In our first edition of the Freehills Asia-Pacific Employee Relations Review in October 2007 we looked at the differences between the workplace relations policies of the two major parties in the lead-up to the federal election.
Following the election on 24 November 2007, for the first time in Australian history, the Australian Labour Party (ALP) holds government in every state, territory, and at Commonwealth level.
In his victory speech, Kevin Rudd indicated that workplace reform (or the repeal of WorkChoices) is one of the ALP’s key priorities as it takes up government.
Initial changes – early/mid 2008
The Federal Government introduced the first stage of its Forward with Fairness reform legislation in the Federal Parliament on 13 February 2008. In summary, the Bill proposes to:
- abolish the Fairness Test and replace it with a new No Disadvantage Test that all workplace agreements must pass
- prevent new Australian Workplace Agreements from being made, and introduce new Interim Transitional Employment Agreements, which can operate until the end of 2009
- start the Award Modernisation process, to be carried out by the Australian Industrial Relations Commission (Commission)
- amend the rules on when workplace agreements come into operation, so that most workplace agreements will only start operating after they receive approval from the Workplace Authority Director (as opposed to from lodgement)
- remove the current restrictions on incorporating or referring to other industrial instruments in workplace agreements – so that, for example, agreements can again be ‘read in conjunction with’ applicable awards
- remove the ability unilaterally to terminate a workplace agreement, replacing it with a power for the Commission to terminate an agreement on application if this is not contrary to the public interest and allow employees to ‘fall back’ to another industrial instrument when a workplace agreement is terminated
- allow parties, in certain circumstances, to extend and vary pre-reform certified agreements on application to the Commission
- extend the operation of NAPSAs to at least 31 December 2009
- enable old IR agreements (agreements made prior to 1996) to continue in operation (they previously had a sunset of 27 March 2009), and
- remove the requirement for employers to provide new employees with a Workplace Relations Fact Sheet.
The Bill is consistent with the ALP’s election policy and its statement on the transition to the new system issued just before Christmas 2007. It is also significant in what it does not contain; contrary to some expectations, it does not abolish employer greenfields agreements, or make any changes to the unfair dismissal system. The existing prohibited content rules have not been altered – although this could yet come as the changes required can be made by regulation.
The Opposition has moved a motion for a Senate enquiry into the Bill, reporting on April 28. Until July, the Coalition has the numbers in the Senate to force an enquiry – although it will not have a majority on the Senate Committee that will hear the enquiry. The proposed report back date will, however, frustrate the government’s stated intention of passing the legislation by Easter.
Assuming that the Coalition (or sufficient numbers of Senators) support the Bill, it could pass in the May sittings. If the Coalition blocks the Bill, however, the earliest it is likely to pass is August – the first scheduled sittings after the composition of the Senate changes on 1 July.
The ALP’s substantial reforms to be implemented by 2010
The second step in the reform process will involve more substantial legislation to introduce the balance of the ALP’s policy proposals, including the following:
- the 10 ‘National Employment Standards’ will come into effect as minimum entitlements for all employees (see below)
- changes to the unfair dismissal laws
- introduction of the new enterprise bargaining regime, including ‘good faith bargaining’, and
- the establishment of ‘Fair Work Australia’ to perform roles currently undertaken by the Australian Industrial Relations Commission, Australian Fair Pay Commission, Australian Building and Construction Commission, Workplace Authority and Workplace Ombudsman.
These changes will all take effect from 1 January 2010. According to the ALP’s policy statement, existing legislative arrangements will remain in place until then. However, it is possible that the minister could seek to amend regulations in the meantime. Such changes could include changing funding arrangements for agencies such as the Workplace Ombudsman, additional regulation of AWAs, varying the remuneration cap for unfair dismissals, or expanding the number of protected allowable award matters.
National Employment Standards exposure draft released
An exposure draft and discussion paper in relation to the new National Employment Standards was released on 14 February 2008.
Implications for employers
Employers will need to consider the likely impact of the ALP reforms on their workplaces, both in the short and long term.
The ALP policy clearly changes the emphasis to collective agreements from the current position where individual arrangements through AWAs have primacy. Accordingly, there is likely to be an increase in union requests to collectively bargain. In addition, employers will have additional ‘good faith’ obligations in collective bargaining. The full details of these requirements are not yet clear.
Full details of the ALP’s unfair dismissal policy have not been released, however it is likely that the scope for unfair dismissal actions will be significantly widened.
The ALP has indicated that it will adopt a ‘measured’ approach to drafting the new legislation, and it will consult with a range of stakeholders including the ALP’s Business Advisory Group. Employers may wish to consider making submissions in relation to the draft legislation, and in particular the draft National Employment Standards.
