International labour law bulletin
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International labour
law bulletin
Developments in international employment law over the past quarter. News from Europe,
Belgium, France, Germany, Hong Kong, Italy, Japan, the Netherlands, Russia, Spain,
and the UK.
Europe
Labour market reforms
The sovereign debt crisis has triggered labour market reforms across Europe. In most cases,
these reforms are intended to simplify hiring and firing and to stimulate employment.
The July 2013 edition of our Labour market reforms tracker reports on planned and voted
reforms in Belgium, France, Greece, Ireland, Italy, the Netherlands, Portugal, Spain and
the UK.
Please contact Jean-François Gerard to get a copy of the tracker.
Belgium
Harmonisation of blue- and white-collar statuses
Belgium is due to end the difference in the way blue-collar and white-collar workers are
treated with respect to, among other things, their notice periods. The legislator has until
8 July 2013 to end this discrimination and to harmonise the statuses of blue-collar and
white-collar workers, which may have a significant effect on the costs of termination. More
information is available in our July 2013 Labour market reforms tracker.
Social ‘ruling’ activated
Recent rules about the fight against fictitious self-employment had foreseen the launch of a
commission to provide guidance on the appropriate categorisation of work relationships. This
commission has now been activated.
The commission can provide guidance for future and for existing relationships. For existing
relationships, it has to be requested within a certain period after the relationship has begun.
The period depends on who files the request.
For more information The financial consequences of re-categorising an employment relationship will be weakened
please contact if it defers to a decision of the commission.
Jean-François Gerard
Head of Practice Development
T +32 2 504 7697
E jean-francois.gerard@
freshfields.com
Freshfields Bruckhaus Deringer llp International labour law bulletin 1
Summer 2013Misuse of social law France
The act of 27 December 2012, entered into force on
10 January 2013, introduces a concept of misuse of social law. Employer liability for stress at work
This is similar to the concept that was introduced in tax law. In a recent case, the French Supreme Court showed
It is an misuse of social law when a party avoids the the extent to which poor working conditions have
application of a social law or places him/herself under the become a sensitive issue under French labour law.
application of such law while it is contrary to the aim of
A case law dated 8 November 2012 noted the employer was
the law.
at fault when an employee had a heart attack because of
If the relevant authority or the inspectorate can prove the stress at work. The supreme court noted that cost-cutting
misuse, the legal act or its qualification used to commit the measures meant the employee’s working hours increased
misuse will not be binding, unless the party involved can to 70 a week. Indeed, the increase in workload was obvious
prove it did not intend to commit the misuse. before the employee’s accident at work. So, the employer
should have known the danger the employee was exposed
A Royal Decree will determine the misuse that falls under
to, even if the employee had never complained before.
the scope of the new provisions.
On 13 March 2013, the same court underlined that
A similar regime has been introduced within the framework
an employee who is absent because of work-related burnout
of international secondments under social security, for the
cannot be dismissed, even if the employer is unaware
event that provisions of the relevant European regulations
of the deterioration of the employee’s health. Indeed,
would be unduly applied to certain situations, in order to
the employee’s absence was caused by a heavy workload,
avoid the application of Belgian social security.
resulting in stress. So, the employee’s absence was the result
of the employer’s breach of its health and safety obligation.
ECJ 16 April 2013 – within the framework of
cross-border employment, the Flemish decree on Job security to boost French competitiveness
use of language violates EU law On 14 May 2013, the French parliament adopted the Job
A Flemish decree of 19 July 1973 imposes the exclusive use Security Bill. Based on an agreement the social partners
of the Flemish language for employment relationships concluded on 11 January 2013, the bill aims to improve
between employers in Flanders and their employees. labour market flexibility and job security.
