Friday, September 23, 2011

Welcome to the September issue of the International Employment Committee Newsletter. In this edition we have articles on recent developments in Guatemala, Brazil, France, Germany, Canada, the US and more. Thank you to all those who have supported the Newsletter by contributing articles. We look forward to meeting as many Committee members as possible in Dublin next month.

The next edition will be published in early December - please let me know if you are interested in contributing an article.

Best wishes
Helen Colquhoun

Brazil: News Laws on Electronic Time Control

By Leticia Ribeiro C. de Figueiredo, Labor Practice Group of Trench, Rossi e Watanabe (associated with Baker & McKenzie International, Swiss Verein)

As of October 2011, Brazilian employers will need to adapt their electronic time control systems to the ensure compliance with the new rules created by the Brazilian Labor Department. These rules aim at providing more safety to employees that their work schedule (and potential overtime) is being properly and accurately controlled, but it will create a significant burden for employers to comply with the new requirements.

The requirement to control working hours of employees in Brazil is not new. It is actually provided in the Labor Code enacted in 1943. But the Labor Code only provided, in Article 74, paragraph 2, that companies with more than 10 employees were legally required to control their work schedule, through a manual (e.g. handwritten time control book), mechanical (e.g. old fashion punch card clocks) or electronic form (e.g. electronic badges).

Thus, one important aspect to stress is that in Brazil an employer can choose to adopt other forms of time control – manual or mechanic, instead of electronic. However, as of October 2011, if an employer decides to use or maintain an electronic time control system, the company will have to comply with the rules provided in Ruling 1,510 issued by the Brazilian Labor Department.

Ruling 1,510 requires all employers with an electronic time control system to use a specific equipment (called “REP”) to control the employees’ work schedule. This equipment also has capacity to print time control statements to employees, regarding each of their entrance and departure times.

Among the conditions relating to the new system, Ruling 1,510 provides that the REP must observe the following requirements:

(I) it cannot allow changes or cancelation of data;
(II) it cannot allow any form of violation of data, in order to guarantee that the time computed is accurate and consistent with the times actually registered;
(III) it cannot have any devices that might allow restrictions of time control;
(IV) it cannot have any devices that might allow automatic time control registrations;
(V) it must be properly identified with the tax ID and name of the manufacturer, brand, make and series number; and
(VI) the REP must also print the Employee Time Control Registration Report, so that employees can check if each of their entrance and departure times are correct.

The REPs can only be acquired from manufacturers that have been duly registered with the Brazilian Labor Department. In addition to acquiring the equipment from authorized manufacturers only, employers must also have certificates issued by the manufacturers of the equipment and make the required registrations with the Brazilian Labor Department, through the official website, to record the data, equipment and software used.

In addition to providing more safety to employees that their work schedule is being properly and accurately controlled, the creation of the REP also aimed at facilitating periodic inspections by the auditors of the Brazilian Labor Department, to monitor whether employers are complying with all required labor rules and regulations. Thus, Ruling 1,510 provides that the REP shall be available in the work place for checks by the auditors of the Brazilian Labor Department in case of inspections.

In case of a breach of any of the provisions of Ruling 1,510, the time control system in place shall be disregarded by the auditor, who shall then assess the company and impose a fine. The actual amount of the fine imposed will be determined at the discretion of the auditor conducting the inspection, based on the nature of the infraction, its extension and the intention of the party who committed the infraction. As per the current chart of the Labor Department, administrative fines may range from R$40.25 to R$ 4,025.33. Also, the penalty can be doubled in the event of repeated infraction.

Finally, if the auditor of the Brazilian Labor Department verifies that there was an improper manipulation of the information stored in the REP or the existence of devices that might alter or block time control registration, the auditor can seize documents and equipment to evidence the employer's illegal action, and seek all appropriate legal actions.

To avoid litigation relating to lack of proper electronic time control, companies must be aware of and observe, as of October 2011, all the provisions of Ruling 1,510. Taking steps to ensure compliance has already caused a lot of work, expense and concern to Brazilian employers.

Canada: Province of Ontario Creates New Accessibility Standards for Disabled Persons

By Trevor Lawson and Kate McNeill-Keller, McCarthy Tétrault LLP, Toronto, Ontario, Canada


The Accessibility for Ontarians with Disabilities Act, 2005 (the “AODA”) is the most recent, and the most far reaching, accessibility legislation to be introduced in Ontario. The first legislation of its kind in Canada, the AODA creates significant obligations for public and private sector organizations in Ontario with respect to accessibility for disabled persons. The stated goal of the AODA is the development of standards in order to achieve accessibility for all disabled Ontarians by 2025.

While the AODA became law in 2005, businesses in Ontario are only beginning to grapple with the obligations imposed by the AODA due to its delayed compliance timelines and the long process mandated by the AODA for the creation of Accessibility Standards. The Accessibility Standards for Customer Service (the “Customer Service Standard”) was the first Accessibility Standard to become law, in 2008.

The AODA will soon become of particular importance to employers in Ontario, as the “Integrated Accessibility Standard, which applies in part to accessibility standards in employment (the “Integrated Accessibility Standard”) became law in June, 2011.

The following is an overview of the key elements of the AODA, as well as information relating to the various Accessibility Standards and the administrative scheme mandated by the AODA.

AODA Accessibility Standards

The AODA is one of several pieces of legislation in Ontario which establish requirements for accommodating disabled persons. Where there is a direct conflict between the AODA and another specific legislative or regulatory requirement regarding accessibility, the AODA provides that the higher level of accommodation will govern. The AODA seeks to gradually improve accessibility for disabled persons through the implementation of the following five “Accessibility Standards”:

  • Built Environment

  • Employment

  • Transportation

  • Information and Communication

  • Customer Service

Under the Ontario Human Rights Code, organizations already have a “duty to accommodate to the point of undue hardship” employees with disabilities and other disabled persons in relation to the provision of goods and services. However, the AODA’s Accessibility Standards will provide for more specific obligations and require organizations to take a more proactive role in accommodating disabled persons.

Process for the Creation of Accessibility Standards

The AODA sets as one of its purposes “the involvement of persons with disabilities, of the Government of Ontario and of representatives of industries and of various sectors of the economy in the development of the accessibility standard”. To that end, the AODA provides for the creation of accessibility standards through a complex consultation process. At the outset, this process requires the establishment of a standards development committee which may include a wide variety of persons, such as:

  • persons with disabilities or their representatives

  • representatives of the industries, sectors of economy or classes of persons or organizations to which the accessibility standard is intended to apply

  • representatives of ministries that have responsibilities relating to the industries, sectors of the economy or class of persons or organizations to which the accessibility standard is intended to apply

  • such other persons or organizations as the Minister considers advisable.

Once the Committee is established, the Minister is required to provide the Committee with terms of reference and make those terms of reference available to the public. Organizations and individuals are then invited to comment on the Accessibility Standard at various stages of its development.

The intended result of this Committee process is the establishment of a proposed Accessibility Standard. The proposed Accessibility Standard is then made available for a period of 45 days for public comment on a government internet site ( After receiving public comment on the proposed Accessibility Standard, it is submitted to the Minister for comment. Within 90 days of receiving the proposed Accessibility Standard, the Minister decides whether to recommend that it be adopted as a regulation in whole, in part or with modifications.

