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Multi-jurisdictional Labor and Employment Law update

June 2014 Issue

Labor and Employment Law in EMEIA

Multi-jurisdictional Labor and Employment Law update1

In this issue …

Editorial 3

France 4

• New laws on flexibility and human resources costs in France

Germany 5

• Temporary agency work

Greece 6

• New law provisions on the definition of minimum salary standards

India 7

• Contract workers: inclusion of the excluded

Italy 8

• Jobs Act: the new Government introduces measures on Italian employment law

Kazakhstan 9

• Attracting foreign labor to Kazakhstan

Multi-jurisdictional Labor and Employment Law update 2

Lithuania 10

• ►Draft amendments to the Lithuanian Labor Code

Norway 11

• Part-time workers’ right to a job position equivalent to that of their actual working hours: legislative amendment in force from 1 January 2014

Poland 12

• Flexible working hours in Poland

Spain 14

• Alternatives to dismissal: measures to promote internal flexibility within companies

Ukraine 15

• Restrictions on salary payment in foreign currency to non-resident employees

Multi-jurisdictional Labor and Employment Law update3 Multi-jurisdictional Labor and Employment Law update3

EditorialAs Europe has seen its average unemployment rate soar from 7% in early 2008 to around 11% by the end of 2013, most European governments have made a priority of curbing such grim figures. While, during the years of low unemployment, most legislation aimed at securing employee rights and protecting their position, times have changed. Legislators are now intent on reducing these statistics, and plan to do so by deregulating the local employment market, to increase hiring, and increasing flexibility, in order to ensure the safeguard of the competitiveness of companies.

Indeed, governments have understood that, in order to make their economy more attractive, they must offer employers the necessary tools to cope with the current financial stress that most of them are suffering. These tools must enable them to modulate their human resources costs as quickly and as efficiently as possible, in order to adapt to the current volatile market.

Flexibility in employment is therefore on the minds of human resources professionals and politicians alike. But these changes do not take place on a “one-way street,” and even if most of the new legislation increases employer rights, and thus somewhat decreases employee rights, some of it aims to strengthen the position of a key element of each country’s workforce: the non-permanent workforce.

Roselyn SandsLabor and Employment Law Leader


France

New laws on flexibility and human resources costs in FranceIn June 2013, the French Government passed a law which aimed to make the French labor market more attractive, in particular by rendering some of the rules governing it more flexible. Indeed, the French labor market has been the subject of severe criticism as it is considered to be excessively costly and governed by overcumbersome legislation; the French Government has made flexibility a cornerstone of its economic and labor reforms.

New laws passed recently increase flexibility by encouraging employee mobility within, as well as outside, their company. Indeed, the law passed in June 2013 allows employees working in a company of at least 300 employees, and with at least two years of seniority, to request that their contract be temporarily transferred to another company, for a predefined amount of time. If the employer accepts, the employees’ contract will be amended and they will be considered as an employee of the new entity, working under the same general conditions e.g., pay, bonuses. Once the predefined term of the transfer is met, the employees can either remain with their new employer, or return to his previous employer. In addition, a new law passed in March 2014 allows employers to reach experimental agreements with their employee representatives, in which both parties will discuss several work-related subjects that are considered as key, such as the geographical mobility of employees.

One of the key measures introduced by the law passed in June 2013 is the option for French employers to reach what is called an “agreement for the preservation of employment.” These agreements can be negotiated between employers and unions, and aim to allow employers to reduce working hours and pay, in order to preserve

employment within companies facing financial difficulties. For the duration of the agreement, which is at most two years, employees agree to work fewer hours and to receive less pay, and in exchange the employer commits to not making any employee redundant for the same duration. Even if such agreements are common in certain countries, such as Germany, they are fairly groundbreaking in France, where preserving employment by reducing salary costs has long been viewed as a lure, which allows employers to increase profits while reducing employee income. The introduction of such agreements in French law is one of the many subtle hints that the French labor market and labor legislation is undergoing considerable change.

However, the new 2013 law also aims to reduce unemployment in France. In order to do so, the French Government has opted to increase costs tied to temporary and part-time work, in the hopes of pushing employers to hire permanent employees. The social contributions tied to short-term contracts have therefore increased by 20% since the new law. In addition, from June 2014, part-time contracts will have to be signed for at least 24 hours of work per week; exceptions have been provided for by the law, in particular for student part-time workers. Nevertheless, the practical implementation of this new law will be extremely difficult.

