Tuesday, January 1, 2008

Issue 8

Dear Committee Members,

We are glad to present the 8th issue of the International Employment Lawyer.

The topics of the articles included in this newsletter were freely chosen by the authors. Most of them focus on the legislation that recently came into force, bringing changes in regard to relevant labor issues; while others discuss the decisions of national courts which may strongly influence the employment market.

We also want to remind you of the coming activities for next year. We will be happy to see you during the spring meeting in New York and the fall meeting in Brussels.

Best regards,
Anders Etgen Reitz
Editor in Chief


Changes in the Interpretation of break periods during continuous shift may affect labor relationships. 

by Victor Manuel Escoto-Zubirán
Escoto Zubirán y Asociados S.C.

The Mexican Supreme Court of Justice has recently resolved that the half hour break taken during a continuous work shift, must be construed as part of the shift and, therefore, paid for.

The prevailing practice and legal mandate is that during their work shift, the workers are entitled to a rest or lunch break, and that the same did not compose the shift; provided that the workers were allowed to leave the job site during such period.

This new interpretation of Articles 63 and 64 of the Mexican Federal Labor Law represents a major change on the labor environment in Mexico in two different fashions.

The first would be that from a litigation approach, all cases pending solution on which reinstatement on the job position has been offered, will be considered by the corresponding ruling authority (i.e. local and federal labor boards, district courts, circuit courts), as if such offer was not made in bona fide and for such reason, judged unacceptable. A reasonable calculation of the number of cases as these currently in process, will easily lead to the tens of thousands nationwide.

The second change may occur on a much more practical fashion, if and when the unions and others labor organizations realize that the lunch or rest period is part of the shift and they have been working an unpaid half hour extra for a long time. This may actually endanger the delicate status quo balance of many labor relationships encumbering the next collective bargaining agreement review to be undertaken.

Other implications, such as an action of the Social Security Institute action to recover quotas arising from that half hour may as well be expected.

This new interpretation criterion arose from the contradiction of thesis 50/2007 and is mandatory for all government agencies and judicial instances.


Significant changes to the Current Labor Law Regime made by the New PRC Labor Contract Law and their influences on future HR management

by Ma Jian Jun
Jun He Law Offices

On June 29 2007, the Standing Committee of the National People’s Congress (NPC) of the PRC held the 28th meeting and adopted the Labor Contract Law of the People’s Republic of China (the “LC Law”) which will become effective on January 1 2008. The LC Law creates significant changes to the existing labor laws, regulations, judicial interpretations and administrative rules of the PRC and will result in significant changes to the current employment relationship of all kind of employers with their employees when it becomes effective. 

I. Company rules, policies and significant decisions
 The LC Law specifies that an employer is required to consult the employees prior to formulation of or amendment to certain company rules or policies concerning employment disciplines and employee benefits that are directly relevant to the interests of employees.  Over the course of consultation, a trade union may represent employees, or the employer may directly discuss relevant matters with all of the employees or representatives of the employees.  While implementing relevant rules or important decisions, employees or their trade union have the right to discuss with an employer as to how to amend or perfect relevant rules and policies.  

An employer has an obligation to notify employees of relevant rules, policies or important decisions. If an employer’s rules and policies violate a law or regulation thereby damaging the interests of employees, employees have the right to terminate the labor contract by notice to their employer at any time and to claim compensation.

Existing PRC labor laws and regulations are silent on how an employer should formulate and amend the rules and schemes that are relevant to the interests of employees.

In light of the draft of the LC Law made public before its formal promulgation, we are of the view that the terms “negotiations on a basis of equality” and “discussion” prescribed in the LC Law, are procedural provisions on the supervising right exerted by employees other than a codetermination system.  We are, however, unable to determine at this time whether the phrase “any company rules or policies are against the applicable laws or regulations” in the LC Law refers only to the substantive content thereof or whether it is inclusive of the procedures stipulated therein.  Additionally, no LC Law provision specifies what constitutes lawful and effective procedures for the consultation and discussion.  As the LC Law specifies that the competent labor administrative authorities of the local people’s governments at the county level or above shall monitor and inspect the formation of company rules and policies that have an immediate impact on the employees’ interest, and the performance thereof, it is, in our opinion, advisable for employers to proactively consult the competent local labor administrative authorities.  See Article 74 of the LC Law for details.

II. Mass redundancies
Under the LC Law, if an employer decides to terminate more than 20 employees or the total number of employees to be made redundant represent 1/10 of the total labor force, the employer is required to satisfy one of the following 4 conditions: (i) the employer needs reorganization under bankruptcy law; (ii) the employer has encountered severe difficulties in business operation; (iii) the employer still needs to terminate employees after transferring businesses, conducting significant technological reforms or changing its business methods and having amended labor contracts; or (iv) the labor contracts cannot be performed due to a significant change in circumstances.  The last two circumstances are newly added in the LC Law. 

We are of the opinion that employers undergoing a merger and acquisition transaction involving the transfer of employees will inevitably be affected by the above provisions.  Under the existing Labor Law, when an employer transfers employees on a large scale as a result of major changes in the objective circumstances such as asset transfer, the employer is not obliged to explain the situation to the trade union or to all of its employees a month in advance, nor does the employer need to listen to their comments or report the employee transfer plan to the competent labor authority.  Under the LC Law, however, employers must notify the trade union or all of the employees of the redundancy plan, solicit their opinions, and report to the competent labor authority. 

