International Labor and Employment Law

Mexico Overhauls Federal Labor Law in Workers’ Favor

Mexico Overhauls Federal Labor Law in Workers’ Favor

On May 1, 2019, International Workers’ Day, Mexico published amendments to its Federal Labor Law in the Federal Official Gazette and secured the right of Mexican workers to organize and enter into collective bargaining agreements. The Mexican Senate voted 120 to 0 to pass the Labor Reform Decree, which will regulate amendments made to Mexico’s Federal Constitution in February 2017.[1] The Decree also ensures Mexico’s compliance with Convention No. 98 of the International Labor Organization and memorializes the labor reforms that President Andrés Manuel López Obrador promised to implement when he negotiated the United States – Mexico – Canada Agreement (“USMCA”) in November of 2018.[2]

Workers’ Rights

The Decree outlines Mexican workers’ right to engage in collective bargaining and to organize and join a union. The right to freely organize is coupled with union members’ right to a personal, free and secret vote. Importantly, the Decree states that workers may not be forced to join a union. These changes are major. They are meant to alter the fabric of Mexican labor relations by creating independent unions and workplaces free from coercion, discrimination and violence.

Prior to these changes, Mexican unions were largely controlled by companies. For decades, Mexican workers did not have the right to organize freely, there were no democratic elections, and labor contracts were negotiated with little input from workers. Companies often entered into “protection agreements” by recognizing unions and signing contracts, creating “white unions” or “protection unions” that represented the interests of the companies, not the workers. Now, the law requires proof that a union represents the majority of workers and that those workers consent to any proposed union contracts. Before entering into a collective bargaining agreement, a union must prove that it represents the interest of the workers it represents by obtaining a certificate of representation from the federal conciliation entity created by the Decree. The same certificate will be necessary in order for a strike to begin.

With respect to workers’ voting rights, the personal, free and secret vote of workers is required before a collective bargaining agreement is concluded, for the election of union leadership, and the resolution of inter-union conflicts. Union representatives must secure at least 30% of the vote of workers participating in the election process. These new voting mechanisms are meant to ensure the eradication of “protection unions” from Mexico’s labor landscape.

Labor Justice Reform

The Decree also includes major changes to Mexico’s labor justice system. State and federal labor courts, resolving labor disputes as a part of the judiciary, will replace current Conciliation and Arbitration Boards. Conciliatory efforts must now take place in a single, mandatory hearing before a matter reaches a labor court. The Federal Conciliation and Labor Registration Center will preside over these conciliatory procedures and register labor organizations, union contracts and internal work rules. State-level conciliation centers will only preside over conciliation procedures. Changes to the labor justice system will be implemented within the next three years.

USMCA

The Mexican Senate passed the Decree before its close of session in anticipation of the American Senate reviewing these changes within the context of USMCA. Annex 23-A of USMCA requires Mexico to pass and implement certain labor reforms, essentially bringing Mexican labor law in line with U.S. labor law. Mexico has now passed the Decree, but the U.S. has made clear that it will not ratify USMCA unless Mexico can show that it will implement these changes.

Impact on Employers

These changes are likely to engender a global effect given the potential for independent unionization to lead to pay raises and other company concessions in a country where the minimum wage is currently around $5 USD.

Employers with a workforce presence in Mexico should revisit existing labor relations policies and prepare for a significant increase in independent unionization. Employers should also review any existing union contracts to ensure compliance with the Decree’s mandates.

Most immediately, the Decree requires certain human resources changes. Employers must:

  • Provide employees with an opportunity, in their individual contracts, to designate a beneficiary who will receive payment of their salary and accrued benefits in case of death or disappearance.
  • Provide employees access to all information concerning their income and deductions, including pay stubs, whether in printed form or by other means. (Online Digital Tax Receipts may replace printed pay stubs.)
  • Implement policies and protocols addressing the prevention of gender discrimination, violence and sexual harassment and the elimination of forced labor and child labor.

