The High Court of Australia’s decision in the Qantas outsourcing case[1] has been widely reported. But both the scope of the decision and the key takeaway have potentially been misunderstood.

How do you (dis)prove a negative presumption about your reasons?

The real issue in this case, as in most adverse action cases, was why Qantas decided to outsource ground handling – that was a factual matter that was debated in the first hearing before the Federal Court of Australia. In these kinds of cases, there is a reverse onus – which means that the employer must prove that the decision-making was not infected by the alleged unlawful reasons. If the employer does not do enough, the presumption is that the decision was made for unlawful reasons.

Qantas said that it had sound commercial reasons for its decision. So where did it all go wrong?

  • The decision maker had received advice and recommendations from others. Even though the others had given evidence that their reasons were not unlawful, the judge was not satisfied that the recommendations weren’t infected by other reasons – namely, that outsourcing would prevent employees from exercising the right to take industrial action in the future.
  • The judge was “less certain” about the decision-maker’s reasons. The judge had “reservations” about the evidence “viewed in light of all the other evidence”. In other words, the broader context in which the decision was made mattered.

The Federal Court was therefore “not satisfied” that Qantas had done enough in its evidence to overcome the presumption that the reasons were, at least in part, to prevent employees from exercising their right to take industrial action in the future.

Is a decision unlawful if it is made to prevent the potential future exercise of rights?

The High Court’s decision considered a fairly narrow issue – whether it is unlawful to take action to prevent employees from exercising rights that they don’t presently have but might be able to exercise in the future. The High Court said yes – an employer can contravene the Fair Work Act 2009 if it dismisses employees as part of an outsourcing program and some part of the reason for the outsourcing was to prevent those workers from taking industrial action against the employer in the future. In other words, dismissing employees is unlawful if it is motivated, even in only a small way, by the desire to stop or avoid those employees exercising their workplace rights in future.

Is this the death of outsourcing?

The bell has not yet tolled for outsourcing, but great care needs to be taken when making decisions for reasons that might include, or be presumed to include, preventing employees exercising workplace rights that they could be expected to exercise if there was no outsourcing – such as taking protected industrial action.

The case directs attention back to the critical importance of the reasons for the decision and the evidence about those reasons. Decision-makers must ensure that their decisions to outsource any business functions are not based on preventing employees exercising any workplace rights that employees might have – whether those rights currently exist or might be able to be exercised in the future.

There are also other areas of the employment relationship where employers will also need to take great care – for example, if an HR manager recommends that an operational manager decides to dismiss an employee before the person has sufficient service to bring an unfair dismissal claim, this will carry risk if one or more of those reasons is to prevent the exercise of that future right.

The High Court’s decision tells us that risks will be higher if there are surrounding circumstances that point to unlawful reasons being relevant to the decision or if a decision-maker is receiving recommendations from people who might be motivated by preventing employees from exercising present or future workplace rights.

[1] Qantas Airways Limited & Anor v Transport Workers Union Of Australia [2023] HCA 27

This instalment of our series on the Closing Loopholes Bill considers new measures aimed squarely at union empowerment.

The Bill mandates rights for union workplace delegates that must be included in all Modern Awards and future enterprise agreements. As a minimum, these rights will be to:

  • represent members and non-members who are eligible to join the union;
  • “reasonable” communication with members and prospective members;
  • “reasonable” access to the employer’s facilities; and
  • for all except small businesses, “reasonable” access to paid (delegates) training.

The “loophole” these unprecedented new laws intends to close is unstated. Because there isn’t one: this is a lifeline to provide unions universal representation in workplaces regardless of their declining membership or employee choice.

The context

We know that union membership has been declining in real terms over many years. It’s hit an all-time low of 8.2% in the private sector.

Unions say they need more rights to arrest this decline. But it might also be true that the value proposition to prospective members is not attractive enough. Perhaps all employers aren’t “bad” after all. Perhaps the strong suite of ever-growing individual rights (more leave, more protections against discrimination and harassment, robust safety laws, and well-resourced regulators) makes unions less relevant. Perhaps the positive employee engagement strategies many employers adopt mean unions are less needed. And perhaps the way some unions conduct themselves is unappealing to workers.

Whatever the cause, fewer and fewer employees across the labour market choose to join and be represented by unions.

This makes unions less relevant. Pretty much every unionised workforce comprises three groups:

  • Group 1: Union members who look to leadership from the union on most workplace issues.
  • Group 2: People who want to make sure they are treated fairly and get good conditions, some of whom will be members of the union, but many will not.
  • Group 3: People without interest in joining the union or participating in its activities. In some industries, a subset of Group 3 is those who join a union because they are coerced into doing so. “No ticket, no start”, as they say.

The proportions of each group vary significantly across different workplaces.

Traditionally, unions engage with employers on behalf of their members. Falling membership means, even in unionised workplaces, Group 1 is commonly only a small proportion, well short of the majority. Unions no longer speak on behalf of enough people in workplaces to achieve their objectives. They no longer represent the majority for the purposes of processes like enterprise bargaining and raising workplace disputes. So, getting employee interest in union business, such as “union rights” clauses in agreements (aimed at delivering the type of rights the new laws will mandate), is getting harder.

This is why the statutory extension of workplace delegate rights to represent non-members (eligible to join the union but have chosen not to) is essential for them.

Unions would only need one member in any workplace to trigger these rights. With it comes a right to ‘represent’ and speak on behalf of all workers eligible to join the union (members or not) on any issue and to communicate with all such workers. Effectively, a right to intervene whether the employees directly involved want them to or not.

Why wouldn’t you want to be a workplace delegate? Paid time during working hours to communicate and represent, and some additional time off for training with the union.

The reality on the ground

Unions talk about “campaigns” and “organising”. What will the new laws look like on the ground?

Meet our example employer, FoodCo. The union endorses three union delegates representing different groups in FoodCo’s manufacturing business: Daisy Delegate, Doug Delegate and Dave Delegate. Each delegate exercises their new rights as follows:

  • Daisy Delegate books a meeting room. She does so to make a call to a union official. She does this daily. Her supervisor asks her to do this during breaks, but that’s not convenient for the union. The calls last up to 30 minutes. There’s no apparent outcome other than FoodCo is down a worker on the production line. A cause for delay. A cause for overtime to be worked as a result.
  • Doug Delegate also conducts regular ad-hoc meetings during the afternoon shift. He’s been asked to do this in the tearoom, but there is no whiteboard there. So, the meetings occur in an office building on an adjacent site. Production is regularly interrupted. He’s asked to work with the supervisor to conduct meetings in a less disruptive way. He does so for a few days and then returns to ad hoc meetings. He says this is the only way he can talk to workers. And sometimes he forgets to book the meeting room as is expected of anyone else. On one occasion, he wouldn’t leave a room that management had already booked.
  • Dave Delegate wants to meet with the two others for two hours. But he’s on the night shift. So, he wants to meet with them as part of ordinary hours. This enables him to receive overtime. They want the boardroom, a speaker phone, and no other rooms booked nearby lest their calls can be overheard.

