Mexico - The recently enacted changes to the Federal Labor Law of Mexico are truly a game changer

By Juan Nájera[1], Najera Danieli & Asocs

They bring more flexibility to the workplace but carry more compliance requirements

Overview

Labor matters such as individual employment contracts or collective bargaining, labor outsourcing, termination, salary and benefits, profit sharing, workers compensation, labor unions or strikes, are regulated in Mexico at the federal level by the “Ley Federal del Trabajo” (Federal Labor Law or “LFT”). These changes were enacted and entered into force on December 1st, 2012.

Key labor issues

The LFT is a public interest law very protective of workers or employees, irrespective of their national origin or residency status, and applies even if there are any contradictory provisions in the secondment, relocation or assignment agreement between the Company and the expat employee.

Under the LFT system, a labor contract or employment agreement is deemed to exist whenever a person renders his or her personal services to any other person[2], business or employer (including foreign embassies, consulates or offices of international organizations), even if an intermediary is used under an “independent contractor” or “labor outsourcing” agreement and regardless if the employee goes to work regularly or not.

Absent a written agreement, or if the current written agreement does not include a specific provision required by law, or its provisions are against the law, then the labor relation is governed by the LFT.

Total salary in Mexico must include payments for the following: i) 1 or 2 resting days per week; ii) Christmas bonus of 15 days each year (or fraction thereof); iii) annual vacations + a 25% vacation premium; iv) employee profit sharing.

Employment may be terminated for cause, provided that the employer has sufficient proof to support the cause of termination. Wrongful dismissals can be costly, as the wrongfully dismissed employee may be adjudicated with a mandatory severance payment of 3 months + 20 days of salary per each year of service, plus accrued unpaid salary while the lawsuit proceeds[3], among others.

Labor outsourcing

It is very common that Mexican subsidiaries of international companies use a dual corporate structure involving an operating company and a labor outsourcing company. By using this structure, the outsourcing company acts in fact as the employer of record and is responsible for the payment of salaries, fringe benefits and any other social obligations of all employees of the business in Mexico.

The most important effect of the labor reform on this dual corporate structure is that it now incorporates the concept of “outsourcing”, effectively outlawing it as commonly used in the Mexican structure and thus rendering the outsourcing companies useless for the purpose they were initially devised, since the law now imposes a number of obligations on employers with the purpose of preventing them from resorting to this strategy with the intention of avoiding certain “undesired” labor obligations. Now, if the mandatory requirements are not met, then the party receiving the outsourcing services is deemed to be jointly and severally liable, and it might be even considered as the employer of record, with full liability, since the ultimate beneficiaries of the work are now held liable for all salaries and benefits, including profit sharing, in favor of all employees within a workplace.

Under the new law, outsourcing all work positions to a related or unrelated third party:

•          Is not allowed if its purpose is to reduce labor rights (i.e. to lower PTU).

•          Must not include all work activities performed in the workplace (total outsourcing outlawed); it must be justified by reason of requiring specialized workers and cannot consist of the same or similar tasks performed by the rest of the workers employed by the company.

•          The company must inspect at all times that the contractor permanently complies with applicable safety, health and environment at work laws and regulations, through a verification unit duly accredited and approved.

•          Ultimate beneficiaries of the work are now held jointly liable for all salaries and benefits, including PTU, in favor of all employees within a workplace.

Although there is not a set deadline or final date for eliminating total outsourcing schemes, provided that the contracting company is in compliance with these new obligations, we recommend acting immediately on this issue, as any employer found using outsourcing in a “malicious way”, may be fined between USD$1,250.00 and USD$25,000.00 per each occurrence[4].

In any event, make sure that the outsourcing agreements with third party companies immediately incorporate the changes in the law regarding specialization, supervision, limitations of liability, etc. and that your company is prepared to continuously perform compliance supervision that these outsourcing contractors comply with all applicable environmental, health and safety at work laws and regulations or, in the alternative, select and hire a suitable government authorized “verification unit”.

Specific aspects of the Labor Reform

·         Introduces new types of labor agreements:

·         By season. - i.e. Christmas, summer, special campaigns, etc.

·         Per time unit (hours).- Is now allowed, provided that the legal maximum hours are not exceeded, all labor rights are respected and social security is paid.  Total salary, despite the number of hours worked, shall not be less than a day’s salary.

·         Employees sent abroad ('seconded' from Mexico).- Living accommodations must be provided free of charge. The secondment agreement must be approved by the JFCA.

·         Trial period.- Now allowed for a period of 30 days (180 days for employees for management positions, managerial and other persons involved in the management or administration), if the labor contract is for an indefinite period of time or for more than 180 days .

·         Initial training period. - Now allowed for a period of 90 days (180 days for management positions, managerial and other persons exercising management or administrative duties), so that the employee acquires knowledge or skills required for the activity for which employee is to be hired.

·         More data required. - It is now mandatory to include additional employee’s data, such as National Id and Tax Id information on the labor agreements. Employees are allowed to perform work or tasks related or complementary to their main line of duty. All forms of discrimination, including pregnancy are banned. The work done remotely using information technologies and telecommunications is now governed by the LFT.

·         Employee Manuals.- Must be duly recorded for each workplace with the competent local Labor Board, which shall made copies of it available to any interested party.

·         Fonacot. - Obligation to enroll employees in the National Fund for Employees Consumption (“Fonacot") and to enroll the workplace with Fonacot (before December 1st, 2013).

·         Training.- Increased training obligations, e.g. mandatory Joint Commissions, for Training and Productivity when the workplace has more than 50 employees. This implies registration of Commissions and related Plans and Programs.

·         Employees’ profit sharing (PTU). – All people performing work activities within the workplace of a company are now considered to be part of it for purposes of employees’ profit sharing.

