Today’s Labor Updates:

The Road Ahead: Top 10 Labor Issues to Watch in the Back Half of 2015

Global June 30 2015

The Road Ahead: Top 10 Labor Issues to Watch in the Back Half of 2015

By Brennan W. Bolt, Seth Borden and Richard Hankins on June 30, 2015 Posted in Amici Briefs, Department of Labor, Executive Orders, Expedited Elections, Federal Court Litigation, Government Contracting, Government Contracts, House of Representatives, Legislation, Micro Units, NLRA, NLRB, NLRB Decisions, NLRB Rule-Making, Persuader Rules, Representation Elections, Senate,State/Local Issues

1.  Will the Courts Uphold the New Expedited Election Rules?

The National Labor Relation Board’s new expedited election rules took effect on April 14, 2015, but not before two lawsuits could be filed seeking to invalidate them in January 2015. The first lawsuitwas filed by business groups, including the U.S. Chamber of Commerce, in the U.S. District Court for the District of Columbia. The second, by the National Federation of Independent Business (NFIB) Texas, Associated Builders and Contractors (ABC) of Texas and the Central Texas Chapter of ABC, was filed in the U.S. District Court for the Western District of Texas. The lawsuits assert that the NLRB provided no adequate justification for overruling decades of Board and judicial precedent balancing employer, employee, and union rights in the election process.

On June 1, 2015, the NLRB notched an important victory as the Texas court dismissed the lawsuit by ABC and NFIB. In dismissing the complaint, Federal District Judge Robert L. Pitman emphasized the great deference that must be accorded to government agencies, as well as the “significant deference to the Board and the Regional Directors in applying the very provisions Plaintiffs challenge.”

Plaintiffs suggest the deference is illusory as the standards under which the Regional Directors may exercise that discretion are “extraordinary” and thus effectively unavailable. However, as discussed above, Plaintiffs are bringing a facial challenge to the New Rule. As a result, they are required to establish there is “no set of circumstances exists” under which the New Rule would be valid.

Judge Pitman also explained that since employers have “almost unfettered ability to rapidly disseminate their election position after an election petition is filed,” the rule could not be found to violate employer speech rights, either. On June 2, 2015, ABC and NFIB appealed Judge Pitman’s decision to the Fifth Circuit Court of Appeals where it remains pending. Meanwhile, no ruling has been issued yet in the U.S. Chamber-led lawsuit pending in Washington DC, but a decision should be issued before the end of the year.

2.  Will the Board Adopt a New Joint Employer Standard?

In May 2014 the Board invited interested parties to submit amicus briefs in Browning-Ferris Industries, a case involving the routine application of the Board’s decades-old standard for determining whether two or more businesses may be found to be “joint employers.” Under the existing standard, two or more employers must “share or co-determine matters governing essential terms and conditions of employment.” Predictably, unions and their allies submitted briefs proposing that a much broader standard be adopted, and the NLRB’s General Counsel’s brief argued that the Board should abandon its current joint employer standard in favor of an amorphous “totality of the circumstances” test.

Under that standard, the Board finds joint employer status where, under the totality of the circumstances, including the way the separate entities have structured their commercial relationship, the putative joint employer wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence. This approach makes no distinction between direct, indirect and potential control over working conditions and results in a joint employer finding where “industrial realities” make an entity essential for meaningful bargaining.

The briefing period for amici closed on June 26, 2014, but the Board has yet to issue a decision.

With Browning-Ferris still pending, the NLRB Office of the General Counsel set its sights on the franchising model and filed a number of unfair labor practice complaints against franchisees and franchisors as joint employers under the General Counsel’s preferred “totality of the circumstances” test. At a hearing of the House Subcommittee on Health, Education, Labor & Pensions on June 24, 2014, Andrew Puzder, the CEO of CKE Restaurants, expressed his concerns about the Board’s shift in approach thus:

If franchisors are considered joint-employers with their franchisees, the cost of increased staff and increased risk will most likely translate into franchisors charging higher royalty rates and fees, perhaps significantly higher. Franchisor control over a franchisee’s labor force, and the risk and higher royalty rates and fees associated with it, have the potential to chill the desire of franchisors to franchise and of franchisees to acquire a franchise or to develop new units, at a time when the country desperately needs economic growth.

However, a recent advice memo issued by the Office of the General Counsel does evidence at least some restraint in how far it seeks to stretch joint employer standard. In Nutritionality, Inc. d/b/a Freshii, the General Counsel concluded that the franchisor and franchisee were not joint employers under either the current standard or the new standard advocated by the General Counsel:

Freshii [the franchisor] does not significantly influence the working conditions of Nutritionality’s [the franchisee] employees. For example, it has no involvement in the hiring, firing, discipline, supervision, or setting wages. Thus, because Freshii does not directly or indirectly control or otherwise restrict the employees’ core terms and conditions of employment, meaningful collective bargaining between Nutritionality and any potential collective-bargaining representative of the employees could occur in Freshii’s absence.

