The "Good Global Employer," the Ultimate Pandemic Winner
A flawless track record in international pandemic management will be key to a company's success in the "post-COVID world," and HR managers are on the front line, their role more critical than ever. For them and the legal professionals who assist them, it will not be enough to ensure compliance with applicable national laws (I); it will also be necessary to consider the practices of other jurisdictions as guides (II), as well as not ignoring the protection of a frequently overlooked group: directors appointed to subsidiaries (III), and finally, integrating globally emerging issues in the legislation of other countries into internal procedures (IV).
To be in a position to retain and recruit the best employees as the crisis emerges, the company will have to demonstrate that, throughout the crisis, it not only managed labor relations with respect for individuals and the law, but also integrated, in advance of the crisis, and even before being forced to do so by local law, current issues highlighted in other jurisdictions, such as equal treatment, veganism, "wage theft," etc.
By aligning itself with the most demanding criteria, which can be achieved without any negative impact on productivity, any company can become a "good global employer." The benefit is twofold: it protects itself against liability claims, and it retains or attracts employees who have retained their skills but whose trust in any employer has been weakened.
Especially for SMEs and mid-caps, the pandemic provides a unique and unprecedented opportunity to compete with large corporations in recruiting quality staff. Less career development opportunities in these smaller organisations can be compensated for by a workforce seeking understanding and security by taking into account individual aspirations and promoting an image of a good overall employer, regardless of the company's size.
Newsletter No. 6 - The "Good Overall Employer," the Ultimate Winner of the Pandemic
I - Respecting national statutes and case-law on labour
The first obligation in managing the pandemic is, of course, to respect the legal rules as they were already in effect before the health crisis: short-time working (total or partial suspension of pay in exchange for a promise of rehiring), redundancies, and to establish fair and legally valid contracts for adaptation to exceptional circumstances concluded with employees, whether individually or collectively.
Compared to French labor law, the rules are sometimes more favourable to the employer. In matters of redundancy, the employer's right to reorganise even in the absence of a situation of distress is generally recognized, and no prior administrative authorisation is required.
But at the same time, there are procedures with no equivalent in French law, such as domestic inquiry, show cause letter, PIP, etc.
The PIP, or "Performance Improvement Plan," is a good example. Sometimes mandatory, sometimes recommended as a precautionary measure for the employer, the plan must include a series of measures allowing the employee accused of underperforming to improve in order to keep their job.
The PIP is more than just an obligation on paper. In a recent ruling, the Australian Federal Court considered an employee placed under a PIP to have been dismissed without just cause because the PIP appeared to have failed to include the various steps required to allow the employee to improve with the help of their employer.
II - Drawing inspiration from best practices in other countries
The expansion of remote working is one of the main components of companies' adaptation to the pandemic. Due to the novelty of the practice, each country has independently developed its own legal rules.
In Australia, for example, an employer cannot be exempted from liability for harm suffered by an employee if it has not implemented procedures regarding the arrangement of the work environment at the employee's personal home, the ability to communicate with the employer in the event of an emergency, the availability of emergency services, etc.
This may be an extreme case, but in 2020, the Supreme Court of Appeal of New South Wales ruled that the children of a teleworking employee killed one morning by her partner were entitled to compensation from the employer, even though the victim was still in her pyjamas at the time of the murder.
These procedures should be examined in detail and transposed elsewhere, after adapting them to the company's circumstances and in compliance with the local law of the destination country.
But the legal framework for teleworking is not limited to aspects of well-being and safety. Other aspects must be considered, and regional hubs have given particular thought to this, and it is wise to benefit from their insights.
In Hong Kong, for example, HR and legal managers consider various aspects:
- Creation of a tax presence for the company/permanent establishment in the other country.
- Personal taxation of the employee in the other country
The employee's right to work in the other country (work permit, etc.). - Compliance with the rules applicable to certain activities in the other country, such as financial activities.
- Applicability of the other country's labor law
The employee's right to benefits guaranteed in the home country. - Health and safety of the employee in the other country.
- Possible changes to the basic employment contract/secondment or expatriation status, and without a host/portage structure.
III - Protecting Non-resident Nominee Directors in Subsidiaries
As highlighted in our previous newsletter, senior executives from head office are increasingly being called upon, with whom they therefore have an employment relationship in addition to their corporate mandate.
The appointment of "non-executive/non-resident" directors, who are supposed to ensure head office control over the subsidiary, should not be made without awareness of the resulting liability for both individuals and parent companies.
However, the obligations are extensive and constantly increasing, as are the civil and criminal penalties.
These obligations derive in each jurisdiction from the general common law principles common to all jurisdictions and from their adaptation by local legislation.
As a reminder, these principles are divided, on the one hand, into "fiduciary duties" (exercising one's powers for the good of the company, exclusively and before the interests of a particular shareholder—which must be closely examined in the case of a local shareholder, whether a natural person or legal entity, holding a stake in the company) and before the interests of the shareholder themselves, which must be subordinate to those of the company of which the person concerned is a director, even if it is a wholly-owned subsidiary) and, on the other hand, into "duties of skill and care."
An example of the interpenetration of common law jurisdictions is the adoption in Hong Kong law of the "standard" of the US Modern Corporation Act and the substitution of an objective criterion (the attention to one's duties that a person in the same position would deem appropriate to exercise their mandate) for the subjective criterion (competence reasonably expected of a person with the knowledge and experience of a director).
Managing directors are familiar with the rules regarding conflicts of interest and abuse of office, and it is easy to avoid violating them. Except in cases of subsidiary insolvency, directors' liability is usually only called into question in circumstances of deliberate violation.
