Winter 2015 Asia-Pacific Labor & Employment News
Upcoming and Recent Changes in the Law
Australia: The Extraterritorial Application of Australian Employment Law
Adam Salter, Michael Whitbread, and Clare Langford
Australia's national industrial relations statute, the Fair Work Act 2009 (Cth) (the "Act"), imposes numerous duties on Australian employers and grants Australian employees numerous rights and entitlements. However, in certain situations, the Act has an extended application, which foreign companies doing business in Australia, or Australian companies doing business overseas, are unlikely to expect. In 2014, the Federal Court of Australia determined two significant cases that helped to clarify the extent to which Australia's employment laws apply to foreign employees (and to foreign companies employing people within Australia).
In December 2014, the Federal Court of Australia held the sole director and shareholder of Devine Marine Group Pty Limited liable for contraventions by the company of its obligations to pay two Fijian workers the minimum wages and other benefits required under Australian Law.
The defendant, Captain Devine, had arranged for the two workers to be brought to Australia as apparent participants in a training program when, in reality, they were carrying out work as employees and were entitled to the benefit of Australia law. The workers undertook salvaging activities for the company in Port Adelaide, South Australia, although they were paid significantly below the applicable Australian minimum wage (quite possibly more than they would otherwise expect to earn in Fiji, however). Consequently, the court reaffirmed the principle that non-Australian employees of Australian employers are afforded the same protections under the Act, at least where their work is carried out in Australia.
The Fair Work Regulations 2009 (Cth) further extend the extraterritorial application of the Act in ways employers are unlikely to expect. Critically, certain protections are extended to employees of Australian employers (including companies incorporated in Australia) whether or not those employees are based in Australia. These extraterritorial protections include (but are not limited to) sections of the Act that prohibit unlawful discrimination and dismissing employees because they were absent by reason of illness or injury.
In 2012, the Fair Work Ombudsman (the Australian regulator) sought to prosecute Australian budget airline Jetstar for contraventions of the Act in respect of non-Australian crew members employed by two subcontractors that were companies incorporated in Thailand and Singapore. The FWO argued that Jetstar was "involved in" and therefore liable for the contraventions, which included a failure to pay the employees the applicable minimum wage. The case was dismissed by the Federal Court in July 2014, largely because the employment relationships in question did not have a sufficient connection with Australia since the foreign employees were employed by foreign companies.
If the non-Australian crew members had been employed by Jetstar (i.e., an Australian employer), they may have been entitled to residual protections under the Act—notwithstanding that the employment relationship otherwise had little to no connection with Australia. The Fair Work Ombudsman may well seek to run another test case along the lines of Jetstar if appropriate facts arise. The risk of noncompliance by Australian employers in respect of non-Australian employees is heightened considering that these non-Australian employees may be willing to work in conditions (and for benefits) that Australian employees would not accept.
Taiwan: Foreign Laborers in Public Construction Projects
Taiwan public construction projects routinely have high demand for foreign labor due to a shortage of local laborers willing to undertake high-risk and labor-intensive projects. Under the current statutory framework, only those public construction projects valued at more than NT$10 billion (approximately US$320 million) can legitimately use foreign laborers to carry out works. Often, only the general contractor of the entire project is able to meet this high threshold to qualify for hiring foreign laborers.
Subcontractors need to meet a NT$1 billion (approximately US$32 million) threshold for the particular contracted portion of a project in order to be eligible to hire foreign labor. Subcontractors of smaller portions of a project, although facing the same labor shortage problem, often find themselves unable to meet this threshold.
In current practice, subcontractors often seek to have the general contractor hire foreign laborers on behalf of and for use by the subcontractors. However, Taiwan's Employment Services Act requires that an employer who hires foreign labor must be the actual employer responsible for providing all required employee benefits, such as labor and health insurance. Therefore, the practice of any general contractor of a public construction projects hiring foreign laborers on behalf of a subcontractor may run afoul of the law. If the general contractor routinely seeks to contractually pass all employer-related responsibilities to the subcontractor who actually uses the foreign laborers, this may further evidence a violation of the Act on the basis that the subcontractor is the actual employer, not the general contractor.
