Corporate Governance Reform – new disclosure requirements

Global Workplace InsiderBy Amanda Sanders on Posted in General, UK

Following on from it proposals for reform, which we reported on at the end of last year (Corporate Governance Proposals), the UK Government has now published draft regulations, (the draft Companies (Miscellaneous Reporting) Regulations 2018). The Draft Regulations will implement some of the proposals, in particular in relation to holding larger companies to account for the salaries they pay and to consider employee representation. The draft regulations include the following new requirements:

  • Publication of CEO’s pay ratio: UK quoted companies with more than 250 UK employees will be required to publish the ratio of their CEO’s total remuneration to the median (50th), 25th and 75th percentiles pay remuneration of their UK employees in their directors’ remuneration report. Where the reporting company is a parent company, the pay ratio must relate to the whole group. This is to ensure that a fair reflection is given, even where more junior staff are outsourced to a service company. Such companies will also have to publish supporting information, including the reasons for changes to the ratios from year to year and, in the case of the median ratio, whether this ratio is consistent with the company’s wider policies on employee pay, reward and progression. There are various options for identifying the relevant employees and for the methodology in calculating the pay ratios, which do allow the company to use previously calculated gender pay gap information as a starting point. As with gender pay gap reporting, the narrative will be key, as the ratio will very much vary depending on sector, size of the company and variable remuneration structure of the CEO.
  • Statement about engagement with employees: Companies with more than 250 UK employees will be required to include a statement as part of their directors’ report summarising how the directors have engaged with employees, how they have had regard to employee interests and the effect of that regard, including on the principal decisions taken by the company in the financial year. The aim is to ensure that UK employees are provided with information on matters which concern them as employees. There will be an exemption if the information is about developments which are in the course of negotiation and which, if disclosed would be seriously prejudicial to the company’s interests. Companies will also have to report on wider engagement with suppliers, customers and others in a business relationship with the company. This is limited to large companies (as defined in the draft regulations).
  • Share price impact reporting: UK quoted companies will need to include some additional provisions in their directors’ remuneration report, including an illustration of the possible impact of future share price increases on executive pay outcomes linked to performance periods or other executive incentive periods of more than one financial year.
  • Section 172 Statement: Companies which are already required to produce a strategic report, will need to include a statement in their strategic report of how the directors have complied with their duty to have regard to the matters in section 172(1) (a) to (f) Companies Act 2006 (CA 2006) (duty to promote the success of the company).
  • Statement of corporate governance arrangements: Very large companies will be required to include a statement in their directors’ report about which corporate governance code, if any, has been applied by the company and how.

Subject to Parliamentary approval, the new requirements will apply to company reporting on financial years starting on or after January 1, 2019. The Financial Reporting Council has also published its revised UK Corporate Governance Code which considers methods of engagement with the workforce and other stakeholders, and ensuring that there are means for the workforce to raise concerns in confidence and, if they wish, anonymously.

Legal update: Minimum protection for Gig Economy workers in Italy and in the international context

Attilio PavoneBy Attilio Pavone on Posted in Contracts, Italy

The need to update existing labour laws in light of the rapid changes introduced by the digital economy is one of principal issues under the “new ways of working” debate and has made the  headlines in many Italian papers, including the leading daily, Il Sole24Ore.  We need to use the legal tools that are available to us today, with modifications if necessary, in order to meet the challenges of the so called “gig economy”.

