Asia-Pacific Labor & Employment News Spring 2015

Upcoming and Recent Changes in the Law

Australia: Uncovering the Exploitation of Temporary Labor within Australia's Agricultural and Food Processing Sector

Adam Salter and Michael Whitbread

On May 4, 2015, Four Corners, an Australian investigative journalism program, broadcasted a report titled "Slaving Away," uncovering the exploitation of temporary labor within Australia's agricultural and food processing sector (the "Report"). The Report examined the conduct of a number of labor hire companies supplying workers engaged in seasonal crop picking and the processing of fresh foods that are sold in many major Australian supermarket chains, such as Coles, Woolworths, and Aldi.

The Report revealed that some labor hire companies are exploiting vulnerable tourists, predominately from Asia, who have travelled to Australia on holiday visas. These tourists are often in a vulnerable position, due to their lack of understanding of Australian labor laws and lack of competent English skills. The labor hire companies appear to be paying such workers significantly less than the minimum wages set out in the applicable awards, and in some cases up to half of the award wage. Further, it is alleged that the labor hire companies often impose unsatisfactory working conditions, including long hours and poor working environments.

Underpayment of workers and the imposition of unsatisfactory working conditions is a clear contravention of Australian labor laws on the part of the labor hire companies. However, it is also possible that the farmers who engage noncomplying labor hire companies, and the supermarkets acquiring the services of such labor through labor hire companies, could be liable under the accessorial liability provisions in the Fair Work Act 2009 (Cth) (the "Act"). They will be found liable if they are "involved" in a contravention of the Act. Under section 550 of the Act, a person is "involved" in a contravention if he/she aids, abets, counsels, procures, or induces it, or is knowingly concerned in or party to it, or has conspired with others to affect it.

Depending on its involvement in the labor hire arrangements, a particular farmer or supermarket could be caught by section 550. For example, if the supermarket had the capacity to influence the conduct of the labor hire companies, had knowledge of the poor working conditions, and had knowledge that the workers were being underpaid, this could constitute sufficient involvement to amount to a contravention. If the amount paid by a farmer under a labor hire agreement is so low that it could not conceivably allow the labor hire company to pay workers the minimum award wage, that farmer may also face liability under section 550.

It remains to be seen whether any action will be taken against the companies and individuals implicated in the Report. However, given the broad nature of section 550 and expanding reach of Australian labor law generally, there is potential for such action to be brought against numerous actors in relation to the exploitation of temporary labor in the Australian agricultural and food processing sector.

China: Public Opinions Sought on Draft Provisions of Mass Layoff of Enterprises

Liming Yuan and Patrick Yu

The Ministry of Human Resources and Social Security of the People's Republic of China published Provisions on Enterprise Mass Layoff (Draft for Comments) (the "Draft Provisions") on December 31, 2014, and requested the submission of public comments and opinions on the Draft Provisions by January 31, 2015.

Currently, Article 41 of the Labor Contract Law (the "LCL") regulates enterprise mass layoffs. The Draft Provisions further supplement the procedural requirements under Article 41. In particular, the Draft Provisions set forth specific information that an enterprise is required to provide to the trade union or all employees prior to the mass layoff, content that a layoff plan must cover, and specific documents that must be filed with the local labor authority.

Moreover, the Draft Provisions provide for certain new articles not covered under Article 41 of the LCL. Article 18 of the Draft Provisions states that if an enterprise intends to terminate 20 or more employees through mutual agreement under the circumstances listed in Article 41 of the LCL, the enterprise must notify the labor union or all employees 30 days in advance and report the number of employees that the enterprise is intending to terminate to the local labor authority.

Currently, if an enterprise intends to terminate 20 or more employees, it may be more willing to adopt the approach of termination through mutual agreement rather than going through the mass layoff procedure under Article 41 of the LCL. This is because mutual termination is more straightforward in terms of process and may avoid the imposition of other obligations, including notifying the labor union and filing with the local labor authority. However, Article 18 of the Draft Provisions will further tighten the procedure of termination through mutual agreement if it involves 20 or more employees. It remains to be seen whether these additional obligations will be included in the final version of this regulation.

Hong Kong: Statutory Paternity Leave

Anita Leung and Cybil Chan

Pursuant to the Employment (Amendment) Ordinance 2014, male employees with a child born on or after February 27, 2015 are now entitled to three days' paternity leave for each confinement of their spouse or partner, if they have been employed under a continuous contract and have notified their employers in accordance with the law. Further, if the employee has been employed under a continuous contract for not less than 40 weeks immediately before the day of paternity leave and has provided the birth certificate of his child to his employer within the stipulated period, the employer must pay him paternity leave pay in respect of the paternity leave taken by him at the rate of four-fifths of his average daily wages. Employees may take paternity leave at any time during the period from four weeks before the expected date of delivery of the child to 10 weeks beginning on the actual date of the child's delivery. The three days of paternity leave may be taken altogether or on separate days.

