After a few video calls, it takes only a cursory kick of the tyres to discern that employment lawyers have had a crazy year. ‘Crazy’ almost does not cover it – you would be hard pressed to identify an area of law that experienced more change in the last year, in both the rate of new law being created and the transformation in advice that advisers found themselves giving.
More than a year has already passed since the Covid-19 pandemic began, yet the Philippines is still struggling to slow down the spread of the virus. New cases per day continue to reach four digit figures despite the mandate for the continued implementation of strict public health standards nationwide. The government’s quarantine measures in the NCR Plus (the National Capital Region plus four adjoining provinces), however, appear to have worked with the continuing decline of new cases along with the reduced positivity rates in the extended area. Continue reading “A Philippine employer’s guide to legal compliance in the procurement and administration of Covid-19 vaccines”
In a notable development for employers doing business in Puerto Rico, on 7 August 2020, the local government enacted Law 90, titled the Law to Prohibit and Prevent Workplace Harassment in Puerto Rico (our translation, hereinafter the ‘Workplace Harassment Act’), to prohibit workplace harassment (commonly referred to as ‘mobbing’). Previously, workplace harassment had not been recognised or protected under the law in this jurisdiction, although plaintiff-side practitioners had long argued for such protections. The law went into effect immediately upon its enactment. At this time, employers are expected to be in full compliance and have anti-workplace harassment policies in place. This, along with Puerto Rico’s Wrongful Discharge Statute, Law 80 of 30 May 1976; and strong local anti-discrimination and other workplace protections, distinguishes Puerto Rico from many other jurisdictions in the US. Puerto Rico is currently the only jurisdiction in the United States with a workplace harassment law in place, and all employers doing business here should ensure to have adjusted their policies and practices accordingly. Continue reading “It’s not funny anymore: a primer on workplace harassment in Puerto Rico”
After a series of long-winded negotiations between the federal government, employees’ representatives and the entrepreneurial sector, the Mexican Congress approved, and the federal government enacted on 23 April 2021 the much prophesied labour reform to ban outsourcing through significant amendments to the Mexican Federal Labour Law (FLL), Federal Fiscal Code, Income Tax Law and Value Added Tax Law, among others. With several hefty restrictions on the labour, tax and social welfare fronts, the federal executive was clear in its intent to put an end to outsourcing and insourcing practices; a goal that had long been pursued and that prompted past, less radical reforms to the FLL.
Here are some of the key elements of Mexico´s new labour reforms:
Prior to the reform, the FLL allowed and regulated outsourcing in Mexico, enabling businesses to indirectly hire employees through a third party. Over the years, providers of personnel and payroll administration services, designed complex cost-cutting solutions from which companies not only benefited but were then able to deduct and/or credit any expenses arising therefrom against their taxes.
As of the date of publication of the labour reform in the Federal Official Gazzete, companies with sub-hiring practices (whether through insourcing or outsourcing) are now required to directly employ all personnel needed to attain their corporate purpose. In order to align with the new labour framework, a large number of Mexican companies are facing the need to (i) undergo internal labour restructures to redistribute human resources from the services companies to the operative entities; (ii) revise and in some case terminate services agreements; and (iii) amend their corporate purpose to include a very specific definition of the company´s core business, allowing them to sub-hire specialised services providers for all those activities not related to the company´s preponderant economic activity.
In connection with the mandatory profit-sharing rights of the employees (PTU), a fundamental point of pushback from the private sector, the PTU went from a pre-reform distribution of 10% of a company’s profits among its workers, to a post-reform payment cap to this benefit at three months of the worker’s salary or the average PTU received by the worker in the previous three years (which ever is more beneficial to the worker).
Finally, in addition to the tax impact, severe sanctions that vary from steep fines to the classification of simulation conducts as tax fraud, apply to both the contractors and the beneficiaries of the unregulated third-party services.
In general terms, the entry into force of the Reform Decree is on the day after its publication, meaning 24 April 2021. However, companies with existing insourcing or outsourcing structures have until 1 August 2021 to turn over their employees to the operating entities. A waiver to the general requisite to transfer the assets (that are essential to the company’s operation) from the transferor to the transferee, has been given to those companies which complete the employer substitution within the next 90 days of the entry into force of the decree. Also, provided that said deadline is met, the substitute employer will be able to maintain the risk premium of the substituted employer.
As part of the provisions included in the Reform Decree, the FLL contemplates a sole exception to the sub-hiring prohibition by allowing the subcontracting of specialised tasks or services and further defines them as all those activities that are not related to the corporate purpose of the company or the main economic activity of the contracting party. This includes shared complementary services between companies of the same business group.