Lastly, recent case law has given additional leeway to employers regarding the manner in which they manage human resources costs. Traditionally, in France, if performance bonuses were to be paid to employees, their objectives had to have been agreed upon by both employer and employee. However, recent case law allows for employers to define employee objectives unilaterally, as long as they respect the two cumulative criteria: the objectives are feasible and the employee must have been informed of their existence. This will simplify HR and cost management in France.

In conclusion, the French legislator currently has a twofold objective: increase flexibility while reducing unemployment in France. Even if the Government’s objective to reduce unemployment comes with an increase in costs related to a certain type of contract, the increase in flexibility should allow employers to manage better their HR costs in difficult times, and allow for better employee mobility.

Roselyn Sands [email protected]


Temporary agency work

Recent decisions of the German Federal Labor Court and the law project of the new German GovernmentNot only does the issue of temporary agency work play a big role in the political debate — it has also become a topic with which the German labor courts have to deal more and more frequently. Even though several questions still remain unanswered, the German Federal Labor Court has delivered two important judgments regarding the duration of temporary agency in the recent months.

Since the German Temporary Employment Act was revised at the end of 2011, employers may deploy leased employees on a “temporary” basis only. However, the legislation did not clarify the specific meaning of “temporary”. In July 2013, the Federal Labor Court held that the term “temporary” could not be understood as a set duration, with no consequences for companies that exceed it. Unfortunately, the Federal Labor Court did not define how long “temporary” actually is. The German Federal Labor Court also decided that the deployment of leased employees without any time limitation is inadmissible. Therefore, if an employer tries to fill a vacancy in a permanent job position with a temporarily leased employee, the works council is entitled to withhold its consent.

The definition of the term “temporary”, introduced by legislation at the end of 2011, was controversial. Some people considered it to be merely a target that employers should respect, since legal consequences for failing to comply with the recommendations for leased employees had deliberately been omitted. Others considered the criterion to be satisfied only if a factual reason for time limitation, approved by the German Act on Part-Time Work and Fixed-Term Employment, could be affirmed. In the case mentioned above, the employer had expressly stated that

it intended to deploy the temporary employee without any time limitation, and in order to replace a permanent employee. This allowed the Federal Labor Court to take the easy way out by declaring the hiring to be invalid on the basis that an employment relationship unlimited in time cannot be “temporary.” According to the Federal Labor Court, the criterion serves to protect temporary workers and is intended to prevent the hirer’s staff from being divided into permanent and leased employees. After this judgment, there was still no indication as to how long “temporary” could actually be. It was only made clear that there must be a limitation in time. It is simply not allowed to deploy a leased employee for an unlimited period in a certain job.

In the second judgment of 10 December 2013, the Federal Labor Court was called upon to rule on whether a temporary worker could be considered to have a permanent employment relationship with their employer, if their temporary employment is not limited in time.

The facts of the case are as follows: the employee (complainant) was in an employment relationship with Company B and worked as an IT administrator. Company B had the necessary administrative authorization to supply temporary workers. Company B was a 100% subsidiary of Company A. The complainant worked as a temporary worker solely in Company A’s offices. He claimed that the Court should declare that a permanent employment relationship existed between him and Company A. The Federal Labor Court dismissed the case.

In justifying its decision, the Federal Labor Court said that, according to the German Temporary Employment Act, an employment relationship between the company hiring a temporary worker and the temporary worker will only be established if the company that lends the temporary worker does not have the necessary authorization to supply

temporary workers. The Court held that there is no legal consequence if the hiring company does have the authorization, and deploys a leased employee not only temporarily but for an unlimited period. The legislator has deliberately refrained from issuing a rule if the employee leasing is not only temporary. European Union Law does not provide such a consequence, either. European Union Law leaves it to the Member States to penalize infringements of the rules of temporary employment. The choice of sanctions has to be made by the legislator not by the labor courts.

Conclusion:The decision of the Federal Labor Court is a positive one for companies that hire temporary workers, because they may deploy leased employees not only on a “temporary” basis without fear of sanctions. This only applies, though, if the company that supplies the temporary workers has permission to do so. But there is still no answer to the question of when employee leasing is not only “temporary”. The Federal Labor Court left this question open, since it was not of importance to its decision.

