ICE Newsletter No. 13 (Jul 17)

Australian immigration changes, Brazilian labour reform, further delays with the Dutch DBA and much more. Check out our July 2017 newsletter here.


Government announces changes to temporary work visas

With a view to guarantee local workers have a priority when seeking jobs, the Australian Government announced back in April 2017  reforms to employer sponsored skilled migration visas, including the subclass 457 visa, which will be replaced with the new Temporary Skill Shortage (TSS) visa in March 2018.

The TSS visa will have two streams: a short-term visa for up to two years and a medium-term visa for up to four years.

Many of the changes have already been implemented as of 1 July 2017, such as those affecting: the list of eligible skilled occupations; the removal of the English Language Salary Exemption Threshold (ELSET), meaning English language test results must be provided for pretty much all applications lodged from now on (limited exceptions still apply); all visa applications now require a criminal record/penal clearance certificate to be provided as part of the supporting documentation and mandatory labour market testing, amongst others.

Companies operating in country should familiarise themselves with the various changes already in place and the ones to be implemented in the coming months.


Temer gets labour reforms approved by Senate

Following the approval of the labour reform bill by the Lower House at the end of April, the bill was approved by the Senate on 11 July 2017 and is now to be sanctioned by president Michel Temer. The bill introduces more than 100 changes to the Brazilian Labour Law – Consolidação das Leis do Trabalho (CLT) – including:

  • Intermittent work:  the introduction of the possibility of this modality of engagement, allowing employers to pay workers only during the period of service provision (which can be based on hourly or daily rates). The worker will still be entitled to pro-rated annual leave, 13th salary, severance indemnity (FGTS) and social security contributions paid by the employer. During periods of inactivity the worker will be able to provide services to a different company/client.
  • Collective bargaining agreements: agreements and conventions put in place between employers and unions may have provisions different to those stipulated by the labour legislation and the former will prevail, even if they are not as beneficial for the workers. Also, individual agreements may prevail over collective agreements if some conditions are fulfilled.
  • Temporary work: the outsourcing legislation approved in March had already changed the rules regarding the maximum duration of engagement from three months to 180 days with a possible extension of 90 days as long as the same conditions were maintained. The labour reform then clarified that the break between assignments has to be at least 18 months, meaning the temporary worker cannot be hired again by the same client until this period has lapsed.
  • Telework (home office): the reform introduced provisions for this modality of work, stipulating that the contract of employment should clearly specify the services to be provided by the employee.
  • Annual leave: the rules have been relaxed allowing employees to take their leave entitlement in up to three separate slots (instead of only two), with one of them being for at least 14 consecutive days and the remaining periods lasting not less than five consecutive days each.
  • Contract termination: the possibility to terminate an employment by mutual consent has been introduced, in which case only half of the notice period would have to be paid by the employer, but the worker will not have access to the unemployment fund.
  • Union contribution fees are no longer compulsory.

Other aspects also affected by the reform are working time, rest breaks, part-time work, labour disputes and fines for employers not registering their employees as required by law, amongst others.


Clarification on new maternity leave entitlement

In May the Indian Labour Ministry clarified that employees already on maternity leave would also be eligible for the enhanced paid leave under the Maternity Benefit Act that came into force on 1 April 2017. The leave was increased from 12 to 26 weeks.

New contract labour licence

A new national staffing licence is to be introduced in India. Currently companies need to obtain approval for hiring contract workers at every location or premises and every time the number of workers changes. The new licence, which would have to be renewed every three years, would make things a lot simpler for companies operating in the staffing industry, minimising the amount of red tape. Draft amendments to the Contract Labour Regulation and Abolition Act, which regulates the provision of staffing services, were announced earlier this year (March) and are also meant to contribute to improving the way the industry works. The government expects that by implementing the changes to the Act and introducing the national licence the level of compliance would be increased and more workers would have their rights protected.


Smart working enshrined in Italian law

On 10 May 2017 the Italian Parliament passed a new law on what is known locally as smart working. This is not to be confused with teleworking and it is not a new type of contract either, but a modality of providing subordinated services. The concept of smart working is based on how modern work is, with no need for a fixed workstation and fixed hours, the office being mainly a meeting place and technology an essential tool to facilitate collaboration between the parties. Whilst flexibility is at the forefront of this, with workers being able to split their working week between home and the office, maximum daily and weekly working hours still have to be respected, as per the applicable collective bargaining agreement. This type of engagement needs to be backed up by a written contract signed between the parties, with details of how the work is to be performed, the devices the employee is to use when working remotely, rest periods and periods the worker is to exercise his/her right to be disconnected. It is also essential that the means to be used by the employer to give working directives when the employee is working remotely be clarified. The arrangement can be based on a fixed or indefinite term; if the latter, either party may give notice of 30 days to withdraw from the arrangement, except when there is just cause for it to be terminated with immediate effect. The new legislation also has provisions for health and safety matters.

