Wednesday, August 7, 2013

International Employment Law Newsletter - Summer edition - August 2013

Dear All,
Welcome to the Summer edition of the International Employment Committee newsletter.

This quarter we have a great issue with articles from a number of jurisdictions including Bangladesh, France, Mexico, Netherlands and the US.

Many thanks to all those who have contributed to making this such a successful edition.

Roselyn S. Sands
EY Société d’Avocats
Dual Qualified Attorney USA & France

Bangladesh - U.S. President suspends Bangladesh from preferential trade benefits program

by Tequila J. Brooks

            On June 27, 2013, the U.S. President suspended Bangladesh from participating in the General System of Preferences trade benefits program.  Suspension of benefits will go into effect 60 days after the announcement.

            The U.S. GSP program is designed to promote economic development and afford less developed countries duty-free access to U.S. markets for specified goods.  Among 127 designated beneficiary countries, Bangladesh is classified as one of the 44 least-developed beneficiaries (along with Afghanistan, Mali, Cambodia and others) for special treatment under the GSP program.  Under 19 USC § 2462(b)(2)(G), a country may be suspended from the program if it has not taken or is not taking steps to afford  internationally recognized workers rights within its territory - including in designated "export processing zones."

            Suspension of GSP benefits previously extended to Bangladesh occurred in the wake of the April 2013 building collapse at Rana Plaza in Dhaka which led to the deaths of 1,129 garment workers, but in fact was the culmination of a trade benefits review process that began almost exactly six years ago with a petition filed by the AFL-CIO.  The June 22, 2007 AFL-CIO GSP petition was the fifth labor petition to be filed against Bangladesh in the last 23 years, following petitions filed in 1990, 1999, 2004 and 2005. 

            The June 2007 petition alleged that Bangladesh failed to afford internationally recognized worker rights in export processing zones (EPZs, which have been recognized under Bangladeshi law since 1980) as well as in the ready-made garment and shrimp and fish processing industries.  Violations outlined in the petition included inadequate legal protections in and dilatory enforcement of a 2004 law governing the associational rights of workers in EPZs - including an executive decree denying workers under the age of 25 the right to hold union leadership positions despite the high participation of young workers in EPZs, improper calculation of workers' wages by employers and labor authorities and the failure to create legal institutions outlined in the law.  In the garment manufacturing sector, the AFL-CIO pointed to the failure of government authorities and employers to implement a 12-point tripartite agreement entered into in 2004 as the result of violence that erupted due to poor working conditions in the garment industry.  The tripartite agreement called for a higher minimum wage, written employment letters, timely pay, payment of unpaid wages and timely registration of trade union registration applications.  Noting the lack of regulations governing the shrimp and fish processing industry and the lack of an official minimum wage, the AFL-CIO pointed to the existence of debt bondage, "company stores," dangerous child labor, lack of documentation and payment of wages and overtime owed and widespread verbal and physical harassment of workers.

            The June 2007 petition also alleged that Bangladeshi police, army, intelligence and security forces actively violated the rights of trade union leaders and members through beatings, detention, deployment of the paramilitary Rapid Action Battalion (RAB) to force trade union leaders to resign from factories as well as utilization of Special Branch intelligence services to monitor the activities and members of trade unions and labor NGOs.

            As a result of the 2007 petition, the U.S. Trade Representative placed Bangladesh on "continuing review" status in September 2007 to monitor progress of improvements to labor law provisions and enforcement.  Hearings in which both the AFL-CIO and Bangladeshi authorities presented their points of view were held in October 2007, October 2009 and January 2012.  In April 2011, the AFL-CIO filed an update to its original June 2007 petition, noting that while the Bangladeshi minimum wage had been nominally increased, working conditions had in fact gotten worse in Bangladesh since the filing of the original petition.  The Bangladesh Center for Worker Solidarity (BCWS) had been de-registered by government authorities and BCWS leaders, including Aminul Islam (who was later murdered) had been arrested on baseless charges by national security and intelligence agents.  Building safety issues also plagued garment factories in Bangladesh.  The AFL-CIO pointed to factory fires in August 2009, February 2010, December 2010 and April 2011 that killed a total of almost 50 people including a firefighter, in addition to inadequate wage and social security benefit levels and ongoing lack of a legal infrastructure to resolve labor disputes in EPZs.  Observers estimate that over 500 workers were killed in fires in Bangladeshi factories between 2006 and 2012.  In November 2012, over 100 workers were killed in the Tazreen Fashions factory in Dhaka. In a March 2013 brief to the USTR, AFL-CIO listed over 40 factory fires that occurred in Bangladesh between November 2012 and March 2013.

             Legal procedures stemming from the 2007 AFL-CIO petition culminated in a hearing at USTR headquarters in Washington, DC on March 28, 2013, with Bangladeshi officials arguing that some progress had been made since 2007 and lobbying the Obama administration and U.S. Congress to maintain trade benefits under the GSP.  Less than 3 weeks later, 1,129 people died in the Rana Plaza building collapse.  In his press release on the decision to suspend GSP benefits to Bangladesh, recently-appointed USTR Michael Froman noted that the U.S. Department of Labor had provided and will continue to provide technical assistance to Bangladesh to improve its labor law framework and enforcement, as well as to improve factory building and fire safety.  

            While a quarter of Bangladesh's exports are destined for U.S. markets, the European Union is Bangladesh's leading trading partner.  Bangladesh is a participant in the EU's GSP program as well as that of the U.S.  According to the EU Trade Commissioner, 90% of Bangladesh's exports to the EU consist of clothing and knit products.  On July 8, 2013, the EU Trade Commissioner announced the launch of the Compact for Continuous Improvements in Labour Rights and Factory Safety in the Ready-Made Garment and Knitwear Industry in Bangladesh.  This Sustainability Compact was launched in partnership with the ILO and Bangladeshi social partners (government authorities, employer and trade union) and calls for reforms to Bangladesh's labor laws and recruitment of 200 additional safety inspectors by the end of 2013 as well as improvement of building and fire safety in garment factories by June 2014.  All efforts will be conducted with technical assistance and monitoring provided by the ILO.