It can be assumed that these outstanding issues will soon be answered by legislation. The new Government plans to restrict the options for companies to use temporary agency workers on permanent jobs and intends to restrict the use of agency workers to a maximum of 18 months. It remains to be seen whether the new law will provide for any consequence if the maximum duration is exceeded. One option discussed is that, in such a case, an employment relationship is established by law between the temporary worker and the company that employed them. Another plan is that, after nine months, agency workers must be paid the same as regular employees.

Karsten Umnuss [email protected]

Germany


Greece

New law provisions on the definition of minimum salary standards The minimum legal monthly salary is fixed by the provisions of Law 4093/2012. Currently, the amount is €586.08 for employees who are over 25 years old and €510.95 for employees who are under 25 years old.

Law 4172/2013 establishes a new procedure for defining the national minimum legal salary. Collective labor agreements and individual labor contracts may not provide for lower standards than the national minimum legal salary. The amount of the minimum legal salary is defined by the following procedure.

First, the Greek Minister of Labor has the final decision over the minimum salary standards.

However, each calendar year, the Government must enter into negotiations with its social partners. These negotiations shall be coordinated by a tripartite committee consisting of one representative of the National Organization of Mediation and Arbitration, one representative of the Greek Ministry of Finance and one representative of the Greek Ministry of Labor.

In February each year, this tripartite committee is obliged to invite institutions such as the National Manpower

Organization, the General Federation of Employees and the National Statistical Office to conduct an official evaluation of the existing legal minimum salary. They also recommend how the minimum salary should be readjusted in the future.

This recommendation is based on factors such as the general situation of the Greek economy, productivity, competitiveness, unemployment and other financial factors.

The tripartite Committee is obliged to submit a file to the social partners that sets out the institutions’ opinion and recommendations. This allows the social partners to develop their position on the issue and make a relevant proposal both to the Minister of Labor and the Minister of Finance.

The negotiations on how the new minimum salary standards should be readjusted must be completed by 31 May each calendar year.

The Minister of Employment then takes into consideration the findings of the tripartite committee, and makes his recommendation on the new minimum salary standards to the boards of ministers. Following a relevant consultation with the other ministers, he shall issue the relevant ministerial decision.

Maria Rigaki [email protected]


India

Contract workers: inclusion of the excluded1

The practice of hiring or employing contract workers is common across the world. In many industries, the practice is seen as a way of boosting competitiveness. A report by the All India Organisation of Employers estimated that 36 million people in India are engaged as contract workers, and that the number has surged in recent times.

The appointment and conditions of service for these workers in India are provided for under the Contract Labor (Regulation and Abolition) Act, 1970. This Act, along with other pieces of labor legislation, such as the Minimum Wages Act, Payment of Wages Act, Provident Fund Act and Employees’ State Insurance Act, safeguards the rights of a contract worker to receive social security benefits similar to those available to regular employees. While the statutory social security benefits for contract workers are similar to those provided to regular workers, several other factors make contract workers the preferred choice for some employers. These factors include: using contract workers to scale the workforce up or down to meet specific business demands; greater freedom to terminate their employment; wage disparity in comparison with regular employees; and the absence of any obligation to provide non-statutory benefits such as loans and bonuses.

While the use of contract workers is on an upswing, there is increasing discomfort among the contracted workforce about the lack of employment rights. The issues that cause concern among the contracted workforce include: less rigorous enforcement of social security legislation; insecurity of tenure; exploitation at the hands of employers; wage disparity; unequal treatment by trade unions; the lack

1 Authored by Tarun Gulati (Partner) with assistance from Anirudh Mukherjee (Senior Associate), Deepti Thakkar (Associate) and Karuna Thapa (Associate) at PDS Legal.

of absorption of contract workers into the regular work stream; and lack of access to non-statutory benefits. Corporate India has seen these concerns spill over into disorder, violence and the loss of human life. This has had a negative effect on the economy at large.

Corporate India and the Government, recognize the unequal treatment meted out to the contracted workforce. Several steps are being considered by stakeholders to address wage disparity and the difficulty of absorbing contract labor into the regular workforce. The working group on labor laws and other regulations formed under the auspices of the Indian Planning Commission has, as part of its working report on the 12th Five Year Plan (2012-2017), recommended amendments to the Contract Labor (Regulation and Abolition) Act. These amendments would make it obligatory for all stakeholders to ensure that contract workers are given the same wages, facilities and benefits as regular employees; and ensure that, even in the absence of security of tenure, contract workers are treated fairly.