Are the atypical employment relationships governed by digital platforms autonomous or subordinate in nature?  This is the crucial question to consider when determining the rights and obligations of the parties to the relationship. First and foremost, it is important to understand that under Italian law, the concept of subordinate work is not what it once was. In fact, it has become increasingly less of a requirement to demonstrate that an employee is subject to the total or near-total control of the employer through explicit commands and directives (and other similar behaviour that has been elaborated by the courts) in order to establish that a subordinate employment relationship exists. The following three examples demonstrate this trend:

  1. The Biagi Law established that, in restricted cases (which can be extended in future), an “on-call” worker has the right to refuse to work, even when called on by the /employer to do so. This significantly weakened one of the cornerstones of the definition of subordinate work: the right of the employer to require service.
  2. In 2015, the Jobs Act established that any “coordinated and continuous” collaboration is “automatically” subject to the subordinate work arrangement whenever it provides for the determination by the employer as to the place and time of work. This removes the requirement to perform the complicated qualification analysis that for decades was the established legal practice.
  3. The recent “agile work” regulations provide that the model of a subordinate work arrangement may be governed by “an agreement between the parties, which can be an agreement to work in stages, by cycles or according to agreed objectives, without precise constraints relating to the place of work, and with the possible use of technological instruments in order to carry out the work.”  This is a seemingly perfect definition for the new work types in the gig economy .

Therefore, it is entirely possible, within the existing Italian legal framework, to find a basis upon which to define a subordinate work arrangement in a way that is very different from the old formal structure: an arrangement which may be discontinuous, without a fixed location, not necessarily measured by time, and that can be activated at the discretion of either the worker or the company/employer.  As a result, new, flexible work relationships can be considered subordinate. This is the case, if not necessarily from a juridical standpoint, from an economic and social point of view. The crucial issue therefore to resolve is: which features the subordinate work arrangement should have in order to meet the needs of workers and employers today?  This impacts in two ways:

  1. at definition level, finding an easily identifiable, criteria that enables a clear line to be drawn between self-employment and subordinate work
  2. on merit, determining the minimum protections for the  “new” subordinate work arrangement. A modern set of labour rules should consider: minimum wage requirements ( with a baseline set according to if and when the worker is obligated to accept the “call to work”); guaranteed rest periods in proportion to the hours actually worked; insurance coverage for accidents, civil liability and ad hoc pensions, etc.. By contrast, indirect types of compensation and certain protections from dismissals are designed for permanent and full-time work arrangements and would not apply in the context of the intrinsically flexible nature of the gig economy work arrangement.

Italy can take comfort in knowing that other countries are facing similar issues. In Germany the debate on arbeiten 4.0 resulted in a “white book” by the Ministry of Labor (www.bmas.de), but the program of the current German government provides only minimal changes to existing contract arrangements. The governments of the United Kingdom and the Netherlands have set up consultations considering similar issues (minimum pay, rest breaks), but it is unclear if, and when, any change will be implemented.  In France, recent legislation has established some minimum rights for those who work through digital platforms (accident insurance, refresher courses, trade union rights), but the legislation does not resolve the question of the workers’ legal status, which has been left to the courts to decide.  Analysis of existing legislation, merit choices on minimum protections, monitoring of the debate in other European countries … these are the things that must be considered in order to reach an effective solution. But cultural progress is also necessary: ​​To consider the technology not as an enemy, but as a more intelligent and innovative means of production that can make work both smoother and more productive; in other words, ultimately, more modern.

National Minimum Wage – “On Call”, “Sleep In” employees

Global Workplace InsiderBy Amanda Sanders on Posted in Contracts, Europe, UK

The Court of Appeal has held that carers who carry out overnight “sleep-in” shifts are not entitled to be paid the National Minimum Wage (NMW) for the full duration of the shift, only when they are actually performing work.

The UK National Minimum Wage Act 1998 creates the right for workers in the UK to be paid an hourly rate of remuneration for work carried out. The National Minimum Wage Regulations 2015 (the 2015 Regulations) (and its predecessor the National Minimum Wage Regulations 1999 (the 1999 Regulations ))  contain complex provisions relating to how employers should calculate the number of hours worked.  The specific issue related to the provision of “time work” set out in Regulation 32 of the 2015 Regulations (with similar provisions in the 1999 Regulations).  This provides that “time work” includes hours when a worker is available, and required to be available, at or near a place of work for the purposes of working (unless the worker is at home).  This is further clarified that, if a worker, by arrangement, sleeps at or near a place of work and the employer provides suitable sleeping facilities, then the hours when the worker will be considered available are only those hours when the worker is awake for the purposes of working.