However, there is one caveat, all companies and individuals that render or wish to render specialised services or perform specialised tasks in favour of third parties must obtain an authorisation from the Ministry of Labor and Social Welfare by registering with the Public Registry of Specialised Services and Task Contractors that was created for such purposes. Said authorisation will be subject to prior analysis of a series of requisites, including proof of compliance with all tax and social security monetary obligations.
On 24 May, the Mexican Ministry of Labor and Social Welfare, published the general rules for the registration of specialised services providers, setting forth the requirements and obligations to be fulfilled to obtain and maintain such registration. Including the obligation to renew the registration every three years and to quarterly report all the services agreements that were executed by the specialised service provider during the preceding quarter. Aside from the obligation to renew the authorisation every three years, the Ministry of Labor and Social Welfare may revoke it at any time, should it become aware of a breach of the specialised services provider’s obligations.
It is to be highlighted that in case the subcontractor fails to comply with these obligations, the beneficiary of the specialised services shall be jointly liable in the employment relationship with the workers of the service provider. Also, those who render specialised services without the necessary registration before the Ministry of Labor and Social Welfare or those who benefit from them, could be subject to fines ranging from $9,000 to $225,000 per each affected employee.
It is fair to say that to maintain business-as-usual in connection to outsourcing practices has been rendered utterly unviable. For nearly 70% of Mexican companies that relied on the subcontracting of personnel to carry out their business, the financial impact in terms of increased profit-sharing payments, social security quotas, taxes and implementation costs has proven to be severely burdensome. In the midst of a pandemic environment, it remains to be seen if this labour reform was the right path to attend to and protect the labour rights of Mexican workers at the risk of adding to the already 2.7m jobs lost during the past year. For now, subcontracting specialised services is still a viable option which as restricted as it is, still gives companies and workers certain breathing room.
On 25 May 2018, Regulation (EU) 2016/679, known as GDPR (General Data Protection Regulation) – on the protection of natural persons (‘data subjects’) with respect to the processing and transfer of personal data – became completely applicable in all EU member states.
As an EU regulation, the GDPR is a provision to be directly applied in its entirety throughout the EU territory. As clarified by the European Commission, it originates from the desire, and the need, to harmonise and simplify the rules on the processing and transfer of the personal data of natural persons, providing both data controllers (and processors) and data subjects with legal certainty.
However, it would be a mistake not to consider the legislation and peculiarities of each member state in which the GDPR is applicable. Indeed, the principles and provisions provided for by the GDPR must be applied taking into account the implementation rules of each member state, adapting to local compliance obligations in each case.
Specifically, for example, to adapt national law to the new regulation, the Italian law maker adopted Legislative Decree no 101/2018 of 10 August 2018, adapting the GDPR to the relevant national legislation, represented by Legislative Decree no 196/2003 (the Privacy Code, and together with the GDPR, the Data Protection Law).
With respect to the above, Article 88 of the GDPR provides that each member state may lay down more specific rules by law and national collective bargaining agreements (NCBA) to ensure the protection of the rights and freedoms regarding the processing of employees’ personal data in employment relationships.
The above, for instance, allows a continuity in terms of individual and trade union protection and prerogatives, as provided for by Italian law, in primis by the Statuto dei Lavoratori (Law no 300 of 20 May 1970, the Statute).
As a matter of fact, by means of Article 4, the Statute preserves the confidentiality of employees, defining the cases in which audio-visual equipment or other instruments from which the possibility of a remote control of employees’ activities may derive, even only potentially. The same Article 4 requires the employer to provide workers with adequate information on how to use the tools submitted and requires a full compliance with the Data Protection law by referring directly to the provisions of the Italian Privacy Code.
Under Italian Law, the employees’ control is not only limited to the ‘workplace’, eg, where it could be implemented through the installation of a video surveillance system (Video-surveillance Provision – 8 April 2010 and the European Data Protection Board (EDPB) Guidelines no 3/2019 on processing of personal data through video devices) but also extends to devices, apps and general tools used to perform the employment services. In this respect, before the application of the GDPR, the Italian Data Protection Authority issued Guidelines for the use of internet and e-mail in public and private workplaces, which clearly define the limits between legal and illegal controls.
Please note that this is only an example of how a correct and compliant application of the provisions of the EU Regulation should be implemented considering local legislation.
In compliance with both the Statute and the Data Protection Law (Article 25(1) of the GDPR), the employer must implement measures to protect employees’ personal data ‘from the design’ of the processing (privacy by design) and by default (privacy by default), in compliance with the ‘accountability principle’. And compliance with the principle of accountability also means adapting to local regulations.
Based on the experience of our GDPR team, corporations fail to comply with the EU and Italian provisions in particular in the following five cases more often.
i) Adoption of security measures and policies. As reported on 2 June 2021 by the Italian Data Protection Authority during the presentation of the report on the activities carried out during the past year: ‘2020 was characterised, at global level, by the negative record of cyber-attacks, facilitated by the increased use of telematic channels as a result of the pandemic and which, a few weeks ago, became real hostile acts in the context of the conflict for the cyber domain’.