Taking a cue from the Government, some large organizations are working with the Indian Planning Commission to frame guidelines that would encourage the equal treatment of regular employees and contract workers. These voluntary guidelines aim to increase the number of permanent workers by encouraging absorption of contract workers that are engaged in activities of a permanent nature into the ranks of the regularly employed workers. The guidelines would also bring the wages paid to contract workers closer to those of regular employees. While the guidelines are not mandatory, they do provide strong moral and legal grounds for ending discrimination against contract workers. As of now, twelve large industrial organizations and a handful of public sector bodies are reported to have committed to

these guidelines.

The adoption of the guidelines is likely to go a long way toward addressing the grievances of contract workers. Consequently, hostility among contract workers toward regular employees and management should be reduced. The successful implementation of the guidelines will also help to establish best practices for preventing unrest among contract workers. Implementation of the guidelines is the first step to making the system inclusive and will pave the way for mandatory regulation in this field.

Once the guidelines are formally published and in the public domain, companies that engage contract workers should be encouraged to adopt them. This will stem labor unrest and improve the image of corporate India.

Tarun Gulati [email protected]


Italy

Jobs Act: the new Government introduces measures on Italian employment lawThe new Government is attempting to reorganize the entire employment system — with the introduction of unemployment benefits, a minimum wage and social assistance, including maternity benefits.

The measures of what is known as the Jobs Act, proposed by the Prime Minister Matteo Renzi, aim at:

• Optimizing employment contracts

• Creating jobs in the culture, tourism, agriculture, information and communications technology, renewable energy, welfare, construction and manufacturing sectors

• Providing unemployment benefits for all jobseekers

• Cutting the regional business tax, kn s Imposta regionale sulle attività produttive (IRAP), by 10%

• Reducing energy bills for businesses

• Eliminating permanent public-sector managerial posts

• Ordering transparent accounts for public administrations, political parties and trade unions

The first part of the new reform, the Law Decree no. 34/2014, comes into force on 21 March and it contains, in particular, dispositions regarding employment contracts and amendments of some of the provisions of the law on fixed-term and apprenticeship contracts.

1. Fixed-term contractsThe maximum duration of fixed-term contracts (contratti a tempo determinato acausali) has been increased from 12 to 36 months. Such contracts can only be used by the employer for a maximum of 20% of their entire workforce.

The duration of fixed-term contracts can now be extended, within the limit of three years, so long as the extension is justified by objective reasons, and the employment relationship continues on the same working activity.

2. Apprenticeship contractsThe main provisions mean that:

• It is no longer necessary to produce a written individual training plan.

• The hiring of new apprentices need not be connected to the hiring of the previous apprentices.

• Apprentices must be remunerated for their training hours at a rate of 35% of that agreed for the same level of work in the applied National Collective Bargaining Agreement.

• The employer is no longer obliged to integrate the professional training plan with the public training offer.

A new bill introduces the concept of smart workingOn 29 January 2014, a new bill concerning smart working was filed.

The main provisions of the bill are as follows:

• It creates the possibility of performing work out of the office for up to 50% of the annual working hours.

• It allows for the use of electronic devices to carry out working activity. Generally these devices are provided by the employer, unless it is agreed with the employee that the employee can use his or her own devices.

• Smart working must be governed by a written agreement between the employee and the employer. Such an agreement can be either open-ended or fixed-term. Fixed-term agreements can have a maximum duration of two years. Such agreements may also govern the procedures for termination (with notice or anticipated) and for extension or renewal.

• The employer has to guarantee measures to protect the health and safety of employees carrying out work under smart working agreements.

Lara Giambra [email protected]


Kazakhstan

Attracting foreign labor to KazakhstanKazakhstan’s Government has undertaken a number of initiatives to attract foreign direct investment, and most of them have been well received by the business society. Some of these measures aim to attract foreign labor to Kazakhstan, which is critical given that there is a lack of skilled professionals in the local market.

Many companies that operate in Kazakhstan attract foreign workers from their group entities around the world or request such specialists from third parties. When attracting foreign workers to Kazakhstan, companies should bear the following factors in mind.

Step 1: Determination of an arrangementCompanies should decide how they would like to arrange their relationships with foreign workers. According to Kazak work permit legislation, foreign individuals can work under a

1. direct employment agreement,

2. secondment agreement or

3. corporate transfer arrangement.