In the care sector, workers are often required to “sleep in” at premises in order to provide 24 hour care to elderly, disabled or other vulnerable people. This particular case involved a claimant who was a care support worker and was required to work a mix of day shifts and overnight “sleep-in” shifts to care for individuals with learning difficulties. No specific tasks were allocated during the overnight period, although she was required to keep a “listening ear” in case her support was required.  The claimant was claiming the NMW for the full duration of the “sleep in” shift.

The Court of Appeal held that on the reading of the 2015 Regulations and the 1999 Regulations, as well as a report by the Low Pay Commission, the provision was that the hours should count for NMW purposes only when the worker on a “sleep-in” shift was awake, or required to be awake, for the purpose of performing some specific activity.

The Court of Appeal then also considered a series of cases and held that whilst some could be distinguished on their facts (i.e in this particular case the worker was expected to be asleep), another had been incorrectly decided based on a mistaken understanding of those previous authorities.

This judgment will be very important in the care sector and is likely to bring relief to many employers who were concerned about both the future level of pay and the potential historic liability.

Regulation applicable to dress codes in the workplace in France

François GuillonBy François Guillon and Elodie Grangier on Posted in Europe, France

An individual freedom…

Generally speaking, employees are free to choose how they wish to dress, including in the workplace. Such freedom is protected by the rules of the French labor code, which provide that an employer may not restrict an employee’s work clothing without proper justification based on the nature of the tasks to be performed and that any such restrictions must be in proportion to the goal sought.

…which can be limited under certain circumstances

However, the freedom to dress as one wishes does not fall within the category of fundamental liberties and therefore it may be limited in certain circumstances.

The decisions of the French courts have therefore held that certain restrictions on the freedom to dress may therefore be permitted if they are prescribed by professional necessities, relating to any of:

  • health and safety (e.g. in the case of a butcher whose particularly negligent clothing had been unfavourably commented on several customers);
  • security (e.g. where particularly unhealthy or dirty working conditions require that appropriate work clothing must be made available to workers);
  • decency (e.g. wearing a transparent blouse, for a bookkeeper, has been considered as “likely to cause trouble in the business”);
  • out of concerns for the company’s image–in particular when the employee is in direct contact with the customers.

Where restrictions are set by the employer, a specific procedure is required to be implemented and this will need to be formalized.

Example of particular restrictions which can be set by French employers

  • Uniform

The employer must justify the requirement made to employees to wear uniform for reasons of health or safety, or due to the fact that employees are in contact with customers.

In this regard, the French Supreme Court has confirmed the validity of the dismissal of an assistant responsible for hotel reservations, who refused to wear the uniform which she considered too daring.

  • Name badge

Under certain circumstances employers may require employees to wear name badges. This is the case in particular for employees who are in contact with the public.

  • Religious clothing or symbols

French law provides a general prohibition on wearing clothing intended to conceal one’s face in a public space, as well as in places open to the public or designated for a public service.

However, French law also considers religious freedom to be a fundamental liberty and any dismissal based on an employee’s religious beliefs is considered as null and void.

The question of how to reconcile the protection of such individual religious liberty (and the consequent freedom to express one’s religious beliefs) and the legitimate interests of employing companies may prove to be difficult, but French courts generally consider that an employer may, under certain circumstances, require employees who are in contact with the public to maintain strict religious neutrality, which implies a prohibition on wearing religious clothing or symbols.

Overtime and holiday pay – non-guaranteed and voluntary overtime

Global Workplace InsiderBy Amanda Sanders on Posted in Contracts, Europe, UK

The Employment Appeal Tribunal (EAT) in the UK has recently considered whether voluntary as well as non-guaranteed overtime should be taken into account in calculating the amount of holiday pay. The question arose both under the terms and conditions of the claimants’ employment, but also pursuant to the EU Working Time Directive (No.2003/88) (WTD).