3.  How Far Can the Board Push Specialty Healthcare to Facilitate Organizing?

In July 2014 the Board issued its long-awaited decision in Macy’s, Inc. in which the Board majority determined that the petitioned-for unit of cosmetics and fragrance employees at a Macy’s retail store is appropriate under the Board’s controversial Specialty Healthcare decision. Under Specialty Healthcare, when a union seeks to represent a unit of employees:

who are readily identifiable as a group…and the Board finds that the employees in the group share a community of interest after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit….

Once the petitioned-for unit is deemed an appropriate unit, the proponent of a larger unit must show that the employees it wishes to include share:

an overwhelming community of interest with the petitioned for employees, such that there is no legitimate basis upon which to exclude certain employees from the larger unit because the traditional community of interest factors overlap almost completely.

The Macy’s decision is significant because it is contrary to long-standing Board precedent setting forth a presumption for a store-wide unit in the retail industry, thus demonstrating the Board’s intent to apply its new “micro-unit” standard in all industries–not simply to the non-acute healthcare facilities at issue in Specialty Healthcare. Despite being a victory for the employer, the Board’s July 28, 2014 decision in Bergorf Goodman confirms that the NLRB is “all-in” with Specialty Healthcare as the Board’s decision provides a roadmap for establishing a valid micro unit. Not only is Specialty Healthcare being applied to all industries, but its impact is dramatic. For example, in Northrop Grumman Systems Corp., Case No. 31-CA-136471 (Oct. 20, 2014), a regional director found the union’s petitioned-for unit was not appropriate–but directed an election in a unit even smaller than that sought by either party based upon the Board’s holding in Specialty Healthcare.

The Macy’s case is not yet settled as Macy’s engaged in a technical refusal to bargain with the union in an effort to seek judicial review of the Board’s decision. The case is now pending before the Fifth Circuit Court of Appeals, with briefing wrapping up this summer.

4.  Will the Department of Labor Revive its Efforts to Restrict Employer Response to Union Organizing by Revising the Persuader Rules?

The Department of Labor has been mulling for several years a final rule regarding the “advice exception” to the so-called “persuader rule” in the Labor-Management Reporting Disclosure Act of 1959 (LMRDA). The LMRDA currently provides that employers must report to the DOL each time they engage a consultant to persuade employees directly or indirectly regarding employees’ rights to organize or bargain collectively (i.e., “persuader activity”). If employers fail to comply with any of the LMRDA’s reporting requirements, they could face jail for a year and a $10,000 fine. However, the LMRDA carves out from the reporting requirements an “advice exception,” which has consistently been interpreted to exclude an employer’s engagement of labor counsel to assist them with organizing campaigns so long as counsel has no direct contact with employees and the employer is free to accept or reject its counsel’s recommendations.

If the DOL’s final rule tracks the proposed rule it released in June 2011, it will narrow the advice exception significantly. As a result, employers who engage attorneys to assist in organizing campaigns will now have to file publicly available reports with the government detailing all the labor work, regardless of whether it is considered persuader activity or not, that the law firm performs for the employer.

Critics of the rule claim that the proposed rule is improper because it effectively writes the advice exception out of the statute. Moreover, the American Bar Association and the Association of Corporate Counsel assert that the proposed rule is also inconsistent with the rules of professional conduct pertaining to lawyer-client confidentiality. They and others believe that the proposed rule forces lawyers to disclose privileged attorney-client information and that it will discourage employers from seeking legal assistance during union organizing campaigns.

The DOL was set to publish its final rule in November 2013, but then delayed it to March 2014 before indefinitely postponing it in March 2014. However, in May 2015, the President’s Administration released its regulatory agenda identifying a possible release of the final rule in December 2015.

5.  What Impact will the ‘Blacklisting’ Regulations have on Government Contracting?

On May 28, 2015, the President’s administration published proposed amendments to the Federal Acquisition Regulation, and related Department of Labor guidance to implement the July 31, 2014 “Fair Pay and Safe Workplaces” Executive Order 13673.  The Order and these proposed changes would subject government contractors to a broad new set of record-keeping, reporting and compliance requirements. Failure to fulfill these obligations and exhibit compliance with all applicable federal and state labor laws would expose the contractor to the prospects of disqualification, suspension, or debarment.

Under this proposed regulatory scheme, offerors on contracts or subcontracts estimated to exceed $500,000 must disclose “any administrative merits determination, arbitral award or decision, or civil judgment” against the contractor under fourteen enumerated federal statutes and Executive Orders (labor law violations), for the three years preceding the contract bid. This information will then be considered when making responsibility determinations during the contract award process.

The proposed regulations and guidance, in conjunction with the Executive Order, would completely transform the risks and costs of doing business with the federal government. Moreover, the standards set by the proposed regulations are grossly unfair to contractors as they are designed to base contract awards, disqualification and suspension entirely on administrative allegations – before those allegations are fairly and fully adjudicated.  The proposed regulations require reporting of any “administrative merits determination” regarding these laws —  including: WH-56 “Summary of Unpaid Wages” forms from the Wage and Hour Division; OSHA citations; OFCCP “show cause” notices; EEOC “reasonable cause” letters; and NLRB complaints. These are not final determinations on the merits. These all are preliminary findings, against which employers have the right to defend themselves, including the rights to challenge evidence at a hearing and confront witnesses under oath. Yet the proposed regulations would allow contractors to be disqualified from contracts based on these.