Under a direct employment arrangement, a local employment agreement should be concluded between the foreign worker and the hosting company located in Kazakhstan. In this scenario, contractual ties only exist between the foreign worker and the hosting entity.

Under a secondment agreement, contractual relationships exist between the seconding entity and the hosting company. In this case, the foreign worker remains an employee of the seconding entity and there is no need to conclude an additional employment agreement in Kazakhstan with the host company.

Corporate transfer is a new concept in Kazak law. Under this arrangement, a foreign worker is sent by a foreign legal entity in

order to perform specific tasks in its branch, representative office, subsidiary or affiliated legal entity registered in Kazakhstan.

Step 2: Work permit applicationOnce a company decides how to bring a foreign worker to Kazakhstan, it should consider applying for a work permit for the worker. As a general rule, a foreign worker cannot start working until they have obtained a work permit. This rule is applicable to all foreign workers except in certain specific cases. These cases include workers on business trips that do not last more than 120 days, or heads of branches and representative offices of foreign legal entities.

Work permits are issued by the local executive authorities, called “akimats,” subject to an annual quota allocated by the Ministry of Labor and Social Protection. Work permits are only issued if a job position is vacant and if it is impossible to fill this position with a domestic worker. For 2014, this quota constitutes 0.7% of Kazakhstan’s economically active population.

There are separate quotas for seasonal workers and individuals working on projects that are deemed a priority. Although, in general, the procedure for obtaining work permits under all the above arrangements is more or less similar, there are some peculiarities that should be taken into account. For example, obtaining a work permit under a secondment arrangement is possible only if:

• A foreign company is sending a foreign worker to Kazakhstan and it does not have its registered branch or representative office in Kazakhstan.

• The Kazak host entity applies for a work permit.

In theory, the work permit application process takes up to three months from the moment a job vacancy is notified to the authorities. However, in practice, this process may take up five months, depending on the regional practices of each authority.

Failure to comply with the Kazakhstan work permit requirements may lead to various sanctions being imposed on both the company and foreign individuals. These sanctions include deportation from Kazakhstan.

Step 3: Actions to take after the work permit is obtainedOnce a work permit is issued, a foreign individual should apply for a Kazak work visa. Upon arrival in Kazakhstan, the following things should be considered:

1. Whether it is necessary for the foreign worker to register with the Kazakhstan migration authorities.

2. Whether it is necessary for the foreign worker to obtain a personal identification number in Kazakhstan.

3. Notifying the authorities of the foreign workers who are exempt from the work permit requirement.

Dinara Salikhzyanova [email protected]


Lithuania

Draft amendments to the Lithuanian Labor Code In the spring session, the National Parliament will consider the following amendments to the Lithuanian Labor Code:

• Certain mandatory administrative obligations have been removed. In particular, employers will no longer need to keep a register of the employment contracts concluded within the company, will no longer need to issue employee ID certificates, and will no longer need to issue pay-slips to employees except to those employees who expressly requests them.

• Companies can now resort to temporary seasonal contracts even if their activity is not seasonal in nature, so long as it is subject to seasonal fluctuations — such as an increase in work load during the Christmas period.

• In Lithuania, certain employees can sign full-liability contracts, by which they are fully liable for their actions. Prior to the spring session, the list of employees who could sign such contracts was set in the collective bargaining agreement between employers and employee representatives. The amendments mean that this list can now be modified by any company, in their own internal rules.

The following draft amendments of the Labor Code have not yet reached the National Parliament but they have been considered by the Lithuanian Tripartite Council. This council is composed of representatives of the unions, employers and the Government.

• One planned amendment would allow employee representatives to participate in their company’s management. Under the amendment, employee representatives would be able to participate in meetings of their company’s management bodies (e.g., board meetings), whenever the possibility of a merger or a transfer

of business is discussed, or whenever matters that may have material impact on the employees’ legal position or the organization of work in the company are adopted. The employee representatives would be allowed to voice their opinion but will have no voting rights.

• Another planned amendment would give certain rights to illegal workers — i.e., those working without an employment contract or without prior notification being given to the State Social Security Fund Board. These rights include the right to claim for the payment of the agreed salary — a salary that cannot be paid at a lower rate than the minimum approved by the Lithuanian Government, unless the employer proves that the employee has been working for a period of less than three months. The employer is obliged to pay all the employment-related taxes for these wages.