However, employers and employees are also advised to observe their obligations under the Personal Data (Privacy) Ordinance in relation to the disclosure and use of personal data of the mother of the employee's child for the purpose of granting or claiming paternity leave and paternity leave pay. Employees should obtain the consent of the child's mother before disclosing her personal data to the employers.

Japan: Enforcement of Act on Special Measures Concerning Fixed-Term Employees with Expert Knowledge, Etc.

Rika Sato and Yusuke Hanada

On April 1, 2015, the Act on Special Measures concerning Fixed-Term Employees with Expert Knowledge, etc. (the "Act") came into force. The Act provides for certain exceptions to the "rule of conversion into indefinite-term contracts." This rule, contained in the Labor Contract Act, provides that an employee may convert a fixed-term contract into an indefinite-term contract if the fixed-term contract has been renewed for five years or more in the aggregate. Specifically, the Act exempts from this rule (i) certain employees with a high level of expert knowledge, skill, or experience ("High-Level Experts"), and (ii) employees who are continuously employed after they have reached retirement age ("Continuously Employed Elderly Employees"). Those exemptions apply only if the employer obtains approval of the employer's plan concerning employment management measures that enable employees to fulfill their potential effectively from the Minister of Health, Welfare and Labor.

To be considered as a High-Level Expert, an employee must engage in projects with a fixed term of more than five years and have both an annual income of at least 10.75 million yen and a high level of expert knowledge, skill, or experience. Employees with a "high level of expert knowledge, skill, or experience" include (i) employees with a Ph.D., (ii) certified public accountants, (iii) medical practitioners, (iv) attorneys, (v) qualified IT strategists, actuaries, or systems analysts, and (vi) employees who are experienced systems engineers, etc.

Under the Act, the right to convert a fixed-term contract into an indefinite-term contract is not available to employees except during the following time periods: in the case of High-Level Experts, a period of up to 10 years during which the employee engages in the project, and, in the case of Continuously Employed Elderly Employees, the period during which an employee is continuously employed after he or she has reached retirement age.

Employers that employ any employees to which this exemption applies are advised to consider utilizing the system under the Act.

Singapore: Employment Act Changes for Retrenchment Benefits

David Longstaff

From April 1, 2015, an employee who has been employed in a company for at least two years may request retrenchment benefits if he or she is retrenched. Prior to April 1, 2015, the requisite period of employment before a request for retrenchment benefits could be made was three years. The relevant provisions of the Employment Act apply only to employees earning a salary not exceeding S$2,500 per month, or workmen earning a salary not exceeding S$4,500 per month.

Following the amendments, employees in Singapore covered by the Employment Act now have the right to request retrenchment benefits after two years. However, the general view is that, in the absence of contractual provisions in any employment contract or collective bargaining agreement to the contrary, there is no right to receive such benefits. Instead, such benefits remain payable at the discretion of the employer. This is because section 45 of the Employment Act simply states that no employee who has been in continuous employment with an employer for less than two years (previously three) is entitled to retrenchment benefits. However, the section does not provide that employees who have been employed for two or more years are entitled to retrenchment benefits.

The view in Singapore is that such rights cannot be specified in this negative way and would instead need to be set out in the Employment Act using positive language to create an actual right to employment benefits after two years. As such, the amendments operate only to give employees the right to request retrenchment benefits after two years, and not the right to receive them.

Singapore: Industrial Relations Act Amendments—More Options for Representation of Executives in the Workplace

David Longstaff

Singapore has recently passed amendments to the Industrial Relations Act, which broaden the options available for representation of executives in the workplace to allow for representation by "rank-and-file" trade unions. The Industrial Relations (Amendment) Act 2015 (the "Amendment Act") came into force on April 1, 2015. It amends the Industrial Relations Act in two main ways.

First, the amendments allow trade unions that predominately represent non-executive employees (commonly known as "rank-and-file" trade unions) to represent executive employees on a collective basis. This excludes executive employees with specific responsibilities where conflicts of interest may arise, such as executives with substantial responsibilities for hiring and firing. Previously, executives could not be collectively represented by "rank-and-file" unions.

Second, the amendments extend the scope of the areas in which such "rank-and-file" trade unions can represent executive employees on an individual basis to include matters concerning re-employment. Previously, "rank-and-file" unions could represent executives only on an individual basis in certain limited areas. The expansion implemented by the Amendment Act provides executives with an additional and less costly alternative for resolving re-employment matters, by settling re-employment disputes through union and management negotiations.

According to the Second Reading Speech, the amendments were intended to better meet the needs of professionals, managers, and executives, which now form more than 30 percent of the Singaporean workforce. The amendments were also directed toward helping "employers and unions to work together to more effectively engage this growing group of employees" and facilitate "harmonious labor-management relations."

Based on the amendments, it is likely that trade unions will seek recognition in relation to executive employees, particularly where such employees constitute a significant proportion of the workforce. However, the collective agreements governing "rank-and-file" employees typically include provisions that may not necessarily be entirely applicable or appropriate in relation to executive employees. These provisions often govern overtime hours, minimum salaries, and the negotiation of increments and annual wage supplements. As such, employers that are engaging with unions that are also representing executives on a collective basis need to carefully consider the interests and concerns of such executive employees.

