Monday, June 5, 2017

France - The Anticipated Labor & Employment Reforms of the New French President

By Roselyn Sands, EY Société d’Avocats

Emmanuel Macron was elected President of the French Republic on May 7, 2017.
His first order of business is reforming French labor & employment laws.

He seeks to trim the Labor Code by taking out hurdles that help no one while protecting employee rights. This requires, in part, moving from a one-size-fits-all legislative architecture to a customized approach by strengthening collective bargaining within companies.
Below are some of the key features of Mr. Macron’s reform:

A new manner of achieving flexibility

The new President wants to ensure that decision are taken “on the ground” through company-wide collective agreements which would prevail over industry-wide collective agreements, or by employee referendum. Industry-wide sectors would be reduced from 100 to 50. Yet, fundamental safeguards would remain in the Labor Code.

Simplification of a Staff representative bodies and strengthening of their role
President Macron seeks the implementation of a single body which would replace the personal delegates, the works council and the Health and Safety committee, in all companies and groups regardless of headcount threshold.

By exception, a company could negotiate an agreement with the unions whereby bodies would remain separated.

Staff representatives would have access to training notably on labor law, and specific tasks on company management. The government would also encourage union involvement and employees presence at the Board of companies so that their involvement can be more useful and pragmatic.

Predictability of Labor Court judgements

In case of litigation, President Macron would like the law to cap damages for wrongful termination. This would allow companies to better anticipate costs and risks of employee litigation.

This rule would not be applicable to dismissals based on discrimination or harassment.
All judgements would be immediately enforceable even pending appeal, subject to some exceptions, in order to prevent delaying tactics.

Tax-free incentive in particular tax free overtime compensation

President Macron would like to reinstate tax free treatment for overtime work to encourage employees to work more: a deduction of 0.50€ per hour on employer contribution for company with less than 20 employees; and full tax exemption of employee contribution on overtime.
Increased purchasing power for employees
President Macron would also like to remove employee contributions for health and unemployment insurance. This measure would be financed by an increase of the generalized CSG contribution of 1.7 point (contribution not only paid by employees). Employer contributions to social security would also be reduced.

Unemployment insurance for everyone

In order to encourage persons to take risks, change careers, try new ones, President Macron would like to make unemployment protection available to everyone, even those that resign.
Employees would have the possibility to benefit from unemployment allowance in case of resignation, once every five years.

Training employees and unemployed

Training will be reinforced by the conversion of employer training contributions to individual training rights for all workers.

Unemployed people would have access to additional training measures but could lose unemployment protection if 2 “decent” job offers are refused or insufficient efforts to search for work.

Maternity leave for all women who work

President Macron would like to create a universal maternity leave for all women whatever their status (employee, independent worker, non-employee…) to further create equality between men and women who work.

Improve access to the independent worker status (gig economy)

President Macron wants to improve independent worker status by removing heavy barriers notably by substantial decrease of their social security contributions and tax, in particular for small businesses that are struggling to survive.

Fighting against social dumping

President Macron would like France to influence Europe by the way of harmonization and creation of a European labor law common base notably by creating minimum standards on training, health and safety, unemployment insurance and minimum wage. Posting of workers in France would be limited to 1 year and European posting of workers rules would be redefined.

It will be interesting to see if these proposed reforms actually become legislation and how that might influence the French economy.

Summer edition

Dear all

Welcome to the Summer edition of the International Employment Committee Newsletter. Thanks as always to our contributors, and please let me know if you are interested in submitting an article for consideration for future editions.

Helen Colquhoun
(qualified in England & Wales, New York, Hong Kong)

Canada - New Developments in Federal Labour Relations and Labour Standards Legislation: Towards a 'Super' Federal Labour Tribunal

By Theodore Goloff, Robinson Sheppard Shapiro, Montreal

Those who follow legislative developments regarding the Canada Labour Code, will remember that important changes came into effect in June 2015 – notably the “abandonment” of a purely “card counting” based system for federal union certification, and the requirement of a “certification election” to obtain union certification pursuant to that Code. Shortly after the election of the present Liberal government, in October 2015, the new administration tabled Bill C-4 whose purpose is to re-establish the old system without an obligatory certification vote. This Bill has not yet been adopted by the Parliament of Canada because of amendments by the Canadian Senate. This Bill is surely a matter to be closely followed!


Recently, following the Budget of March 22, 2017, the Federal Government tabled Bill C-44, very substantially changing the Canada Labour Code. Inter alia, the Bill amends Part III of the Code to increase parental leave from 37 to 63 weeks, allowing employees to take such leave within a period of 78 weeks following the birth or “due date”, instead of within 52 weeks as was the case previously. The changes allow as well for maternity leave to begin 13 weeks prior to the birth or “due date”, instead of 11 weeks as was the case previously. The Bill also provides for a new leave for an employee who is obliged to provide care to a gravely ill adult. Simple but significant changes in what may be their possible effects!


However important, the above changes are simply the tip of the iceberg, as other sections of Bill C-44 radically transforms the labour relations landscape for all employers falling within the federal jurisdiction in Canada.

In a nutshell, the Canada Industrial Relations Board [CIRB], now becomes the primary jurisdiction to hear all recourses under the Code whether pursuant to Part I, II and/or III that deal respectively with labour relations, health and safety and labour standards. There are, of course, clear parallels between the recent creation of the Quebec Administrative Labour Tribunal but as seen below, this proposed federal legislation goes further than its provincial counterpart.

The CIRB, which previously had jurisdiction to hear only recourses provided for violation of Part I, would now inherit the responsibilities previously given over to “appeal officers” provided for in Part II, in matters of health and safety.

With respect to Part III, the CIRB would now also have jurisdiction to hear complaints for alleged unjust dismissal filed pursuant to Section 240 – replacing outside arbitrators named by the Minister. It would still be possible for the CIRB to name an outside arbitrator to hear files both under Part II or Part III, depending upon the anticipated volume of complaints and the somewhat limited resources of the CIRB. This latter change could certainly impact on consistency of decisions.


A new and fundamental change introduced by this Bill is the creation of a regime of administrative fines for infractions of Parts II and III. It would now be the CIRB that would hear appeals from penalties imposed by the Ministerial order. Furthermore, alleged violations of Parts II and III would no longer be treated by the common law courts. While this may be the harbinger of a more efficient system of redress than recourse to penal complaints that have not been frequently used in the past, because decisions of the CIRB are without appeal, unlike decisions of the common law courts. This too represents a significant change.