The case involved a group of employees in an NHS trust, who brought claims for unlawful deductions from wages, relating to two types of overtime – non-guaranteed overtime and voluntary overtime. Non-guaranteed overtime related to payments, where, at the end of a shift, one of the employees was obliged to work extra time to finish a task. The claimants were also completely free to choose whether or not to work any voluntary overtime shifts.  The first claim was in relation to the terms and conditions of employment of the employees which stated that pay during annual leave was “calculated on the basis of what the individual would have received had he/she been at work”. The employees also brought a claim under Article 7 of the WTD.

The Employment Tribunal initially held that the employees contractual terms and conditions entitled them to have their non-guaranteed overtime taken into account in the calculation of their holiday pay, but not the voluntary overtime.   With regard to the WTD claim, the employer conceded that non-guaranteed overtime should also be taken into account under the WTD following the decision in Bear Scotland Ltd v Fulton (2015), but the Employment Tribunal held that voluntary overtime did not form part of the claimants “normal remuneration” and therefore did not have to be considered.

The claimants therefore appealed the Employment Tribunal’s findings that voluntary overtime did not need to be included in the calculation under either the terms or conditions or Article 7 of the WTD, and the employer cross-appealed the finding that the contract required the claimants non-guaranteed overtime to be taken into account when calculating holiday pay.

The EAT noted firstly that the tribunal has not had the benefit of the recent decision of the EAT in Dudley Metropolitan Borough Council v Willetts (2018), (Holiday pay – Regular voluntary overtime should be included – 18 August 2017) which held that the overarching principle established by the case law  is that “normal remuneration” must be maintained in respect of the period of annual leave guaranteed by Article 7.  This meant that payments in respect of voluntary remuneration should be taken into account where they have been paid over a sufficient period of time and which formed a regular and settled pattern. As such, the determination of whether each claimant had a pattern of overtime which was sufficiently regular to fall within “normal remuneration” would need to be remitted to another tribunal.

In relation to the contractual claim, the EAT held that references to “pay” in the contract terms did not have to be limited to basic pay. The clause should be read as a whole and  its intention was to maintain the overall level of remuneration which the employee would have received if working.  This construction also accorded with the WTD.  As such there was no basis to distinguish between non-guaranteed and voluntary overtime in the contractual term.

This case again shows the difficulties employers face in arguing that voluntary overtime should be excluded from holiday pay. In principle it can be taken into account and it is then a question of fact as to whether it is regular and sufficiently settled to fall within the definition of “normal remuneration”.  It is likely that this case will be appealed and we will keep you updated.

Tort liability: other grounds for bringing actions against a parent company in French employment litigation

Marie-Thérèse EugénioBy Marie-Thérèse Eugénio on Posted in Europe, France

It is a fact of life in French employer-employee relations that employees have no hesitation in bringing actions against their employer, in particular following termination of an employment, and that litigation is therefore not just a virtual weapon. Not only do employees sue their employer but, where the employer is a part of a group of companies, they have sought to impose liability on the group parent company in such employment litigation where they consider that the parent company was too involved in the management and decisions of its French subsidiary and that such involvement had proven detrimental to the French entity.

Historically, such actions were initially based on a claim by the employees that they were in fact co-employed both by the company with which they had their employment and by the group parent. However, over the course of several years, French case law has rendered more stringent the criteria entitling the employee to claim co-employment by the group parent, making the chances of success of an action based on such ground more difficult.

However, the door has not been entirely closed with respect to the ability of an employee to bring a claim directly against the parent company, as grounds of action against parent companies exist other than a claim of co-employment and this is what the French Supreme Court has recently recalled in several decisions rendered on 24 May 2018.