·         Mandatory application of regulations (NOMs) on safety, health and environment and for making adjustments for People with Disabilities. - When workplaces have more than 50 employees, it is mandatory to display those NOMs in a visible place.

·         All forms of discrimination outlawed. - It is now expressly prohibited to ask for “certificates of non pregnancy” to all female applicants. If a female employee gets pregnant, or changes her marital status or has minor children, these factors shall not prevent her from being eligible for a promotion and does not give the right to the employer to terminate her employment.

·         Additional grounds for termination for the benefit of Employer. - i) dishonesty or violence against customers or suppliers; ii) harassment or sexual harassment against any person in the workplace, and iii) lack of necessary documents for the service attributable to the employee in accordance with applicable regulations.

·         Additional grounds for termination for the benefit of Employee. - i) when the employer, his family or any of its representatives, within the workplace, engage in harassment and / or sexual harassment against the employee, spouse, parents, children or siblings and ii) when the employer requires the performance of acts, conduct or behavior that undermine or is against the dignity of employees.

·         Payment of salary and benefits by bank transfer now allowed. - At the prior request or consent of the employee, at the full expense of employer.

·         Flexible maternity leave. - Transfer up to 4 of the 6 weeks of the pre-birth maternity leave to the 6 weeks post-birth period. Additional time shall be granted if the newborn has a disability or a serious disease. A 6 weeks post-birth time also applies in case of adoption of a child.

·         Paternity leave.- Must be granted to all male employees for five days with full pay (also applies in case of adoption of a child).

·         It is now mandatory to provide written or electronic notice of accidents occurred.- Within 3 days. In addition to this, it is now mandatory for all authorities exchange Information with the Department of Labor (STPS) and the Social Security Administration (IMSS).

·         Employment of minors (less than 14 yrs. old) prohibited.- And is now punished with jail.

·         POA requirements.- All employer’s representatives must now be licensed lawyers . All POAs shall include the authority to enter into a compromise binding his/her client;

·         E-discovery now allowed.- Photographs, films, fingerprint records, audio and video recordings, or any other information and communication technology, such as computer systems, optical or electronic media, fax, email, digital documents signatures or passwords are now admitted as proofs in trial and are subject to electronic discovery if so requested.

·         Punitive salaries in case of litigation when decided in favor of employee plaintiff now limited.- To no more than 12 months of full wages. If the litigation elapses for more than 12 months, interest accrues at the legal rate.

·         New procedure for "Social Security Individual Conflicts".- A new, separate  procedure to claim social security benefits, including Infonavit and Retirement Funds, as well as those are applicable under collective bargaining agreements.

·         Disciplinary fines for lawyers, litigants or representatives.- Now set from USD$500.00 to USD$5,000.00, for any such person promoting any legal actions, exceptions, incidents, diligences, offer of proof, appeals or any other procedural motion which is deemed frivolous or grossly inappropriate, with the purpose of extending, delaying or impeding the proceedings, adjudication or resolution of a labor dispute.

·         Increased compensation in case of death.- Now set at 5,000 days of minimum salary (equivalent to USD$25,000.00 at the current exchange rate). This will also have a direct and immediate impact on civil liability and the cost of insurance premiums. It is most important to update insurance coverage.

·         Alimony.- The employer must withhold any such payments owed by any employee to his/her beneficiaries and must pay the withheld amounts to them as well as to report termination of an employee paying alimony to all competent authorities and beneficiaries, within five business days.

Key social security issues

Social security -IMSS-, housing -INFONAVIT- and retirement savings -SAR- are all regulated by federal law and enforced by federal authorities. It is important to mention that recently enacted amendments to the Social Security law impose strict reporting requirements (and penalties) upon labor outsourcing companies and their clients, which make it easier for the authorities to monitor compliance by primary and secondary employers.

Affiliation of employers and enrollment of all permanent or temporary employees is not optional. Lack of compliance may carry stiff fines and penalties.

There are useful ways to eliminate or minimize double taxation on Social Security or Pensions by requesting the issuance of coverage or transfer certificates under a current bilateral Social Security or Pension Transfer Treaty. There are also Social Security or Pension Transfer Treaties signed by Mexico with other countries, which are promoted by the International Labor Organization, an agency of the United Nations.

Please keep in mind that Mexican law expressly prohibits the procurement of insurance coverage from foreign insurance companies not licensed in Mexico and punishes this as a federal crime. Life or medical insurance may be procured locally to supplement social security coverage.

Key immigration issues

Visas, resident aliens and immigration matters are regulated at federal level by the brand new Migration Law (Ley de Migración). The competent authorities are the National Migration Institute (Instituto Nacional de Migración or “INM”) and the Mexican Consulates in more than 130 countries.

It is important to mention that it is no longer possible for a foreign person to enter Mexico as a tourist or with a temporary visa and then change it to a work or residency visa. All work or residency visas must now be granted through Mexican consulates outside Mexico, although the employer must process the visa application locally. Foreign persons not properly documented must leave Mexico and may only be readmitted upon obtaining a new visa.

Practical implications

The change with the most important financial effect is the employee’s profit sharing (PTU), which now has to be made among all employees of all of the company’s workplaces. This might turn into an additional cost of up to 10% of the gross taxable income of your business in Mexico, so it is important to consider this issue very carefully to minimize costs while securing full compliance.

These changes also imply that Mexican employers must start working immediately in the review of any and all documents used in labor management, including any other documentation that contains any reference to employer/employee relationships to make sure they are in conformity with the new law and to amend labor agreements to include additional employee’s data, such as National Id and Tax Id information and review the job descriptions to make them more flexible according to the new law.