Non-compliance results in the employment contract
(or other relevant acts or documents) being invalid. The bill changes labour code rules. It improves, for instance,
supplementary health coverage and implements new rules
On the prejudicial question of the labour tribunal on unemployment benefits, training rights (creating
of Antwerp, the ECJ has decided that within the framework a training account), internal staff mobility, procedures
of cross-border employments, the decree, in particular the of information, consultation of employee representatives,
sanction of nullity, constituted a disproportionate limitation and so on.
of the freedom of movement for workers as enshrined
in article 45 of the EU treaty. The new bill changes the procedure for collective
redundancies, in particular where companies with more
While it has been made about the Flemish decree, the same than 50 employees plan to dismiss more than 10 employees
reasoning should apply to the Decree of the French within 30 days, triggering a job protection plan.
Community on the use of language, which also provides
for a sanction of nullity. Conversely, the existing rules in the Companies (or groups of companies) that are obliged
Brussels Region and the German-speaking Community area to implement a job protection plan will have to define the
should remain unchanged. They do not provide for dismissal procedure – that is, works council’s information
a sanction of nullity but only in a mandatory translation and consultation procedure, selection criteria for order
on request of the employee. of dismissals, timing of dismissals, number of job cuts and
professional categories concerned, redeployment measures.
It cannot be anticipated if and how the local legislators will They will have to either sign an agreement with the trade
modify the existing decrees. And the ECJ’s decision only unions or implement a so-called unilateral document
concerns the cross-border employment situations. Hence, established by the employer. This agreement or unilateral
caution remains recommended when drafting employment document, as the case may be, will then have to be
contracts and documentation. submitted to the Labour Administration.
The consultation of the works council is now framed into
Satya Staes Polet a closed timeline. At the end, the works council will be
E satya.staespolet@freshfields.com deemed to have been consulted, even if it refuses to give
an opinion.
These new proceedings will, in principle, apply to any
dismissal procedure started after 1 July 2013.
2 International labour law bulletin
Summer 2013The bill changes employment litigation rules: Companies that regularly use agency workers from another
company within the same group, to fill permanent positions,
• reducing the statute of limitations from five to two years
are therefore at risk of having higher personnel costs and
for claims relating to the performance or termination
liabilities than expected. We are awaiting the German
of the employment contract (three years for salary-related
Federal Labour Court’s decision, which might draw
claims instead of five years); and
a different conclusion. Until then, users should review
• introducing minimal, lump-sum compensation for the positions to which they assign agency workers against
employees willing to settle at the conciliation hearing these risks.
before the labour court in dismissal cases.
Finally, a significant part of the redundancy procedure Beware of looking for university graduates and
litigation will shift to the administrative courts (except for young professionals
claims disputing the absence of economic grounds). The German Federal Labour Court recently held that a job
The bill was enacted on 16 June 2013. The main provisions advert for ‘university graduates/young professionals’ can be
(‘job security agreement’, ‘internal staff mobility’ agreement, viewed as unlawful age discrimination. The advert sought
reduced statute of limitations, and so on) entered into force applicants for a hospital’s leadership training programme.
on 17 June 2013. Implementing decrees are currently being According to the court, to an objective reader, it meant an
published. applicant should be no more than 30 or 35 years old at most.
The court did not accept the employer’s defence, justifying
age discrimination, that within 10 years 35 per cent of the
Elena Piotrowski employees would retire and almost 50 per cent would be over
E elena.piotrowski@freshfields.com 50 years old. The court did not recognise this as a problem
of an ageing workforce. It held that the employer failed to
show the disadvantages of such an age structure within the
Germany workforce. The two-year training programme could not
Non-temporary agency workers pose a risk to justify a maximum age in the sense that it would only be
a reasonable investment for university graduates/young
user undertakings
professionals, to be sensible from a business management
The revised German Act on Agency Work, which implements perspective.
EU Directive 2008/104/EC of 19 November 2008, came into
force in Germany on 1 December 2011. One big change was
a new qualification to temporary agency work. It stated that Alice Jenner
agency workers can only be assigned temporarily, reflecting E alice.jenner@freshfields.com
the definitions of the directive.
As expected, the meaning of ‘temporary’ work and the legal
implications when this is not the case soon gave rise Hong Kong
to litigation under the new act. Case law on this point so far
appears inconsistent. However, a strong opinion has evolved. Change to remedies available to employees for
An assignment is no longer temporary when there is unreasonable and unlawful dismissal
a permanent demand for a job that is met by engaging The Legislative Council of Hong Kong proposes to change the
agency workers. And the condition of being temporary must remedies available to an employee who has been unlawfully
be understood to refer to the position, not the employee. or unreasonably dismissed.
