv) they are regulated mutually, except for cases where, by their nature, mutual contractual penalty is not possible (e.g. a contractual penalty imposed only on the employee for post- termination non-compete provision).

Discrimination protection Discrimination in labour relationships is prohibited. Employees cannot be treated differently due to their work or contract type unless there are essential reasons. Employees cannot be paid or treated differently, through or at the termination of the

GLI - Employment & Labour Law 2018, Sixth Edition 241 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London GUNER | legal Turkey employment contract, for the same or equal work or work of equal value due to their gender or pregnancy. In case of violation of the non-discrimination rule, the employee can claim compensation four times his/her monthly salary and the rights s/he has not been granted. The burden of proof in this regard is, in principle, on the employee. Mobbing is not defi ned under Turkish laws. Turkish court precedent, however, defi nes mobbing as physical or psychological pressure aimed at the employee’s terminating the employment contract, and entitles employees to indemnifi cation in case of mobbing. Sexual harassment of an employee by the employer or another employee grants the employee a right to terminate the employment contract immediately with just cause, thus severance and notice pay, as well as indemnifi cation.

Protection against dismissal Termination of employment contract with just cause and valid cause Turkish laws make a distinction between termination with just cause and valid cause. The type of the cause results in differences in relation to the employee’s entitlement to severance pay, notice pay and re-employment claims, which will be described in the below sections. Employees are entitled to terminate the employment contract with just cause immediately due to: • health reasons; • employer’s failing to comply with morals and good intention rules and similar situations; and • acts of God resulting in the cessation of work in the workplace for more than one week. Employers are entitled to terminate the employment contract immediately with just cause due to: • health reasons due to the employee; • the employee’s failure to comply with morals and good intention rules and similar situations; and • acts of God resulting in the employee’s inability to work in the workplace for more than one week, or being arrested or taken into custody for a period more than the termination notice period applicable to that employee. Termination reasons providing the employer with valid reasons are: absence of the employee exceeding the notifi cation period due to the condition of being taken into custody or being arrested, in addition to the ones counted above. Termination with valid cause, on the other hand, is available only to the employer and apply in cases where there are reasons which prevent the employee from fulfi lling his/her duty due to reasons attributable to the employee or the workplace. For an employer employing more than 30 employees in a workplace, the employment contract of an employee who has worked in the said workplace for at least six months can be terminated only for just or valid cause; otherwise the employee may demand his/her re-employment. Re-employment claims: Unworked period payment and indemnifi cation due to employer’s breach of re-employment obligation If a dismissed employee wins a re-employment lawsuit, s/he will also be entitled to an “unworked period payment” amounting to four times his/her last gross salary. If the

GLI - Employment & Labour Law 2018, Sixth Edition 242 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London GUNER | legal Turkey employer does not re-employ the employee, the employer will be obligated to pay an additional indemniﬁ cation amounting to four to eight times the employee’s last gross salary. Re-employment claims must be ﬁ led within one month following the termination. The employee shall demand re-employment within ten days following the court decision’s delivery to the employee, and the employer shall re-employ the employee within one month following the employee’s such demand.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Severance pay Employees who have worked for a certain employer for at least one year are entitled to a severance payment if s/he terminates the employment contract with just cause or if his/her employment contract is terminated by the employer without just cause. The employee is also entitled to severance pay if they terminate the contract due to being enlisted for military duty, retirement, marriage (available only for women and if the employment contract is terminated within one year following the marriage), and death. The severance payment is calculated by multiplying the number of employee’s working years for that employer by his/her last gross salary. If the employee’s salary is not stable, the last year’s average salary should be taken into account. The gross salary taken into account in this calculation, however, cannot exceed a certain limit, which is TRY 4,732.48 for 2017. Notice pay The following notice periods apply for terminating an employment contracts with indeﬁ nite term, except for cases of termination with immediate effect:

Duration of employment contract Notice period -6 months (exclusive) 2 weeks 6 months (inclusive) – 1.5 years (exclusive) 4 weeks 1.5 years (inclusive) – 3 years (exclusive) 6 weeks +3 years (inclusive) 8 weeks

In case of breach of the above notice periods, the other party is entitled to a notice pay equal to the salary the employee would be entitled to for the duration of the notice period. When the employment contract is terminated with notice, the employee should be granted two hours per day for seeking a new job. These hours can be combined by the employee. If the employee is not granted this right, the employee must be paid twice his hourly rate for these unused hours. Indemnifi cation for bad faith Employees who cannot benefi t from the provisions of employment security and who work with an employment contract of an indefi nite duration, can demand “indemnifi cation for bad faith”. This indemnifi cation is calculated by multiplying the notice pay by three. Annual paid leave To be entitled to annual paid leave, the employee should work for the same employer at least for one year. Right of annual paid leave cannot be renounced. It is forbidden for

GLI - Employment & Labour Law 2018, Sixth Edition 243 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London GUNER | legal Turkey the employee to work in another paid job during their annual paid leave. Otherwise, the payment can be taken back by the employer. For the calculation of the one-year working period, the days during which the employee actively works are taken into account, as well as the days which the law deems to be worked. These are as follows: a) Days during which the employee is unable to work due to reasons such as accident or disease. b) Days during which female employees did not work before and after their pregnancy. c) Days during which the employees are unable to attend to their work during their assignments in a military manoeuvre or otherwise by law. d) Fifteen days of the time which the employee spent without working as a result of the work being suspended for more than a week, except for cases of force majeure at the workplace. e) Week holidays, national holidays and nationwide holidays. f) Half-day leave that is required to be given to employees, other than Sundays, during x-ray examinations. g) Days during which the employees cannot continue their work due to reasons of: attendance to mediation meetings, arbitration committees, or performing employee representation duties within these committees; attending to councils, boards, commissions and meetings founded in line with the legislation regarding business life; or conferences, congresses or commissions of international institutions related to labour issues as an employee or union representative. h) Leave given to employees up to three days in case of marriage or death of their parents, spouses, siblings or children. Annual paid leave entitlements are as follows:

Duration of employment contract Annual paid leave entitlement 1 year (inclusive) – 5 years (exclusive) 14 days 5 years (inclusive) – 15 years (exclusive) 20 days +15 years (inclusive) 26 days Employees working underground (e.g. mine workers) are entitled to an annual leave four days more than the above. Additionally, employees who are below age 18 or above age 50 are entitled to a minimum annual paid leave of 20 days. National holidays, week holidays and general vacations which coincide with the term of leave, shall not be counted as a part of the leave duration. For employees who spend their annual paid leave in a location other than the place in which the company is located, a total amount of up to four days can be given by the employer as unpaid leave for the time that will spend on the road during their round trip (departure and return), upon the employee’s request and provided that the trip is documented. Employers are obliged to pay the employees in advance for their annual paid leave. In case the employment contract comes to an end for any reason, payment in respect of the annual paid leave term earned but not used by the employee is made over the payment on the date that the agreement is concluded. In case of termination of the employment contract, the employee is entitled to payment of unused annual leave, over their last salary.

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Parental leave Male employees are entitled to ﬁ ve days’ paid leave in case their spouse gives birth. For the treatment of a child with permanent disease or at least 70% disability, employees are entitled to ten days of paid leave per year, which can be used in whole or in part, provided that the leave is used only by one of the working parents. In principle, female employees shall not work eight weeks before giving birth and eight weeks after the birth. In cases of multiple pregnancy, the unworked period before the birth date is extended to ten weeks. However, provided that her doctor approves that her health condition is suitable, pregnant employees can work until three weeks remain to the birth. In such cases, the period during which the female employee works will be added to the leave period after the birth. In cases of premature birth, the unused part of the pre- birth leave period shall be added to the leave period after the birth. In case of adoption, one of the parents is entitled to parental leave of eight weeks following the delivery of the child to the family. Upon the employee’s request, employees are granted unpaid leave after the paid parental leave after birth or adoption. This unpaid leave period can be 60 days for the ﬁ rst child, 120 days for the second child and 180 days for subsequent children. If the child has a disability, this period will be 360 days. In order to breastfeed children below the age of one, female employees are granted a breast-feeding leave for a total of one hour and a half per day. The hours during which this leave will be used and the number of its portions are determined by the employee. This period is considered to be a part of daily working period. Week holiday and general vacations Employees are entitled to a minimum uninterrupted 24 hours of resting period (week holiday) per week, provided that s/he has worked through the week. The employee is entitled to payment also for the week holiday. The week holiday is, in principle, on Sundays; the parties may, however, agree on another day. If the employer suspends the work at the workplace for one or more days in a week without any force majeure or economic reason, the days of the week which have not been worked through are considered as days worked in the calculation of week holiday entitlements. In case of a force majeure that requires work to be suspended for more than a week, the half-day payment paid to the employees for the unworked days shall also be paid for the week holiday. Nationwide (general) holidays are days deemed, in principle, as worked. The employee’s work during week holidays or general vacations is subject to the employee’s consent. If the employee works during a week holiday or general vacation, they must be paid twice the amount of their daily payment.

Worker consultation, trade union and industrial action Right of trade union Employees and employers have the right to establish, becoming members of, and withdraw from trade unions. Nobody can be forced to become a member of a trade union or withdraw from membership. Multiple memberships within the same line of work are not permitted.