If the Lithuanian Tripartite Council approves these amendments, they will be forwarded to the Lithuanian Government and then transferred to the National Parliament for consideration.

Recent developments in Lithuanian case law relating to the calculation of compensation in cases of unlawful termination of employmentUnder the Labor Code, should a court consider that a dismissal is unlawful, the employee is entitled — as compensation for forced absence from work — to the amount of their average salary for the entire period from the dismissal to the full execution of the court’s decision. If the employee has found a new job, the compensation can be equal to the difference between the employee’s salary with the new employer and their previous average salary. This means that, if the court takes more than a year to render its decision, the amounts can be significant.

In its recent ruling, the Supreme Court of Lithuania modified its previous judgments relating to the amount of compensation payable to employees in such cases.

The court stated that the compensation amount should be decided on the basis of an evaluation of all the circumstances of the case, and that the principles of fairness, reasonableness and justice — along with other criteria — are important considerations when determining the amount.

The court confirmed that the compensation has to be adequate and, therefore, it is possible to reduce its amount, e.g., due to the poor financial condition of the employer, or in cases where the employee receives a pension.

Julija Lisovskaja [email protected]


Norway

Part-time workers’ right to a job position equivalent to that of their actual working hours: legislative amendment in force from 1 January 2014From 1 January 2014, part-time workers who have regularly worked longer than the agreed working hours during the past 12 months will have the right to claim for a job position equivalent to that of their actual working hours during this period. The reference period of 12 months shall be calculated retrospectively from the time the employee submits such a claim.

It is the work performed in excess of the agreed working hours that gives a part-time worker the right to claim for a position equating to their actual working hours. The provision shall apply regardless of whether there is an increased workload, absences due to illness or other circumstances justifying a need. The provision restricts situations where an extension is agreed in the form of a temporary employment contract. An example could be a part-time worker — working half the hours of a full-time worker — who agrees, for a period, to be employed additionally in a temporary part-time position to cover for a colleague who is on maternity or paternity leave. Given that the employee has agreed to working extra hours, the additional position can therefore not be deemed as work beyond agreed working hours.

Right to a position: extra working hoursTo claim for regular extra working hours, they must be of certain regularity and of a certain volume. For example, it would not suffice if a worker only takes on extra shifts in connection with holidays or in connection with typical seasonal variations.

It would be necessary to have an element of extra working hours during day-to-day operations. On the other hand, it is not necessary for the added working hours to be split equally over the entire 12 month period. The crucial point is that the use of added working hours shall appear as an established practice during the relevant reference period.

The provisions shall not be understood in such manner that a part-time employee may choose the percentage or share by which they wish to extend their working hours, even though the desired percentage is within the framework of the actual added working hours. A part-time worker who submits a claim in accordance with the provision must initially take the whole extension of the position that equates to the actual extra working hours. The provision does not, however, prevent the parties from agreeing to a shorter extension of the position than what is the employee’s right in accordance with the legislation.

The content of the job positionAs to the detailed content of the job position, such as determining the working hours and work location, it shall equate to the content of the added working hours that the person has actually carried out during the relevant period. If the added working hours were performed in one or more locations or departments, the part-time employee must accept that the employer may require that they continue working at different locations or departments in the company. Further, the employee must accept the same volume of inconvenient shifts as included in the added working hours, if this is the employer’s wish.

ExceptionA claim for a position equating to the actual added working hours does not apply if the employer can document that the company does not have a need for the added working hours in the future. For instance, one can imagine that the employer may justify an expected reduction of added working hours due to the company reducing staff numbers, or if it is likely that staff will be laid off temporarily in the foreseeable future. If the employer shows that only a partial need for added working hours is present, the part-time employee would, in such case, be entitled to a position equating to the future need.

Sven Skinnemoen [email protected]


Poland

Flexible working hours in PolandIn August 2013, the changes to the Polish Labor Code — which were long awaited by employers — came into force. The amendments allow for the more flexible organization of working time, to take into account the business needs of employers. The amendments are also likely to be welcomed by employees trying to reconcile their careers with their personal lives.

By increasing the flexibility around the organization of working time, the amendments are intended to increase companies’ competitiveness and, as a result, to enable them to retain existing jobs and create new ones. Moreover, flexible working hours may contribute to Poland’s increasing investment attractiveness.

Past situationPreviously, the traditional work organization system was mainly characterized by fixed working hours and days, no working Sundays or holidays, fixed eight-hour workdays, and short reference periods, usually of one month. The length of reference periods varied and depended on the particular working time system.