All this calls into play what’s “reasonable”. But “reasonableness” can only provide a partial answer. What can’t be overcome is the regular attempts to press management’s tolerance in the quest to assert “delegate rights”, which is in and of itself draining and disruptive.

This will happen because the changes require employers to “deal with delegates” and “not hinder or obstruct delegates exercising their rights”. Employers face liability for doing the wrong thing. There is no such sanction for delegates who overstep the mark in the exercise or purported exercise of their powers.

Sure, the scenarios above will not be universal. But neither are they fanciful: they are based on real disputes under union rights clauses in existing enterprise agreements. And there are countless other examples.

The upshot

Five key implications follow from these measures:

  1. The ability of an employer to limit delegate time on union business (as opposed to what they are paid for) will be compromised. They will be paying employees whose attention will necessarily be diverted elsewhere and antithetical to the interests of the employer and, potentially, employees.
  2. Expect to see more delegates on the floor. Working under union direction will be more fun for some Group 1 employees – especially if the boss pays.
  3. Work will be more prone to interruption. Unions have the potential to have on-the-job discussions with employees during paid time.
  4. Non-union members will be caught in the wash of workplace issues they have no interest in.
  5. The question of whether and to what extent an employer can discipline an employee who misbehaves whilst exercising “delegate rights” will again arise – an issue ripe for union litigation against employers as they seek to press the boundaries in reliance on these new rights.

Where to from here?

That a broad legislative mandate is required to compel employers and non-members to recognise and deal with union representatives is telling of a much deeper problem for the union movement: that not enough workers want them involved in their affairs. How workers who have chosen not to be union members will react to this forced intervention remains to be seen.

Of course, unions will still want members; they are businesses, too, and that is how they make money. If past attempts to try and deal with that problem by stronger statutory rights (e.g. a right to meet in break rooms) is any guide, these representative rights are unlikely to win workers over to join them.

And what happens to freedom of association when a union can speak and agitate “on my behalf” even though I disagree with the union’s position and I am not a member?

You know, the other side of freedom of association.

The use of contracting arrangements is widespread; however, around the world, we are seeing trends suggesting this type of work arrangement may become more restricted, higher cost or higher risk to companies in the future. We asked several partners to share their insights on what’s changing for companies that use contractors and what the key impacts of this may be in the future.

What changes are we seeing in the use of contractors?

Pam Devata, employment law partner in Seyfarth’s Chicago office, says that many US states have already enacted laws that apply to contractors. Pam says these laws have impacted various employment conditions, including wages and hours, background screening and ban-the-box laws relating to what and how companies can use criminal history or other screens to make decisions.

Erin Hawthorne, employment law partner in Seyfarth’s Melbourne office, says that in Australia, the government is proposing new laws that will make it easier for contractors to argue they are employees and harder for businesses to defend allegations of sham contracting. There will also be a new capacity for the national labour tribunal to vary or void all or part of independent contractor contracts that include ‘unfair’ terms. This will affect the risk profile of all independent contractor arrangements. In addition, for road transport businesses and businesses that operate online platforms deal with ‘employee-like’ contractors, the proposed laws will introduce ‘employment-like’ conditions for contractor arrangements, including minimum rates and conditions, termination protections and union-led collective bargaining.

Helen McFarland, employment law partner in Seyfarth’s Seattle office, says that more and more states (particularly on the West Coast) are enforcing laws that make it extremely difficult to be classified as an independent contractor. State agencies are aggressively pursuing these issues, even seeking to classify gig workers as employees. Further, legislators are drafting new laws (on the city and state level) chipping away at the differences by requiring companies to provide leaves and various other benefits to contractors that were previously reserved only for employees.  

Mandana Massoumi, employment law partner in Seyfarth’s Los Angeles office, says that California has been the perfect test case in how issues related to classification of independent contractors has been legislated and then litigated. In 2019, California passed laws requiring the application of the “ABC test” to determine if employees are independent contractors for purposes under certain circumstances. Under the ABC test, a worker is considered an employee and not an independent contractor unless the hiring entity satisfies all three of the following conditions:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • The worker performs work that is outside the usual course of the hiring entity’s business; and
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

However, while the ABC test is the applicable test for most workers, some occupations or industries are an exception to it, meaning a case-by-case review is always required.

Ana Cid, employment law partner in Seyfarth’s New York office specialising in European and Latin American employment law, says that while some years ago, we saw an initial trend in some countries, like Spain, which regulated an ‘economically dependent’ contractor providing some sort of ‘employment’ rights to those contractors that had a strong dependence into one client, this trend has not continued or developed much. Yet, what is a trend in Europe and also Latin American countries is to have a much stricter bar when classifying independent contractors as such, instead of employees, interpreting signs of supervision and control as factors to reclassify the contractors as employees and also regulating specific test to presume the relationship as employment relationship, particularly in the context of individuals rendering services through digital platforms, where a draft EU Directive is being discussed and is expected to be concluded soon.

Tessa Cranfield, employment law partner in Seyfarth’s London office, sees no sudden changes in the UK, despite various government consultations around adjusting the balance in favour of gig and other ‘insecure’ workers and simplifying the UK’s legal and tax tests for employment. However, a spate of ‘gig economy’ cases has made clear that status depends more on the reality of an arrangement than the written terms. And one change that is here to stay (despite a plan to reverse it by the short-lived Liz Truss government last year) is to make end users ultimately responsible for employment taxes, where a contractor works via an intermediary and works akin to an employee.

Kathryn Weaver, employment law partner in Seyfarth’s Hong Kong office, says that while contracting arrangements remain outside the purview of employment protection laws in Hong Kong, there has been increased scrutiny by the Hong Kong tribunals on the classification of independent contractors. Recently, the Labour Tribunal ruled in favour of six gig workers for a food and delivery parcel platform being employees and not independent contractors, which meant that they were then accorded the statutory employee protections and benefits. This is the first time the Hong Kong Labour Tribunal has found in favour of gig workers and is likely to be of considerable concern to other gig economy companies in Hong Kong.

What does this mean for businesses?

Pam says that employers in the US need to be aware of different types of laws when determining whether to engage with contractors or employees. This is because multiple state and local jurisdictions in the US are broadening their scope of protection for contractors. Pam warns that employers can no longer engage contractors without triggering specific labour requirements in certain states. For example, Pam notes that independent contractors in New York City and Los Angeles as well as other states are subject to Fair Chance and ban-the-box laws traditionally reserved for employees.