[1] Amendments to Mexico’s Federal Constitution Articles 103 and 123, in effect since February 24, 2017, promulgated changes to the labor justice system in Mexico by creating specialized labor courts, centralizing collective bargaining agreements and union organization registration, requiring unions to prove that they represent a majority of a company’s workers before executing a collective bargaining agreement, and guaranteeing personal, free and secret voting.

[2] In September of 2018, Mexico ratified Convention No. 98 of the International Labor Organization, which protects the rights of union members to organize freely and participate in collective bargaining. Convention No. 98 will enter into force on November 23, 2019.

Major Reform to the Thailand Labor Protect Act

On December 13, 2018, the National Assembly of Thailand approved significant amendments to the country’s Labor Protection Act (“LPA”). The amendments took effect on May 6, 2019.

Under the amendments, employees with 20 or more uninterrupted years of service will be entitled to receive 400 days’ pay as severance. This is an increase from the current maximum payment of 300 days’ pay for employees with 10 or more uninterrupted years of service.

The amendments also increase the amount of maternity leave employers must provide pregnant employees. Whereas the current LPA requires employers to provide employees with 90 days of maternity leave, the amendments require employers to provide 98. Public holidays during a period of leave as well as pre-natal doctor visits are counted against the period of maternity leave. Employers are responsible for up to 45 days’ wages during an employee’s maternity leave.

The current Labor Protection Act provides employees “necessary business leave,” but does not define how many necessary business leave days an employee is entitled to. The amendments address this issue, requiring employers to provide employees with a minimum of 3 days of paid necessary business leave per year. Neither the current law nor the amendments define “necessary business leave,” however, leaving open the question of when an employee may take such leave.

The amendments also provide that employees cannot be transferred as a result of a change in employer without their consent and a new employer is obligated to assume all of the rights and obligations of the old employer.

An employer who plans to relocate an employee’s current work location must provide at least 30 days’ advance written notice. Such notice must be placed conspicuously at the workplace and state which employees will be relocated along with the date of the relocation. An employee who believes that his or his family’s ordinary course of living will be materially affected may refuse to relocate. In this case, the employee’s employment contract will be deemed terminated on the date of relocation and the employee will be entitled to severance.

Under the current LPA, an employer may terminate an employee who has an indefinite term employment contract without cause and without giving otherwise statutorily required notice by making a payment in lieu of notice. The law, however, does not specify when this payment must be made. The amendments address this by requiring that employers make payments in lieu of notice on the effective date of termination.

The new amendments also require all wages, including overtime and holiday pay to be paid equally to male and female employees who engage in the work of the same type, quality, and quantity. Additionally, employers who temporarily suspend business operations (for any reason other than an act of god) are required to pay employees 75% of their usual daily wages, at a minimum, during the suspension of business.

Employers who fail to make payments in lieu of notice of termination, payments pursuant to a temporary suspension of business, or other payments under the Labor Protection Act must pay their employees interest on such payments at a rate of 15% per year.

Failure to comply with the LPA’s amendments will subject employers to penalties. Accordingly, employers should review their policies and work rules to ensure compliance with the new amendments to the LPA.

The European Parliament Approves EU-Wide Standard for Whistleblower Protection

Per our previous post, the European Parliament and the Member States agreed to adopt new rules that would set the standard for protecting whistleblowers across the EU from dismissal, demotion, and other forms of retaliation when they report breaches of various areas of EU law. According to a press release issued by the European Parliament on April 16, 2019, the Parliament approved these changes by an overwhelming majority. The new rules require that employers create safe reporting channels within their organization, protect whistleblowers who bypass internal reporting channels and directly alert outside authorities, including the media under certain circumstances, and require that national authorities provide independent information regarding whistleblowing. This legislation marks a significant departure from the jurisdiction-specific approach that has resulted in disparate protection across Europe, with some jurisdictions, like Germany and France, offering relatively limited protection when compared to other jurisdictions, such as the UK. These changes, if approved by the EU ministers, will set a uniform baseline and therefore considerably increase whistleblower protections in the EU. Member States will have two years to achieve compliance. For an additional discussion as to the implications of this legislation, see this article by The New Times. We will continue to monitor this development.