A more compliant way of relieving subcontractors' demands for use of foreign labor is to rely on a 2005 Ministry of Labor (formerly the Council of Labor Affairs) ruling (No. 940500913), which allows foreign laborers hired by a general contractor to be seconded to a subcontractor in the same construction project. In such a case, the general contractor is still the actual employer and bears all the responsibilities and liabilities as an employer. The general contractor may contractually seek indemnification and reimbursement from the subcontractor to protect its interests. It is critical for foreign and local contractors interested in bidding for public construction projects in Taiwan to have a thorough understanding of the availability of and regulations governing the use of foreign labor.
Singapore: New Tripartite Guidelines on Union Representation for Executives
David Longstaff and Elaine Ho
On November 26, 2014, the Ministry of Manpower ("MOM"), the Singapore National Employers Federation ("SNEF"), and the National Trades Union Congress ("NTUC") jointly released a set of guidelines on extending and expanding the scope of union representation for executives. The guidelines were introduced in the run-up to the amendment of the Industrial Relations Act, which is expected to be passed by the second quarter of 2015.
The Guidelines allow rank-and-file trade unions to represent executives as a group, whereas currently executives can only be represented as individuals and do not hold any rights to engage in collective bargaining. However, senior management and certain other categories of executives are still excluded from rights to collective representation.
The Guidelines also prescribe two broad benchmarks, which were deliberately kept flexible, for unions and firms to refer to when deciding which executives can be represented as a group by trade unions. These benchmarks are salary level and the ratio of executive/managerial employees to rank-and-file employees within the organization.
Singapore: Tripartite Guidelines on Issuance of Written Key Employment Terms Released
David Longstaff and Elaine Ho
On December 16, 2014, the MOM, NTUC, and SNEF jointly announced that they have developed a set of Tripartite Guidelines on the Issuance of Key Employment Terms in Writing ("KET Guidelines").
The issuance of the KET Guidelines follows the MOM's announcement in April 2014 that they will impose on all employers a mandatory obligation to provide their employees with select written key employment terms by the first half of 2016. The guidelines aim to provide employees with certainty as to their employment terms. Businesses in Singapore should review their practices now to ensure compliance when the provision of key written terms becomes mandatory in early 2016. The following terms, where relevant to the employment, must be provided by employers to their respective employees in writing:
- Identity of employer and employee.
- Job title and scope of employee's duties and responsibilities.
- Commencement date and term of employment.
- Work days and hours of work.
- Rest days.
- Information on salary.
- Fixed allowances and other salary-related benefits.
- Overtime rate and overtime payment period.
- Leave entitlements, including annual leave, medical leave, and statutory leave.
- Medical benefits.
- Term of probation.
- Manner and mode of termination, including applicable notice period.
The KET Guidelines state that the key employment terms should be provided to an employee prior to his or her commencement date and in any event not later than 14 days following the date on which the employee commences work with the company. As a matter of good practice, companies should also procure the employees' written acceptance of the key employment terms.
Key employment terms can be provided to employees in hard copy or electronically and should be communicated to the employee in a language that the employee understands.
Key Decisions of Local Courts and Regulators
Singapore: No Extra Claims in Constructive Dismissal
David Longstaff and Elaine Ho
In August 2014, the Court of Appeal in Singapore ruled that employees who are forced to quit after their employer makes "life unbearable" (namely, in a "constructive dismissal" situation) should not expect to be awarded any compensation other than that contemplated by their contracts of employment. In order to receive additional damages, employees must show proof of actual loss stemming from their dismissal.
The Court of Appeal made this ruling in an appeal against a High Court decision relating to the dismissal of former Robinsons assistant general manager of corporate sales and cards, Lawrence Wee. Mr. Wee alleged that the company persecuted him because of his homosexuality and requested compensation for loss of future earnings and additional damages, even though he was paid four months' salary in lieu of notice plus cash for unconsumed leave, which was more than the two months' notice (or payment in lieu) provided for in his contract. The Court of Appeal rejected the claim and ordered Mr. Wee to pay S$20,000 in legal costs to Robinsons.