It is also important to make sure that all Employees’ Manuals, Joint Commissions for Training and Productivity and related Plans and Programs are recorded with the JLCA of each workplace and that the company is enrolled with the National Fund for Employees Consumption (“Fonacot").

Other recommendations

·         Identify any applicable regulations (NOMs) on safety, health and environment and required adjustments for People with Disabilities on all of the company’s workplaces.

·         Properly report, record and document any dishonest act or violence against customers or suppliers; or harassment or sexual harassment against any person in the workplace.

·         Provide written or electronic notice to the Ministry of Work (STPS) of any labor related accidents within 3 business days from their occurrence.

·         Make sure that all employer’s labor representatives are licensed lawyers and that their POAs include the authority to enter into a compromise binding the grantor.

·         Plan for e-discovery and confine or protect sensitive information.

·         Update insurance coverage in case of death to 5,000 days of minimum salary (from 730) for all of the company’s facilities, equipment and vehicles.

·         Give written notice of termination of any employee paying alimony to the competent authorities and to all beneficiaries, within five business days.

·         Review all current outsourcing agreements with third party companies to incorporate the changes in the law regarding specialization, supervision, limitations of liability, etc.

·         Plan for the transition

[1] JD, Universidad Iberoamericana -UIA-, Mexico. LLM UOL. Diploma in International Commercial Arbitration (ICC Mexico-ELD). LLD Universidad Panamericana, Mexico. Doctoral Researcher in Tax Law at the University of Salamanca, Spain. Member of the ICC Committees of Arbitration and International Trade, the Committee of the Diplomat in Foreign Trade of the ICC and the Escuela Libre de Derecho and the Committee for revision of Incoterms 2000-2010. Former teacher of “Labor Relations in Mexico” joint program between UIA and UCSD. Associate member of the ABA. Comments and requests are welcome to: info@nda.mx

[2] Domestic personnel is considered to be a worker under the LFT and the Social Security Law.

[3] However, this is not automatic, so be careful yielding to pressure to pay any such amount just by the mere threat of being sued.

[4] Regardless of any other infractions or measures, including the closure of buildings due to lack of compliance with disabled persons’ access and safety regulations, or mandatory distribution of profit sharing.

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United Kingdom: Recent Cases on Discrimination in the Workplace

 By Amity Farrar, Farrer & Co LLP

European judgment on right to religious expression at work

In mid-January of this year, the European Court of Human Rights ("ECHR") issued its judgment in

Eweida and others v United Kingdom, four cases from the United Kingdom which deal with employees' rights to manifest their religious beliefs at work.

One of those claims was brought by Ms Eweida, a Christian, who was a member of British Airways' ("BA") check-in staff.She was not permitted by BA to wear a visible cross as this was contrary to its uniform policy. The Airline's policy provided that "no other items are acceptable to be worn with the uniform" and that "any item of jewellery that does not conform to the above regulations" could not be worn.Ms Eweida felt she was discriminated against because male Sikh employees could wear a turban or Sikh bracelet and female Muslim staff were allowed to wear a hijab in BA-approved colours.After a series of negative media reports, BA relaxed its policy but, until it did, Ms Eweida chose to stay at home without pay rather than comply with the uniform policy.BA did not compensate her for loss of earnings for the period she was at home.

  

Ms Eweida lost her discrimination case in the UK and then brought her case to the ECHR, on the basis that UK law failed to protect her right, under Article 9 of the European Convention on Human Rights ('the Convention'), to manifest her religion or beliefs.

The ECHR found that the Court of Appeal had accorded too much weight to BA's desire to project a particular corporate image, and the fact that BA subsequently changed its uniform policy to allow employees to wear symbolic religious jewellery suggested that the issue of religious jewellery was not ultimately that important to BA.The ECHR concluded, therefore, that Ms Eweida's Convention rights had not been protected sufficiently under UK law.

  

However, the ECHR rejected the complaints of the other three employees, agreeing with the decisions of the UK courts in relation to their discrimination claims:

The Chaplin v Royal Devon & Exeter NHS Foundation case had some similarities to the BA case. Ms Chaplin, a nurse, had been prevented from wearing a cross on a chain at work due to her hospital employer's health and safety regulations. Like BA, the hospital had a uniform policy.Unlike the BA situation, however, this policy was designed to "minimise the risk of cross infection".To reduce the risk of injury when dealing with patients, necklaces were prohibited.Ms Chaplin refused to comply with the policy and was transferred to a temporary, non-nursing position. Shortly after the transfer, she resigned. 

Ms Chaplin brought discrimination proceedings in the UK but was unsuccessful.The ECHR found that the aim of protecting the health and safety of staff and patients was 'inherently of a greater magnitude' than BA's desire to manage its corporate image, and that managers at the hospital where Ms Chaplin worked were better placed to make decisions about clinical matters than a court.

The other two cases dealt with religious beliefs and same-sex couples.In Ladele v London Borough of Islington and McFarlane v Relate Avon Ltd, the ECHR found that the UK courts were entitled to reject the Claimants' discrimination claims following their dismissals for refusing to perform certain aspects of their jobs on religious grounds.

Ms Ladele refused to officiate at civil partnership ceremonies (which have been legal since the 2004 Civil Partnership Act), and Mr McFarlane refused to counsel homosexual couples.Ms Ladele argued that she felt forced by Islington, which had an equality and diversity policy, to choose between her faith and her job.Islington initially allowed Ms Ladele to switch duties with colleagues on an informal basis so she did not have to conduct civil partnership ceremonies.However, two colleagues raised concerns that her refusal to conduct the ceremonies was discriminatory.