Case law disagrees on the consequence of a non-temporary Currently, if the Labour Tribunal finds that an employee
assignment. For some courts, the company that provides has been unlawfully or unreasonably dismissed, it can order
agency workers would lose or not be granted its temporary terminal payments. These are statutory payments
work. Other court decisions suggest that when temporary an employee is entitled to on termination of employment.
agency workers are assigned on a non-temporary basis, this Usually these would have been paid to the employee in
constitutes unlawful temporary agency work. This in turn, any event.
by virtue of law, leads to an employment relationship Alternatively, the Labour Tribunal can order reinstatement
between the agency worker and the user – the company that or re-engagement of the employee. However, only if the
uses the worker. employer consents, and the court has no power to force
Where the agency only provides temporary workers to other this consent.
group companies, does not target the market and only serves The proposed change will enable the Labour Tribunal, where
to reduce personnel costs or avoid dismissal protection laws, it considers reinstatement or re-engagement appropriate,
there is a risk that a German labour court will consider this to compel reinstatement or re-engagement without consent.
circumventing the law and treat the temporary worker If the employer does not comply, it will be ordered to pay
as an employee.
International labour law bulletin 3
Summer 2013a further sum of three times the employee’s monthly wages, Dismissal of an employee for failing to submit
capped at HK$50,000, approximately US$6,500. the medical certificate to his employer
It is not yet known when the proposed change to the The Italian Supreme Court upheld the dismissal
Employment Ordinance will be enacted. However, once of an employee who, failing to submit to his employer
adopted it will increase the need for employers to consider a medical certificate confirming his sickness, had four days
whether there is a valid reason for dismissal, as the incentive of unjustified absence. On the basis of the general principles
for an employee to bring a claim under the new regime of good faith and fairness as set out by the Italian Civil Code,
will increase. regardless of the factual existence or not of the sickness, the
employee is obliged to promptly inform the employer in case
Abolishment of right to offset severance or of absence, to limit the prejudice caused to the employer.
Failure to do so may result in the employee’s dismissal,
long-service payments
as the court decided in this case.
Another change being discussed is to abolish the employer’s
right to offset severance or long-service payments payable to
employees in case of dismissal against the Mandatory
Dismissal under employee’s lack of consent to
Provident Fund (MPF) contributions made by the employer. accept transfer
Under the current regime, an employer may deduct the Under Italian Law, in cases where an employer asks an
severance and long-service payments from the contributions employee to transfer from one company work unit to
it made into the employee’s MPF fund. another, the transfer must be grounded on documented,
objective business reasons. If these reasons exist and the
The proposal would mean that employees in case of dismissal employee declines the transfer, the employer may dismiss
will not only be entitled to severance or long-service the person. The transfer proposal can also include a
payments but also to their full MPF fund. Although it is not condition whereby the employee must consent before a set
yet clear when this proposed change will become law, if date. If the employee does not consent before this date, the
adopted, it will raise the costs of dismissal in Hong Kong. employee can be dismissed.
The Italian Supreme Court recently decided a case in which
Rob Van Eldik an employee was not aware of the transfer proposal for
E rob.vaneldik@freshfields.com reasons outside his control. Therefore, he did not give
consent by the due date. But in this case, the court upheld
the employee’s dismissal. He had been allowed to give his
Italy consent even after the due date, but did not.
