Labour Law in Asia Pacific and Covid-19

Covid-19 is bringing upheavals in many areas, and labor law is no exception.

One can speak of deglobalization to the extent that national labor laws are now an essential element of international human resources management.

Les principes généraux ne suffisent plus lorsque des licenciements, des réductions de salaire deviennent nécessaires, et lorsque les déplacements entre le siège et les filiales lointaines se font plus rares.

A new labor law is emerging, which combines group policies and local legal constraints. This law does not yet have a name. It is distinct from international labor law. In our geographic region, we will call it Asian labour law.

Newsletter No. 5 - A new branch of labor law is emerging in Asia Pacific in the post-Covid-19 era

What has changed?

The essential function of labour law is to regulate the relationship between employer and employee.

This law was conceived and developed in a context of closeness between its stakeholders.

In a single territory like metropolitan France, this closeness has been weakened by the rise of remote working in response to Covid-19, in a way that could be long-lasting or even permanent in some companies.

Internationally, social distancing is nothing new. But it has reached an unprecedented level.

Drastic cost-cutting measures will be deemed necessary: temporary suspension or reduction of pay, layoffs, stricter and less lenient assessment of "poor performance" justifying individual dismissal.
Procedures applicable to employees will be subject to review and possible challenge by those employees with regard to their rights like never before.
The bond of trust between local employees and foreign employers (subsidiary and parent company) will be profoundly and lastingly affected.
One will now have to rely less on the stability and loyalty of local teams as a means of compensating for the decline in the number of expatriate managers in the traditional sense of the term, i.e., those delegated by headquarters to perform key managerial or technical functions.
With international travel, particularly transcontinental travel, becoming rarer and less frequent, the authority of headquarters, as asserted through periodic or ad hoc visits by senior executives, will be eroded.
Replacement solutions will have to be found, in the form of employment contracts and procedures that are considerably more elaborate than those currently in force.
The issue of compatibility with national laws can no longer be ignored.

A New Branch of Labour Law

For a long time, the international aspect of labor law and social relations, for the HR and legal departments of French companies, consisted of formalising secondments and expatriations.

There was often a temptation to neglect local legislation, whether for employees sent abroad and sometimes subsequently relocated, or for those recruited for local purposes, in the country itself or in third countries.

Based on the assumption that it is possible and sufficient to draw inspiration, even outside France, from "general principles" of labor law extrapolated from French law.

Understandable at one time, this approach has become obsolete, and a thorough review of current practices is required, which must include recognition and awareness of local labor laws.

Why the Status Quo is behind us

These stem from three key observations:

The global business slowdown will lead to the repatriation of certain functions to France, the partial relocation of branches, and, in extreme cases, the elimination of entire foreign operations. This must be done in compliance with local regulations so as not to close off—by creating a negative image of the foreign company—either strategic markets or opportunities for rehiring in the face of a rebound in activity.
These movements will leave behind those with skills and/or trade secrets that could be shared by current or future competitors, which will specifically raise the question of the validity and effectiveness of confidentiality and non-compete clauses.
With videoconferencing providing only an imperfect substitute for the increasingly rare intercontinental travel of executives from headquarters to subsidiaries and associated entities, the principle of "remote control" will become essential. Employment contracts previously considered sufficient will no longer be so; they will need to be reexamined in light of the new environment, and elaborate procedures will be required to supplement them. The question of validity under local law, as well as the employer's right to apply these new rules during the term of the contract, will be essential.

Employee Protection Under Local Laws in Asia-Pacific

In Asia-Pacific, local labor and industrial relations laws are both more complex and more protective of employees than one might expect from a French perspective.

In common law territories in Asia-Pacific, certain basic principles themselves are fundamentally at odds.

To take just a few examples:

Courts dealing with labor relations rule not only on the basis of law but also on the basis of "conscience and equity," applying a concept (equity) unknown in French law.
Economic dismissal can be justified simply on the basis of the employer's right to adapt the company to the circumstances, without having to demonstrate a state of necessity, but in return for an obligation of sincerity and transparency.
In the case of dismissal for insufficient performance, the preliminary interview is not only intended to warn; it aims to establish cooperation between the employer and the employee with a view to giving the latter a real opportunity to remedy their shortcomings.
In the case of dismissal for serious misconduct, an internal investigation is the rule, "domestic inquiry" or "due inquiry," and is subject to strict substantive and procedural rules specific to each jurisdiction.
Indirect dismissal by the employee creating unacceptable conditions ("constructive dismissal") is punishable as dismissal without real and serious cause.

Confidentiality and Non-Competition

Non-compete clauses, both during the employment period and those intended to survive its expiration, are not based on the notions of limitation in time and space from the employee's perspective as in civil law, but on the broader and fundamentally different concept of restraint of trade, a principle also applicable to perpetual confidentiality clauses.

Other rules specific to these jurisdictions

National laws in Asia-Pacific differ from French law in areas as diverse as:

The negotiation of job offers and the preservation of the prospective employer's freedom to contract until the contract is signed.
The intrinsic justification for fixed-term employment contracts.
The prohibition on termination of employment contracts without just cause, even with compliance with the contractual notice period.
Employee rights during the probationary period.
The possibility of "varying" contractual terms to adapt the company's organization to major changes affecting its environment, such as the loss of a commercial contract, a shrinking market for products or services, an economic or health crisis, etc.
Prevention of and response to employee complaints of discrimination in hiring or during employment based on ethnic origin, religion, or sexual orientation, and harassment.
Forced labor ("modern slavery") and child labor.
Protection of employee personal data.
Workplace safety… etc.

In summary

After the reduction in the number and benefits of traditional expatriation contracts in favour of local recruitment, a new phase is beginning that concerns HR managers and lawyers specialising in employment law.

The implementation of decisions made necessary by the deteriorating business climate must be carried out in compliance with national law to avoid generating potentially lengthy and costly disputes and harming the continuation of business in markets that remain essential.

The weakening of the bond of trust between local teams and headquarters, the development of remote management, will require an adaptation of the contractual aspect of human resources management which will have to be part of a new logic of strict compliance with national labor laws.

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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).