Friday, September 28, 2012

Welcome to the September edition

Welcome to the September edition of the International Employment Committee Newsletter.  Many thanks as always to all those who have contributed articles to this edition.

The next issue will be published in December - please let me know if you are interested in submitting an article on an issue in your jurisdiction.

Helen Colquhoun
Dual qualified in NY and England & Wales
Withers Bergman LLP

Canada - Freedom of Association under the Charter: Snake or Tree?

By Michael A. Hines, Hicks Morley
The ancient parable of the six blind men and the elephant is a lesson in perspective. Each blind man was asked to describe “what an elephant is like” by touching one part of the animal. One, touching the trunk, proclaimed elephants to be like snakes. Another, touching a leg, declared elephants to be like trees. And so on.
This lesson, combined with the ability of courts to see what they want in earlier precedent, provides an insight into two recent decisions from Saskatchewan and Ontario on the so-called Charter “right to collective bargaining.”
The “elephant” in question is the recent Supreme Court of Canada case law on section 2(d) of the Charter, most particularly its unanimous 2007 decision in B.C. Health Services and its 2011 decision in Ontario (Attorney General) v. Fraser (“Fraser”).
Section 2(d) guarantees to everyone the fundamental “freedom of association.” The legal question here concerns the extent to which unions can use section 2(d) to challenge legislation adverse to their interests. B.C. Health Services was hailed as the case that reversed a series of 1987 Supreme Court decisions, making labour legislation and “collective bargaining” finally subject to Charter rights – a case that would, for the first time, force governments to exercise legal caution when enacting wage restraint legislation, back-to-work legislation and so on. Significantly, B.C. Health Services emphasized that section 2(d) does not prescribe any particular model of labour relations, so long as a process of “good faith collective bargaining” is statutorily protected.
The Court’s fragile “unanimity” in B.C. Health Services was soon revealed by Fraser, which yielded four sets of reasons among its nine members. It should therefore come as no surprise that these cases are now generating divergent interpretations. What is striking is the extent of the disparity. Indeed, accepting a basic shared parameter (the applicability of section 2(d) to labour law), the two most recent cases could not be more different.
On February 6, 2012, Justice Ball of the Saskatchewan Court of Queen’s Bench released his decision in Saskatchewan v. Saskatchewan Federation of Labour (“SFL”). At issue was the constitutionality of The Public Service Essential Services Act (“PSES”), which guaranteed the continuous provision of public services necessary to ensure safety, health and order. Employees engaged in providing such services were prohibited from striking at any time.
PSES was unusual in two important respects. First, employers covered by PSES could determine, without appeal, which services were to be regarded as essential. Second, PSES contained no third-party dispute resolution mechanism to resolve outstanding bargaining issues. The collective bargaining concerns of “essential services workers” could remain unresolved indefinitely.
Although Justice Ball could have focused on the absence of any dispute resolution mechanism to support a conclusion that section 2(d) had been violated, his decision was much more specific. He held that section 2(d) constitutionally guarantees a right to strike. The denial within PSES of a right to strike was sufficient on its own to constitute a section 2(d) violation, forcing the government to justify this omission under section 1 of the Charter. The implications for police, hospital and other similar “no strike” labour regimes are obvious.
Justice Ball placed extensive reliance on the dissenting judgment of Chief Justice Dickson in the three 1987 decisions that B.C. Health Services had overturned. He also relied heavily on an analysis of Canada’s international treaty obligations regarding labour laws and collective bargaining, many of which advert to a “right to strike.” He regarded the majority decision in Fraser as an unqualified endorsement of B.C. Health Services. He mentioned only in passing the Court’s important observation that section 2(d) does not compel any specific model of collective bargaining.
On June 1, 2012, the Ontario Court of Appeal released its decision in Mounted Police Association of Ontario v. Canada concerning the labour law regime applicable to members of the RCMP. The issue was more fundamental and less extreme than the “right to strike” affirmation in SFL. The challenged provisions did not require the employer to recognize any employee association selected by the affected employees. Rather, the legislation provided a structure that allowed the employees to elect a number of Staff Relations Representatives (“SRRs”) who would discuss, in good faith, matters of concern with representatives of the employer. There was, of course, no right to strike. The only “dispute resolution mechanism” concerned salary, where a panel of two SRRs, two employer representatives and a neutral chair would do no more than make recommendations to the Treasury Board concerning compensation issues.
The analysis in SFL would have found a violation of section 2(d) simply based on the absence of a “Charter-guaranteed right to strike.” Yet in its unanimous decision, the Ontario Court of Appeal found the legislation to be consistent with section 2(d). SFL was not mentioned. Fraser was regarded as having tempered B.C. Health Services and was interpreted as being based largely on its unusual facts –a consideration of the Charter rights of migrant, politically disenfranchised agricultural workers that had little to say about well-organized police unions. The revered “Charter right to collective bargaining” was held to be merely a “derivative right” arising in certain cases only as an adjunct to the freedom of association. International treaties were not mentioned. Rather, the Court pointed out that many successful labour relations systems in other countries were modelled on “representative” systems like the SRR structure at issue.
This observation, combined with the statement in B.C. Health Services regarding “no single prescribed model,” allowed the Court to find that the model before it was sufficient to guarantee the associative freedoms protected by section 2(d).
So is “the Charter right to collective bargaining” a snake, a tree, or something else? The answers at this stage are anything but clear.