Customer Service Standard

The Customer Service Standard was filed as a regulation on July 27, 2007 and came into force on January 1, 2008. However, organizations have been provided with a significant amount of time to comply with the Customer Service Standard. Designated public sector organizations had until January 1, 2010 to comply with the Customer Service Standard while private sector providers of goods or services have until January 1, 2012 to comply.

Under the Customer Service Standard, organizations in Ontario are required to:

  • establish policies, practices and procedures governing the provision of goods or services to persons with disabilities, including provisions for assistive devices

  • ensure that service animals and support persons are not denied entry to an organization’s facility if the public and/or third parties have access to the premises

  • provide notice of temporary disruptions in services usually used by those with disabilities

  • ensure that persons involved with providing services to members of the public or other third parties receive training on:
    (1) how to interact and communicate with persons with various types of disabilities
    (2) how to use equipment or devices available on the provider’s premises that may help a person with a disability
    (3) what to do if a person with a particular type of disability is having difficulty accessing the provider’s goods or services
    provide ongoing training in connection with any changes to the organization’s policies, practices and procedures

  • establish a process for receiving and responding to feedback (and complaints) about the manner in which an organization provides goods or services to those with disabilities

In addition, all public sector organizations, and private sector organizations with at least 20 employees in Ontario, are required to:

  • prepare documents outlining its policies, practices and procedures

  • file accessibility reports with the Ministry

  • provide, upon request, copies of such documents to any person in a format that takes into account the individual’s specific disability

Integrated Accessibility Standard
On May 31, 2010, the Ontario government announced the development of an “Integrated Accessibility Standard” which integrates the proposed “Employment Standard”, “Information and Communications Standard” and “Transportation Standard” into one streamlined regulation. The Integrated Accessibility Standard was filed and came into force as a regulation on June 3, 2011.

(a) The Information and Communications Standard
The Information and Communications Standard set out at Part II of the Integrated Accessibility Standard sets out obligations with respect to the following, with staggered compliance deadlines for large, non-public sector organizations (i.e. private sector organizations with 50+ employees in Ontario) noted as well:

  • Ensuring that processes for receiving and responding to feedback are provided via accessible formats and communications supports, upon request (compliance deadline – January 1, 2015)

  • Providing accessible formats and communication supports in a timely manner, taking into account the individual’s accessibility needs, at a cost no more than the regular cost charged to other persons, if any (compliance deadline – January 1, 2016)

  • If the organization has emergency procedures, plans or public safety information that it makes available to the public, such information must be provided in an accessible format or with appropriate communication supports, upon request (compliance deadline – January 1, 2012)

  • Ensuring that internet websites and web content confirm with World Wide Web Consortium Web Content Accessibility Guidelines (compliance deadline – staggered, commencing with first phase on January 1, 2014 and second phase by January 1, 2021)

(b) The Employment Standard

The Employment Standard set out in Part III of the Integrated Accessibility Standard will likely have the largest impact on employers’ obligations in terms of both administrative resources and cost. The stated goal of the Employment Standard is to create equal employment opportunities for people with disabilities by removing barriers to employment. Private sector employers carrying on business in Ontario should anticipate implementing compliance over the next five years, with the bulk of requirements coming into force on January 1, 2016 for employers with more than 50 employees and on January 1, 2017 for employers with less than 50 employees.

The Employment Standard will apply to the recruiting, hiring and retaining of paid employees, including full time, part time, or apprenticeships. However, it will not apply to unpaid employees, volunteers, or persons on co-op or high school work experience placements. The Employment Standard will require organizations to:

  • Provide training on the requirements of the accessibility standards to employees and, for employers with 50 or more employees, create a document describing the training policies

  • Establish, maintain and implement policies governing the implementation of the accessibility standards. The policies must include a description of how the organization will meet the standards as well as a statement of commitment for meeting the needs of persons with disabilities. As noted above, for employers with more than 50 employees, a separate document will have to be prepared describing the policy, which is available to any person upon request (and in a format that meets the person’s needs)

  • Accommodate persons with disabilities in the recruitment process by, for example, notifying applicants that accommodations will be provided to enable their participation in the recruitment process and also notifying selected applicants that any assessment and selection materials and processes used will be available in an accessible format upon request

  • Develop individual accommodation plans for employees with disabilities, upon request. The plans must assess and accommodate employees on an individual basis, identify the accommodation to be provided, include timelines for the provision of accommodations, and include individualized workplace emergency information. This would only apply to public organizations and private sector employers with 50+ employees

  • Provide electronic information in a new format if working with electronic information is necessary to perform the job

  • Deliver individualized workplace emergency information to employees with disabilities

  • Take into account the accommodation needs of employees with disabilities in existing performance management, career development and redeployment processes

  • Develop procedures that include individual accommodation plans where appropriate for employees returning to work from injury or illness

Employers with 50 or more employees will also have to file annual accessibility compliance reports with the Ministry for review and approval.

(c) The Transportation Standard

The Transportation Standard set out at Part IV of the Integrated Accessibility Standard is an industry-specific standard which sets out obligations that will apply to conventional and specialized transportation service providers, municipalities and taxicab providers. Given that this standard will not apply to most private sector employers, we have not summarized the requirements of the Transportation Standard in this article.

Part V of the Integrated Accessibility Standard sets out the proposed compliance structure which will apply both to the Integrated Accessibility Standard and the Customer Service Standard. It establishes:

  • the amounts of administrative penalties (max. $100,000 in the case of a corporation and $50,000 in the case of an individual or unincorporated organization) and the process by which they should be determined

  • the process by which a review of an order may be made

  • the payment schedule for administrative penalties

  • the designation of the License Appeal Tribunal as the tribunal to hear matters arising under the AODA

The Accessible Built Environment Standard

The Accessible Built Environment Standard was available for public comment between July 14, 2009 and October 16, 2009. The final proposed Standard has now been submitted to the Minister of Community and Social Services who is considering what aspects of the proposed Standard will become law and when. The terms of reference provided to the Committee for the creation of this standard provided for a focus on preventing barriers on a go-forward basis. As such, new buildings and buildings undergoing major renovations will need to meet the requirements of this proposed Standard, but it does not appear that existing buildings will need to be modified to comply with this Standard.

Administrative Scheme

As noted above, the AODA’s administrative scheme is really only beginning to take effect, as the specific administrative procedures mandated by the AODA have not yet been fully put into place. However, the AODA does provide for specific administrative and reporting structures including requirements related to the inspection of an organization’s premises, the making of orders by a director and the hearing of appeals related to the AODA.

Next Steps for Organizations in Ontario

The obligations created by the AODA are significant and will likely require additional HR staffing and resources in order for an organization to become and remain compliant with the AODA. Organizations in Ontario are well advised to become familiar with the AODA and their obligations thereunder. A “compliance team” should be assembled or a point person identified before January 1, 2012 in order to guide the organization towards compliance with the AODA. Existing policies should be reviewed, and new policies and procedures addressing requirements under the AODA should be created. Employee training programs may need to be revised (especially for those employees who deal with customers), as well as any third-party contracts that raise potential compliance issues.

Although the AODA represents the first legislation of its kind in Canada, other Provinces appear set to follow Ontario’s lead. In June, 2011, the Minister of Labour for the Province of Manitoba appointed a Council to look at issues of accessibility in Manitoba. The Council will hold meetings over the next year and write a final report (due in June, 2012) which is expected to be the basis for accessibility legislation to be introduced in that Province some time later in 2012.

