ICE June 2016 Newsletter

With the contentions labour laws in France still sparking a lot of protests and all eyes on the UK referendum, we have a look at the impact of the Panama papers and other news affecting the staffing industry and the world of work.

BRAZIL

Paternity leave increased to 20 days

Employees working for companies enrolled in the Citizen Company Programme*  will be entitled to request extension to their paternity leave, which would then increase from five to 20 dys. The request for extension needs to be submitted no later than two business days after the child’s birth. Law 13,257/2016 also allows eligible employees to take up to two days to accompany spouse to medical examinations during pregnancy and one day of paid leave per year to accompany their children to medical examinations until the age of six.

The extended paternity leave is to be paid by the employer but the new law gives the possibility of deducting the extra salary costs from corporate income tax. Employees of companies not enrolled in the Programme are entitled to the standard five days of leave and cannot request the extension.

* Special programme to encourage employers to offer better maternity and paternity benefits to employees in exchange for tax deductions

CHILE

Apostille Convention promulgated

In the last newsletter we had an article on Brazil explaining the Apostille Convention was ratified in country. Now we can confirm that a presidential decree promulgated the same in Chile, meaning the requirement of consular legalisation of foreign public documents has been eliminated. The Apostille Convention in Chile will apply for five years following its entry into force on 30^th August 2016 with a tacit renewal for further five years, provided the convention is not abrogated. Apostilles issued in country will be electronic, enabling validation to be confirmed online. Once in force the application of the Convention will certainly benefit foreign companies conducting business in Chile as the existing legalisation procedure is very bureaucratic and cumbersome.

FRANCE

Contentious labour reforms to be discussed in Senate

Even though the original text has been substantially watered down from the original proposal, the El Khomri Law has become one of the most contested reforms in French labour legislation. The reform was billed as an attempt to tackle the chronic unemployment that has plagued François Hollande’s time in office.

The proposed law would loosen France’s notorious rigid labour market by reducing employee protection in the hope this would encourage businesses to hire more people. Those opposing the law argue it will simply allow employers to bypass workers’ rights on things such as pay, rest periods and overtime rates.

With the bill struggling to get enough support, the government  resorted to a constitutional mechanism to force it through parliament without a vote, but this just resulted in further mass demonstrations and industrial action coordinated by the CGT union (Confédération Générale du Travail – France’s oldest and biggest union).

The debate on the bill opens in the French Senate on the 13^th June, at which point the centre-right hopes to be able to put back clauses that were previously dropped by the government in an attempt to appease the unions, such as the controversial proposal to end the 35-hour limit on the working week.

We will follow up on developments when issuing the next newsletter in August.

MEXICO

President proposes employment and labour law amendments

The Mexican Federal Labour Law (FLL) had some major amendments back in 2012, but a number of issues were still missed. At the end of April President Enrique Peña Nieto submitted to the Senate a series of proposals that would further amend the employment provisions of the Constitution and the FLL. Having enough support in both the Senate and the House of Representatives, it is expected that the president will be able to have all his proposals approved, which include:

• A new system for resolving labour disputes, which would involve a prejudicial submission of the case to a conciliation centre. Run by autonomous government agencies; only if not settled that way would a case be heard at a specialised labour court;
• Amendments to the Federal Labour Law that are intended to:

1. enhance regulation of the CBA filing and registration process;
2. establish rules regarding strike notices demanding the execution of a CBA; and
3. introduce additional provisions for the voting process for representation claims filed by unions.

If the amendments are passed further changes as well as practical measures would be required to ensure all objectives are met, and so the desired increase to Mexico’s competitiveness and faster solutions for individual employment conflicts become a reality.

PANAMA PAPERS

For those who, like myself, thought that the Panama Papers were going to become a watershed moment in international tax history, there can be a feeling of disappointment now we’re two months down the line from when the first news stories were published.

With many important figures in politics, sports and art implicated, it still cannot be argued that what many have done is against the law, because it isn’t. There are many cases however that indicate ethical and legal impropriety. And undeniably the question around the morality of it all, even when perfectly legal, still remains.  According to The New York Times, Mossack Fonseca (the law firm at the centre of the scandal) had publicly said it would not work with clients convicted of crimes or whose financial activities raised ‘red flags’, but still several individuals in the US with criminal records were able to use the firm’s services to open new companies offshore, as revealed by the documents. Time and again the law firm came up with creative strategies to help their clients save money. I personally have always believed that too much creativity and compliance can’t coexist harmoniously.