This article was written by George Cooper, Practice Leader, and Celia Yuen, Solicitor, Singapore.
The Singapore Government recently announced that it intends to introduce re-employment legislation, to take effect on 1 January 2012. The legislation will require employers to offer re-employment to workers beyond their retirement age.
Background
The proposed legislation is part of a broader suite of initiatives intended to address demographic issues in Singapore.
Singapore’s average life expectancy is now around 80 years. Falling birth rates, increasing longevity and smaller family size mean that Singaporeans will have to rely on their own savings in retirement and work longer to adequately fund their retirement.
The government decision to introduce re-employment legislation rather than simply raise the statutory retirement age was based on findings that:
- raising the retirement age may make older workers even less employable as employers may avoid employing older workers so they do not have to continue to employ them beyond 62, and
- without legislation that allows re-negotiation of employment terms once they reach 62, these workers can become less cost competitive.
Other related measures announced by the government include:
- a higher Workfare Income Supplement (WIS) for workers above 55 years ($150 per month up from $100 per month) and above 60 years ($200 per month up from $100 per month)
- increasing CPF interest rates
- progressively raising the CPF draw-down age, and
- introduction of a longevity insurance scheme.
Re-employment obligations
Under the legislation, employers will be required to offer re-employment to workers when they reach the current retirement age of 62. The employee can then work until age 65, with this re-employment age to be eventually extended to 67. However, there will be flexibility regarding the terms of re-employment. It need not be in the same job or at the same pay.
Implications for employers
The Tripartite Committee on Employability of Older Workers is currently working through the practical aspects of the re-employment legislation and plans on producing guidelines for employers within two years.
In the meantime, employers can refer to the existing Tripartite guidelines on Employment of Older Workers above 62 years old at the Singapore National Employers Federation website.
Employers should also be aware of the ADVANTAGE! scheme under which they may be eligible for up to $400,000 in grants from the Singapore’s Workforce Development Agency to recruit older workers and to re-employ them beyond age 62.
Employers who observe these guidelines should be well prepared for the new legislation once it is introduced over the coming years and takes effect in 2012.
This article was written by George Cooper, Practice Leader, and Celia Yuen, Solicitor, Singapore.
Vacation leave and public holiday entitlements in the PRC have changed from 1 January 2008 as a result of the promulgation of a new regulation by the Chinese State Council.
Background
Article 45 of the PRC Labour Law contains only a brief reference to the entitlement of a worker who has worked for more than one year to enjoy paid annual leave. Previously, the Chinese State Council had not set down any prescription regarding the quantum or the circumstances in which employees may access paid leave entitlements.
In relation to public holidays, employees in China have since 1999 enjoyed a total of 10 paid public holidays per annum, comprising New Years’ Day plus three sets of three consecutive days: the Spring Festival (Chinese or Lunar New Year), the May Day Festival and the National Day Festival.
These festival periods are sometimes referred to as ‘Golden Weeks’, as it is common practice to work an adjacent weekend or make other arrangements to enable a full week off work. They have been notorious for the large crowds and strain on transport and tourism resources that they create.
Changes to annual vacation entitlements
In summary, the regulations provide for paid annual vacation entitlements of:
- five days for employees who have worked for one to 10 years
- 10 days for employees who have worked for 10 to 20 years, and
- 15 days for employees who have worked for more than 20 years.
Reactions to the regulations have generally been positive, given the previous absence of clear legislated annual leave entitlements for most employees in the PRC.
Changes to public holidays
However, the changes to public holidays have been more controversial.
The regulations remove the May Day Golden Week and instead prescribe a single day public holiday on May Day, with three additional single day public holidays throughout the year:
- Tomb-Sweeping Day
- Dragon Boat Festival, and
- Mid-Autumn Festival.
Thus the total number of public holidays per year has increased from 10 to 11.
Effectively spreading out one of the Golden Weeks and introducing the annual leave entitlements is hoped to ease the congestion problems that have been experienced in the past. However, there is some resistance to the public holiday changes, particularly from those who work away from their family base and say that more people would be forced to travel home during the remaining two ‘Golden Weeks’. They claim the single day holidays do not provide a long enough break for such travel.
Implications for employers
The changes to both public holiday and vacation leave arrangements pose interesting questions for employers in China managing the resourcing requirements of their workforce, particularly for employers who are accustomed to having a ‘shut down’ period during the May Day Golden Week. These employers need to consider how the new entitlements can be accommodated within operational requirements.