Canada: New Criteria to Assess Specialized Knowledge Workers

By Sergio R. Karas, B.A., J.D. (Certified Specialist in Canadian Citizenship and Immigration Law by the Law Society of Upper Canada)

Multinational employers who wish to transfer certain types of employees for assignments in Canada can usually take advantage of the provisions related to Intra-Company Transferees. The Immigration and Refugee Protection Act (IRPA) regulations provide an exemption from a Labour Market Opinion (LMO) to Senior Managers, Executives, and Specialized Knowledge workers being transferred between branches, divisions, or subsidiaries, of companies under common control. The Intra-Company Transferee category was created to permit international companies to temporarily transfer qualified employees to Canada for the purposes of improving management effectiveness, expanding Canadian exports, and enhancing the competitiveness of Canadian entities in overseas markets. The IRPA regulations provide authority for the entry of Intra-Company Transferees, in addition to the NAFTA and other international treaties which contain similar provisions.

“Specialized Knowledge” is generally defined as a very high level of knowledge of a company’s product or service, or, an advanced level of knowledge or expertise in the organization’s processes and procedures. In some cases, individuals who possess Specialized Knowledge have been instrumental in the creation or development of a specific product, software or process, and in others, they may have a very intimate knowledge of the company’s international operations.

Prior to the end of 2010, many individuals who did not necessarily qualify as Specialized Knowledge workers could nonetheless receive Work Permits exempt from a LMO under other immigration facilitation programs such as the Information Technology Workers Program, which has been recently discontinued. With some of the facilitation programs cancelled by Citizenship and Immigration Canada, many workers sought to enter under the Specialized Knowledge category as an alternate route, but were unsuccessful in doing so. Many applicants did not possess the required qualifications, experience or earned an appropriate level salary.

In response to concerns about inconsistency in the decision making process at Ports of Entry and Visa Posts abroad, Citizenship and Immigration Canada recently published Operation Bulletin 316 summarizing the criteria to be followed by decision makers when assessing Specialized Knowledge applicants. In considering whether an applicant qualifies as a Specialized Knowledge worker, officers must assess a number of factors to determine if the application qualifies under the new criteria. These factors include:

(1) Education – is a diploma or degree required for the position sought?

While not a determinative factor, possessing a degree, diploma, or certificate relevant to the occupation may be a good indication that the employee possess the appropriate level of knowledge and training for the position. It must be noted, however, that many Specialized Knowledge workers have acquired “hands on” experience and do not necessarily have a degree.

(2) Knowledge – is it relatively unique within the company and industry in that it is not commonly held?

In general terms, it is considered that individuals who hold knowledge that is unusual and different from that generally found in a particular industry and sufficiently uncommon may possess Specialized Knowledge, particularly when they occupy a position that is of critical importance to the enterprise. The knowledge may not be of a proprietary nature, but if it relates to a product or process that is patented, it can also be a good indicator of “Specialized Knowledge”. As a general rule, Specialized Knowledge may mean thorough and intimate familiarity with a product, process, or service which no other company makes or that other companies make but differently. For example, a scientist who is involved in the production of a particular drug may possess specialized knowledge even though a similar drug is manufactured by a competitor. Similarly, an applicant could have knowledge of a particular business process or method of operation that are unusual and has some complexity, meaning that it cannot be easily transferred to another individual in the short term. Specialized Knowledge would normally be gained by experience with the organization and used by the individual to contribute significantly to the employer’s productivity or wellbeing. Some characteristics of workers who have Specialized Knowledge are:

- Possesses knowledge that is valuable to the employer’s competitiveness in the market place;
- Uniquely qualified to contribute to the Canadian employer’s knowledge of foreign operating conditions;
- Knowledge has been gained through extensive prior experience with the employer;
- Has been utilized as a key employee abroad in significant assignments which have enhanced the employer’s productivity, competitiveness, image, or financial position.

The test to be applied is whether the applicant possesses such knowledge and not whether it exists in Canada.

Advanced knowledge is complex or high level knowledge, not necessarily unique or known by only a few individuals, or even proprietary, but knowledge that will require a specific background or extensive experience with the employer who is transferring the worker, or experience from within the same industry. The person may possess key knowledge which enables them to contribute to the Canadian office’s ability to operate competitively.

(3) Experience – does the experience with the foreign company or the respective industry support the claim of specialized knowledge?

The number of years of experience that a person possesses in a specialized field is typically a good indicator of Specialized Knowledge. The experience need not be with the same employer, but it can be within the same industry. The longer the experience, the more likely the knowledge is indeed “specialized”. In some cases, however, a foreign worker may only have one year of experience with the company, or even in the industry, but it may have a considerable wealth of knowledge in the field (i.e. a PhD in a relevant specialty, or a particular skill that can be demonstrated or verified). Studies in a relevant area can also be a substitute for experience.

(4) Salary – is the salary realistic in terms of Canadian wage levels for the occupation concerned?

In some cases, employees who may possess Specialized Knowledge but are not sufficiently senior, are not highly compensated. In addition, current economic conditions have resulted in many employees not being able to command high salaries in many specialties or industries. Salary is one of the indicators that can be used to determine if the employee possess Specialized Knowledge, but it should not be considered in isolation.

(5) Relevant training – does any previous training support the claim to specialized knowledge?

Many candidates do not have degrees but possess in-house or industry training that may be very difficult to impart outside of their specialty.

(6) Supporting documentation – do the resume, reference letters, and other documents support the claim?

It is extremely important that all applications be thoroughly documented given the increasing scrutiny to which they are subject.

It must be noted that, officers have been instructed to determine whether the occupation level in the parent company is similar to that in the position sought by the Specialized Knowledge worker in Canada. Salaries must be realistic in terms of Canadian wage levels for the occupation concerned. A low salary may be considered to be a red flag. Non-cash allowances or per diems such as hotel and transportation paid by the employer are not to be included in the calculation of the overall salary and are not acceptable for the purposes of claiming that a worker possesses Specialized Knowledge. Further, officers are directed to compare salaries against the Human Resources and Skills Development Canada guide, which contains the average salaries for a specified geographical location (

Given the complexity of the Specialized Knowledge category, employers are encouraged to seek the appropriate legal advice prior to attempting to transfer any foreign workers to Canada.

France: Employee Privacy 1 - Employer Surveillance 0

By Judith Beckhard-Cardoso, Partner, Noémie Birnbaum, Associate, and Alexina Chalachin, Associate and member of the New-York Bar, Fasken Martineau

It can no longer be assumed that all emails are work-related. A private email, even if received in the employee professional inbox, cannot be used to sanction that employee. This was the ruling handed down this summer by the labor chamber of the French Supreme Court (Cour de cassation) some 10 years after its ruling in the Nikon case.

On July 5, 2011, the labor chamber of the Cour de cassation added a new cornerstone to its pre-existing case law on the right to privacy in the workplace by holding that "although an employer may consult files not identified as personal by an employee, it may not use them to sanction the employee should the content of those files reveal that they concern his or her private life".

As the exchange of intimate emails and the keeping of erotic photos is a private matter for an employee, it may not regarded as reprehensible behavior as long as doing so does not objectively create a problem for the company.

As the employer could not validly rely on such evidence, the employee obtained damages for dismissal without real and serious cause.


A senior management employee exchanged various intimate emails with another employee in his firm. He also kept erotic emails in his work-related email messaging system. The employer discovered the emails after an unannounced visit was conducted in the employee's absence, and subsequently dismissed the employee. The case is of interest as the messages in question did not have a subject heading or designation to indicate that they were personal.

