Issue 15

Dear Committee Members,

Welcome to the 15th issue of the

International Employment Lawyer.

This issue, like the one before is still affected by the current financial situation in many countries. In addition, several interesting topics are addressed of interest to the international employment lawyer.

We would like to thank all contributors for making this publication a great success.

We hope to see many of you at the Fall 2009 Meeting in Miami (www.abanet.org/intlaw/fall09)

Best regards,

Anders Etgen Reitz

Editor in Chief

USA

Data Breach Notification and the Multinational Employer: Europe and Beyond

By Donald C. Dowling

White & Case LLP

Imagine a serious data security breach that leaks names and private data of a multinational’s employees who are based across a number of countries—including some states in the European Economic Area. The breach might be due to a hacker, to a lost laptop, to data stolen by a rogue departing employee, or to any other security breakdown. Whatever the situation, the legal question quickly becomes: What are a multinational employer’s obligations to notify affected employees, and government data protection authorities, of the fact that human resources data leaked?

The answer depends on “applicable” law. In the human resources data context, the laws applicable can be the laws of all jurisdictions where affected employees are based, because a multinational employer will often be subject to personal jurisdiction in all countries where it employs staff (a multinational often transacts business and serves as a “data controller” in each locale where it employs staff and where it has employees; in addition, a multinational might also be subject to data laws in jurisdictions where is does not have employees, such as where it has servers). As such, although the employment-context security breach itself―the hacking, the lost laptop, the rogue employee data theft―usually occurs in just a single country, the applicable breach-notification requirements will often be the notice mandates (if any) of all jurisdictions where there are affected employees. Complying with applicable law after a data breach that affects employees across a number of countries, therefore, means ascertaining, and following, the notification rules of each of the home jurisdictions of the breach-victim employees. This task is complicated when any affected employees are based in the European Economic Area, because the breach raises difficult issues of European data protection laws.

Speaking broadly, we can address global data breach notification compliance from three geographical perspectives: The United States, the European Economic Area, and the rest of the world.

United States: U.S. state laws regulate breach-notification obligations to U.S. residents, often including employees, whose data get compromised in a breach. (As of mid-2009, federal bills were pending which could preempt this area with federal legislation.) While data protection/privacy in the U.S. generally tends to be regulated less comprehensively than in jurisdictions like the European Union, Canada, Argentina, Honk Kong, and Japan in this specific context—security breach notification—U.S. states impose some of the world’s toughest obligations. Since 2003, when California passed a groundbreaking and influential data security breach notification law, 44 U.S. states have imposed laws requiring breach notice in certain contexts. These laws generally require database owners to notify affected “customers” or other data subjects, including employees, of a breach. Some of these laws also require notice to state attorneys general or credit bureaus. Many of these laws provide a private right of action.

• When a U.S.-based multinational suffers a data security breach that happens within the U.S., most of the affected employees may prove to be U.S. residents. In these cases, U.S. state data-breach obligations may drive the multinational’s global breach-notification strategy: U.S. employees will likely need to be notified of the breach, consistent with U.S. state laws. Human nature being what it is, these employees can be expected to discuss the data breach with co-workers abroad. Notifying all affected employees that a breach of their data occurred is often recommended, even where notice is not legally compelled. Often, a sound human resources strategy will be for the multinational employer to notify all employee breach victims, worldwide—although a key issue can be timing. Breach notices may need to be expedited in some jurisdictions, and delayed in others.

European Economic Area: When some employee victims of a data security breach are based outside the U.S., relevant employer breach-notification obligations become the domestic mandates of jurisdictions beyond the U.S. In many cases the outside-U.S. analysis begins with the European Economic Area, with its especially–stringent data protection laws. But European data law principles are surprisingly sketchy as to specific breach notification mandates. Perhaps ironically, the European Economic Area—which otherwise imposes what are widely recognized as the world’s toughest set of general data-protection laws—has, so far, imposed few specific breach notification requirements (at least outside the telecommunications sector).

• This is probably because the European Economic Area’s tough general data-notification rules (as opposed to its data security rules) are built around notifying “data subjects” and government data agencies up front about data processing systems. In a sense, Europe’s general data notice rules are preventive, in that they try to “close the barn door before the horse gets out.” They focus less on post-crisis breach response―mandating special notices “after the horse gets out.”

This said, expect European employee data subjects and European member state data protection authorities (DPAs) to argue that Europe’s broad general rules requiring “data controllers” to notify data subjects and DPAs about data processing systems somehow encompass a mandate to notify of a specific breach incident. One argument here may be that unless the data controller had previously disclosed (to data subjects and DPAs) that “breaches” are one form of permitted data processing, then the controller must notify data subjects and DPAs after an unanticipated breach occurs. Further, a small but growing number of European states now impose state-specific breach-notification obligations. Norway, for example, expressly requires notifying the Norwegian DPA even if just one Norwegian is affected by a breach. And an incoming German law is expected to mandate breach notification to local German DPAs.

• A publicized data breach risks drawing close scrutiny from European data subjects and DPAs. Indeed, a multinational’s breach-notification strategy in Europe needs to factor in the high stakes. European states can impose onerous penalties for widespread data-law violations, especially where a data-controller is shown not to have followed compliant data processing practices.

In short, breach notification requirements in Europe split into two prongs: First, must the data controller notify affected data subjects? (This prong itself then splits into two halves: notice requirements to “direct data subjects” like employees, versus notice to “indirect data subjects” like employees’ email correspondents.) Second, must the data controller notify the relevant DPAs? Where a multinational employer that suffers a breach of employee data decides, for human resources reasons, to notify all affected staff worldwide about the breach, the issue of whether laws in Europe compel notice to European employees can for the most part drop out, as a practical matter (because the employer complies anyway). This leaves the issue of whether the multinational must notify European DPAs. While a few European states (like Norway and, soon, Germany) do impose clear government-notice mandates, in many cases whether DPA notice is mandatory is a murkier issue. Often the local advice will be that DPA notification is “recommended.”