Denmark - Sanctions imposed on multinational corporations failing to register whistleblowing systems

By Oline Nowicki, Sofie Bille-Steenberg and Anders Etgen Reitz, IUNO

Danish subsidiaries of parent Companies listed in the US should be mindful of the parent Companies’ obligation to have whistleblowing systems under US law and to their duty to register these systems with the Danish Data Protection Agency. If the company fails to register its whistleblowing system in Denmark, it will be fined.
According to the most recent figures from August 2012, 134 companies in Denmark had registered their whistleblowing systems with the Danish Data Protection Agency.

The primary purpose of a whistleblowing hotline is to ensure that employees and others can report any wrongdoings in the company to its management or an external hotline.

Under Danish law, it is up to the company whether it wishes to introduce a whistleblowing scheme. It is, however, different under US law. And this may cause multinational corporations with Danish subsidiaries to face problems.

US law on whistleblowing systems
In 2002 the United States introduced the so-called Sarbanes-Oxley Act which provides that all publicly traded companies must have a whistleblowing system. The whistleblowing system also applies to the company’s subsidiaries, which will often appear from the internal guidelines of the subsidiary.  In 2010  the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, and this Act gives the whistleblower a potential "bonus" equal to 10-30 % of the sanctions imposed on the company.

Multinational corporations with Danish subsidiaries obliged
The US law is significant to Danish companies if the parent company is listed in the United States and where it is typically the parent company that administers the company’s whistleblowing system. Under Danish data protection law, the company is obliged to register its whistleblowing system with the Danish Data Protection Agency. This is important for the companies as a violation of the duty to register is punished by fine. The maximum penalty is in principle imprisonment of up to four months, but this penalty has never been applied in practice.

Before the company registers the whistleblowing system with the Danish Data Protection Agency, it is necessary for the parent and the subsidiary company to clarify between themselves who will be the responsible Data Handler. This will be the company that has to ensure that the Danish regulations will be followed and that the security is up to code.

Easy to overlook
Many Danish parent companies have become attentive to the duty to register their whistleblowing systems in Denmark. The problems of whistleblowing systems can, however, easily be overlooked by subsidiaries with parent companies listed in the United States. Therefore, it is particularly important to pay attention to the duty to register whistleblowing schemes with the Danish Data Protection Agency and to the sanctions applied in case of failure to register.