In one of these decisions, following the judicial liquidation of Lee Cooper France which had led to the dismissal of 74 employees, several of them lodged a claim against the holding company of the group. The claim was firstly based on alleged co-employment by the parent entity, but this argument was rejected by the court, on the basis of the principle that co-employment is defined restrictively as follows: a company belonging to a group can only be considered as the co-employer of staff initially employed by another entity if, beyond the necessary coordination of economic actions between entities belonging to the same group, there is a confusion of interests, activities and management between them resulting from an interference in the social and economic management of the other entity.

However, the employees also made an alternative claim for damages from the holding entity on the basis of tort liability (responsabilité délictuelle ) for actions which according to the employees had led to the loss of their employment.

On these grounds, the court of appeal ruled that because the parent entity had – through various questionable acts aimed at favoring its own interests – made faulty decisions which created economic difficulties and led to the disappearance of job positions within its subsidiary, it was liable to pay damages to the employees of the French subsidiary. More precisely, the holding entity was found to have required the French subsidiary to do the following:

– make a financial contribution to the group beyond the subsidiary’s financial capacity;
– effect a free transfer of a trade mark license to another entity of the group while the French subsidiary continued to bear the license fee;
– provide a real estate guarantee for the benefit of another entity of the group;
– purchase a stock of goods to another entity of the group when such stock was already subject to a right of retention in favor of a creditor;
– provide services to other entities of the group which were only partially paid.

The decision of the appeals court was subsequently confirmed by the French Supreme Court, which ruled that such behavior was faulty and damageable for the French entity and its employees.

In an earlier decision of 8 July 2014, the French Supreme Court had already admitted that tort liability constituted valid grounds to hold a parent entity directly liable towards the employees of its French subsidiary. The recent decisions of 24 May 2018 have confirmed this possibility while providing more details as to the scope of the faulty behavior of the parent entity on which such an action must be based, i.e., management decisions made abusively by the parent entity in its sole interest, which prevent the subsidiary from acting in accordance with its own corporate social interest.

Therefore, it is essential that within groups of companies a line can be drawn between the necessary economic interactions amongst the various entities of the group and the situation where the decisions made at group level would endanger its subsidiary and would fall into the category of faulty behavior which the French jurisdictions have constituted grounds upon which the actions of the parent company may trigger claims for damages.

Le temps de trajet des salariés itinérants n’est (définitivement) pas du temps de travail effectif

Global Workplace InsiderBy Elodie Grangier on Posted in Contracts, Europe, France

La détermination du temps de travail effectif des salariés est un sujet complexe, et l’enjeu est considérable pour les salariés dans la mesure où ce temps de travail effectif a un impact direct sur leur rémunération.

C’est encore plus vrai pour les salariés itinérants, dont les fonctions impliquent des temps de trajet importants (notamment entre leur domicile et le lieu d’implantation des clients de l’entreprise pour laquelle ils travaillent, qu’il s’agisse du premier client visité dans la journée ou le dernier client).

Comment doivent être pris en compte ces temps de trajet ? Sont-ils constitutifs d’un temps de travail effectif ? Dans la négative, l’employeur est-il tenu d’offrir une compensation aux salariés concernés (sous forme de repos ou sous forme financière) ?

Cette question peut apparaître simple, dans la mesure où l’article L. 3121-4 du Code du travail énonce clairement : « Le temps de déplacement professionnel pour se rendre sur le lieu d’exécution du contrat de travail n’est pas un temps de travail effectif. Toutefois, s’il dépasse le temps normal de trajet entre le domicile et le lieu habituel de travail, il fait l’objet d’une contrepartie soit sous forme de repos, soit sous forme financière. La part de ce temps de déplacement professionnel coïncidant avec l’horaire de travail n’entraîne aucune perte de salaire. »

Le Code du travail répond donc sans ambiguïté à la question de la prise en compte des temps de trajet des salariés itinérants. Mais c’est sans compter le droit européen…

Dans un arrêt récent du 30 mai 2018, la Cour de cassation a été saisie du cas d’un technicien SAV dont le contrat de travail prévoyait, pour la compensation de ses temps de déplacement, un forfait rémunéré de 16 heures hebdomadaires, et qui réclamait l’annulation de ce forfait et le paiement de ses temps de trajet domicile – client comme temps de travail effectif.