            On July 19, 2013, the U.S. DOL, Department of State and USTR issued a joint press release outlining steps that the Government of Bangladesh must take in order to have its GSP benefits restored. These steps include development and improvement of labor, fire and building standards and improvement of trade union protections and administration in the garment and shrimp processing sectors and in EPZs.  In its press release, the Obama administration announced that it would cooperate with the EU and the ILO in their Sustainability compact for continued labor and safety improvements in the garment industry in Bangladesh. 

            In addition to actions taken by international, European and U.S. authorities, two competing multi-stakeholder/private fire and building safety initiatives came into existence in the wake of the Rana Plaza disaster.  The first is the May 13, 2013 Accord on Fire and Building Safety in Bangladesh which calls for safety inspections, remediation and fire safety training and credible safety inspections for Bangladeshi garment factories in member supply chains.  The Accord establishes a Steering Committee with an equal number of trade union and employer representatives (3 each) with a neutral chair chosen by the ILO.  The Accord also establishes dispute resolution and worker complaint mechanisms.  The majority of the company signatories to the Accord are European.  The other private mechanism is the Alliance for Bangladesh Worker Safety established on July 10, 2013 by a group of U.S. and Canadian companies led by Wal-Mart and The Gap.  The Alliance is supported by the American and Canadian Apparel and Footwear Associations and other industry organizations.  It has no trade union or worker participation in its governance structure but does contemplate unilateral donations from member companies.

- Technical Trade Proclamation to Congress Regarding Bangladesh by the President of the United States (June 27, 2013):
- USTR Press Release on President's Decision to Suspend GSP Benefits for Bangladesh (June 27, 2013):
- Statement by the U.S. Government on Labor Rights and Factory Safety in Bangladesh (July 19, 2013):
 - EU Trade Commissioner press release on Global Sustainability Compact in response to Bangladesh tragedy (July 8, 2013):
- Alliance for Bangladesh Worker Safety (July 10, 2013):
- US ‘will consider GSP revival for Bangladesh’ (BD News 24, July 10, 2013):

France - New French Labor & Employment Law Legislation Brings Significant Changes – Effective Date June 17, 2013

By Roselyn S. Sands
EY Société d’Avocats

In the context of high unemployment and complex labor & employment laws, France has taken a step towards a “flexi-security” model.  Indeed, the new law on the securisation of work (known as “LSE”) grants employers greater flexibility and safeguards to adapt to the difficult economic environment, while providing increased protections and flexibility to employees to help them adapt as well.  The key features of this new law are summarized below.

Increased Flexibility for Employers and Employees

The LSE law aims to increase flexibility in the way in which employers and employees manage their labor relationships.  Through groundbreaking modifications of the French labor rules, companies, when facing serious economic difficulties, may now achieve flexibility through collective bargaining, thus reducing HR costs, either by reducing compensation or increasing working hours.  For the duration of this agreement, the employer must commit not to engage in redundancies.
Additionally, again through collective bargaining, employers can now further modify the employment relationship by unilaterally changing employee positions or job locations, without employee consent.
In a novel new measure, the LSE law also allows employees greater flexibility in the way they manage their careers and gain new professional experiences.  In companies of over 300 employees, employees may experiment working in another company without losing the ability to return to work if they so choose.  At the end of the period, employees can either resign and choose to remain with their new employer or return to their previous employer.
Increased Protections for Employees Impacting HR
Costs for Employers

Under the new LSE law, all employees will be entitled to additional health insurance in 2016.  Indeed, as of January 1, 2016, all employees must be covered by a top-up health insurance, in addition to the current compulsory Social Security health insurance.  The employer will bear at least half of the cost of this new health insurance.  Additionally, unemployed workers will be entitled to the continuation of health insurance at the employer’s expense for 12 months.
The new law encourages full-time work and open-ended employment contracts.  Part-time work must be at least 24 hours per week, unless a shorter working time is expressly requested by the employee, with increased pay of 10 to 25%.  The costs of overtime pay for part-time work will also be increased by 10% starting January 1, 2014.  In addition, recourse to fixed-term employment contracts will be made more expensive for employers, through an increase of the employer’s unemployment contribution rates.
Reinforced Role for Works Councils and Employee Representation

In order to facilitate the transmission of information to Works Councils and employee representatives, companies of over 300 employees must create a dedicated database containing various economic, financial and social information.  This database will only be accessible by employee elected representatives.
The new LSE law also creates two new mandatory consultations of the Works Council: one annual consultation regarding the company’s general strategic orientations, and one annual consultation regarding the use of the available new tax credit for companies (“CICE”).
In companies with total headcount of at least 10,000 worldwide or 5,000 in France, employees must now be represented at the governance body level defining the company’s strategy, e.g.,
the board of directors or supervisory board.

Modification of Large-Scale Redundancy Process
One of the great difficulties for employers in France in a redundancy process is managing the timeline of the Works Council process and its completion.  For this reason, the new law provides that a redundancy process may be more carefully managed through two potential avenues:
(i)        A collectively bargained company-wide agreement with unions.  Among other things, this agreement can fix the number and agenda of meetings with the Works Council, fixed periods of time between such meetings, the list of documents to disclose, the conditions under which an expert may be called upon by the Works Council, the selection criteria and the content of the social plan.  This agreement is to be validated by the Labor administration within a 15-day period.
(ii)       Labor administration validation, whereby the employer unilaterally files a document with the Labor administration, containing the above measures.  The administration has 21 days to reject this plan otherwise it is deemed accepted, and redundancies may begin and must be communicated to the Works Council.  Under this method, a maximum period of time is set for the duration of the Works Council process, based on the number of employees to be terminated.
The Works Council consultation process must be completed within 2-4 months depending on the number of redundancies.
This significant change to redundancy laws aims at eliminating the uncertainty factor in the timing and costs of the redundancy process.
Specifically, when the closure of a company or establishment is considered, the employer must now search for a purchaser as soon as the announcement of the shut down project is made.  The Works Council must be informed and consulted about this search, and can seek the analysis of an expert for the sale process, its methodology and scope to permit it, to assess the information available to potential purchasers and comment on the sale projects.  When a potential purchaser presents an offer to buy the company, the Works Council must be informed and consulted so that it may render a non-binding opinion on this offer prior to acceptance by the company.
Simplification of the Litigation Process

The statute of limitations for employees to file a legal action for wrongful termination of the employment contract will now be reduced from five to two years (the statute of limitation was 30 years before 2008!).  Claims based on payment of salary have a 3-year statute of limitation.  Claims of discrimination or harassment have a 5-year statute of limitation.
Conciliation of employee litigation at an early stage of the procedure will be encouraged, by the creation of a suggested indemnity scale.  The amount of this indemnity varies depending on the employee’s years of service, from two months salary (under two years of service) to 14 months salary (as from 25 years of service).