 

Brunei Now Penalizes Homosexuality with Death by Stoning

At a time when much of the world is accepting LGBTQ individuals and relationships, the pendulum has swung in the opposite direction in the small nation of Brunei.  Earlier this month, Brunei put into force a new set of harsh criminal provisions mandating extreme physical punishment for certain acts forbidden by Islamic law, most notably that any individual found guilty of a homosexual act will now be punished with death by stoning.

The new criminal provisions were originally announced by Brunei’s Sultan Hassanal Bolkiah in 2014.  Bolkiah has led Brunei since 1967 and is one of the wealthiest people in the world due to Brunei’s oil exports.  In December 2018, Brunei’s Attorney General released a notification that the laws would be put into force beginning in April 2019.

The new laws also require the death penalty for adultery, abortion, and certain forms of blasphemy against the Quran or the Prophet Muhammad.  The law additionally requires amputation of limbs for stealing and 40 lashes for lesbian intercourse.  Children that have reached puberty are treated as adults under the law, while children older than seven may be punished by whipping.

Many members of the LGBTQ community already have fled Brunei fearing persecution.  Meanwhile, governments and NGOs around the world have urged Brunei to reverse its new mandate.  Human Rights Watch described the laws as “barbaric to the core” and against international law.  The United States Department of State released a statement that the new code “runs counter to [Brunei’s] international human rights obligations, including with respect to torture or other cruel, inhuman or degrading treatment or punishment.”  Despite the opposition, Brunei officials thus far have stated that Brunei will keep the laws in place.

Brunei joins nine other countries[1] that penalize homosexuality with the death penalty.  At a time when multinational companies are making increasing efforts to promote global diversity, Brunei exemplifies the special challenges posed in understanding and working with a variety of legal requirements, as well as cultural values and perspectives.

[1] Afghanistan, Iran, Mauritania, Nigeria, Qatar, Saudi Arabia, Somalia, Sudan, and Yemen.

Major Changes to Singapore’s Employment Act, Effective April 1, 2019

Major changes to Singapore’s Employment Act (“EA”) took effect on April 1, 2019. First, the EA was expanded to include more employees and offer greater protections. Before April 1, the EA’s core provisions excluded managers and executives earning more than S$4,500, and its Part IV provisions, which provide additional protection to select groups of workmen (i.e. manual laborers) and non-workmen (i.e. general white-collar employees, such as receptionists), excluded non-workmen earning more than S$2,500. Now, the EA’s core provisions apply to all employees (except for seafarers, domestic workers, and public servants who continue to be excluded), and the Part IV provisions were amended to cover non-workmen earning up to S$2,600, and increase the overtime rate payable cap to match the new threshold.

Second, wrongful dismissal claims previously were heard by the Ministry of Manpower, but now will be heard by the Employment Claims Tribunals (“ECT”). The ECT will hear these matters in addition to salary-based claims, thereby eliminating an employee’s need to navigate separate adjudicatory channels when bringing both types of claims against an employer. Additionally, the minimum service period managers and executives must complete before bringing a wrongful dismissal claim for a dismissal with notice, as applicable, was reduced from one year to six months.

Third, the EA now requires that employers accept all medical certificates issued by doctors and dentists registered under the Medical Registration Act and Dental Registration Act, respectively, when issuing reimbursements and granting paid sick leave. This is a significant change from the EA’s previous provision, which required acceptance of certificates from government and company-approved doctors and dentists only. Moreover, employers may, but are not required to, accept certificates from other types of health practitioners as well.

Fourth, employers now may make other deductions, in addition to those already authorized by law, upon the employee’s written consent, which the employee must be allowed to withdraw penalty-free at any time.