Within the basic working time system, as a rule, a reference period could not be set at longer than four months. It could only be extended — to up to 12 months — in agriculture or security companies, provided that additional requirements were met.

Within the balanced working time system, the reference period could not be longer than four months, and this period could not be extended.

Employers had one month to compensate all overtime work — either in the form of overtime payments or days off.

New rulesNow, longer reference periods are possible in every working time system. The reference period can be extended to up to 12 months if the extension is justified by objective or technical reasons or by reasons concerning the organization of work. However, employers cannot introduce a longer reference periods without consent either from the trade unions operating in the given workplace or, where there are no trade unions, from work councils or other employee representatives.

The amendments enable employers to manage working time by adjusting it, reasonably, to current market requirements. In periods of increased demand for the goods or services of an employer, employees will work longer. Employers will then have 12 months (rather than just 1) to compensate for overtime work. This will allow them to give days off in the periods when the number of orders and the amount of work has decreased.

Flexible working hours benefit employers and employeesThe amendments introduce the concept of flexible working hours. Usually, it is understood as an organization of working time whereby the employer sets, in the internal workplace regulations, a time range within which employees should start their working day. Each employee is left to decide at what precise time to start work on any given day. This allows

the employees to arrange their working time in a flexible manner, enabling them to reconcile their work with their family and personal life or with continuing education or other activities.

Better work organizationAnother possibility resulting from these amendments — something that, in fact, took place very often in practice — is to establish individual working time schedules to set different starting hours on different days. Currently, the employee may, for example, start work on Mondays at 9.00 a.m., on Tuesdays at 8.00 a.m., on Wednesdays at 11.00 a.m. and on Thursdays and Fridays at 10.00 a.m. Irrespective of when they start, work days should last eight hours.

Before the amendments were introduced, this situation was ambiguous: the National Labor Inspectorate treated it as creating overtime; the Ministry of Labor did not. The new regulations clarify that starting work an hour earlier than on the previous day will not result in overtime, provided that flexible working hours have been introduced in the workplace.

As is the case with extended reference periods, introducing flexible working hours requires the consent of the trade unions operating in the given workplace or, where there are no trade unions, of work councils or other employee representatives. However, as flexible working hours often benefit employees, it is possible to establish them for interested employees upon their written request, even if flexible working hours have not been introduced in the given workplace.


Further flexibility in work time organization: working SundaysIn February 2014, further amendments to the Labor Code were passed by the Polish authorities. The new regulations broaden the list of the types of work that may be performed by employees on Sundays and statutory holidays.

As a rule, employees are not allowed to work on Sundays and statutory holidays, with the exception of the types of work exhaustively listed in the Labor Code. This list has now been extended to include work providing services, via electronic communications or telecommunications devices, received outside the territory of Poland. Employees may work during these days, provided that the Sundays or the

Polish statutory holidays in question are working days according to the regulations binding the recipient of the services and any other people who must work at that time to make the provision of the services possible.

However, if employees perform work on Sundays or statutory holidays (which, as a rule, should be days off for an employee), the employer is obliged to grant them another day off.

The new regulations are crucial for numerous shared services centers establish in Poland. These centers often provide services for entities based in countries with different statutory holidays.

The amendments came into force in March 2014.

Alicja Biernat [email protected]

Adriana Bindulska [email protected]

Poland


Spain

Alternatives to dismissal: measures to promote internal flexibility within companiesIn 2012, significant labor reforms took place in Spain. One of the main objectives was to implement effective mechanisms for internal flexibility within companies, in order to protect employment. This was particularly necessary given that the recent adjustments in the Spanish economy were mainly produced through layoffs because the legal framework did not favor other options. A rigid labor system makes it difficult for employers and workers to adapt their relationship to suit changing economic conditions. To address this, the 2012 labor reform has offered the following alternatives to dismissal:

1. Job classification system: The reforms ended the rigid classification of workers into professional categories and made the professional groups system more widespread. This was done to facilitate the transferring of workers to new roles. By switching to the professional groups system, Spain has moved to a much broader concept than that of the professional category — the purpose being to “overcome the rigidity of the professional category concept and to make ordinary functional mobility a much more effective adaptive mechanism,” according to the reform document. Removing the old categories and subcategories has given employers greater flexibility for functional mobility thanks to the fact that they can now relocate workers to a wider range of tasks.