The high number of cyber attacks and personal data breaches have undoubtedly raised the awareness of both data controllers (and processors) and data subjects about the importance of the issue, but on the other hand they have revealed a low level of compliance by the actors involved, which goes through the importance of adopting security measures, policies and tools that help prevent them.
Specifically, the adoption of internal policies is one of the tasks that is too often underestimated.
ii) Appointments. Adopting internal policies that regulate the security of the information processed and define roles and responsibilities is a tool that not only serves to ensure the compliance of the organisation with the applicable Data Protection Law, but also reduces the risk of any damage that may directly affect the business of the company. The internal policies and procedures to be adopted must be tailored for each case, based on the characteristics and risks that each situation presents and must comply with any additional procedures already applied by the company. For economic reasons or due to a lack of thought, it often happens that to comply with the obligations deriving from the applicable law, standardised internal policies or procedures are adopted which, in fact, are not suitable for the organisation adopting them.
iii) Training. Once policies and procedures have been adopted, training and raising the awareness of staff on the correct application of these policies and procedures is essential. Systematically educating and updating who must daily apply it contributes to reducing the risks to which the data controllers or processors are exposed.
Defining roles and responsibilities, also through the adoption of internal procedures and policies, makes it possible, among other things, to meet another requirement that is often underestimated by both data controllers and processors and which concerns the ‘records of processing activities’.
iv) Monitoring. Introducing monitoring plans that take the form of continuous verification of the actions taken by the data controller to ensure compliance with the Data Protection Law – as well as effective implementation and compliance with policies, procedures, organisational and security measures – is one of the tools aimed at ensuring full compliance with the so-called accountability principle. The principle requires the data controller to proceed with the identification and management of risks relating to the processing operations carried out.
v) Continuous updating processes. It is frequent to find records adopted in order to comply with the GDPR but which are never reviewed and updated and which often no longer correspond to the actual reality to which they refer, which has changed and evolved in the meantime.
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With respect to the above mentioned, since the entry into force of the GDPR, the Data Protection Law has certainly represented an interesting challenge for Europe, for the recipients of what is prescribed in the Regulation and for the subjects that it wants to protect. A challenge which, in view of a constantly evolving scenario, does not seem destined to end and which, although with common objectives, the legislators and the authorities of each member state will have to continue to meet.
In Malaysia, employment issues are governed primarily by statute and contract. In respect of enterprises with large scale workforces, which would include the financial, manufacturing, industrial and plantation sectors, collective agreements between employers and registered trade unions are important in regulating the employment relationship between the parties.
Continue reading “Employment law in Malaysia – an overview/recent developments”
On 16 March 2020, the Austrian government imposed drastic measures to contain the SARSCoV2 virus, commonly known as Covid-19. The international Covid-19 crisis resulted in a seven week complete lockdown in Austria, with only ‘critical infrastructure’ such as banks, supermarkets, pharmacies and hospitals remaining open for business.
Simultaneously, the Austrian government applied several economic measures, at-tempting to cushion the severe impact of the lockdown for the Austrian economy. Austria quickly set up the Covid-19 Finanzierungsagentur des Bundes GmbH (COFAG) commissioned with ‘the provision of services and the taking of financial measures necessary to maintain the solvency and to bridge liquidity difficulties of companies in connection with the spread of Covid-19 and the resulting economic effects’, which was equipped with a total financial framework of €15bn. COFAG’s central financing instrument is the issuing of bridge guarantees for up to 100% of the credit value applied for at banks as well as the granting of fixed-cost subsidies. COFAG does not grant any financial aid to undertakings considered to have been in financial difficulties before the onset of the Covid-19 pandemic.
In addition, after these initial emergency measures the Austrian legislator adopted numerous legislative changes, also in the field of insolvency law, to mitigate the economic impact of the coronavirus crisis.
The Austrian insolvency regime differentiates two scenarios, each of which leads to an obligation to file for insolvency under the Austrian Insolvency Act:
When Austrian companies are either illiquid or over-indebted, their respective management is obliged to file for insolvency proceedings immediately, and at the latest within 60 days after the insolvency was triggered if the management took reasonable, yet unsuccessful restructuring measures to prevent insolvency. If the debtor’s insolvency is caused by a natural disaster such as the coronavirus, the 60-day period is doubled to 120 days. In the course of the Covid-19 crisis the Austrian legislator clarified that epidemics or pandemics also lead to an extension of this period to 120 days.