Governments have started doing a bit more in response to the revelations – the UK government, for example, has enhanced and accelerated its proposals to enact new offences for failure to prevent facilitation of tax evasion. It is hoping to bring these proposals into force in January 2017 following a formal consultation. The European Parliament agreed to set up an inquiry to investigate alleged contraventions and maladministration in the application by the EU Commission or member states of EU laws on money laundering, tax avoidance and tax evasion. It will have 65 members and 12 months to present its report. Furthermore, following a report by The Times confirming 2400 clients of the Panamanian law firm were based in the United States over the past decade, it will be interesting to see how the American authorities react to it. But truth is, nothing will happen or change overnight. Laws will have to be tightened, amended, enacted – so there is potentially still a long road before true change takes place. Hopefully not too long to allow Mossack Fonseca and other law firms enough time to come up with too many alternative creative strategies…

PORTUGAL

Changes to SS contributions and public holidays

As the Portuguese government continues to attempt  to support employment, on top of increasing the minimum monthly salary (€530), it also approved a measure that allows employers to reduce their social security contributions rate. The payable rates will be reduced by 0.75% regarding the salaries paid to employees between February 2016 and January 2017; it also includes sums paid as holiday and Christmas bonuses.

Employers are eligible for the reduction when meeting the following criteria:

• The subject employee is engaged under a full-time employment contract or a part-time employment contract entered into before 1^st January 2016;
• As of 31^st December 2015, the employee has earned a base monthly salary of €505 to €530 for full time engagement or a pro-rated amount for part-time contracts; and
• The employer’s social security obligations are in good order.

For those operating in Portugal, it is also worth noting that a new law in April has reinstated the following national public holidays:

• Corpus Christi (a moveable feast);
• Implantação da República (5^th October);
• All Saints’ Day (1^st November); and
• Restauração da Independência (1^st December).

TURKEY

Temporary employment draft law approved

The Turkish parliament has approved a draft law establishing temporary employment relations via private employment agencies that offer flexible work models. Even though Turkey does not have to observe EU legislation, the draft law does make reference to the EU Agency Workers Directive and it establishes the notion of equal treatment in relation to equivalent permanent workers.

In order to supply temporary workers, private employment agencies will have to obtain a special authorisation from the Turkish Employment Agency (ISKUR), which is valid for three years. Only agencies that can demonstrate they have operated for at least two uninterrupted years will be able to submit an application to IKSUR. Both agencies acting as intermediaries without a permission and employers using their services can be fined between TL10,000 and TL40,000.

Situations in which temporary workers can be used include:

• Cover for an employee on maternity leave or job share with an employee returning to work after giving birth and choosing to work part-time
• Seasonal agricultural labour;
• Cover for employee leaving for military service
• Cover for employees whose labour agreements have been suspended
• Period employment for non-core activities
• Significant increase of workload

Temporary employment will be prohibited in the public and mining sectors though. Restrictions will also apply to companies making collective redundancies and during strikes and lockouts.

Duration of engagement is limited to up to four months with a maximum of two extensions for periods not exceeding eight months in total, with the exception of agricultural labour and increase of workload. Where those time limits are not respected, the contract will be deemed to be of an indefinite term instead.

The number of temporary workers shall not exceed a quarter of the total number of permanent employees (but companies with 10 or fewer employees will be able to employ up to five temporary workers). Measures have also been put in place so that an employer can’t rehire a dismissed permanent employee as a temporary worker for at least six months after the dismissal.

The law also defines the concept of remote working (telecommuting) and provides for minimum content of employment agreements applicable in these cases, including the right to equal treatment for employees engaged under this model.

UNITED KINGDOM

Watch out for the effects of the Modern Slavery Act on SMEs

Earlier this year businesses supplying goods or services in the UK with a turnover of £36m or more started to publish their first Slavery and Human Trafficking Statements, as required by the Modern Slavery Act 2015. In the Statement an organisation has to describe what it is doing to ensure slavery and human trafficking is not taking place in its business or its supply chain, meaning due diligence will have to be carried out on the entities involved in that supply chain. As a consequence more and more businesses now require anti-slavery and human trafficking clauses in their supply contracts, which may translate as a requirement on the supplier to guarantee compliance with the customer’s anti-slavery policy and a need to carry out extensive due diligence on their own suppliers. SMEs with complex business and supply chain operating within high risk sectors such as agriculture, telecommunications, hospitality and the manufacturing of electronics and consumer goods should take particular care. SMEs should also be careful not to blindly sign standard terms from larger companies if they do not have the right resources and procedures in place to comply with the specific requirements.