Framework agreement on collective bargaining
system Valerio De Stefano
The main Italian Employers’ Association (Confindustria) and E valerio.destefano@freshfields.com
the main trade union confederations (CGIL, CISL, UIL) have
recently entered into a framework agreement regulating
national collective bargaining (the Framework Agreement). Japan
For the first time, for private sector collective bargaining,
precise criteria concerning representativeness of unions
New rules for fixed-term employees have
and stipulation of national collective bargaining agreements taken effect
(NCA) were agreed. Changes to the Labour Contract Act took effect on
1 April 2013. The changes reinforce protection for fixed-term
In particular, a minimum representativeness rate employees, which has been long discussed. The recession
is necessary to participate in NCA negotiations. The NCAs has increased the number of fixed-term employees to an
will be considered binding by every union that is a party estimated 12 million, and their lives have likely lacked
to the Framework Agreement if the draft of an NCA is stability.
approved – by means of a referendum – by a simple majority
of the employees of the relevant sector and if the NCA So, the practice of the courts had been to rule in favour
is signed by one or more unions having a representativeness of employees who have not had their fixed-term employment
rate of at least 50 per cent +1. contracts renewed, if there were grounds to suggest the
employees had reasonable expectations that their
Representativeness rates are calculated on the basis of both employment contracts would be renewed. The new changes
union membership ratios and vote percentages in the give legislative effect to the rules developed by court practice
elections of the works council. The Framework Agreement – and they go even further.
also provides that all members of the works council be
elected by the employees of the relevant work unit; before
The rule of ‘conversion to unlimited term employees’
the Framework Agreement, one-third of these members were
The change that should have the most effect is the rule
directly appointed by the unions.
of ‘conversion to unlimited term employees’. Under this rule,
if an employee’s fixed-term contract with the same employer
4 International labour law bulletin
Summer 2013has been renewed at least once and the total contract term the next step in Dutch case law could be that the principal
exceeds five years, the employment contract will be qualifies as the employer, effectively making the purpose
converted to an unlimited term employment contract of the structure, to shift the employer’s responsibility to
on the employee’s request. the payroll company, redundant.
Many employers may wish to avoid this conversion because This ruling builds on a tendency to take more of a substance
it is difficult to dismiss an unlimited term employee under over form approach where it concerns the definition of
Japanese law. Using ‘cooling off periods’ between contract ‘employer’.
terms – for example, a cooling off period of at least six
Also, as part of the social agreement (Sociaal Akkoord)
months for contracts longer than 10 months – may help stop
between social partners in April 2013, social partners have
contracts from being interpreted as lasting over five years.
agreed to review how to counter the abuse of triangular
However, employers should be careful not to be seen relationships (eg payrolling, contracting, temporary
as trying to circumvent the law. They need to take care employment agencies) and other shams. In this context, the
in renewing fixed-term contracts (ie, considering the special dismissal rules for individuals working on the basis
employee’s performance or other factors to judge whether of a payroll construction will be removed and more emphasis
to renew the contract), by taking into account if the will be placed on the transparency of an employment
employee would be a suitable unlimited term employee relationship for the employee.
in the future.
Other rules to reinforce protection for fixed-term Anne-Fleur Versteegh
employees E anne-fleur.versteegh@freshfields.com
The changes also give legislative effect to the court practice
outlined above. This stops employers from not renewing
fixed-term employment contracts if there are grounds to
Russia
suggest the employees had reasonable expectations that their Potential changes to employment legislation
employment contracts will be renewed.
On 26 April 2013, the State Duma of the Federal Assembly of
In addition, the changes ban employers from setting the Russian Federation adopted a draft bill regulating
unreasonable working conditions for fixed-term employees, outsourcing personnel. To come into legal force, the draft bill
compared with unlimited term employees (in which case, needs to pass one more reading at the State Duma, to be
the working conditions considered to be unreasonable will approved by the Federation Council and to get signed by
be invalidated). he president.
The changes provide for regulations for outsourcing
personnel under personnel lease agreements and establish
Akiko Yamakawa
the terms and conditions under which such outsourcing is
E akiko.yamakawa@freshfields.com
legal and appropriate. So far there has been no legislation
regarding outsourcing personnel.