Because there are serious problems with the Order and proposed guidance, litigation challenging the final rules is a certainty. Contractors and employers who might want to do business with the government in the future should prepare now for these new regulations. In addition, they should also consider submitting comments in response to the proposed regulations before the July 27, 2015 deadline.

6.  Will the NLRB Undermine State Right to Work Laws?

On April 16, 2015, the NLRB invited interested parties to file briefs in United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Union International, Local 1192, AFL-CIO, CLC (Buckeye Florida Corp.), in which an ALJ found that the union violated the National Labor Relations Act by maintaining and implementing a “Fair Share Policy” requiring nonmember bargaining-unit employees to pay a grievance-processing fee. In excepting to the ALJ’s decision, the union asked the Board “to adopt a rule allowing unions to charge nonmembers a fee for grievance processing, so long as that fee does not exceed the amount a union could charge nonmember objectors under Beck and California Saw.” In response to that request, the Board invited briefs addressing the following questions:

1. Should the Board reconsider its rule that, in the absence of a valid union-security clause, a union may not charge nonmembers a fee for processing grievances? Should it adhere to or overrule Machinists, Local No. 697 (H.O. Canfield Rubber Co.), 223 NLB 832 (1976), and its progeny?
2. If such fees were held lawful in principle, what factors should the Board consider to determine whether the amount of such a fee violates Section 8(b)(1)(A)? What actions could a union lawfully take to ensure payment?

Concerned by the Board’s consideration of this issue, The House Education and the Workforce Committee held a hearing entitled, “Compulsory Unionization through Grievance Fees: The NLRB’s Assault on Right to Work.” (Click here for the archived video webcast). During the hearing, Mark Mix, President of the National Right to Work Committee, explained:

the NLRB’s new ‘fee-for-grievance’ scheme would give union officials a way to extract ‘fees’ from nonunion workers – fees that could in fact be greater than regular dues – leaving the right-to-work law on the books, but severely emasculated….

Interested parties have until July 25, 2015 to submit a brief with the NLRB.

7.  Are Works Councils the Answer to Labor’s Organizing Woes?

The United Auto Workers has developed its “Southern Strategy” in an aggressive effort to unionize foreign automakers in the Sunbelt. However, in February 2014, the UAW suffered a highly-publicized defeat at Volkswagen’s Chattanooga, TN plant despite running unopposed by the employer. The union filed objections, but ultimately withdrew them. A few months later in November 2014, Volkswagen released a new labor policy providing labor groups with differing levels of access depending on the number of Volkswagen workers in their ranks. For example, the greater the number of workers in a given labor group, the more likely that group will be able to meet and confer with management officials. A Volkswagen official explained then that:

We recognize and accept that many of our employees are interested in external representation, and we are putting this policy in place so that a constructive dialogue is possible and available for everyone,” said Sebastian Patta, executive vice president for human resources at Volkswagen Chattanooga. “Volkswagen has a long tradition of positive employee engagement at our plants around the world, and we welcome this in our company.

Just one month after Volkswagen announced its new labor policy, the UAW claimed that it had reached the “highest level” of recognition entitling it meet bi-weekly with Volkswagen officials on campus. As of April 2015, the UAW claims to have majority support at the Volkswagen plant, and now seeks to implement a German-style works council at the factory. According to reports, the parties have laid the groundwork for a group made up of both management and bargaining-unit employees to meet and discuss wages, hours, and terms and conditions of employment in the spirit of a German-style works council. Interestingly, however, the UAW has not filed papers to hold a union election or asked for a card check. Meanwhile, Volkswagen stated that it will continue to work with the American Council of Employees (ACE), a rival union that is also seeking to organize Volkswagen’s employees.  ACE has previously referred to VW’s labor policy as “unfair” and has warned the company not to dole out improper benefits to the UAW.

Both employers and unions are watching the developments in Chattanooga closely, and if the UAW is successful in organizing the facility, how a works-council type representation is received by the employees. If successful in Chattanooga, the UAW (and other unions) will look to parlay that success across the South.

8.  Will the rate of union representation petitions filed, and the speed of elections, continue to increase while the new election rules are in effect?

The new expedited election rules have been in place now for over two months.  Early analyses generally bear out the concerns expressed during the months leading up to the effective date of the changes. Many more petitions are being filed, and elections are being held approximately two weeks earlier.

Lawyers at Vorys spoke to Susan Connelly at PTI Labor Research about her analysis of the NLRB’s docket during the first month under the new rules. Her assessment:

The first month under the new rules (April 14 to May 14, 2015) saw a whopping 266 union certification petitions filed with the NLRB (“RC” petitions).  This was up 24% from the previous five years’ average for the same time period.  We have seen various reports of the numbers of petitions filed in recent weeks and the numbers seem to be slightly different from one source to the next, though all show an increase in activity.  We were able to verify our numbers with the NLRB’s website (www.nlrb.gov).

Law360 also published an Odin Feldman study of elections actually held during the first two months, which concluded that the median number of days from petition to election at a polling place dropped from 38 days in 2014 to 24 days in 2015.  That’s a reduction of two whole weeks – or 35% of the time – for employees to obtain information and for parties to communicate with eligible voters.

