Be Global - September 2014 (Global Labor & Employment)

by DLA Piper



  • Global Employment Guides
  • Australia: No implied term of mutual trust and confidence in Australian employment contracts
  • US: Franchisor and franchisee as joint employers: time to review franchise agreements
  • Mexico: Labour authority inspections


  • Australia: Royal Commission into Trade Union Governance and Corruption
  • Australia: Report recommends changes to 457 Visa Scheme
  • Australia: Fair Work Commission - representation decisions
  • Australia: Sexual harassment compensation
  • China: Safety at work: Increased penalties for employers and stricter supervision
  • China: Supreme People's Court clarifies when a work related injury can occur outside of the workplace


  • France: New working hours requirement for part-timers
  • France: Round-up
  • Germany: Changes to employment terms can trigger mass dismissal obligations
  • South Africa: New legislation in force
  • UK: New parental leave regime


  • US: Court rules California employers must pay employee cell phone expenses
  • Mexico: Labour authority inspections

Highlights: Australia: No implied term of mutual trust and confidence in Australian employment contracts

In a welcome development for employers, the High Court of Australia has handed down a landmark decision that confirms, for the first time, that Australian employment contracts do not contain an implied term of "mutual trust and confidence": Commonwealth Bank of Australia v Barker  This decision clearly distinguishes the law of Australia from the English position, and offers employers welcome relief from such claims. However, as noted by the Court, the question of whether an implied term of "good faith" applies generally to contracts remains undecided in Australia. To read a full update on this important development, please click here for further details.

Highlights: US: Franchisor and franchisee as joint employers: time to review franchise agreements

The General Counsel of the National Labor Relations Board (NLRB) has authorized the issue of a number of unfair labour practice complaints against a major US corporation that operates a franchise model, on the grounds that the corporation could be held liable as a joint employer for it franchisees’ treatment of their workers. If accepted by the NLRB, this decision recognizing franchisors as joint employers could have wide-ranging implications across a variety of industries where the franchise model is common and could open the door for the joint employer principle to be expanded into employment disputes beyond those involving unfair labour practices. Pending the NLRB’s final decision, franchisors are advised to review their franchise agreements and their relationships with franchisees to ensure that they are in a position to rebut allegations of joint employer liability.

Highlights: Mexico: Labour authority inspections

On 17 September 2014, new regulations in relation to inspections by the Labour Authority came into effect. Click here to read more.


Australia: Royal Commission into Trade Union Governance and Corruption

The Royal Commission into Trade Union Governance and Corruption has continued its hearings, and recently called former Prime Minster Julia Gillard to give evidence in relation to an alleged slush fund set up by the Australian Workers' Union in the early 1990s. Ms Gillard strongly denied having received any personal benefit in relation to the fund. The Australian Workers Union is one of eight unions being investigated. The Maritime Union of Australia is the latest union to be added to the Commission's terms of reference and will be the subject of a hearing at the end of September. The Royal Commission is expected to hand down a preliminary report by 31 December 2014.

Australia: Report recommends changes to 457 Visa Scheme

An independent review into integrity in the subclass 457 programme has delivered its report to the Australian government. The 457 visa allows foreign workers to work for approved employers in Australia for up to four years. The report makes a number of recommendations, including easing English language competency requirements, abolishing the requirement that employers test the local labour market to determine if there are any Australians who meet the employer's needs, and fast-tracking approvals for employers with unblemished records. The report's extensive recommendations are stated to be aimed at streamlining the existing process and creating a more transparent system. The government has welcomed the report as "balanced" and "measured" but has yet to respond formally.

Australia: Fair Work Commission - representation decisions

The Fair Work Commission has delivered two separate decisions which clarify the nature of representation available to both employers and employees before the Commission.

In the first decision, the Commission granted leave for an employer to be represented by a legal practitioner within its anti-bullying jurisdiction, despite the employee's objection that the scheme contemplated that parties should be self-represented. The Commission allowed the employer legal representation on the basis of efficiency and a lack of disadvantage to the complainant: H v Centre and Others.