Australian businesses that use contractors will need to prepare for a period of uncertainty in the short term as the law reforms take shape. In the longer term, Erin predicts greater legal risk, higher costs, and less flexibility for businesses using contractors (as well as other forms of labour outside of permanent employment). Depending on the reasons for using contractors, these changes may necessitate review of alternative options.

Helen encourages employers to be extremely cautious when choosing to use contractors to perform duties that can also be completed by your employees. When considering the added risk of litigation and government penalties, and joint employment risks as contractors are bringing more lawsuits directly against the companies, it may not be worth it to hire contractors.

Mandana notes that for businesses in the United States, it is important to review any state specific laws (such as the ABC test implemented in California) to ensure proper compliance with the classification requirements, given that this area has been a hotbed of litigation.

Ana suggests that international businesses set up mechanisms to ensure that the relationships with contractors meet the applicable test in each country, particularly when such contractors are providing most of their services for one company. Particular attention should be given to employee presumption tests in each country, even more so if the services are set up under digital platform structures.

Amid the fast-growing gig economy market in Hong Kong, Kathryn reminds companies to exercise caution when engaging gig workers or contractors. If the overall impression of the relationship between the contractor and the company is that of employment, taking into account factors such as the degree of control over the contractor, who provides the equipment to perform the services, whether there is a right to appoint a substitute, who bears the financial risks, and whether the contractor is integrated into the company, then no matter how carefully drafted the independent contractor agreement is, there will be a high risk that the contractor will be deemed to be an employee by the Hong Kong tribunals.

Please contact any of our partners if would like to explore or review your contracting arrangements.

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Anything but casual…

In the first of our series examining the Closing Loopholes Bill introduced into Parliament yesterday, we look at the new measures for casual employment.

The Orwellian title of the Closing Loopholes Bill foreshadows its intentions: casual employment is double-plus-ungood. Premised on the doublethink notion that casual employment is a bad moon on the rise, the Bill proposes wholesale changes to the casual employment test, including measures to protect casuals from their own choices.

The objective

The stated objective is to close the “loophole” of what the Minister has called “permanent casual employment”, by introducing a new “what’s really going on” test. For more information, see the article in The Australian Financial Review Labor is closing the permanent casual worker loophole.

Accepting this is the genuine policy intention, the test of the measures is: do they do what they say, and will they work as they want?

We have serious reservations.

The new test

In their steely determination to place choice about status in the hands of employees, and to prevent abuse of casual employment, the Government has devised a test that:

  1. Requires employers to evaluate and re-evaluate the “true nature” of each casual’s employment circumstances on an ongoing basis;
  2. Introduces a complex definition based on the absence of something (A Future Advance Commitment), effectively requiring employers to disprove a negative to defend their decisions;
  3. Defines the absence of advance commitment by a multi-factorial test of relative considerations, none of which is decisive, but any of which could be in a given case;
  4. Relies on a combination of abstract novel terms, that are very much in the eye of the beholder: “real substance”, “practical reality”, “true nature”, “regular” but not uniform: who knows what they mean sitting here;
  5. Introduces a right for casuals to request conversion every six months and requires employers who wish to refuse to provide detailed reasons informed by the test and based on the circumstances of each employee: administratively burdensome but very convenient for later evidence collection;
  6. Continues the existing obligations for employers to offer conversion after 12 months; and
  7. Creates ongoing liability for misrepresentation of casual arrangements at any point in time, including penalties and back payments (think sham contracting for casuals – so don’t get it wrong).

These measures, however well-intentioned, risk having precisely the opposite effect. Driving uncertainty and insecurity for those people who actually want, and feel well-served by, casual employment.

We will explain why.

The practical implications

Our concern is that the thinking does not take into account how businesses manage risk in the real world. The practical reality is that by failing to define clearly what casual employment is, and using a complex test based on what it isn’t, any ongoing casual relationship is going to carry substantial risk for businesses.

Simply put: too uncertain + serious consequences = high risk. Well-resourced employers will identify and take steps to mitigate this risk. As they do with any risk. And how can a small business owner possibly hope to apply more than 10 abstract notions, to assess the “real substance” and “true nature” of their casual employees on an ongoing basis?

This means that the use of casual employment will change at the initiative of employers, regardless of the choice exercised by employees. It will not result in casual employees having the choice of permanent employment in all circumstances. Some employers will avoid casual employment altogether. Others will change their work practices to reduce the risk.

The risk profile created by the Bill means employers must manage their affairs to:

  1. Avoid regular patterns: Employees will not have the certainty of working on particular days, employers will be compelled to change it up. To ensure not just that there is not a uniform pattern of days but a sufficiently disrupted pattern to avoid the test of “regular” but not “uniform”.
  2. Avoid any future commitments: This is not focussed on the casual with the 12 month roster or, even the promises made during the employment. It will be assessed by things like “mutual expectation” and “understandings” derived from conduct (that do not have to be sufficient to be contractual terms) and the likelihood of future work. What you do and what you say – even how you say it – can affect the outcome.
  3. Increase turnover: Longer service under this test increases risk. The rational thing to do will be to turnover casual employees so the time-based tests are not triggered. Casuals will end up having multiple short-term jobs rather than building experience and potentially other career opportunities with one employer.

The bottom line is that any casual employment relationship is now contestable. The Bill creates a world where legitimate casual employment is confined to fragmented occasional single day employment (on different days). Anything else will carry increasing risk over time.

The result is unlikely to be good for most casual employees.

Most casuals want to be casuals….but now they can make claims

The Minister has said that he sees the legislation providing employees choice and that most will decide to remain casual. The data on that is in: just to illustrate, a large employer who made offers to more than 500 casuals to convert to equivalent part-time, had fewer than 10 acceptances (a conversion rate of under 2). Our experience is that sectors that rely heavily on casual employment typically have conversion rates of 5-10%. Most of those are long-term casuals with settled employment. The Minister seems to acknowledge this, but the Bill does not. Rather than address the specific harm (long term casuals in permanent arrangements) it applies to the norm: all casuals at any point in time.

This is a critical point where the new test fails: it removes the capacity for employers to get certainty from the decision of a casual to remain a casual in respect of their past period of employment. The relationship is all contestable and carries significant financial risk if employers are later found to have got it wrong.