While the unions’ win rate has not increased significantly in these early contests, one expects it will as the sample size increases and organizers adapt to the new framework.  As Ms. Connelly explains:

We predict that as time goes under the new election rules that the Board will reduce the average time from a petition to election even further from what we have seen in the first month.  Our historical research has shown us that the shorter the time from the petition to the election, the more likely it is that the union prevails in the election.

9.  Will the Board Finally Address Whether Student-Athletes Are Employees?

More than a year has passed since a NLRB regional director in Northwestern University found that the university’s football players are “employees” under the National Labor Relations Act, but the Board still has not weighed in on the issue. The football players voted in a union election on April 25, 2014, but the votes were immediately impounded pending the Board’s ruling. The parties submitted their final briefs to the Board on July 31, 2014.

Meanwhile, former student-athletes have filed a collective action against the NCAA and member institutions alleging that they are temporary employees who must be paid the minimum wage under the Fair Labor Standards Act. Similar to the allegations in the Northwestern case, the plaintiffs in the collective action assert that because student-athletes are more strictly supervised and controlled by both the NCAA and university staff and that the NCAA and member institutions profit from NCAA sports, student-athletes should be compensated under the FLSA for the services they provided.

If the Board affirms the Regional Director’s decision, it could deal a death blow to the NCAA’s amateur athletic structure and start a domino effect creating significant liability for unpaid wages and benefits. Even if the Board overrules the Regional Director, a decision adverse to the NCAA in the FLSA collective action could prove persuasive to the Board in a future NLRB representation case.

10. Are Unions Becoming “Cool” & Will There be an App for That?

Unions are spinning a Pew Research Center survey to assert that “unions are becoming cool” as more young people view unions more favorably. According to the Pew Research Center,

Across age groups, views of unions are most positive among young adults: 55% of those ages 18-29 view unions favorably, while just 29% view them unfavorably. Among older adults, favorability ratings of unions are mixed with about as many holding favorable as unfavorable views.

The Pew Research Center, however, found little recent change in overall favorability of labor unions: “48% hold a favorable view of unions, while somewhat fewer (39%) say they have an unfavorable view.”

According to Elizabeth Stoker Bruenig of The New Republic,

Despite recent strides in right-to-work legislation, a resurgence in union strength might just come as millennials ascend to political power. It makes sense: Young people have grown up during a massive recession and watched wages associated with middle-class jobs of yesteryear drop precipitously. Unions might be the most promising way to assure that working class people get a shot at turning their jobs into livable occupations.

Given the Pew Research Center’s survey data, it is not surprising that labor organizers might be looking to create online tools for workplace organizing to target younger workers. The Century Foundation, a liberal think tank, released a report making an impassioned plea for app developers to get involved in online organizing:

All around us, online technology has disrupted business models and entire industries virtually overnight, dramatically changing the landscape for consumers and workers alike.

With just one click, you can summon a cab through Uber. At two clicks, Venmo allows you to instantly send cash to your kid away at college. At three clinks, Turbo Tax is preparing your returns, and at four clicks, you are on LegalZoom drafting your last will and testament. What if with five clicks, you and your coworkers could petition the National Labor Relations Board (NLRB) to schedule a union election?

Due to a little-known, but far-reaching change made by the NLRB last year, virtual labor organizing by employees is now sanctioned by law in many situations and could possibly be transformative in the workplace.

Many employees want more clout at work—to leverage better pay and benefits, but also nonmonetary things, such as more predictable work schedules, or a stronger voice in workplace safety or procedures. And it is a good bet that many would join a union, if signing up were easier for workers to do, and harder for employers to stop.

The problem today is that joining a union at work is decidedly last century—clunky, contentious, confusing—and companies such as Walmart and McDonald’s want to keep it that way.

But virtual labor organizing could change that.

Even a moderately successful app could cause union organizing to undergo a sea-change. As BuzzFeed notes,

That kind of low-cost organizing could address one of the biggest contradictions of the modern labor movement: that its most energetic and high-profile campaigns, to organize fast food and other minimum-wage workers, are unlikely to result in dues-paying members, and are funded primarily from the membership fees of workers in other industries.

Global June 30 2015

ASIA PACIFIC

Australia: Increase to minimum wage from 1 July 2015

The Fair Work Commission has raised the minimum wage by 2.5%.  With effect from 1 July 2015, the new weekly minimum wage will be AUD 656.90 (or AUD 17.29 an hour).

Australia: New annual leave rights for award employees

As part of its four-yearly review of modern awards, the Fair Work Commission has amended annual leave provisions in modern awards in two important respects.  Employees will be allowed to cash-out annual leave to a maximum of 2 weeks’ leave in a 12 month period.  The new cashing out capability is subject to record keeping requirements, parental approval in writing for under 18s, and the already existing prohibition on undue influence or misrepresentation by employers.

A complementary change will allow employers to direct employees to take annual leave where “excessive” leave has been accrued.  For shift workers, excessive leave is an accrual of 10 weeks, and for non-shift workers, eight weeks.  A direction to take leave may not result in the employee’s balance dropping below six weeks, and the employer must first try to agree steps with the employee to reduce the accrual before making any direction.