Beyond the U.S. and Europe: Going beyond Europe and the U.S., the breach notification issue follows a broadly-similar analysis. First ask: What is the applicable law? Then ask: Does each applicable country’s law impose any breach notification obligations? Often it will not. For example, according to the Australian Office of the Privacy Commissioner’s Guide to Handling Personal Information Security Breaches (August 2008, at p.12), Australia’s “Privacy Act does not expressly require…an organisation to notify individuals if personal information is subject to a breach….” Where laws do compel notification, ask: What are the precise obligations to notify both affected data subjects and government agencies?

When a multinational employer makes the business decision to notify all affected employees worldwide, the focus becomes notification obligations to government authorities. Relatively few jurisdictions outside the U.S. and Europe impose direct mandates to notify government agencies about breaches of human resources data, but some may. A chart summarizing breach notification laws around the world appears in a 2009 article by Alana Maurushat, “Data Breach Notification Law across the World from California to Australia” (Univ. of New South Wales Faculty of Law Research Series paper #11). Where laws do not compel notice, ask: What notice is recommended as a matter of good practice? Are there any obligations to third parties affected by the breach, such as employee representatives?

Other legal issues: We have been focusing on data protection and privacy laws, but other legal issues can come into play when there is a data breach. In many jurisdictions, what breach notification mandates apply will depend on the specific facts. For example, where a breach leaks regulated information about publicly-traded securities, securities laws can kick in―such as the stringent notice requirements under Australia’s Corporations Act, mandating notice to the Australian Securities and Investments Commission. In the U.K., a single lost laptop led to a huge fine from the Financial Services Authority, because that laptop contained regulated financial data. In some cases, third party contracts can impose penalties.

Conclusion: Data travel internationally in an instant, and so a single data breach, in an instant, can implicate data subjects across national borders. Where a multinational employer suffers a human resources data breach, breach-response strategy needs to account for the local laws of all jurisdictions of affected employees. Broadly, the geographical analysis breaks down into U.S. versus Europe versus the rest of the world. As to mandatory reporting obligations, the legal analysis breaks down into mandatory notice to affected employees versus notice to data protection authorities. Further, sector-specific mandates and contractual obligations might come into play, depending on the nature of the data breached.

Italy

Transfer of businesses in "Critical difficulties": Italian law does not comply with EU law


By Vittorio Pomarici, Marco Sartori
Bonelli Erede Pappalardo - Studio Legale


The EU Court of Justice, in its Judgment of 11 June 2009, C- 561/07, stated that Italy has failed to fulfill its obligations in terms of Council Directive 2001/23/EC, which safeguards employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.


The Directive provides for two fundamental principles in the event of a transfer of an undertaking: the transferor’s rights, and the obligations arising from any employment contract relationship that exist on the date of a transfer, must, by reason of the transfer, be transferred to the transferee (Sect. 3); the transfer of an undertaking does not in itself constitute grounds for dismissal of an employee by the transferor or the transferee (Sect. 4).


Member States may provide a derogation to the guarantees laid down in Sect. 3 and Sect. 4, when the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted to liquidate the assets of the transferor, and are under the supervision of a competent public authority (Sect. 5).


Accordingly, if a proceeding is designed to liquidate the debtor’s assets in order to satisfy creditors, the transfer effected under this legal framework is not subject to Sect. 3 and Sect. 4. Conversely, when the purpose of the proceeding is primarily to safeguard the assets and, where possible, to continue the business, then Sect. 3 and Sect. 4 are applicable.


Presently, Article 47(5) and (6) of Italian Statute No. 428 of 29 December 1990 allows the transferor and the transferee, where an agreement with the trade unions has been reached in the context of the information and consultation procedure, to be exempted from the application of Sect. 3 and Sect. 4, provided that the concerned undertaking has been declared to be in «critical difficulties» by certain Italian competent authorities.


But the EU Court of Justice has stated that the above exemption is not in compliance with the Directive as the declaration of «critical difficulties» under Italian Law cannot be regarded as pursuing an outcome analogous to that of insolvency proceedings. In fact, according to the Court decision, this procedure is designed to promote the continuation of the business with a view to its subsequent recovery, and does not involve any judicial supervision or any measure whereby the assets of the undertaking are put under administration.


As a consequence, the Republic of Italy must take the necessary measures to carry out the EU Court decision in order to avoid the relevant penalties related to the breach committed.


In the meantime, Italian Courts could decide to directly apply Sect. 3 and Sect. 4 in the relevant case, according to the principle of primautè of EU law, instead of Article 47(5) and (6) of Italian Statute No. 428 of 29 December 1990. Moreover, any individual may file a claim against Italy for any damages suffered because of this EU law violation.

Poland

Act on Reducing Results of the Economic Crisis for Employees and Entrepreneurs 

By Krzysztof Nowicki
Magnusson

The risk of extension of the global financial crisis led in Poland inter alia to introduction of the Act on Reducing Results of the Economic Crisis for Employees and Entrepreneurs. The new law, which came into force on August 22, 2009 provides more elastic working regulations, which eventually should lead to protection of Polish labor market against massive layoffs. The anti-crisis regulations generally concern entrepreneurs facing financial problems, however, there are also changes which provide facilitation for every entrepreneur operating in Poland. Below, we focus on the changes concerning all entrepreneurs. 

Until the end of 2011, each employer will be allowed to extend the work time settlement period up to 12 months and in this 12 month settlement period the employer will be entitled to manage employees’ work time in a more elastic manner, depending on a market situation and the current work demand. Thanks to that, the employer may in some periods increase the daily work time (but with its reduction in other periods). Introduction of the elongated work time system shall require preparation of a time schedule. The employees’ work time schedule does not, however, need to cover the whole 12 months; it is sufficient to elaborate a schedule covering at least 2 months. Additionally, apart from changes concerning the work time system, the Act offers a possibility to arrange individual work hours at which the employee shall begin/finish his/her work each day. In such cases, the employer is not obliged to pay any additional remuneration for overtime, if the performance work ends and later on starts on the same day.