The changes are also relevant to companies who are reliant on branches or suppliers in China in running their business. Supply chain and operational schedules that have been used in the past may need to be revised to take into account the shorter May Day holiday period, and the introduction of the additional public holidays.
This article was written by George Cooper, Practice Leader, and Celia Yuen, Solicitor, Singapore.
In November 2007, in the case of Man Financial (S) Pte Ltd v Wong Bark Chuan David [2007] SGCA 53, the Singapore Court of Appeal considered the doctrine of restraint of trade.
Background
In the course of finalising Mr Wong’s employment, the parties had agreed that during Mr Wong’s three months’ garden leave, and for a further four months thereafter, he would be restrained from soliciting Man Financial’s employees or clients and from engaging in a business competitive with Man Financial.
The parties also agreed that at the conclusion of the garden leave period, Mr Wong would receive a substantial sum of money and shares in Man Financial.
However, Man Financial refused to pay the compensation at the end of the garden leave period, alleging that Mr Wong had breached the provisions dealing with non-solicitation of employees and non-competition.
Mr Wong’s claim
Mr Wong commenced proceedings against Man Financial for recovery of the compensation pursuant to the termination agreement.
Man Financial argued that Mr Wong had breached the restraints in the agreement, which were enforceable, hence disentitling him to the compensation. Its alternative argument, if the clauses were unenforceable, was that the compensation was not payable as there was a failure of the main consideration for the compensation under the agreement.
First instance decision
At first instance, the High Court found that both the non-solicitation of employees and the non-competition provisions were too wide to be enforceable.
In a controversial decision, the High Court rejected Man Financial’s argument as to failure of consideration. Given there was no division and allocation of compensation between the particular undertakings given by Mr Wong under the agreement, the court found that the whole amount of the compensation was still payable to him.
Court of Appeal decision
The Court of Appeal overturned the High Court’s finding that the non-solicitation of employees provision was too wide to be enforceable. The clause prohibited the solicitation of any ‘officer, director, representative or employee’ of Man Financial. Significantly, the Court of Appeal held that when looked at in context, the clause was not intended to and did not apply to peripheral support staff, but rather to senior staff only. The provision was accordingly upheld.
The court found on the facts (as did the trial judge) that Mr Wong had breached the clause. Moreover, the clause was regarded by the court as a condition of the contract, meaning that Man Financial was entitled to treat the contract as at an end once the clause was breached. Hence, the company was not obliged to pay the compensation.
Implications for employers
The Court of Appeal’s approach in this case, in looking beyond the words used in the clause to the intention of the parties, may signal a move away from the stricter approach previously taken towards restraint of trade clauses by the Singapore courts.
Whilst the above is a brief outline of the key points in the case affecting its result, the court reviewed virtually all aspects of the doctrine of restraint of trade in the employment context. Accordingly, the decision is likely to heavily influence the general practice in Singapore in the area of negotiating and drafting post-employment restraints.
This article was written by George Cooper, Practice Leader, and Celia Yuen, Solicitor, Singapore.
In the recent case of HSBC Bank Plc v Wallace, the High Court of Hong Kong made an interlocutory finding that the Hong Kong Employment Ordinance (Ordinance) did not apply to the employment of a senior employee based in Hong Kong.
Background
The employee in question, Mr Wallace, was recruited by HSBC in London and employed by a UK entity. However, he was recruited with the intention of being immediately ‘seconded’ to work for HSBC in Hong Kong, which is what occurred. The documents governing the terms and conditions of his employment were expressed to be governed by English law.
In June 2007, Mr Wallace resigned from HSBC, giving the company six months’ notice as required by his contract. HSBC advised Mr Wallace that he would be placed on ‘garden leave’ for the duration of his notice period.
Three months into his garden leave period, Mr Wallace sought to end his employment earlier. He purported to rely on the Ordinance, which contains a provision that permits either an employer or an employee to shorten the notice period by making a payment to the other party in lieu of the unexpired period of notice. Mr Wallace then commenced working for Citigroup, a competitor of HSBC.
Application by HSBC
HSBC applied to the High Court for an urgent injunction to prevent Mr Wallace from working for Citigroup.
HSBC claimed that Mr Wallace was not entitled to rely on the Ordinance to buy out his notice period, and accordingly would remain an employee of HSBC until the expiry of his notice period. HSBC also sought to rely on a non-competition clause in the contract of employment to restrain Mr Wallace from working for Citigroup for a further period after his employment with HSBC ended.
HSBC’s application was successful, and the High Court granted an injunction restraining Mr Wallace from working for Citigroup for the remainder of his notice period, and for a further three months thereafter.