Australia: Costly parental leave policy

An employer which mistakenly denied unpaid parental leave to a father has been ordered to pay AUD 170,000 in unpaid wages and redundancy pay. Under the employer’s policy, unpaid parental leave was said to be available only to a primary care-giver. This contravened the Fair Work Act which does not restrict parental leave only to a “primary” caregiver. Unaware that the policy contradicted the Fair Work Act, the employee was not permitted to take 12 months’ unpaid parental leave, and when he took other types of leave, was allowed to return to work only in a part-time position, rather than to resume in his former capacity.  A year later his position was made redundant.  The Federal Circuit Court held that the employee was entitled under the Fair Work Act to unpaid parental leave, and that the failure to grant this leave had the consequence that he lost the protection the Act also provides by allowing a person who has been on parental leave to return to the same job.  The damages awarded reflected the difference between his part-time salary and the full-time salary of the job to which he would have returned, had he been given the right to take parental leave. It also took into account the difference between the severance pay that was due to him as a part-time employee, as distinct from the severance pay that would have accrued to him as a full-time employee in his former role.  This case highlights the importance of regularly reviewing and updating policies for compliance with current legislation.

China: Severance pay in Beijing

It was announced in early June 2015 that the average monthly salary in Beijing for 2014 was RMB 6,436 (approx. GBP 667) which means that the cap on severance pay has now increased to RMB 19,389 (approx. GBP 2,010).

China: Labor inspections in Beijing on the rise?

We are aware that a number of international businesses have been subjected to labor inspections by the District Labor Bureaux in Beijing recently.  These appear to be random inspections, and it is not clear whether this indicates a trend towards increased inspections, but it serves as a reminder to all businesses operating in the PRC that they should be ready to respond to an inspection request at any time.  The District Labor Bureau will initiate the inspection by sending a notice to the company requesting employment and/or social security related documents and inviting company representatives to attend a meeting at the Labor Bureau so that the documents can be inspected.  All business operating in Beijing in particular should ensure that their documentation is in good order in case an inspection notice is served.  For more information about labor inspections in the PRC and their consequences, please speak to your usual DLA Piper contact or email Johnny Choi, Of Counsel in our Beijing office.

China: New rules on salary payments issued for consultation in Guangdong Province

Guangdong Province has published new draft amendment regulations on salary payments for public consultation.  The draft regulations deal with the mechanism for making salary payments: for instance, the frequency of salary payments, the method of payment and the date on which payments must be made.  As and when the regulations are adopted, they will provide welcome clarity on some practical payroll issues for all businesses operating in Guangdong Province.  The implementation date is as yet unclear.

EMEA

EU Wide: AG’s opinion: travelling time counts as ‘working time’

In a case referred to the European Court of Justice by the Spanish Court, the Advocate General has recently given the opinion that travelling workers who have no fixed or habitual workplace should be able to count the time spent travelling from home to the first customer and from the last customer back to their homes as ‘working time’ under the Working Time Directive. According to the Advocate General, for such ‘peripatetic workers’, travelling is an integral part of the work and is a necessary means of providing services to the customers, meaning that it should be regarded as forming part of the workers’ activities. The European Court which will give its full judgment in the case later this year.

Denmark:  Bill on restrictive covenants revoked

We previously reported (Be Global, October 2014) that the Danish Government was considering changes to the rules on non-competition, non-solicitation and “job” clauses.  The bill which had been introduced with a view to implementing rules restraining and regulating the use of restrictive covenants in employment contracts,  has, however, now been revoked due to the recent call for parliamentary elections in Denmark.  It is anticipated that the bill will be reintroduced by the new government later in 2015.

France: Macron Bill update

The Business friendly economic reforms proposed by Economy Minister Emmanuel Macron (reported in the January and May editions of Be Global) are still a hot topic and the subject of intense debate before the French Parliament.  On 16 June 2015 the Prime Minister engaged the Government’s prerogative to allow adoption of the Macron Bill without the need for a vote and at the same time added 36 amendments to the Bill.  The Bill has now been sent for the last time to the Senate for a final review (scheduled to take place between 30 June and 6 July) before its final adoption by the Assembly which is expected to occur by 14 July at the latest.

France: Update on draft bill proposing changes to staff representation regime

On 2 June 2015, the French General Assembly voted in favour of the new law proposed by the Government which aims to improve social dialogue and employees’ collective involvement.  The Bill will be discussed before the Senate after 22 June 2015.  For further information,  see May’s Be Global.

France: Extension of welfare portability to all companies as of 1 June 2015

With effect from 1 June 2015, all companies must maintain welfare guarantees (prévoyance) for their former employees on the same basis as they are required to maintain complimentary health coverage (i.e. up to 12 months and free of charge for the employees). This entitlement to temporary complimentary health and welfare portability must be referred to in the work certificate which is provided to an employee on termination of their employment.