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The employment contracts of employees who leave their workplace to become managers of a union become pending. The manager may, however, terminate his/her employment contract with immediate effect on the day that s/he leaves work without being bound by the notice period and become entitled to severance pay. If the manager terminates his/ her employment contract during his/her management duty, severance pay is calculated over the salaries of similar employees on the date of the termination. Upon the end of the managerial duty, s/he can apply to the employer within one month to restart the work. The employer is obliged to re-employ him/her in his/her previous job or a similar one; otherwise, the employment contract is deemed terminated by the employer. In case the employee representative’s employment contract is terminated by the employer, upon a court’s decision on his/her re-employment, the termination will be deemed invalid and the payments and other rights between the termination date and the court decision becoming defi nitive shall be paid by the employer to the employee. If the employee applies for re-employment within six business days following the verdict becoming defi nitive and the employer does not re-employ him within the next six business days, the employment contract will be deemed to continue and the employer will be obliged to continue paying the representative’s salary and other entitlements. Trade union activities and collective labour agreements Employees have the right to carry out trade union activities outside their working hours. Carrying out trade union activities within working hours is subject to the employer’s approval. Employees and employers have the right to enter into collective labour agreements. Members of the trade union, which is the party to the collective labour agreement, benefi t from those agreements. Collective labour agreements can cover one or more workplaces in the same line of work. In such cases, collective labour agreements can only be made at the enterprise level. Collective labour agreements can be made for a minimum term of one and a maximum term of three years, save for works with a duration of less than one year. The trade unions may request an authorisation within 120 days before the expiry of the collective labour agreement. However, the collective labour agreement that will be executed cannot enter into force before the expiry of the previous agreement. Unless otherwise specifi ed in collective labour agreements, employment contracts cannot contradict collective labour agreements. Provisions of the employment contracts that contradict collective labour agreements are replaced by the relevant provisions of collective labour agreements unless the employment contract provision is to the benefi t of the employee compared to the collective labour agreement. Provisions of the expired collective labour agreements related to employment contracts continue to be the provisions of the employment contracts until the new collective labour agreement enters into force. Dissolution of the trade union which is party to the collective labour agreement, their activities being suspended, the labour union losing its authority and changes in the employer’s line of work, do not invalidate or terminate the collective labour agreement. In case of workplace transfer, if the transferee employer has a collective labour agreement that is in force at its workplace(s) in the same line of work, provisions of the collective labour agreement in connection with the transferred workplace continue to be provisions of the employment contract. If there is not a collective labour agreement in place at the workplace(s) of the transferee employer, rights and obligations arising from the collective

GLI - Employment & Labour Law 2018, Sixth Edition 246 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London GUNER | legal Turkey labour agreements in force at the transferred workplace continue to exist as provisions of the collective labour agreement until a new collective labour agreement is made. In cases in which a workplace without a collective labour agreement is acquired by an employer, which is a party to an established collective labour agreement, that workplace comes within the scope of the established collective labour agreement. Trade unions are authorised to enter into collective labour agreements provided that at least 1% of the employees are working in its line of work, more than 50% of the employees in the relevant workplace, and 40% of the employees of the whole enterprise (i.e. all workplaces within the said enterprise) are its members. If more than one trade union has as its members more than 40% of the employees of an enterprise, the trade union having the highest number of members is authorised to make a collective labour agreement. The number of members at the date of application for authority is taken into account in these calculations. If no agreement is reached among the parties for a collective labour agreement, the matter is referred to a mediator. The mediator shall resolve the matter within 15 days, which can be extended by a maximum period of six business days. If agreement cannot be reached during mediation meetings, the mediator prepares no-settlement minutes and delivers them to the Ministry of Labour and Work Authority City Directorate or the Ministry of Labour and Social Security, depending on the case. The relevant authority then sends the no-settlement minutes to the parties. The parties then may refer the matter to the High Board of Arbitration. The decision of the High Board of Arbitration is defi nitive and has the force of a collective labour agreement. Strike and lock-out The trade union, within 60 days following the notifi cation of the mediator’s no-settlement minutes, can decide to start a strike and start applying it with six business days’ advance notice to the other party. In cases in which a strike decision is not taken or the opposite party is not notifi ed about the date of its implementation within this period, the trade union’s authority to enter into a collective labour agreement expires. An employers’ union, which is party to a labour dispute, or employers who are not members of a trade union, can make a decision of lock-out within 60 days following their receipt of the strike decision, and start applying it with six business days’ advance notice to the other party. Strike and lock-out decisions must be announced at the workplaces. Strikes and lock-outs cannot be carried out in: life- and property-saving business; funeral and cemetery business; city water supply; electricity; natural gas; petrol production; dissolution and distribution business; petro-chemical business originating from naphtha or natural gas; in workplaces managed directly by the Ministry of Defence, General Command of Gendarmerie and Coast Guard Command; and government fi re departments and public hospitals. Employees are free to participate in the strike or not. Employees participating in the strike and employees exposed to a lock-out are required to leave their workplace. Employers cannot employ other employees permanently or temporarily or make others work instead of the employees with pending employment contracts during a legal strike or lock-out. In case of an illegal strike, employers can terminate the employment contracts of the participants, or employees who persuade others to go on or continue the illegal strike.

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Such reasons of termination are accepted as just causes. In case of an illegal strike, the employer’s loss due to that strike shall be compensated by the trade union which made the decision of the strike, or employees participating in that strike if the illegal strike is carried out without a trade union decision. In case of an illegal lock-out, the employer must continue to pay the employees their salaries and other rights and indemnify them for their losses. Union compensation Due to the no-discrimination rule, employees’ employment contracts cannot be terminated due to trade union activities or participation in strikes. Otherwise, the employer is obligated to pay a “trade union compensation” to the employee. The amounts of trade union compensation are as follows:

Duration of employment contract Trade union compensation -5 years (exclusive) Equal to 12 months’ gross salary 5 years (inclusive) - 15 years (exclusive) Equal to 13 months’ gross salary +15 years (inclusive) Equal to 14 months’ gross salary

The conditions for re-employment lawsuits apply also for claiming trade union compensation. The six-month employment condition required for initiating a re-employment lawsuit, however, has been abrogated by the High Constitutional Court for trade union compensation claims.

Employee privacy Employers are obliged to use their employee’s personal data in line with good faith and laws, and not to illegitimately disclose these personal data. The information in the employee’s personnel ﬁ le are also deemed personal data. Turkey has enacted the Law on the Protection of Personal Data in 2016 (“Personal Data Law”). A Personal Data Protection Authority has also been established in line with the Personal Data Law and has recently become operational. The Personal Data Law is based on and resembles the European Union Directive 95/46/EC on the Protection of the Personal Data. According to the Personal Data Law, the following administrative ﬁ nes apply for the following types of breach:

Breach Administrative ﬁ ne Breach of non-disclosure obligation TRY 5,000 – 100,000 Breach of data protection obligation TRY 15,000 – 1,000,000 Non-compliance with the Personal Data Protection Authority TRY 25,000 – 1,000,000 decisions Breach of obligations to register with and notify the data registry TRY 20,000 – 1,000,000

Additionally, Turkish Criminal Code sets out the following criminal sanctions for breach of personal data:

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Act Criminal sanction Illegal recording of personal data 1–3 years of imprisonment Illegal disclosure of or access to personal data 2–4 years of imprisonment Non-deletion or non-anonymisation despite being obliged to do so 1–2 years of imprisonment

The sanctions under the Turkish Criminal Code apply to individuals who are intentionally involved in the criminal act. Legal measures, however, apply to legal entities which are used in or beneﬁ t from the criminal act. These legal measures include cancellation of governmental permits and conﬁ scation of goods used in or derived as a result of the criminal act. Last but not least, employees whose personal data are breached by the employer may claim damages from the employer.

Other recent developments in the fi eld of employment and labour law Changes to the Sub-Employment Regulation In August 2017, the Sub-Employment Regulation provisions were amended. The amendments relate to governmental inspections against the use of sub-employment relationships to circumvent the employee’s employment relationship with the main employer, and the employers’ objections thereto. The essential amendments are as follows: • The inspection minutes also need to be delivered to the employers, besides the inspection report. • The deadline for employers’ objection has been extended from 6 to 30 business days. • The administrative fi ne in case of circumvention has been abrogated and instead it is stipulated that employees will be deemed to be employees of the main employer. Changes to the Overtime Work Regulation In August 2017, the Overtime Work Regulation was amended. According to these amendments, the requirement to obtain the employees’ consent to overtime at the beginning of each year has been cancelled. Now, it will be suffi cient for employers to obtain such consent in the employment contract, or whenever necessary. The employees, on the other hand, have been granted the right to repeal such consent at any time with one month’s prior notice. The said regulation has also been amended so as to prohibit mine workers from working overtime except for compulsory situations. Changes to the Annual Paid Leave Regulation In August 2017, the Annual Paid Leave Regulation was amended. The essential amendments are as follows: • Previously, annual paid leave could be divided maximum into three portions. This limitation has been removed. • The regulation has been amended to clearly state that the annual leave entitlements of employees who continue to work in the same workplace under different sub-employers, should be calculated starting from the employee’s fi rst employment in the workplace. The main employer is also liable to ensure that employees are granted the right to use their annual leave rights accordingly. Sub-employers are obliged to provide the main employers with the annual leave documents of the employees.

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Haşmet Ozan Güner Tel: +90 212 282 6025 / Email: [email protected] Haşmet Ozan Güner advised and represented many local and multinational companies particularly on structuring commercial partnerships; distributorship, franchise and agency agreements; drafting, localising and negotiating their contracts; analysing the legal risks of termination of these relationships and conducting the termination process and disputes in these fi elds. His clients’ industries include pharmaceuticals, medical devices, food supplements, retail, automotive, food & beverages, port construction and operations and industrial machinery. With his fi rm GUNER | legal, he represents clients in +2000 employment disputes. Ozan has successfully represented many multinational companies in their commercial disputes in Turkey. He also coordinates with foreign law fi rms to resolve his local clients’ disputes abroad. He also has experience in competition law compliance, Competition Board investigations, clearance fi lings for mergers and acquisitions and individual exemption applications. He advised many clients in the merger and acquisition process and negotiation of their agreements. Ozan has specifi c expertise in pharmaceuticals, medical devices, veterinary, agricultural and food supplements regulations.

Dilara Doğan Güz Tel: +90 212 282 6025 / Email: [email protected] Dilara Doğan Güz provides legal consultancy to employers on employment law, as well as execution law and dispute resolution. She coordinates the Firm’s client relationships in the area of employment law and coordinates the Firm’s employment law team. She also coordinates the Firm’s correspondent law ﬁ rms in other cities of Turkey for proceedings outside Istanbul. Dilara also advises clients on dispute-preventive and risk-reducing measures in employment law, including employment law due diligence activities, conduct of large-scale dismissals and workplace transfers.

Murat Caner Çelebi Tel: +90 212 282 6025 / Email: [email protected] Murat Caner Çelebi focuses on employment law, representing the employers in many employment disputes. He also coordinates the Firm’s employment law due diligence activities and advises clients on day-to-day legal issues. Caner coordinates the execution proceedings carried out by or against the clients. His practice includes initiation and conduct of the execution proceedings, debt collection, sale of debtors’ movable and immovable assets through public auctions and suspension of the execution proceedings initiated against the Firm’s clients. Caner also has experience in family law.