Analysis and Scope of the Decision

Given the development of information and communication technologies ("ICT"), the Cour de cassation had to state that an employee's private life did not cease to exist at the threshold to the workplace. In the wake of the landmark "Nikon" case
[1], the Court has regularly defined the employer's power of surveillance by delineating the right to privacy at work. It is restating this notion by imposing an obligation on the employer to interpret the content of emails received on a business messaging system if the employee has not identified them as personal.

(1) From the recognition of privacy in the workplace …

The right to privacy is guaranteed by various legislative provisions: article 9 of the Civil Code, article 8 of the European Convention on Human Rights and Fundamental Freedoms, and article 226-15 of the Penal Code. The Labor Code is not however a source of this right.

Article 9 of the Civil Code was the basis for the Cour de cassation's formulation in 1997
[2] of the related notion of personal life. It covers any act, unrelated to a work-related obligation, committed by an employee in the workplace during or after working hours.

The Nikon case became the jurisprudential cornerstone of that legal construct: as every French employee knows, he or she is entitled "while in the workplace, during working hours, to the right to privacy. This specifically implies the secrecy of correspondence. Thus, an employer may not, without infringing this fundamental freedom, read any personal messages sent or received by the employee using a computer tool made available to the employee for his work, even when the employer has prohibited such non work-related use of the computer".

The development of what was previously called "new" ICTs has rendered the traditional boundary between professional and private life somewhat difficult to grasp.
[3] In the space of a few years, emails have gradually replaced phone calls, smart phones have become the norm for managers, employees and the self-employed, and social media networks have become a preferred recruitment and marketing tool for companies. This change also has a direct impact on employees who are finding it increasingly difficult to disengage from work, even when at home.

Such technologies have also made it difficult for employers to control how their employees spend their time. How can an employer determine if an employee sitting in front of a computer is exchanging business or personal emails during working hours? Is the employee working or taking a break?

The Cour de cassation labor division case law has attempted to achieve a balance between both considerations.

(2) … to an informed oversight of practices

The Nikon case left several issues in abeyance: the assessment of the nature of the correspondence exchanged, the necessity of the employee’s presence when his or her files are opened, and the characterization of the files created with the computer tool made available to the employee.

In its 2004 report on cyber-surveillance in the workplace,
[4] the Commission nationale de l'informatique et des libertés [National Commission on Information Technology and Liberties] (CNIL), reminded employers that the "the use of electronic messaging to send or receive a reasonable number of personal messages is generally and socially acceptable."

The Cour de cassation has gradually adopted a more nuanced solution, mindful of the need to balance an employee's right to privacy against the employer's legitimate interests.

Thus, in 2005, the Labor division formulated a new solution regarding personal computer files
[5] drawing back from the Nikon case and stating that "except in the case of a specific risk or event, an employer may not open any files designated by an employee as personal that are stored on the hard drive of the computer made available to the employee unless the employee is present or has been duly summoned".

The Court hereby held, on the one hand, that it is incumbent on the employee to determine the nature and content of correspondence exchanged and on the other hand that there is an obligation on the employer to ensure that the employee is present when his or her personal files are opened, except in the case of a specific risk or event. The Court thus paved the way for the May 23, 2007 decision reconciling the right to privacy of employees with the right of the employer to conduct in futurum expertise contemplated in article 145 of the New Code of Civil Procedure.

This shift in case law was heralded in 2006 when the Court stated that files and records created by an employee on a computer provided by the employer for work-related purposes are presumed to be work-related, unless designated by the employee as personal.
[7] Therefore, the employer may access them in the employee's absence.

The presumption that computer stored data is work-related was extended, in 2008, to Internet connections.

Until the July 2011 decision discussed above, the following rules were thus laid down by case law:

(a) Electronic files or documents in any other media are presumed to be work-related. In the case of express indication of their private or personal nature, the employer may nevertheless search them in the employee's presence, or provided that the employee was warned beforehand;

(b) Emails, hard-copy correspondence or faxes received and sent from the workplace during working hours are presumed to be work-related. In the case of express designation that they are private,
[10] the employer may nevertheless search such correspondence if it obtains an order to that effect from the Motions Judge pursuant to article 145 of the Civil Code[11].

On July 5, 2011, the Cour de cassation altered this delicate balance by stating that even if an email is not designated as private, if, on reading it, the employer becomes aware that the content is private, it may not use it as evidence against the employee.

Clearly, this is a common-sense decision, but it should be examined solely in the context in which it was rendered.

The July 5, 2011 decision was rendered on evidentiary grounds as opposed to the right to privacy. What can be deduced from that? A new interpretation key on the issue of the employer's respect for the confidentiality of private information:

(a) if the employee states that the content of an email is private, the employer may not access it without a judge's permission;
(b) if the employee does not state that the content of an email is private, the employer may access it;
(c) if on reading an email the employer notes that its content is strictly work-related, it may read it and make use of it;
(d) if on reading an email the employer notes that its content is strictly private, it may read it, but it may not make use of the content.

It must be borne in mind that statements denigrating the management hierarchy are always regarded as work-related and are therefore sanctionable
[12] as is the misuse of the business messaging system solely or primarily for private purposes.[13]

What if an employer, on reading an email, is not sure of its nature? And what if the content of the email is private as well as work-related?

These problems in interpretation arise especially in connection with internal surveillance and monitoring procedures that have had to be implemented in France for the purpose of foreign provisions intended generally to improve corporate governance. Consider internal investigations and other wistleblowing alerts generated by the U.S. Foreign Corrupt Practices Act,
[14] Sarbanes-Oxley legislation[15] or its Japanese counterpart,[16] and more recently Dodd-Frank legislation.[17] Such legislation applies to any French company listed in the U.S. (or in Japan) and to any French subsidiary of a listed American (or Japanese) company.

In case of contravention of any of the aforementioned legislation, the government authorities responsible for implementing the provisions of those statutes and for conducting investigations may impose heavy sanctions including the suspension of access by the companies concerned to governmental procurement contracts. This explains why companies sometimes proactively have an internal investigation conducted by their own counsel and auditors when they suspect the occurrence of potentially illegal practices within the company.

This type of investigation requires the examination of thousands of emails. In practice, software automatically analyze the emails, identifying only those that contain certain key words. Thus, a company can readily decide to automatically exclude emails marked "private" or "personal".

However, what can a company do if it detects suspicious emails that have no specific designation as to their nature?