Mexico - The Federal Labor Law Amendment - Flexibility Towards Productivity

By Pietro Straulino
R.Sánchez DeVanny

Mexican Labor Law (MLL) was finally amended last November 30, 2012 by President Calderón.  On the next day, President Peña Nieto took office.  This amendment was achieved after more than forty years of discussions, meetings and negotiations between different political parties, players and groups trying to reach a consensus at the Mexican Congress.

The MLL, intends to bring flexibility to employers and boost the productivity and investment in Mexico.  Some of the newest institutions in MLL are the following:
(i)    Probation/Training Labor Agreements;
(ii)   Regulation of the Out-Sourcing regime;
(iii)  Limitation to the back wages in labor litigation awards up to a year (and then payment of accrued interests); and
(iv)  The possibility to pay or to settle any labor claim at any point of the trial or before the final resolution has been issued.

Probation/Training Labor Agreements
In jurisdictions different from Mexico, it was possible to execute probation/training agreements with the employees.  Hiring them under those specific circumstances and then if they failed to perform under the probation period or if they did not score positively during their training period the labor relation was immediately terminated.  The terms provided by the MLL are:
Probation agreement[1].  The term shall be from 30 days up to 180 days, for employees under managerial positions or when the employees render technical or specialized services.
Training agreement[2]. The term shall also be from 3 months up to 7 months, for employees hired for executive, administrative or decision making positions, or when the services to be rendered are specialized.
In both cases the agreement must be executed in writing, they cannot be executed simultaneously or successively, and it is a onetime option for any employee of the company.  The employee hired under these conditions must receive payment and the same benefits as other employees and it is mandatory to pay for social security benefits. Once the termination day approaches, in order to avoid subjective and/or arbitrary decisions by the employer, the Joint Productivity, Skills and Training Committee[3] has to be informed.  We recommend preparing the appropriate data to inform the Commission in case the agreement needs to be terminated.  Failure to notify the Commission or the employee before the expiration of the corresponding term will result in the continuation of the labor relation indefinitely, and if it is terminated, severance payment will be applicable.  We also recommend having a receipt signed by the employee at the termination where all proportional benefits are paid and no further benefits are due.

Regulation of an Out-Sourcing regime
Prior to the amendment of the MLL, the Out-Sourcing regime was poorly regulated.  It was not clear when it was possible to outsource services and when this scheme went against the interests of the employees.  While numerous companies entered into the Out-Sourcing business, some of them illegally benefited from the employees since they avoided payment of adequate salaries, benefits and social provisions (health, pension and housing), all of which are mandatory in the current amended regime.
The Out-Sourcing scheme shall be applicable when an employer called Contractor executes or provides services with the employees under his dependence, in favor of a Client (either individual or entity), but the Client is responsible for setting the tasks and supervising the rendered services, normally at his own premises.
In order to avoid liabilities (fines that could be up to 250-5000 times the minimum wage in Mexico and litigation for discrimination or employment recognition), this regime has to comply with the following conditions:
a)      The services rendered by the Contractor shall not comprise all of the company’s activities[4], or be equal or similar to the ones rendered or developed by the company in the determined premises;
b)      The hired services have to be specialized; and
c)      The services shall not constitute similar or equal activities as the ones rendered by the company’s employees at the premises.

The Out-Sourcing agreement shall be executed in writing and the client has to make sure that the Contractor complies with the labor and social security’s obligations with its employees.  It is also important to ensure that the Contractor has the sufficient economic resources to respond for any claim.

Failure to satisfy the requirements mentioned above will bring as a consequence:
a)      The client shall be deemed as the employer of the Contractor´s employees with the following effects:
                              i.      Labor: payment of salaries, benefits and even profit sharing bonus; and
                              ii.      Social Security: payment of quotas, fines and inflation increases.
b)       If the labor authority considers that the Out-Sourcing regime was used fraudulently (when the main objective was to diminish the employee’s benefits, mainly profit sharing bonus) a fine shall be imposed.  This fine shall amount to approximately USD $1,250 up to USD $25,000 per employee.

It is be very important to analyze the corporate structure of the companies who have an operating company (and no employees) and a services company (with employees that render services to the operating company) in order to comply with the requirements mentioned above to avoid liabilities.

Limitation of the back wages up to a year (and then payment of interests)
Prior to the amendment of the MLL, if any employee sued its employer he/she had the chance to claim severance payment or reinstatement in addition to, in any of these cases, the back wages from the separation date until the employer finally paid or reinstated the employee.  Normally any labor claim filed in Mexico lasts from 2 to 4 years, so the amounts for back wages represent the biggest percentage of the contingency amount for any labor claim.
The amendment to the MLL establishes a limitation to the back wages.  Now the back wages shall be paid for a maximum of one year, starting on the day the employee was terminated.  After such year, a 2% monthly interest shall apply on the basis of 15 months of salary payment (3 months for severance payment and 12 months for the first year of capped back wages).
This limitation is creating a psychological effect on the employee and its counsel to make labor trials more agile and expedite.  Prior to the amendment, any plaintiff’s goal would be to extend the process so that the liability on any labor claim would increase proportionally to the time passed on a daily integrated wage basis.  According to our experience, labor claims are now being processed in shorter periods between 6 months and a year, and plaintiffs are more inclined to settle. Moreover, flexibility can be foreseen in case the employer decides to terminate the employment contract as a result of the labor costs (in case of litigation).