GUNER | legal Konaklar Mah. Akasyalı Sok. 11/3 4. Levent 34330, Beşiktaş, İstanbul, Turkey Tel: +90 212 282 6025 / URL: www.gunerlegal.com

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Charles Wynn-Evans, Emma Byford & Emma Zarb Dechert LLP

General labour market and litigation trends Employment tribunal fees declared unlawful In July 2017, the UK Supreme Court ruled that the introduction of Employment Tribunal fees in 2013 was unlawful and that fees should no longer be charged. The Government has responded, as it had undertaken that it would if this were the result of the challenge to the fees regime, by ceasing to charge fees with immediate effect. The Employment Tribunal fees regime required payment by claimants of fees of up to £1,200, which the Government had argued would reduce the number of malicious and weak cases being brought. Statistics demonstrated that there was a reduction of 79% in the number of cases brought after the introduction of the requirement to pay, which was argued to demonstrate that the fees regime was an unjustifi able barrier to access to justice. The Supreme Court effectively agreed with UNISON, the trade union which brought the case, that: • The Employment Tribunal fees regime interfered unjustifi ably with access to justice under both the English common law and European Union law. • In order for rights given to workers and employees to be effective, and to achieve the social benefi ts intended by Parliament, they must be enforceable in practice. The Employment Tribunal fees regime meant that in many cases it was not economically worthwhile to bring a claim in the Employment Tribunal, and for many people with low or middle incomes the Employment Tribunal fees were in practice unaffordable. The fee remission system did not alleviate the problem. • The fees regime discriminated unlawfully against women and other protected groups because a higher fee is charged for discrimination claims, and this was not justifi able. The immediate practical effect of this judgment is that fees in the Employment Tribunal and Employment Appeal Tribunal (“EAT”) are no longer being charged. Fees paid to date will also have to be repaid. It remains to be seen what remedy there will be for individuals who were prevented or deterred from bringing claims due to the fees regime who may seek to argue that their claims should now be allowed to proceed on the basis that the fees regime meant that it was not reasonably practicable for the individual to bring the relevant claim in the prescribed time period. The number of Employment Tribunal claims going forward is likely to increase as a result of this judgment, although the requirement for ACAS early conciliation may temper the likely rise in claims – as

GLI - Employment & Labour Law 2018, Sixth Edition 251 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Dechert LLP United Kingdom may, in the context of unfair dismissal claims, the other changes made in 2013 which constrained employees’ rights to bring claims, namely the increase from one to two years of the eligibility requirement to claim unfair dismissal, and the introduction of an upper limit to compensation of one year’s pay, even if that is less than the overall cap on the compensation which can ordinarily be awarded in unfair dismissal claims, which is now £80,542. Employment Tribunal judgments published online With effect from February 2017, Employment Tribunal judgments in England, Wales and Scotland are now published online and can be searched not only by reference to date ranges and specifi c types of claim – unfair dismissal, discrimination, transfer of undertakings, etc. – but also through a general search function. The full detailed reasons for a judgment will only be available if a party has requested that they be issued in writing, or the judgment was not given orally at the hearing but was issued subsequently. Concern has understandably been expressed that the online judgment database will lead to employers being able to vet or even blacklist potential recruits by reference to whether they have brought claims. Parties may also be concerned about possible reputational damage from easily accessible publication of the fact that a claim has been brought and the type of claim – not least as full detail of the claim, even if unsuccessful, will be available where written reasons are given for the judgment. Employers and employees should also appreciate that the publication of Employment Tribunal judgments online means that their ability to maintain confi dentiality of tribunal proceedings is constrained in two potentially signifi cant ways. First, the database contains judgments made at preliminary hearings. The subject matter of a claim brought by an employee may therefore end up being ventilated by way of a publicly available judgment on a preliminary issue ahead of the full merits hearing at which the case is fi nally adjudicated. Examples of preliminary hearing judgments which may to a greater or lesser extent address the subject matter of a claim will include the resolution of whether a claimant has a disability for the purposes of the Equality Act 2010 and whether a claim has been brought in time. Secondly, where proceedings have started and are then settled – with the claimant withdrawing the claim – the formal judgment dismissing the proceedings following that withdrawal will be public. The details made public include the relevant “jurisdiction code”. Consequently, even if a case brought before an employment tribunal is settled and subsequently withdrawn, the type of claim which was made – unfair dismissal, discrimination etc. – will be public. Labour market statistics The latest bulletin published by the Offi ce for National Statistics (the “ONS”), which outlines the most recent trends in the UK labour market, revealed that for the period February to April 2017, employment continued to rise to 74.8%, a record high since comparable records began in 1971. Unemployment is also continuing to fall; the unemployment rate for February to April 2017 was 4.6%, down from 5% for a year earlier and the joint lowest since 1975. The unemployment rate is defi ned by the ONS as the proportion of the economically active population (those in work and those seeking and available to work) who are unemployed. Regular average pay (excluding bonuses) has also continued to rise, with a 1.7% increase from February to April 2017 on the comparable period in 2016. Total pay (including bonuses) increased by 2.1%.

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Business protections and restrictive covenants Compensation for removal of confi dential information – Marathon Asset Management LLP and another v Seddon and another This case considered how the damages payable when departing employees were found to have misused confi dential information should be assessed. Two employees (one a founding member) of an investment management company, Marathon Asset Management LLP (Marathon), left to set up a rival business. In anticipation of their exit, one of the employees, Mr Bridgeman, copied onto USB drives a substantial number of fi les containing information confi dential to Marathon. Prior to their exit Mr Seddon, the second employee, also saved a number of fi les in a shared area on Marathon’s computer system through which Mr Bridgeman could and subsequently did access them. It was accepted that Mr Seddon had not used the documents and, although Mr Bridgeman used some of the documents, it was not alleged that this caused Marathon any fi nancial loss. Marathon argued that it did not matter that the confi dential information was not used or that no loss had been shown. Marathon asserted that, since the defendants had admitted that they unlawfully took the confi dential documents, they should pay for the value of what they took. Based on previous case law authority – the Wrotham Park decision – Marathon claimed £15 million in damages, arguing that that was the sum Marathon would reasonably have charged the defendants to release them from their confi dentiality obligations. The court held that both defendants had breached their obligations of implied duty of confi dence as well as the confi dentiality obligations in their employment contracts by copying and retaining the confi dential fi les. However, Marathon’s claim for substantial damages was rejected and nominal damages of £1 per defendant were awarded on the basis that the misuse of confi dential information had neither caused Marathon any fi nancial loss nor did the defendants make any fi nancial gain. This decision potentially limits the scope for employers to seek compensation for the removal of their confi dential information.

Discrimination protections Continuing pay for employees absent due to disability – G4S Cash Solutions (UK) Ltd v Powell Under the Equality Act 2010 (“EQA”), an employer has a duty to make “reasonable adjustments” where it knows (or ought reasonably to know) that a person has a disability (as defi ned by the EQA) and its arrangements in relation to a disabled person constitute a “provision, criterion or practice” which places the disabled person at a substantial disadvantage compared to those who are not disabled. In this case, the EAT upheld the Employment Tribunal’s decision that G4S should have continued to pay Mr Powell at a higher rate of pay as a “reasonable adjustment”. In summary, before his dismissal in October 2013, Mr Powell had been employed by G4S for 16 years. He had worked as a single-line maintenance engineer; maintaining G4S’ ATM machines. By mid-2012 he was no longer fi t for roles involving heavy lifting or working in confi ned spaces – and it was accepted that he was disabled (for the purposes of the EQA) from that point. After a period of sickness absence, Mr Powell began work as a key runner – which essentially involved driving and delivering goods to other G4S employees. His salary continued to be paid at the same rate he had received in the more senior role of single-line maintenance engineer. By May 2013, G4S was considering discontinuing the key runner role. G4S informed Mr Powell that his key runner role had not been permanent and that he should apply for alternative vacancies. Mr Powell raised a grievance asserting that G4S was attempting to change his terms and conditions. In response, G4S made his

GLI - Employment & Labour Law 2018, Sixth Edition 253 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Dechert LLP United Kingdom key runner role permanent but sought to reduce his pay by 10%. Mr Powell was not willing to accept the drop in pay and his employment was terminated. The EAT agreed with the Employment Tribunal’s conclusion that continuing to pay Mr Powell at his higher rate of pay was a reasonable adjustment. Unlike the Employment Tribunal, the EAT also agreed with Mr Powell that there had been a variation of his contract. The EAT held that, if an employer proposes an adjustment which is incompatible with the contract of employment, it is open to the employee to decline the adjustment (which therefore would not be effective without the employee’s agreement). The EAT made it clear that it will not be an everyday event for employers to have to continue to protect a disabled employee’s pay. The facts here were unhelpful to G4S – who had paid Mr Powell at the higher rate for over a year and also led him to believe that the arrangement was long-term. Indirect discrimination – Essop v Home Offi ce (UK Border Agency) Under the EQA, those with “protected characteristics” are afforded various protections against discrimination – including the right not to suffer indirect discrimination. Indirect discrimination occurs when an employer (A) applies to an employee (B) a provision, criterion or practice (“PCP”) which puts or would put persons with whom B shares the protected characteristic at a particular disadvantage compared to others. The employee will then have a claim for indirect discrimination unless the employer can show that the PCP is a “proportionate means of achieving a legitimate aim”. In this case, the Claimants were from black and minority ethnic backgrounds and over the age of 35. In order to be promoted to a post of higher executive offi cer or above within the Home Offi ce, the applicants had to pass a Core Skills Assessment test which was a generic test for all positions (the “CSA”). The Claimants argued that the requirement to pass the CSA was a PCP which indirectly discriminated against them on the grounds of age and race. There was no obvious reason why any particular individual Claimant had failed the test. The case went to the Supreme Court on appeal. The Supreme Court held (overruling the Court of Appeal’s decision) that there is no requirement for a claimant to prove the reason why a PCP puts or would put an affected group sharing a protected characteristic at a particular disadvantage. What is required is a causal connection between the PCP and the disadvantage suffered. The reason why the PCP puts the group at a disadvantage (which the Supreme Court dubbed the “context factor”) does not need to be related to the protected characteristic. This distinguishes indirect discrimination from direct discrimination (where the characteristic has to be the reason for the treatment) and may, in practice, mean that employees can more easily succeed in claiming indirect discrimination.