France: Failure to consider complaint of sexual harassment constituted gross misconduct

The French Supreme Court recently held that a manager’s failure to act in response to a complaint raised by an employee about sexual harassment amounts to gross misconduct and can justify the early termination of a fixed-term employment agreement.     An employee complained about sexual harassment by a client of the restaurant she worked for, in front of her manager and another employee. She was examined by a doctor and made a formal complaint to the police. The manager’s failure to react, other than shrugging his shoulders, qualified as gross misconduct justifying early termination of the manager’s fixed-term employment contract.  This ruling would also apply to an indefinite term employment contract.    The result of this case means that, in practical terms,  employers should be extremely cautious and should start investigating as soon as they are informed of any complaint of sexual or moral harassment.

France: Employer’s duty of safety applies to passive smoking

The duty to maintain a safe workplace requires an employer to take all necessary measures to protect employees’ mental and physical health.  In a recent judgment,  the Supreme Court confirmed that this duty gives rise to a strict obligation with respect to passive smoking.

An employee, who had been assessed as disabled by the occupational health doctor, was dismissed in the absence of any alternative position being available. She brought a legal action against her former employer,  claiming inter alia damages for exposure to passive smoking. The Appeal Court rejected her claims stressing that she had not raised this issue during her periodical assessment and was satisfied with her work conditions other than having raised an issue in relation to noise. It was also noted that she used to accompany her colleagues during smoking breaks which she was not obliged to do,  her physical presence on the employer’s premises had been limited and her absences from work had been due to another illness unconnected to passive smoking.

The French Supreme Court reversed this decision on the basis that the employer could not be exonerated from its responsibility with regard to passive smoking exposure.  The case was referred to a second Appeal Court for a ruling on the merits of the question of passive smoking and the employer’s potential failures in this regard.  This decision stresses the increasing responsibility on employers to ensure their employees’ health and safety at work which requires positive action and, in some cases,  taking action in respect of employees who are freely and deliberately exposing themselves to potential danger.

France: Dispute about non-compete provision can result in annulment of mutually agreed termination

The French Supreme Court has held that a mutual termination agreement was null and void where the employee’s consent was obtained improperly.  After having guaranteed the employee, during various meetings prior to signature of a termination agreement, that he would be paid financial compensation due in respect of his non-compete undertaking (2/3 of monthly net salary for twelve months), the employer eventually waived the undertaking after the termination agreement had been signed and approved by the Labor Administration.  In practice, nothing prohibits an employer from unilaterally releasing an employee from a non-compete undertaking after signing a mutual termination agreement (and therefore not paying the related financial compensation).  However, this case shows that an employer who assures the employee, before execution of the mutual termination agreement, even if this is only done orally, that they will be paid the non-compete financial compensation, meaning that the non-compete clause will not be waived, risks the mutual termination agreement being void if the commitment is not honoured.  The employee is likely to argue that the employer’s assurance was intended to persuade him or her to sign, and was thus a condition of his or her agreement.  In practice, to avoid this risk, we recommend that the non-compete issue should be specifically addressed in the termination agreement which should be signed by the parties before the actual termination of the employment contract.

Germany: Social selection and age: when can dismissal be challenged?

In large-scale redundancy exercises for operational reasons the employer may carry out social selection required by law in such a way that the social selection will be conducted within specific previously identified age groups. In this way, not all employees of the company are considered together in the context of social selection. Instead, employees in certain groups (e.g. all 31 to 40 years olds, 41 to 50 years olds etc.) are pooled.  This ensures that the existing age structure within the company is maintained and will not alter significantly as a result of collective redundancies.

In this context, the Federal Labor Court recently ruled that the employer – when conducting social selection based on age groups – is obliged to “thin out” each age group equally.  This means terminations need to be equally proportioned in each age group.

The question then arises, whether the employer is also obliged to “thin out” each age group equally in cases where the employer and the works council created a reconciliation of interests with a list of names.

In cases of collective redundancies, section 111 of the Works Constitution Act generally applies. Accordingly, the employer must try to negotiate a reconciliation of interests with the works council while the works council may demand a redundancy plan.  If a reconciliation of interests with a list of names has been created, it is presumed under the Protection against Dismissal Act, that the termination of the employees listed is justified by urgent operational requirements.  In addition, the social selection may only be reviewed by the labor court for serious mistakes.

Therefore, the question arises whether a disproportionate termination quota in the different age groups will still be illegal where there is a reconciliation of interest with a list of names.  In other words, is the disproportionate allocation of terminations among age groups a serious mistake under the Protection against Dismissal Act?  If it is not, the disproportionate terminations would be legal.

In the case at hand, a 55 year old employee was terminated in the course of collective redundancies due to operational reasons.  Her employment relationship had lasted for 16 years.  Her complaint referred to the fact that a higher percentage of older employees had been terminated.  In her opinion, her termination was illegal, although the employer acted in accordance with the reconciliation of interest and the list of names.

The Federal Labor Court upheld the employee’s claim. According to the Protection against Dismissal Act, a balanced personnel structure needs to be secured, but not implemented.  Therefore, the termination quota (e.g. 20 %) must be applied to each age group proportionally if the employer is carrying out a social selection based on age groups.  If the employer allocates the terminations quota unequally in the different age groups, a “serious mistake” is made in the social selection and although there is a reconciliation of interests with a list of names, a dismissal may be unlawful.