Mr McFarlane, a relationship counsellor, refused to advise gay couples.He said that his Christian faith prohibits him from supporting homosexuality.His employer, however, is a member of the British Association for Sexual and Relationship Therapy and follows an ethics code that provides that therapists "must…avoid discrimination, for example on grounds of…sexual orientation…"He was eventually dismissed for gross misconduct.

In both the Ladele and McFarlane cases, the employer's aim to provide services to the public without discrimination was found by the UK courts to outweigh the employees' rights to manifest their religious beliefs. The ECHR found that these decisions fell within the UK's margin of appreciation in seeking to balance competing Convention rights.According to the judgment, it was "evident that the aim pursued by the local authority was legitimate."

This judgment in relation to these four cases is the latest in a long line of decisions at the ECHR on freedom of religion and discrimination.It serves as a reminder of the UK's obligation to secure Convention rights for individuals, and to strike a fair balance between the competing interests of the individual and the community as a whole. While freedom of religion remains important in Europe, the ECHR has decided that at work there can be restrictions on this freedom, depending on the facts.It is, however, possible that this case could be appealed further; for three months after the judgment, any party may request the referral of the case to the Grand Chamber of the Court.

UK's obligation to give employees greater legal protection against dismissal on grounds of political beliefs

Like under US federal law, under English law, there is no specific protection for employees who are dismissed or subjected to a detriment because of their political beliefs.Employees may bring claims for unfair dismissal if they have sufficient qualifying service (two years for those starting employment on or after 6 April 2012 and one year for those starting before that), and in some circumstances political beliefs may qualify for protection under the religion and belief discrimination legislation.For example, in 2010, a genuine and strongly held belief in climate change was held to qualify for protection.

  

However, cases where employees have argued that membership in a specific political party is a protected ground have so far failed, leaving employees who have less than either one or two years' service (depending on their joining date) unable effectively to challenge a decision to dismiss them which arises from their membership in a particular political party.

  

In Redfearn v United Kingdom, the European Court of Human Rights suggested that this violates the European Convention on Human Rights.Mr Redfearn was employed by Serco Ltd as a driver, providing transport services for disabled adults and children.Most of his passengers, like Mr Redfearn's manager, were Asian in origin.In June 2004, Mr Redfearn was elected as a local councillor for the British National Party ('BNP').At that time, the BNP only allowed white people to become members, and was opposed to any form of integration between British and non-European peoples.

On 30 June 2004 Mr Redfearn was summarily dismissed by Serco on the basis that continuing to employ him would present a risk to the health and safety of employees and passengers, cause considerable anxiety to passengers and their caregivers and jeopardise Serco's reputation.Serco was also concerned that Mr Redfearn's political activities could potentially endangering Serco's contract with the Council to provide transport services.

  

As he had been with Serco for less than a year, Mr Redfearn did not have sufficient length of service to bring a claim for unfair dismissal.Instead he brought a claim for race discrimination.His claim was ultimately rejected by the Court of Appeal, which found that Mr Redfearn was not dismissed 'on racial grounds' but because he was a member of the BNP.

Mr Redfearn argued that discrimination on grounds of membership of a political party contravened various Convention rights, including Article 10 (which protects freedom of expression) and Article 11 (which protects freedom of association).He applied to the ECHR for a declaration that UK law is not compatible with the Convention in this respect.

  

Late last year, the ECHR found that there had been a violation of Mr Redfearn's rights under Article 11 and that UK law had erred in failing to provide sufficient protection against detriment on grounds of political opinion or affiliation.The Court noted that Article 11 applies to all associations and organisations, even those which are regarded as holding offensive views, and Mr Redfearn should have been given the opportunity to challenge the decision to dismiss him based on his membership of the BNP.

Following this judgment, it is likely that the current law will need to change to allow individuals who are dismissed because of membership of a political party to bring claims for unfair dismissal regardless of their lengths of service (although it is anticipated that such dismissals may still be fair if they can be justified for "some other substantial reason").The government recently has tabled some important amendments to the Enterprise and Regulatory Reform Bill 2012-2013, one of which is an amendment in response to this case.

For now, private sector employers are not affected by the ECHR's decision, but public sector bodies are required to act in a manner which is compatible with the Convention, so public sector employees who are dismissed because of their political affiliations could bring claims under the Human Rights Act 1998 even if they cannot bring claims for unfair dismissal.

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International Employment Law Newsletter - December 2012

Dear all

Welcome to the December bumper issue of the International Employment Law Committee Newsletter.  Many thanks to all those who have contributed articles - this edition we have great articles on a range of jurisdictions, including Canada, Hungary and Mexico.

Wishing you all a happy holidays and a successful and busy 2013!

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

Canada - Reasonable Expectations of Privacy in Workplace Computer

By Paul E. Broad, Hicks Morley

The Supreme Court of Canada has issued a significant decision regarding workplace privacy. In R. v. Cole, it unanimously held that employees have a diminished, but reasonable, expectation of privacy in personal information stored on an employer-issued computer. Employers may continue to access information stored on their work systems for their legitimate purposes, though they should now use more thorough and detailed policy to establish a clear management right.

BACKGROUND

Cole is about a teacher charged with having pornographic images of an underage student on his employer-issued laptop computer. A member of his school board’s IT staff discovered the images after noticing irregular network traffic during routine maintenance.

The board provided the police with the computer and a disc that included the teacher’s temporary Internet files. The police searched the computer and disc without obtaining a warrant.

The police charged the teacher with possession of child pornography and unauthorized use of a computer. The teacher argued that the evidence on the computer was obtained in violation of his right to be free from unreasonable search and seizure as guaranteed by section 8 of the Canadian Charter of Rights and Freedoms and sought to have the evidence excluded.