We present the information and analysis above for your reference only.  The English version of this memorandum shall not be construed as the official legal opinion of Jun He Law Offices

United States

New proposed Employment Legislation in the US 

by Philip M. Berkowitz
Nixon Peabody LLP

Congress is now in the (virtual) control of the Democratic Party, but the margin is too narrow for much legislation to pass. This margin may grow after the 2008 elections. Moreover, most pundits predict that the Democrats will re-take the White House in 2008. Thus, an examination of new and proposed legislation from Congress offers a glimpse of what life may be like after the 2008 elections.

Discrimination against Homosexuals 
In September 2007, Congress held hearings on the Employment Non-Discrimination Act (ENDA). This bill would prohibit discrimination against employees on the basis of both sexual orientation and gender identity. It would prohibit discrimination against gay, lesbian, bisexual and transgender employees.

The law would prohibit discrimination not only on the basis of protected status, but also on the basis of perceived protected status. Thus, it would seem to explicitly prohibit discrimination on the basis of sexual stereotypes.

ENDA goes beyond the protection offered by the numerous states, whose laws have already addressed discrimination against homosexuals. For example, the New York Sexual Orientation Nondiscrimination Act (SONDA) prohibits discrimination only on the basis of sexual orientation. Currently, thirteen states have policies prohibiting both sexual orientation and gender identity discrimination in employment, seven states including New York have state laws that prohibit discrimination based on sexual orientation only, and fifteen states have laws that have been interpreted to protect transgender persons.

Arbitration Fairness Act 
The Arbitrations Fairness Act (AFA), introduced in August 2007, would prohibit pre-dispute arbitration agreements that require arbitration of employment, consumer, or franchise disputes. The bill’s authors believe that mandatory arbitration of employment disputes inevitably favors the more powerful party – viz., the employer, because it allegedly favors repeat players (companies), is expensive and time consuming, imposes a shroud of secrecy over employment disputes, and is virtually devoid of judicial review. The Act would overturn fifteen years of Supreme Court precedent which has repeatedly favored arbitration of employment disputes, including claims of discrimination.

Fair Pay Restoration Act 
The Fair Pay Restoration Act (FPRA), introduced in July, would amend several federal employment discrimination statutes to specify that an unlawful job practice occurs each time an employee receives pay resulting from an allegedly discriminatory compensation decision. The bill seeks to supplant the U.S. Supreme Court's 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., which rejected the "paycheck rule" held that the time limit for filing a discrimination charge only starts to run when the employer makes a discriminatory decision about the employee's compensation.

The FPRA would amend federal anti-discrimination laws to provide that the time limit would be triggered each time wages, benefits, or other compensation is paid, resulting in whole or in part from an unlawful discriminatory decision.

Employee Free Choice Act In March 2007, the House passed the Employee Free Choice Act (EFCA), which aims to amend the National Labor Relations Act (NLRA). The Act would require the National Labor Relations Board (NLRB) to certify a union without an election as the exclusive representative of employees if a majority of the employees in an appropriate unit has signed valid authorizations.

EEOC Guidance on Family Caregivers Finally, one recent development shows an increased interest in enforcement of prohibitions of discrimination against individuals because of their family responsibilities. In April 2007, the Equal Employment Opportunity Commission (EEOC), which enforces federal anti-discrimination laws, issued a “Guidance on Family Responsibilities Discrimination.” The guidance draws attention to the possibility that increased discrimination claims may arise from the increase in dual-income households and the conflict between balancing work and family obligations.

The guidance points out how sex- and age-based notions of family obligations may violate existing laws, and even constitute a hostile environment. While hardly groundbreaking, it reflects an increased focus by the EEOC on this important area. Employers would be well advised to pay attention to their policies, particularly in the areas of leaves of absence and reasonable accommodation for disabilities.

New Zealand

Employer’s disciplinary investigations under fire by Employment Court 

by Jennifer Mills and Isobel Foote
Minter Ellison Rudd Watts

The case of X v Auckland District Health Board demonstrates that the Employment Court will now examine every detail of an employer’s dismissal to determine whether it was substantively and procedurally fair. 

In this case, a senior physician, Dr X, took photos of his genitalia on his work mobile phone, and attempted to email them on his work email to a colleague. However, he was unsuccessful at sending the email, and it was retained in the employer’s IT system. Dr X also forwarded an email of an inappropriate calendar. Both of these emails were discovered by his support staff. After conducting a disciplinary investigation, the employer decided to dismiss Dr X for serious misconduct. Dr X brought a claim for an unjustified dismissal and unjustified disadvantage.

The Court held that the decision to dismiss was both substantively and procedurally flawed. The Court held that the employer was in breach of the Employment Relations Act 2000, his employment agreement, and the employer’s own policies. The Court held that the unfair investigation led to an unfair and unreasonable outcome of dismissal. There were multiple failures in the employer’s process including failing to advise Dr X of the nature of the initial meeting, and advising him that although he had a right to representation it would not be necessary. The employer then “ambushed” Dr X by inviting an experienced employment lawyer to attend the meeting.

The Court held that given that the employer did not believe Dr X, it should have put its disbelief of his explanations to him, especially given that these formed significant grounds for Dr X’s dismissal. The Court found that an employer cannot act as a “proverbial sponge” but must interact with the employee and question their responses in a disciplinary meeting.

A significant element of this decision was that the Court held that Dr X should not have been dismissed, despite the finding of serious misconduct. Rather, the employer should have considered alternative sanctions and behavioural correctives. Such a finding by the Court has now made it much harder for employers to justify dismissing an employee.