Asia-Pacific Labor & Employment News Winter 2016

UPCOMING AND RECENT CHANGES IN THE LAW

China: Implementing Rules on Labor Contract Law Released for Public Comments

Liming Yuan and Ivy Wang

In July 2015, the Ministry of Human Resources and Social Security of the People's Republic of China ("PRC") released Draft Provisions Related to the Implementation of PRC Labor Contract Law for public comments ("Draft"). The Draft provides detailed interpretations clarifying certain issues that have arisen during the implementation of the current Labor Contract Law. Although the provisions are still in draft form and have no legal effect as yet, they contain various provisions that, if adopted, would have a significant impact on the implementation of the PRC Labor Contract Law.

The key provisions worth noting are as follows:

• If a non-PRC employee has entered into a labor contract with an employer in China but has not duly obtained the working permit from the local labor authority, no labor relationship will have been established.
• Company policies that will directly affect the employees' interests must be notified to the employees, with the permitted methods for publication including requesting employees to sign acknowledgement letters, organizing training on new policies, etc.
• Employers are entitled to impose monetary fines on their employees if employees violate the company policies and cause economic losses to the employers.
• Labor contracts must be written in Chinese, and the Chinese version will prevail over other versions in any foreign languages.
• An employer must enter into a non-fixed-term labor contract with an employee if such employee has served two fixed-term contracts consecutively, unless such employee agrees otherwise (regardless of whether the employer is willing to renew the labor contract).
• If an employee is transferred to a new employer that is an affiliate of the old one or the newly registered entity after the dissolution of the old one, his/her service year must be carried over to the new employer.

At the present time, it remains to be seen when and whether all of these draft provisions will become legally effective.

China: Maternity, Paternity, and Marriage Leave Entitlements Affect Population and Family Planning Law

Elizabeth Cole and Cathleen Sun

On December 27, 2015, the Standing Committee of the National People's Congress issued the amended Population and Family Planning Law ("Family Planning Law"). While the Family Planning Law has drawn worldwide attention for its implementation of the Chinese government's change to its long-standing one-child policy, which now permits couples to have two children, employers should be aware that statutory marriage, maternity, and paternity leave entitlements have also been affected, and greater local variations may apply.

The Family Planning Law removes the concept of late marriage and late maternity and the corresponding additional national leave entitlements. For late marriage, which was deemed to occur at or above age 23 for women and 25 for men, there was an additional leave entitlement of seven to 23 days depending on the locale. For late maternity, which was deemed to occur if a woman was age 24 or above at the time of delivery of her first child, there was an additional leave entitlement of 30 days. In response to these changes, many local governments have amended or are expected to soon amend related local regulations.

In the case of marriage leave, most local governments have simply cancelled corresponding regulations on late marriage leave, so that couples are entitled only to the national three-day leave entitlement. However, some have taken the opposite approach. In Shanxi, for example, the government has maintained a 30-day additional marriage leave period and applied it to all marriages, not just late marriages. For couples that married before January 1, 2016, the common understanding is that they are still entitled to the late marriage leave entitlement that would have applied prior to the introduction of the Family Planning Law.

For maternity leave, the current national entitlement is 98 days. However, many local governments have replaced the late maternity leave with an additional 30–60 days of local maternity leave for all women. Some local governments have also extended the paternity leave periods for men.

China: Deadline for Reducing Dispatch Employees to 10 Percent

Elizabeth Cole and Cathleen Sun

In 2014, the Ministry of Human Resources and Social Security issued the Interim Provisions on Labor Dispatching ("Provisions"), which required that dispatch employees be limited to temporary, auxiliary, or substitute positions and comprise no more than 10 percent of the total number of employees of the employer. The Provisions provided for a two-year grace period to comply with the 10 percent limitation, which expired on February 29, 2016. Several cities and provinces have issued notices in the past few months to reiterate the deadline, including Sichuan, Suzhou, and Guangdong, and it is expected that local labor authorities will carry out more frequent inspections to ensure compliance with the limitation during the first half of 2016.

In addition to either returning excess dispatch employees to the dispatch company or directly hiring dispatched employees, many employers have moved from a dispatch to a service outsourcing model. However, employers need to be careful to structure outsourcing arrangements so that they are not considered to be engaging dispatched employees themselves and are subject to the Provisions.