In the second decision, a full bench of the Fair Work Commission held that a union is not entitled to represent employees in unfair dismissal applications to the Commission if those employees are not eligible to be members of the relevant union. This decision overturned a previous ruling of the Commission in which two truck drivers were allowed to be represented by the Construction, Forestry, Mining and Energy Union (CFMEU) in unfair dismissal applications, even though there was insufficient evidence to determine whether they were eligible to be members of the union: CDJV Construction Pty Ltd v Errol McCarthy and Gabriel McCarthy.

Australia: Sexual harassment compensation

In a significant sexual harassment decision, the full court of the Federal Court of Australia has awarded $100,000 in general damages and $30,000 for economic loss to an employee who successfully argued that she had been sexually harassed in the workplace over a 6 month period and consequently resigned her employment. The amount of $130,000 was a substantial increase on the damages awarded in the lower court, which had limited them to $18,000. In explaining the award, the full court referred to "community standards" which now accord a higher value to compensation for pain and suffering, and loss of enjoyment of life, while drawing comparisons with instances of high damages awards in cases of workplace bullying. The decision suggests that there is increasing scope for higher awards of damages in sexual harassment cases, which would be a departure from the historical position which has often kept awards below $20,000: Richardson v Oracle Corporation Australia Pty Ltd.

China: Safety at work: Increased penalties for employers and stricter supervision

New rules on work safety came into effect in the PRC on 31 August 2014, imposing higher penalties and the possibility of criminal sanctions on employers and granting stricter supervision rights to the government department in charge of production safety. Under the new rules, if there is a production safety breach in the workplace that results in a serious accident, the company can be fined up to RMB 20 million (approx. GPB 2 million). The person in charge of production safety will be deemed responsible and can be demoted, removed from their position and/or can have their salary reduced by 60 - 100% by way of a penalty (and will not be permitted to take charge of production safety again for any employer within the same industry). A very serious safety breach could also constitute a criminal offence. The new rules also grant stricter supervision rights to the government department in charge of production safety which includes the ability to detain company property.

China: Supreme People's Court clarifies when a work-related injury can occur outside of the workplace

The distinction between a work-related injury and non-work-related injury in the PRC is an important one. If an employee suffers a work-related injury the employer is likely to pay the medical cost and any financial loss and compensation associated with the injury and in some cases the employee will enjoy special protection from termination. The same will not apply when an injury is unrelated to work. The Supreme Court has now clarified when injuries incurred outside of the workplace will be deemed to be work-related:

  • An employee who was involved in an accident (which was not his/her fault) when commuting to or from work will be deemed to have suffered a work-related injury if: (1) he/she was travelling on a reasonable route between his/her home (habitual residence or company dormitory) and the workplace and (2) the journey had taken a reasonable time, due to daily living needs. For instance, if the employee stopped to buy groceries on the way home, the route / time taken to get home is likely to be considered reasonable even though it was not a direct route home.
  • An employee who suffers an injury when out of the workplace for a work-related reason will be deemed to have had a work-related injury. This will apply where the employee was assigned by employer to undertake a work-related activity outside the office, for instance, to attend a business meeting, work-related study or another assignment in the course of business.

There are exceptions however. Where an injury was sustained because the worker was under the influence of alcohol or drugs and/or the worker harmed themselves (or committed suicide), the injury will not be deemed to be work-related. The employer will, however, need proof from a competent authority that any of these exceptions apply.


France: New working hours requirement for part-timers

The new minimum 24 hours' work per week for part-timers applies to part-time employment contracts concluded as from 1 July 2014.

Designed as a guarantee for part-time workers, this minimum was originally set by the Law for the Securing of Employment of 14 June 2013. The minimum requirement was due to be effective for employment contracts concluded as from 1 January 2014 (subject to exceptions in particular the possibility of extended industry-wide collective bargaining agreements providing otherwise, if specific guarantees were granted to employees in return). However, the application of the new minimum hours requirement was suspended by the Law on Vocational Training, Employment and Social Democracy of 5 March 2014 in order to allow for such collective bargaining negotiations.

Pursuant to the relevant legal provisions (above), the application of the minimum 24 hour working week depends on the date of conclusion of the part-time employment contract:

- for part-time employment contracts concluded between 1 and 21 January 2014 inclusive: the minimum 24 hour working week applies (subject to exceptions);

- for part-time employment contracts concluded between 22 January and 30 June 2014 inclusive: the minimum 24 hour working week does not apply;

- for part-time employment contracts concluded as from 1 July 2014: the minimum 24 hour working week applies (subject to exceptions).