The possibility to pay or to settle a labor claim at any point or prior the final resolution has been issued
            One of the least discussed aspects on the MLL amendment, but in our opinion the most useful for any budget forecast, is the possibility to pay (fully or partially) any plaintiff’s labor claim.
If the plaintiff sues for severance payment (even if the amounts he/she is claiming do not correspond to the salary and/or benefits legally applicable) there is a possibility to pay the amounts that actually correspond to the plaintiff in front of the Board and stop the liability and back wages as soon as the amount is deposited before the labor authority. 
The pending benefits (those subject to evidence) can later be subject to the Board’s ruling throughout the process.  The importance of this possibility is mainly that even though the employee is suing for an amount or for benefits that he/she never gained, there is no impediment to solve the labor case promptly, stop the liability of the back wages and avoid long labor processes that participated in encouraging a negative perception of Mexico’s labor system, as inefficient for the present time. 
With the above examples of the latest amendments to the MLL, the government tries to incorporate 6.8 million individuals to the formal market in order to make them contribute to the Country’s growth and productivity.  Increasing flexibility and clarifying labor costs will boost Mexico’s foreign investment numbers and raise its worldwide exposure considerably as a competitive labor market.  However, this effectiveness will depend on the advance of other strategic legal reforms that are currently in progress.

[1] Whenever the employee has the skills and capabilities to render the agreed services, but yet needs to prove he/she can be reliable.
[2] The employee shall receive the skills and capabilities training from the employer, the employer shall mark the employee’s results of the training.
[3] This Commission, joined by representatives from the employer and employees is also a new institution of the MLL.
[4] We will need to refer to the scope of the Company’s activities in the By-laws.

Netherlands – The Labour Market Reform Program

By Els de Wind

Van Doorne N.V.

The Dutch government and social partners have recently reached agreement on a package of short-term measures to stimulate economic recovery and adapt the labour market to the current needs. They proposed an active approach towards preventing unemployment and helping employees move from one job to another. The goal of the program is to minimise the time spent on unemployment benefits for the good of employees, employers and public finances. To ensure equal treatment, compulsory procedures for the termination of employment will be introduced. Employees who are made redundant will no longer be entitled to a severance pay, but will receive a transition fee instead, enabling them to train for a new job, improve their employability and generally increase their chances to get a new job. The position of employees working on temporary employment contracts will be strengthened. Employees coping with occupational disability will be better assisted in finding suitable work. When the reform program was launched, it was announced that in case Dutch economy would not have improved by September 2013, the measures will need to be renegotiated. We will keep you informed on developments around the announced reform program.

Flexible employment
In order to achieve a better balance between the degree of protection enjoyed by temporary employees and permanent employees, proposals are made to strengthen the position of temporary employees as from 1 January 2015. Employees with a temporary contract will qualify for a permanent contract sooner and will enjoy more security. No more than three consecutive contracts can be agreed by the same parties (intervals of up to six months - which used to be three months - do not ‘break the chain’). The fourth contract will make the contract permanent. Parties might even be in a situation that two or more employment contracts is the maximum: the total duration of two or more consecutive temporary contracts may not exceed a total duration of 24 months (this used to be 36 months). Again: intervals of up to six months do not count. These rules do not apply to employment contracts of persons under the age of 18. It is allowed to agree in a collective bargaining agreement that instead of a maximum of three contracts in 24 months, a maximum of six contracts in 48 months can be entered into before the contract becomes permanent.

Probation periods may no longer be included in temporary employment contracts for six months or less. Where a non-compete provision may currently be agreed in temporary contracts, this will no longer be allowed, unless under (yet to be defined) ‘special circumstances’.

Termination of employment
As from 1 January 2016 the procedural rules on the termination of employment contracts will be simplified. Currently employers have the choice to go through a Labour Office (UWV) or a court procedure if they want to terminate an employment contract. The court can award severance pay to the employee (or the employer), but the Labour Office cannot, forcing employees to initiate a court procedure to claim severance pay. Employees in the same situation are therefore not always treated equally, as the different procedural routes may have a different outcome. Under the new rules, the Labour Office procedure will be compulsory if the employment contract is terminated for economic reasons or for incapacity for work due to illness longer than two years. The court procedure will be compulsory if the employment contract is terminated for performance related reasons. If the Labour Office rejects a request for termination of employment, the employer can appeal to the court and request the termination by the court. If the Labour Office has given approval for the termination, the employee can appeal to the court and claim reinstatement. There will be no appeal to the court’s judgment, save in extraordinary situations in which procedural rules have been violated by the court. Sector wide or company wide collective bargaining agreements may provide for a sector committee, which may decide on the termination of employment contracts and which will be allowed to deviate from the general selection criteria which apply to collective dismissals.

If the employer and the employee agree to terminate their employment relationship by mutual consent, a mandatory two week reflection period will apply, during which the employee can revoke his or her consent to the termination of employment.

Notice periods
After the employer has obtained the approval of the Labour Office to terminate an employment contract it will have to give notice of termination, taking into consideration the applicable contractual or statutory notice period. A new rule will be that the employer may diminish the notice period by the time spent on the Labour Office procedure, provided at least one month notice remains. The same applies for the court procedure: the court can take the time spent on the court procedure into account when determining the termination date, as long as there is at least one month between the date of the court judgment and the date of termination of the employment.