Another substantive modification to the Code is a new Section dealing with claims for “reprisal” – the equivalent of what Quebec practitioners know as complaints for illegal practices pursuant to Section 122 and the following of the Quebec Labour Standards Act. But there is a twist. The Bill, as tabled, prohibits the joinder of a claim of reprisal with a complaint for unjust dismissal pursuant to Section 240 of the Federal Code. This joinder is allowed under the equivalent provisions of the Quebec Labour Standards Act.


Another substantive change to the Code deals with the recovery of sums allegedly due by an employer to an employee pursuant to Part III of the Code.

Firstly, the powers of inspectors are enlarged substantially because they now can decide whether or not a discharge has in fact taken place so as to bring into play Sections 230 and 235, that deal with notice of termination and severance. These same inspectors can order the end to practices that they deem violations of Part III, all this in addition to issuance of Ministerial (administrative) orders for investigation to assure compliance with the law.

In line with these changes, the CIRB (or an outside arbitrator that it assigns a case to) now may hear appeals from payment orders made by inspectors pursuant to Sections 251 et seq. of the Federal Code. The CIRB will as well now have the power to order costs in such cases, as well as extrajudicial costs incurred by the parties.

It is clear that the federal government’s intent is to reduce the number of violations of Part III, and to more effectively prosecute and penalize those who fail to respect the law, bearing in mind that these are minimum labour standards for employees falling under federal jurisdiction. In other words, legislation with teeth!

Will the creation of this “Super Tribunal”, with its attendant new powers, really shorten delays, lighten the load of common law courts and promote faster and better industrial justice? The federal government seems to think so! Effective or not, given this new landscape – employers beware!

Canada - Canadian Labor Department Issues its First Report on Petition Filed Under the Canada-Colombia Agreement on Labour Cooperation

By Tequila J. Brooks

On January 27, 2017, Canada’s labor ministry Employment and Social Development Canada (ESDC) released its first report on a petition filed under the Canada-Colombia Agreement on Labour Cooperation (CCALC). The CCALC is the labor side accord to the Canada-Colombia Free Trade Agreement (CCOFTA) which was signed in November 2008 and went into effect on August 15, 2011. The underlying petition was filed by the Canadian Labour Congress (CLC) and five Colombian trade unions in May 2016. The Canadian National Administrative Office (NAO – the department within ESDC empowered to respond to petitions under labor side accords to Canada’s free trade agreements) accepted the petition for review on July 15, 2016. The petition was based on the same labor issues and events occurring in the petroleum and sugar producing and processing industries as those in a petition filed and accepted by the U.S. Department of Labor under the U.S.-Colombia Trade Promotion Agreement (TPA) in July 2016. USDOL issued its report on January 11, 2017. Based on their assessment of the allegations and evidence in the petitions, the labor departments of Canada and the U.S. both recommended ministerial consultations with the Government of Colombia to address serious shortcomings in its compliance with labor provisions of its free trade agreements (FTAs) with Canada and the U.S.

The main issues addressed by the Canadian NAO in its report were (1) the misuse of subcontracting arrangements by employers in the petroleum and sugar producing industries in Colombia to avoid compliance with labor laws; (2) shortcomings in administrative and legal processes for workplace inspections resulting in the failure to levy and collect fines and remedy labor law violations in a timely manner; and (3) ongoing failure by the Government of Colombia to protect trade unionists from violence and threats of violence.

Under Articles 1 and 3 of the CCALC, the Governments of Colombia and Canada committed to ensure protection of internationally recognized labor principles and rights including freedom of association and the right to collective bargaining. Based on its review of evidence and interviews with government officials, trade unions and employer representatives in Colombia, the Canadian NAO found that a number of subcontracting arrangements utilized by employers created situations where it was difficult for workers to effectively and freely exercise their rights to freedom of association and collective bargaining. As part of the process of improving labor standards to accede to FTAs with the U.S. and Canada, Colombia made it unlawful for employers to utilize “Associated Work Cooperatives” to subcontract out permanent core functions in order to avoid labor law compliance.

Lack of clarity in the law led to the utilization of subcontracting in different legal forms – Simplified Stock Companies (Sociedad por Acciones Simplificada or SAS) or “union contracts” (agreements whereby a union provides employees to employers and operates as a subcontracting entity – not to be confused with independently negotiated collective bargaining agreements) – with the same effect as work cooperatives. Acknowledging that subcontracting can be a legitimate business mechanism, the Canadian NAO observed a significant amount of interference by de facto employers in the management of subcontractors – an indication that labor intermediaries were being used to avoid compliance with labor law obligations. The Canadian NAO found that misuse of subcontracting by de facto employers chilled workers’ exercise of freedom of association due to the fear of non-renewal of short-term contracts and blacklisting as well as legal obstacles to recognition of representative trade unions by the primary employer.

Article 3 of the CCALC requires Canada and Colombia to effectively enforce labor laws through labor inspections and other mechanisms and to ensure that labor law violations are appropriately sanctioned in a timely manner. In its discussion of the adequacy of the operation of Colombia’s labor inspectorate, the Canadian NAO observed that labor inspectors are hired on a provisional basis subject to budgetary constraints. While noting that there have been improvements in the functioning of Colombia’s labor inspectorate in recent years, the Canadian NAO found that the labor inspectorate’s administrative processes are still burdensome and not completely effective – and that sufficient funding and resources are required to ensure that inspectors are adequately trained and experienced. Even in cases where inspectors find labor law violations and levy fines against employers, bureaucratic delays occur due to of lack of coordination between Colombia’s labor inspectorate and the government agency empowered to collect fines (Central de Inversiones S.A. or CISA). As a result, fines and remediation may not occur in an efficient and timely manner and thus do not have a sufficient deterrent effect.