There is no clear definition of "outsourcing" under Chinese law. The Meeting Minutes of the Shanghai Municipal Human Resources and Social Security Bureau and the Shanghai High People's Court on Several Issues Concerning the Application of Law in Labor Dispatching 2014 stipulate that outsourcing is a new concept in the market and that some forms of "outsourcing" may constitute "dispatch." Whether this is the case will depend on various factors, including the application of employing companies' internal policies to such workers and management power over work conducted by such workers. The greater the management control over outsourced workers for the purposes of fire control, work safety, product quality, or workplace order, the more likely that there will be a deemed dispatch arrangement.

Hong Kong: Commencement of the Contracts (Rights of Third Parties) Ordinance

Elizabeth Cole and Sheila Lee

The Contracts (Rights of Third Parties) Ordinance (Cap. 623) ("Ordinance") came into effect on January 1, 2016 and applies to all contracts entered after this date, subject to certain specified exceptions, such as bills of exchange, covenants relating to land, and letters of credit. The Ordinance confers on a person who is not a party to a contract (a third party) the right to enforce a term of the contract if the contract expressly provides that the third party may do so or the term purports to confer a benefit on the third party. Unless the contract contains an express provision to the contrary: (i) rescission or variation of a contract that affects a third party's right will require consent of the third party; and (ii) the third party may assign such third party's rights, except for a personal right, to another person.

Consistent with similar legislation in other common law jurisdictions, contracting parties are allowed to opt out of the Ordinance in whole or in part by including an express term to that effect in the contract. A third party's right to enforce a term of a contract of employment against an employee is expressly excluded under the Ordinance, meaning that a third party may only have a right to enforce a term of an employment contract against an employer and not the employee. For example, a family member may seek to enforce insurance or other benefits granted by an employer for the benefit of such family member.

This exclusion from the Ordinance does not apply to other employment-related contracts where a third party may have rights, such as noncompetition agreements (if executed on a stand-alone basis), settlement agreements, and secondment agreements. It also does not apply to independent contractor agreements. Accordingly, employers should consider whether they need to amend their standard contracts to expressly exclude the Ordinance or structure such contracts to take advantage of the Ordinance.

Hong Kong: Full Implementation of the Competition Ordinance

Elizabeth Cole and Sheila Lee

The Competition Ordinance (Cap. 619) ("Competition Ordinance") came into full effect on December 14, 2015. There are three major competition rules under the Competition Ordinance, which are the First Conduct Rule ("FCR"), the Second Conduct Rule, and the Merger Rule. In particular, employers should be aware of the FCR, which, subject to certain exemptions, prohibits an undertaking from making an agreement or engaging in a concerted practice that has the object or effect to prevent, restrict, or distort competition in Hong Kong.

According to the Guideline on the FCR issued by the Competition Commission on July 27, 2015, discussions, collective bargaining, or arrangements (as the case may be) with respect to salary or other conditions of work between one or more employees and their employers, or between a trade union and an employer, are outside the scope of the FCR. The primary risk for employers lies in agreements or arrangements between competing employers. Agreements between competing employers to restrict hiring from a particular competitor, fix wages, or exchange competitively sensitive information, such as wage and employment terms, may all constitute contraventions of the FCR. Employers should be particularly careful when making informal exchanges of sensitive information that may occur, for example, in networking associations among human resources professionals in a particular industry.

Unless "serious anti-competitive conduct" is involved, the FCR does not apply to agreements and concerted practices if the combined turnover of the undertakings involved does not exceed HK$200 million in the relevant turnover period. Conduct that seeks to fix prices, share markets, restrict outputs, or rig bids are all considered to be "serious anti-competitive conduct" under the Competition Ordinance.