France - New legislation: increase of human resources costs in France

By Roselyn S. Sands – Ernst & Young Société d’Avocats - Paris, France *
New legislation: increase of human resources costs in France – Part 1
As promised during the presidential campaign, the new government has enacted several reforms this summer in France. These reforms have a significant impact on human resources matters and will generally increase costs for employers as well as employees.
1)       New Finance Bill for 2012
The Finance Bill for 2012, published on August 17, 2012, contains several measures affecting tax costs for employers in France:
a)       Increased taxation on stock options and free grants of shares;
b)      Increased taxation on profit sharing payments and other employee savings vehicles;
c)       Increased taxation on overtime work;
d)      Increased taxation on termination indemnities.

a)                   Increased taxation on stock options and free grants of shares:
The Finance Bill for 2012 provides that:
·         The employer contribution to be paid upon the grant of stock options or free shares is increased from 14% to 30%.
·         The employee contribution to be paid based on profits when the options are exercised is increased from 8% to 10%.
This new measure is effective for options and free shares granted as from July 11, 2012.
b)                   Increased taxation on profit sharing and other employee company savings vehicles:
The Finance Bill for 2012 contains measures increasing from 8% to 20% the employer social contribution (forfait social) applicable to the following programs:
·         Compulsory profit sharing (participation)
·         Optional profit sharing (intéressement)
·         Company contribution to retirement plans (known as ‘PEE’ or ‘PERCO’)
·         Company contribution to optional supplementary retirement plans
·         Director’s fees (jetons de presence)
·         Bonus on profit sharing (prime de partage de profit)
This new measure is effective for payments made as from August 1, 2012.
The rate of 8% remains applicable for company contributions to supplementary welfare insurance plans.
c)                   Increased taxation on overtime:
The law of  August 21, 2007 (known as ‘TEPA’ law) provided for exemptions of employer and employee social security contributions on overtime pay.
The Finance Bill for 2012 contains cancels this TEPA law as follows:
         Employee social security contributions and personal income tax on overtime performed will no longer be exempt.
         Employer social security contributions on overtime pay will no longer be exempt in companies with 20 employees or more.
This new measure will generally be applicable for overtime pay as from September 1, 2012.
d)                   Increased taxation on termination indemnities
Prior to the Finance Bill for 2012, the indemnities paid to employees or corporate officers upon termination of their employment contract or office were exempt from social contributions, within certain limits, but were fully subject to social contributions when they exceeded 1 million Euro.
The Finance Bill for 2012 decreases this 1 million Euros ceiling down to 363,720 € effective for indemnities paid as of September 1, 2012. This means that if termination indemnities surpass 363,720 €, they are fully taxable for social security and employee personal income tax purposes.
2)       Key HR issues submitted to unions for negotiations
In addition to the foregoing, and in keeping with the tradition of labor relations consultations in France, the Government also released guidelines encouraging union negotiations and discussions on several HR matters prior to potential legislation on these matters in 2013–14.
These guidelines are currently under discussions and may impact HR flexibility and the costs of doing business in France over the next few years.
-         The “Generations Contract”
To manage the increasing need to keep older employees working longer discussions have been launched with the aim of promoting the employment of older employees and young employees. Exemption from social security contributions in the context of hiring both a ‘younger’ and an ‘older’ employee are being discussed as a potential incentive measure.
These negotiations could result in a draft ‘Generations Contract’ bill to be put before Parliament in early 2013.
-         Measures to secure employment and potential modifications to redundancy procedures
A guidance paper was presented to unions in September 2012 on “securing” employment including fighting against precarious employment, improving measures to avoid dismissals, clarifying mass redundancy procedures. This could result in a bill to be put before Parliament in the first quarter of 2013.
-         Mass Redundancies
A draft bill is under discussion to clarify/limit of mass redundancies in companies paying dividends to their shareholders.
-         Remuneration
An official consultation was organized by the government on remuneration paid to senior executives and increased corporate governance monitoring of very high compensation.
This could give rise to a draft bill to be put before Parliament by the end of 2012.
-         Gender equality
In an effort to achieve ‘true’ equality between men and women, negotiations started in September 2012 around current penalties for discrimination and revisions to increase the efficiency of measures that promote equality. The first measures are expected for 8 March 2013 (International Women’s day!).
-         Employee representatives
In an effort to promote social dialogue, negotiations have started in September 2012 to revisit the role of the existing employee representative bodies and simplify the numerous existing compulsory negotiations that must take place on a recurring basis within larger companies.
The French government will continue to pass legislation on these human resources matters. We will be sure to provide a new update (Part 2) in the next issue.