Let's take the example of an examination of emails conducted on the basis of the key words "payment ", "suitcase" and "benefit". A senior executive is the author of a suspect email containing those words. After analysis, the company dismisses him for proven corrupt practices. According to the July 2011 decision, and despite all precautions taken by the company, will the employee be able to challenge his dismissal? He may be able to argue that the email was in fact personal, the sole purpose of which was to arrange his leave and that the evidence can therefore be challenged…

[1] Cass. soc., October 2, 2001, Sté Nikon v. France, No. 99-17.855;
[2] Cass. soc., May 14, 1997 : Bull. civ. 1997, V, No. 175;
[3] Cf. J.-E. Ray, La Guerre des Temps. Le Net ? Never Enough Time, Droit Social No. January 1st 2006;
[4] Cnil, La cyber-surveillance sur les lieux de travail, March 2004, p. 13 :;
[5] Cass. soc., May 17, 2005, No. 03-40.017, Klajer v. Sté Cathnet-Science;
[6] Cass. soc., May 23, 2007, No. 05-17.818, SA Datacep v. H;
[7] Cass . soc., October 18, 2006, No. 04-48.025;
[8] Cass. soc., July 9, 2008, No. 06-45.800;
[9] Cass. soc., May 17, 2005, op.cit.;
[10] Cass. soc., December 15, 2010, No. 08-42.486;
[11] Cass. soc., May 23, 2007, No. 05-17.818, op. cit.;
[12] Cass.soc., February 2, 2011, No. s09-72.313 et 09-72.449;
[13] Cass. soc., June 2, 2004, No. 03-45.269;
[14] Foreign Corrupt Practices Act, 1977, § 15 U.S.C. 78, et seq
[15] Pub. L. No. 107-204, 116 Stat. 745, enacted July 31, 2002
[16] Standards published on February 15, 2007 by the Japanese "Financial Services Agency" and codified in the "Financial Instruments and Exchange Act" of June 7, 2006.
[17] Dodd–Frank Wall Street Reform and Consumer Protection Act enacted July 20, 2010 (Pub.L. 111-203, H.R. 4173)

France: Summer Developments in French Labor Law

By Roselyn Sands and Giani Michalon, Ernst & Young Société d'Avocats, France

The French “days per year” (“forfait jours”) system is upheld in France yet subject to certain conditions

France is well-known for its 35-hour a week working time limit.

However, fewer know that managerial employees (“cadre”) and, under certain conditions (notably the autonomous nature of the employees duties) some non-managerial employees (“non cadre”) may work on the basis of a number of days per year (i.e usually 218 days worked/year) instead of a set number of hours per week.

The only limit expressly placed was the compulsory daily rest (11 hours) and weekly rest (35 hours).

Under French law, employees under the “day-a-year” system are entitled to some additional days off which may range from 0 to 10 days.

However, this system never placed any other maximum number of hours worked.

As a result, this French System was challenged before both the French courts and the European court on the grounds that it violated the European Social Charter as employees could be required to work as many as 45 hours per week.

A long-awaited decision on the validity of such mechanism was rendered on June 29, 2011 by the French Supreme Court.

In this case, an employee was hired in 2001 as a managerial employee to the days per year system (i.e. 217 days/year) pursuant to the applicable Collective Bargaining Agreement (CBA) of the Metallurgical Industry.

Following his resignation in 2006, the employee challenged his working time before the French Labor Court claiming notably for overtime payments given the failure of the employer to limit the number of days worked or control his workload.

Unlike what many commentators contemplated, the French Supreme Court did not throw out the validity of working time system based on a number of days per year.

However, according to the French Supreme Court such system, to be valid, must be subject to certain conditions which will ensure respect for the general principles relating to protection of health and safety of employees.

The French Supreme Court recalled notably that such system must be collectively bargained so as to guarantee respect of the maximum working time duration and the mandatory provision on daily and weekly rest.

As a consequence of this decision, employers should verify that the “day-per-year” system in place complies with the French Supreme Court ruling. Companies must not only ensure that the CBA provisions allow them to have employees working on the basis of a number of days per year, but also that such conditions are properly respected from a practical standpoint. Employment contracts should also be reviewed.

Otherwise, concerned employees will be in a position to challenge the working time duration and seek overtime payment.

This decision may therefore increase company’s exposure and collective bargaining is anticipated at an industry-wide or a company-wide level in order to mitigate this risk.

Increased dividend payments may trigger mandatory employee’s bonus payment

A new law dated July 28, 2011 requires the payment of bonuses to employees in certain cases when the employer decides a dividend distribution.

The new rules apply to employers (i) with 50 employees or more on a mandatory basis, (ii) those under 50 employees on a voluntary basis, and (iii) those whose share capital is owned at least at 50% by the State or its French public establishments.

The bonus has to be paid to all the employees when the dividend per share distributed to the shareholders is higher than the average of the dividends per share distributed in the two previous fiscal years.

Nevertheless, when a company belongs to a group, the amount of dividends which triggers the bonus payment will be the one distributed by the controlling company.

The new rules apply to distributions decided by the ordinary general meeting of shareholders (the agreement is subject to the modalities applicable to the signing of a profit-sharing agreement) or that the employer will grant on its own (in case of failure of the agreement negotiations).

An anti-abuse rule would apply: the bonus cannot replace remuneration increases or bonuses either agreed or paid on a voluntary basis or mandatory basis.

Up to EUR 1,200 per employee and per year, the bonus is exempted from social security contributions (except the general supplementary social contribution (CSG), the French contribution to the reimbursement of the social security debt (CRDS) and the flat social contribution "forfait social").

The payment of this bonus must be negotiated through collective bargaining between employer and union representatives at the company or group level.

Such collective bargaining agreement must be concluded within 3 months as from the dividend distribution and before October 31, 2011 for dividend distribution made prior to the publication of the law (ie. July 29, 2011).

If the parties cannot agree on the bonus modality or amount, the employer may take an unilateral decision subject to prior information and consultation of the works council.

Failure to start the negotiations would expose employers to criminal sanctions although the law provides for exemptions.

New French Law further restricts the possibility of “lending” of employees even if not for profit (“prêt de main d’oeuvre à titre gratuit”)

In France, the “lending” of employees to another company with the intention or result of having made a profit on these services is prohibited except in very limited cases (temporary work agency, etc.).

However, the “lending” of employees with no profit has been accepted by French case law.

Indeed, the “lending” of employees (with no-profit purpose) is a common and frequent practice especially within companies of the same group.

A recent decision of the French Supreme Court of May 18, 2011 unexpectedly modified this long-standing practice significantly restricting it.

A new law of 28 July 2011 clarified the situation: it provides expressly for the first time that “lending” of employees has no-profit purpose when the “loaning” company only charged the “borrowing” company the paid salary, the relating social security contributions and business expenses relating thereto.

However, this new law also adds new requirements for the validity of the “lending” of employees with no-profit purpose, notably:

- Prior written consent of the employee concerned and amendment to his/her employment contract (mentioning the place of work, the working time and the job position); the employee must also be reinstated within the loaning company with the same functions and remuneration at the end of the loan;
- A written agreement between the loaning and the borrowing companies with specific details of the arrangement;
- Information and consultation of employee’s representatives (works council or staff delegates and health and safety committee) of both companies concerned prior to the implementation of the loan system;
- A probationary period may be contemplated and is mandatory if the “lending” results in a significant modification of the employee’s terms and conditions of employment.

Even though this new legislation secures the common practice of the “lending” of employees for no-profit purpose, companies must comply with the new restrictive conditions to avoid any risk/criminal sanctions with respect notably to works council information and consultation process.

Greater flexibility yet reinforcement and reconfirmation that in France, French is the official language

In March 2011, the French Supreme Court introduced a significant slice of flexibility when it comes to variable remuneration based on objectives to be reached by employee.

Indeed, it adopted a quite favorable decision for employers considering that, under certain conditions, an employer may unilaterally modify the objectives determining an employee’s variable remuneration. Earlier case law required the employees’ written consent for any changes (even more favorable) to the remuneration of the employees.

In a recent decision of June 2011, the French Supreme Court has decided that any document providing for the objectives to be reached by an employee must be in French; otherwise it is not binding on the employee concerned.

In that case, an employee’s remuneration included a fixed part and a variable part subject to individual objectives determined annually.