One question remains - whether employment contracts concluded between 22 January and 30 June 2014 are subject to the minimum 24-hour working week as from 1 July 2014. According to the Ministry of Labour, such contracts should benefit from the interim measures provided by law, i.e. the minimum 24 hours per week should apply only as from 1 January 2016. However, in the event of litigation, it cannot be guaranteed that a judge would take the same position as the Ministry of Labour.

As mentioned above the requirement is subject to exceptions. In particular, an industry-wide collective bargaining agreement may provide for a shorter duration if specific guarantees are granted to employees in return. The employee may also ask for reduced working hours in order to be able to combine two different jobs or in view of, for example, family constraints.

France: Round-up

  • A new law to ensure effective equality between men and women was adopted on 4 August 2014. The main new provisions are the following:

    o As regards compulsory annual negotiations, employers must now conduct annual negotiations relating to professional and pay equality between the genders. This replaces the current system where there are two separate sets of negotiations;

    o Employees who sign a civil partnership ("PACS") are now entitled to 4 days of paid holidays;

    o An employee who is the father of a new-born child is protected from the termination of his employment contract during a 4-week time period from the date of birth (save in case of gross misconduct or where it is impossible to continue the employment contract for a reason other than the birth of the child).
  • A recent decision of the French Supreme Court has extended the potential scope of contractual mobility clauses. To be valid, a mobility clause must define precisely its geographical zone of application. The French Supreme Court decided recently, for the first time, that a clause that provided for mobility "within the geographical limit of the French territory", is sufficiently precise and thus valid, even when account was taken of the fact that where an employee, who is subject to such a mobility clause, refuses a move to another city in France, this may lead to his/her legitimate dismissal.
  • A recent decision of the French Supreme Court has limited the scope of when an individual will fall within the definition of a senior executive ("cadre dirigeant"). When someone is qualified as a senior executive, he/she is not subject to the French legislation on working hours, thus he/she is not entitled, for instance, to payment for overtime hours. Traditionally, to be considered as a senior executive, three criteria had to be met - (1) the exercise of important responsibilities, which implies significant independence in the organization of the individual's work schedule; (2) the power to take decisions in an autonomous manner; and (3) a salary at the highest level of the company's salary range. The French Supreme Court has recently added a new condition to be met in order to be considered as a senior executive, which is (4) effective participation in the management of the company. This requirement will, in practice, limit the number of situations in which the status of senior executive applies.

Germany: Changes to employment terms can trigger mass dismissal obligations

Terminations related to changes to terms of employment are redundancies in terms of Section 17 of the German Dismissal Protection Act. As such they may require the prior notification of the Employment Agency according to a judgment of the Federal Labour Court in February 2014. Employers who intend to lay off a certain number of employees during a 30 day period must notify the Employment Agency prior to the service of any termination notice letter. While this statutory requirement is triggered by the number of dismissals, the court ruled that the employer is also required to notify the Employment Agency if terminations related to changes to terms of employment are intended, regardless of whether the employee decides to accept to continue the employment relationship under changed terms or to end the employment with the employer.

Consequently, employers who intend to terminate employees as a result of changes to terms of employment need to consider whether the number of potential terminations exceeds the thresholds of mass dismissals, even if they expect the employees will accept the changes and continue their employment relationships. Failure to notify the Employment Agency will make any mass dismissal invalid.

For more information on recent developments in Germany, visit the Employment Germany Blog.

South Africa: New legislation in force

As reported in previous editions of Be Global, South African employment legislation is in the process of being updated. Many of the material effects of these amendments have also been highlighted in previous editions. Employers operating in South Africa should note that the amendments to the Employment Equity Act, 55 of 1998 (EEA) and the Basic Conditions of Employment Act, 75 of 1997, have already come into effect, on 1 August 2014 and 1 September 2014 respectively.