A l’appui de ses prétentions, le salarié faisait valoir un arrêt de la CJUE en date du 10 septembre 2015 rendu à propos de travailleurs itinérants soumis à la législation espagnole. A cette occasion, la CJUE avait considéré, en s’appuyant sur les termes de la Directive Temps de travail n° 2003/88/CE du 4 novembre 2003, qu’en l’absence de lieu de travail fixe, le temps de déplacement quotidien entre le domicile des travailleurs et le premier et dernier lieu d’intervention devait être considéré comme du temps de travail.

Cet arrêt avait été particulièrement remarqué en France eu égard aux dispositions de l’article L. 3121-4 du Code du travail, qui sont en parfaite contradiction avec la décision de la CJUE. La Cour de cassation avait même, dans son rapport annuel pour 2015, appelé le législateur à modifier les termes de cet article.

Le Code du travail n’a pas été modifié, et la Cour de cassation a été saisie de cette question épineuse.

C’est finalement pour une application stricte des dispositions de l’article L. 3121-4 du Code du travail que la Cour de cassation a opté, et elle a, de ce fait, débouté le salarié de l’ensemble de ses prétentions.

La motivation de la décision de la Cour de cassation a fait l’objet d’une attention particulière. La Cour de cassation a en effet pris soin de relever que la directive de 2003, sur laquelle s’appuyait la décision de la CJUE, « se borne à réglementer certains aspects de l’aménagement du temps de travail, de telle sorte que, en principe, elle ne trouve pas à s’appliquer à la rémunération des travailleurs ». Elle en a légitimement déduit que cette directive ne s’oppose pas aux termes de l’article L. 3121-4 du Code du travail qui ont vocation à déterminer les droits à rémunération des salariés.

Pour l’heure donc, et sauf modification législative, le sujet est réglé. Les salariés itinérants ne peuvent réclamer la rémunération de leurs temps de trajet en tant que temps de travail effectif. Cependant, il ne faut pas oublier que ces temps de trajet, lorsqu’ils excèdent le temps normal de trajet entre le domicile et le lieu habituel de travail du salarié, doivent faire l’objet d’une compensation (financière ou en repos).

The Australian Government has Announced an Amnesty on the Superannuation Guarantee

Sally WoodwardBy Sally Woodward on Posted in Australia

On 24 May 2018, the Minister for Revenue and Financial Services announced a 12 month Superannuation Guarantee Amnesty (Amnesty), subject to the passing of legislation, which will apply retrospectively from 24 May 2018 to 23 May 2019.   The Amnesty is encapsulated in the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill.

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AHRC launches national inquiry into sexual harassment in Australia

Sally WoodwardNicola MartinBy Sally Woodward and Nicola Martin on Posted in Australia, Discrimination and harassment

The Australian Human Rights Commission (Commission) has recently launched an inquiry into sexual harassment in Australian workplaces (Inquiry). It seems that the ‘watershed’ moment that the #MeToo campaign was hailed as, has indeed driven the momentum to keep the issue alive and for meaningful action to come from it.

There can be little argument that a culture that tolerates, condones or rewards inappropriate conduct or the wrong behaviours creates real and significant risk for an organisation – from a legal, commercial and reputational perspective.   It is essential, both at Board and executive level, that there is an awareness and understanding of the organisation’s culture or cultures and the risks that arise through such a culture and, most importantly, that steps are taken to mitigate or remove those risks.   Indeed, organisational culture and behaviours that are rewarded, encouraged or ignored, have been a key focus in the Financial Services Royal Commission and the Royal Commission into Institutional Responses to Child Sexual Abuse.

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