The Act provides, however, for certain restrictions concerning the above, i.e. the new work time cannot deprive the employees of their right to an 11-hour daily break and a 35-hour weekly break. Moreover, during the elongated work time system the employees’ monthly remuneration cannot be lower than the minimal statutory remuneration. Furthermore, introduction of the elongated time system and individual work time requires negotiations with trade unions operating within the employer’s enterprise and introduction of changes to the collective labor agreements, if any, or if there are no trade unions active within the employer’s enterprise, consultations with the representatives elected by the employees.

The other solution refers to the employment agreement for a fixed term. Previously, the law did not specify any maximum duration period of such contract. Now it can be established for a period not exceeding 24 months (including subsequent agreements if the interval between the termination of one employment contract and entering into the subsequent one was not longer than 3 months). Also, a rule stating that once the third subsequent fixed term employment contract is signed, it is deemed to have become an indefinite term employment contract, is no longer valid. The employers may enter into several subsequent fixed term employment contracts and it will not automatically lead to the establishment of an employment relationship for an indefinite period. This regulation shall be valid till the end of 2011.

South Africa

The importance of Immigration Compliance

By Zahida Ebrahim 

Edward Nathan Sonnenbergs

As a result of the growing international focus on security risks and with most countries enforcing stricter and, often more complicated, immigration policies as a result of the global increase in staff mobility, the issue of legal compliance has become increasingly important.


Although there are some fundamental principles common to most jurisdictions, the law governing immigration can differ substantially from jurisdiction to jurisdiction, making compliance with domestic laws an administrative nightmare for a Human Resources Department without the specialist training required to deal with the complexities of the specific legal system. This results in multinational employers spending copious amounts of money, time and resources on remedying their compliance problems.


To avoid the compliance risks inherent in multi-jurisdictional employment, mitigating compliance risks must be a core focus when planning expatriate employment strategies. Particular emphasis needs to be placed on compliance in areas of tax, exchange control, employment law, payroll regulation and, of course, immigration law, which we focus on here. Ironically though, most information pertaining to immigration compliance can also be applied to other areas of legal compliance.


Aside from the administrative headaches that result from adhering to compliance requirements, the effect of non-compliance can be quite far-reaching with potential consequences of fines, penalties and even criminal sanction for both employer and employee; damage to employer/employee relationships; future migration difficulties; delays in time-sensitive projects as a result of refusal of entry or deportation of expatriate employees; damage to individual and company reputation; and, as a result, loss of productivity and revenue.


The key factors in establishing an effective system of immigration compliance in multi-jurisdictional transfers include identifying areas of compliance risk; implementing specific internal controls to address these risks; and adhering to a codified internal practice which encompasses effective processes, such as creating a basic reporting procedure applicable to all expatriates as well as their accompanying family members; adopting a consistent approach and establishing uniform processes by determining which issues affect an expatriate in any jurisdiction;

• ensuring HR Managers are trained to determine, enforce and monitor legislative and regulatory compliance;
• developing policies setting out guidelines for HR managements of different types of assignments in each jurisdiction;
• ensuring synergy between business units such as HR and Legal Compliance;
• creating awareness with division/line management of the importance of making HR aware of regular travellers;
• Implementing measures and securing professional support to keep HR and expatriate employees abreast of changes in laws and regulations;
• Implementing document checking and formalizing record-keeping procedures in accordance with regulation;
• And, lastly, monitor the expiry dates of permits.

Another key factor includes Outsource specialist functions. Although fees will be incurred, these will often be less substantial than the costs of non-compliance. It is wise to weigh up the cost of effective external management against internal management costs and even companies who wish to administer the process in-house must at least consider outsourcing complex compliance aspects to professionals who are familiar with potential pitfalls peculiar to the jurisdiction. By outsourcing specialist functions, it ensures accurate and timeous information transfer to professional support and that all facts are relayed in as much detail as possible as even seemingly unimportant facts can have dire consequences;


It is important to secure services from professionals who can assist with all areas of legal compliance as a 'one stop' approach is often less time-consuming and less expensive.


The one common factor in the different jurisdictions is the severe sanctions imposed for non-compliance, whether in the form of fines, penalties, blacklisting or criminal sanctions. This all proves that while compliance can be costly, non-compliance can prove to be extremely expensive!

United Kingdom

New Equality Law 

By Sarah Gregory
Baker & McKenzie LLP

The UK Government has recently published the Equality Bill (the Bill), draft legislation with the aim of consolidating, simplifying and harmonizing all existing UK discrimination legislation. The Bill also contained a number of surprises - some of which have not been welcomed by employers.

The Bill still has to be approved by Parliament and will inevitably undergo some amendment over the next few months. However, it is anticipated that the majority of the Bill as currently drafted will make it to the statute book and will eventually be implemented in autumn 2010.

Overview
Under the Bill it will be unlawful to discriminate because of age, disability, gender reassignment, marriage or civil partnership status, pregnancy and maternity, race, religion or belief, sex and sexual orientation (the "protected characteristics"). These reflect the existing law. Despite earlier talk of specific protection because of genetic predisposition, and for parents and carers, these categories are not included.

Key Changes
Public sector equality duty. Certain public bodies will be under a specific duty, when carrying out their functions, to have regard to eliminating unlawful discrimination and advancing equality of opportunity for those with a protected characteristic. This duty will inevitably impact on procurement practice.

Gender pay gap information. A new and unexpected provision will enable the Government to order all employers with more than 250 employees to publish information about gender pay gaps. However, the Government has said that this power will not be exercised before 2013 and only then if there has been insufficient progress in employers providing such information voluntary. It remains to be seen whether this power is ever invoked, particularly if there is a change in Government.

Pay secrecy clauses. A new provision will, to a limited extent, make pay “gagging” clauses (those preventing employees from discussing their pay) unenforceable. This is designed to end secrecy about pay but will apply only to employees’ discussions about pay with colleagues in connection with potential discrimination. Pay secrecy clauses in themselves are not banned and can still be enforced if the discussion between colleagues was for some other reason. The impact of this provision is therefore much narrower than at first glance.