Employers who are affected by the amendments and have not made changes to their practices and policies in order to comply with the changes should do so immediately. For more information, the current version of the statute may be accessed here and a guide summarizing the changes, which was released by the Tripartite Alliance for Fair & Progressive Employment Practices and the Ministry of Manpower, may be accessed here.

U.S. Court Holds No Foreign Law Exception to the ADEA and Title VII in GM Bias Case

On January 30, 2018, Shawn Wang (“Plaintiff”), filed suit against GM (China) Investment Co., Ltd. (“GMCIC”) and General Motors (GM) alleging, among other things, age discrimination in violation of the Age Discrimination and Employment Act (“ADEA”) and race and national origin discrimination under Title VII. Plaintiff, a naturalized U.S. citizen, was a GMCIC employee in Shanghai, China until he was terminated. GM filed a motion to dismiss arguing that it was required to terminate Plaintiff in order to comply with China’s mandatory retirement age law. On March 5, 2019, the Eastern District of New York denied the motion to dismiss the suit.

Background

Title VII and the ADEA each contain a “foreign law” exception that shields employers from liability for actions involving an employee in a workplace in a foreign country. The exception applies where compliance with Title VII and the ADEA would otherwise cause the employer, or a corporation controlled by the employer, to violate the laws of the country where the workplace is located. To receive protection, the employer’s conduct in question must be necessary in order to avoid violating a foreign law.

Chinese law creates a mandatory retirement age of sixty years old for male employees. Upon reaching sixty years of age, an employee’s labor contract is terminated.

Decision

After reviewing Chinese case law, the Court noted that, although an employee’s labor contract is terminated on his sixtieth birthday, the law permits the individual to continue his relationship with his employer as an independent contractor. The Court continued by pointing out that, under Chinese case law, contracts entered into by parties to create independent contractor relationships are not subject to the statutory retirement age. Accordingly, under Chinese law, the Court found that it would have been lawful for GMCIC to maintain a working relationship with Plaintiff as an independent contractor.

Next, the Court turned to GMCIC’s retirement policies which expressly stated that the company could, at its discretion, continue an individual’s employment after reaching retirement age on a year-to-year basis until the age of sixty-five. Indeed, in response to Plaintiff’s EEOC charge, GM indicated that, in rare instances, where GMCIC’s business needs require the services of a former employee, the company will enter into independent contractor relationships for those services.

Ultimately, the Court held that GM did not meet their burden in demonstrating that they would have violated Chinese law by continuing a working relationship with Plaintiff beyond his sixtieth birthday. The Court held that, contrary to GM’s contentions, the law would have permitted GMCIC to maintain an independent contractor relationship with Plaintiff.

On April 5, 2019, GM filed a motion seeking certification of an interlocutory appeal to the Sixth Circuit. In its motion, GM argued that certification for the appeal was appropriate because the foreign law exceptions present novel legal issues for which there is no guidance from the Sixth Circuit.  Resolution of these issues on appeal, GM argued, would advance the litigation by facilitating settlement, narrowing the issues, or causing Plaintiff’s claims to be dismissed.

Implications

In light of this decision, employers should review applicable foreign laws thoroughly to determine whether compliance with those laws can be accomplished consistently with Title VII and the ADEA.

UK Court of Appeal Allows Asda Supermarket Employees’ Equal Pay Claims to Proceed

Earlier this year, the UK Court of Appeal held that a class of 30,000 female Asda retail employees could compare themselves to male employees working in Asda’s distribution warehouses for purposes of their equal pay lawsuit. The Court’s analysis and decision has broad implications for gender pay litigation in the UK.