The Court of Appeal for Ontario held that the teacher was protected by section 8 because he had a diminished, but reasonable, expectation of privacy in the contents of his employer-issued computer. It then held that the actions of the school board (which it assumed was bound by the Charter) were reasonable but the actions of the police were not. The Court ordered evidence obtained from the police search to be excluded from evidence at trial under section 24(2) of the Charter as its admission would bring the administration of justice into disrepute.

THE SUPREME COURT’S DECISION ON REASONABLE EXPECTATION OF PRIVACY

The Supreme Court of Canada affirmed the Ontario Court of Appeal’s finding that the teacher had a diminished, but reasonable, expectation of privacy in the contents of his employer-issued computer. The majority (6-1) allowed the appeal, holding that the Court of Appeal had improperly excluded evidence under section 24(2) of the Charter.

The Supreme Court’s expectation of privacy finding is principled and broad. There were flaws with the school board’s policy framework that the Court does not treat as significant. To the contrary, it recognizes that the school board’s policy and “technological realities” deprived the teacher of exclusive control, but that privacy protection was still warranted given the teacher’s personal use, which generated information that was “intimate” and revealing of the teacher’s “biographical core.” Promulgating more strict or absolute policy is therefore not a means to eliminate the expectation of privacy recognized in Cole. A reasonable expectation of privacy would not likely subsist in the face of an absolute prohibition on personal use, but the Court itself hinted at the difficulty in enforcing such policy by specifying that an expectation of privacy would prevail when personal use is “reasonably expected.”

Although the Court’s expectation of privacy finding is principled and broad, the Court stressed the competing factors governing the privacy interest at stake and suggested that the expectation is very limited. It said, for example, that the board’s policy and the technological realities of its work system diminished the teacher’s expectation of privacy but “did not eliminate it entirely.” It also took account of the limited nature of the teacher’s expectation of privacy in deciding against the exclusion of evidence obtained through the unlawful police search.

The diminished nature of the privacy expectation is important because it will allow for the eventual recognition of a broader employer right of access. The scope of such a right is an issue that the Court expressly “left for another day,” but the Court did gratuitously affirm the Court of Appeal’s finding that the teacher’s employer had acted reasonably – i.e., within its implicit right to access information in conducting system maintenance and within its implicit right to conduct a reasonable investigation in order to maintain a safe school environment.

Though the Court bases the latter right as corresponding to a principal’s duties under the Ontario Education Act, its reasoning could easily apply to workplaces in general. In speaking of this right, the Court refers to its 1998 school case called M. (M.R.), which establishes a very flexible search standard (based on reasonableness in all the circumstances) suited to an organization entrusted with managing an “orderly environment.”

IMPLICATIONS FOR EMPLOYERS

In light of Cole, transparency about employer access to system information should be the new norm. Employers should immediately revisit their acceptable use policies to ensure that they:

·         Articulate all the purposes for which they access system information (e.g. to audit, to investigate, to conduct e-discovery, to analyze performance, to foster work continuity and so on)

·         Articulate the means by which they will access system information (e.g. through traffic analysis, through content analysis, by restoring deleted information and so on)

·         Explain that employees have a choice and tell employees, “If you require a private means of computing and sending communications, please use a personal device unconnected to our network.”

Cole makes clear that such policy will not eliminate the potential for employee privacy claims, but it is now essential in establishing a clear and broad management right to access work system information for legitimate purposes. There is nothing in Cole that suggests employers bound by the Charter or other employers will be fettered in asserting such a right despite the now-recognized employee privacy interest, but having thorough and detailed policy and implementing the policy through periodic communications is now key. The days of resting on a simple “no expectation of privacy” disclaimer are now clearly over.

Canada - Foreign Worker Entitled to Loss of Earnings While Work Permit Extension Pending

By Sergio Karas, karas@karas.ca

In another twist to the lengthy delays that foreign workers must endure when applying for extensions of their status at the Citizenship and Immigration Case Processing Center in Vegreville, Alberta, a recent worker’s compensation decision held that an employee performing modified work duties, acting in good faith in attempting to renew his Work Permit, was entitled to loss of earnings benefits for a period in which he was laid off because the employer thought that his Work Permit was not valid.

In Decision No. 822/11[1], the Ontario Workplace Safety and Insurance Appeal Tribunal allowed an appeal by a foreign worker from a decision of a Case Manager denying loss of earnings benefits on the basis that the worker did not provide the employer with appropriate documentation of his renewed Work Permit during the period of the lay off. The worker was employed as a labourer. He injured his right shoulder when he was pulling a hydro cable. The Worker’s Safety and Insurance Board (WSIB) granted him entitlement for a right shoulder strain. He received the appropriate treatment and then returned to modified work with the accident employer. The employee was a foreign worker in Canada and was in the process of seeking permanent residence. He had a valid temporary Work Permit issued by Citizenship and Immigration Canada (CIC) which expired on July 27, 2009. On August 13, 2009, the employer laid him off until the worker would provide a new Work Permit on the basis that the employer assumed that he was not entitled to work in Canada. The worker returned to work to modified duties on September 17, 2009, the day after he received his new Work Permit. The worker requested that the WSIB grant him loss of earnings attributable to the period of his layoff. A Case Manager denied the worker entitlement to benefits for the approximately four weeks of the layoff on the basis that the reason for his wage loss during that period was not compensable, since the worker was not legally entitled to work in Canada. A reconsideration requested by the worker’s representative also resulted in a negative decision, even though he indicated that the worker had “implied status” during the time in question because he had filed a request for an extension of his Work Permit and its processing was not yet completed. Nevertheless, the request for reconsideration was denied on the basis that the worker did not provide the employer with appropriate documentation of his renewed Work Permit until after he returned to work. A further objection to the Appeals Review Officer (ARO) also resulted in a negative decision. However, the Ontario Workplace Safety and Insurance Appeal Tribunal allowed the appeal.