Protection against dismissal When negligence is gross misconduct – Adesokan v Sainsburys Supermarkets Limited In this case, the Court of Appeal held that gross negligence can constitute gross misconduct allowing an employer to terminate an employee’s employment without notice. Mr Adesokan held a senior post of Regional Operations Manager and had worked at the employer for 26 years (and had an unblemished disciplinary record). The employer conducted an annual survey to ensure staff were engaged and motivated. The employer placed great importance on this survey and its results. One of Mr Adesokan’s direct reports, an HR Manager, deliberately tried to manipulate the results by sending an email asking managers to encourage only the most enthusiastic employees to complete the survey. Mr Adesokan became aware of the email and asked the HR Manager to rectify her actions and

GLI - Employment & Labour Law 2018, Sixth Edition 254 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Dechert LLP United Kingdom encourage full participation. The HR Manager did not respond and Mr Adesokan failed to follow-up or to contradict the HR Manager’s email. As a result, Mr Adesokan was subsequently dismissed for gross misconduct. Mr Adesokan brought a claim for wrongful dismissal/breach of contract, arguing that it was unreasonable of the employer to dismiss him without notice. The Court of Appeal agreed with the trial judge’s decision that Mr Adesokan’s negligence amounted to gross misconduct because its effect was to undermine the trust and confi dence of the employer in Mr Adesokan. In reaching its decision, the Court of Appeal took into account the seniority of Mr Adesokan’s role and held that there was no requirement of dishonesty or a deliberate act or omission for an employee’s employment to be summarily terminated – Mr Adesokan’s failure to take active steps to ensure the HR Manager had followed his instructions was enough. Furthermore, it also did not matter that the results of the survey had not, in fact, been compromised. Prior to this decision, it was not clear whether an employer needed to prove that an employee’s act or omission was wilful to constitute gross misconduct. Although this decision was specifi c to its facts, it does now raise the possibility that an employee can be summarily dismissed by the employer for gross negligence in the absence of proof that the employee’s conduct was deliberate. Considering expired warnings in unfair dismissal cases – Bandara v British Broadcasting Corporation In this case, Mr Bandara was given a fi nal written warning in relation to allegations of abusive behaviour towards his manager, failure to follow lawful instructions and potential breach of reporting guidelines. His conduct was categorised as “potentially constituting gross misconduct”, for which the sanction would usually be summary termination. The fi nal written warning remained active for 12 months. Whilst the fi nal written warning was still active, Mr Bandara was invited to a further disciplinary meeting for similar allegations of misconduct relating to bullying and intimidation, abusive behaviour towards colleagues and failure to follow lawful instructions, and Mr Bandara was dismissed. In relation to his unfair dismissal claim, the Employment Tribunal found that the active fi nal written warning was “manifestly inappropriate”, since the misconduct had been wrongly categorised as gross misconduct and thus the sanction was disproportionate, and there were fl aws in the previous disciplinary process. Nonetheless, the Employment Tribunal concluded that the subsequent dismissal fell within the “range of reasonable responses” of the employer and therefore was fair in the circumstances. On appeal, the EAT held that a sanction would be manifestly inappropriate “if there is something about its imposition that once pointed out shows that it plainly ought not to have been imposed”. In this case, it agreed that the fi nal written warning was manifestly inappropriate because it had been wrongly categorised as “potentially constituting gross misconduct”. It held that in those circumstances, the Employment Tribunal needed to consider the extent to which the employer relied on the fi nal written warning when deciding to dismiss Mr Bandara – if he would have been dismissed anyway, regardless of the active fi nal written warning, the dismissal would be likely to be fair, but if the decision-maker relied on the fi nal written warning to a signifi cant degree in reaching their decision to dismiss, it was diffi cult to see how the dismissal could be fair in the circumstances. The case has been remitted back to the Employment Tribunal to reconsider its decision. This decision therefore makes clear that in practice, a prudent employer will check the sustainability of a previous warning which the decision maker will take into account in making a decision whether or not to dismiss an employee.

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Perfunctory redundancy process in an unfair dismissal claim – Thomas v BNP Paribas Real Estate Advisory and Property Management UK Ltd Mr Thomas was an employee with over 40 years’ service. Following a strategic review of its operations, BNP Paribas decided to place Mr Thomas “at risk” of redundancy and placed him in a pool of one rather than a wider selection pool (of multiple employees). Following the “at risk” meeting, Mr Thomas was immediately escorted out of the employer’s workplace on paid leave and was told not to contact any customers or clients. A few days later, he was invited to a redundancy consultation meeting where the invitation letter read “Dear Paul” and not his actual name, Peter. The role was eventually conﬁ rmed as redundant albeit the employer got the termination date wrong which had to be corrected. Mr Thomas brought a claim for unfair dismissal in the Employment Tribunal arguing that the redundancy process had been a sham and predetermined. Although the Employment Tribunal was critical of the employer’s actions and held that the redundancy had been carried out in a “perfunctory and insensitive manner”, it nevertheless found that the employer’s actions fell within the “range of reasonable responses” and was therefore fair. The Employment Tribunal also found that for the employer to place the employee on paid leave did not mean the redundancy had been pre-determined. On appeal, the EAT found the Employment Tribunal’s decision to be “troubling” in the light of the ﬁ nding that the redundancy was found to be perfunctory and insensitive, and considered that the decision to place Mr Thomas on paid leave contributed to this. The EAT therefore allowed an appeal and remitted the case to the Employment Tribunal to reconsider the case. This decision emphasises the need to conduct redundancy consultation sensitively and carefully in order to reduce the risk of an unfair dismissal claim.

Statutory employment protection rights Gig economy workers – Aslam and others v Uber BV and others; Pimlico Plumbers Ltd v Smith Currently there are three broad categories of status in English law for the purposes of employment protection – employees, workers and the (truly) self-employed. Workers do not benefi t from the full suite of employment rights applicable to employees and in particular, do not have the right to claim unfair dismissal, to a redundancy payment or maternity leave, etc. They are, however, entitled to receive the national minimum wage, statutory paid holiday, rest breaks and fall within the scope of the UK’s statutory protections from discrimination on the grounds of a protected characteristic. A number of recent cases have addressed the position of individuals working in the “gig economy”, where the business engaging them has sought to structure its arrangements on the basis that the individuals in question are neither employees nor workers. The fi rst major decision in this context was Aslam and others v Uber BV and others, in which Uber argued that its drivers were self-employed, with Uber being simply a platform connecting 30,000 small business in London. Uber emphasised that drivers are under no obligation to switch on the Uber app or accept a fare offered to them. Uber argued that, if a driver does accept a fare through the app, the contract which is formed is between the passenger and the driver. Whilst the Employment Tribunal accepted that Uber drivers are under no obligation to switch on the app, it found that the Uber drivers were workers at all times when they: (a) have turned on the app; (b) are in the territory in which they are authorised to drive; and (c) are ready and willing to accept fares. In reaching its decision, the Employment Tribunal disregarded the contractual documentation in place fi nding that it did not refl ect the reality of the relationship. The

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Employment Tribunal found the following factors (amongst others) to be indicative of a worker relationship: • Uber interviews and recruits drivers and enforces its requirements (including the obligation to accept fares) by logging drivers off the app who breach those requirements, and sets the default route of travel. • Drivers cannot negotiate a higher sum with the passenger and are subject to a rating system. Another signiﬁ cant case on worker status is Pimlico Plumbers Ltd v Smith, in which the Court of Appeal held that Mr Smith was a worker despite the fact he had registered as self-employed and paid his own taxes. Mr Smith complained that, following a heart attack, he had been unfairly or wrongfully dismissed and should be entitled to arrears of pay, holiday pay and pay during medical suspension. Pimlico Plumbers argued that Mr Smith was an independent contractor and was not entitled to those beneﬁ ts. The Court of Appeal concluded that Mr Smith was a worker, as he was required to provide personal service and was not a business on his own account. In reaching its decision, the Court of Appeal noted that there was no right to sub-contract work to an external plumber. Furthermore, the fact that Mr Smith was required to work a 40-hour week was inconsistent with the view that he was running his own business. Other noteworthy points were that Mr Smith had been issued with a uniform and a mobile telephone, and was required to use a van with the Pimlico Plumbers logo on it for work assignments. Rest breaks – Grange v Abellio London Ltd The EAT held in this case that the right to a rest break under the Working Time Regulations 1998 (“WTR”) is infringed where the employer has not actively provided an entitlement to a rest break. The employer, Abellio, expressed an expectation that Mr Grange work straight through for eight hours without a break, being allowed to instead leave a half hour earlier than his contracted hours. Mr Grange lodged a claim in the Employment Tribunal that he had been denied his entitlement to a rest break throughout three different periods of his employment: where he had been too busy to take a break; when an email expressed an expectation (at best) or instruction (at worst) that employees work through the day; and when the claimant made a request that he be afforded his right. The Employment Tribunal dismissed this claim, following a previous decision (Miles v Linkage Community) where the EAT held that no complaints about the failure to provide a rest break could be made to the Employment tribunal before the worker raised a grievance about his entitlements. The key issue for consideration was whether Mr Grange could only bring a complaint about his right to a rest break once the employer had expressly refused him a break or breaks. The EAT considered that, where the employer has an obligation to afford the worker an entitlement to take a rest break, then, rather than responding to an employee’s initial request for a rest break, the employer is obliged to take active steps to ensure working arrangements that enable the worker to take the requisite rest break, irrespective of whether the worker actively seeks to utilise their entitlement. Importantly, the EAT held that the employer is to be considered as having refused the individual the requisite rest breaks where it has put in place working arrangements that fail to allow the taking of 20-minute rest breaks. The employee does not need to take the further step of requesting a rest break in order to establish a refusal of his or her right to rest break. This decision emphasises the importance of an active effort from employers to provide rest breaks, regardless of how heavy an employee’s workload is or whether they choose to take a break.

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What is the “public interest” for the purposes of whistleblowing protection – Chesterton Global Limited and anor v Nurmohamed Employees are protected from suffering a detriment or dismissal if they make a qualifying “protected disclosure” (colloquially known as whistleblowing). In order for the disclosure to qualify, the person making the disclosure must have a reasonable belief that the disclosure is in the public interest. In this case Mr Nurmohamed was a director of the Mayfair offi ce of Chesterton Global Limited, a large fi rm of estate agents. Mr Nurmohamed reported his belief that the employer was deliberately misstating £2–3 million of actual costs and liabilities in its accounts. He argued that the consequence of Chesterton’s alleged conduct was that senior managers, including himself, received lower bonuses than they might otherwise have received, thereby increasing the employer’s profi tability and that his complaint was a protected disclosure. The issue potentially affected around 100 of Chesterton’s employees. The Employment Tribunal concluded that Mr Nurmohamed had held a reasonable belief that his disclosures were in the public interest. On appeal, the EAT upheld that decision. Chesterton appealed to the Court of Appeal. The Court of Appeal rejected Chesterton’s appeal, fi nding that the Employment Tribunal had been entitled to fi nd that the public interest test was satisfi ed in this case. The Court of Appeal declined to give specifi c guidance on whether, for a matter to be in the public interest, it needed to affect a certain minimum number of people, i.e. to be broad enough in effect to have some public interest. The Court of Appeal stated that the correct approach, when the disclosure relates to a breach of the worker’s own contract, is to consider whether there were features of the case that make it reasonable to regard the disclosure as being in the public interest as well as in the interest of the worker. The question is “one to be answered by the Tribunal on a consideration of all the circumstances of the particular case”. The Court of Appeal said that the following fourfold classifi cation of the relevant factors may be useful in this determination: • The numbers in the group whose interests the disclosure served – however, the fact that a disclosure affects a large number of employees is unlikely, of itself, to be suffi cient. • The nature of the interests affected and the extent to which they are affected by the wrongdoing disclosed – a disclosure of wrongdoing directly affecting a very important interest is more likely to be in the public interest than a disclosure of trivial wrongdoing affecting the same number of people, and all the more so if the effect is marginal or indirect. • The nature of the wrongdoing disclosed – disclosure of deliberate wrongdoing is more likely to be in the public interest than the disclosure of inadvertent wrongdoing affecting the same number of people. • The identity of the alleged wrongdoer –“the larger or more prominent the wrongdoer (in terms of the size of its relevant community, i.e. staff, suppliers and clients), the more obviously should a disclosure about its activities engage the public interest”.