Positive action. There will be new (voluntary) rights for employers to take "positive action". This will apply to recruitment or promotion, where the employer “reasonably thinks” that people who share a protected characteristic are disadvantaged or that a protected group is disproportionately badly represented. The employer may only rely on this provision if A is “as qualified” as B and the employer does not already have a policy of treating people in the protected group more favourably.

This is a completely new concept. The Bill does not address how employers can assess when two people are “as qualified” as each other. Employers will be concerned that they could face discrimination claims from the unsuccessful candidate if they rely on this provision, at least in the absence of clear guidance.

Multiple Discrimination. The Bill introduces a new concept of "multiple" discrimination, enabling an employee to bring a discrimination claim on two combined grounds. This is difficult under existing legislation because the employee must show that the reason for the discriminatory conduct was the relevant protected characteristic, which may not be the case where there are two such reasons.

Comment The Bill as currently drafted is a useful codification of existing UK discrimination law and, as such, employers should already be familiar with the vast majority of the obligations it imposes. However, there will be a number of new provisions with which employers will need to become familiar - such as those relating to multiple discrimination, positive action and gender pay gaps. To assist employers, we expect further guidance to be provided on these areas in advance of the Bill being implemented. 

Issue 14

Dear Committee Members,

Welcome to the 14th issue of the

International Employment Lawyer.

This issue (like others before it) presents articles that address topics of interest to the international employment lawyer.

We would like to thank all contributors for making this publication a great success.

Let me also take this opportunity to thank Thomas Griebe, who is retiring as co-chair of the committee, for his contribution, and to welcome Ueli Sommer, who will take his place when the new association year begins.

We look forward to see you to at the annual meeting in Chicago or the Fall 2009 Meeting in Miami (http://www.abanet.org/intlaw/fall09)  

Best regards,

Anders Etgen Reitz

Editor in Chief

France

Flexi-security under French Employment Law: A New Solution to Terminate Contractual Relations 

By Katell Deniel-Allioux 

Salans

A new law enacted on June 25, 2008, offers employers and employees the possibility to use a new type of termination for their contractual relations: the amicable termination (or “rupture conventionnelle”).

Prior to the enactment of this law, employers/employees could only terminate their contractual relations if either party made a unilateral decision to terminate employment. Termination of employment contracts occurred one of two ways:

1) Employee-Initiated Termination 
An employee could decide to resign from his/her job. However such employee could risk becoming ineligible for unemployment coverage - which could translate to the loss of unemployment coverage in the amount of about 57.4% of the employee’s last wage.

2) Employer-Initiated Termination 
If the employer dismissed the employee on the other hand, such termination could also pose a problem for the employer. Under French law an employer-initiated termination would have to be backed by a real and serious cause because dismissal without cause is considered unfair and the terminated employee can be eligible to receive damages to compensate for the prejudicial/unfair treatment. The Court considers various factors when determining if a termination is unfair or done without cause.

This new process of amicable termination could however be beneficial for both employers and employees as it provides them with a non contentious way to terminate their relations without creating artificial debate while cushioning both parties from the financial risks they could incur under the unilateral means of termination.

In order to prevent abuse and undue influence by the employer, the terms of “rupture conventionnelle” provide for the intervention of the Labor authorities in order to ensure the amicable termination is done with the employee’s clear consent.

Since its enactment this type of termination has been successfully applied and observers hope it will lead to less litigation over employment termination.

USA

Global Swine Flu Pandemic Plans: Top 10 Legal Issues 

By Donald C. Dowling
White & Case LLP

In April 2009 the World Health Organization called the Spring 2009 swine flu outbreak a “public health emergency of international concern” and the New York Times said the world was at “the leading edge of a global pandemic.” With no vaccine yet in existence and with public health officials recommending extreme local and international precautions, the emergency was truly global. 

 Any communicable-disease outbreak raises real concerns in the employment context. Employers have a keen interest in keeping staff healthy and in containing the spread of a disease, not only for the obvious reason of employee welfare but also to keep business operations running and to minimize liability exposure. A communicable-disease outbreak of “international concern” could also raise special issues for multinational employers: How can a multinational corporation implement pandemic precautions and policies across worldwide operations? What legal issues does a cross-border pandemic response policy raise?

The elements in an effective pandemic protocol vary widely by employer - with the medical issues predominating over the legal. Pandemic plans tend to address topics as disparate as: workplace safety precautions; insurance coverage; paid time off, mandatory telecommuting and vacation; disaster communications; employee travel restrictions; stranded employee travelers unable to return home; mandatory medical check-up/vaccination/medication; mandatory reporting of exposure (employee reporting to employer and employer reporting to public health authorities); employee quarantine/isolation; terminations for violating protocols; and facility shut-downs.

Medical professionals may be better experts than lawyers to advice on content of a global swine flu protocol, but any global workplace pandemic plan implicates a number of international employment law issues that should not be overlooked. A best practice is to draft a global pandemic response plan template that accounts for legal compliance internationally, and then to adapt that template to the local laws of each jurisdiction. In doing that, an employer needs to consider these ten legal issues that are most likely to be implicated:

1. Health and safety representatives: In much of Latin America and Europe, employers must appoint health and safety representatives, and consult with them on workplace health/safety policies. Since current versions of an employer’s local health/safety plans will almost surely be silent on recent communicable-diseases such as swine flu, rolling out new pandemic procedures requires amending existing local plans. The amendment procedure needs to follow local law and involve local health/safety representatives. Neglecting this step by unilaterally imposing a pandemic policy could amount to an unfair labor practice in countries where the employer sponsors health/safety representatives.
   
2. Labor/employment law: Health/safety representation aside, many countries confer on labor representatives (like trade unions and work councils) a right to consult on issues affecting the workplace. Labor representatives may not have an absolute right to veto a new pandemic plan, but they will likely have power to void one that was unilaterally-implemented. In some countries local government labor agencies will also have a voice. For example in Japan and Korea, employers are required to post written work rules. As a result, adding any pandemic contingency procedures to the terms/conditions of employment requires amending current work rules and posting them for employees.
   