Netherlands Under the changes, outsourcing services may only be
provided by:
Recent developments in respect of flexible labour
relationships • private employment agencies that have the necessary
accreditation; and
Flexible labour contracts have become more popular in the
Netherlands. However, because people working on the basis • companies exchanging personnel, if one of the companies
of these flexible contracts often enjoy less protection than has direct or indirect control over the other.
regular employees under Dutch law. These flexible contracts Private employment agencies may only send employees to
have also become more and more the subject of political individuals who need personal care or help at home, to
discussions. individual entrepreneurs and to companies, to carry out the
duties of temporarily absent employees and to individual
Payrolling, in particular, whereby the principal recruits and
entrepreneurs and companies for work related to known
chooses the individual, who enters into an agreement with
fixed-term (up to nine months) expansion of production or
the payroll company and then works exclusively for the
service volume.
principal, is subject to criticism. Recently, in line with the
opinion of several Dutch authors, a Dutch court ruled that In addition, private employment agencies may send
in such triangular relationship no employment agreement employees studying full-time, single parents with three
existed between the payroll company and the individual. minor children and persons released from prisons to third
This was because the payroll company solely took care of parties under outsourcing agreements in other cases where
the assignment of the individual to the principal. And this it is permitted to execute fixed-term employment contracts
relationship therefore did not meet the elements of an under the legislation.
employment contract under Dutch law. Consequently,
International labour law bulletin 5
Summer 2013One significant issue of the changes is that the customer may • creation of companies with no real operation;
incur secondary liability for all of the service provider’s • common funds and employees; and
obligations stemming from employment relations with
• external appearance of unity and unity of direction.
outsourced employees. These include salary obligations,
employment termination compensation payable to In the case at stake, all companies belonging to this
employees, as well as obligations for social and pension group were considered a single employer, so jointly and
contributions. severally liable.
In certain cases – for example, a strike, the customer’s This case shows how the Spanish courts are shifting, on
employees being prevented from working due to reasons collective redundancies, towards a formal approach when
outside their control or the threat of mass staff reduction – resolving on the validity or not of such proceedings.
engagement of employees by outsourcing is prohibited. Therefore, it is key to prepare and carry out a comprehensive
consultancy procedure with the employees.
The changes, if adopted as a law, will come into force on
1 July 2014.
Raquel Florez
E raquel.florez@freshfields.com
Olga Chislova
E olga.chislova@freshfields.com
UK
Spain UK government passes legislation that
introduces the new voluntary status of an
First Supreme Court review of collective
‘employee shareholder’ into UK law
redundancies after the 2012 labour reform
The government has legislated to introduce ‘employee
The Supreme Court issued a first ruling on collective shareholder’ status. The proposal was announced in October
redundancies as regulated after the labour reform of 2012 2012 and has been consulted on and debated, including twice
and confirmed a decision declaring a proceeding invalid. being rejected by the House of Lords.
Two issues were raised: the consultation period and the Employee shareholders will have the same rights as
conditions for a single employer consideration within a employees, except they will forego certain employment
group of companies (involving joint and several liability of rights. These include:
its members).
• the right to request time off for study or training;
Further to the labour reform of 2012, employers may carry
out collective redundancies without prior administrative • the right to make a flexible working request (except
authorisation, but going through a reinforced consultation to a limited extent after a return from parental leave);
period with the employees’ representatives. • the right not to be unfairly dismissed (except in health
and safety cases, automatically unfair cases, or cases
The Supreme Court places emphasis on this consultation where the dismissal is discriminatory); and
period. It should be directed to avoid or, at least, cut the
scope of the collective redundancy and to mitigate its • the right to a statutory redundancy payment.
consequences, through social measures to improve Employee shareholders must also give 16 weeks’ notice if
employability of the redundant employees. The sentence they want to return early from statutory maternity, adoption
further stresses the need for a real consultation period, or additional paternity leave.
meaning a period aimed at trying to reach an agreement In return for giving up these rights, the employee
between the company and the workers’ representatives, and shareholder will be issued or allotted a minimum of £2,000
not just a formality. In the case at stake, it was considered worth of shares in their employing company or its parent
that the consultation had not been duly completed, and, company.
therefore, the collective redundancy was declared invalid.