Employee privacy The purpose of subject access requests – Dawson-Damer & Ors v Taylor Wessing LLP Under the Data Protection Act 1998, individuals have the right to make a subject access request (“SAR”) to a data controller. Subject to the detailed requirements of the legislation, including various exemptions from disclosure, a SAR requires the data controller, amongst other things, to provide the individual with the personal data that the data controller holds

GLI - Employment & Labour Law 2018, Sixth Edition 258 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Dechert LLP United Kingdom about the individual. In the employment context in particular, SARs are sometimes used by individuals as a means of obtaining details of communications about and other material concerning the individual which, once disclosed, may be used as the basis for or to support a claim. Data controllers seeking to resist SARs which they consider to be “fi shing expeditions” have sought to argue that the courts should not require compliance with a SAR where it has a “collateral purpose” – such as furthering litigation. SARs can put employers to very considerable effort not only in locating and identifying potentially disclosable information but also in assessing whether material which the employer holds is actually disclosable. Employers often seek to argue that complying with a SAR will entail disproportionate effort. In this case, the Court of Appeal made two important fi ndings. First, in a dispute about whether the data controller has conducted a suffi cient search, the data controller needs to show what searches it has conducted and bears the burden of showing that a further search is disproportionate. As regards whether a search for personal data is reasonable, the Court of Appeal made clear that the correct approach when considering whether a suffi cient search has been undertaken is to examine what steps the data controller has taken, and to ask if it would be disproportionate to require further steps to be taken to comply with the individual’s right of access to his or her personal data. Second, the motive of the person for making a SAR is irrelevant to whether the subject access request is valid and should be complied with. The Court of Appeal rejected the suggestion that there is a “no other purpose” rule such that the court will not order compliance with a SAR if the person making the SAR proposes to use the information for some purpose other than verifying or collecting data held about the individual. Unless it is successfully appealed, this case appears now to settle the question of the relevance to the validity of a SAR of the motive of the person making it. In summary, employers cannot easily resist SARs on the basis that the person making the request does so with a view to actual or potential litigation by seeking information which might substantiate or support a claim.

Other recent developments Regulatory references In March 2017, new rules regarding the giving of references in the fi nancial services industry in the UK came into force. These rules were introduced by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority as part of the Senior Managers and Certifi cation Regimes. The rules are part of the new requirement for employers (rather than the regulators) to certify individuals as “fi t and proper” to carry out a role or function. The aim of the regulatory reference regime is to stop individuals with poor conduct records moving unchecked between fi nancial fi rms. Currently the rules apply to the largest fi nancial institutions in the UK such as banks, building societies and large insurers. However, the regulators have now published draft rules to roll out a similar regime to smaller fi nancial fi rms towards the end of 2018. The new rules apply to candidates for senior management functions, certifi cation functions and their equivalents under the insurance regime, and certain non-executive directors. In summary: • Where a fi rm wishes to hire a candidate for a position covered by the new regulatory references regime, it must ask for references from each of the candidate’s employers during the previous six years. • Firms which receive a request for a regulatory reference are under an obligation to respond to that request, and to update references previously given when new information comes to light which would change the way a reference is written.

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• The reference must disclose all matters during the previous six years of which the fi rm is aware, that it reasonably considers to be relevant to the assessment of the individual’s fi tness and propriety. Firms should use the regulator’s mandatory template which sets out the minimum information which the reference must include. • A fi rm may not enter into any agreement – such as a termination agreement with a departing employee – which restricts its ability to disclose information under these new rules. The Taylor Review of Modern Employment Practices A Government-sponsored review into the modern British labour market chaired by Matthew Taylor produced its report, “Good Work, The Taylor Review of Modern Working Practices”, in July 2017. The Taylor report sets out detailed recommendations for the reform of UK employment law as it applies to individuals who are not traditional employees, in particular workers in the “gig economy”, agency workers and those on so-called zero-hours contracts. Whether or not all or any of these measures are adopted remains to be seen. Some of the key recommendations are as follows: • Currently there are three broad categories of working status for the purposes of employment protection: employees; workers; and the self-employed. The Review suggests renaming “workers” as “dependent contractors”. This is intended to refl ect more accurately the reality of modern working relationships, where an individual is not an employee but not genuinely self-employed. • The Review considers that fl exibility should not be one-sided or used by employers to cut costs and exploit workers. A number of proposals are suggested to address this: dependent contractors should be entitled to the national minimum wage; attempts should be made to align the employment status framework with the tax status framework; dependent contractors should be entitled to a written statement of particulars; and the Government should develop an on-line tool for individuals to use to determine their legal status. • The Review considers that the gig economy and other sectors and business models could plan their staffi ng arrangements better and are perhaps relying too much on zero- hours contracts, agency workers and short-hours contracts which do not necessarily refl ect the reality of the working pattern in question. The Review sets out a range of recommendations to address this concern, including: a higher rate of National Minimum Wage (“NMW”) for hours that are not guaranteed; discounting gaps in service of up to a month (so that casual workers are more easily able to accrue the necessary service for various employment benefi ts and protections); a new right to request a direct contract of employment for agency workers who have been with the same hirer for 12 months; and a right to request a contract with guaranteed hours which better refl ects actual hours worked for those who have been on a zero-hours contract for 12 months. • The Review suggests a number of additional measures to improve enforcement of individuals’ rights, including reversing the burden of proof so that there is a presumption of worker or employee status. Currently the individual must prove their status before they can take their claim further.

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Charles Wynn-Evans Tel: +44 20 7184 7545 / Email: [email protected] Charles Wynn-Evans, head of Dechert’s employment practice in London, focuses on all contentious and non-contentious employment-related matters. He handles issues relating to redundancy, unfair dismissal, wrongful dismissal, unlawful discrimination, industrial action, boardroom disputes, restrictive covenants, agreed terminations, tax issues and all kinds of employment- related litigation as well as the employment aspects of corporate transactions. He trained with the ﬁ rm, was admitted as a solicitor in 1992 and has been a partner at Dechert since 1997. Charles writes regularly on employment law issues for journals such as the Industrial Law Journal, PM Online and the Employment Law Journal and is the author of The Law of TUPE Transfers (Oxford University Press, second edition 2016). Charles is a member of the editorial committee of the Employment Lawyers Association’s ELA Brieﬁ ng and a member of the Employment Law Committees of the Law Society of England and Wales and of the City of London Law Society. He is a CEDR accredited mediator, a fee-paid employment judge assigned to the Midlands (West) Region and a Deputy Chair of the Central Arbitration Committee.

Emma Byford Tel: +44 20 7184 7866 / Email: [email protected] Emma Byford deals with the full range of employment matters for corporate clients. She has particular experience in the employment aspects of transactional work including the preparation of incentive plans. Ms. Byford also regularly advises on the structure, content and drafting of various employment and LLP framework documents including contracts, terms of admission, handbooks and termination documents and has experience in dealing with high value High Court litigation. She was named an “Associate to Watch” in the 2014 edition of Chambers UK. Ms. Byford trained with Dechert LLP and was admitted as a solicitor in October 2006.

Emma Zarb Tel: +44 20 7184 7455 / Email: [email protected] Emma Zarb focuses her practice on all aspects of employment law including contentious, advisory and transactional matters. Ms. Zarb has experience drafting and negotiating employment contracts, consultancy agreements and settlement agreements as well as staff handbooks and policies. She also has extensive experience conducting and resolving employment litigation in both the employment tribunal and the High Court. Furthermore, Ms. Zarb’s transactional experience includes advising on all aspects of corporate and commercial transactions including the implications of TUPE. Prior to joining Dechert, Ms. Zarb was an employment associate at a mid-sized international law ﬁ rm in London.

Dechert LLP 160 Queen Victoria Street, London EC4V 4QQ, United Kingdom Tel: +44 20 7184 7000 / Fax: +44 20 7184 7001 / URL: www.dechert.com

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Ned H. Bassen, Margot L. Warhit & Nathan W. Cole Hughes Hubbard & Reed LLP

General labour market and litigation trends States enact laws banning employer inquiries into applicant salary history Salary history laws prohibiting employers from inquiring about an applicant’s compensation history during the hiring process have been sweeping across the nation. The theory behind these laws is that the gender pay gap is perpetuated when employers rely on compensation history as a factor in determining a new hire’s starting pay. The salary history laws are therefore aimed at limiting pay inequality between men and women. Don’t Ask! Delaware Employees’ Salary History is Now Off-Limits, 22 No. 7 Del. Emp. L. Letter 2 (July 2017); Oregon Legislature Passes Aggressive Equal Pay Law, 23 No. 10 Or. Emp. L. Letter 1 (June 2017); Salary Inquiries Are History in NYC: Employers Banned From Asking About Applicants’ Pay, 24 No. 5 N.Y. Emp. L. Letter 3 (May 2017). Employers should remove any questions about salary history from their job application forms and inform employees involved in the interviewing and hiring process that they are not to ask applicants how much they earned in previous jobs. Employers would be well advised to review the salary history laws applicable to them to ensure they are in compliance. EEOC’s sex-based pay discrimination lawsuits The Equal Protection Act of 1963 and Title VII of the Civil Rights Act of 1964 both prohibit compensation discrimination based on sex. See 42 U.S.C. § 2000e-2; 29 U.S.C. § 206. Ensuring equal pay for men and women by enforcing equal pay laws is one of six national priorities identifi ed by the Equal Employment Opportunity Commission’s (the “EEOC”) Strategic Enforcement Plan for Fiscal Years 2017–2021. Executive Summary, U.S. Equal Employment Opportunity Commission Strategic Enforcement Plan Fiscal Years 2017–2021 (on fi le with author). In September 2017, as part of its continuing effort to end gender-based pay discrimination, the EEOC initiated three lawsuits alleging wage discrimination against female employees. Press Release, U.S. Equal Employment Opportunity Commission, EEOC Files Three Lawsuits in D.C. Metro Area Charging Sex-Based Pay Discrimination (Sep. 27, 2017) (on fi le with author). The EEOC fi led these lawsuits after its attempts at pre-litigation settlements through the conciliation process failed. Id. On September 26, 2017, the EEOC brought a lawsuit in the United States District Court for the District of Washington, D.C., alleging that George Washington University paid a female executive assistant to the University’s athletic director less than the University paid her male counterpart who performed substantially similar work. EEOC v. Geo. Wash. U., No. 1:17-cv-01978 (D.D.C. Sep 26, 2017). The complaint further alleged that the University discriminated against the female executive assistant by “failing to provide her with

