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5 Labour Law Basics for Companies Expanding Overseas

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Labour law is the relationship between workers, employing entities, trade unions and the government. Collective labour law relates to the tripartite relationship between employee, employer and union. Individual labour law concerns employees’ rights at work also through the contract for work.

Your company is doing well in the United States, and you are looking to expand overseas. But besides the practical logistics, what fundamentals do you need to know before you take on an employee in another country?

Once you grasp the basic differences between dealing with United States- and non-United States employees, you will foster smoother employee-employer relationships and prevent unexpected hits to your bottom line.

Following are five points to consider as you hire and manage employees in other countries.

  1. Understand that every country has its own distinct labour laws and that when it comes to employee protections, other countries tend to be more like each other than they are like the United States. The most important distinction is that there is no labour at will in the rest of the world—meaning that labour is contractual and that generally speaking, you cannot just terminate or even materially change the labour contract unilaterally without consequences.
  2. Many employee relations issues flow from the absence of at-will labour, especially when United States management is unfamiliar with the reasonable expectations that employees outside the States have about their labour relationship with companies. Since employees have the contractual right to continued labour, they are trained to behave differently from United States employees. They are entitled to ask questions, push back on instructions they disagree with, and communicate with employers in ways that United States managers may be unused to—all without fear of being perceived as “questioning” the company’s strategy. In addition, because they receive paid vacations by law, employees usually do not hesitate to take all of the vacation time allotted to them. Especially in Europe and common law jurisdictions in the Americas and Asia Pacific region, employees do not hesitate to demand their legal and contractual rights under statute, collective bargaining agreement, or contract. In many countries, poor performance also is not legally sufficient reason to terminate labour, so employers must carefully hire motivated employees or find ways to provide extra motivation for extra effort. Unlike in many U.S. states, “continued labour” is never sufficient consideration for restrictive covenants imposed after initial labour has begun, precisely because the employee is already protected from dismissal.
  3. Beware of hidden expenses. American employers often front-load employee costs in their labour offers, because they expect certain costs and termination expenses to be minimal. But outside the United States, you may want to reconsider base salary offers that are substantially over market, because the cost of terminating someone’s labour can be substantial. So, not only should budgets take into account potential termination costs down the road, but when termination pay is based on “total remuneration,” as is the case in most countries, any out-of-pocket cash benefits over base salary—including annual discretionary bonuses—will increase the severance cost when an employee does not work out. In addition, in many countries almost all employees are entitled to overtime pay—even at the manager level—so you may want to take that into consideration when pricing an offer, or take the appropriate steps to avoid unexpected overtime costs. Another potential surprise cost lies in jurisdictions that require an extra holiday “allowance” or 13th, and sometimes even 14th, month of pay on top of base salary. If you do not know about these in advance, you may get a nasty surprise when you cannot take back a too-generous offer.
  4. Did we mention that labour is contractual outside the United States? This is true even in Canada, and even if many United States employers do not realise it. So let an labour contract be your friend! It is a good thing, to have a written contract laying out the respective rights and obligations of the parties. Without it, you may not be able to enforce certain expected behaviours, the employee will always get the benefit of the doubt, and the employee will sometimes get substantially more generous entitlements that you might have otherwise been able to control by agreement.
  5. Rightly or wrongly, local employees, unions, labour authorities, and courts sometimes perceive United States employers as arrogant and wilfully ignorant of local expectations, customs, practices and laws. Given that all of those players usually play a greater role in the employer-employee relationship than in the United States, showing them that your company is looking to forge relationships and work within the system to everyone’s benefit can go a long way toward easing your path and helping you achieve your goals.

Provisional Job Stability of Disabled Employees due to Pandemic

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A pandemic is an epidemic of an infectious disease that has spread across a large region, for instance multiple continents or worldwide, affecting a substantial number of individuals. A widespread endemic disease with a stable number of infected individuals is not a pandemic.

At the end of 2019 and beginning of 2020, the world observed the disastrous trajectory of the Sars-Cov-2 Coronavirus, which infected thousands of people in the city of Wuhan, China, and spread to several provinces in that country, and then around the world.

In Brazil, the Ministry of Health published, on February 3, 2020, Ordinance no. 188/2020, which declared a Public Health Emergency of National Importance, due to Human Infection by the new Coronavirus.

On February 6, 2020, Law no. 13.979/2020 was published, containing measures for countering the ESPIN, due to the outbreak of the virus. The Law has suffered subsequent changes.

On March 11, 2020, the Director-General of the World Health Organisation, Tedros Adhanom Ghebreyesus, declared the existence of a pandemic, resulting from COVID-19, motivating the Brazilian National Congress to establish a state of calamity, until December 31, 2020, through Legislative Decree no. 6/2020. A series of Provisional Measures were issued in order to counter the pandemic.

One of the MPs was no. 936, converted, on July 6, 2020, into Law no. 14.020/2020, which created the so-called Emergency Program for the Maintenance of Employment and Income, and provided, in article 1, for complementary measures to combat the public health emergency caused by the coronavirus.