Following his termination, the employee filed a claim before French Labor Court and notably claimed that the documents fixing his individual objectives were not binding on him given that they were written in English.

The French Supreme Court recalled that, pursuant French Labor code, “any document including obligations for the employee or provisions knowledge of which is necessary for the performance of his/her work must be written in French”.

As a consequence, it decided that the documents were not enforceable against the employee.
It is quite common for multinationals to communicate by e-mail or on the intranet with their employee in English either for basic information but also to provide for policies enforceable within the company or bonus plan.

Employers should review employee documentation drafted in English to avoid the risk of non-enforceability.

Germany: Costs of Works Councils - Does the Employer Really Have to Pay For All and Everything?

By Bernd Weller, Partner, Heuking Kuhn Luer Wojtek, Frankfurt am Main

In many companies, there is a continuous dispute between works council and employer with regard to the costs incurred by the works councils. The works council usually orders office equipment, instructs lawyers, books external training and accommodation and asks for the payment of overtime work – due to long hours in a works council meeting. In this context, many companies are unaware of the stipulations of the works council constitution act (“Betriebsverfassungsgesetz, BetrVG”). During recent months and years, the Federal German Labour Court (“Bundesarbeitsgericht, BAG”) had to deal with such questions quite often and, hence, has clarified many disputes.

With regard to the costs of the works council, typically the following aspects have to be considered: 1. office equipment, office space and personnel, 2. training and external accommodation, 3. expenses of works council members, 4. release and continued pay for works council work, 5. instruction of lawyers, and 6. works council overtime.

1. office equipment, office space and personnel

Section 40 of the BetrVG reads as follows:

Ҥ 40 expenses of works council and material facilities
(1) Any expenses arising out of the activities of the works council shall be borne by the employer.
(2) The employer shall provide, to the necessary extent, the rooms, material facilities, means of information and communication and office staff required for the meetings, consultations and the day-to-day operation of the works council."

As one can see, the law itself makes a difference between (i) expenses, and (2) means that are to be provided by the employer. There is a significant difference between the two categories:

Everything that falls into the scope of Para. (2) is to be provided by the employer. The works council can bring a claim for certain goods and materials in court. The works council, however, cannot buy and organise such material and goods on its own. The following procedure must be observed:

(1) In the first step, the works council decides that it needs certain material.
(2) It then goes to the employer and asks the employer to provide it with the desired goods.
(3) The employer then has to evaluate whether or not – in his opinion – the goods are necessary for the works council’s work.
(4) If the materials are necessary, he should provide the works council with the goods. Otherwise the works council can sue the employer at the Local Labour Court.

During the pending court proceeding, however, there is no obligation for the employer to provide the works council with the desired goods – unless ordered otherwise in a preliminary injunction. Proceedings at the Labour Court between works council and employer (involving the Local, Regional and the Federal Labour Courts) may last for between three and four years. Hence, it can be a tactical instrument for the employer to force the works council to bring a claim through the Labour Court to be provided with certain goods.

But what has been considered “necessary” by the German Labour Courts? Without a doubt, a works council can claim a reasonable works council room, works council computers, fax (separated from the employer’s one), access to a copy station, access to meeting rooms, works council telephone line, internet and email access (for each individual work council member), in particular circumstances a mobile phone for the works council, the collection of legal texts, legal reviews, paper, pens and a homepage in the company’s intranet (if the company has and uses an intranet) and a personal assistant (‘PA’) for the works council.

Usually, disputes between works council and employer concern the works council’s room (size and location), IT and PAs.

It must be noted that consent of the employer is not required. Quite the contrary: the works council can, with the Court’s help, force the employer to provide it with certain goods and means. As regards the works council’s room, there is no absolute minimum according to German Labour Courts. The particular situation of the company and the premises concerned will be relevant. In addition, the number of works council members and those fully released from the working duties (see below) are important to decide what size is actually necessary for the works council. Typically, works councils demand an office that is big enough for all of the works council members to meet at the same time – each with a separate computer. That, however, is not necessary under German law. Typically, only smaller groups of the works council meet in the works council office. If the works council assembles all works council members, they can – like the employer’s representatives do – book a normal conference room and have the meeting there.

Another typical dispute concerns the intranet. Wherever the company has its own intranet, works councils often demand the option to publish their messages to staff on the intranet. Most of the German Labour Courts will grant such an entitlement to the works councils. That, however, does not give the works council’s the right to be its own administrator. The administration of the works council’s intranet site remains with the employer. Of course, the employer must refrain from censoring the works council’s messages. Only where the works council clearly commits criminal offences (for example defamation), can the employer censor the works council’s messages.

Last but not least, the works council’s demand to be provided with its own PA often shocks the employer. Although the works council’s individual members may – wherever necessary – leave their normal jobs and do work council work (see below), that does not prevent a works council from demanding its own PA. Again, whether or not and to which extent (part time, full time) the works council can successfully claim its own PA depends very much on the circumstances of the case. In bigger companies, such a claim is more likely to be granted than in small companies. The selection of the PA is, however, the employer’s task, not the works council’s. The works council can only in particular circumstances reject the employer’s selection. It is not necessarily a bad idea to give the works council a PA selected by the employer.

Para. (1) of section 40 covers most other expenses and costs of the works council, which are described in detail below.

2. Training and external accommodation

According to the BetrVG, both the works council as a representative body and its members individually are entitled to be trained externally to the extent necessary. There is a widespread, and incorrect, belief that each works council member can claim (only) three weeks of training during the four year term of the membership. At any point in time, the works council can meet and jointly decide that the training of an appointed member of the works council in a specific topic is considered necessary. That can exceed the three weeks cap. Again, the works council can book external training and accommodation without the employer’s consent. However, the procedure to be observed is the following:

· 1. The works council decides in one of its meetings to send one or more works council members to a specific external training at a specific point in time.
· 2. That decision is made known to the employer.
· 3. The employer then has three options: (i) consent, (ii) object to this specific date – for example making reference to an important meeting or important workflow that requires the presence of the appointed works council member on his/her workplace, and/or (iii) highlight the fact that the same training is offered at a different point in time and a different location that causes fewer costs and a smaller impact on the internal workflow.
· 4. The works council then can decide to stick with its original plan or to follow the employer’s concerns.
· 5. If the works council does not follow the employer’s concerns, the employer must consider whether to enter into a dispute with the works council regarding the costs of the training.

Generally, wherever the training is necessary for the works council’s work, the employer must bear the costs of the training, accommodation, travelling and the continued pay of the works council member during his/her absence. If an agreement between the employer and works council regarding the specific training cannot be achieved, the employer can deny payment of the above and force the works council member to sue the employer at the Local Labour Court.

3. Expenses of works council members

One of the strongest principles of the BetrVG is that the office of works council member is an honorary post. As a consequence, no remuneration or advantage shall be granted to the works council member due to his/her office as works council member. On the other hand, the works council members shall have no disadvantage from their post. As a consequence, the employer is obligated to bear the necessary costs that are caused by the works council membership.

Whenever the works council member commutes to the work place for works council work, such commuting expenses must be borne by the employer. In general, there are few disputes about such expenses. However a recent decision of the Federal Labour Court highlighted the potential financial exposure of employers in this regard. A female works council member, mother of two children, travelled overnight due to works council assemblies. During that time, the works council member hired a babysitter and claimed the expenses from the employer. To the surprise of many, the Federal Labour Court ordered the employer to bear the expenses for the babysitter.