2. Functional mobility: In line with the reform of the job classification system, professional categories and professional group memberships are no longer an obstacle to functional mobility within a company. Since the reform, functional mobility will be possible for both higher and lower functions not corresponding to a professional group, if there are technical

or organizational reasons that justify it and only for the necessary time. In addition, following the reform, there is no longer an urgency and unpredictability requirement for the functional mobility to take place.

3. Working time: The company and the workers’ representatives may come to an agreement on the distribution of irregular working hours but, if no agreement is reached, the decision is left to the company if the hours in question amount to 5% or less of the working day. If the decision concerns the distribution of working hours that amount to more than 5% of the working day, the company and the workers have to reach an agreement.

4. Geographic mobility: The transfer of employees from one work center to another necessitating a change of residence requires the existence of economic, technical, organizational or production reasons. These reasons must relate to competitiveness, productivity or the technical organization of work in the company. The employee may choose to accept the transfer or terminate the contract. The Labor Authority is no longer allowed to order that the contract’s term be extended or impose a six-month delay on the transfer.

5. Substantial change in working conditions: Since 2012, a company can modify any working conditions so long as it has an economic, technical, organizational or production reason for doing so. It is no longer required that the proposed measures help to prevent a negative financial evolution for the company or improve its financial situation. Furthermore, wage rate has been specifically introduced as a working condition subject to change. If an agreement is reached, then, to avoid dismissals, companies in difficulty can choose not to apply certain conditions of the collective agreement.

6. Suspension of contract or reduction in working hours: The company may terminate the employment contract for economic, technical, organizational or production reasons, or may reduce the workers’ hours by between 10% and 70% of the working day. Since 2012, companies no longer need prior authorization from the Labor Authority to suspend contracts or reduce working hours, which is a great simplification of the previous procedure.

It is worth noting that the Organisation for Economic Co-operation and Development (OECD) has stated that internal flexibility has improved significantly as a consequence of the 2012 labor reforms. It said that the increased internal flexibility has significant wage moderation, although the wage restraint is also the result of the economic situation in Spain and of cutbacks in the public sector.

Raúl Luis García [email protected]


Ukraine

Restrictions on salary payment in foreign currency to non-resident employees Historically, foreign nationals employed by Ukrainian entities could be paid, and receive, their salaries locally in foreign currency.

However, on 16 September 2013, a resolution brought by the National Bank of Ukraine was adopted. It deprived non-residents of the right to receive their salary in foreign currency by removing banks’ ability to credit the salaries received locally into the individual’s foreign currency bank accounts held in Ukraine.

Now, the salary amount an employer pays to a non-resident employee in a foreign currency is subject to obligatory sale by the authorized bank on the Ukrainian interbank currency market. The bank must then credit the equivalent amount of that salary in local currency, the Hryvnia (UAH), to the individual’s current account.

Given that non-resident employees usually need or prefer to have foreign currency at their disposal to transfer funds abroad, the UAH equivalent received after the bank sells the foreign currency will need to be converted again back into foreign currency. This will inevitably lead to significant losses, given bank commission fees and the different exchange rates that will apply during the two-way conversion.

Below, we outline several alternatives that companies and foreigners working in Ukraine may wish to consider:

• Salary can be paid to non-resident employees in UAH. (Subsequently, foreigners will be able to purchase foreign currency and transfer it abroad if they need to, incurring currency exchange losses that are half of what they would be were salary initially paid in a foreign currency.)

• Salary can be paid to non-resident employees partially in Ukraine (in UAH) and partially from abroad (in a foreign currency), based on labor agreements concluded with both the Ukrainian company and the foreign home office. (Potential tax risks related to the deductibility of costs for the salary and intercompany cost recharge, and reverse-charge VAT need to be considered.)

• The entire salary for work the individual performs under a secondment agreement can be paid from abroad. (This option, however, does not work for certain categories of foreign employees, such as those who need to be employed directly.)

• Salary can be paid to non-resident employees in foreign currency in cash. (Non-resident employees will be able to credit the cash they receive into their foreign currency bank accounts at Ukrainian banks. However, this option might be inconvenient, because it might not be possible for non-residents to authorize a third party to credit cash to their accounts. Instead, they may have to do it personally.)

Oksana Lapii [email protected]


Labor and Employment Law services

For further information, please contact:

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Tel: + 35 12 2600 8002

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