GLI - Employment & Labour Law 2018, Sixth Edition 262 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Hughes Hubbard & Reed LLP USA promotional opportunities, subjecting her to disparate terms and conditions of employment, and depriving her of employment opportunities and advancement because of her sex.” Id. In a second lawsuit brought on the same day in the same district court, the EEOC alleged that the National Association for the Education of Young Children (“the “NAEYC”), a professional membership organisation, paid a female associate editor at a lower rate than a male associate editor for performing the same work. EEOC v. Nat’l Ass’n for the Educ. of Young Child., No. 1:17-cv-01989 01978 (D.D.C. Sep 26, 2017). The female associate editor with 30 years of editing and writing experience received a starting salary of $48,000, whereas her male counterpart with 21 years of editing experience received a starting salary of $56,000. Id. When the female worker brought the disparity to NAEYC’s attention, the organisation refused to remedy the inequality. Id. Finally, on September 27, 2017, in the United States District Court for the Eastern District of Virginia, the EEOC brought a lawsuit against Vador Ventures Inc., dba Total Quality Building Services (“Vador”), which provides janitorial services to commercial buildings. Press Release, U.S. Equal Employment Opportunity Commission, EEOC Files Three Lawsuits in D.C. Metro Area Charging Sex-Based Pay Discrimination (Sep. 27, 2017) (on fi le with author). In its suit against Vador, the EEOC alleged that a female janitorial worker was paid less than her male counterpart. EEOC v. Vador Ventures, Inc. d/b/a Total Quality Bldg. Serv., No. 17-cv-01083-TSE-IDD, (E.D. Va. Sep. 27, 2017). The female worker was paid $11.40 per hour, whereas the male worker who had substantially equal duties was paid $13.10 per hour. Id. The complaint further alleged that when the female worker complained to her supervisor about the pay differential and asked for more money, she was fi red in retaliation. Id. The EEOC is seeking back pay, compensatory, punitive, and liquidated damages, in addition to injunctive relief to discontinue the discriminatory compensation practices. Press Release, U.S. Equal Employment Opportunity Commission, EEOC Files Three Lawsuits in D.C. Metro Area Charging Sex-Based Pay Discrimination (Sep. 27, 2017) (on fi le with author). These three lawsuits demonstrate that sex-based compensation discrimination is a problem in a wide range of industries and that the EEOC is committed to fi ghting for equal pay for women across all socioeconomic groups. Predictable scheduling laws across the nation Major cities are increasingly passing predictable scheduling laws, also known as fair workweek measures, which are intended to afford employees in certain industries more predictable schedules and income stabilisation. Jay-Anne B. Casuga, Last-Minute Schedule Changes? Some Cities Say Employers Must Pay, BLOOMBERG BNA, (Dec. 2, 2016), https:// www.bna.com/lastminute-schedule-changes-n73014447981/. Predictable scheduling laws primarily affect retail stores, restaurants, and the hospitality industry, as these businesses have unpredictable scheduling practices that leave their employees constantly uncertain about when they will be working. Predictive Scheduling Provides Shift Notice, Income Consistency, 23 No. 8 Or. Emp. L. Letter 3 (April 2017). These laws generally require that employers give their workers advance notice of their scheduled shifts. Id. Under many predictable scheduling laws, employers must compensate employees for schedule changes made after a stated deadline, which is referred to as “predictability pay”. Id. Schedule changes include shift cancellations, shift reductions, as well as adjustments to the date or time of the scheduled shift. Id. Employers also must pay employees who are “on-call” for a shift but are not called in to work. Id. San Francisco was the fi rst to pass a predictable scheduling law, which went into effect in 2015. Laura A. Stutz and Maxine Neuhauser, San Francisco California Retail Workers

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Bill Of Rights, THE NAT’L L. REV., July 8, 2015, available at https://www.natlawreview. com/article/san-francisco-california-retail-workers-bill-rights. Under San Francisco’s Predictable Scheduling and Fair Treatment for Formula Retail Employees Ordinance, certain employers are required to give a written “good faith estimate” of an employee’s “expected minimum number of scheduled shifts per month, and the days and hours of those shifts”. S.F., CAL., POLICE CODE art. 33G (2015). The law further requires employees to be given at least two weeks’ notice of their schedules. Id. On September 19, 2016, the Seattle City Council unanimously passed the Secure Scheduling Ordinance (the “SSO”), which went into effect July 1, 2017. Janet I. Tu, Seattle’s ‘secure scheduling’ rewrites work rules at stores, restaurants, THE SEATTLE TIMES, (July 2, 2017), https://www.seattletimes.com/business/retail/seattles-secure-scheduling-rewrites-work- rules-at-stores-restaurants/. Similar to San Francisco’s law, the SSO requires certain employers to post employee schedules at least 14 days in advance. SEATTLE, WASH., C.B. 118765 (2016). The SSO also requires employers to pay employees for one additional hour when an employer increases an employee’s scheduled hours. The SSO additionally mandates that employers offer qualifi ed existing employees additional hours before hiring external employees, promoting full-time employment. Id. Further, the SSO allows employees to “request schedule preferences regarding times and location of work”, and it protects employees’ rights “to decline any hours not on the originally posted schedule”. Id. On May 30, 2017, New York City’s Mayor Bill de Blasio signed into law the Fair Workweek legislation (the “Fair Workweek” laws). Aaron Warshaw and Nicole Welch, What To Know About New NYC ‘Fair Workweek’ Laws, LAW 360 (June 21, 2017), https://www.law360. com/articles/936248/what-to-know-about-new-nyc-fair-workweek-laws. Similar to other predictable scheduling laws, the Fair Workweek laws aim to ensure that employees in the retail and fast food industry receive predictable paychecks and work schedules. Id. Under the Fair Workweek laws, retail employers with 20 or more employees must provide a written work schedule at least 72 hours prior to the schedule beginning and notify an employee at least 72 hours prior to making changes to the schedule. Additionally, the Fair Workweek laws put an end to on-call scheduling in the retail industry. Press Release, Mayor de Blasio, Speaker Mark Viverito Announce That New York City Is The Largest City To End Abusive Scheduling Practices In The Fast Food And Retail Industries, The Offi cial Website of the City of New York (May 30, 2017) (on fi le with author). Employers that violate the on-call ban will face a $500 or greater penalty for each employee affected or will be liable for the amount of actual damage the employee suffers. William R. Horwitz, New York City Enacts Predictable Scheduling Law, THE NAT’L L. REV., June 27, 2017, available at https://www.natlawreview.com/article/new-york-city-enacts-predictable-scheduling-law. Under the Fair Workweek laws, certain fast food establishments may not require an employee to work two shifts within 11 hours of each other. However, the employer may do so if the employee is paid an additional $100 in compensation. Further, in order to provide greater access to working hours, regular or on-call shifts must be offered to current employees before hiring new employees or transferring employees from other locations. Aaron Warshaw and Nicole Welch, What To Know About New NYC ‘Fair Workweek’ Laws, LAW 360 (June 21, 2017), https://www.law360.com/articles/936248/what-to-know-about- new-nyc-fair-workweek-laws. Predictable scheduling laws such as the ones enacted in San Francisco, Seattle, and New York are important to workers who face unpredictable work schedules. Unpredictable work schedules have been found to be detrimental to employees and their families for

GLI - Employment & Labour Law 2018, Sixth Edition 264 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Hughes Hubbard & Reed LLP USA numerous reasons: (1) income instability; (2) diffi culty arranging child care, elder care, and transportation; and (3) diffi culty pursuing education or obtaining additional employment. S.F., Cal., POLICE CODE art. 33G (2015); Press Release, Mayor de Blasio, Speaker Mark Viverito Announce That New York City Is The Largest City To End Abusive Scheduling Practices In The Fast Food And Retail Industries, The Offi cial Website of the City of New York (May 30, 2017) (on fi le with author). Employers in the affected industries should familiarise themselves with these new predictable scheduling laws, which are likely to keep popping up across the nation.

Business protection and restrictive covenants Defend Trade Secrets Act of 2016 The D efend Trade Secrets Act of 2016 (“DTSA”), which took effect on May 11, 2016, federalizes and strengthens trade secrets law. 18 U.S.C. § 1836. Under the DTSA, employers can now fi le civil lawsuits for trade secrets theft under the federal Economic Espionage Act (“EEA”). Prior to the enactment of the DTSA, prosecutors could bring criminal cases under the EEA for trade secrets misappropriation, but private civil cases had to be brought under State law. Now, for the fi rst time, there is also federal jurisdiction over civil causes of action for trade secret misappropriation. The DTSA does not preempt State law; rather, the DTSA will exist alongside existing State laws. Employers can therefore pursue relief in either federal or State court. The DTSA’s ex parte seizure provision provides a new powerful tool in trade secret litigation. The provision allows a trade secret owner to ask the court for an ex parte seizure order to prevent the dissemination of a trade secret. 18 U.S.C. § 1836(b)(2). This extreme remedy gives a trade secret owner the right, “in extraordinary circumstances”, to seize property of a competitor without providing any notice. Id. The court obtains custody of the property and is then required to hold a seizure hearing during which the party who obtained the seizure order has the burden to prove the facts underlying the order. Id. To prevent potential abuse of this procedure, the DTSA allows parties to seek damages if they are harmed by a “wrongful or excessive seizure”. Id. In addition to seizures, courts may grant other types of relief, including: • an injunction; • monetary damages, including damages for the actual loss suffered by the trade secret owner and unjust enrichment caused by the trade secret theft; • “exemplary damages” if the misappropriation was willful and malicious; and • reasonable attorney’s fees to the prevailing party. 18 U.S.C. § 1836(b)(3). However, if an employer did not provide notice of the DTSA’s immunity provisions to the misappropriating employee, the employer cannot recover exemplary damages or attorney’s fees. The immunity provisions, which allow employees in certain circumstances to avoid liability for the disclosure of a trade secret, should therefore be included in new or updated employment and independent contractor agreements. The provisions are as follows: (b) Immunity from liability for confi dential disclosure of a trade secret to the Government or in a court fi ling. (1) Immunity – An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that–

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(A) is made – (i) in confi dence to a Federal, State, or local government offi cial, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document fi led in a lawsuit or other proceeding, if such fi ling is made under seal. (2) Use of trade secret information in anti-retaliation lawsuit – An individual who fi les a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual – (A) fi les any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order. 18 U.S.C. § 1833(b). DOJ and FTC issue Antitrust Guidance for Human Resource Professionals On October 20, 2016, the Department of Justice Antitrust Division (the “DOJ”) and the Federal Trade Commission (the “FTC”) released guidance to inform human resource (“HR”) specialists how antitrust laws apply in the employment context. See Department of Justice Antitrust Division & Federal Trade Commission, Antitrust Guidance for Human Resource Professionals (October 2016), available at https://www.justice.gov/atr/ fi le/903511/download. The guidance advised that HR professionals should not enter into agreements with competing fi rms concerning terms of employment. Id. at 3. Specifi cally, naked wage-fi xing and no-poaching agreements are illegal under the antitrust laws. Id. The guidance states: “An individual likely is breaking the antitrust laws if he or she: • agrees with individual(s) at another company about employee salary or other terms of compensation, either at a specifi c level or within a range (so-called wage-fi xing agreements), or • agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called ‘no-poaching’ agreements).” Id. The DOJ and FTC announced in the guidance that for the fi rst time the DOJ is going to proceed criminally against naked wage-fi xing and no-poaching agreements. Id. at 4. This decision refl ects that these agreements hinder competition in the same way as agreements to fi x prices or allocate customers, which have traditionally been subject to criminal prosecution. Id. In light of this guidance, it is important that HR professionals review their companies’ practices and existing agreements to ensure they are in compliance with the antitrust laws. It is important to note though that wage-fi xing and no-poaching agreements can still be lawful when they are not “naked restraints” on competition. A “naked restraint” is generally an agreement that serves no purpose other than to hamper competition. Id. at 3. An “ancillary restraint”, on the other hand, has a legitimate business purpose and, therefore, would likely not be criminally prosecuted. For example, restraints on trade made in pursuit of a legitimate commercial interest, such as a merger or acquisition, would be considered ancillary, rather than naked restraints on trade.