Indonesia: Stringent New Requirements for Employing Foreigners Amended

Elizabeth Cole and Michelle Angela

Following extensive lobbying and criticism from the business community, on October 23, 2015 the Ministry of Manpower enacted Regulation No. 35 of 2015 regarding Procedures for the Utilization of Foreign Workers, which amends the stringent requirements for the employment of foreigners under Regulation No. 16 of 2015, which came into force only four months earlier. The key amendments that largely revert the requirements for employing foreigners to the status quo prior to the enactment of Regulation No. 16 of 2015, with some modifications, include:

• Removing the requirement to employ a minimum of 10 local employees for every foreign employee employed. The Ministry of Manpower has confirmed that the ratio between local employees and foreign employees has reverted to the prior position of 1:1, and that this requirement applies only to foreign employees holding long-term work permits.
• Clarifying the requirements for foreign directors and commissioners of Indonesian companies residing outside of Indonesia by confirming that they are not required to obtain a work permit (IMTA), and will therefore be considered as nonresidents for Indonesian tax purposes.
• Significantly reducing the range of activities requiring a temporary work permit. A temporary work permit (which is granted for a maximum period of six months) is now no longer required for: (i) providing guidance, counselling, and training in the application of industrial and technological innovation to improve the design and quality of industrial products; (ii) giving lectures; (iii) attending meetings with the head office or representative in Indonesia; (iv) conducting audits, production quality control, or inspections of the company's branch in Indonesia; (v) undergoing work-competency tests; and (vi) performing one-off work. However, a temporary work permit is still required for: (i) producing commercial films (with a permit from the competent authority); (ii) conducting audits, production quality control, or inspections of the company's branch in Indonesia for more than one month; and (iii) performing work relating to the installation of machinery and electrical systems, providing after-sales services, and conducting product testing in the market.

It should be noted that the criteria for employing foreigners, which were expanded under Regulation No. 16 of 2015, have not been amended. Companies may only employ foreigners who: (i) have the educational qualification that is appropriate for the position to be performed; (ii) hold a competence certificate for the proposed role or have at least five years of experience for the proposed position; (iii) provide a statement that they are willing to share their expertise with their counterpart Indonesian workers; (iv) hold an Indonesian tax registration number (NPWP), if such foreigner has been working in Indonesia for more than six months; (v) have joined Indonesia's national social security scheme, if such foreigner has been working in Indonesia for more than six months; and (vi) hold an insurance policy with an insurance company that has legal status in Indonesia. However, it should be noted that the criteria referred to in sub-paragraphs (i), (ii), and (iii) do not apply to foreign directors and commissioners, or other management or supervisory roles, in Indonesian companies.

Singapore: New Statutory Boards Focusing on Skills Upgrading and Manpower Management

Elaine Ho and David Longstaff

The Singapore government has announced reorganization plans, with two reconstituted statutory boards looking into employment-related matters expected to be formed by the end of 2016.

A new statutory board, SkillsFuture Singapore, will implement SkillsFuture, a program introduced in the 2015 budget whereby every Singaporean is given an initial SkillsFuture credit of S$500, which will be topped up at regular intervals and which can be used toward skills upgrading.

Separately, the Singapore Workforce Development Agency will be reconstituted into a new statutory board named Workforce Singapore, which will focus on jobs and ensuring enterprises can become manpower-lean while remaining competitive.

Singapore: New Guidelines on Managing Workplace Harassment

Elaine Ho and David Longstaff

On December 23, 2015, the Ministry of Manpower, National Trades Union Congress, and Singapore National Employers Federation issued the "Tripartite Advisory on Managing Workplace Harassment." These guidelines were developed following the enactment of the Protection from Harassment Act 2014 on November 15, 2014 and contain practical information on how to manage and prevent workplace harassment.

Taipei: Loosening of Restrictions on Foreigners Intending to Work in Taiwan

John Lin, Raymond Wang, and Jean Kuo

Recently, low birth rates and an aging society in Taiwan have resulted in a drastic reduction in the workforce. In response, in December 2015, the Executive Yuan decided to loosen the restrictions on foreigners who intend to work in Taiwan.

Currently, foreigners who intend to work in Taiwan must meet several requirements, including requirements regarding minimum wages and higher education. Companies offering professional positions in general must also meet the minimum capital requirement. These rigid conditions have caused difficulties for foreigners and in turn have reduced their willingness to work in Taiwan.