In addition, the Austrian legislator temporarily suspended the obligation to file for insolvency due to over-indebtedness until 31 January 2021, if the over-indebtedness occurred in the period between 1 March 2020 and 30 June 2021. If a debtor is over-indebted at the end of 30 June 2021, it must file for the opening of insolvency proceedings without undue delay, but at the latest within 60 days after 30 June 2021 or 120 days after the occurrence of over-indebtedness, whichever period ends later.
In order to increase the willingness of shareholders to contribute to the restructuring measures of insolvency-endangered companies, the Austrian legislator also provided for simplifications in the otherwise rather strict Austrian equity replacement legislation. While monetary shareholder loans would usually be considered equity replacing and therefore subordinate to creditor claims in insolvency proceedings if given for more than 60 days, such shareholder loans can now be granted for up to 120 days until 30 June 2021 and will not be considered equity replacing and thus not subordinate to creditor claims.
Bridge loans used to pre-finance salaries of employees on short-time work, which were taken out in the period between 1 March 2020 and 30 June 2021, and immediate repayment of such loans upon receipt of the short-time work subsidy, are not subject to Austrian insolvency voidance, if neither a pledge nor comparable security from the borrower’s assets was provided for the loan and the lender was not aware of the borrower’s insolvency when the loan was granted. This legislative initiative aims at further strengthening the willingness of banks to support companies through the Covid-19 crisis and save jobs at the same time.
On 22 February 2021 the ministerial draft of the Restructuring and Insolvency Directive Implementation Act (Restrukturierungs- und Insolvenz-Richtlinie-Umsetzungsgesetz) was published. The review period ended on 6 April 2021. The federal law is to come into force on 17 July 2021. The law contains regulations, among others, with respect to access to the restructuring process with the restructuring plan as the core of the process, which contains haircuts for creditor claims, the involvement of a restructuring representative, a stay of execution and contestation in case of failure of the restructuring plan.
In principle, the new Restructuring Act is to be applicable to all entrepreneurs, which also includes sole proprietors. However, certain companies in the financial sector, such as credit institutions pursuant to Section 1 para 1 of the Austrian Banking Act, as well as public bodies and natural persons who are not entrepreneurs, are expressly excluded.
The restructuring proceeding is intended to be available to companies in the event of ‘probable insolvency’. It must be initiated at the request of the debtor and is intended to enable the debtor to avert insolvency and ensure the viability of its company.
The restructuring proceeding is a proceeding with self-administration. According to the draft legislation, the debtor in the restructuring proceedings must in principle retain full or at least partial control over its assets and the day-to-day operation of its business. However, the court may make certain legal acts subject to the approval of a so-called restructuring officer or assign them to a restructuring officer.
At the debtor’s request, the court may order a stay of execution proceedings for a period of up to three months (extendable to a maximum of six months) to support negotiations on a restructuring plan. During this stay of execution proceedings, the debtor’s obligation to apply for the opening of insolvency proceedings due to over-indebtedness is suspended. On the other hand, no decision is to be taken on a creditor’s application for commencement of insolvency proceedings during the period of the restructuring proceedings.
With global vaccination rates lifting consumer sentiment there are reasons to be optimistic about economic recovery from the global pandemic. However, new virus mutations, uneven vaccination rates, and reducing levels of government economic support measures all mean that the economic outlook remains uncertain and many market sectors will continue to face challenges in the medium term. Continue reading “The zone of insolvency: what directors and companies need to know”
A year ago, the Luxembourg government announced the introduction of a new type of guarantee which was intended to better meet the needs of the market in terms of certainty and robustness. The Luxembourg law dated 10 July 2020 (the PPG Law) introduced the ‘professional payment guarantee’ (garantie professionnelle de paiement) (the PPG). Continue reading “The Luxembourg professional payment guarantee one year later – assessment of Luxembourg’s newest creditor-friendly tool”
What’s next?A Covid-19 cloud has obscured the current disputes landscape, but as the fog fades, what will be keeping restless litigators busy? Continue reading “Disputes Yearbook 2021”
Traditional banks have been the key players of the finance industry in Japan. In recent years, however, fintech companies, on the back of venture capitalists and lighter licensing burdens, have been increasingly active in certain aspects of finance in Japan. This has resulted in pressure on traditional banks to provide fintech services, whether by themselves or through affiliated companies. These efforts, however, have been impeded by regulations under the Banking Act of Japan, which restrict the scope of businesses that banks and bank subsidiaries are permitted to conduct.
Continue reading “Recent developments in fintech-related banking regulations in Japan”
Recently, digital art and digital trading cards represented by Non-Fungible Tokens (NFTs), which are non-replaceable digital tokens issued on a blockchain, have been traded for tens, hundreds or even billions of yen. As a result, NFTs have been rapidly gaining attention in Japan. Continue reading “The boom in NFTs and potential legal issues in Japan”