And it is important to remember how these risks manifest as claims. As explained above, very few casual employees elect to change status while they remain employed. The challenges will come when the relationship breaks down. Where arrangements that were agreed are re-characterised through a prism of discontent. And the legislation permits events throughout the relationship to be contested. We know where this ends…

Not all aggrieved employees bring claims. But some will. The choice not to convert will be characterised by fear of losing their job or claims that they were forced not to convert. Most claims will fail. Or be settled to avoid the high cost of litigation that outweighs the value of the claim (rather than because of any genuine wrongdoing). However, this will compel employers to further alter their use of casual employment to reduce that risk.

Where to from here?

You could be forgiven for thinking that the Bill views all casual employment as a subversive form of exploitation to be treated with suspicion, and deserving of legal sanction. This is where the ideology of the Bill bites hard: an underlying assumption that casual employment could not possibly be in anyone’s interests.

This law is not just about the perceived evil of the “permanent casual”, it would apply to all casual employment from day one. And in doing so, it would impose an unworkable test that opens the door for a range of bad outcomes for all involved.

The extent of the changes is unnecessary to address the “permanent casual” loophole the Minister wants to close. They are clumsy, heavy-handed and will affect people who, even on the government’s position, are doing no wrong. These are the hallmarks of bad legislation. If the government really wants to address “permanent casual” employment, the Bill should be substantially amended. It would be a simple fix to introduce positive limitations on the use of long-term casual employment.

Unless what the government really wants is to stamp out casual employment more widely. In which case, this presents as an old-school bait and switch: to hold up the example of the casual truck driver with eight years’ service and a 12-month roster (that most people think shouldn’t happen) and use it to make wholesale changes to something the government and their union stakeholders don’t like (but which most people won’t read in the detail).

The Bill squarely raises that question.

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Some of this is guesswork, and the extent of what’s coming is uncertain, but:

  1. Fixed term arrangements have a limited life. This we know already.
  2. Employees have greater rights to flexible work arrangements. Ditto.
  3. The use of casuals will be restricted, and casuals will have more rights.
  4. For organisations with enterprise agreements, outsourcing work will be limited to using external labour for the same price as that (otherwise) paid internally.
  5. Independent contractors will have the potential to access employment-like terms.
  6. The labour hire industry will be more regulated.
  7. The “gig economy” will see employment-like protections.

What’s obvious is the Labor Government’s intent to drive permanent employment and use legislative levers to reduce the number of other categories of workers.

Contracting, franchising, outsourcing and other legal devices have disrupted long established employment relationships…

– ALP National Platform 2021

So, we will very likely see the disruption of long established means of contracting and engaging personnel.

This doesn’t take much of a crystal ball; anyone who has paid attention to Government messages can join the dots.

But from a labour strategy perspective, the ability:

  • to flex up and flex down will be reduced and/or be more costly;
  • for employees to be engaged as regular casuals and enjoy the 25 % loading will be reduced;
  • to identify cost/efficiency savings through outsourcing will be reduced;
  • drive competition in labour supply will be reduced (in effect, another distortion in the price of labour will apply); and
  • to shift the burden of compliance to third parties, the “owners” of labour, will be reduced.

Interesting times. Of course, more employees mean more potential union members. And unions are not forgotten in the legislated levers also. They stand to gain even more rights to intervene in workplaces they can cover, regardless of membership.

Stay tuned for our series reviewing the third wave of reforms and its implications for employers and the labour market generally – commencing shortly.

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In part three of our four-part series on Reductions in Force in Asia Pacific, we looked at severance costs and benefits, key timing challenges and consultation with employees or employee representatives.

In this final instalment of our series, we’ll cover the last three things that we recommend multinational employers consider: (#8) consideration of expats, (#9) post-employment considerations and (#10) risks.

#8 – Consideration of expats

When the RIF involves expat employees, four areas that companies might need to take into account include:

  • Specific selection criteria. First, check whether there are any specific selection criteria that apply to foreign employees. There may be legal requirements in place requiring companies to select foreign employees before local employees, in particular for the jurisdictions that are more pro-employee and protective of their national core. For example, in Malaysia, within the same category of workers, foreign employees must be retrenched before local employees.
  • Impact on employee composition. Employers should also consider whether and, if so, how the RIF would affect the foreign to local employee ratio. Even where a jurisdiction does not require companies to select foreign employees before local employees in a RIF, a legal requirement to maintain a certain foreign to local employee ratio may mean that companies will need to review the number of foreign and local employees who will be affected by the RIF to ensure that the foreign to local employee ratio will be maintained post-RIF. Singapore is an example of where such a ratio is in place.
    • In some jurisdictions (e.g. Vietnam), companies can only recruit expats for positions that require specific skills that cannot be found locally. Companies may therefore want to consider whether they can move expats to alternative roles that will require the expat’s skillset.
    • Companies should also consider whether any workplace arrangements need to be reviewed in relation to expats. For example, in Indonesia, employers are required to appoint a local employee to be the companion of every expat, so that they can exchange views on technology and expertise. If a local companion will be terminated due to a RIF, the employer will need to appoint someone else to be the expat’s local companion.
  • Work visa issues. Where an expat is working under an employment visa (or equivalent), sponsored or supported by the company, the company will need to consider the impact of the RIF on the expat and also what the company’s obligations are to the immigration authorities and to the expat, if the expat is made redundant/retrenched. For example, will the work visa and the expat’s right to remain in the jurisdiction lapse shortly after the termination of employment, or will the employee be able to remain in the jurisdiction for a period of time to try and find another role?
    • If an expat’s employment visa will lapse due to the RIF exercise, consider whether there is any obligation on the employer to repatriate the expat to his/her home country, under contract and/or statute. Even if there is no legal obligation to do so, companies can consider whether to offer a repatriation package as part of the RIF, perhaps in exchange for the employee entering into a mutual separation agreement where he/she agrees to waive and release the company from any claims.
  • Notification obligations. Where the employee is on a work visa, companies would usually need to notify the relevant authorities (e.g. the immigration and inland revenue/tax departments) when the employment is terminated. There is often a prescribed timeframe on when the notification should be made.
    • In some cases, approval of an authority may be required in relation to an expat being made redundant and changing job. For example, in Indonesia, pre-approval from the Director General of Labor must be sought where a foreign employee intends to change employer, and the approval will only be granted in specific circumstances.