The same law has provisions for self-employed workers including rules against late payments (payment terms for more than 60 days are now considered illegal and void), benefits in case of illness or accident, and greater protection for self-employed women on maternity leave. Another change with the new law is the deductibility of 100% of training expenses and related travel/accommodation costs (previously only 50% of these expenses were deductible).


More delays for the DBA Act

The Dutch government has announced further postponement of the enforcement of the DBA Act from January to July 2018.

The DBA replaced the VAR certificates back in 2016, but a year of grace was agreed to allow companies to get themselves organised to comply with the new system. Full enforcement of the legislation was supposed to take place from 1 May 2017, however in November 2016 the State Secretary Wiebes had to delay the full enforcement of the new legislation for the first time. The initial assessment of the DBA implementation showed there were a number of issues that had to be addressed, so it made sense to buy some extra time to get it right. It was then suggested the government would be ready by January 2018, but there was a possibility of further delays, which indeed turned out to be the case, as confirmed by the latest announcement in June.

Increased paternity leave on hold

And it is not only the DBA that is facing delays – the proposed increase of paternity leave from two to five days has also been put on hold. The proposal was put forward by the Foreign Minister of Social Affairs, Lodewijk Asscher, with the intention of having the extra days apply from 2019, however the political party VVD requested a final decision be made only after the new government formation is complete. It remains unclear when the issue will be debated again. All this coincided with the European Commission presenting their own proposals for social policies, which would require all Member States offer at least 10 paid days to new fathers, so it is unlikely the Dutch government will be able to avoid the matter for much longer.


Flexible working in the private sector

It was reported in May that the Ministry of Labour and Social Development is looking into introducing a new system that would increase flexibility in the labour market. The objective is to boost the employment of locals who may have struggled to find a full time position by allowing employers to use flexible work contracts. Payments would be based on hourly rates and processed weekly. Under the new contracts, workers would lose out on certain labour rights such as paid leave, medical insurance or post-service benefits, but employers have to at least guarantee job security.

Additionally the government wants to promote remote working, which would help working-age women who are currently not allowed to drive to work. This initiative alone is expected to turn nearly 375,000 existing jobs into potential remote positions. By 2020 there should be an additional 141,000 remote working jobs made available by the private sector. Finally, the government announced a new royal decree relaxing restrictions on women’s ability to work and study. With all these efforts combined, the Saudi government hopes to increase female employment to 28%.


Thousands flee the country after new law on foreign work comes into effect

On 23 June 2017, a new Royal Decree (Royal Ordinance on Foreign Workers Management) came into effect replacing two main pieces of legislation that regulated foreigners working in Thailand. Whilst the new Royal Decree maintains main requirements and principles of the previous laws, it was meant to bring the provisions up to date and deal with current challenges faced by the country. The decree provides a new definition of work and introduces increased penalties for non-compliance with immigration requirements, both on employers and foreign workers who accept being engaged without the correct visas and/or permits.

However, within days of the enactment of the new decree, thousands of registered and unregistered migrant workers from Cambodia, Laos, Myanmar and Vietnam fled the country, fearing arrest and harsh punishment (the law provides for criminal penalties on migrants without a permit, which could result in up to five years in prison and hefty fines). Many employers who were also concerned with the possible consequences of their potentially illegal hiring encouraged migrants to leave the country. The risk was not only for undocumented workers, but also for those who hold an authorisation however for a job different to the one actually registered at the Department of Employment – both situations would attract the hefty fines. The repercussion across the country was so extreme that the government was forced to delay enforcing the stringent measures for at least 120 days, allowing employers and individuals to make adjustments, where possible, in order to achieve compliance.


New framework for labour inspections now in place

A new resolution (Resolution of the Cabinet of Ministers of Ukraine No.295) came into force on 16 May 2017, approving a framework for inspectors to carry out state control to ensure companies and individuals who engage employees comply with the local labour laws. The Resolution also introduces a supervision procedure which enables the exposure of those inspectors who commit violations themselves when carrying out of their own job. Even though inspections were allowed from the beginning of 2017, it was only with the new resolution that a procedure was clearly defined, therefore enabling inspectors to proceed with their work.