The ruling, however, did leave open the possibility of damages being claimed if the constructive dismissal results in the employee's future employment prospects being impaired.
Japan: The Supreme Court Decision on the Demotion of a Pregnant Employee in Connection with her Request to Transfer to Other Light Activities
Article 65, paragraph 3 of the Labor Standards Act of Japan allows pregnant employees to request a transfer to lighter activities. In addition, Article 9, paragraph 3 of the Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment ("Equal Opportunity Act") forbids employers from treating female employees disadvantageously as a result of them making a request to transfer to other light activities.
In the Hiroshima Chuo Hoken Coop - C Coop Hospital case, the appellant asserted that she was unlawfully demoted as a consequence of her request to transfer to other light activities when she was pregnant, in violation of Article 9, paragraph 3 of the Equal Opportunity Act. The appellant also asserted that it was unlawful for her employer to prevent her from returning to her former position once she returned from child care leave.
The Supreme Court found that Article 9, paragraph 3 of the Equal Opportunity Act is a mandatory statute and that a demotion arising out of a pregnant employee's request to transfer to light activities is in violation of the Act, unless either:
- there are objectively rational reasons that make it possible to recognize that the pregnant employee voluntarily agreed to the demotion, or
- it is difficult for the employer to transfer the employee to light activities without demotion because of the necessity of a smoothly functioning business or an appropriate allocation of human resources,
in which case the Court may find in favor of the employer where the demotion does not substantially violate Article 9, paragraph 3 of the Equal Opportunity Act.
In this case, the Supreme Court found that there were no objectively rational reasons that would explain why the appellant would voluntarily agree to the demotion, and thus the first criterion was not satisfied, but it was not clear from the record whether there are any facts that would satisfy the second criterion. Accordingly, the Court remanded the case to the original court for adjudication
The Supreme Court's decision in Hiroshima is noteworthy because this is the first case in which the Supreme Court sets out the criteria used to determine whether a demotion in connection with a pregnant employee's transfer request may violate Article 9, paragraph 3 of the Equal Opportunity Act.
China: Further Guidance on Distinguishing Between Labor Dispatch and Outsourcing
Liming Yuan and Patrick Yu
The Interim Provisions on Labor Dispatch were published by the Chinese Ministry of Human Resources and Social Security on January 24, 2014, and came into effect on March 1, 2014 ("Interim Provisions"). The Interim Provisions require that no more than 10 percent of a company's total workforce can be engaged through labor-dispatch arrangements (akin to independent contract workers in common law countries). Companies that are not currently compliant with the Interim Provisions must adjust their employment structure to comply with the 10 percent cap by March 1, 2016.
In order to comply with this cap requirement, many foreign invested enterprises ("FIEs") are contemplating outsourcing work originally undertaken by dispatch workers to third-party service providers. FIEs should be careful outsourcing work in this way as the Interim Provisions prohibit some forms of outsourcing and provide limited guidance on how to distinguish between legitimate outsourcing and prohibited indirect labor-dispatch arrangements.
A recent ruling issued by the Shanghai No. 2 Intermediate People's Court on May 15, 2014 ((2014) Hu Er Zhong Min Yi (Min) Zhong No. 408) provides us with some assistance to distinguish the difference between a legitimate outsourcing arrangement and indirect labor-dispatch arrangements prohibited by the Interim Provisions. In this case, the court emphasized that the third-party service provider was a true outsourcing arrangement because the service provider had management power over its workers, controlled the production process, and directly instructed, supervised, and managed its workers. By comparison, a prohibited indirect labor-dispatch arrangement would have arisen where the contracting company did not exercise direct management over the service provider's workers, nor did it instruct or control them.
Since the Interim Provisions are silent on how to distinguish these two arrangements, it is possible that courts and labor authorities of other jurisdictions in China may take into account other factors on a case-by-case basis. The control and management over workers, however, is likely to be one of the most important factors to consider in Shanghai as well as in other locales of China.
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