Background

The Court of Appeal’s decision is only the latest development in this long-running litigation. In fact, although this case has been pending since 2014, this decision still only tackles the preliminary issue: whether female employees working in Asda’s retail stores may compare themselves to male employees employed in an entirely different position and at a different location. After holding a hearing on that preliminary issue, the Employment Tribunal ruled in October 2016 that the plaintiffs were entitled to make such a comparison. Asda appealed to the Employment Appeal Tribunal, which affirmed. Asda then appealed to the Court of Appeal.

Decision

The Court of Appeal analyzed UK’s Equality Act of 2010, which in relevant part permits plaintiffs in an equal pay lawsuit to compare themselves to either: (i) higher-paid comparators at their same employment establishment; or (ii) at a different establishment where “common terms” of employment apply. Here, the plaintiffs sought to rely on the second limb of the standard, meaning that the court had to determine its meaning. After a thorough review of  the case law, the Court of Appeal determined that the plaintiffs may compare themselves to male employees at Asda’s warehouses so long as the warehouse employees’ terms and conditions of employment would be the same had they worked at the supermarkets where the plaintiffs worked, and vice versa (referred to as the “North hypothetical”).

This concept can be tricky to apply. Essentially, a court must first determine the hypothetical question of whether the male distribution employees would have broadly the same terms of employment had they worked at the plaintiffs’ retail stores, even if they never would in reality. Similarly, the court then asks the further hypothetical question of whether or not the female retail employees would have broadly the same terms of employment had they worked in the distribution centers. As the Court stated, “[t]he effect of the case-law and of North in particular is that in such a case ‘wherever they work’ extends even to a workplace where they would never in practice work because the nature of its operations is so different.” To be clear, the proper analysis is not to compare the terms of the plaintiffs’ employment to the terms of their comparators. Instead, the court compares each group’s terms to the terms that the hypothetical group of the same employees working at the other location would have.

Here, the Court recognized that Asda employees enjoy the same terms of employment regardless of where they worked. Therefore, because each group would have the same terms had they worked at each other’s establishment, plaintiffs’ claims could proceed.

Implications

Unless Asda appeals to the Supreme Court, this case will now proceed to the next two relevant questions—whether plaintiffs and their comparators roles are of equal value, and if so, whether their pay differential is based on sex. Asda has argued that any pay differences are instead based on market rates for the different positions.

The Court of Appeals’ determination seems to be moving towards a high water mark of ruling that essentially all of a company’s employees will be suitable comparators in an equal pay lawsuit, provided that the company’s terms and conditions of employment do not differ for each location. With similar cases currently pending against British supermarkets Tesco, Morrisons, and Sainsbury’s, this decision likely will have an important impact on how UK courts analyze those and other equal pay cases going forward.

EU Agrees to Set the Floor for Whistleblower Protection Across All Member States

According to a press release issued by the European Commission today, the European Parliament and the Member States have agreed to adopt new rules that set the standard for protecting individuals who blow the whistle on breaches of EU law from dismissal, demotion, and other forms of retaliation. This reform, which was first proposed by the European Commission in April 2018, seeks to replace the patchwork of whistleblower protections that currently exist across the Member States with a uniform approach. If formally adopted by the Parliament and Council, the new rules would protect those who report violations of various areas of EU law, including data protection, and Member States could extend protection to other areas of the law as well. Employers would have an obligation to create safe reporting channels within the organization, and whistleblowers, while encouraged to report internally first, also would be protected when reporting to public authorities. Additionally, whistleblowers could safely report violations directly to the media if no action was taken, if a report to the authorities would be futile, or when the violation is an “imminent” or “manifest” danger to the public interest. Lastly, the new rules would require that national authorities inform citizens and train public authorities on various aspects of whistleblowing. We will continue to monitor this development.

Chinese government forbids employers from asking about childbearing or marital status

On January 15, 2019, we posted an article about the effect of the #MeToo era on China’s efforts to draft its first Civil Code enshrining the country’s civil laws (https://www.internationallaborlaw.com/2019/01/15/china-responds-to-metoo-employers-stay-alert/). While China is not expected to adopt the Code until at least 2020, the Chinese government is beginning to take steps now to address gender discrimination in the workplace.