But the subject is far from being limited to corporate law, as is often assumed; it is closely linked to labor law, for two reasons:
- The issue of directors' personal civil and criminal liability is infinitely more complex than briefly summarised below, continually developing into more directors' duties and responsibilities.
- It is illusory, as it is ineffective as a defence, to hide behind the "company secretary," whose role is purely administrative and not advisory.
Consistent case law common to all common law countries holds directors responsible for the health and safety of employees. Penalties can be severe, even for a simple omission of which the director was unaware, on the grounds that he or she "should have known."
To take two recent examples:
- In Australia in 2020, a director was sentenced to ten months' imprisonment, four of which were suspended, and his company was fined AU$1 million for failing to take measures that could have prevented an employee's fall.
- In the same state of Queensland, and in a more serious circumstance for the employee, the company was ordered to pay AU$3 million and the two directors were sentenced to 10 months' imprisonment.
In summary, the position of director of a foreign subsidiary, especially on the other side of the world, is not a courtesy title; it is a real position that must be accepted with full knowledge and assumed as such by the person to whom it is offered.
Since directors are also executives of the company that appoints them to foreign boards, failure to inform them of their duties and obligations, the consequences of potential breaches, and failure to guide them throughout their term in a legal environment that is often foreign to them, is likely to incur the company's liability under French labor law and before the French courts.
IV - Integrating emerging issues in advance, the ultimate criterion of the "good global employer”
As we emerge from the crisis, a shortage of qualified, motivated, and loyal workers will become apparent. This is particularly true in Asia-Pacific, which has reasserted itself as the new economic center of the world.
The winners will be those who can then present themselves as a "good employer."
And this will be achieved by demonstrating that even during the crisis, the employer has behaved as a "good employer." This includes, beyond respecting rights and good practices as outlined above, the "non-essential" aspects that the "good employer" has taken into consideration during the crisis.
Modern Slavery
In Australia, the Modern Slavery Act's effective date has been postponed, but only until the end of 2020/first quarter of 2021. This translates into an obligation to identify risks, take measures to identify them, and report them to the authorities.
The principle is being extended to other countries such as the United Kingdom, and could thus become another global concept.
Wage Theft
Another typically Australian characteristic is "wage theft," the penalty imposed for paying wages below the employee's entitlement under a complex system called Modern Awards. Major companies have been called into question by the Fair Work Ombudsman, unsuccessfully claiming that the underpayment was unintentional.
States have made it a criminal offence, first in Victoria and then in Queensland.
In Victoria, penalties can be as high as AUD 1 million for the company and 10 years' imprisonment for directors. This also includes a reference to the rather vague and therefore dangerous concept of "corporate culture" for employers.
Gender Equality and Other Discrimination
Gender equality is a major issue in all countries, including France, and in developing countries. However, a French HR manager or employment lawyer cannot simply rely on their own interpretation of the principle; the local legal framework must be taken into account.
For example, in Australia, the state of Victoria passed a law, applicable from the beginning of March 2021, requiring companies with more than 50 employees to have a Gender Equality Plan, along with reporting obligations and penalties.
In Hong Kong, changes to the Employment Act came into effect in 2020, covering maternity leave and proof of incapacity for pregnant women, and reforming the law on discrimination at work. The Sex Discrimination (Amendment) Bill 2020, which came into force on June 19, 2020, includes significant advances: protection of breastfeeding, prohibition of racial discrimination based not on the individual but on an associate such as a spouse, partner, or even domestic staff, even without the intention of discrimination, and extension of the scope to "workplace participants" without an employer/employee relationship, such as interns or volunteers.
Veganism
In some jurisdictions, veganism is considered a belief, and failure to respect this belief constitutes discrimination for which the employer is liable.
In a famous 2020 case, Casamitina v. The League against Cruel Ports, the UK Employment Tribunal ruled that veganism was a philosophical belief, which was acknowledged by the employer. The applicant had emphasised the distinction between veganism for dietary reasons and veganism for ethical reasons.
Given the scale of the phenomenon in the United Kingdom and the associated media coverage, it's a safe bet that veganism will become a major topic for HR managers and employment lawyers in the near future, particularly in common law jurisdictions.
Reporting
Since July 1, 2020, companies listed on the Hong Kong Stock Exchange must compile and disclose a list including the composition of their employees by gender, job type, age group, geographic region, and turnover for each category, workplace accidents, safety and hygiene measures, including psychological conditions, and training described in detail for each category.
Only listed companies are affected, but this foray by the Hong Kong Stock Exchange into the employment field is indicative of a trend.
Dynamic monitoring of legal developments is essential, both to ensure local compliance and to achieve a transnationally inspired vision of "Good Global Employer."
This must be done at both global and local levels. Globally recognized principles can be adapted differently depending on local realities.
More than ever, we must be informed, prevent, and act. Ignorance is no excuse, and the scope of investigation into what may constitute "misconduct" on the part of the employer is constantly expanding, as is the advisory responsibility of labor law lawyers and HR managers to the company's senior management. For them, increased responsibility equals an increased role.
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The content above is purely for informational purposes, relating to a selected overview of legislative, regulatory and case law developments in the relevant geographical area, which is not and does not claim to be exhaustive.
It does not constitute legal advice in relation to any particular case and should not be regarded as such. A more detailed doctrinal study on any of the topics mentioned may be requested.
Philippe Girard-Foley is a Registered Foreign Lawyer accredited by the Supreme Court of Singapore before the Singapore International Commercial Court – Certificate of Full Registration under Section 36P Legal Profession Act (Chapter 61).