Transitional fee
An employee who has been employed for two years or longer and whose employment has been terminated will not be entitled towards the employer to severance pay but to a so-called transitional fee. This fee is meant to facilitate the employee in finding a new job more easily or even switching careers. The money can be used for training or outplacement purposes. The fee will amount to 1/3 gross monthly salary for each of the first ten service years and 1/2 gross monthly salary for each consecutive service year, up to a maximum of the higher of EUR 75.000 gross or a gross annual salary. Employees who are 50 years or older and who have been employed for ten years or longer, are entitled to a transition fee of one month per service year, unless the employee is working for an employer employing less than 25 employees. No transition fee will have to be made available to employees younger than 18 years old, if payment of such fee would impact the continuity of the employer, if it would lead to additional dismissals and the employer has made an effort to replace the employees or if the employee is to blame for the termination. If the employer and the employee agree that the employee will be provided outplacement services or training, the cost thereof may be deducted from the transition fee. If the employer is mainly to blame for the termination, the court may award the employee an additional severance pay.

Unemployment benefits
Starting January 2016, the maximum duration of unemployment benefits will gradually be reduced by one month for each quarter of a year to a maximum of 24 months where the maximum is now 38 months. An additional 14 months of unemployment benefits can be agreed upon in collective bargaining agreements. For each service year during the first ten years of service, the employee will become entitled to one month of unemployment benefits. For each consecutive service year, the employee will be entitled to half a month of unemployment benefits. Service years built up prior to the coming into force of the new rules will be taken into account when calculating to the total number of service years.

Due to earlier plans of the Dutch government, the maximum tax friendly pension accrual percentage will be reduced from 2,25 to 1,85 per cent of the pension base. Furthermore, it will no longer be possible to accrue pension in a tax friendly manner over pensionable salary in excess of an amount of EUR 100.000. To maintain consumer purchasing power, the government has called on the social partners to reduce pension premiums payable into pension funds. Currently it is expected that these pension premiums will not decrease, as pension funds intend to use any financial margin to improve their financial situation. To keep old-age provisions on a comparable level as was the case in the past, social partners have announced that they will seek alternatives or supplements in the third pillar. A legislation proposal providing for this has - despite fierce criticism - been recently adopted by the parliament. Whether or not the senate will do so as well remains to be seen.

As per 1 January 2013, the state pensionable age was raised, for the first time since its introduction, by one month. Under current legislation the pensionable age will be increased to 67 years in 2023. However, the government intends to accelerate this process in order to set the pensionable age at 67 years in 2021. A bridging scheme will be introduced for employees on salaries up to a certain threshold who take part in an early retirement scheme and who are unable to make provisions for this increase. In response to the social partners' request to widen the scope of admission for this bridging scheme, the government will extend its scope to include participants earning up to 200% of the statutory minimum wage (300% for couples).

United States of America - Are the Rumors of the Demise of the Alien Tort Claims Statute Greatly Exaggerated in the Wake of Kiobel