High Court’s decision
In reaching its decision, the court rejected Mr Wallace’s argument that the Ordinance applied because be was based in Hong Kong and performed his work there.
The court observed that the parties had chosen English law as the governing law of the contract. The court examined the provisions of the Ordinance, and found that there was no specific provision stating that the Ordinance would apply to contracts governed by foreign law. On this basis, the court held that the Ordinance did not apply to Mr Wallace’s employment. The court did note however that the result may have been different if there was no connection between the parties and the stated governing law jurisdiction (ie England).
Implications for employers
This decision is significant for multi-national companies employing expatriates to work in Hong Kong, where the company and expatriate may have links to several legal jurisdictions.
To date, it has generally been assumed that the Ordinance will apply to contracts of employment where the employment is based in Hong Kong. However, this decision suggests that parties can opt out of the application of the Ordinance by specifying a different governing law, provided that there is a connection between the parties and the governing law jurisdiction that is selected.
It remains to be seen whether the same conclusion would be reached at a final hearing in the Hong Kong courts or at the appellate level.
This article was written by George Cooper, Practice Leader, and Celia Yuen, Solicitor, Singapore.
The Industrial Disputes Act 1947 (ID Act) is the main legislation for the investigation and settlement of industrial disputes in India. The ID Act also sets out the conditions relating to the lay-off, retrenchment and dismissal of workmen, as well as the circumstances under which an industrial establishment can be closed down.
The Bombay High Court (the city of Bombay is now known as Mumbai) recently took an in-depth look at the duty of an employer to re-employ retrenched workmen after the closure of an industrial undertaking.
Background
In the present case, the employer (a company registered under the Companies Act 1956) had a manufacturing facility in India. The factory manufactured rubber products and employed 600 employees. In 1980, the company declared a lockout due to insufficient funds to carry on the process of manufacturing. The company subsequently issued a notice of closure. The government granted permission and the facility was closed down in 1982/1983.
After some time, the company opened up a new manufacturing facility in a different location. The former workmen (petitioners) filed complaints before the Industrial Court demanding they be re-employed at the new factory, claiming back payment of wages for the period of forced unemployment. The workmen also alleged that the employer had engaged in unfair labour practices by not complying with the provisions of the ID Act.
At first instance, the Industrial Court directed the employer to re-employ the workmen with back wages. The employer appealed to the Bombay High Court challenging the application of Section 25-H of the ID Act (dealing with re-employment) on the basis that it had complied with the requirements in the Act for the closure of an industrial undertaking. In addition, it argued that the obligation to offer re-employment did not apply because the new facility was in a different location.
Legal obligations on closure
Section 25-O of the ID Act sets out the procedure for the closure of an industrial undertaking where 100 or more workmen are employed. In these circumstances, the employer has to apply to the appropriate government for permission to close an industrial undertaking at least 90 days before the date of intended closure. A copy of the application is required to be served simultaneously on the workmen’s representatives. In addition, the employer is required to provide reasons for the proposed closure.
The government will grant approval if it is satisfied as to the ‘genuineness and adequacy’ of the reasons for the closure, taking into account the interests of the general public and all other relevant factors. The government is required by law to communicate its decision within 60 days from the date of application for closure by the employer, otherwise consent is deemed to have been granted.
If a workman is retrenched for reasons other than those relating to voluntary retirement or retirement upon reaching the superannuation age or due to the non-renewal of contract or continued ill health, the employer is required to fulfil certain conditions including the payment of compensation.
Obligation to offer re-employment
In the present case, the employer had complied with the legal procedures for closure of an industrial undertaking and had made the requisite statutory compensation payments to the retrenched employees. It was alleged, however, that it had failed to comply with the provisions relating to re-employment of retrenched workmen in section 25-H of the ID Act when it opened the new facility.
Section 25-H of the ID Act provides that where any workmen are retrenched and the employer proposes to employ any persons, then the employer is obliged to give the retrenched workmen an opportunity to offer themselves for re-employment. The workmen who offer to accept re-employment must be given preference over other persons.
The Bombay High Court observed that the order passed by the Industrial Court at first instance raised the following issues; namely, whether:
- Section 25-H would apply to the case where there has been a valid closure of the industrial establishment under Section 25-O of the ID Act?
- The provisions of section 25-H are applicable where a company which has validly closed an earlier unit subsequently restarts another unit in a different location?
- The employment relationship would continue to operate after the closure of the unit and once it had started functioning again in a different place?
Implications for employers
The Bombay High Court held that the initial closure was valid and legally done, as notice was given to the appropriate government and was served on workmen and the statutory compensation payments were made.