The proposed changes replace the current rigid requirements with a flexible "point system," where foreigners can apply for a work visa in Taiwan based on the number of points that they earn. Foreigners earn points by proving their expertise and bilingual ability, while companies in Taiwan will be able to hire these foreigners without meeting minimum capital requirements after the changes are implemented. These changes are in line with similar changes in other modern Asian countries such as Japan, South Korea, and Singapore.

The Executive Yuan expects to implement the changes shortly. A part of the proposed change requires an amendment to the respective labor laws by the Legislative Yuan, which is expected to be reviewed and voted on before the end of 2016.

Japan: Enforcement of the Amended Industrial Safety and Health Act Regarding Stress Checks

Yuichiro Mori and Misa Osagane

On December 1, 2015, the Amended Industrial Safety and Health Act ("Amended Act") regarding stress checks came into force in Japan. Under the Amended Act, employers are required to conduct a stress check once a year on full-time employees and contract employees who will work or who have worked for the employer for one year or longer in workplaces staffed by 50 or more employees, with limited exceptions. In workplaces staffed by fewer than 50 employees, employers are obliged to make an effort to carry out a stress check, but there would be no liability for failing to do so. The major objectives of the Amended Act are to determine the degree of stress employees carry and prevent the development of serious mental disorders.

Under the Amended Act, employers must:

• Have medical professionals, such as doctors and public health nurses, examine employees to determine the degree of stress they are under;
• Implement face-to-face guidance sessions with a doctor if requested to do so by employees who have been informed that they are under heavy stress and are subsequently suggested to participate in such sessions by the medical professionals who carried out the examination;
• Not treat an employee unfavorably on the grounds that such employee requested a face-to-face guidance session; and
• Take note of the opinions of the doctor who implemented face-to-face guidance sessions for an employee and take appropriate measures, such as changing tasks or shortening working hours, for such employee if necessary.

Employers may not be provided with the result of a stress check without the employee's consent. The results of a stress check must be given directly to employees by the medical professionals who carried out the examination.

That said, the Amended Act provides only the minimum obligations of employers toward employees' mental health. Employers may be required to take further actions to prevent the occurrence of employees' mental disorders, even though such actions are not detailed or required under the stress check procedures outlined above. When employers are made aware of information regarding an employee's declining mental health, they have a responsibility to take appropriate action to address such mental health issues.

The first test should be completed by November 30, 2016. Therefore, employers should move quickly to be ready to implement the stress check procedures outlined above.

KEY DECISIONS OF LOCAL COURTS AND REGULATORS

Australia: Employee Who Rejected Alternative Positions not Entitled to Redundancy Payout

Adam Salter and Joshua Kang

In Adcock v Blackmores Limited & Ors [2016] FCCA 265 (February 12, 2016), the Federal Circuit Court of Australia ("FCCA") found that an employee had not been made redundant when his role was made redundant but he had been made genuine offers of employment in similar roles not inferior in seniority, remuneration, and responsibility, which he had rejected. Accordingly, the court held that the employee was not entitled to the relevant redundancy benefits.

In September 2014, Mr. Adcock, who had been employed as Commercial Manager Asia by Blackmores Limited ("Blackmores"), left Blackmores claiming that it had repudiated its contract of employment with him. Mr. Adcock's resignation followed a period in which Blackmores made a number of offers to reassign him to various different positions, after notifying him that the role of Commercial Manager Asia had been, in broad terms, made redundant. One important term of Mr. Adcock's contract, which was highlighted to him when the various offers of alternative positions were made, was that he could be asked to perform tasks or duties other than those set out in the position description of his current job and that his position and responsibilities could be changed from time to time.

He brought proceedings in the FCCA for recovery of redundancy entitlements and pay in lieu of notice and sought orders imposing pecuniary penalties for beaches of the relevant enterprise agreement. Mr. Adcock alleged that:

He had been made redundant;

• Blackmores had repudiated his contract of employment;
• By failing to pay him notice and redundancy pay, Blackmores had breached the enterprise agreement and therefore section 50 of the Fair Work Act 2009 (Cth) ("Act"); and
• Blackmores, through one or more of its representatives, knowingly or recklessly made false and misleading representations to him relating to his ability to recover entitles in court and his entitlements under his employment contract, in breach of section 345 of the Act.