The tribunal noted that there was no dispute that the worker required modified work due to his injury, and that the employer did in fact provide suitable modified work before and after the period of loss of earnings in dispute. The main question was whether the worker’s legal status prevented him from performing the modified work, which the employer offered him during the period in question, and which he confirmed in his testimony was suitable and was able to do.

The worker claimed that he applied for an extension of his Work Permit on May 28, 2009, before the expiration of his previous permit. He contended that he had “implied status” thereby allowing him to continue working while his application for renewal of the Work Permit was being processed. It must be noted that it is CIC policy that applicants who file a Work Permit extension request prior to the expiry of their permit indeed have “implied status” until a decision is made by the Case Processing Centre. On the other hand, the employer argued that it stopped providing modified work and laid off the worker on August 12, 2009 when it became aware that his Work Permit had expired and the worker had not advised the employer that he had applied for its renewal. The worker agreed that the employer acted in compliance with the law by not employing the worker while its managers understood that his status in Canada was in question. However, that was an incorrect interpretation from their part. The worker provided the tribunal with a copy of his application to extend his Work Permit showing payment of the required filing fee of $150.00 on May 28, 2009, and testified that he told his foreman that he had applied to renew his permit two months prior to the expiry of his previous Work Permit.

The tribunal found it reasonable and sufficient that the worker would have advised his foreman of his Work Permit renewal application with the expectation that he would have passed on the information to the company administration. Even if he had not advised the employer at the time, the tribunal noted that the employee’s representative who filed the extension request faxed the employer a copy of the application on August 12, 2009. The employer advised that it had no clear protocol for maintaining records for such information at the time and it appears that, therefore, the communication between the worker’s representative and the employer was not handled appropriately. The worker also testified that he had indeed applied for a previous extension without any difficulties, continuing to work while his application was pending on that occasion. The tribunal found that the worker complied with his obligations and took the necessary steps to keep the employer informed of his efforts to maintain his legal status in Canada, and that he remained willing and able to perform the modified work.

The tribunal noted that the employer raised the issue that the worker’s Social Insurance Number had expired together with the Work Permit, and that therefore the worker was not legally able to work and should not be entitled to loss of earnings benefits during the period in question. The tribunal held that the lack of a valid Social Insurance Number was not an issue at the time and that it lacked the capability of verifying whether a person can be paid after a Social Insurance Number has expired. 

Based on the evidence, the tribunal held that the worker took all the steps that he could and acted appropriately to keep the employer informed of his efforts to maintain his legal status and was therefore entitled to loss of earnings benefits for the period in question. However, the tribunal also held that the employer acted in good faith in suspending the worker’s employment during that time as this was a novel situation and it appeared that there was some confusion within the company about how to handle it. Then, the employer should not be penalized with the cost of the claim.

This case highlights the importance for employers to have the appropriate protocol in place to track the status of foreign workers in their employ. Had the employer obtained legal counsel from an immigration lawyer and explained the situation thoroughly, it would have been advised that the worker had indeed the ability to continue to work while his application for a Work Permit extension was pending, as the worker indeed had “implied status”. This would have saved the employer considerable time, effort and cost in dealing with the situation. Employers must endeavor to maintain good records and make inquiries of the foreign workers as to the steps they have taken to maintain their status in Canada. Employers must be proactive in assisting their foreign workers to pursue their applications deliberately and well in advance of the expiry of their Work Permits to avoid unnecessary headaches and unpleasant situations, and the cost and time required in dealing with situations that can put a strain on their relationship.

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[1] Decision No. 822/11

[Names of Parties are Not Published] [2011] O.W.S.I.A.T.D. No. 1148

France - New Definitions and Increased Sanctions for Sexual and Moral Harassment

By Roselyn Sands and Corinne Bourdelot, Ernst & Young Societe d'Avocats, Paris

Even though the notion of harassment is a recent concept, it has now become a priority for the European Union and all European Member States to protect not only the physical safety of employees but also their psychological health at work, and thus fight against sexual and moral harassment.

According to the definition provided by the European Directive n°2000/78, harassment is an “undesirable behavior the aim or effect of which is to infringe someone’s dignity and to create an intimidating, hostile, degrading, humiliating or offensive environment.” All EU countries have transposed this Directive into their national laws and adopted rules against sexual harassment and moral harassment (“bullying”).

In France, sexual and moral harassment are both prohibited.

A specific offense regarding moral harassment was created in the Penal Code and the Labor Code in 2002. The definition is very broad and concerns any repeated behavior the aim or effect of which is to degrade someone’s working conditions entailing infringement of his/her rights and dignity, or disturbing his/her physical or mental health or damaging his/her career.

Concerning sexual harassment, both a civil and criminal offence in France, the French Penal Code has been recently amended (Act dated August 6, 2012) to include a new definition (the former definition being considered as unconstitutional as too vague). Sexual harassment now covers:

·         Repeated words or behavior with sexual connotations, that either:

o        degrade the victim's dignity because they are degrading / humiliating, or

o        create for the victim an intimidating, hostile or offensive environment;

·         Any serious form of pressure aiming to obtain an act of a sexual nature, for the harasser or a third party, is assimilated to sexual harassment. In this case, repetition is not required: even a single event may constitute a criminal offense.

Moreover, the criminal sanctions for sexual and moral harassment have been harmonized and increased: up to 2 years’ imprisonment for the harasser and/or 30,000 € fine. More severe sanctions and up to 3 years’ imprisonment and/or 45,000 € fine may be imposed in certain circumstances, e.g. abuse of position of authority or harassment against a very young person or a particularly vulnerable person.