The Bombay High Court concurred that the obligation of the employer to provide re-employment to the retrenched workmen when starting the new manufacturing facility had not been fulfilled. However, it held that the Industrial Court had erred in stating that the employment would be automatic with back wages since section 25-H provides only that the employer would offer employment. The Bombay High Court confirmed that even if an employer re-starts manufacturing activities in a different location, it is still under an obligation to offer employment to its former workmen.
The case is significant because it highlights the need not only for employers to follow the procedures for the closure of an undertaking, as set out in the ID Act, but emphasizes the requirement that employers give retrenched workmen the chance to be re-employed in a new or separate unit of the same employer, even if these are in different locations.
As per the information available, an appeal has been filed against the order in the Supreme Court of India. However, the current status of the appeal is not known.
This article was written by Manishi Pathak, Partner, of Kochhar & Co. Advocates & Legal Consultants in India. Freehills Workplace Law & Advisory–Asia has worked with Kochhar & Co on various workplace relations matters in India.
Thailand continues to be a strategic hub in Southeast Asia for multi-national corporations. For example, the Japanese Chamber of Commerce in Bangkok is the largest Japan Chamber of Commerce in the world outside of Japan, with nearly 1,300 member companies.
Foreign companies doing business in Thailand are generally aware that Thai employment and labor laws regulate the hiring and firing of Thai nationals, as well as determining the parameters for pre-litigation settlements between employers and employees. However, not all employment disputes are able to be settled in-house. For foreign companies facing an employment lawsuit in Thailand, this means entering into the unfamiliar territory of Thailand’s specialty Labor Court.
Thai court systems
The Thai legal system is based on civil law. The court system is divided into three levels: Courts of First Instance, Courts of Appeal, and the Supreme Court.
The Courts of First Instance are at separate geographical locations throughout the country and are divided into three categories: general courts, juvenile and family court, and specialised courts. The general courts are empowered to try and adjudicate criminal and civil cases, and the specialised courts consist of the Labor Court, the Tax Court, the Intellectual Property and International Trade Court, and the Bankruptcy Court.
There is one Court of Appeal in Bangkok and nine Regional Courts of Appeal. The Supreme Court (Sandika) is the highest court and its decisions are final.
Thai Labor Court procedure
Once a claim is filed with the Thai Labor Court, the defendant is promptly served notice and requested to answer the complaint prior to the parties’ first hearing date. This hearing is usually held within two months after the claim is filed.
Thai Labor Court cases are heard by three judges in total. One judge is a career judge and the other two are associate judges, the latter of whom are lay people with specialised knowledge/experience in employment and labor matters. The lay judges are recruited to assist the career judge in adjudicating the case. One lay judge is selected from the employer industry/federations and the other from the labor industry/federations.
From the outset, there are three critical elements concerning the nature of the Thai Labor Court that foreign companies should be aware of:
- Unlike the general courts, the Thai Labor Court uses the investigation system not accusation system, so the judge is empowered to investigate the facts.
- The Thai Labor Court generally takes a pro-labor stance when resolving disputes.
- The three judges presiding at the first and any subsequent hearings will endeavor to facilitate a timely compromise of the dispute in order to prevent the matter from proceeding to a trial.
If the parties do not settle at the first hearing, the Thai Labor Court typically schedules a second hearing to try and re-negotiate a compromised settlement. Should the parties not reach settlement, the Thai Labor Court may schedule a third hearing for re-negotiation or, alternatively, it may schedule the matter for trial. For many foreigners a process that encourages the parties to reach a compromise may seem unusual, however, it reflects a fundamental Thai cultural practice of allowing the parties to ‘save face’.
Implications for employers
In the event a foreign company contemplates dismissing a Thai national, it is advisable that the employer first consult local legal counsel to obtain advice on the dismissal and assistance in negotiating a settlement with the employee. Obtaining a signed voluntary resignation from the employee that releases the employer from future claims for additional compensation can help to minimise the risk of litigation in the Thai Labor Court. It will also reduce exposure to litigation legal fees and a lengthy trial procedure, which could last up to six months.
More importantly, the company can avoid having its name being listed in the Thai Labor Court directory of defendants. Above all, employers may find the concept of settling early and ‘saving face’ works in their favor by allowing them to save time and money in a system which is ultimately geared to achieve the same outcome.
This article was written by Timothy Harney, Consultant, and Nippita Pukdeetanakul, Associate, of Seri Manop & Doyle in Thailand. Seri Manop & Doyle are a referral firm of Freehills Workplace Law & Advisory–Asia.
More information
For information regarding possible implications for your business, contact