#9 – Post-employment considerations

There are several post-employment issues that companies should be aware of:

  • Taxation. Employers may be obliged to notify tax authorities of the termination of employment, within the prescribed timing. In some jurisdictions, the notification needs to be made prior to the termination of employment.
    • There is also the question of whether statutory severance is taxable as income – different jurisdictions take different approaches to this. Also, tax authorities may have varying views as to whether enhanced severance payments are taxable. These tax queries should be investigated prior to making any severance payments, together with whether the employer is subject to any tax-related withholding obligations in respect of termination/severance payments. For example, there are tax-related withholding obligations in Hong Kong.
  • Data retention. We have been seeing governments in APAC jurisdictions placing greater emphasis on data privacy and protection in recent years. In terms of employee data, employers should find out whether there are data retention requirements under local laws, as well as what the best practices or guidelines in the market are. A breach of data privacy laws (inadvertent or otherwise) may lead to both civil and criminal consequences.
  • Pensions. There may be notification requirements in relation to pensions – employers should check if they need to inform the relevant pensions provider, or central authority, of the termination of employees. Employers should also consider whether there are requirements – statutory or contractual – for them to assist with or procure any transfer or withdrawal of the pension funds. If so, the employer should prepare the necessary paperwork (noting whether there are prescribed timings for doing so) and liaise with the employees/relevant providers in relation to this.
  • Restrictive covenants. It is common for employment contracts to provide for post-termination restrictive covenants, for example non-compete and non-solicitation of employees and customers. When looking at restraints, there are two main things to consider in a RIF situation – (i) whether the restraints are enforceable in the jurisdiction, and (ii) if so, whether the employer intends to enforce them.
    • As regards enforceability, local law advice is recommended, as legal frameworks can be vastly different – for example, in Malaysia, non-competes are prohibited; in the PRC, they are allowed but must be compensated for; in Australia and Hong Kong, restraints can be enforceable but must be drafted very carefully.
    • Even if the restraints are enforceable, employers may choose not to enforce them. For example, if an employee has been on garden leave prior to the termination, and therefore has been out of the market for a period of time, it may no longer be necessary to enforce the restraints. Offering to waive a non-compete could also be deemed valid consideration for an employee to enter into a waiver and release of claims.
  • Confidentiality. Employees will generally be bound by confidentiality obligations post-termination of employment. However, employers often choose to remind employees of their confidentiality obligations or, depending on the roles/seniority of the employees involved, have them enter into fresh confidentiality undertakings on termination.
  • Outplacement services. Employers may wish to consider whether to offer outplacement services to employees, to assist them to move on to another job or career. This may form part of the separation package in the case of a mutual termination, or may be offered more generally as part of the standard RIF exercise. Outplacement services are not as common in Asia Pacific as they are in other parts of the world, but they can be a helpful benefit to offer employees in a RIF situation to make the job-hunting process easier for them.
  • Debriefing. After the RIF, it is advisable to debrief and review the lessons learned – are there matters for improvement, or special points that should be noted? Are there particular cultural factors, legal requirements etc, that the employer should bear in mind if there is a next time? Consolidating this information, as well as keeping good records of all relevant paperwork and communications, can be of substantial value for any future RIFs.
  • Employee relations. Last but not least, employers should manage employee relations of the remaining team carefully during and after a RIF exercise. RIFs can affect existing employees in numerous ways – their job duties and compensation may change due to the RIF; there may be feelings of negativity or insecurity etc. It is important for employers to provide adequate support and reassurance to the remaining employees in order for the workplace to remain positive and productive. For example, employers can arrange for employees to access employee assistance programs, encourage and foster open communications between managers and employees, communicate a positive outlook and company values to the employees, and provide reassurance – if possible – that there are no further planned RIFs for the time being.

#10 – Risks

There are significant risks and consequences if a unilateral termination for a RIF is regarded as a wrongful dismissal (noting this phrase may have different meanings in different jurisdictions).

Figure 1: Consequences for wrongful dismissal

Figure 1 presents the consequences for wrongful dismissal in various jurisdictions. Reinstatement is the most widely recognised consequence, and compensation is generally an alternative or combined consequence. The provisions regarding wrongful dismissals in the PRC are more detailed and worthy of close attention.

The key takeaways related to the risks of a wrongful dismissal are four-fold:

  • Before the RIF, determine the ultimate goal and work backwards from there. This requires a thorough analysis of the entire business and employment situation.
  • Ask yourself: “What’s the priority?” and “Which is more important – maintaining good employee relations, speed, or minimising overall cost?” By answering these questions, you will be clear and can focus on the company’s priorities and needs.
  • Try to get the full picture from local HR and headquarters to understand the current employment and RIF situation in the intended jurisdictions.
  • Finally, bear in mind that it’s fairly typical to face litigation risks and industrial disruption in a large RIF exercise. Therefore, it’s important to be aware of this and fully prepared regarding the process.

We hope that our series breaking down the top ten things to look out for in APAC reductions in force has been insightful. Our authors would be pleased to address any follow-up queries you may have.

This post was originally published on Seyfarth’s blog Employment Law Lookout: Insights for Management and is reproduced in its entirety here.

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In a previous blog, we summarised the recent case of Groff v. Dejoy, where the U.S. Supreme Court unanimously clarified the undue hardship standard under Title VII, a federal law in the United States that prohibits employment discrimination based on race, colour, religion, sex, and national origin.

The decision is in line with a general global trend in other common law based jurisdictions towards inclusivity in the workplace and the notion that an employer simply cannot deny such requests without at least a legitimate consideration of whether an accommodation based upon belief system can be made. Many employers acknowledge the importance of fostering a work environment that values and embraces diversity, equity and inclusion, which includes recognising and respecting religious differences. The challenge for all employers lies in ensuring that these considerations are balanced with commerciality. Additionally, multinational corporations need help ensuring compliance with the legal standards set by all the countries in which they operate, given the variations in standards and requirements across different countries.

Our international employment practitioners have provided some insights below for multinational employers regarding their obligations to accommodate employees’ religious beliefs in the United States, United Kingdom, Australia and Hong Kong to highlight some of the differences in each jurisdiction.

Groff v. Dejoy and the new U.S. standard addressing employee religious accommodations

In Groff v. Dejoy, the Court rejected the long-standing de minimis standard established in the TWA v. Hardison case, which held that employers cannot avoid meeting religious requests simply by arguing that it would cost them more than a trivial amount. Instead, the Court stated that an accommodation imposes an undue hardship on the employer only if it substantially increases costs directly related to business operations. Additionally, the Court emphasised that the impact of accommodation on co-workers is considered an undue hardship only if it affects the overall conduct of the business. Based on this new standard, the Court ruled that an accommodation that may compel other employees to work overtime does not automatically meet the criteria for undue hardship.

Although the case concerned accommodating a Christian’s observance of the Sabbath day, the obligation is not limited to traditional Judeo-Christian concerns. Amici representing the interests of many religions and faiths filed briefs arguing for a higher standard for many religions and faith practices. In the end, employers in the U.S. and in other common law states face an interesting question—does the ruling put larger employers with more resources under a greater obligation to make such accommodations than smaller employers with more limited resources? Only time, and jurisprudence, will settle that question.