  

Sexual and moral harassment are also civilly prohibited by the French Labor Code. On this basis, the victim may be entitled to civil damages, payable by the harasser AND the employer (be it an individual or a legal entity). Indeed, in France, the employer is bound by a strict obligation to protect the physical and moral health of its employees and may be held liable, even through no fault of its own, if an employee is subject to harassment.

In addition to the new rules provided by the Penal Code, the Labor Courts clearly tend to recognize more widely the liability of employers in cases of sexual or moral harassment, notably following several suicides in the workplace in major French companies like Renault or France Telecom.

For example, a recent case law has condemned an employer with a double sanction based on (i) moral harassment and (ii) failure to implement preventive measures (Cass. Soc., June 6, 2012, n°10-27694).

In this case, an employee, hired as security agent by the RATP (transportation company in the Paris area), was transferred to another position after the occupational doctor declared him unfit for work. He sued his employer on several claims, notably on the basis of discrimination and moral harassment.

The Court of Appeal, approved by the Supreme Court, decided that the employee could be entitled to damages both on the basis of the moral harassment itself (violation by the employer of its strict obligation of security) and on the basis of the failure of the employer to take measures to prevent the harassment, provided that the employee can prove that he suffered harm on both grounds.

Harassment may also be the origin of an occupational accident or disease (for example, if the harassment causes a nervous breakdown). In this case, the employee, who will be indemnified by the national insurance body, may claim additional compensation if he proves that the occupational accident results from the gross fault (“faute inexcusable”) of the employer. This will be the case if it is proved that the employer knew, or should have known, that the situation could become a danger for the employee’s health.

On this topic, a very recent decision of the French Supreme Court dated 8 November 2012 (n° 11-23855) decided that the employer had committed a gross fault towards an employee who had suffered a heart attack due to stress at work. The Court considered that the employee was subject to a very heavy workload in the years preceding his accident (70 hours of work per week) and that he was subject to pressures and to unreachable targets. In addition, the employer did not replace terminated employees, whose workload was borne by the victim. Therefore, the Court judged that the employer knew or should have known of the danger to the health of the employee and had not taken steps to protect him.

In this case, the French Supreme Court does not refer to moral harassment, but decides that methods of management causing excessive stress at work may constitute a violation of the employer’s obligations of security towards its employees. Here the Court opens an even wider area than the area of harassment...

This new legislative and judicial trend shows that the cases of harassment constitute a growing risk area for employers. It is becoming more and more important for all employers to adopt measures of prevention of harassment and protection of the health and safety of their employees.

Indeed, the new Act dated August 6, 2012 has implemented reinforced obligations regarding prevention of harassment (the legal texts prohibiting harassment must be included in the internal rules of the company and also posted in the work premises), but the employer is free to choose the measures it wishes to implement.

A well-advised employer should:

·         Assess and identify the risks of harassment in the workplace, by knowing the facts and situations that constitute harassment and being aware of the managers’ and employees’ behavior and language;

·         Improve and prevent harassment by bringing back values in companies (through a code of conduct for example), organizing training sessions for employees on the topic of harassment or proposing a “warning” system (through a hotline or mediators);

·         Monitor and manage harassment situations by closely investigating in case such a situation appears and taking steps where appropriate to sanction the harasser.

This process will constantly need to be reviewed, adapted to the specific situation of the company and improved, if necessary, to eliminate harassment in the workplace. Prevention measures are the only way for employers to avoid, or at least limit, liability in situations of harassment.

France - Less Working Hours Shall Not Mean Increased Pressure

By Judith Beckhard Cardoso and Noemie Birnbaum

In 2000, legal working time in France went from 39 hours a week to 35 hours. Since then, the computation of the employees' working time has been dependant upon each employee's position. Senior officers whose working hours cannot be controlled or pre-determined in advance may enter into an agreement with their employer providing that their compensation shall be disconnected from their actual working time but shall constitute a consideration for a flat number of days worked along the year, and up to 218 days. Such agreements are called "forfaits-jours", i.e., "lump sum (consideration) (for a working time computed) in days".

To enter into force, such lump sum in days agreements must be permitted by an industry-wide or collective company agreement, negotiated by the employers' and the employees' unions from time to time and extended to all companies within a specific professional and/or geographical scope by the Labor ministry. These union agreements must also provide the terms and conditions for implementing individual lump sum in days agreements. 

Setting a trend of precedents, the French civil Supreme Court (Cour de Cassation) ruled on September 26^th, 2012 that a lump sum in days agreement is not valid if no union agreement allows for sufficient protection of the employee's health and safety. 

In this case, a management level employee, whose employment contract was governed by the collective bargaining agreement for Wholesale Trade, benefited from a lump sum in days agreement. Upon being retired by the company, the employee sued his employer before the French labor courts claiming payment of damages for unfair computation of overtime hours[1]. He was able to demonstrate that his actual working hours were from 7:15am to 8pm, and included some week-ends and bank holidays due to a staff shortage. His argument was that the lump sum in days agreement did not warrant sufficient protection of his health and safety.

Whilst the facts of the matter do not raise much interest per se, the merits of the case stemming from the health and safety obligations resting on French employers is however interesting for two reasons: it was based both on the French Supreme Court's rationale in a recent similar case, and used the legal trend increasing employers' obligations in connection with health and safety issues.

Indeed, in a precedent dated June 29^th, 2011, the Supreme Court, while reviewing a similar lump sum agreement governed by the collective bargaining agreement for the Metallurgical Industries, provided for a test to assess whether such lump sum agreement complied with legal requirements. According to this test, the computation of working time in days should only be deemed legal if the union agreement allowing for the lump sum in days also enabled a monitoring of both working hours and the employee's workload along with sufficient resting periods.