The Canadian NAO observed that a climate of violence and anti-union culture have posed significant challenges to the advancement of trade unionism in Colombia. Between 1986 and 2014, more than 3,000 trade unionists were murdered, 230 disappeared and thousands of others suffered threats, kidnapping and other types of violence. Despite recent legislative and executive progress in recent years, there were 18 labor-related homicides in Colombia in 2015. Noting that the strengthening of Colombia’s National Protection Unit (NPU) in recent years is essential to tackling impunity and violence against trade unionists, the Canadian NAO observed that the progress achieved will be compromised if the Government of Colombia does not allocate sufficient resources to support the NPU’s work to protect trade unionists. Similarly, the Canadian NAO observed that the Office of the Attorney General of Colombia is critical to prosecuting perpetrators of violence and murder against trade unionists – but “note[d] with concern that no case of trial and subsequent conviction under Article 200 of the Criminal Code has been reported by the Colombian Government.” Other shortcomings highlighted by the Canadian NAO of Colombia’s procedures and lack of results in protection of trade unionists from violence and threats include: failure to respond to calls for investigation of excessive force by police authorities against trade unionists; the closing of files without criminal prosecution; and the number of files stuck at the pre-investigative phase. The Canadian NAO pointed specifically to the mandatory conciliation phase of the process for investigating and prosecuting violence against trade unionists as being a sticking point in the timeliness and efficiency of the process.

The Canadian NAO’s report contains a number of substantive, administrative and policy recommendations to the Government of Colombia to address shortcomings in its protection of the fundamental rights to freedom of association and collective bargaining. On the issue of the use of labor intermediaries to avoid compliance with labor laws, the Canadian NAO recommended the elimination of union contracts and collective pacts as well as the elimination of the misuse of short-term contracts. It also recommended the implementation of measures to reduce widespread and systemic misuse of subcontracting. The Canadian NAO noted that 2016 regulations issued by the Government of Colombia seem to make it lawful to use certain forms of subcontracting to avoid labor law compliance and that this may be in violation of the CCALC’s non-derogation provision.

On the issue of strengthening the enforcement of labor laws through the labor inspectorate, the Canadian NAO recommended a number of reforms, including: ensuring reinstatement or severance as remedies for labor law violations; streamlining administrative processes; improving coordination between government agencies to enhance collection of fines for labor law violations; and providing labor inspectors with adequate training and resources to perform preventive and proactive labor inspections.

Finally, the Canadian NAO recommended that the Government of Colombia strengthen its efforts to fight impunity and violence and bring perpetrators to justice by: evaluating the effectiveness of the mandatory conciliation phase; reviewing and acting on pending criminal investigations to ensure that justice is administered before legal time limits expire; providing the NPU with sufficient resources to effect its mandate; critically examining the actions of police authorities in cases where excess violence is alleged in actions involving trade unions; and effectively prosecuting acts of violence against trade unionists.

On April 27, 2017, the Minister of Labor of Colombia Clara López Obregón, and the Minister of Labor and Workforce Development of Canada Patty Hajdu agreed to negotiate a Work Plan to implement the Canadian NAO’s recommendations. On May 23, 2017, Minister Hajdu released a public statement indicating that she and López Obregón’s successor, Minister Griselda Janeth Restrepo, will continue ministerial consultations to develop a multi-year work plan to address issues raised by Colombian and Canadian trade unions under the CCALC. Under Article 12 of the CCALC, the Government of Colombia had 60 days to respond to Canada’s request in writing for ministerial consultations to address the issues raised in the Canadian NAO’s report. The parties are required to make every effort to reach a mutually satisfactory agreement on resolving the issues raised in the petition. Unlike similar provisions in NAFTA’s labor side agreement (North American Agreement on Labor Cooperation – NAALC), Article 12(5) requires that ministerial consultations shall conclude no later than 180 days after they are initiated.

If the Governments of Canada and Colombia are unable to reach agreement on resolution of the issues raised in the Canadian NAO’s report through ministerial consultations, the Government of Canada may call for the establishment of a Review Panel under Articles 13 and 14 of the CCALC. The matters in the report must be trade-related for the Review Panel to be established. The Review Panel would consist of three recognized experts in labor law matters and issue an independent report according to rules set forth in the CCALC. The states parties, members of the public and the petitioners are able to provide information to the Review Panel. If in its final report the Review Panel finds that Colombia is not in compliance with the CCALC, under Article 20 the Review Panel may levy monetary assessments against the Government of Colombia.

The existence of two simultaneous reviews of the same labor issues in Colombia by Canadian and U.S. labor authorities provides a unique opportunity for comparison of the U.S. and Canadian models for incorporating and implementing labor provisions in FTAs. This has not happened since the 2003 Puebla Garment Workers case was filed simultaneously with the Canadian and U.S. NAOs under the NAALC. While the procedures under the CCALC and Chapter 17 of the U.S.-Colombia Trade Promotion Agreement (TPA) are fairly similar at the beginning stages (acceptance and review of the petition, issuance of report, request for ministerial consultations), the rules diverge after the ministerial consultations phase. If ministerial consultations between the U.S. and Colombia fail to result in a satisfactory outcome, under Article 17.7.6 of the U.S.-Colombia TPA, the U.S. may call for formal dispute resolution under Chapter 21 of the agreement, leading to a potential request for the establishment of an Article 21.6 trade arbitration panel.

Germany - The 2018 Works Council Election is Getting Closer - what next?

By Bernd Weller, Frankfurt office of Heuking Kühn Lüer Wojtek PartGmbB
Dr. Johan-Michel Menke Hamburg office of Heuking Kühn Lüer Wojtek PartGmbB

In 2017, Germany will be electing a new parliament. There is a lot of talk of political disenchantment and new political parties and movements. The composition of the German Bundestag could change dramatically.

The next important elections will be held in 2018 – the next regular works council elections. And here, too, there will be something new. According to the observations of the undersigned, there were already a lot of changes in the composition of works council bodies in the last elections in 2014; in 2018, this change is set to become stronger and more rapid.
In addition to the change of generation, with many long-serving works council members taking (early) retirement during the last period of office and many others planning to do so during the upcoming period of office, it is above all social changes that will affect the works council bodies.

The rates of union membership have been decreasing for years; many younger employees no longer feel that the traditional unions (with their more traditional distinction between the “oppressed workers” and the “capitalist employers”) represent them. They do not want rules based on a “one size fits all” scheme, but rather, they want to express and implement their individual needs and wishes more strongly, independently and without a “muzzle.” The system of values has changed, company cars and salaries are no longer the main attractions of employment; equalizing and rigid working time systems are often considered a hindrance by younger employees. Many young employees – including works council members – want to focus on designing rather than preventing.