UK REFERENDUM – What might Brexit mean for employment law and immigration?

As the debate on the UK’s possible exit of the European Union intensifies and the date of the referendum approaches (23^rd June), both leave and remain camps continue to be criticised for scaremongering. According to What UK Thinks: EU Poll of Polls which is based on the average share of the vote for ‘Leave’ and ‘Remain’ in the six most recent polls of voting intentions in the EU Referendum, the remain campaign is slightly ahead with 51% versus 49% for the leave campaign.

From an employment law perspective, many articles have been written about the potential impact of Brexit and what this would mean to workers in the UK. Whilst many of the UK’s current laws are rooted in EU law such as anti-discrimination, TUPE, family-friendly rights and working time laws, experts believe it is unlikely that things would change drastically should the UK leave the EU, even in the long term. The main argument is that the EU would still continue to exercise influence even after a Brexit and, in any case, many of these laws are so ingrained in the UK society that it would probably be very difficult for the government to repeal them. Having said that, pieces of legislation that were less popular such as the Agency Workers Regulations may be more at risk.

What has been a central topic of the discussion from the beginning is immigration. On this what can be said is that a Brexit result would mean those EU nationals working in the UK would no longer have an automatic right to live and work here; in order to do so, they would have to move to a different category of immigration or leave the country. Similarly, UK citizens working in other EU countries would also lose their automatic right to live and work in those member states and alternative immigration solutions would have to be identified. In any case, even if the decision was to leave, the UK would have to give two years’ notice of its intention to leave the EU, so nothing would happen overnight

In August we will look at the results and impact of the same on the recruitment and staffing industry.

UNITED STATES

San Francisco approves time off with full pay for new parents

San Francisco passed a new law in April 2016 making it the first city in the United States to approve time off from work with full pay for new parents. Parents of both genders, whether full or part-time employees, are eligible for the programme as long as they have been employed by the same company for at least 180 days. Employers with at least 20 employees will be required  to cover the 45% of employees’ wages not already covered by the Paid Family Leave programme.

The law is due to come into effect in January 2017 for businesses with 50 or more employees; companies with 35 to 49 employees will have to comply from July 2017 and those with 20 to 34 employees from 2018.

New York enacts higher minimum wage and paid family leave policy
New York’s Governor Andrew Cuomo announced in April an increase of the state’s minimum wage from $9 to $15, which is to come into force by as early as 2018. The new law will be implemented region by region and businesses will have staged schedules for increasing the hourly pay depending on the number of employees they have. Employers will need to revise and monitor their payroll practices in order to ensure compliance with the yearly increases. It is estimated that 2.3 million workers will have higher pay as a result of the minimum wage increase.

In the same announcement Governor Cuomo confirmed he had signed into law a 12-week paid family leave programme, which will allow workers to take 12 weeks’ paid leave to care for an infant or a family member with a serious health condition, or to attend to family matters when someone is called to active military service. The benefits will be phased in from 2018 with expected completion by 2021. Pay will be capped and employees will be eligible for the programme once completing six months with the same employer.

VENEZUELA

Venezuela raises minimum wage by 30%

With rising inflation rate and food shortages across the country, President Nicolas Maduro raised the minimum wage by 30% in May as an attempt to help workers who are struggling with the country’s crumbling economy. The move was likely to further stoke inflation predicted to hit triple digits this year. Critics of the president stated this measure would not do anything to help average Venezuelans.

A founding member of the OPEC (Organization of Petroleum Exporting Countries), Venezuela earns 96% of its hard-currency income through oil sales so the country has suffered terribly over the past twelve months; the local currency lost 75% of its value on the parallel market over the same period. According to the IMF’s forecast (International Monetary Fund), the Venezuelan economy is due to contract 7% this year.

Despite this measure, the country continues to see opposition protests and some even fear a possible coup as the government struggles to pay for imports and is currently operating schools and services part time in order to save on electricity and water.

Venezuela has recently featured as the most complex country in the Staffing Industry Analysts’ 2016 report on Most Complex Contingent Markets Globally.

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