United Kingdom

While there is no positive statutory duty in England and Wales for an employer to make reasonable adjustments to the work environment for religious belief, in the same way as the law of discrimination so clearly applies to disabilities, an employer would be at peril in failing to accommodate or at least trying its best to accommodate working constraints around employee belief systems.

The UK Equality Act 2010 prohibits both direct or indirect discrimination on the grounds of religion or belief in the workplace. Whilst direct discrimination is wholly prohibited, there are exceptions where indirect discrimination might be justified, where the contentious practice is a proportionate means of achieving a legitimate aim. Case law in this area is both legion and fact specific. An (easy and oversimplistic) illustration of this is where an item of religious clothing is prohibited for health and safety reasons or to ensure the personal safety of the employees. This is a legitimate aim and, provided it is reasonable in all of the circumstances, it is likely to be held to be lawful.

Had Mr Groff bought this action in England and Wales, the analysis would be different because the UK has never really had the same “de minimis” standard as the United States has. The claim would most likely present under the auspices of indirect discrimination, and it would be for the employer to demonstrate that insisting Mr Groff work Sundays contrary to his beliefs or disciplining him for failing to work Sundays would be a proportionate means of achieving a legitimate aim. The way this works in practice, in our experience, is that the employer must show it had little practical choice but to adhere to the policy in issue for sound operational reasons. But, employers must always start with a view to seeking a way to accommodate such requests if they are legitimate. Minor costs of waiving this requirement would probably not justify enforcing it, but major costs or other operational constraints attendant in doing so might.

Some critics in the UK claim that the Equality Act fails to provide the requisite protection for those seeking to assert their religious freedom. This has led to calls for clearer duties, not dissimilar to those imposed in the area of disability discrimination, to be established for religious rights. The Equality Act and the relevant code of practice supporting it make it clear that the law encourages balanced, pragmatic reasoning that should be engaged on a case-by-case basis by employers. The key is respect for the tenets of the religion or belief system and a genuine attempt to accommodate it within the operational parameters of the enterprise.


Similar to the UK, there is no positive obligation to make adjustments to accommodate religious practices under Australian law. It is likely that an equivalent claim in Australia would have been argued on the basis of indirect discrimination, alleging that the employer’s requirement to work on Sundays was a requirement that (while appearing to apply equally to everyone) had a discriminatory impact by disadvantaging employees with religious commitments on that day. The lawfulness of any such requirement (and the capacity to enforce it) will turn on an assessment of whether the requirement is reasonable or not.

When assessing reasonableness, relevant factors include: whether a less discriminatory alternative exists; whether it would be as effective, efficient and convenient; and the time, cost, and effort of not discriminating. While cost is one factor that will be considered, a de minimis cost impact is unlikely to be sufficient (on its own) to demonstrate reasonableness.

What is reasonable (and therefore lawful) for one employer might not be reasonable for another. Employers are expected to balance the discriminatory impact and the interest of individuals, as well as the broader objectives of promoting substantive equality. Less discriminatory alternatives need to be considered on a case-by-case basis, with potentially discriminatory requirements only used where these can be justified as reasonable.

Hong Kong

In Hong Kong, there is no statutory protection against religious discrimination. In fact, there are only four anti-discrimination ordinances in Hong Kong covering sex, race disability, and family status. It may, however, be possible for an employee to bring a claim under the race anti-discrimination ordinance in respect of religion if the argument was made that the race, colour, descent, national or ethnic origin, and the religion were intrinsically linked – certainly, we are aware of complaints being made to the Equal Opportunities Commission in Hong Kong by Muslims in respect of being treated discriminatorily due to wearing hijabs, although there have been no reported court cases of this nature. Therefore, practically, if an employee wanted their employer to accommodate their religious beliefs in the workplace, they could raise this internally first, through a complaint/grievance, and could then escalate it to the Equal Opportunities Commission or the District Court, if the matter was not resolved to their satisfaction.

Even though there is no positive statutory obligation for an employer to accommodate employee requests regarding religious beliefs in Hong Kong, as a matter of good practice, had Mr Groff made his request to a Hong Kong employer, the employer should have properly assessed whether it was reasonable to accommodate the request. In doing so, the risks of any indirect racial discrimination claim relating to the religion of certain racial groups should be considered, and, if the employer was minded to reject the request, the reason for refusal should be legitimate and objective (e.g. based on costs or operational/business needs).

Further, if Mr Groff was employed under a continuous contract (i.e. employed continuously for at least four weeks, with at least 18 hours worked each week), he would also have been entitled to at least one rest day per week in Hong Kong. In that case, the employer could, subject to operational needs, appoint Sunday as Mr Groff’s weekly rest day to accommodate his request and discharge its statutory obligations.

The above examples have been chosen to highlight some of the differences between key jurisdictions, however, we are working with our clients across jurisdictions globally to ensure that they are compliant.

Seyfarth’s International Employment Team and International Dispute Resolution Group collaborate closely with multinational clients to address the complexities and opportunities that impact their cross-border operations. With our extensive expertise in International Labour and Employment matters, Seyfarth is uniquely equipped to assist in striking a balance between commercial considerations and the implementation of equity and inclusion best practices. Our global experience allows us to provide comprehensive legal guidance, develop and execute diversity and inclusion strategies, and track progress towards meaningful change.

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In part two of our series on reductions in force in the Asia Pacific, we addressed the importance of restructuring rationale, employee selection and redeployment, and consultation with employees or employee representatives. In part three, we’ll cover the next three issues we recommend multinational employers consider: (#5) severance costs and benefits, (#6) timing challenges, and (#7) logistics and practicalities of implementation.

#5 – Severance Costs/Benefits

As we mentioned in part one of our series, costs and budgeting concerns can affect the overall approach to the RIF.

Figure 1: Severance across key APAC jurisdictions

Figure 1 highlights some formulas for statutory severance across popular APAC jurisdictions. We have also included common enhanced severance package benefits.

Other costs/benefits typically include:

  • Notice period or payment in lieu of notice (other than in the case of employee misconduct).
  • Bonuses, incentive pay, and equity based compensation (usually subject to contractual arrangements).
  • In some cases, outplacement services.

This does not take under consideration other costs that may be incurred by threatened or actual litigation or PR issues (e.g., use of HR/business time/resources, legal fees, and/or potential PR/consultancy firm fees).