So, more candidates, more lists, and therefore also a fiercer election campaign are to be expected. All of this is more than enough reason for employers to prepare themselves for the elections. In this first article before the upcoming election, we therefore want to raise the following questions and give some recommendations:

• preparation for the elections themselves
• cost and support of the election
• tactical considerations on the employer’s side
• sanctions for attempts to influence the elections
• key points of the election

1. Preparation for the elections themselves

The works council election is a vote by the staff; it is led by the election committee. The employer’s obligations are only supporting ones – it must provide information and offer time and money to support the elections.

So why should employers and company management consider the topic and prepare themselves in advance?

First of all, every election costs money. During the election meetings and the election itself, every employee has a claim to free time off work, costing time and productivity. In addition, the employer must finance the election preparations and must also accept that members of the election committee will have to meet, undergo training, and if necessary obtain consultation weeks or even months prior to the election, which will result in further expenses.

In addition, as a result of and during the election campaign, productivity will decrease. Employees are involved in organization and discussions. Discussions that are sometimes controversial will take place in the workplace. In addition to the short-term effects on productivity, this can also have a long-term effect on the mood of the workforce. Employers will and should be concerned if their staff disintegrates into “political fractions.”

Taking all of this into account, each company should consider working through or examining the following checklist:

• training of executive staff and managers on key issues
• training of all other managers on dos and don’ts
• definition of the employer’s role in the election (preparations) (see item 3.)
• tactical considerations (see item 3.)
• human resources planning (see item 3.)
• handling of key topics (see item 3.)
• preparation by the employer for the election process (see item 3.)

Executive staff and general managers should be trained on key topics before each election. This includes, in particular, being sensitive to the fact that your statements on the election and particularly about individual election candidates can easily exceed the threshold of impermissible influence on elections. In addition, you should develop a fundamental understanding of what the works council elections are and what the basic procedure is. This will prevent unnecessary disputes in case of impairments to company activity as a result of the works council election (preparations). Not least, the top management group should be committed to the shared company line about how the company/management views the election (deliberately distanced/neutral or rather deliberately supportive/neutral). Finally, the executive staff should be prepared for the fact that in works council elections (as a result of imminent thresholds for the size of the body or the number of releases from work duties), there may be repeated operational discussions or even court disputes about its status.

All other executives should also be trained prior to an election and before the beginning of preparations for it. They are not executive staff and therefore also participate in the works council elections like all other employees – as voters or candidates. At the same time, they also represent the employer’s side for the workforce – and often also for labor courts and unions – and therefore the employer’s intents. This means that executives have to make a strict distinction between their supervisor roles and the role as voter/candidate. They must always also ensure that they do not give the impression that they:

1) are speaking for the employer,
2) are participating in the political discussion and election “as a representative” of the employer or
3) would take advantage of their supervisor role in connection with the elections (promising advantages, threatening disadvantages for incorrect political attitudes).

Although this sounds easy in theory, it sometimes ends up being difficult in practice. Of course, a supervisor may not promote himself or herself or another candidate during team meetings that he/she has scheduled (as the supervisor) (and that are paid for as working time). But is any critical confrontation already considered use of the supervisor position? While in many cases the courts consider even a strongly polarizing or confrontational election campaign to be legal and promote the give and take of political discussion by each employee, they nevertheless often impose a higher level of restraint on executives than on “normal” employees during election campaigns. Executives should be prepared for the traditional election argument in particular from unions that they are “working undercover” for the employer’s side, simply because they have a supervisory role.

2. Cost of the election

The law makes it very easy – the employer is responsible for the cost of the election, Section 20 German Works Constitution Act.

Traditional cost items of the Works Council Election are:
- election documentation (ballot, if applicable also in other languages)
- ballot box(es)
- working time (for voters, candidates, election committee, human resources department (for researching information))
- shipping (for postal votes)
- journey/transportation cost (in case of multiple operating sites for the transportation of ballot boxes and journeys by the election committee, etc.)
- equipment of the election committee (paper, etc.)
- training cost (election committee, if applicable also record keepers)
- consultant cost (election committee, if applicable also record keepers)
- cost for election advertising (printers, paper, etc.)
- cost for the removal of election advertising (cleaning, etc.)
- any court cost (declaratory proceedings in accordance with Section 18a Works Constitution Act)
space cost (meetings of the election committee, election meetings, election, determination of the election result)

Most stated cost factors will be expenses that are incurred “anyhow” in a works council election. The employer, however, does have a certain influence, for example, on expenses used for the election. The employer does not have to hold an (even extensive and colorful) election campaign. The employer is not obligated to finance:

• election gifts,
• election materials (brochures, posters, stickers, etc.), or even
• “election parties.”

The employer must do one thing above all before and during an election: it must treat all election candidates/lists equally. It must therefore not give support to one list and skimp on others. It the employee therefore prohibits – prior to the election – any use of its company resources (printers, paper, ink, etc.), this will mean of course that it saves cost. At the same time, this may also send a signal to the workforce that the employer is against the actual works council election. If, on the other hand, it grants all candidates/lists the right to use its resources (to a limited extent) for election advertising, the election unavoidably becomes more expensive. At the same time, it sends a signal to the workforce that the employer is supporting the election.

With regard to the training and consultant cost, the employer also – in any case effectively – to have an opportunity for influence. The employer can defend itself here traditionally because then many election committees can waive training and/or involvement of a consultant in case of doubt. At the same time, this increases the probability that the election procedure becomes more prone to error and there will have to be new (more expensive) elections – as a result of successful election challenges) or if the election committee comes to decisions that are based more on the result (exclusion of unwelcome applicant lists) than on a neutral election.

3. Tactical considerations from the employer’s point of view

Even the brief statements about the cost of the works council election show clearly that employers would do better not to make decisions during the works council elections “off the hip,” but rather should consider them strategically in advance. This initially involves a status analysis:

• Is the works council about to reach certain threshold values (number of employees and releases from work duties)?
• Is a “quiet” election emerging or is there a reason for the assumption that the election campaign will be harder than usual (change in generation, occurrence of a new group in the operation, participation of the union with own list, pending/completed/ongoing upheaval in the operation (redundancies, restructuring, new owners, etc.), division/polarization of the works council body, etc.)?
• Are measures/changes pending, about which the works council body does not know/anticipate anything?
• Does the works council doubt the status of the executive staff?
• How is the relationship between the employer and the works council/majority fraction? Would the company prefer to preserve the body or a new composition?
• How is the workforce expected to develop over the next few years?