By Robert B. Fitzpatrick, Esq.
Robert B. Fitzpatrick, PLLC

I.              Introduction
On April 17, 2013, the Supreme Court handed down its decision in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 185 L. Ed. 2d 671 (U.S. 2013), finding that the federal court did not have subject matter jurisdiction over the matter, as the Alien Tort Statute (the “ATS”) under which the human rights claims were brought possesses a presumption against extraterritoriality, and all of the relevant events in the case occurred in Nigeria.  Some have opined that the Court’s decision is the “last breath” of the Alien Tort Statute.  This article will summarize the various opinions in Kiobel, subsequent developments, and then address whether litigation under the ATS is or is not now futile.
II.            The Alien Tort Statute
The first Congress of the United States, sitting in Philadelphia, passed the Judiciary Act of 1789 which contained, in section 9, a single sentence that constitutes the ATS.  That single sentence reads as follows: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C § 1350 (2011). 
For decades and decades thereafter, there was virtually no litigation under this statute.  Then, thirty three years ago, the Second Circuit issued an opinion in Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980), which breathed life into the somnambulant statute.  Thereafter, a spate of ATS cases were filed, most of them involving torture or genocide committed overseas, with the claims being filed in federal district courts by aliens who had sought refuge in the United States from a nation-state allegedly engaged in violations of customary international law. 
In 2004, in Sosa v. Alvarez-Machain, the Supreme Court addressed the statute, holding that such claims could not proceed if the customary law norm under which the claim was brought had “less definite content and acceptance among civilized nations than the historical paradigms familiar when [the ATS] was enacted.” 542 U.S. 692, 732 (U.S. 2004). 
III.           The Kiobel Litigation
Between 1992 and 1995, several Nigerian nationals granted asylum in the United States sued, among other defendants, a Dutch corporation, Royal Dutch Petroleum, alleging that it had aided and abetted violations by the Nigerian government of customary international law, to wit, torture of individuals protesting environmental damage by the oil companies in the Niger River delta. Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 117 (2d Cir. 2010). Eventually, the Kiobel litigation resulted in a Second Circuit opinion, holding that, under customary international law, a corporation may not be sued for violations of international norms. Id. at 145. Thereafter, the Supreme Court granted certiorari to review that question. 132 S. Ct. 472 (U.S. 2011).
IV.          Kiobel I
After extensive briefing, including 37 amicus briefs, the Court heard oral argument on the corporate responsibility issue in the 2011-2012 term. See Kiobel v. Royal Dutch Petroleum, SCOTUSBlog, (last visited July 23, 2013). A week after oral argument, the Court issued an order directing that the parties brief whether the statute could be applied extraterritorially to conduct occurring exclusively outside the United States. Id.; 132 S. Ct. 1738 (U.S. 2012). The Court set the case for reargument during the October 2012 term. 132 S. Ct. at 1738. 
V.           Kiobel II
Again, after extensive briefing, including some seventy amicus briefs, and after oral argument, the Court issued a unanimous holding that the federal district court lacked subject matter jurisdiction over the controversy. Kiobel, 133 S. Ct. at 1663. The Chief Justice issued an opinion for five Justices (Scalia, Thomas, Kennedy, and Alito joined) in which he stated that while the presumption against the extraterritorial application of the statute had not been overcome in this case, that the presumption could be overcome if the facts sufficiently “touch[ed] and concern[ed] the territory of the United States”. Id. at 1669. Justices Thomas and Alito filed a concurrence in which they questioned whether the Chief Justice’s “touch and concern” standard satisfied the “definiteness and acceptance among civilized nations” requirement articulated in Sosa. Id. at 1670 (Alito, J., concurring).
Justices Breyer, Ginsburg, Kagan, and Sotomayor issued a concurring opinion in which they articulated at least three circumstances under which conduct occurring outside the United States might still be actionable in federal court: “(1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant’s conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind.Id. at 1671 (Breyer, J., concurring). 
Justice Kennedy also issued a one-paragraph concurrence, in which he praised the majority for its cautious approach in declining to answer the myriad questions arising out of the application of the ATS. Id. at 1669 (Kennedy, J., concurring). Indeed, the Kiobel opinion leaves unanswered many important questions in international human rights litigation, and raises new ones, including: What is the significance of the Court’s use of the phrase “displace the presumption,” rather than the usual “rebut the presumption?”. Is corporate liability permitted under the ATS? If so, does the presumption against extraterritoriality apply even if the corporation operates in, is domiciled in, and is headquartered in the U.S.?
VI.          Commentary
a.    The “Touch and Concern” Framework
In the wake of Kiobel, several commentators and bloggers have opined that Kiobel represents the demise of ATS litigation involving conduct occurring outside the United States. See, e.g., Phil Berkowitz et al., The Final Breaths of the Alien Tort Statute, Littler Mendelson P.C., Apr. 19, 2013, (last visited July 23, 2013); James E. Berger & Charlene Sun, International Litigation Update: Developments Concerning the Alien Tort Statute and Personal Jurisdiction King & Spalding Client Alert, May 16, 2013, (last visited July 23, 2013). Their principal argument has been that the majority’s strong presumption against extraterritoriality means that ATS plaintiffs, traditionally foreign nationals bringing cases against U.S. corporations for human rights violations overseas, face a nearly insurmountable hurdle in establishing that the entity that allegedly caused their injuries sufficiently touches and concerns the territory of the United States. Kiobel demonstrates that it is insufficient to merely show that a corporation, such as Shell, has some operations in the United States. These commentators believe that many ATS plaintiffs will be unable to show sufficient contacts with the U.S. in post-Kiobel litigation, and their claims will accordingly fail.