On Thursday, February 21, the Chinese government posted a notice on the website of the Ministry of Human Resources and Social Security of the People’s Republic of China, outlining plans to enforce current laws against gender discrimination in the workplace.

The notice comes in response to a declining birth-rate driven by the “one-child” policy which has been in place since 1979, concerns over sluggish economic growth, and decreased female participation in the workforce. The notice’s main focus is to better define what constitutes “gender discrimination” in employment practices, a practice that is technically enshrined in the Chinese constitution, but in reality vaguely defined and poorly enforced.

China has a widespread issue with of sexual harassment and gender discrimination in the workplace. Recruiters and employers are known to ask female candidates about marital status or childbearing plans. Job postings may specify that the position is only open to men or highlight the “beautiful girls” working in the office. It was not until 2013 that a woman successfully brought a case claiming gender discrimination in an employment context. Indeed, 73 percent of women participated in the workforce in 1990, but that number has declined to 60 percent in 2018.

In an effort to address these concerns, the notice specifically forbids employers and recruiters from:

  • Asking about a woman’s marital or childbearing status;
  • Restricting births as a condition of employment; or
  • Asking a woman to take a pregnancy test as a condition of hiring.

Additionally, the Chinese government intends to reinforce a victim’s ability to bring claims in court, increase child and infant care services in the workplace, and provide more support for women trying to reenter the workplace after giving birth. Employers or recruiters who discriminate based on gender may face up to $7,400 in fines, and more serious or repeat violations could result in stiffer penalties.

While there are still questions around the actual implementation and enforcement of these new policy goals, the notice signifies a shift toward greater protections for women in the workforce.

2019 Brings Minimum Wage Increases Across the European Union

The New Year has brought an increase in minimum wages across the majority of European Union member countries. While most of these changes have been minimal, France and Spain, in particular, announced considerable increases to their respective minimum wages at the end of 2018.

From the beginning of his tenure in May 2017, French President Emmanuel Macron has passed numerous reforms aimed at stimulating economic growth within the country. Many of these reforms have met opposition from the French people, ultimately culminating in the “Yellow Vest” Movement (“Movement”). Since November 2018, the Movement has seen thousands of people across France take to the streets to protest President Macron’s policies.

On December 10, 2018, after weeks of political pressure applied by the Movement, President Macron announced a series of concessions and called on the French people to come together. In his address, Macron: (i) announced an increase to the minimum wage; (ii) announced that taxation on overtime pay would be abolished; and (iii) called on employers to pay tax-free year-end bonuses to employees.

President Macron announced that France’s minimum wage would increase by €100 per month in 2019. Employers will not be responsible for this additional compensation, however. Instead, the French government will foot the bill. As part of his concessions, President Macron also noted that overtime compensation would no longer be subject to taxation, effective January 1, 2019. While this abolition of taxation on overtime pay was previously scheduled to go into effect on September 1, 2019, President Macron’s concession accelerated that timeline. Finally, President Macron urged employers to pay a year-end bonus to their employees, noting that such bonuses would be tax-free.

Two days after President Macron announced these concessions, Spanish Prime Minister Pedro Sanchez announced a 22% increase in Spain’s minimum wage beginning in 2019. The increase was later approved through a royal decree, ensuring it would take effect on January 1, 2019. The increase is the largest to Spain’s minimum wage in over 40 years.

The decree raises the minimum wage from €736 per month to €900 per month. This change will bring the yearly minimum salary to €12,600 and will affect an estimated 2.6 million workers. According to statistics, this increase will also inadvertently reduce the gender pay gap. This is because more than half of the employees who will benefit from this increase (56.7%) are women. The 22% increase stands in stark contrast to recent years where the country’s minimum wage has increased by only a few percentage points.

Employers operating in the EU should review their policies to ensure compliance with the widespread minimum wage increases.

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