Germany: Further clarification of minimum wage

In a welcome decision for employers, the Düsseldorf Labor Court recently decided that a performance bonus awarded by the employer may be credited to the legal minimum wage.  The decision indicates that not only components of the salary which compensate the “regular work performance” of the employee form the minimum wage amount, but also all payments related to the work performed by the employee may be included in the minimum wage.

The German Minimum Wage Act came into force on 1 January 2015 and generally guarantees a minimum wage of EUR 8,50 per hour.  The decision of the Labor Court is another step in clarifying the controversial question of whether special payments made by the employer may be included in the minimum wage.

In the Labor Court decision, an employee was claiming payment of the minimum wage. Before the Minimum Wage Act became effective, the employee earned EUR 8,10 per hour.  The company operated a bonus scheme which provided an optional bonus for special performance of a maximum of EUR 1,00 per hour.  The plaintiff argued she was entitled to the minimum wage of EUR 8,50 per hour and that the performance bonus must be paid on top of it. The employer argued that the plaintiff’s salary was EUR 8,10 per hour as provided in her employment contract but as a performance bonus of EUR 0,40 per hour was paid in accordance with the corporate bonus scheme, her total remuneration would be EUR 8,50 per hour.

The employee based her argument on the widespread and controversial point of view that the minimum wage amount only covers the “regular work performance” of the employee; awards and bonuses granted for special work performance should be paid on top of it.  The Labor Court did not follow this point of view. It ruled that any payment of the employer related to the employees’ work performance may be credited to the minimum wage. The only condition for crediting additional payments is the relationship between the special payment and the work conducted by the employee.  Only those payments which are not connected to the work performed may not be included in the minimum wage amount. Since a bonus for special performance is related to the work performed it may form part of the minimum wage amount.

This decision means that companies can probably justify the inclusion of special payments in the minimum wage on the basis of this decision.  Nevertheless, an appeal is possible. It remains to be seen whether the employee will file an appeal and if the appellate court, the Higher Labor Court of Düsseldorf  will confirm the Labor Court’s point of view.

For more information on the development of the law on the national minimum wage, visit the Employment Germany blog.

Ireland: New employment claims structure in effect 1 October 2015

The Workplace Relations Act 2015 was recently signed into law and will come into effect on 1 October 2015.  The Act introduces significant reforms to the way in which workplace disputes are resolved and employment law is enforced in Ireland.

Further details of these changes will be provided in a future edition of Be Global.

Italy: Supreme Court considers validity of social media dismissal

The Supreme Court has recently considered the validity and lawfulness of a dismissal of an employee who used Facebook, his mobile phone, and a tablet for private purposes, during his working hours.  The Supreme Court found that this type of behavior can interfere with normal work activity and cause damage to a company’s business. It is interesting to note that, in order to investigate the behavior, the company created a fake Facebook account in order to discover the employee’s misconduct.  In this respect the Supreme Court stated that the company’s conduct did not violate the employee’s privacy and was not against the basic principles of good faith applying to the employment relationship.

In Italy, court precedents are only binding for those who are party to the proceedings.  However, court judgments (especially judgments issued by the Supreme Court) have a strong authoritative weight on other judges deciding similar cases.

Netherlands: New Rules Effective 1 July 2015

As reported in January’s Be Global, new rules on the conversion of fixed-term contracts into indefinite term contracts and reforms to dismissal procedures and severance payments come into force on 1 July 2015.

• Succession of fixed-term employment contracts – The provisions on the conversion of fixed-term employment contracts into indefinite term contracts will be amended. From July, the last fixed-term contract in a chain will be considered permanent if: (i) that contract is the fourth contract in the chain; or (ii) the total duration of the chain of fixed term contracts exceeds a period of two years (unless the chain of consecutive contracts is broken by a six month break).
• Dismissal law – Currently there is a “dual dismissal system”. If it is not possible to terminate with mutual consent, an employer can terminate by giving notice after receiving permission from the Dutch Employee Insurance Agency (UWV) or Cantonal Court. The amendments to this system will be:
  • New compulsory proceedings (Court or UWV) will apply depending on the reason for termination. A dismissal on business economic grounds or based on long-term illness will be handled via the UWV, a dismissal for personal circumstances via the Court.
  • The Cantonal severance formula will be replaced by a “transition payment”. The amount of the transition payment is based on the employee’s length of service and is capped at EUR 75,000 (or one year’s salary if higher). In exceptional cases, judges can allow compensation over the transition payment cap, for example where the employer is to blame for an unworkable situation and it is “unreasonable” to only pay the transition allowance. Case law following July will dictate what circumstances will qualify as “unreasonable”.

Netherlands: Flexible working

It is anticipated that on 1 July 2015 a new law that allows employees to work more flexibly and from home will come into effect.

When the law comes into place, the following will be the case:

• All employees who have worked with the employer for over 26 weeks can request to work from home or request to work less or more hours/week or request to shift their working hours (ie not working 5×8, but 4×10,  for example);
• The request must be made two months before the anticipated start date (however, if the employer is willing to agree on an earlier start date, this is not prohibited);
• The employer must decide on the request at least one month before the requested start date. If he does not, the employer will be taken to have impliedly agreed with the request;
• The employer can only refuse a request if the change is not possible because of the compelling interests of the company.