The primary question for the court was whether Mr. Adcock had been constructively dismissed through repudiation. Judge Cameron stated that the test to be applied was whether the employer's conduct, judged objectively, evinced an intention no longer to be bound by the contract or to fulfill it only in a manner substantially inconsistent with the employer's obligations. As the offers of alternative positions, a number of which had been made by Blackmores, did not involve a significant diminution in remuneration, status, or responsibility, they were found not to be repudiatory. Mr. Adcock further failed to identify what conduct amounted to be repudiatory except for the argument that, in practical terms, an employer could avoid redundancy payments by purporting to transfer the employer to an "unsuitable role" such as an interstate transfer. The court, not being satisfied that this was in fact the case, found that Blackmores had not repudiated its contract with Mr. Adcock and, hence, Mr. Adcock had resigned on the date he left the company.

As Mr. Adcock failed to demonstrate that he had been made redundant, his claims that Blackmores had breached section 50 of the Act by failing to pay him redundancy and notice entitlements also failed.

The court also found for Blackmores in the false and misleading representations claims under section 345 of the Act. In the case of the alleged representation by Blackmores to Mr. Adcock of his prospects of success in litigation, Judge Cameron found the requisite reliance element lacking because of the general nature of the relevant comments and the fact that Mr. Adcock had already engaged lawyers at this stage. In the case of representations as to his contractual entitlements, Judge Cameron found that, on the evidence, such representations had not, in fact, been made to Mr. Adcock.

Accordingly, Mr. Adcock's application was dismissed.

Australia: Federal Court Finds Averse Action when New Mother Made Redundant

Adam Salter and Stephanie Crosbie

In Heraud v Roy Morgan Research Ltd [2016] FCCA 185 (February 5, 2016) the Federal Circuit Court of Australia decided that an employer took adverse action against an employee (the "Applicant") by refusing her request for flexible working hours and bringing forward her redundancy when she sought to return to work after maternity leave.

The Applicant commenced employment with Roy Morgan Research Ltd ("Roy Morgan") as National Customised Operations Director on September 10, 2012. She commenced parental leave on September 27, 2013, which ended on July 2, 2014. In late 2013 and early 2014, Roy Morgan embarked on a restructuring of the business in response to a loss of clients and emergence of a competitor, which resulted in redundancies. Prior to returning to work, the Applicant had made a request for flexible working arrangements, and instead of granting the request, Roy Morgan brought the Applicant's redundancy forward to June 11, 2014 instead of late July 2014 (as originally planned).

The Applicant alleged that she was dismissed in contravention of the Fair Work Act 2009 (Cth) ("Act"). She relied on section 340 of the Act, which states that a person must not take adverse action against another person because the person has a workplace right, or has or has not exercised a workplace right. Under sections 83, 84, and 65 of the Act, an employee's workplace rights include the right to take parental leave, to return to work at the completion of parental leave, and to request flexible working arrangements. The Applicant also relied on section 351 of the Act, which protects employees from adverse action taken based on particular attributes, including "family or carer's responsibilities" and "pregnancy."

In response, Roy Morgan argued that the only reason it took any action was simply to effect a commercially necessitated restructuring of the business, which meant that the Applicant's position prior to her taking parental leave and the restructure was redundant.

Judge Jones found that the employee's position had been made redundant as a result of the restructure, and that Roy Morgan failed to redeploy the Applicant in an equivalent position. The judge also found that Roy Morgan had brought forward the Applicant's redundancy, which had been planned for late July 2014, to mid June 2014 (prior to the date on which the Applicant was to return to work), and also failed to accommodate the Applicant's flexible working arrangements. Based on the evidence available from the relevant period, Judge Jones found that the reason for bringing forward the Applicant's redundancy was the Applicant exercising her workplace right to request flexible working arrangements. As such, Roy Morgan was found to have taken adverse action against the employee in contravention of the Act.

Employers should exercise caution when undertaking restructuring that involves making roles redundant while an employee is on parental leave. If an employee exercises his or her right to take parental leave or request flexible working arrangements, it is unlawful to take adverse action (including dismissing the employee or altering an employee's position to his or her detriment) against the employee on the basis that he or she has exercised that right.