The Finance Bill 2013 proposes changes to UK tax legislation
Second, the sentence deals with a group of companies for to make sure the employee shareholder will not pay tax
employment purposes. It resumes its traditional doctrine on on the first £2,000 of shares. Further changes to UK tax
the field. To extend the responsibility undertaken by one of legislation will make sure there will be no capital gains tax
the companies with its own employees to the other group charged on disposal of the first £50,000 of shares (valued on an
companies, the companies must not only belong to same unrestricted basis, as at the respective dates of acquisition).
group but must also require additional elements; namely:
To agree that the individual will become an employee
• uniform organisation; shareholder, the company must supply a written statement.
• simultaneous or successive provision of services by the And the statement must confirm the employee will not have
employees to various companies of the group; certain employment rights and specify the rights that apply
6 International labour law bulletin
Summer 2013to the shares. The agreement can only become effective if UK government consults on how the proposed
the individual gets independent legal advice from a solicitor shared parental leave scheme should be
or barrister. The company must meet the reasonable costs administered in the UK
of this advice. Legislation has been proposed to provide that
Following an announcement in November 2012, the UK
this advice will be tax-free for the individual.
government consulted between February and May 2013
Finally, an individual must be given a seven-day cooling-off on how the proposed shared parental leave scheme should
period before the agreement takes effect. be administered. It is intended that shared parental leave
(previously known as flexible parental leave) will be
It is expected that the new status will be implemented on
introduced in the UK in 2015.
1 September 2013.
Under the proposed scheme, eligible parents will be able
Employment Appeal Tribunal ruling has to share the statutory maternity leave and pay that is only
implications on the meaning of ‘establishment’ available to mothers. The same principles will apply to
adoption leave and pay, which is only available to the
for the purposes of a collective consultation on
primary adopter.
redundancy
It has been reported that the UK Employment Appeal It is proposed that parents will be allowed to take their leave
Tribunal (EAT) changed its position on the meaning of concurrently or separately and that they will be permitted
‘establishment’ in section 188(1) of the Trade Union and (with the agreement of the employer) to take the leave in
Labour Relations (Consolidation) Act 1992 (TULRCA) for a small blocks of no less than one week at a time.
collective consultation on redundancy. The consultation addressed the details of how various
Under UK law, an obligation to consult collectively with aspects of the proposal will operate, including:
employees arises if an employer proposes to make 20 or • statutory ‘day one’ rights for fathers and partners
more people redundant at one establishment within of pregnant women to attend ante-natal classes;
90 days or less.
• eligibility requirements for the shared parental leave
It has been acknowledged that the words ‘at one scheme and the application process;
establishment’ are incompatible with the EU Collective • the system of operating ‘keeping in touch’ days;
Redundancies Directive (Directive 98/59/EC), under which
• how to protect parents’ rights to return to the same
there will be a collective redundancy even where the
job while maintaining flexibility for employers; and
dismissals are at different establishments. However, before
this case, the UK courts had not adopted a purposive • how the system should be operated in the case of
interpretation of the UK legislation and a body of case law adoption.
has developed regarding the definition of ‘establishment’. The government will publish its response to the consultation
in late summer.
In the relevant case the EAT reportedly ruled that the words
‘at one establishment’ in section 188(1) of TULRCA should be
disregarded for any collective redundancy of 20 or more
Martin Macleod
employees. The EAT found in favour of the trade union
E martin.macleod@freshfields.com
representing former employees of Woolworths in claims for
protective awards, overturning the Employment Tribunal’s
ruling that each store was a separate establishment for
the purposes of TULRCA.
This would be a significant change to UK law. If it is
proposed that at least 20 employees in a single business
are to be made redundant, the number of establishments
at which those employees work would be irrelevant in
determining whether there is an obligation for
collective consultation.
Freshfields Bruckhaus Deringer llp is a limited liability partnership registered in England and Wales with registered number OC334789. It is authorised and regulated by the Solicitors Regulation
Authority. For regulatory information please refer to www.freshfields.com/support/legalnotice. Any reference to a partner means a member, or a consultant or employee with equivalent standing
and qualifications, of Freshfields Bruckhaus Deringer llp or any of its affiliated firms or entities. This material is for general information only and is not intended to provide legal advice.
© Freshfields Bruckhaus Deringer llp, July 2013, 36343freshfields.com
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