On the basis of this status analysis, the employer should make a decision at an early stage:

3.1 Pending measures

In particular if the employer is considering drastic measures, i.e., there are signs of an operational change as defined under Section 111 Works Constitution Act, the employer has the potential to maneuver. Should it announce the measure during the election preparations and during an election campaign?

The result is then not infrequently a large number of employees who take advantage of promises of advantages under unfair dismissal law in accordance with Section 15(3) German Unfair Dismissal Act by becoming a candidate for the works council election. There is a threat of a collective glut of candidates. In addition, in such scenarios the struggle for the places in the future works council body is particularly fierce. Not least, the employer is then subject to the threat of having to negotiate again with new works council members (elected for the first time), who:

• have not found an internal balance of power yet and are therefore unpredictable,
• are uncertain in their role and their options because of their lack of knowledge and experience and are therefore unpredictable, reluctant, and unreliable negotiation partners.
In contrast, the negotiations with a “settled” and experienced body after an election can have many advantages with regard to the negotiations and implementation of the operational change.
Of course, the aforementioned considerations will also apply if not the whole operation but an individual department is affected by the measure.

3.2 Human resources planning

On the contrary, a reduction in the staff after the election does not lead (directly) to a reduction in the size of the body; at most a reduction in the number of optional works council members takes place immediately when the number of members of the workforce decreases. If the employer is aware that operations will decrease significantly (shortly) after the election, this should be taken into account. The options here are as follows:

• not to say anything,
• to announce the reduction before the election so that it can be taken into account in the election
• or to perform the reduction in the first half of the period of office in order to force a new election ahead of schedule in accordance with Section 13 Works Constitution Act.

In the first case, the problems mentioned under 3.1 in the election campaign are avoided, but a body that is too large, i.e., that has too many members, will be accepted (at least for a term of 2 years).

In the second case, the topics mentioned under item 3.1 must of course be dealt with.
In the last case, things may be peaceful prior to the election, but even just after the election and when the staff cuts are implemented, there will probably have to be another election. The staff cuts will often be a feature of this, the works council will be exposed to significant accusations (of not having negotiated hard enough, etc.). The fear of this may become apparent even during the negotiations on the reduction in staff.

Irrespective of these major topics, human resources planning must be performed before the election with a cool head. There are many questions to be answered:

• What number of employees should be indicated to the works council (and the likely members of the election committee)? Should the number of (likely) employees be kept below important threshold values in order to reduce the size of the body? Doing so would provoke critical questions among executive staff…
• When do limited term contracts/trial periods expire? Are employees being given incentives to be a candidate unnecessarily as a result of this?
• How many temporary agency workers are being included in the plans? These will also count (and vote).
• Are there more female employees? This can influence the guarantee of the minimum representation of the minority sex in the works council body – there can be a significant influence on the chances of success of individual applicants and candidate lists.

3.3 Tactical considerations with regard to the election itself

In view of the significance of the works council body and its composition for operations and cooperation with the employer, it is appropriate for the employer to consider the election, the election campaign, and possible outcomes of the election. In this process, employers are rightly attempting – contrary to what is repeatedly conjectured by some employee representatives –to have their own "preferred candidate" in the election in rare cases only. This is not advisable in view of sanctions (see item 4).

Irrespective thereof, attempts of this kind are also not advisable for another reason: employers who wish to push “agreeable" works council members into the body are often not doing themselves any favors. Again and again, they look for "yes men" hoping to avoid conflicts with the works council body in this way. This has repeatedly turned out to be a big mistake. “Yes men” are extremely unsuited as members of works councils. Irrespective of the fact that they are often unable to attract any votes, they are also unable to perform the office. They lack the standing and presence in order to represent their own point of view to employers, the workforce, and other works council members. They regularly become less important in the body during the term of office and also usually vote along with the more ideological representatives in the body.

When employers consider the works council elections, other topics are often more important for them:

• cost savings,
• proper election process (without election challenges),
• avoidance of splits in the workforce,
• avoiding becoming a victim of the election campaign (the works council shows its “muscles” and blocks important projects in order to gain votes) and
• maintenance/creation of a good relationship with the works council body.
Often, employers are therefore more interested in maintaining the status quo rather than putting it at risk by means of reckless maneuvers. If that is the case, the employer can and should be prepared:
• The employer supports a “due and (predominantly) error-free election” by means of training and granting of external legal counsel for the election committee.
• By training supervisors, the employer prevents them from trying to influence the election campaign in an uncoordinated and awkward (or even punishable) manner.
• If the employer restricts the opportunities of the election campaign, it tends to support the status quo; the opening up of election campaign resources makes it possible, on the other hand, for an “opposition” to be formed.
• The employer may be able to influence the mood in the workforce – to the advantage or disadvantage of the members of the works council in office by means of holding negotiations and through its demeanor during the term of office.
• Finally, the employer can procure the most important election items itself – through its own purchasing – and in this way possibly achieve significant cost savings.
• The analysis of the workforce (how many employees cannot speak German or cannot speak German sufficiently well and must be informed of the election and the election process in their native language or in another language?) can help to arrange the election process more smoothly later.

3.4 Handling of key topics

Another part of the tactical consideration is approaching important topics with the works council in a timely manner prior to the election so that they can be negotiated before the election and therefore before any risk of politicizing or the risk of a delay as a result of a lack of time by members of the works council when it comes to dealing with practical issues during the election campaign.

In this respect, too, company policy is not a lot different from governmental politics. When the election campaign is announced, only the most urgent factual issues will be processed. And in this process, the assessment of what is urgent can differ significantly between the employer and the works council …

4. The threat of sanctions for attempts at influence

In everything that the employer does, it must be aware of the consequences of its actions:

4.1 Criminal liability

The employer – and each individual employee (including executive staff!) – may be subject to criminal liability or a fine in accordance with Sections 20, 119 Works Constitution Act.
Each intervention in the democratic process of forming opinion is subject to punishment. While it is often said during disputes between employees that such disputes are part of a democratic process and have to be “put up with,” the situation is quite different regarding the (apparent) conduct of the employer. The sensitivity of labor courts, unions, public prosecutors, and above all the press is entirely different.