Poland: Changes to fixed-term contracts and garden leave on the horizon

The Polish regime governing the use of fixed-term contracts is expected to change in late 2015.  Among the proposed changes will be :-

• the introduction of a maximum duration of a fixed-term contract and limit on the number of successive fixed-term contracts;
• new rules on notice periods for terminating fixed term contracts; and
• a new requirement to justify the termination of a fixed-term contract.

Changes are also expected with regards to garden leave, so that it will be possible to place an employee on garden leave during the notice period, regardless of the type of employment contract; the employee will retain the right to receive remuneration until the termination date.  This change is also expected to come into force in late 2015.

Further details of these changes will be provided in a future edition of Be Global.

Russia: New data protection law in force from 1 September 2015

A new Russian Data Protection Law will come into force on 1 September 2015 which introduces game changing rules for most companies operating in Russia-

• A new obligation will be imposed on data operators to ensure that the personal data of Russian citizens is recorded, systematized and stored with the use of databases located in the territory of the Russian Federation;
• This appears to suggest that foreign companies will not be permitted to process personal data of Russian citizens on servers located outside of the jurisdictions;
• Because of the uncertainties about the meaning of the new law, to date, most companies have taken a wait-and-see approach but this approach will need to change as the implementation date grows ever nearer.

Saudi Arabia: Major labor law reforms to be implemented in October 2015

The significant amendments to the Saudi Labor Law, which were published in the Official Gazette in April 2015,  will be implemented on 24 October 2015.  Included in the amendments are changes to leave entitlements, notice periods and penalties for violations.  Click here to read more.

UK:  When must collective redundancy consultation begin?

An issue of major practical importance to employers engaged in a collective redundancy exercise is when the obligation to begin consultation with the employee or union representatives is triggered.  Employers need this knowledge to ensure they comply properly with their consultation obligations and avoid potentially significant liabilities for protective awards.  Unhelpfully, however, the law on this issue has been uncertain for some time following conflicting case law. The Employment Appeal Tribunal has recently considered this issue.  Click here to read more about the EAT’s decision.

UK: Transparency in supply chains: the Modern Slavery Act 2015

The Modern Slavery Act 2015, which recently received royal assent,  will require larger businesses with a certain level of turnover derived from their UK operations to publish an annual slavery and human trafficking statement.    This legislation, together with other developments expected at EU level,  mean that worker welfare in global supply chains is back on the agenda.  Click here to read more.

UAE: Final regulations published for Abu Dhabi Global Market free zone

Final Regulations have now been published for the new Abu Dhabi Global Market free zone which has been set up to provide a broad-based financial services hub for local, regional and international institutions (see January’s Be Global).  The Regulations contain some changes from the draft version published earlier in the year.

Most notably, the Regulations now explicitly allow parties to enter into settlement agreements waiving statutory employment rights, something which is not permitted under UAE Labor Law or in the Dubai International Finance Centre (DIFC) Employment Law.  The new Regulations also expressly prohibit discrimination on the grounds of age and impose duties on employers to make reasonable adjustments for disabled employees.  Again, these are provisions which do not appear in UAE Labor Law or under the DIFC Employment Law.  Despite discussions during the consultation phase regarding putting a cap on damages for discriminatory conduct, no such cap has been included in the final draft which could lead to a “claim culture” in the ADGM particularly if a separate employment tribunal system is established as has been suggested. Other provisions relate to family-friendly rights (including more favorable maternity leave rights than under the UAE Labor Law and the introduction of 5 days’ paternity leave), working hours, annual leave, notice, part-time workers, sick pay and data protection.  Full details will be published in a future Be Global.

Middle East: Summer working hours’ restrictions

With the summer time months approaching and the temperature and humidity continuing to rise, the annual restrictions on summer working time hours will soon be implemented in GCC countries  to protect the health and safety of employees working outdoors during certain hours of the day.  Employers found by the Labor inspectors to be breaching the summer working hours’ restrictions could face severe penalties which vary depending on location but can include fines, a ban on obtaining new work permits, and closure of the establishment in severe cases.  Click here for full details.

AMERICAS

Canada: New federal legislation on genetic discrimination

With genetic testing being used increasingly in health care, there is a growing concern in regards to “genetic discrimination”.  On 9 June 2015, the Government of Canada introduced the Protection Against Genetic Discrimination Act, a new legislation that addresses this new, but rising issue of genetic discrimination.  Click here to read more.

Canada: Employees and independent contractors

Organizations are increasingly retaining the services of individual contractors rather than hiring employees in order to increase the organization’s flexibility and obtain special expertise on an as-needed basis. Case law over the past ten years suggests that the classic distinction between employees and independent contractors is becoming blurred.  Click here to read more.

US:  Accommodating religious practice – three steps for employers

Following a recent Supreme Court decision which held that knowledge of an employee’s religious practice is not a prerequisite to liability, our US practice suggest three steps employers should take to accommodate religious practice in the workplace.  Click here to read more.

US:  Guidance on food allergy accommodations under disability legislation

Julia DiPrete from our New York office considers what guidance is available for employers on managing employees with food allergies in compliance with the Americans with Disabilities Act.  Click here to read more.