When MP no. 936 was converted into Law 14.020, article 17 was introduced, which prohibits the unjustified dismissal of disabled persons while the state of calamity persists. This category of employees was not singled out in the texts of the MP or of Law 13.979/2020 and its subsequent amendments.

It is an undoubted fact that persons with disabilities deserve differential treatment, in order to provide them with protection and ensure their inclusion in society and in the job market, as in Law no. 8.213/91, which provides for the mandatory hiring of these persons, pursuant to a pre-established quota.

Portaria no. 188 of February 3, 2020, of Ministry of Health, accessed on February 10, 2021. (Click here to read.)

Note that the social security legislation imposed, on a permanent basis, an obligation on the employer to hire a certain number of persons with disabilities, unlike article 17 of Law no. 10.020/2020, which guarantees protection to this group of employees only for the duration of the state of calamity due to the COVID-19 pandemic.

However, the state of calamity, which is the subject of Legislative Decree no. 06/2020, was not extended by the National Congress and, furthermore, Justice Ricardo Lewandowski of the Federal Supreme Court, when hearing Direct Unconstitutionality Action no. 6.625 MC/DF, maintained the validity of a number of articles of Law no. 13.979/20, but made no reference to the provision dealing with persons with disabilities. From this standpoint, there would be no question of stability of employment for this category of employees.

On the other hand, termination, on December 31, 2020, of the validity of Legislative Decree no. 6/2020, to which Law no. 13.979/20 is linked, unfortunately did not put an end to the state of calamity and the hardship imposed by the Sars-Cov-2 Coronavirus, reported on a daily basis by all the media. On the contrary, Brazil still faces great difficulties in combating COVID-19, which takes the lives of hundreds of people every day, and incapacitates many others.

This fact was stressed by Supreme Court Justice Ricardo Lewandowski, in the decision rendered in ADI no. 6.625 MC/DF. He considered that it was prudent and advisable that the exceptional measures contained in Law no. 13.979/2020 be maintained to combat the pandemic. The STF also ruled that the States may, through their Legislative Assemblies, decree the maintenance of the state of public calamity, as done by Minas Gerais, Paraná and Tocantins, besides several Brazilian municipalities.

Another question comes up. In view of the state and/or municipal decrees, which extend the state of public calamity, is it possible to maintain the employment of persons with disabilities, as provided for in item V, article 17, of Law no. 10.020/2020.

The exclusive competence of the Federal Government to legislate on Labour Law, provided for in art. 22, I, of the Constitution of 1988, prevents state or municipal governments from doing so. However, in this specific case, the federal law exists and may be applied, in theory, since the state of calamity remains.

The discussion on the subject is still far from over, and, little by little, lawsuits are reaching the Courts seeking the reinstatement of persons with disabilities dismissed after the enactment of Law no. 10.020/2020.

We suggest caution, therefore, when dealing with this issue, taking care to verify possible collective rules issued during this period and that may have regulated the matter in a similar or even wider manner than the law under comment.

Renata Gallo Tabacchi Gava de Oliveira and Patrícia Salviano Teixeira
Associate lawyers in Labour Law Area – São Paulo
renata.gallo@stussinevessp.com.br and patricia.salviano@stussinevessp.com.br

Can Employers Terminate Employees Due to COVID-19 Pandemic?

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With the recent outbreak of the COVID-19 Virus, the hardest hit are establishments within the hospitality, F&B and retail industry, with many restaurants, gyms and many other businesses being forced to shut their doors temporarily or at least downscale their production and / or services drastically.

The greatest expense for most businesses is the payment of employee salaries. In circumstances where businesses are sometimes not operating and employees are not working as a result of the COVID-19 outbreak and the resulting measures adopted by the United Arab Emirates government, certain queries arise.

BSA provides answers to these queries in an effort to allow employers / businesses to curb their losses and employees to know their rights.

Employment provisions relating to the COVID-19 outbreak

At the outset, it is important to note that, to date, no special provisions / exceptions have been implemented to govern the relations between the establishments that have been affected by the mandatory closures relating to the COVID-19 outbreak; and their employees.

BSA has reached out to the MOHRE and they have confirmed that their stance thus far is that the COVID-19 outbreak has not been declared a force majeure event and in the absence of special provisions relating to the exceptional measures taken as a result of the COVID-19 outbreak, the status quo remains and both employers and employees will be bound by their rights and obligations as outlined in Federal Law no. 8 of 1980 and their relevant employment agreements.

In light of this unprecedented global pandemic, it is preferable for employers and employees to enter into discussions, negotiate and agree upon terms that are acceptable to all parties involved.

Can an employer terminate an employee under the current circumstances resulting from the COVID-19 pandemic?

In the absence of specific provisions adopted as a result of the COVID-19 outbreak, employers can terminate their employees, however, such terminations will be governed by the provisions of the Labour Law and the relevant employment contract. Any such employers will likely be required to settle the employees’ dues and will be at risk of facing arbitrary dismissal claims. In circumstances where the COVID-19 has not been declared a force majeure event, employers will need to assess this risk in light of the Labour Law.

The same rules will apply as regards limited term employment contracts given that the Covid-19 outbreak has not yet been deemed a legitimate justification for termination. As such, if an employer terminates an employee as a result of the COVID-19 pandemic, the termination will be considered to be without cause and the employer may be held liable for compensating the employee.

Can an employer compel its employees to take unpaid leave?

In light of the COVID-19 outbreak and resulting mandatory closures, many employers are likely to attempt to avoid payment of their employees’ salaries and consider their absence as ‘unpaid leave’.

Any such attempt will be considered unlawful under the Labour Law as employers are not permitted to ‘freeze’ the employment of their personnel for a set period of time.

Unless the parties agree that the employee will be taking an unpaid leave, an employer’s instruction to enforce unpaid leave on his employees will constitute a breach of the Labour Law and the contract given that the employer will be failing to pay the employee’s salary.

Can an employer compel its employees to take their annual leave during the COVID-19 outbreak?

The general principles embodied in Article 76 of the Labour Law state that the employer may determine the date of the commencement of the annual leave, and may divide it if necessary, to two or more periods. This right has been given to employers since they are the responsible persons who are aware of the volume of work being undertaken by the company, and also to determine the priority as to when the work must be executed.

This right is given with a view to prioritise continuity of work. In view of this principle, the converse is also applicable during this period of slowdown caused by the outbreak of COVID-19, where there is a discontinuity of work. Therefore, given the above information, the employer can determine the date of commencement of an employee’s annual leave during the COVID-19 outbreak.

Can an employer impose a salary reduction?

Should an employer perform any deduction of salaries outside the scope of Article 60 and the employment contract, an employee can seek the recovery of any deducted amount before the competent labour courts.

In a context of cooperation during these unparalleled circumstances, parties may wish to agree upon a structure suitable for both the business, which is likely to be facing financial difficulties arising out of the COVID-19 outbreak, and its employees, who need to be paid their salaries, in an effort to avoid mass terminations as a result of the pandemic.

Is there a moratorium on salary payments?

The MOHRE has confirmed that at this point, the status quo remains, notwithstanding the COVID-19 outbreak. As such, there is no moratorium on the payment of salaries and employers must continue with making salary payments unless the employment contract provides otherwise.

The peculiarity of the situation will undeniably need to be considered by labour courts when hearing employment cases arising out of the COVID-19 outbreak.

Taking affirmative steps now is especially important as companies currently can foresee and attempt to mitigate any potential operational impacts in advance of the outbreak spreading to any new locality. Ideally, businesses will be able to plan accordingly to avoid any disruptions in their operations if the virus continues to spread.

Women’s Rights in Saudi Arabia

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Women’s rights are the rights and entitlements claimed for women and girls worldwide. They formed the basis for the women’s rights movement in the 19th century and the feminist movements during the 20th and 21st centuries.

Over the past two years, citizens of the Kingdom of Saudi Arabia have witnessed huge legal reforms related to women’s rights. The most anticipated and exiting amendments were recently announced pursuant to Royal Decree number dated 27/11/1440 corresponding to 30/07/2019.

This decree constituted the amendment of four different laws, granting men and women equal civil rights, as well as freedom of independent movement, while ensuring equality for women in the work place.

The first amendment was made to the travel documents law. The change allows women to now issue, renew, and receive their own passports, instead of restricting this right to male citizens. Prior to this amendment, passports of female citizens used to be issued only after a request submitted by their male guardians, following which, only the guardian was authorised to receive it.

In addition, a Saudi woman was required to carry a travel permit issued by her male guardian, through the Saudi immigration directorate, in order to travel outside the country. Following the recent reforms, these restrictions have been lifted, allowing Saudi women over the age of 21 to request the issuance of their own passports and travel outside of KSA without needing permissions from their male legal guardians.

Another very important right given to Saudi women, as a result of the Decree, is the right for a divorced or widowed mother, holding the custody of her children, to have the authority to issue their passports and travel permissions.

The recent reforms also include amendments to the Saudi labour law, especially with regards to women’s rights. It began by changing the definition of an ‘employee’, stipulated in article two of the law, to state that ‘an employee is any natural person – male or female – who works for an employer…..’ This amendment is a huge recognition of Saudi women’s role and contribution at the workplace.

The amendments to the labour law also state that work is a right of every citizen, without any discrimination based on sex, disability, age, etc. In addition, it restricts an employer’s right to terminate a female employee’s contract in case of absence resulting from her pregnancy or any illness related thereto, as long as such absence does not exceed 180 days a year, whether consecutive or intermitted. This restriction is expected to safeguard working moms’ interests and rights.

The new Saudi labour law demonstrates perfect equality between the two genders at the workplace, in addition to accommodating special provisions that Saudi women may require in certain situations. The recent changes bring Saudi women closer to equality and recognise their importance to the government and economy as a productive, well-respected member of the society.

Witnessing such amendments fills every Saudi women’s heart with pride and a sense of fulfilment. It has been a great year for women in Saudi Arabia and I am proud to be one.