Each statement by an executive staff member is weighed up and can easily be understood as an (attempt at) influencing the election. Some courts go so far here as to accusing employers of the fact that a general information event about the election and the election process could only be associated with the intention to influence the election; otherwise, an employer would not hold such an event. The worldview of some judges imparted in this way sometimes leaves a deep impression.

With things as they are, it is a good idea to be careful. Under no circumstances should there be a risk of mixing the supervisor’s function with the function of a “normal” employee who is entitled to vote.

4.2 Disavowal of candidates

In addition to the legal sanctions, there is a risk of another sanction – at the ballot box. If the employer/supervisor creates the impression that they would particularly prefer/fight against a candidate/candidate list, there is a risk of a sanction at the ballot box, a “protest or solidarizing vote.” In many companies – and to some extent, in society overall – it is still presumed that there are two diametrically opposed poles, the employer and the employees. Every employee representative, to whom too employer-friendly conduct and/or support from the employer is attributed, is vulnerable. Such candidates are easily disavowed. They lose authenticity, credibility, and therefore the support of parts of the workforce. Praising the employer for many employees is praising the wrong side. It does more harm than good.
Employees could also get the impression (or such an impression could be imparted by competing candidates) that the employer wishes to influence the election and then consciously vote for the other side.

Restraint is therefore also appropriate on the employer’s part from a tactical point of view with regard to elections.

5. Key points of the election

Finally, we should mention a few more key points of the election, as a brief overview. A differentiation is made between:

• normal election procedures (in companies with more than 100 employees entitled to vote) and
• simplified election procedures (in companies with up to 50 employees entitled to vote).
• In companies with 51-100 employees entitled to vote, employees and the election committee can agree on the simplified election procedure, but if one of the two does not agree, the normal procedure is to be applied.

The normal election procedure can be divided into five main sections:

a) appointment of the election committee,
b) preparation of the list of voters,
c) announcement of the election notice,
d) submission, review, and announcement of the proposal lists, as well as
e) performance of the actual election procedure, as well as the counting of votes and notification of the election result.

The election committee is of central importance in the election procedure - it:

• prepares the list of voters, so it decides who can vote and who can be elected,
• checks and decides on the validity of candidate/list proposals submitted,
• controls the entire election procedure (publishes the election notice and controls the scheduling).

It is even more surprising at first glance that employees of the election committee are also allowed to be candidates. In a federal/state election this would (correctly) be unimaginable. In companies, this “propriety” can, however, not simply be granted because of a lack of people; elections would then only be possible in companies with significantly more than 5 employees.

If only one candidate list is permitted in an election, the election of a person (majority vote) will take place; if there are several lists, the election will take place in accordance with the principles of proportional representation. The distribution according to d’Hondt will be applied here – with one modification. The election committee must state what proportion of each gender the workforce is composed of. The minority gender is guaranteed a minority share of the seats in the body – in legal breach of the principles of voting equality. Irrespective of the number of votes achieved – as long as there is a sufficient number of candidates of the minority gender.

In contrast, the simplified procedure is significantly trimmed down and rapid.

• After the election committee has been elected (by the works council in office),
• it issues this election notice and voter list and issues an invitation to an election meeting,
• during which the voting proposals (submitted in the meantime) are voted on.

KSA - Managing Employee Performance

By Sara Khoja, Clyde & Co

Managing employee performance is a key concern for every employer. The measure of success and method for harnessing employee performance to align with business needs will vary from employer to employer as well as being dependant on industry sector. Whilst employers will seek to tailor their performance management systems to their own operations employers in KSA need to be mindful of the provisions in the Ministry of Labour and Social Affairs’ Model Work Regulations regarding performance management. The Model Work Regulations are available for employers to adopt wholesale or to adopt with modifications provided any amendments receive prior approval from the Ministry of Labour and Social Affairs. Extensive modification of the standard model is unlikely to be approved for use by an employer. Broadly the Model Work regulations provide for the following.

Appraisal System

Every employee should be assessed formally and in writing at least once a year; with the appraisal covering the following:
• The individual’s ability to perform work and their level of proficiency;
• The employee’s conduct, cooperation with colleagues, customers, and managers; and
• The individual’s punctuality.

Each employee should be given a performance marketing or ranking based on five performance gradings which are not specified but would include categories along the lines of high performance, upper intermediate, intermediate, lower intermediate, and poor.

Reward and Promotion

Perhaps surprisingly for many employers, the Model Work Regulations also seek to regulate the payment of bonus payments in that the regulations provide that an employee ranked as intermediate should be eligible for a bonus where an employer operates a bonus scheme. The amount and method for calculating any bonus is for the employer to determine and indeed, whether or not to provide any bonus scheme at all is at the employer’s discretion.

Internal promotions are also regulated by the Model Work Regulations and linked to the performance management and assessment scheme. Where a role is vacant then an employee is able to apply for it on the basis that it is a higher ranking role for which he is appropriately qualified and has achieved a performance ranking in his last appraisal of ‘upper intermediate’ and the promotion is approved by the General Manager. If there are competing internal applications for the same role, the Model Work Regulations provide that the following factors should be taken into account: which employee has achieved a higher appraisal ranking, has higher educational qualifications, experience, seniority within the organisation and the authorised (i.e. line of report) manager’s view.

Employment Termination due to Performance

Where an employee’s performance warrants review it is worth noting that the KSA Labour Law and the Model Work Regulations envisage the employer following the same process as that which applies for disciplinary matters. Whilst poor performance and misconduct are conceptually different, the procedure to document an employer’s steps to remedy them are the same under the KSA Labour Law and the Model Work Regulations. A three step process involving inviting an employee to a meeting in writing and outlining the concerns, meeting with the employee to give him an opportunity to explain the situation and make any representations he may have and finally confirming the employer’s decision in writing, should be followed. There are also time limits to take into account such as the requirement that any procedure is initiated within thirty days of the employer becoming aware of the employee’s poor performance. The Model Work Regulations contain a table providing guidance on the type of sanction applicable for various acts by an employee and, where poor performance is involved, an employer would be expected to issue written warnings identifying the skill gap and what needs to be done by the employee to address it. An employer would also be expected to provide training and support to an employee in order to improve his performance and where possible even consider moving him to a role more in line with his capabilities.