3. Language: A pandemic response plan rolled out internationally must be understandable. Some jurisdictions require that communications or work rules be in the local language. Even where laws are not so strict, to be understood and enforced, a pandemic plan needs to be in a comprehensible language for employees.
   
4. Medical attention: In Brazil, Italy and elsewhere, many employers have on-staff doctors. It is important to enlist company doctors as crucial players on the front line of any communicable-disease outbreak. Outside of countries that permit or require company doctors, employers will have a more difficult time requiring employees to get a medical exam or take a vaccine or medications. In countries from Europe to Canada to Asia, the analysis will depend on whether an employer’s mandate for employees to see a doctor is reasonable. Other legal issues as to employer-provided medical care include: regulation of prescriptions; drug importation; employer distribution of drugs/vaccines; employer (or nurse) practicing medicine; doctor/patient privilege.
   
5. Medical costs/procedures/coverage: In many countries government medical systems (sometimes partly payroll-funded) pick up sick employees’ medical costs, so medical bills of sick staff may not add to an employer’s costs. A problem, though, can arise as to immigrants, expatriates and business travelers away from home-country medical care systems. It’s important to make sure mobile employees have coverage and know where to go for medical help.
   
6. Isolation: Some employer pandemic plans try to reserve an employer’s right to isolate or “quarantine” possibly infected employees. Some pandemic plans seek to restrict employee travel (business and personal) into problem areas, or return travel after exposure in a problem area. However, isolation orders and travel bans are usually scrutinized in light of employee rights. Spell out isolation procedures and travel bans clearly in the pandemic plan. Anchor them in reasonable medical advice.
   
7. Personal injury liability: Multinationals implement global pandemic plans in part to reduce exposure to personal injury lawsuits from employees exposed to viruses on-premises. In most countries, worker safety laws and other rules impose an affirmative duty of care on employers. To meet this duty, pandemic plans need to address safety measures (distribute masks? distribute medication? require available vaccines?). In many countries employers can invoke a doctrine like the workers’ compensation bar to defend against employee personal injury claims. But some jurisdictions (like England) have no such defense. Other places, such as in Latin America, allow employees to surmount the workers’ compensation bar by proving mere employer negligence. Plan accordingly.
   
8. Discipline: When a pandemic hits, employees may refuse to report for work or refuse business travel assignments or insist on working from home. Local law may support a no-show employee whose refusal to work is reasonable - but employers can usually discipline employees for unreasonable absences. Implement clear rules prohibiting unreasonable refusal to report. Build clear procedures for communicating when the workplace is safe.
   
9. Shut-downs: Swine flu workplace shutdowns spread across Mexico in April 2009. The main employment liability here is pay: In many countries an employer that shuts down temporarily must pay those willing to work. (Sick workers often collect sick pay, from either the employer or the state, under local sick-pay systems.) In some countries, there are local laws that permit an employer to suspend operations and pay in the event of a genuine force majeure. In other countries implementing a furlough may be possible. Any pandemic policy should address these issues in a defensible way. Data privacy: In a swine flu pandemic, employers will want workers to report whether they or their family members have the flu; where they have recently traveled; and whom they have been exposed to. However jurisdictions with robust privacy laws restrict employers from forcing workers to divulge personal data - particularly health information, which in the EU is subject to special rules for “sensitive” data. Pandemic plans should spell out situations where public health factors make personal inquiries reasonable. Invoke any employer duties to report infections to public authorities and to maintain a safe workplace. Process employee flu-status data carefully.

New Zealand

Planning for Disaster – the Swine Flu Pandemic in New Zealand 

By Jennifer Mills
Minter Ellison Lawyers

There is worldwide concern about the reach and possible impact of the swine flu pandemic. Given that employees are the lifeblood of most businesses, a key issue in pandemic planning is considering how a business will cope if its employees are infected. This article briefly considers, in a New Zealand context, some of the employment issues that the swine flu pandemic raises for businesses. 

The swine flu pandemic raises a number of employment-related questions. Can an employer send sick employees home if they report for work? What about employees who seem well, but who have been in contact with someone who has, or may have, swine flu? In New Zealand, the legal position is that an employer has an obligation to take all practicable steps to ensure that the workplace is free of hazards, including health hazards such as swine flu. This may require an employer to send sick employees home, to minimize the risk of them passing any illness on to other employees. More generally, employers may also need to consider factors relating to the workplace itself, to ensure that the workplace does not pose an unnecessary risk to employees and visitors.

In addition, given that swine flu has been declared a pandemic, health authorities have quite extensive powers, including the ability to force people to quarantine themselves and to require premises (including businesses) to be closed. If this occurs, an employer has no choice but to direct employees to remain away from the workplace.

Other than in the above circumstances, however, New Zealand employers generally cannot require employees who are not sick to stay away from work. Doing so risks a claim from the employee that they have been unlawfully suspended, although in some cases an employer may be able to rely on health and safety obligations to require employees who are (reasonably) suspected of having the swine flu to remain at home, even if they seem well.

The question then becomes whether an employer must pay employees who are absent because of the swine flu. In New Zealand, under the Holidays Act 2003, employees are entitled to use sick leave in situations where they are sick or injured, or where their spouse or someone who depends on them for care is sick or injured. This entitlement will apply if an employee has to stay home because of their own illness, or to care for a family member who has swine flu. Where an employer directs an employee who is well to remain at home, then it is likely that there will be an obligation to pay the employee, although there may be special circumstances where this is not required. Where it is the employee who elects to remain at home, the situation is less clear and the best solution may be to reach some form of compromise or agreement with the employee.

A related question is whether an employer can require employees to work from home. In New Zealand, this will largely depend on any “location” provisions contained in the relevant employment agreements. In the absence of a provision which envisages the employee working from home, consent will be required. Similarly, the issue of whether an employer should compensate employees for additional costs incurred by working at home is one that should be negotiated and agreed with employees. That said, where the employee is directed to work from home and incurs extra costs, in most situations these should be borne by the employer.