Inspections may be instigated by an employee whose rights were violated, by a court decision or by a governmental body upon identifying a breach of labour laws or employees’ rights, amongst others.

Depending on the reason behind the inspection, the authorities will not necessarily have to notify the employer of an impending visit, which, depending on the size of the company, can last from two to a maximum of 10 business days. Once violations are identified, an improvement notice is issued establishing the maximum period for rectification. Failure to do so can then result in fines of up to USD12,000.


Not long before the Criminal Finances Act comes into effect

The Criminal Finances Act 2017 received Royal Assent on the 27 April 2017 and comes into force in September 2017. Modelled on the “failure to prevent bribery” offence in the Bribery Act 2010, this new act incorporates into law the new criminal offence for corporations that fail to prevent the facilitation of evasion (to be clear, facilitating UK tax evasion is already a criminal offence).

In order to comply, companies should consider a number of steps including the carrying out of “tax evasion” risk assessment of their business and contractual relationships. This should then be followed by an appropriate implementation of adequate procedures to prevent the facilitation of tax evasion, which will certainly require a robust due diligence process in relation to clients, suppliers, contractors, employees etc. And due diligence here is to be understood as a process that truly scrutinizes solutions and the way they are carried out, how payments are made, where to and so on – the old one-page questionnaire is unlikely to suffice. Consideration should also be given to staff training and strong governance, whilst developing a culture that will assist controls work in practice. Efficient monitoring and review of all these steps will also be an essential part of a company’s strategy.

It is important to note here that the reach of the legislation is very broad: the offence could be based on the facilitation of evasion of UK taxes but also of foreign taxes; it is applicable both to UK and foreign companies carrying on business in the UK (or, for those not operating in country, the legislation would still apply to them if the facilitation takes place in the UK either wholly or in part).

No doubt this is a matter of great importance to those in the staffing industry so companies are strongly advised to seek advice to ensure they can take a compliant approach to the new requirements.


Lighter approach worker classification rules?

On 7 June 2017 the US Secretary of Labour Alexander Accosta announced that the Department of Labour (DOL) had withdrawn two interpretations from the Obama administration, one related to independent contractors and the other to joint employment. The former had a specific focus on the misclassification of employees as independent contractors under the  broad definitions of the FLSA (Fair Labor Standards Act), based on a strong presumption (not explicitly) that most workers are employees. The latter was related to joint employment relationships, also under the FLSA, targeting larger and more established employers with the ability to implement policy or systemic changes to ensure compliance. Collectively these interpretations were seen as an attempt of the DOL to enforce the FLSA.

While the action by the Trump Administration suggests the DOL may enforce employee classification rules with less zeal, this should not be understood as a licence to ignore employee classification rules moving forward. The DOL employees who carry out investigation and enforcement of these rules are still the same, and it may take some time for the change in administrative priorities to really affect them. Besides that, private lawsuits for overtime and benefits denied to misclassified workers remain a real risk to companies, especially considering the courts are not bound by interpretive guidance issued by the DOL. Employers really need to watch the development of this issue as there is a possibility of a fragmented enforcement landscape between state and local levels and the courts, especially as some state agencies have already reacted to the perceived deregulation at the federal level with increased enforcement efforts on their side.

Travel ban now in force

The modified version of Trump’s travel ban came into effect on the 29 June with strict criteria for visa applicants from six Muslim-majority countries. According to the supreme court ruling, those who lack a “credible claim of a bona fide relationship with a person or entity in the United States” may be denied entry to the country. New visa applicants travelling for business who are nationals of Syria, Sudan, Somalia, Libya, Iran and Yemen must have “formal and documented evidence” to prove they have a relationship with a business or educational institution (“formed in the ordinary course rather than for the purpose of evading” the executive order). It is advised they contact the relevant American Consulate to ensure they can clarify what that evidence will consist of so they can provide the correct documentation to support their visa application. The ban is supposed to last at least until the end of September 2017.

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I hope you find this newsletter useful. However please note that the content of this newsletter is to be used for informational purposes only and is not to be construed as legal or financial advice. While ICE tries to ensure the information is accurate at the time of writing, due to the nature of Global Compliance, all such information is subject to change AT ANY TIME based on country laws and regulations. ICE shall therefore not be held responsible in any way, and you are strongly advised to contact ICE directly should you wish to obtain further details on a specific country.

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