#6 – Timing Challenges

When planning a RIF in Asia Pacific countries, it’s important to consider appropriate timing for employee and public facing communications, including global announcements of any plans to conduct RIFs and, equally, commitments to any timeline for finishing these exercises in the context of the following:

  • The target date may not be fixed. Country specific limitations can cause the RIF completion date (i.e., the termination date for all impacted employees) to slip, impacting other operational scheduling issues. Thus, it’s important for employers to ensure they don’t make any definitive statements too early, especially concerning timing. Announcing unrealistic timing can have an impact on financial results, reporting and RIF costs allocation, as well as employee morale.
  • Consultation requirements. Consultations may need to be at least initiated and sometimes completed before potential impacts may be announced.
  • Third party employer involvement. Third party employer involvement may mean delays in implementation – sometimes significant ones – created by the time needed for the company notify the Professional Employer Organization (PEO), which may then need to coordinate with their local service provider or employer. Any services contract with a PEO or Employer of Record (EOR) should be consulted for the advance notice required, but even this timeline may slip if there are any disagreements as to the legal requirements and how to proceed. In practice, such disagreements will need to be resolved since it is the third party employer that will take many of the requisite steps.
  • Protected employees. For protected employees, including pregnant and sick employees, it’s important to determine how long protection will last and whether additional extensions are possible. It may be necessary to carry protected employees on payroll until their period of protection is over and for some period thereafter.
  • Local custom/holidays. Global companies need to look out for local holiday periods (e.g., Lunar New Year, Golden Week) when it would be considered bad form or insensitive to undertake reductions. This can include the period in the run up to the holiday or festival period and can also impact the timing of legal advice required, availability of consultation bodies, employees and their representation, and even government authorities and agencies.

#7 – Logistics and Practical Implementation

For a multinational company, particularly one based in the U.S., the logistics of RIF implementation in the APAC region can pose particular difficulties:

  • Delivering the news. Again, timing is a key consideration, including time zone differences and who will be available to deliver the news. Practically speaking, a global RIF may need to be “launched” in Asia, or the region may have to “wake up to” news of a RIF from the day before in the U.S. or elsewhere.
  • In person/remote meetings. Also critical is determining whether you can have in person or remote meetings, and whether they will be held as a group or individually. In person meetings are typically best, but for larger rounds and in cases where employees work remotely, there is no HR function, or limited HR function in country, at least some of the meetings may need to remote. Also, scheduling large numbers in multiple countries can be tricky whether remote or in person, and there may be technical and logistical difficulties with remote meetings (e.g., unreliable internet, lack of printing or scanning facilities).
  • Appropriate representation/power of attorney. This is one item that should be confirmed early on, so that any decisions and terminations are not compromised by invalid, inappropriate, or unauthorised representation of the company, including in locations where local national HR must be making the employment related decisions and actions (e.g., Indonesia). Powers of attorney may be needed to sign termination documents by available personnel and to sign related corporate documents including share transfers and buybacks. It may be necessary to offer retention packages to the key employees who will remain available to execute RIF actions.
  • Collecting signatures. For the company, consider where a chop is required and whether coordination with the PEO/EOR is required. It’s important to make sure ahead of time that any third party employer representative required for execution is available on the day. For the impacted employee, consider what they will need to sign (not every termination notice necessarily needs the employee’s signature, but mutual separation agreements will inevitably require it – the requirements may be more flexible for mutual agreements). If the employee is signing remotely, is a scan sufficient? Do they need to return the original, and how will any required duplicates get where they need to be? Also, consider if there are witnesses required, recommended, and available.
  • Removal/resignation of directorships. Consider whether a replacement must be appointed for any impacted directors and whether there are any nationality or residency requirements. Director/shareholder resolutions may be required in the event of forced removal of directors.
  • Collecting company property and equipment. Consider what company property and equipment needs to be collected, the tax impact of any equipment being retained by the employee, and the actual logistics of how this will be collected, inventoried, wiped if necessary, and shipped back to headquarters or repurposed locally.

Stay tuned for Part 4, the last in our series on the 10 things to look out for when doing an APAC RIF. We’ll cover numbers 8-10 in our top ten list: Consideration of Expats, Post-Employment Considerations, and Risks.

This post was originally published on Seyfarth’s blog Employment Law Lookout: Insights for Management and is reproduced in its entirety here.

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In Part 1 of our series on reductions in force (RIFs) in the Asia Pacific, we addressed the importance of planning and strategy timing. In Part 2, we consider the next three things that we recommend multinational employers look out for: (#2) restructuring rationale; (#3) employee selection and redeployment, and (#4) employee/employee representative consultation.

#2 – Rationale for Restructure

While companies should make sure there is a proper business case and rationale for a RIF, it is also important to ensure that the business case falls within the permitted grounds in each specific APAC jurisdiction. The permitted grounds differ depending on jurisdiction and range from not needing to justify the reasons for a RIF to aligning with specific permitted grounds under labor laws.

Figure 1 looks at some different jurisdictions as examples.

Figure 1: The need for business rationale varies by country

At one end of the spectrum are Singapore and Hong Kong, where there are no legal requirements to justify to employees the reasons behind the decision; it is sufficient so long as companies have genuine business rationale for the RIF. At the other end are countries like Japan, South Korea, Taiwan, and the PRC, where specific grounds/criteria are required by law, and companies may be required to provide proof.

#3 – Selection and Redeployment


In terms of determining which employees are selected for redundancy, key considerations to ensure employers get it right in each relevant APAC jurisdiction include:

  • Protected characteristics. In a number of jurisdictions, there are legislative prohibitions against terminating employees during a RIF process where the employee has a particular protected characteristic. The key characteristics include pregnancy, maternity leave, absence due to work-related illness or injury, or being an employee representative.
  • Statutory criteria. Employers should check whether there are statutory criteria that need to be applied when selecting employees for redundancy in the affected jurisdiction, such as in Malaysia and the PRC.
  • Restrictions in other instruments. Even if no mandatory statutory criteria exist, there may be other instruments, such as policies or collective agreements, that contain restrictions on who can be selected and what process is to be applied. For example, in Australia, collective agreements may specify particular considerations that must be taken into account, such as ‘Last In First Out’ or seeking volunteers before compulsorily retrenching employees.
  • Role of objective criteria. Even where criteria are not mandated, such as in Australia, Singapore, Hong Kong, and Japan, you may still need to defend selection decisions down the track. As such, in these jurisdictions we still recommend that objective and non-discriminatory criteria are applied (e.g., skills, qualifications, licenses, experience etc.), particularly when downsizing within a group of interchangeable roles. This will help in defending against claims that the selection was for a discriminatory reason or was otherwise unfair or unjustified.
Figure 2: Framework for selection

Figure 2 is a ready reckoner summarising the key jurisdictions where there are no statutory criteria and those where statutory criteria may apply. On the right hand side are the jurisdictions where you particularly need to consider whether you are required to ring-fence employees who fall into protected categories. In jurisdictions such as Australia and Singapore, so long as the reason for selecting an employee for redundancy is not because of (or does not include) the protected attribute then there is no absolute protection merely by holding the protected attribute.