In addition to these employment law issues, a number of commercial law and general business issues will arise. Swine flu has the potential to cause serious disruption to businesses – and responsible organizations ought to act now, before it is too late, to put business continuity plans in place and to take reasonable steps to avoid the spread of the disease in the workplace.

China

Foreign Representative Offices Face Labor Disputes in China 

By Frank Hong
Long An Law Firm

Labor and employment controversy has always been the most significant risk of dispute for foreign companies doing business in China. The ongoing financial crisis coupled with the newly effective PRC Labor Contract Law, which mandates a whole host of rights for employees, has further exacerbated the situation. 

Many foreign companies, especially those in professional service sectors such as law, investment banking, insurance, and general consulting, usually set up Representative Offices in China in order to avoid the requirement of substantial registered capital for incorporation as Wholly-Owned Foreign Enterprises (WOFEs).

For example, in Shanghai (the economic center of China) there are thousands of representative offices of international financial and shipping companies, among other types of businesses. However, such foreign offices are not considered independent legal entities under PRC laws. As a result, the liability of foreign offices in China will transfer to the parent entity under a theory of respondeat superior.

In addition to this, foreign representative offices are legally required to employ Chinese nationals through qualified human resources agencies. This requirement dates back to a State Council Regulation issued in 1980 and has survived the legal reforms engendered by China’s accession to the WTO in 2001. Per the 2008 Labor Contract Law, Chinese nationals working for foreign representative offices must first enter into written labor contracts with a qualified human resources agency, which then assigns the employee to work at a foreign representative office. Consequently, there are no written labor contracts between Chinese employees and the foreign representative offices which are their actual employers. This peculiar tri-party relationship has led some foreign companies to argue that foreign representative offices cannot be parties to labor arbitration or litigation, which are mostly initiated by employees.

However, on March 3rd, 2009, the Shanghai Supreme People’s Court issued a set of judicial interpretations of the Labor Contract Law (HuGaoFa [2009] 73), which essentially provide that in Shanghai duly registered liaison or representative offices of foreign companies may be parties to labor arbitration or labor lawsuit, as long as the employees were hired through qualified human resources agencies. If on the other hand employees were not hired through qualified human resources agencies, the concerned foreign offices may still be parties to civil actions (as opposed to labor arbitration or labor lawsuit). Consequently, foreign companies, through their representative offices in China, will have to face the employee initiated labor arbitration or lawsuits in China.

Hong-Kong

Hong Kong’s Race Discrimination Ordinance 

By Jennifer Van Dale and Diana Purdy-Tsang
Baker & McKenzie LLP

Hong Kong prepares to enforce new Race Discrimination Ordinance protecting employees against discrimination in the workplace. 

Hong Kong’s Legislative Council passed the Race Discrimination Ordinance in July 2008, and the first provisions became effective in October 2008. The Code of Practice for Employment published by the Equal Opportunities Commission is nearing finalization, and is currently with the Legislative Council for final vetting.

Once the Code of Practice is approved, the substantive provisions of the Race Discrimination Ordinance (notably, those that render race discrimination, harassment and victimization unlawful) are expected to come into effect. While no firm date has been announced by the Hong Kong Government, it should be sometime in 2009, according to the latest information from the Equal Opportunities Commission. Implementation of the Ordinance will be delayed until July 2011 for small employers with fewer than five employees.

The Ordinance prohibits discrimination, harassment, vilification and victimization based on “race”. “Race” is defined as “race, color, descent or national or ethnic origin”. Although “national origin” is included in the definition, “nationality” is not. Citizenship, resident status, right of abode, length of stay and indigenous inhabitant status are not covered by the Ordinance and it therefore does not prohibit discrimination on these grounds. Immigration and citizenship laws are not intended to be affected by the Ordinance.

While it protects employees against racial discrimination, the Ordinance also has provisions that permit differential treatment on the ground of race. The Ordinance provides for an exemption from its requirements in a number of exceptional cases such as where race is a genuine occupational requirement, or in the case of certain expatriates hired from outside Hong Kong. The greatest impact of this exception will likely be felt when hiring expatriate staff who are already working in Hong Kong but wish to be re-engaged by a new employer also on expatriate terms. These staff will not meet the requirement of being hired from outside Hong Kong and therefore will not be exempted under the Ordinance if they are re-hired in Hong Kong.

Employers should note that while individual employees may be liable for their own discriminatory acts in the workplace, the employer can also be liable for those acts even if it did not approve of or know about them. Employers may avoid liability by showing that they took all reasonably practicable steps to avoid such unlawful acts. To do this, employers must at least have policies in place prohibiting racial discrimination. These policies cannot exist in a vacuum, however. They must be made known to employees, and training should be provided to all employees on what discrimination is and what conduct is not acceptable in the workplace. In addition, recruitment guidelines should be drawn up that cover advertisements, interview questions, and selection criteria to ensure that objective criteria are used when hiring and promoting staff.

Czech Republic

Green Cards in Czech Republic 

By Pavel Jakab
Peterka & Partners

Under the amendment to the Employment Act and certain other laws which took effect on 1 January 2009, the Czech Republic started issuing green cards to foreigners at the beginning of this year. The law also permits a green card holder to apply for permanent residence after one year of residence in the Czech Republic. 

The green card is essentially a long-term residence permit and an employment license authorizing the holder to work at a specific position for the duration of the green card. Foreigners[1] are able to solicit job vacancies in which Czech Republic and other EU citizens and their family members have shown no interest in for 30 days (this does not include vacancies for state and municipal positions).

Types of Green Cards 
The Czech Republic issues three types of green cards to foreigners: type A for qualified university graduates and key personnel - valid for a maximum of three years; type B for workers who have graduated from high or trade schools - valid for two years (or a maximum of three years); type C for ‘other’ workers - valid also for two years (type C cards cannot be extended however).

Requirements 
If a foreigner loses their job through no fault of their own, they must find another job within 60 days in order to remain “in-status.” If they fail to do so they must leave the country after the expiration of the 60 day grace period. Vacancies are offered to foreigners through a special central register maintained by the Ministry of Labor and Social Affairs in order to help them gain new employment.