In addition, new regulations to the EEA were published and also came into effect on 1 August. These regulations were previously published for comment, and were discussed in May's Be Global. The final regulations deviated from the draft regulations in respect of the indicated comparator that should be used by employers, when establishing whether their workforce is sufficiently representative of South African society. The final regulations no longer limit an employer's right to use the regional "economically active population" (EAP) as the comparator for certain categories of employees. Whether the national EAP, regional EAP, or alternative appropriate comparators may be used will be an election that employers must exercise (rationally) in consultation with employees.

The effective date of the amendments to the Labour Relations Act 66 of 1995, and the Employment Services Act 4 of 2014 remain unknown, but other than publication of the effective dates, the legislative process is complete. Further information can be found in our Guide to the 2014 Amendments. Click here to read more.

UK: New parental leave regime

On 1 December 2014, businesses operating in the UK will see the introduction of the most sweeping reforms to parental leave since maternity rights were first formalised nearly forty years ago. Eligible parents will, for the first time, be able to share up to 50 weeks' leave. The new regime will apply to parents expecting a baby on or after 5 April 2015. It is therefore relevant to employees becoming pregnant from early July 2014 onwards. Similar provisions will apply to adoptions. Employers with UK operations should now be considering implementing the new regime within their organisation and this will include, for example, amending existing family leave policies and putting new policies in place; training managers to equip them to handle requests under the new rules; and addressing arrangements for shared parental pay and return to work bonuses in a way which avoids the inherent discrimination risks where male and female employees are treated differently.


US: Court rules California employers must pay employee cell phone expenses

The California Court of Appeal has now told employers that if California employees are obliged to use their cell phones for work-related calls, they must be reimbursed a reasonable portion of their cell phone bills for that use. The ruling in Colin Cochran v. Schwan’s Home Service, Inc. applied to a class action by service managers seeking reimbursement of work-related cell phone expenses, but will also apply to smart phones used to access business data in the Cloud and on network servers. Margaret Keane, a partner in our San Francisco office, has considered this case in a recent Employment Alert. Click here to read more.

Mexico: Labour authority inspections

On 17 June 2014, Mexico’s Offical Gazette published new regulations for labour inspections, through the General Regulations for Work Inspection and Sanctions Applicability (Reglamento General de Inspección del Trabajo y Aplicación de Sanciones) which came into force on 17 September 2014. This new legal body will replace the current General Regulations For Inspection And Sanctions Applicability for Labour Legislation Violations (Reglamento General para la Inspección y Aplicación de Sanciones por Violacion a la Legislación Laboral).

The purpose of this new regulation is to monitor companies' employment legislation compliance as well as to apply sanctions in the event that irregularities in an employer's compliance with Federal Labour Laws are detected.

At present, inspections by the Labour Authority occur at random. However, an important new provision is the inclusion of an alternative mechanism which enables employers to confirm compliance regarding employment matters. An employer may now request that the Labour Authority conduct an inspection and give support and technical assistance. The company will then receive a labour inspector visit to confirm they have taken all mandatory actions and have all required documents in place. If any irregularity is detected, an employer who has requested an inspection will not be subject to any economic sanction. Please note that this alternate procedure may bring further, additional verification inspections in order to confirm compliance with the inspector’s observations. Before requesting a Labour Authority inspection, our recommendation is that employers should take legal advice on compliance. Alternatively, employers may prefer to wait and see what happens once this new rule has been tested in practice.

The new regulation also includes the option for the Labour Authority to carry out supervision inspections in order to confirm that the information provided by the employer to the Authority and the information provided by the inspector during any inspection requested by the Employer has been accurate. In case of any irregularity regarding the foregoing, an employer may be subject to an extraordinary inspection where the employer may be made subject to economic as well as criminal sanctions.

Finally the regulation specifies the time limit to demonstrate compliance where there is any lack of documentation or irregularity. A set time period will be given to the employer to amend any identified inconsistency or any lack of document detected in any inspection. Immediate remedy can be required if the omission represent a high risk for employees. However, if it is not considered sufficiently risky, the deadline to amend, update or show pending documents is between 30 and 90 business days. The deadline will be determined based on the materiality of such omissions, economic strength, type of industry, number of employees and the complexity of rectifying the omissions. Where there is a failure to comply, the labour inspection department will pass the file to the sanction authority to start an administrative procedure to impose economic sanctions based on the severity of the lack of compliance.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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