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Discrimination protection Sexual orientation discrimination Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of sex. 42 U.S.C. § 2000e-2. While Title VII does not explicitly include sexual orientation as a protected class, the Equal Employment Opportunity Commission (EEOC) has taken the position that sexual orientation discrimination is sex discrimination under Title VII. See Complainant v. Foxx, EEOC Appeal No. 0120133080, 2015 WL 4397641 (July 15, 2015). Despite the EEOC’s position, courts have been reluctant to hold that sexual orientation discrimination is prohibited under the law. On April 4, 2017, the Seventh Circuit became the fi rst circuit court to hold that Title VII prohibits sexual orientation discrimination. Hively v. Ivy Tech Community College of Indiana, 853 F.3d 339 (7th Cir. 2017). Plaintiff Kimberly Hively fi led a complaint against Ivy Tech Community College, alleging she was denied full-time employment and promotions because she is a lesbian. The United States District Court for the Northern District of Indiana granted Ivy Tech’s motion to dismiss on the ground that Title VII does not cover sexual orientation discrimination. Hively v. Ivy Tech Community College, No. 3:14-cv-1791, 2015 WL 926015, at *3 (N.D. Ind. Mar. 3, 2015). On appeal, the United States Court of Appeals for the Seventh Circuit affi rmed the district court’s decision, holding that claims for sexual orientation discrimination are not cognisable under Title VII. Hively v. Ivy Tech Community College, South Bend, 830 F.3d 698 (7th Cir. 2016). Hively’s petition for an en banc rehearing was granted, and the Seventh Circuit, sitting en banc, reversed the district court’s decision. Hively, 853 F.3d at 341. In an 8-3 decision written by Chief Judge Diane Woods, the court fi nally held that “a person who alleges that she experienced employment discrimination on the basis of her sexual orientation has put forth a case of sex discrimination for Title VII purposes.” Id. at 351-52. The court accepted both of Hively’s approaches in reaching its holding: (1) “the tried-and- true comparative method in which we attempt to isolate the signifi cance of the plaintiff’s sex to the employer’s decision: has she described a situation in which, holding all other things constant and changing only her sex, she would have been treated the same way?” and (2) the associational theory, based on the Loving v. Virginia line of cases, “protect[s] her right to associate intimately with a person of the same sex.” Id. at 345. Judge Woods also raised the EEOC’s 2015 announcement of its view that sexual orientation constitutes sex discrimination, describing the EEOC as “the agency most closely associated with [Title VII]”. Hively is a landmark decision for the LGBT community. While Title VII sex discrimination claims have been fairly successful for LGBT plaintiffs when the harassment alleged is based on the plaintiff’s noncompliance with gender stereotypes, the Seventh Circuit is the fi rst circuit to explicitly hold that sex discrimination encompasses sexual orientation discrimination. With the resultant circuit split, the issue of sexual orientation discrimination will likely be before the Supreme Court in the near future.

Statutory employment protection rights (such as notice entitlements, whistleblowing, holiday, parental and maternity leave, etc.) Over-broad no-recording policies violate the NLRA On June 1, 2017, the United States Court of Appeals for the Second Circuit afﬁ rmed a National Labor Relations Board (the “NLRB”) ﬁ nding that Whole Foods’ over-broad no- recordings policies violated the National Labor Relations Act (the “NLRA”). See Whole

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Foods Mkt. Grp., Inc. v. NLRB, 691 F. App’x 49 (2d. Cir. 2017). Section 7 of the NLRA protects an employee’s right “to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157. Further, Section 8(a)(1) of the NLRA prohibits an employer from “interfer[ing] with, restrain[ing], or coerc[ing] employees in the exercise of” their guaranteed Section 7 rights. 29 U.S.C. § 158(a)(1). An employer’s policy or rule amounts to an unfair labour practice in violation of Section 8(a)(1) if the policy or rule “tends to chill” employees’ rights to engage in protected concerted activity. See Whole Foods Mkt. Grp., 691 F. App’x at 51. Whole Foods distributed to its employees a General Information Guide that contained two policies prohibiting recording at work without management approval. Whole Foods Mkt., Inc., 363 N.L.R.B. 87 (2015). The ﬁ rst policy, which appeared under the heading “Team Meetings”, provided: “It is a violation of Whole Foods Market policy to record conversations, phone calls, images or company meetings with any recording device . . . unless prior approval is received from your Store/Facility Team Leader, Regional President, Global Vice President or a member of the Executive Team, or unless all parties to the conversation give their consent.” Id. The second policy appeared under the heading, “Team Member Recordings”, and provided: “It is a violation of Whole Foods Market policy to record conversations with a tape recorder or other recording device (including a cell phone or any electronic device) unless prior approval is received from your store or facility leadership . . . .” Id. On appeal, the Second Circuit applied the Lutheran Heritage test, under which a policy that does not explicitly restrict employees’ protected activity can still violate the NLRA if: “(1) employees would reasonably construe the language to prohibit [protected] activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of [protected] rights.” Id. As the parties agreed the policy was not implemented in response to union activity or applied to restrict protected activity, the focus was on whether the no-recording policy violated the “reasonably construe” standard. Id. Under this test, the Second Circuit found that the no-recording policies’ language was over- broad and could “chill” an employee’s exercise of his rights protected under Section 7 of the NLRA. Id. An employee would reasonably conclude that the policies banned even protected activities since the no-recording policies prohibited all recordings, without limiting the prohibition to “those activities in which employees are not acting in concert.” Id. The Second Circuit unanimously rejected Whole Foods’ argument that its no-recording policies were implemented to promote candid communication by assuring employees their statements would not be recorded. Id. Although the court found Whole Foods’ no-recording policies unlawful for their over-broad language, the court did not reject every no-recording policy. In a footnote, the Second Circuit stated that employers should be able “to craft a policy that places some limits on recording audio and video in the work place” without violating the NLRA. Id. at 51 n.1 (“Whole Foods’ interest in maintaining such [no-recording] policies can be accommodated simply by their narrowing the policies’ scope.”) Therefore, companies can craft policies that pass muster with the courts by narrowly tailoring their no-recording policies to prohibit the recording only of information that is not protected under the NLRA, such as information about vendors or suppliers. President Trump signs Whistleblower Protection Act into law On October 26, 2017, President Trump signed the Dr. Chris Kirkpatrick Whistleblower Protection Act of 2017 (the “Protection Act”) into law. Dr. Chris Kirkpatrick Whistleblower

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Protection Act of 2017, Pub. L. No. 115-73, 131 Stat. 1235. The Protection Act was introduced by Wisconsin Senator Ron Johnson after Dr. Chris Kirkpatrick committed suicide the day he was fi red from the Department of Veteran Affairs Medical Center for questioning “the over- prescription of opioids to veterans”. Press Release, Johnson, Ernst Whistleblower Protection Bill Signed by President (Oct. 26, 2017) (on fi le with author). The Senate Homeland Security and Governmental Affairs Committee (the “Committee”) conducted a 16-month investigation into the “mistreatment of veterans and retaliation against whistleblowers”. Press Release, Chairman Johnson Releases 359-Page Report Detailing Committee Investigation Into The Tomah VA Tragedies (May 31, 2016) (on fi le with author). The Committee determined that the Department of Veteran Affairs systematically failed to address employee concerns regarding “mismanagement at the facility” and the retaliation against whistleblowers for questioning particular practices, which resulted in “multiple tragedies.” Id. The Protection Act expands current whistleblower protections for federal employees by increasing awareness of the available whistleblower protections and strengthening disciplinary actions for those supervisors who retaliate against whistleblowers. Dr. Chris Kirkpatrick Whistleblower Protection Act of 2017, Pub. L. No. 115-73, 131 Stat. 1235. Specifi cally, the Protection Act requires federal agencies to: 1. “[R]efer to the Special Counsel . . . any instance . . . an employee of the agency commit[s] suicide; 2. provide training regarding how to respond to complaints alleging a violation of whistleblower protections; 3. [provide] information regarding whistleblower protections available to new employees during the [employee’s] probationary period; 4. [inform employees of] the role of the Offi ce of Special Counsel and the Merit System Protection Board with regard to whistleblower protections; and 5. make available information regarding whistleblower protections applicable to employees of the agency on the [agencies] public website.” Id. Although these expansions to existing whistleblower protections are quite new, it is clear that violators of the Protection Act will face greater penalties than before and the protections will be increasingly transparent. EEOC issues fi nal rule on Affi rmative Action for Individuals with Disabilities in Federal Employment On January 3, 2017, the Equal Employment Opportunity Commission (the “EEOC”) issued its fi nal rule (“Final Rule”) on affi rmative action for individuals with disabilities in federal employment. Press Release, U.S. Equal Employment Opportunity Commission, EEOC Issues Regulations on the Federal Government’s Obligation to Engage in Affi rmative Action for People with Disabilities (Jan. 3, 2017) (on fi le with author). The Final Rule revises the regulations implementing Section 501 of the Rehabilitation Act of 1973 (“Section 501”), which is a civil rights law that prohibits employment discrimination based on disability in the federal sector, and further requires federal agencies to establish affi rmative action plans for individuals with disabilities. U.S. Equal Employment Opportunity Commission, Questions and Answers: The EEOC’s Final Rule on Affi rmative Action for People with Disabilities in Federal Employment, available at https://www.eeoc.gov/laws/regulations/ qanda-ada-disabilities-fi nal-rule.cfm. The EEOC issued this Final Rule to explain what “affi rmative action” means under Section 501 and to improve employment opportunities for individuals with disabilities in the federal sector. Id.