Other commentators believe that Kiobel does not represent the “final breath” of that ATS. Chief Justice Roberts’ touch and concern language, according to one commentator, “has provided fodder for another decade or more of litigation and created more business for litigators, [as] [c]ompanies and victims’ advocates will battle over when claims touch and concern the U.S. with sufficient force.” Katie Redford, Door Still Open for Human Rights Claims After Kiobel, SCOTUSBlog (Apr. 17, 2013 6:48 p.m.), (last visited July 23, 2013). Another scholar explained that ATS suits like Doe v. Exxon – brought by fifteen Indonesian villagers tortured by Indonesian soldiers allegedly hired by Exxon – could possibly survive under this post-Kiobel framework, as Exxon has extensive operations in the United States, employs tens of thousands of Americans, is headquartered in the U.S., and sends many thousands of barrels of oil from Indonesia to the U.S. every year. Oona Hathaway, The Door Remains Open to “Foreign Squared” Cases, SCOTUSBlog (Apr. 18, 2013 4:27 p.m.), (last visited July 23, 2013).
b.    DaimlerChrysler Corp. v. Bauman
In fact, the question of whether ATS claims sufficiently “touch and concern the territory of the United States” could be further articulated next term, when the Supreme Court hears DaimlerChrysler Corp. v. Bauman. See 133 S.Ct. 1995, 185 L. Ed. 2d 865 (U.S., 2013). In Bauman, twenty-two Argentinian nationals sued Daimler in California federal court for human rights violations allegedly undertaken by the company’s Argentinian subsidiary in collaboration with the government during Argentina’s “Dirty War” in the 1970s and 80s. See Bauman v. DaimlerChrysler AG, No. 04-00194, 2007 U.S. Dist. LEXIS 13116 (N.D. Cal. Feb. 12, 2007). In 2011, the Ninth Circuit held that Daimler had sufficient contacts with the state to justify the exercise of personal jurisdiction. See Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 911 (9th Cir. 2011). Applying a two-pronged agency theory, the court reasoned that MBUSA, Daimler’s U.S. subsidiary, was Daimler’s agent because MBUSA was distributing vehicles in California, a “critical aspect” of Daimler business, and because Daimler controlled “nearly all aspects” of MBUSA’s operations. Id. at 922-24.
Although the case primarily concerns the standard for establishing personal jurisdiction, some have noted that the Bauman case could provide an opportunity for the Court to either cite Kiobel in dismissing the case, or expand upon its reasoning in Kiobel by requiring a certain level of contact between the U.S. and the corporate defendant. John Bellinger, Reflections on Kiobel, Lawfare (Apr. 22, 2013 8:52 p.m.), (last visited July 23, 2013); Xander Meise Bay, The ATS’s Second Act: The Supreme Court Looks to Address the Unanswered Questions of Kiobel, Corporate Responsibility and the Law, (Apr. 23, 2013), (last visited July 23, 2013).      
c.    The Future of Non-ATS Human Rights Litigation
Regarding the future of non-ATS human rights cases, one commentator remarked that, “[w]hen U.S. federal courthouse doors close, other doors open for the litigation of transnational cases.” Donald Childress, An ATS Answer with Many Questions (and the Possibility of a Brave New World of Transnational Litigation), SCOTUSBlog (Apr. 18, 2013 5:03 p.m.), (last visited July 23, 2013). Some human rights cases now precluded by the Kiobel decision could move to foreign courts, while others may move to U.S. state courts. Suing U.S. corporations in courts in the nations where the violations took place could prove ineffective, however, as the judiciaries of countries such as Nigeria lack the safeguards, objectivity, and robust enforcement capabilities that U.S. courts possess.
As for state courts, assuming plaintiffs can effectively “plead around” removal to federal court, where Kiobel and forum non conveniens defenses could prove insurmountable, they may be able to bring cases under state law in state courts. Donald E. Childress III, The Alien Tort Statute, Federalism, and the Next Wave of International Law Litigation, 100 Geo. L.J. 709, 741 (2012), available at (last visited July 23, 2013). As Rich Samp noted, “States are largely free to craft their tort law without interference from the federal government, so plaintiffs’ lawyers barred from raising overseas human rights claims in federal court under the ATS may well decide to file their lawsuits in state courts instead.” Rich Samp, Supreme Court Observation: Kiobel v. Royal Dutch Petroleum & the Future of Alien Tort Litigation, Forbes (Apr. 18, 2013 10:51 a.m.), (last visited July 23, 2013). Although there are few, if any, current examples of this state law-state court approach, such cases will undoubtedly arise in the next few years.
VII.         Conclusion
In short, Kiobel unquestionably limited the possibilities for plaintiffs’ lawyers seeking to bring international human rights claims against American corporations. But Kiobel did not close down all avenues of potential litigation, and we can anticipate that creative lawyers will construct ways to pursue such cases in both federal and state courts, as well as in hospitable fora overseas, in the near future.
Left lingering, meanwhile, is the question of what Congress will do with the now-limited extraterritorial application of the ATS. In his concurrence, Justice Kennedy noted that Congress eased the judiciary’s task when, in 1991, it expressly defined the extraterritorial application of the Torture Victims Protection Act. Kiobel, 133 S. Ct. at 1669. Surely Congress can do the same here. Human rights advocates and multinational corporations will no doubt be advocating for and against such a change in the coming months.