Key Decisions of Local Courts and Regulators

Australia: Australian Fair Work Commission Signals New Willingness to Terminate Restrictive Enterprise Agreements that have Passed Their Nominal Expiry Dates

Adam Salter and Stephanie Crosbie

A Full Bench of the Fair Work Commission (the "FWC") in Aurizon Operations Limited: Aurizon Network Pty Ltd [2015] FWCFB 540 has ordered the termination of 12 enterprise agreements that had passed their nominal expiry dates.

Aurizon was privatized by the Queensland government in 2010. During the course of privatization, the government oversaw the inclusion of generous terms and conditions for employees, and the imposition of inflexible restrictions on the employer, in Aurizon's enterprise agreements. This included a prohibition on forced redundancies and restrictions in relation to rostering and the tasks employees could be asked to perform, which produced a significant loss of productivity. The nominal expiry date for the agreements was December 31, 2013, and in May 2014, Aurizon applied to have the agreements terminated.

Once an enterprise agreement reaches its nominal expiry date, it operates indefinitely until it is replaced by another agreement or is terminated by the FWC. Under section 226 of the FWA, the FWC must terminate an enterprise agreement after its nominal expiry date has passed if the FWC is satisfied that:

• "It is not contrary to the public interest to do so"; and
• "It is appropriate to terminate the agreement taking into account all the circumstances," including the views of the parties covered by the agreement and the "likely effect that the termination will have on each of them."

The FWC had previously shown a reluctance to terminate enterprise agreements under section 226 when bargaining was ongoing, which often left employers with inflexible and restrictive agreements that were effectively indefinite in operation. However, in the Aurizon decision, the Full Bench decided to terminate the enterprise agreements, effective from May 18, 2015, as both aspects of the statutory test in section 226 were satisfied.

The Full Bench stated that there is no inherent inconsistency between "the termination of an enterprise agreement that has passed its nominal expiry date and the continuation of collective bargaining in good faith for an agreement." Further, it was recognized that termination of an unproductive agreement might actually further the objects of the FWA by incentivizing the negotiation of a replacement agreement.

Relevant factors included that: (i) bargaining had reached a stalemate, (ii) Aurizon undertook that the employees' wages and allowances under the agreements would continue for six months, (iii) the changes sought by Aurizon were "rationally based" on a desire to change "clearly inefficient" work practices, and (iv) many provisions in the agreements were "not common" and were imposed on Aurizon as a result of the company's "peculiar history" of privatization. For those reasons, termination was both appropriate and consistent with the public interest.

This decision signals a new willingness to terminate expired enterprise agreements that are particularly restrictive, even if bargaining is ongoing. It paves the way for employers who are subject to restrictive expired enterprise agreements to seek termination of those agreements, where negotiations for a replacement agreement have failed and they can show that termination is appropriate and not contrary to the public interest. While the circumstances in the Aurizon decision were fairly unusual, the Full Bench's pragmatic recognition that enterprise agreements are not intended to "continue unaltered in perpetuity" leaves open the possibility for employers to apply to have such agreements terminated in the future.

Hong Kong: Clarification on Calculation of Payment under the Protection of Wages on Insolvency Ordinance

Anita Leung and Michael Mai

The Protection of Wages on Insolvency Fund (the "Fund") was established in 1985 to provide timely relief in the form of an ex gratia payment to eligible employees affected by the insolvency of their employers, for example where employees' severance payments are withheld pending winding-up proceedings. Section 16(2) of the Protection of Wages on Insolvency Ordinance (the "Ordinance") provides that the Commissioner for Labour shall not make payment out of the Fund of amounts exceeding certain caps. In addition, section 31I of the Employment Ordinance provides that an employee's severance payment will be reduced by his or her Mandatory Provident Fund ("MPF") benefit.

In the case of Yung Chi Keung v Protection of Wages on Insolvency Fund Board CACV 37/2014, the applicant's severance payment was partly reduced by his MPF benefit. The Commissioner refused to make such ex gratia payment in respect of the outstanding severance payment to the applicant, on the basis that the MPF benefit received by the applicant exceeded the cap imposed by the Ordinance.

The applicant accepted that the Commissioner has a discretion as to whether to make payment or not. However, the applicant contended that, if the Commissioner should decide to make a payment, he has no discretion on the amount of payment, which must be the amount outstanding after the MPF benefit deduction, subject to the cap.

The Court of Appeal found that the object of the provisions is to provide quick relief to employees who have lost their jobs suddenly while preventing double payment. The proper interpretation of the Ordinance requires the Commissioner to use either the gross severance payment or its respective capped amount, whichever is less, as his starting point, and then reduce it by the benefit received by the employees. In the applicant's case, his severance payment was more than the cap from which his MPF benefit was deducted. Since the deduction gave rise to a negative figure, the Court of Appeal ruled that the Commissioner was correct in refusing to make any ex gratia payment.

This decision by the Court of Appeal clarifies the intention of the Fund and how payment of the Fund shall be determined.