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The EEOC’s rule codifi es various existing obligations mandated by management directives and Executive Orders and imposes two additional affi rmative action requirements on federal agencies. Affi rmative Action for Individuals With Disabilities in Federal Employment, 82 Fed. Reg. 654 (Jan. 3, 2017). First, the rule mandates that federal agencies take steps that are reasonably designed to increase the number of employees who have disabilities in order to meet the goals set by the EEOC. Id. The Final Rule set a 12% representation rate goal for individuals with disabilities, which are defi ned broadly, and a 2% representation rate goal for individuals with “targeted disabilities”, which are those disabilities that most substantially impede employment, such as blindness, deafness, paralysis, convulsive disorders, and mental illnesses. Id. Second, the rule requires federal agencies to provide personal assistance services to disabled employees, which are non-medical services that help with the performance of daily living activities, such as “assistance with removing and putting on clothing, eating, and using the restroom”. Id. Agencies are only required to provide these services if, with their help, the disabled employee is able to perform his job up to normal standards. U.S. Equal Employment Opportunity Commission, Questions and Answers: The EEOC’s Final Rule on Affi rmative Action for People with Disabilities in Federal Employment, available at https://www.eeoc.gov/laws/regulations/qanda-ada-disabilities-fi nal-rule.cfm. Through these personal assistance services, the EEOC not only aims to allow disabled individuals to enjoy the benefi ts of paid employment, but also hopes to decrease the amount of taxes needed to fund disability benefi ts. Id. The Final Rule became effective on March 6, 2017. Affi rmative Action for Individuals With Disabilities in Federal Employment, 82 Fed. Reg. 654 (Jan. 3, 2017). The EEOC recognizes, however, that federal agencies need time to come into compliance and has therefore provided until January 3, 2018 for agencies to make “any necessary changes in policy, staff, or other aspects of their operations”. Id. Note that the Final Rule only applies to federal agencies, and neither private sector employers nor state or local governments need to comply with the new rule. Id. Private employers, however, are covered by the Americans with Disabilities Act (ADA), which prohibits employers with 15 or more employees from discriminating on the basis of disability, but the ADA does not require employers to engage in affi rmative action. U.S. Equal Employment Opportunity Commission, Questions and Answers: The EEOC’s Final Rule on Affi rmative Action for People with Disabilities in Federal Employment, available at https://www.eeoc.gov/laws/regulations/qanda-ada- disabilities-fi nal-rule.cfm.

Employee privacy Workplace drug testing expanded to include testing for opioids The Department of Health and Human Services’ federal mandatory guidelines for drug testing in the workplace have been revised to include testing for four semi-synthetic opioids: oxycodone, oxymorphone, hydrocodone, and hydromorphone. Press Release, SAMHSA, Mandatory Guidelines for Urine Testing Updated to Include Four Semi-Synthetic Opioids (Sept. 29, 2017). These prescription pain medications, more commonly known by their brand names such as OxyContin, Vicodin, Percocet, Dilaudid, are frequently abused and taken without doctor approval. Id. These new mandatory guidelines, which became effective on October 1, 2017, cover all federal employees who work in “testing designated positions”, as deﬁ ned by each federal agency’s Drug-Free Workplace Program. Id. The Substance Abuse and Mental Health

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Services Administration reported that positive test results that have a valid medical explanation will not be reported to federal agencies. Id.

Other recent developments in the fi eld of employment and labour law Federal judge strikes down Obama’s Overtime Rule On August 31, 2017, a federal judge in Texas invalidated an Obama administration rule that would have made over four million currently exempt employees eligible for overtime pay. U.S. Judge Strikes Down Obama Administration Overtime Pay Rule, 32 Westlaw Journal Employment 2 (Sept. 12, 2017). The case was heard by Judge Amos Mazzant of the United States District Court for the Eastern District of Texas. Nevada v. United States Department of Labor, No. 16-cv-731, 2017 WL 3837230 (E.D. Tex. Aug. 31, 2017). The rule primarily updated the salary and compensation levels used to determine whether executive, administrative, and professional employees are exempt from the Fair Labor Standards Act’s (the “FLSA”) overtime pay protections. United States Department of Labor, Defi ning and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees under the Fair Labor Standards Act, available at https://www.dol.gov/WHD/overtime/fi nal2016/. Specifi cally, the rule: 1. “Set[] the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker); 2. set[] the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and 3. establishe[d] a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.” Id. In addition, the rule “amend[ed] the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.” Id. Judge Mazzant held that the Department of Labor exceeded its authority in promulgating the rule. The court explained that by setting the salary threshold at a level so high, the Department “essentially ma[d]e an employee’s duties, functions, or tasks irrelevant if the employee’s salary f[ell] below the new minimum salary level.” Nevada, 2017 WL 3837230, at *8. It was Congress’ intent, however, that an employee’s duties should determine exempt status and that employees with executive, administrative, and professional employees should not be eligible for overtime. Id. The Department’s rule made “overtime status depend predominantly on a minimum salary level, thereby supplanting an analysis of an employee’s job duties”. Id. The Department of Justice is appealing Judge Mazzant’s decision to the U.S. Court of Appeals for the Fifth Circuit. United States Department of Labor, Important Information Regarding Recent Overtime Litigation in the U.S. District Court of Eastern District of Texas, available at https://www.dol.gov/whd/overtime/fi nal2016/litigation.htm. In addition, on October 30, 2017, the Department of Labor announced it will be commence new rulemaking with regard to overtime. United States Department of Labor, Department of Labor Provides Update on Overtime, available at https://www.dol.gov/newsroom/releases/osec/osec20171030. For now, the annual salary cutoff for overtime pay remains at $23,660 ($455 per week).

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DOL withdraws pro-employee guidance on joint employment and independent contractors On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the Department of Labor had withdrawn two of its recent administrator interpretations on joint employment and independent contractor status. United States Department of Labor, US Secretary of Labor Withdraws Joint Employment, Independent Contractor Informal Guidance, available at https://www.dol.gov/newsroom/releases/opa/opa20170607. In Administrator’s Interpretation (“AI”) No. 2015-01, which was released in July 2015, the Department took an expansive view of “employment” and announced that “[M]ost workers are employees under the FLSA’s broad defi nitions,” rather than independent contractors. DOL Withdraws Guidance on Joint Employment, Independent Contractors, 14 No. 11 Fed. Emp. L. Insider 4 (July 2017). AI No. 2016-01, released in January 2016, provided the factors courts should look to when determining joint employment in the context of the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act. In this AI, the Department similarly took the view that the concept of joint employment should be defi ned broadly, increasing the ability for a worker to be considered an employee of two or more employers. Id. In retracting its interpretive guidance, the Department noted that “[R]emoval of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant Seasonal Agricultural Worker Protection Act, as refl ected in the department’s long-standing regulations and case law.” United States Department of Labor, US Secretary of Labor Withdraws Joint Employment, Independent Contractor Informal Guidance, available at https://www.dol.gov/newsroom/releases/opa/ opa20170607. Nonetheless, employers around the U.S. are rejoicing, as the Department’s withdrawal of the 2015 and 2016 AIs sends a message that under the Trump administration, the Department will take a more pro-business stance to employment law issues. DOL Withdraws Guidance on Joint Employment, Independent Contractors, 14 No. 11 Fed. Emp. L. Insider 4 (July 2017). Minimum wage for federal contractors The Department of Labor released the 2018 minimum wage rate for federal contractors as required by Executive Order 13658, “Establishing a Minimum Wage for Contractors”. Federal Contractors’ Minimum Wage Goes Up to $10.35, Over $3 More Than Federal Standard Hourly Wage, 41 No. 23 Construction Contracts Law Report NL 1 (Nov. 10, 2017). Executive Order 13658, signed by President Obama on February 12, 2014, set the minimum wage for federal government contractors’ employers at $10.10 per hour for 2015 and requires the Department of Labor to adjust for infl ation each year in determining the minimum wage. Id.; 29 C.F.R. § 10.5. Effective January 1, 2018, the minimum wage for federal contractors will increase to $10.35 per hour. Federal Contractors’ Minimum Wage Goes Up to $10.35, Over $3 More Than Federal Standard Hourly Wage, 41 No. 23 Construction Contracts Law Report NL 1 (Nov. 10, 2017). Employers, of course, must consult applicable state laws before setting these workers’ wages, as state law may require higher hourly rates of pay.

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Ned H. Bassen Tel: +1 212 837 6090 / Email: [email protected] Ned Bassen is Chair of the Employment & Unfair Competition department of Hughes Hubbard & Reed LLP. His work is recognized by such publications as Chambers USA, Euromoney’s Guide to the World’s Leading Experts in Labour and Employment, Best Lawyers in America and Super Lawyers. He was named Best Lawyers’ 2016 New York City Labor Law-Management “Lawyer of the Year.” He also is included in Human Resource Executive’s The Nation’s Most Powerful Employment Attorneys Top 100 and in Lawdragon’s The Guide to World-Class Employment Lawyers. Mr. Bassen has been awarded the Burton Award for Legal Achievement, Distinguished Writing Award In Law. He graduated from Cornell University’s School of Industrial and Labor Relations in 1970 and Cornell Law School in 1973, where he was Note and Comment Editor of the Law Review.

Margot L. Warhit Tel: +1 212 837 6206 / Email: [email protected] Margot Warhit is an associate in the Labour & Employment Practice Group of Hughes Hubbard & Reed LLP. She has experience researching matters involving federal, state and city employment laws and contributed research related to a successful opposition motion to an appeal in a case concerning joint employment. She graduated from Tufts University with a B.A. in economics and graduated cum laude from Fordham University School of Law in 2015, where she served on the Fordham Law Review and was a Ruth Whitehead Whaley Scholar.

Nathan W. Cole Tel: +1 212 837 6098 / Email: [email protected] Nathan Cole is an associate in the litigation department of Hughes Hubbard & Reed LLP. He has experience researching matters involving federal constitutional rights violations. He graduated from Michigan State University in 2009 and Brooklyn Law School in 2017, where he was Articles Editor of the Brooklyn Journal of Corporate, Financial & Commercial Law, a National Trial Division Moot Court Honor Society member, Alternative Dispute Resolution Honor Society member, and received the NYC Trial Lawyers Alliance Trial Advocacy Award in 2017.

Hughes Hubbard & Reed LLP One Battery Park Plaza, New York, New York 10004-1482, USA Tel: +1 212 837 6000 / Fax: +1 212 422 4726 / URL: www.hugheshubbard.com

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