Family Reunification 
Family members of card A and B holders are allowed to join them after half a year and one year of the cardholder being resident in the Czech Republic, respectively; family members of card C holders are not allowed to do so.

Application A foreigner may apply for a green card at the Czech embassy in the relevant state or directly at the Ministry of the Interior in the Czech Republic. The Ministry issues the green card within 30 days of receiving the application; however, the Ministry retains the right to grant or deny an application for a green card. A green card application may be denied for various reasons including (but not limited to) national security concerns.

[1] It should be noted that only citizens of states included in the list drafted by the Ministry of the Interior are allowed to seek jobs in the Czech Republic. 

United States

U.S. Supreme Court Upholds Employer’s Right to Compel Arbitration of Age Discrimination Claims

By Anthony J. Oncidi and Jeremy M. Mittman
Proskauer Rose LLP

In an important and far-reaching opinion, the U.S. Supreme Court has ruled that a collective bargaining agreement (“CBA”) that requires employees who are union members to arbitrate (rather than litigate) claims arising under the Age Discrimination in Employment Act (“ADEA”) is enforceable as a matter of federal law. 

The high court’s decision validates the right of an employer and a union to agree to the manner in which employment disputes are to be resolved, even when those disputes involve individual statutory rights that are unrelated to the union contract itself. Accordingly, the decision is significant to all U.S. employers that have collective bargaining agreements with their employees.

The lawsuit was filed in federal court by three employees who alleged that they had been demoted due to their age – the ADEA protects workers who are age 40 and older. After the union declined to pursue grievances on their behalf under the CBA, the employees filed a lawsuit in federal court. While the lower courts denied the employer’s motion to compel arbitration, the U.S. Supreme Court, in a 5-4 decision, reversed the lower courts and held there is nothing in the ADEA that precludes the arbitration of age discrimination claims where the union and the employer have agreed that such claims would be subject to arbitration rather than litigation.

As a result of the Court’s ruling, and absent any intervening legislation (which already is pending in the U.S. Senate), employers in the U.S. with unionized workplaces should consider bargaining with the union over provisions requiring the arbitration of statutory discrimination claims. In negotiating and drafting such clauses, employers should consult with counsel in order to make sure they are using clear and unmistakable language that specifically identifies the types of claims to be arbitrated, while ensuring that all substantive statutory rights possessed by the employees are preserved. The employer in this case, 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456 (2009), was represented by Proskauer Rose LLP.

Germany

The German Board Member Remuneration Act 

By Thomas Griebe
Taylor Wessing

As a result of the global financial crisis the German Government wants to implement additional statutory regulations on the remuneration of board members (see Sec. 87 subsec. 1 German Stock Company Act, "Aktiengesetz").

Even though the German legislator does not plan to enforce any limits on the remuneration of the management the annual remuneration shall be reasonable and shall also be linked to the individual performance of each member of the board. The remuneration shall also be in line with comparable remuneration schemes in the concerned business or country and shall provide for long term incentives to the member of the board, as well. In this respect the minimum vesting period for stock options shall be extended to 4 years, too.

According to the law the Supervisory Board ("Aufsichtsrat") is still competent and responsible for the remuneration of the board members (see Sec. 116 and 93 German Stock Corporation Act). The members of the Supervisory Board are personal liable in case of a violation of the law (e.g. the remuneration would not be reasonable in terms of the Act). In order to ensure a reasonable remuneration all members of the Supervisory Board are obliged to participate in the appointment of the remuneration package and, thus, the decision cannot be delegated to a subgroup of the Supervisory Board anymore.

The Act provides for a authorization and an obligation of the Supervisory Board to reduce the agreed remuneration unilaterally (see Sec. 87 German Stock Corporate Act) if the financial situation of the Company would become critical and the continuation of the remuneration would be unreasonable for the Company (i.e. the Company cannot contribute any profits to the shareholders or is forced to initiate a redundancy process in order to save costs).

Finally, members of the board shall not become members of the Supervisory Board for a period of 3 years after their active membership in the board (“cooling off period”). 

Issue 13

Dear Committee Members,

Welcome to the 13^th issue of the

International Employment Lawyer.

In a world of global financial crisis, a better understand of employment laws have proven to be an important factor when steering through the challenging times.

Several of the articles in this issue are in this context highly relevant, as they focus on different legal issues related to personnel cost reductions.

We are pleased to announce, that the program has been finalized and registration for the ABA-AIJA conference in Hamburg is now open: http://www.aija.org/modules/events/index.php?id=252

Best regards,

Anders Etgen Reitz

Editor in Chief

Sweden

New rules regarding the hiring of employees from outside the EU

By Carl-Fredrik Hedenström
Magnusson

New rules for labour migration to Sweden have just entered into force, constituting one of the most significant reforms of Swedish immigration policy in several decades. The new regulations aim at making it easier for employers to hire staff from non EU-countries.

No authority based labour market probation 

In the previous system, the Swedish Public Employment Office examined the need for recruitment of foreign workers from outside the EU based on a work offer that the potential employer had to submit to the agency. The new rules delegate it to the individual employers to assess whether labour is available within Sweden, other EU/EEA countries or Switzerland. The new rules are based on the assumption that an employer is best suited to decide the recruitment needs for his or her business and not a government agency. 

Under the new rules, the Swedish Migration Board has, however, taken over the responsibility from the Swedish Public Employment Office to control that Community preference is respected, i.e. that job vacancies are made available first to applicants in the other EU/EEA countries and Switzerland, before being offered to non-EU residents. An employer will fulfill his duties in this respect by posting a job offer at for instance the site for open positions at the Employment office before offering it to a non-EU resident. 

Requirements regarding terms of employment
The Swedish Migration Board examines whether the terms offered to the foreign employee, i.e. salary, insurance protection and other terms of employment, are in accordance with the conditions applying for employees already resident in the country. The terms of employment must thus be at par with those set out in relevant Swedish collective bargaining agreements or provided by common practice in the particular occupation or industry. This is to ensure that there is balanced competition for jobs in the labour market and that social dumping is avoided. 