The important question with regard to expenses is twofold: was the expense caused solely by the works council membership and were the expenses necessary? If both questions are answered “yes” the employer must bear the costs.

4. Release and continued pay for works council work

Works council members – as honorary members – in general have to perform both their normal job and perform the work council duties in addition to this. It is obvious that duties as employee on the one hand and works council duties on the other hand may be contradictory. The BetrVG provides two different solutions to this challenge. First, depending on the size of the company and the number of works councils members, the law allows individual works council members to be released full time from their normal job duties (with continued pay). Second, the law entitles each and every works council member to a temporary release from his/her normal job in order to perform works council tasks, provided that such release is “necessary”. However, necessity is not monitored based on objective criteria. German Labour Courts only check whether or not the individual works council member could legitimately be convinced that a specific task was necessary at a specific point in time. In a nutshell, this limits the monitoring to cases of (evident) abuse.

5. Instruction of lawyers

Lawyers can be instructed by works councils for various purposes – as advisors in the day-to-day business, as representatives in court disputes, as experts for legal questions, as trainers, as participant in arbitrary committees (“Einigungsstelle”) or as speakers in town hall meetings.

If employer and works council call in an arbitrary committee, the remuneration of each external member of such committee is stipulated by law: the (neutral) chairperson freely negotiates his or her remuneration with the employer and the external additional members, i.e. in particular the works council’s lawyer, receive 7/10 of the chairperson’s remuneration.

In court disputes, the representation of the works council is in almost all cases considered necessary. Therefore, the employer must bear the costs of the works council’s legal representation. The fees of the works council’s lawyer are determined according to a statutory lawyers’ remuneration scheme under German law.

Where a lawyer is being instruct as trainer, the above (cf. 2.) applies mutatis mutandis.

In the remaining scenarios, that is where the lawyer is instructed as legal expert or as legal advisor in the day to day business, this is often because of a dispute between employers and works councils. Works councils often (wrongly) believe that they are entitled to be continuously advised by an external lawyer. According to section 80 Para. 3 of the BetrVG,

“The works council can call an external lawyer as expert in after having concluded a respective agreement with the employer and in so far as the call in is necessary for the due full filament of the works council’s tasks.”

According to the law, the works council’s must observe the following procedure:

· 1. First of all, the works council must make a formal resolution (“Beschluss”) according to which the employer’s permission shall be asked to instruct an external lawyer in relation to a specified question and with specified costs.
· 2. Then it is the employer’s decision to grant the instruction of an external lawyer or not.
· 3. Should the employer not grant the instruction of an external lawyer, the works council cannot instruct an external lawyer before a final and binding decision by the German Labour Courts has been made. Such decision may take some years of court proceedings.

As a consequence, works councils have no entitlement to be legally advised on a day to day basis. According to the Federal German Labour Court, such entitlement does not exist and is not needed. According to the BetrVG, the works council is entitled to significant external training so that the works council is able to perform its tasks alone without day to day legal advice.

Nevertheless, many employers pay for the external lawyer of the works council basically for two reasons. First, correct legal advice sometimes facilitates negotiations with the works council – negotiations become more professional. Second, there is often a deep and loyal relationship between works councils and their lawyer. In scenarios where the works council’s lawyer do not earn “enough” such lawyers can use their influence on the works councils to have them take a stronger stand vis-à-vis the employer and file more lawsuits.

6. Overtime payments

Works council members sometimes use a lot of their working time for works council duties. They then often demand the payment of “overtime work” caused by their works council duties. With regard to such overtime, the following must be noted:

· First of all, works council members are generally required to perform their works council duties during normal working time. Works council work outside of normal working time should only occur in exceptional cases. Unfortunately, again the courts monitor only the existence of (evident) abuse.
· If a works council accumulates overtime due to the works council work, section 37 Para. 3 of the BetrVG stipulates that such overtime shall be compensated for by a release from normal working duties. Such release from normal working duties shall be made within one month after the “overtime”.
· The works council member is entitled to overtime pay only where such release is not possible for operational reasons.

7. Summary

As one can see, the BetrVG has much confidence in the works council members and allows them many opportunities to incur costs. Of course, few employers are happy with this. However, in practice he success of German companies on the world markets should be proof that the management of German operations can be successful notwithstanding the existing duties according to the BetrVG.

Guatemala: USTR Issues First Letter of Arbitration in Labor-Related Case Under US Free Trade Agreement

By Tequila J. Brooks, Washington DC

On August 9, 2011, the United States Trade Representative Ron Kirk issued a Letter of Arbitration against the Government of Guatemala in the first ever government-to-government arbitration request to arise from the violation of the labor chapter of a U.S. free trade agreement (FTA). Should the arbitral panel find against the Government of Guatemala, up to $15 million in fines may be assessed.

The claim had its genesis on April 12, 2008 when the AFL-CIO and five Guatemalan unions filed a public communication with the Office of Trade and Labor Assistance (OTLA) in the U.S. Department of Labor alleging that the Government of Guatemala had failed to comply with its obligation under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) to effectively enforce national labor laws.

The CAFTA-DR went into effect in Guatemala on July 1, 2006. Like the labor side agreement to the NAFTA (the North American Agreement on Labor Cooperation - NAALC), Chapter 16 of the CAFTA-DR obligates signatories to effectively enforce their own national labor laws. Unlike those of the NAFTA, the labor provisions of the CAFTA-DR are an integral part of the FTA and the seven signatories to the CAFTA-DR - including the United States - obligated themselves in Article 16.1 to strive to ensure that the workplace protections set forth in the 1998 ILO Declaration on Fundamental Principles and Rights at Work are recognized and protected by law. The workplace protections covered by the 1998 ILO Declaration include freedom of association and the effective recognition of the right to collective bargaining, elimination of all forms of forced or compulsory labor, effective abolition of child labor and elimination of discrimination in respect of employment and occupation. Failing to comply with the labor provisions in Chapter 16 of the CAFTA-DR - as well as Chapter 17 environmental provisions and Chapter 7 technical barriers to trade - is subject to the government-to-government arbitration process set forth in Chapter 20 of the CAFTA-DR. It should be noted that under CAFTA-DR Article 16.6.7, only the Article 16.2.1(a) obligation to effectively enforce labor laws - and not the Article 16.1.1 obligation to strive to recognize and protect fundamental workplace protections - is subject to the Chapter 20 government-to-government arbitration provisions.

The petition submitted to the OTLA outlines Guatemala’s failure to effectively enforce labor laws in the process of privatization of Guatemala’s ports as well as in the banana production, fruit and vegetable processing and garment manufacturing sectors. Each of the five cases discussed in the public communication implicates either the transportation or production of goods for export to the United States by five companies including Bandegua (the Guatemala subsidiary of Del Monte Fresh Produce, the world’s third largest banana producer in the world), INPROCSA (a fruit and vegetable processor that exports to SYSCO, Heinz, Superior Foods International and Safeway Select), Avandia S.A. (a manufacturer that produced garments for Jones Apparel Group and participated briefly in a pilot project to improve compliance with JAG’s corporate code of conduct), Fribo S.A. (a Korean-based manufacturer that produced garments for Kohl's and Dress Barn) and Empresa Portuaria Quetzal (a parastatal company that manages Guatemala’s primary port on the Pacific coast).