Failure to comply with such ruling may result in severe financial consequences for the company. By cancelling the lump sum agreement, the court ruled that the company had to pay any overtime hours claimed by the employee, with the burden of demonstrating that the employee did not actually work such overtime resting on the employer. 

From a practical standpoint, the working time agreement for the Wholesale Trade industry did not enable a control of the employee's daily workload nor did it provide for a breakdown of the workload per day. Indeed, it only verified the number of working days and allowed for an annual assessment of the employee's workload by the employer. The Supreme Court deemed this insufficient as working conditions may vary from one year to the next. Thus, such provisions were not sufficient to effectively protect the employee's health and safety.

Despite the addition of a company collective agreement which provided for a quarterly meeting during which the employee's supervisors were supposed to examine the practical implications of the lump sum in days agreement, the Supreme Court ruled that the combination of both agreements was not sufficient to guarantee a reasonable burden and dispatch of work for the employee concerned.

A second similar ruling had been issued by the Supreme Court on September 19^th, 2012 for another lump sum agreement governed by the national collective bargaining agreement for the Clothing Industry. The Court specifically stated that a company collective agreement should include provisions protecting the employee's rights to health and safety guaranteed by the constitution and EU regulations.

The Supreme Court is thus clearly setting a trend one collective bargaining agreement at a time. Companies should therefore remain vigilant and start implementing mechanisms enabling an effective control of the working hours but also of the workload of their employees, without waiting for a new precedent.

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[1] Statute of limitation for overtime claims is 5 years.

Hungary - The New Labor Code

By Orsolya Görgényi and László Pók[1]

    (1)    Introduction

Hungarian employment law has gone through significant changes this year since a new Labor Code[2] entered into force on July 1, 2012.

The main purpose of the introduction of the Labor Code was to create a labor law system, which is in line with new market conditions and has a greater acknowledgement of the needs of the service industry and SMEs.

(2)    More flexibility for the parties

The new Labor Code offers more flexibility to the parties in negotiating the terms of the employment relationship.  The general rule concerning employment agreements remained the same - that deviation from the Labor Code is only allowed in favor of the employees.[3]  However, the Labor Code provides more possibilities compared to the Old Labor Code[4] for the parties to deviate from the provisions of the Labor Code, even to the detriment of employees.  On the top of this, in collective agreements, the parties are free to agree on the conditions (even if such conditions are not favorable for the employees) except if there is a provision to the contrary.  It is important to note that, in each chapter, there is a list of paragraphs where deviation from the main rules is prohibited or, in the case of collective agreements, where the deviation is allowed only in favor of the employees.  In the case of executives[5], parties are free to deviate from the Labor Code.

(3)    Promotion of atypical forms of employment

There is no general definition of atypical forms of employment in the Labor Code.  However, we can speak about atypical employment if some characteristics of the typical forms of employment are missing.  The basic characteristics of typical forms of employment are an indefinite term, the full-time working order and that the place of employment is the office of the employer.  

The spread of atypical forms of employment (e.g. part-time employment, fixed-term employment etc.) is quite low in Hungary.  The Labor Code introduced more flexible rules with respect to atypical terms of employment to create a legal environment where the parties can find forms of employment that can better suit to their needs.

One of the leading examples is related to the termination of employment relationships governed by fixed-term employment contracts.  The Old Labor Code did not provide the possibility of (ordinary) notice for fixed-term employment contracts.  However, according to the Labor Code, fixed-term contracts can also be terminated by (ordinary) notice if one of the following reasons exists:  (i)  the employer is under liquidation or bankruptcy proceedings;  (ii)  in case of the incapacity of the employee;  or (iii)  if the employment relationship cannot be maintained due to reasons out of the parties' control.[6]  

Employees may also terminate fixed-term employment contracts by (ordinary) notice if the maintenance of the employment becomes impossible or disproportionally difficult with respect to the employee’s circumstances.[7]

Another example of promoting the atypical forms of employment is that the Labor Code now obliges employers to amend employment agreements to a 4-hour per day part time agreement upon the request of employees until the third birthday of the employee’s child.[8]  This provision is also intended to help employees to come back to work after maternity leave.

In addition to the above, new forms of atypical employment were introduced, like employment on call[9], job sharing[10] etc.

(4)    Consequences of unlawful termination

One of the big achievements of the Labor Code is that it makes the costs of a potential unlawful termination more calculable, therefore it highly reduces the risks for employers in the case of the termination of employment relationships. 

One of the new rules is that the employment terminates with the original notice and not with the final and binding judgment.  In addition to this, compensation to be paid by the employer to the employee for the arrears of salary will be limited to an amount equal to a 12 months' absence fee.[11]

(5)    Conclusion

A more business-friendly employment law environment was introduced in Hungary this year.  The new legislation may help companies to be more competitive and, consequently, to create jobs in Hungary.   

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[1] Partner and associate respectively at Szecskay Attorneys at Law, Budapest, Hungary (www.szecskay.com)

[2] See Act I of 2012. Hereinafter referred to as the "Labor Code".

[3] See section 43 of the Labor Code.

[4] See Act XXII of 1992. Hereinafter referred to as the "Old Labor Code". 

[5] Executive employees are the head of the employer and his/her deputies. In addition to these executives, by law the employment agreement may classify other employees as executives if they are in key positions and their basic salary exceeds the mandatory basic salary sevenfold. (Please see Section 208 of the Labor Code.)

[6] Section 66 (8) of the Labor Code.

[7] See section 67 (2) of the Labor Code.

[8] See section 61 (3) of the Labor Code.

[9] See section 193 of the Labor Code.

[10] See section 194 of the Labor Code.

[11] See section 82 (2) of the Labor Code.