Extended time limits for work permits
Work permits can be granted for the duration of the employment, but for a maximum of two years. The permit can be extended once or several times, if the person’s employment continues after the initial period. The total duration of the permit is limited to no more than four years, after which the person can qualify for a permanent residence permit. Applications for an extension of a work permit can be made while the employee is in Sweden. 

Three months period for finding a new job
Based on a job offer it will also be possible for potential employees to come to Sweden for interviews etc. and if the job is finally offered to the applicant, he/she will not have to leave Sweden while the permit is processed as was the case under the old rules. It may of course also happen that an employment is terminated during an ongoing permit period. To avoid a withdrawal of the residence permit in these situations, the employee will be free to stay in Sweden for an additional three months to apply for a new job. 

Applications by visiting students
Visiting students who have completed at least one semester in a postgraduate program at institutions of higher education are allowed to apply for a residence and work permit without having to first leave Sweden when the education is completed. 

Asylum seekers applying for residence and work permits
In certain circumstances, an asylum seeker whose application for a residence permit has been refused through a final decision will be able to apply for a residence and work permit while in the country. The asylum seeker must have worked for at least six months, have an offer for a permanent job or a job lasting at least one year, and otherwise fulfill the general requirements for being granted a work permit. The application has to be made to the Swedish Migration Board within two weeks of the final decision rejecting the asylum application. 

France

HR Cost Reduction in France: "Everything Old is New Again"

By Roselyn S. Sands
Ernst & Young Société d’Avocats

By all standards, the current global crisis has no precedent. In these turbulent times, companies are more than ever looking at reducing their HR costs.

HR cost reduction is most often thought of as headcount reduction. However, French regulatory constraints require employers to use best efforts to reduce HR costs through less drastic means first before resorting to forced redundancies. Moreover, given the current economic climate, employers are looking for quicker and more flexible means to reduce HR costs. It is in this context that many French employers are using the recently resurrected "chômage technique"or "furlough".

The notion of "chômage technique" was created in the late 1970s as a means of reducing HR costs by putting workers on "temporary unemployment". Subject to certain conditions, including works council process, this measure allows employers to cut back on their activities, such as closing a factory, on a temporary basis. Originally, this mechanism was limited to a maximum of 4 weeks and a maximum of 600 hours per worker. If conditions were met, employees were paid 50% of their salary. Government subsidies could also be requested to cover a portion of this partial salary.

Since January 2009, the French government has encouraged companies to use this old measure by rendering it more attractive. Thus,

• the 4-week maximum has been extended to 6 weeks;
• the hours per worker limit has been extended to 800 hours per worker (and 1000 hours in the automobile industry);
• the amount paid to employees has been increased to 60% of their salary;
• the Government is more lenient, when processing subsidy requests; and
• the Government has increased the rates of its subsidies. 

As a result, "chômage technique" is living a renaissance as an efficient and more attractive way to temporarily cut HR costs, while ensuring that companies will be prepared to ramp up quickly and be ready when the economy recovers.

United States

Rules differ around the globe for reducing employee compensation 

By Anthony J. Oncidi and Jeremy M. Mittman
Proskauer Rose LLP

In response to the current economic crisis, and as an alternative or in addition to layoffs, many companies in the United States have begun instituting reductions in employees’ compensation. In fact, implementing such measures is a relatively simple process in the U.S. In other countries, such reductions in compensation can be more difficult to effect.

Absent the existence of a written employment contract or collective bargaining agreement, all jurisdictions in the U.S. permit employers to reduce prospectively the compensation of employees. Some U.S. states have stricter laws specifying the amount of advance notice that must be given to affected employees before changes can be made to their pay. Maryland, for example, requires at least one pay period’s advance notice before any changes can go into effect, while Missouri requires at least 30 days’ advance notice. Even in those jurisdictions in which there is no specific notice requirement, employers are advised to provide as much notice in writing as possible.

While the salaries of employees who are classified as exempt from overtime may be reduced in most instances, it is important to make sure that their compensation does not fall below the statutorily mandated minimum wage, so as not to jeopardize the employees’ exempt status. The U.S. Department of Labor takes the position that it is possible to reduce the hours of exempt employees and reduce their salaries by a corresponding amount (for example, by instituting a four-day work week and reducing salaries by 20%). On the other hand, California’s labor commissioner, for example, has expressly declined to follow the federal rule and has prohibited a partial work-week reduction in salary that is tied to a reduction in hours.

Reducing the compensation of employees in other countries can be more difficult. For instance, in Australia, in order to reduce an employee’s salary, an employer must first obtain the employee’s prior agreement to the change in writing. Unilaterally reducing compensation without prior agreement would be deemed a repudiation of the employment contract, permitting the employee to bring suit for damages for breach of contract.

In the United Kingdom, employees with one year or more of continuous employment may claim “unfair dismissal” if they do not agree to a change to the terms and conditions of their employment (such as a reduction in salary). Therefore, an employer that wishes to reduce the salary of a U.K. employee must carry out a special “consultation exercise” with the employee in which the company explains why the salary reduction is necessary for sound business reasons and considers the employee’s alternative suggestions. In the event the employee still refuses to agree to the reduction, the company may provide notice of dismissal and offer the employee a new contract to start immediately on termination of the old contract on the same terms (with the exception of the reduced compensation).

In France, an employer wishing to reduce an employee’s compensation must first inform the employee that the company intends to modify his or her contract, that the employee has one month to refuse the proposal, and should he or she refuse, the company may terminate the contract for a “valid economic reason.” If the employee does not respond, he or she is deemed to have accepted the change in salary; if the employee refuses to accept, however, the employment may be terminated on the ground that a valid economic reason for the termination exists. The employee, however, can challenge the termination, asserting that the “economic reason” is not a valid one under French law. As the global economic crisis continues to unfold, more multinationals will be looking for ways to cut their operating expenditures. Many companies already have reduced the number of workers they employ. An additional arrow in the quiver is the reduction of compensation, which is a further step companies may take with the assistance of counsel familiar with the varying jurisdictional limitations on such measures.