Generally, prior to considering termination by reason of poor performance an employer would be expected (depending on the surrounding circumstances) to have issued at least two written warnings over a six month period. Where a warning or sanction is issued (of whatever nature), these are valid or ‘live’ for a period of one hundred and eighty days following which they can remain on an employee’s file but they are not ‘live’ warnings upon which further action can be based.

Very often employers will wish to enter into discussions with employees to agree termination by mutual agreement and in accordance with article 74 of the KSA Labour Law. Care needs to be exercised when entering into these discussions as any conversation with an employee is ‘on the record’ and the concept of ‘without prejudice’ does not exist in KSA within the context of employee relations. Moreover, where a termination by mutual agreement is reached, this could have an impact on an employee’s ability to claim unemployment benefit from the General Organisation for Social Insurance (GOSI) under its Sanad program. GOSI will need to be notified by the employer that the employee is no longer in its employ and it will usually request a reason for the employment termination. Where the reason given is resignation or termination by mutual agreement this can potentially bar the employee from claiming unemployment benefit.

Mexico - Reform to Mexico's Labor Justice System

By Stefano Sandoval Malori, Pietro Straulino, Charles E. Engeman, Ogletree Deakins International, S.C.

On February 24, 2017, Mexico’s Official Gazette of the Federation (known as the Diario Oficial de la Federación or DOF) published a decree that reformed and added several dispositions of Articles 107 and 123 of the Mexican Federal Constitution.

The goal of the reform is to transform the labor justice system in Mexico. The reform aims to consolidate autonomy of the labor justice system, promote efficiency in the administration of justice, and increase labor productivity.

The following highlights some of the most important aspects of the reform:

1. The reform eliminates the local and federal Conciliation and Arbitration Labor Boards (las Juntas Locales y Federales de Conciliación y Arbitraje) as tripartite labor justice administration organs and creates local and federal labor courts dependent on the federation’s judicial branch or of the power of the states of the Mexican Republic.

2. The reform creates a pre-judicial conciliatory stage. Employees and employers in conflict will be required to attend this stage of the proceedings before the commencement of a labor trial that would be processed before the courts. It is worth noting that this pre-judicial conciliatory stage will take place on a date and time expeditiously appointed by the conciliation centers (see below) in accordance with the applicable law.

3. At the local level, specialized and impartial conciliation centers (Centros de Conciliación) will be established in the states of the Mexican Republic. Those centers will be in charge of conducting the compulsory pre-judicial conciliatory stage.

4. The federal order provides for the integration of a decentralized agency (un Organismo Descentralizado) which, in addition to conducting the compulsory pre-judicial conciliatory stage described above, will be in charge of: (i) registering all the collective bargaining agreements applicable within the Mexican Republic; (ii) registering all the unionized organizations or labor unions of the country; and (iii) participating in and solving all administrative labor/collective matters.

5. The following principles will be incorporated in the law: (i) representation of collective union organizations and (ii) certainty in the execution (signature), registration and storage of collective bargaining agreements.

6. The ratification of the collegiate circuit courts as jurisdictional bodies in charge of reviewing and deciding appellate claims filed against resolutions issued by the lower courts.

In order to implement the reform— which, along with its modifications, became effective on the day after it was published in the DOF, the following must take place to transition to the new justice system:

1. The Mexican Congress and the legislatures of the states of the Mexican Republic must make the necessary changes to local and federal legal bodies within one year of the reform’s effective date.

2. Until the courts, conciliation centers, and decentralized agency become operational, the labor boards and, as applicable, the Secretary of the Ministry of Labor and Social Welfare or the local labor authorities will continue to process the conflicts arising between employees and employers, as well as any other issues related to the registration of collective bargaining agreements and unionized organizations.

3. All matters pending at the time the activities of the courts, conciliation centers, and/or decentralized agency begin will be solved in accordance with the legal dispositions in effect at the time of the matter’s commencement.

4. The competent authorities and the labor boards must transfer all files and documents under their attention and shelter to the courts, the conciliation centers, and/or the decentralized agency.

UK/US - Bridging the Gap: Gender Pay Gap Initiatives

By Georgina McAdam Baker McKenzie London and Emily Harbison Baker McKenzie Houston

Countries across the globe are looking to address the gender pay gap and are doing so in a variety of ways. Initially the UK introduced a scheme in 2011 for employers to publish their gender pay gap voluntarily. However, very few employers did so. Therefore, the UK recently enacted legislation that requires employers with at least 250 employees to publish details of their gender pay gap on a publicly accessible website on an annual basis.

Although the UK legislation establishes how the gender pay gap should be calculated, which employers are required to publish this information and how it should be published, employers are facing various challenges when implementing the legislation.

How specifically should the gender pay gap be calculated?

Legislation in the UK sets out specific metrics companies are to report and how to calculate them. The metrics are:

• the difference in mean and median hourly pay between men and women,
• the difference in mean and median bonuses between men and women over a 12-month period,
• the proportion of men and women who receive bonus pay in a twelve-month period,
• and the proportion of men and women in each pay quartile within the company.

The rules are complex and not always clear. Being compliant may require employers to make judgment calls on tricky issues such as whether particular payments or employees are in scope. For example, bonuses paid in April may need to be included in both the hourly pay gap and bonus pay gap (depending on exactly when they are paid), and may exacerbate the hourly pay gap figures. In addition, there are some particular challenges around certain types of payment such as sign-on and retention bonuses which will require judgment calls. There are also some anomalies, for example, financial services employers who pay role-based allowances in April will need to include them in their hourly pay gap. The timing of payments can therefore have a distorting effect.

Which employers need to publish details of their gender pay gap?

Employers with 250 or more employees on 5 April in any year must report their gender pay gap data for that year. Employees in this sense includes apprentices and anyone employed under a contract to personally do work, which includes workers and some contractors. In addition, employees can include ex pats posted overseas, if they retain a sufficient connection to Great Britain (Northern Ireland is currently excluded). Therefore, employers must consider their wider workforce and not just their employees in Great Britain. However, agency workers and individuals providing work though personal service companies are excluded. In addition, workers and contractors can be disregarded for the purposes of the gender pay gap metrics if the employer does not have the data for them and it is not reasonably practicable to obtain the data.