The AFL-CIO, four unions and one organizing committee representing workers at these five companies in Guatemala alleged that some or all of the companies engaged in the following activities: failure to bargain in good faith with the unions, unlawful dismissal of union leaders and members, failure to comply with court decisions ordering the reinstatement of unlawfully terminated workers, blacklisting worker representatives for participating in a factory compliance program and failing to make payments to the Guatemalan Social Security Institute after deducting social security contributions from workers’ pay. In two of the cases, union leaders received death threats, were subject to violent threats and attacks and were interrogated by the military about their union activity. On January 15, 2007, Pedro Zamora, the President of STEPQ, the union representing port workers at EPQ, was shot and killed in front of his children. On September 23, 2007, Marco Tulio Ramirez, a union leader and younger brother of the President of SITRABI, the union representing workers on Bandegua’s banana plantations, was killed by masked assailants while walking to work on the Yuma banana plantation. In the CAFTA-DR public communication, these murders were framed as violations of Guatemalans’ freedom to associate and collectively bargain under the 1998 ILO Declaration because of the chilling effect such violence can have on workers’ participation in worker organizations, protesting poor working conditions and negotiating with employers for better wages and improved workplace standards.

To demonstrate a violation of Chapter 16 of the CAFTA-DR or the labor provisions of any of the other nine FTAs the U.S. has with 17 countries, it is necessary to show not that an employer may have violated a nation’s labor and employment laws but that the nation itself failed to effectively enforce those laws. The petition submitted by the AFL-CIO and five Guatemalan worker organizations addresses both systemic failures to enforce labor laws as well as those specific to the five cases raised in the petition. The petitioners argued that the cases demonstrated that the Government of Guatemala failed to protect trade unionists from threats and violence and did not adequately investigate death threats against trade unionists or the assassinations of Pedro Zamora of STEPQ and Marco Tulio Ramirez of SITRABI. Other examples include failing to order the reinstatement of unlawfully terminated workers and union members; not compelling garment manufacturer Fribo S.A. to pay over $1 million in unpaid social security contributions deducted in part from workers’ pay to the Guatemalan Social Security Institute; not enforcing court decisions ordering EPQ to reinstate unlawfully terminated workers and union members; failing to compel fruit and vegetable processor INPROCSA to bargain in good faith with the workers’ union SITRAINPROCSA upon learning of INPROCSA’s non-compliance with labor laws; allowing companies to reincorporate under new names in order to evade legal obligations without consequences; not dispatching labor inspectors to factories to verify whether workers were indeed laid off due to lack of work or as a result of their union activities; allowing companies to refuse entry to labor inspectors; and failing to order the reinstatement of workers terminated for participating in a pilot project to comply with a corporate code of conduct.

The OTLA accepted the petition for review on June 12, 2008, completed its investigation six months later on December 12, 2008 and issued its report on January 16, 2009, four days before the inauguration of President Barack Obama. Based on reviews of documentary evidence and in-person interviews with workers, unions, employers, government officials in Guatemala in July and October, 2008, the OTLA confirmed most of the allegations made in the petition both as to the violations of Guatemalan labor law and the weaknesses of Guatemala’s labor rights enforcement regime. Regarding allegations that the Government of Guatemala failed to provide adequate protection to trade unionists from threats, violence and murder, the OTLA noted that the government offered protection to the entire STEPQ Executive Board, but only provided a single bullet proof vest and required STEPQ to pay for the lodging and expenses for guards although the Ministry of Public Security is legally obligated to pay these expenses. Although it afforded the Government of Guatemala wide latitude and benefit of the doubt regarding investigators’ conclusion that Pedro Zamora’s murder did not have a trade-union related motive, the OTLA did pointedly find, “[W]hen a union leader is violently attacked with total impunity, the crime’s impact can reach beyond the individual and cast a shadow of fear upon others, weakening the right of association and collective bargaining” (OTLA Guatemala Report, p. 8).

The OTLA report draws attention to a number of systemic flaws in Guatemala’s labor rights enforcement regime. One key flaw related to the implementation by Guatemala’s labor ministry of Supreme Court orders and other judicial decisions. The OTLA found, “It does not appear that there is a system that would allow for the court decisions to be shared with the initiating executive agency, so that the agency can see how the [labor] inspection was dealt with, and to incorporate any relevant information into its case management systems” (OTLA Guatemala Report, p. 27). Thus, the labor inspector’s report would be overturned by the judiciary, but the labor inspectorate would never be informed so it would continue to operate on the faulty legal reasoning utilized in the overturned initial report. Another systemic flaw noted by the OTLA was the fact that the Guatemalan Institute of Social Security appears to have no effective mechanism for sanctioning employers that do not make legally-mandated contributions to the social security system or transfer contributions deducted from workers’ pay.

Chapter 16 of the CAFTA-DR is similar to the NAFTA labor side agreement in that it requires that member states engage in a period of ministerial consultations to discuss and address in a non-confrontational manner any issues uncovered in the report written as the result of a public communication. Generally, ministerial consultations are the first stage in a process that may lead to further inter-governmental action. In the case of the NAFTA labor side agreement, no public communication has ever gone beyond the stage of ministerial consultations. In its report in response to the Guatemala petition, the OTLA recommended against ministerial consultations. While this recommendation may seem counter-intuitive given the violence perpetrated against trade union leaders in two of the cases raised in the petition and the observations made by the OTLA about systemic flaws in Guatemalan labor enforcement mechanisms and failures to effectively and enforce labor laws in cases involving individual companies, the introduction of the OTLA’s report gives some indication as to why this recommendation was made that goes beyond a simply political interpretation and analysis. Given a recent change in presidential administration in Guatemala and the extreme cooperation of the Government of Guatemala in facilitating the OTLA’s investigation of the petition, it appears that the OTLA decided to afford the Government of Guatemala the opportunity to address matters raised in the petition without calling for ministerial consultations - but not without limits. The OTLA left itself an opening to request ministerial consultations if the matters raised in the public communication and discussed in its report were not addressed within 6 months. This time limit included in the OTLA’s report laid the procedural groundwork for the USTR’s eventual request for arbitration in August 2011. After a year and a half of ongoing “informal” discussions between the U.S. and Guatemalan governments, on June 30, 2010, the USTR and OTLA called for ministerial consultations with Guatemala which were conducted in Guatemala in September and December 2010. When ministerial consultations did not have the desired effect, the USTR called for a meeting of the labor and economic ministers of all the CAFTA-DR member states on May 16, 2011. This meeting was held on June 7, 2011. When this meeting did not have the desired effect of improved application and enforcement of Guatemalan’s labor laws, the USTR called for an arbitral panel on August 9, 2011.

Despite the numerous differences between Guatemala and Mexico and the structural and legal differences between the NAFTA and the CAFTA-DR, the inter-agency approach taken by the U.S. and Guatemalan governments in addressing the claims made in the 2008 Guatemala CAFTA-DR petition demonstrates a number of potentially beneficial and positive practical effects of the inter-agency approach. One such example is engaging Guatemala’s Ministry of the Economy in de-certifying Guatemalan companies that do not comply with labor laws or pay their social security contributions from tax benefits and economic trade-related benefits afforded by the CAFTA-DR and even from conducting business altogether - and better tracking companies that change their business registration for the purpose of avoiding legal obligations under labor, social security and other laws.

USTR Letter of Arbitration:
USTR Web Page about the Guatemala petition:
OTLA Report on the Guatemala petition: and Guatemalan Unions petition on Guatemala’s failure to effective enforce labor laws: