14 May, 2019
In this issue of Bird & Bird's APAC Frontline, we will look back at the significant changes that came into effect in the last quarter across Australia, Hong Kong, the People's Republic of China (PRC) and Singapore.
Our Case Updates section features two Australian and one Hong Kong court ruling. The first Australian case highlights the risk of employing a single individual to undertake multiple roles within the same organisation. In the second Australian court decision, we are reminded of the serious implications of a failure to comply with local Australian legislation, even where company officials concerned are located outside Australia. The Hong Kong case demonstrates that the courts will not allow employers to claw back bonuses paid to employees in the absence of a clear legal basis to do so.
Our Legal Updates section examines the new protections for corporate whistleblowers in Australia. In Hong Kong, we take a look at the Equal Opportunities Commission's response to proposed new discrimination legislation. We also report on the new agreement providing for reciprocal recognition and enforcement of judgments between the PRC and Hong Kong. Remaining with the PRC, we consider the reforms announced at the recent National People's Congress, the new gender discrimination provisions and the 2019 Shanghai minimum wage increases. Finally, we look at the changes introduced under Singapore's Employment Act.
Scroll to the end, and you'll also find details of our upcoming events.
Case Updates
Employers must exercise caution when employing a single individual to undertake multiple roles
Lacson v Australian Postal Corporation [2019] FCA 51
On 1 February 2019, the Federal Court of Australia was required to consider a relatively novel question: can two jobs with the same employer count as one for the purpose of a claim for entitlements under an enterprise agreement? The Court decided that employees engaged under two separate agreements with the same company can be treated as having two separate jobs for the purposes of an enterprise agreement.
What was of paramount importance here was that the two jobs in this case were actually two separate roles. An employer cannot split what would otherwise be one role into two roles in order to avoid or minimise its obligations under an enterprise agreement. If there had been evidence of this in the present case, it is likely that the decision would have been in favour of the employee.
Large multinational implicated in adverse action breaches in Australia
In an unfortunate lesson for local and international companies alike, the decisions of Keenan v Cummins South Pacific Pty Ltd [2018][1]("Keenan No. 1") and Keenan v Cummins South Pacific Pty Ltd (No. 2) [2019][2] ("Keenan No. 2") serve as a powerful message about the view Australian courts are taking in relation to non-compliance with Australian legislation, irrespective of where senior managers and decision-makers are located.
Keenan No. 1 required the Federal Circuit Court of Australia to consider whether the employer was liable for taking adverse action against an employee with over 34 years of service. Having determined liability, Keenan No. 2 was the decision on liability and the associated orders, which included reinstatement and back payment of wages totalling some AUD1 million.
Case Updates
Courts will not allow employers to claw back bonuses paid to employees in the absence of a clear legal basis to do so
Pet Line Company Limited v Wong Wai Hei [2019] HKDC 227
This case concerned a claim by the plaintiff employer, Pet Line, against the defendant employee, Ms Wai Hei Wong, to recover damages arising from Ms Wong's negligence and/or breach of duty, as well as discretionary bonuses previously paid to Ms Wong.
While the District Court awarded a portion of the damages sought, it rejected Pet Line's claim for recovery of bonus payments which formed the bulk of the amount pleaded.
This case highlights that employers will not be entitled to claw back bonuses already paid, unless they can demonstrate a clear legal basis to do so. It also illustrates that, even where the express wording of an employment contract provides the employer with a right to withhold or recover bonuses if an employee fails to perform their duties, an employer will not be entitled to rely on such a right if the terms do not provide the employer with a true discretion.
Legal Updates – Australia
Enhanced protection for corporate whistleblowers
Following an inquiry by the Parliamentary Joint Committee on Corporations and Financial Services into whistleblower protections in the corporate, public and not-for-profit sectors, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 ("Bill") received Royal Assent on 12 March 2019. The amended laws will take effect from 1 July 2019. The legislation aims to guarantee enhanced protection for whistleblowers in the corporate and financial sectors, and in particular whistleblowers who report breaches of tax laws.
The existing protections for whistleblowers were described in the revised explanatory memorandum to the Bill as a "confusing web for whistleblowers to navigate, with differences and gaps in the protections available". This led to the whistleblower protections rarely being utilised. Following the changes made in this Bill, whistleblowers will be able to act with greater anonymity and with greater certainty that they will not face repercussions for reporting misconduct.
Legal Updates – Hong Kong
Equal Opportunities Commission makes submission to Bills Committee on Discrimination Legislation (Miscellaneous Amendments) Bill 2018
The Discrimination Legislation (Miscellaneous Amendments) Bill 2018 ("Bill"), which was gazetted in November 2018, seeks to strengthen protection against discrimination and harassment in Hong Kong. The Bill is a response to eight of the recommendations contained in a detailed report submitted by the Equal Opportunities Commission (EOC) in March 2016 to the Government, setting out 73 recommendations for anti-discrimination reform, 27 of which it considers to be of a high priority (Discrimination Law Review). The EOC welcomed the Bill, but in February 2019 also made a written submission to the Bills Committee, highlighting what it sees as failures to go far enough to provide protections for certain groups, including volunteers, interns and ethnic minorities. The EOC also called on the Government to implement the other recommendations set out in its Discrimination Law Review as soon as possible, in particular those of a higher priority.
Mainland China and Hong Kong sign law which provides for mutual enforcement of judgments in employment matters
On 18 January 2019, the PRC Supreme People's Court and the Government of the Hong Kong Special Administrative Region signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region ("Arrangement"). The Arrangement will come into force following completion of implementation steps by both Governments and will apply to judgments made on or after the commencement date.
Building on previous agreements, the Arrangement seeks to establish a more comprehensive mechanism for the recognition and enforcement of judgments in a wider range of civil and commercial matters between Mainland China and Hong Kong. Significantly, from an employment perspective, the Arrangement will facilitate the enforcement of judgments on employment matters between Mainland China and Hong Kong; this was not permitted under previous agreements.
Legal Updates – PRC
Primer Li Keqiang announces measures to further reduce burdens upon businesses and to stabilize employment
On 5 March 2019, Primer Li Keqiang delivered the Report on the Work of Government of 2019 to the second session of the 13th National People's Congress, putting forward the following plan aimed to further reduce the financial burden on businesses and achieve stable employment:
- VAT reform will be deepened: The Government will introduce both general-benefit and structural tax cuts, focusing primarily on reducing tax burdens in manufacturing and on small businesses. Value-added taxes will be reduced: the current rate of 16% in manufacturing and other industries will be reduced to 13%, while the rate in the transportation, construction and other industries will be lowered from 10 to 9%.
- To significantly reduce enterprise contributions to social insurance schemes: The Government will reduce the rate of urban workers' pension insurance contributions to be made by employers. In addition, localities may cut this contribution rate down to 16%. The social insurance premium collection methods currently in operation will remain unchanged. The Government has also ordered that no locality should take any measure that increases the burden on small enterprises when reforming their collection systems, or require, on their own, that longstanding arrears are paid off in a lump sum. The current policy of reducing premiums for unemployment insurance and work injury compensation insurance will continue until April 2020. The Government commits that this year, premium payments, particularly for small businesses, must be substantively reduced.
- Multiple channels will be used to achieve stable and expanding employment in 2019: Enterprises hiring staff from low income rural areas or hiring urban residents registered as unemployed for at least six months will be entitled to a fixed amount of tax and fee deductions for three years. The Government will also implement a vocational skills training initiative, and allocate RMB100 billion from the surplus in unemployment insurance funds to provide training for over 15 million people upgrading their skills or switching jobs or industries.
PRC issues new rules to prevent gender discrimination in workplace
On 18 February 2019, the Ministry of Human Resource and Social Security, Supreme People’s Court, the Ministry of Education and another six departments jointly issued the Notice regarding Further Regulating Recruitment Behaviours to Promote Female Employment ("Notice"), which sets out a number of gender discriminatory behaviours that are now prohibited in recruitment and employment. In light of the Notice, in any recruitment plan, recruitment advert and recruitment process, employers / human resource agencies are prohibited from:
- specifying a gender requirement or gender priority, except for certain jobs which female workers are prohibited from undertaking by the Government;
- restricting the employment of female employees on the grounds of gender;
- asking a female candidate about her marital status and whether she has children;
- including a pregnancy test in pre-employment physical exams;
- making it a condition of employment that a female employee not become pregnant; and
- setting higher employment standards for women than men.
If an advert contains gender discriminatory information, the employer or human resource agency who published the advert will be ordered to take corrective action. If it refuses to do so, an administrative fine of between RMB10,000 and RMB50,000 may be imposed. Compliance with the Notice will be recorded in the employer's social credit.
In addition, the Notice stipulates that equal employment rights provided under the Notice can be relied on as a cause of action in labour litigation. The Notice has also established hotlines and service windows for victims to report employers who have engaged in gender discrimination. Employers who are believed to have engaged in such behaviours may be interviewed and investigated by the relevant enforcement body. Employers who are found to have contravened the Notice may be ordered to take corrective action, with failure to do so being announced on social media.
Shanghai unveils its minimum wage and enterprises salary growth guideline
From 1 April 2019, the statutory minimum wage of Shanghai will be increased to RMB2,480 per month. The hourly rate will be increased from RMB21 to RMB22.
In addition, the Municipal Federation of Trade Unions of Shanghai, the Municipal Enterprise Confederation / Entrepreneur Association of Shanghai, and the Municipal Federation of Industry and Commerce of Shanghai have jointly issued the 2019 guidelines for the annual growth of corporate salaries: the average growth rate is 5% to 6%, with lower growth rates at 2% to 3%. The provisions are for guidance only and do not constitute mandatory norms.
For enterprises with normal production or operations, the average growth rate can be used to determine wage increases. For enterprises with declining economic returns, the growth rate of wages can be determined by reference to the lower rate. For enterprises with difficulties in production and operation and poor economic returns, the wage growth rate can be less than the lower rate.
Legal Updates – Singapore
The new Singapore Employment Act – too much or too little?
Significant amendments to the Employment Act (EA) will take effect from 1 April 2019. With the removal of the qualifying requirements around salary and job grade, every private sector employee in Singapore will now be entitled to the rights and protections under the EA.
This has far-reaching implications on the approach and practice in relation to termination of employment. Broadly, it means that employees may bring a claim against employers if they consider that they have been dismissed without just cause or excuse (the shorthand of which is "unfair dismissal") or for constructive dismissal (i.e. forced resignations).
Despite the Legislature's positive intentions, these changes create a number of practical issues, including whether companies should invite employees to resign, and possible increased financial risks in connection with unfair termination.
For further information, please contact:
Kristy Peacock-Smith, Partner, Bird & Bird
kristy.peacock-smith@twobirds.com
[1] FCCA 2600
[2] FCCA 523