In a group of companies, the obligation to report applies to each company separately, based on the number of employees in the company rather than in the group as a whole. Each group company with 250 or more employees must therefore produce its own report and upload its data to the government website, even if the group voluntarily produces a consolidated version. Equally, companies with fewer than 250 employees do not have to produce a report, even if they are part of a wider group with more than 250 employees.

Depending on the group and organisational structure, this could have unintended consequences and mean peer comparisons are not entirely like for like. For example, in some groups the board may be out of scope of the calculations, if they are employed by a group company with fewer than 250 employees. Whilst we do not expect companies to change their group structure because of gender pay reporting, the rules may give an "advantage" to some groups with certain existing structures.

How must employers publish their gender pay gap?

Employers must publish their data (i.e. the metrics described above) within 12 months of 5 April 2017 on a publicly accessible website. This means that the first reports will be due by 4 April 2018. Companies therefore have a degree of flexibility over the timing of the publication, as they can publish their data any time prior to the deadline.

The guidance published by the government encourages early publication, which it says will enable employers to be seen as leaders in their sector. However, some employers will be concerned that early publishing could attract more media attention and, given that most in-scope employers will be publishing a gender pay gap, that the publicity will be negative. Employers will also need to manage multiple stakeholders and may want to ensure that their employees, senior management teams and relevant employee groups are briefed in advance of publication. In addition, the process of calculation and sign-off is not straightforward. Therefore, most companies are likely to wait to publish their data towards the end of the 12-month publication window.

The information will need to remain on the website, accessible to employees and the public, for at least three years to enable trends to be identified.

Employers must also upload their data to this national government website to enable easy comparison with other employers. At the time of writing, only 9 employers have uploaded their data.

In addition to the metrics, companies have an option to publish a narrative alongside their data when publishing on their own website. For example, to explain their analysis of the gap, any measures they are taking to reduce the gap and to put their data in context alongside their diversity and inclusion initiatives. This will help to give context to any pay gap. Multinational employers will need to think about whether their narrative is, or needs to be, consistent with what they are saying elsewhere.

Employers may also want to consider publishing additional or more detailed metrics, for example, the average hourly pay gap between employees at the same grade. This may show a much smaller pay gap, but a pay gap at this level may be more indicative of equal pay risks, so employers will need to consider this carefully. The Conservative Party manifesto states that, if they win the forthcoming general election, they will require employers to publish more data and (although the manifesto does not give any specifics) this could well involve a breakdown by grade, and possibly age.

Are there any sanctions for non-compliance?

There are no civil or criminal penalties for employers that do not publish their gender pay gap data, although the Equality and Human Rights Commission could take enforcement action against non-compliant employers. The intention seems to be that employees, unions, the media, customers and shareholders will apply sufficient pressure to non-compliant organisations.

What steps are employers taking?

Employers need to analyse their figures and their own demographics to understand the causes of any gender pay gap before developing action plans to close it. Some clients may want to do this under legal advice privilege as far as possible, and this needs careful planning. A key question is also whether there is an underlying equal pay issues and legal exposure. Where this is a concern, it should be explored on a privileged basis.

Many organisations are starting to look beyond the immediate concern of compliance with the legislation. Some want to analyse their data to better understand the causes of the gender pay gap in their organisation and consider what measures they could take to narrow it. These organisations are likely to look at alternative or adjusted metrics in order to track their progress, whether or not they also publish those metrics. Any deep analysis of the gender pay gap or production of alternative or adjusted metrics may take considerable resources when compared to simple compliance, and measures to target the gap will also require investment.

If a company is going to take measures to address the gender pay gap, it is important to be realistic and acknowledge what cannot be changed, at least in the short-term, as well as what can. There is a risk of an employer announcing a package of measures aimed at narrowing the gap and then finding that the gap remains the same in subsequent years. As explained above, employers need to display three years' worth of data on their websites. Some measures may be effective in the long-term but make the gender pay gap worse in the short-term. Companies should not just be thinking about a package of measures to announce in the first year of gender pay gap reporting; they need to be looking ahead to the longer-term, and monitoring the impact of measures.

What are other countries doing?

The gender pay gap is a global issue, and other countries are taking a closer look at what can be done to improve it. For example, in the United States, there are new rules on gender pay reporting from the Equal Employment Opportunity Commission (EEOC), which is the federal agency responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, colour, religion, sex, national origin, age, disability or genetic information. For years, the EEOC and the Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) have collected data from certain private employers and federal contractors and subcontractors about their employees on the "Employer Information Report" or the EEO-1. The EEO-1 previously collected data about the number of employees by job category and by sex and race or ethnicity. On September 29, 2016, the EEOC announced approval of a revised EEO-1, starting with the 2017 report, to now also collect summary pay data from employers, including federal contractors and subcontractors, with 100 or more employees. The EEOC expects the revised report will "assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces."

Using the revised EEO-1 report, covered employers will be required to report the total number of full and part-time employees they had during the “workforce snapshot period” in each of 12 pay bands listed for each EEO-1 job category. Notably, employers do not report individual pay or salaries. In addition, employers must tally and report the number of hours worked that year by all the employees accounted for in each pay band. Employers are required to submit EEO-1 reports annually. The EEO-1 deadline for the 2017 report is 31 March 2018. Employers will have a total of 18 months-from 30 September 2016 (2016 report deadline) to 31 March 2018 (2017 report deadline) to make the change to the revised form.

There are no penalties or fines associated with the failure to file a EEO-1 report. However, the EEOC can compel a company to file the report. Moreover, if a federal contractor fails to submit a report, it may lose its current government contract and/or be prevented from receiving future contracts.

It is worth noting that it is possible that the Trump Administration may reverse the course here. The new EEOC Acting Chair, Victoria Lipnic, previously voted against the revised EEO-1 report and recently reiterated her opinion that the purported benefits of collecting the pay data do not outweigh the costs of doing so. However, for now the new rules stand and employers should be prepared to report the new pay data information in their 2017 reports.