United States of America - An International Primer on Good Cause Dismissals

By Donald C. Dowling, Jr.
White & Case LLP
New York City

In dismissing staff anywhere in the world (except perhaps in the U.S., which subscribes to employment-at-will), “step one”—always—is determining whether the employer will fire the particular targeted worker for good cause. Where an employer can demonstrate good cause, a dismissal becomes much cheaper. Indeed, in some places (in so-called “lifetime employment” jurisdictions like Germany, Japan, Korea, Iraq, Romania and Russia), the dismissal becomes possible, because these jurisdictions prohibit most no-cause dismissals.
Where a dismissal is for demonstrable good cause, most countries offer employers broad freedom to fire without much or any notice or severance pay. But this principle is far narrower than it sounds because “good cause” is substantially less than a good business reason. After all, employers always have good business reasons for firing employees—no rational employer fires staff whom business needs weigh in favor of retaining. So “good cause” under law necessarily means more than merely a good business reason. Good cause usually means the employer can prove the targeted employee willfully committed some material misconduct.
Each jurisdiction has its own local notion of which specific acts of employee misconduct constitute good enough cause to justify a no-severance-pay summary dismissal. And, of course, each case turns on its facts. But we might make a simple generalization: Good cause tends to mean egregious misconduct. Few jurisdictions’ notions of good cause reach poor performance, imperfect attendance, bad attitude or mismatched skill set. Even jurisdictions like Korea that recognize poor performance as cause for dismissal tend to accept only well-documented, outrageously bad performance over a sustained period, and proof burdens get exceptionally high. Justifications for dismissal external to the targeted employee himself—business downturn, internal restructuring, sale of business assets—might offer economic justification for a dismissal, but economic necessity is a separate issue usually quite distinct from good cause.
Italy offers a representative concept of good cause. According to employment lawyers in Rome, an Italian employer can fire an employee for good cause (giusta causa) only when the employee’s act of “misconduct”
“makes the continuation of the employment relationship impossible.” Examples of just cause are theft, riot and insubordination. [Italian] case law shows a series of sharply contrasting precedents which make it extremely difficult in practice for an employer to [invoke good cause as grounds to fire an employee] with speed and certainty. (Lauro Sovani & Asociati Law Firm, Employment in Italy in a Nutshell (2013), at 26(a) (available at:
Outside the U.S., the standard for good cause happens to be closely analogous to a similar concept under domestic U.S. law: the willful misconduct standard under U.S. state unemployment compensation systems. According to a Pennsylvania decision, Unemployment Compensation Review Board v. Vereen (29 Pa. Commw. 252 (1977)):
As a general principle[,] in order to deny unemployment compensation benefits to an employee, his…action must involve a wanton or willful disregard of the employer’s interest, a deliberate violation of the employer’s rules, a disregard of standards of behavior which the employer has the right to expect of his employees, or negligence in such degree or recurrence as to manifest culpability, wrongful intent, or evil design, or show an intentional and substantial disregard of the employer’s interests or of the employee’s duties and obligations to the employer.
Speaking broadly, where an outside-U.S. employee commits an act of willful misconduct that, if committed stateside, would be egregious enough to defeat a U.S. state unemployment benefits claim, then we might expect a foreign labor court to uphold a firing for good cause. The corollary, though, is that where an overseas employee misbehaves in an innocuous enough way that his actions, if committed stateside, would not offer a defense to his state unemployment benefits claim, then a foreign labor court will not likely uphold a firing as for good cause. Embezzling money, vandalizing equipment, bribing officials, attacking co-workers, shooting up a workplace—all are grounds for good-cause dismissal.  But short of serious crime, the issue becomes murky.
A common conundrum in good cause analysis is the employer that thinks it has a legal justification to fire an employee who broke a posted work rule, a human resources policy or code of conduct provision. Imagine, for example, an overseas salesman who “entertains” clients at a strip club, dropping hundreds of expense-account dollars on stripper “tips.” Imagine this employer can make a strong case that these acts violated a standing employer work rule, HR policy or code of conduct provision on business entertainment, use of expense accounts, bribery/improper payments or sexual harassment. Can the employer fire this executive for good cause? Perhaps not. By anyone’s definition, intentionally breaking a work rule is willful misconduct. But overseas, the analysis becomes more nuanced. Being able to prove someone broke a posted rule/policy/code is not necessarily good cause, particularly if the infraction is innocuous or the rule is a technicality. Countries as far-flung as Costa Rica, the Czech Republic, Indonesia, Malawi, Peru, Philippines, Russia, Saudi Arabia, Ukraine, Vietnam and others list dischargeable infractions right in their labor codes. (See, e.g., Saudi Arabia Labour Regulation, Royal Decree No. M/51 of 23rd Sha’ban 1426 Hejra (9/27/05), at art. 80 (listing 9 infractions justifying good-cause dismissals)). We might call these “statutory list” jurisdictions.  In them, an employer has no grounds to fire a rule-breaker unless the breached rule happens to parallel one of the grounds for dismissal on the country’s statutory list.  The statutory lists in these countries might not include an infraction that fits this particular employee’s misdeeds.
As another example of how these statutory lists work in practice, imagine a manufacturing multinational that posts on its intranet a globally-applicable work rule instructing factory workers to shut down their machines at the end of their shifts, and saying that violators are subject to dismissal for a first offense. Imagine that excellent business reasons support this rule: safety, plant security, machine maintenance, power conservation. And imagine that all workers in the company’s factories worldwide have signed acknowledgements agreeing to comply with this particular rule. Having globally implemented the rule and having collected these employee acknowledgements, American headquarters may assume it can fire, for good cause, any worker who intentionally clocks out and leaves his machine running. But this assumption is wrong. In what we are calling “statutory list” jurisdictions, firing someone for breaking this rule will not likely be for good cause because “leaving machine running” will not likely appear on countries’ lists of statutory dismissal grounds.
          Work rules. This said, an employer overseas is usually well advised to articulate comprehensive rules that set out grounds for good-cause dismissal, particularly in countries like Bahrain, Colombia, France, Japan, Korea, Oman and Russia that affirmatively require written work rules. An employer’s argument that a misdeed amounts to good cause is always stronger where the infraction violates a posted work rule that purports to subject violators to dismissal.
Sometimes local law prohibits employers from dismissing for cause even workers who commit infractions that do appear on a country’s statutory list of for-cause dismissible infractions. For example, probably every country on Earth recognizes theft as grounds for a good-cause firing, but labor courts abroad often excuse proven theft of small change and cheap goods. German Civil Code § 626 includes “theft” as grounds for dismissal without any express de minimus exception, but in 2009 Germany’s highest labor court held otherwise in its widely publicized Emmely case involving an employee (known across Germany both as “Barbara E.” and “Emmely”) who had pocketed a handful of employer coupons worth €1.30. (See, e.g., Justus Leicht, “Germany’s Highest Labour Judge Defends Sacking Workers for Next to Nothing,” Axis of Logic website (, Jan. 12, 2010).  As another example, many countries impose laws expressly banning workplace harassment, but many court cases in those countries often hold dismissal too severe a punishment for proven harassers. Canadian courts apply a “proportionality” test that makes every dismissal a fact question; a Canadian employer firing someone for proven theft or harassment might not have good cause if dismissal is disproportionate to the employee’s specific misdeed. (See, e.g., McKinley v. BC Tel., [2001] 2 SCR 161 (Sup. Ct. of Canada); Kidd v. Hudson’s Bay Co., [2003] O.J. No. 1474; Varsity Plymouth Chrysler v. Pomerleau, [2002] A.J. No. 929.).
All this said, though, employers overseas sometimes do have demonstrable good cause justifying a dismissal. At that point the question becomes: What does demonstrating good cause mean for an employer? The answer differs depending on whether the employer is in a so-called “lifetime employment” jurisdiction like Germany, Iraq, Japan, Korea, Romania, Russia. In lifetime employment jurisdictions, no-cause firings are flatly illegal, so the only legal way to fire someone who refuses to leave is for the employer to demonstrate good cause (or economic necessity, discussed below).  No good cause means no dismissal. Indeed, in these lifetime employment jurisdictions, statutory severance pay tends not to come into play, and in countries like Japan does not even exist: A worker either gets fired for good cause and gets no severance pay or else that worker is the victim of a wrongful dismissal and so is entitled to a court award of reinstatement and back pay—but no severance pay.
Outside lifetime employment jurisdictions, good cause for dismissal is not necessary to fire anyone, but being able to prove good cause makes a big difference. In the words of Argentine lawyers explaining the rule in Argentina (a typical no-lifetime-employment jurisdiction), the “general principle in force [is] private sector employers can freely dismiss their employees without just cause by paying severance [pay] based on the salary and seniority of the employee.” (Alejo Baca Castex & Alejandro López Tilli, “Discriminatory Dismissal in Argentina,” 22 IBA Employment & Ind. Rel. Law no. 1, at 51 (Mar. 2012) (emphasis added)).  Employers in these jurisdictions can usually fire staff unilaterally without good cause, but subject to separation pay liability—notice pay, severance pay and the payments due in any dismissal such as final paycheck, proportional accrued vacation, proportional bonus, proportional “thirteenth month pay” and other accrued benefits.  Further, having good cause tends not to excuse obligations under statutory dismissal procedures like dismissal communication requirements, grievance resolution procedures and notice to employee representatives and government labor agencies.  Indeed, because countries impose these procedures to probe employer grounds for dismissal, countries have a policy reason to enforce their procedural requirements even where an employer obviously has good cause. For example, in a highly publicized 2008 case, Parisian rogue trader Jérôme Kerviel singlehandedly lost his bank employer, Société Générale, US$7.2 billion in unauthorized trades. Even though French police arrested and incarcerated Kerviel, French dismissal procedure laws blocked a quick firing. In a front-page article, the Wall Street Journal chronicled why French dismissal procedures forced Société Générale to retain Kerviel on its “headcount” for over a month (“French Twist,” Wall St. J., Feb. 1, 2008 at A-1.).
Having said all this about good cause dismissals around the world, in real life it may only be the exceptional situation where an employer invokes good cause for dismissal to fire an employee who, in turn, goes on to sue in court, challenging the grounds for dismissal. In practice, employers everywhere, particularly in “lifetime employment” jurisdictions, often negotiate an agreed separation with a release of claims—that is, a resignation and waiver in exchange for a cash payout. Employers and employees negotiate these settlements against the backdrop of the issues we just discussed. Some jurisdictions confer a special legal status on mutually agreed separations, such as the French rupture conventionnelle and the Turkish ikale, letting employees resign while retaining eligibility for unemployment benefits.