The next issue to consider is whether, in the relevant APAC jurisdictions, there is an obligation to consider redeployment to vacant positions within the company or the group (locally or worldwide) to try to avoid dismissal before proceeding with RIF terminations.

In Australia, for employees who earn less that the statutory unfair dismissal salary threshold, redeployment should be considered prior to termination; otherwise, the termination may not be regarded as a genuine redundancy. In Japan, redeployment is not a specific legal obligation. Nonetheless, employers are expected generally, and by the Court, to only proceed with the RIF if (among other things) it was necessary, and after every reasonable effort was made to avoid it. This would generally include considering the option of redeploying the employees. In Malaysia and the PRC, employees made redundant should as far as possible be given priority for re-engagement if the employer subsequently hires employees.

#4 – Consultation

Whether or not consultation with employees and/or trade unions/employee representatives is required varies between jurisdictions and needs to be factored into employers’ timing and process. Consultation considerations include:

  • Who must be notified – affected employees and/or unions? For example, in the PRC, Vietnam, and South Korea, employee representative or union consultation is mandatory.
  • Timing for the process – is there a timeframe you need to be aware of? For example, in South Korea, 50 days’ prior notice of a RIF must be given; in the PRC, the consultation process needs to be kicked off 30 days before any dismissal.
  • What information needs to be given to employees and/or unions? For example, in Australia, certain “relevant information” may need to be provided to affected employees and their union representatives (if any) about the reasons for the RIF and selection criteria. Be aware that litigation may arise, so care should be taken when creating internal documents that may need to be discovered.
  • What obligations must be met before you can proceed with the RIF? For example, in Vietnam and Japan, certain documents need to be in place before proceeding with the RIF.

All of these things need to be built into your process and timing.

Next up is Part 3 of our series, in which we’ll examine numbers 5-7 in our top ten list: Severance Costs/Benefits, Timing Challenges, and Logistics and Practical Implementation.

Seyfarth recently hosted a webinar entitled Asia-Pacific Reductions in Force: Ten Things to Look Out for, addressing the practical issues employers should be aware of when restructuring in APAC. We shared examples across a variety of countries in the region, including Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the People’s Republic of China, Singapore, and Vietnam, among others.

Given the interest in this subject matter, we bring you this series of four blogs that break down highlights of our top ten things to look out for. Please read on for Part 1, which covers our first consideration – planning and strategy timing.

  1. Planning and strategy timing

The key question for a reduction in force (RIF) is, how can companies reach their business objectives efficiently and effectively while avoiding legal and cultural pitfalls? RIFs in APAC, in particular, can be challenging because the requirements and local nuances vary vastly among jurisdictions, which may affect the overall planning and strategy timing. Therefore, it is crucial not only to understand the laws of the jurisdictions in which RIFs are intended, but also to capture the right level of information upfront, so that there can be a proper assessment of whether, and if so, what legal requirements are applicable or triggered.

In APAC, the RIF legal framework can be very different between employer-friendly jurisdictions and employee-friendly jurisdictions. Broadly speaking, the ease of carrying out RIFs in different APAC jurisdictions can be categorised into three levels – easy (green), medium (amber), and hard (red) – which we illustrate for some common APAC countries in the heat map in Figure 1.

Figure 1 – RIF difficulty heatmap in APAC

In addition to the importance of understanding the legal requirements of the impacted jurisdictions, other key considerations in relation to planning and strategy include:

  • Timing. Often, businesses will have an intended timeline for a RIF – for example, before the end of a financial year, or before or after the completion of an M&A project. Therefore, it is important to allow for sufficient time to complete necessary legal processes before the intended RIF date. For countries where the process of a RIF would be lengthier (e.g. Indonesia, Taiwan and India), the legal process may have to begin sooner than other jurisdictions such as Hong Kong, where an immediate RIF is possible. Where there are protections over specific classes of employees against termination of employment (e.g. pregnant or sick employees), this will also impact the planning around timing.
  • Communication. The overall timing will also impact the communication plan. For example, if you need to stagger the timing of the RIFs in different jurisdictions, how do you manage employee expectations? A clear communication plan upfront can help manage those expectations effectively throughout the RIF process. One-size-fits-all approaches should be avoided as there are different legal and cultural considerations to bear in mind across the region. With the communications strategy, it is important to consider the who (e.g. who is most appropriate to deliver the communication – HR, management, in-house counsel, etc.?) and the how ( e.g. via townhall, email, letter, in-person/zoom meeting, board resolution, individual or group meeting, etc.?).
  • Costs and budgeting. Costs and budgeting concerns can affect the way in which companies approach a RIF in APAC. If the key driver is to keep costs as low as possible, a company may wish to follow the statutory process in each APAC jurisdiction in order only to pay the statutory minimum termination payments to affected employees – however, in some jurisdictions, this can take a long time, and disgruntled employees could make complaints or raise claims if they are not satisfied with the process. If the key driver is to complete the APAC RIF promptly or by a fixed date and to minimise any legal risks, a company may prefer to consider the mutual separation route under which they will provide an ex-gratia payment to affected employees in return for them waiving their rights to bring any claims against the company – this will obviously cost more money though. In some jurisdictions, such as Japan, it may be the market norm to offer an enhanced package to employees, and there may be market benchmarks. Therefore, apart from looking at the legal requirements, market practice and expectations may also affect the costs and budgeting of the RIF.
  • Business case and objectives. Finally, the business case and objectives are crucial elements to a RIF. For some jurisdictions, a RIF cannot be justified without a proper business case being in place (e.g. showing that the company is experiencing financial difficulties), whereas for other jurisdictions an explanation for the RIF is only required if an employee challenges the RIF in court (we’ll address this in greater detail in our next blog). Business objectives around what the company wants to achieve and what roles, skills, and experience it requires going forward will affect how the RIF is conducted and how employees are selected for redundancy. While planning a RIF, thought should also be given to how to avoid, as much as possible, disruption to the rest of the business. Communication with the remaining employees is important to relieve any concerns, assist with retention, and ensure continued productivity.

The key takeaway from the planning and strategy stage of a RIF is not to look at all of these elements in a vacuum, but to understand the whole landscape in which the RIF will happen in order to plan appropriately and ensure a smooth process that achieves the company’s goals.

Please stay tuned for Part 2 of our series, where we’ll examine numbers 2–4 in our Top Ten list: Rationale for Restructure, Selection and Redeployment, and Consultation.

This post was originally published on Seyfarth’s blog Employment Law Lookout: Insights for Management and is reproduced in its entirety here.

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