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.

Australia

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

Selection

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.

Redeployment

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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Already stretched HR, ER, WHS and Legal teams are about to confront a (seemingly) never-ending stream of law changes that will require cross-team collaboration to operationalise.

At a time when there are already broader economic and market challenges for businesses, leading employers will need to have sufficient resourcing and planning to confront the changes we know are coming.

To take some simple examples:

  • 1 April 2023 – Commonwealth and Queensland work health and safety laws were updated for psychosocial risk changes (continuing the trend of other similar changes recently in WA, Tasmania and NSW, but in the Commonwealth and Queensland requiring the hierarchy of controls).
  • 1 May 2023 – many awards were varied to incorporate new provisions dealing with business shutdowns – any business that relies on shutdowns (e.g. during holidays) will need to ensure that it has new processes in place to manage this for award-covered staff.
  • 6 June 2023 – there are new requirements for how employers must respond to an employee’s flexible working request under the Fair Work Act 2009.
  • 6 June 2023 – a number of changes to bargaining processes, industrial action and putting an agreement to a vote come into effect. Any employer in bargaining needs to be across this to ensure the new steps are followed. Our previous blog posts here, here and here have explored these issues.
  • 7 June 2023 – new pay secrecy laws mean that contracts and any variations need to be compliant after this date.
  • 1 July 2023 – Northern Territory work health and safety laws will be updated to introduce psychosocial risk regulations (not requiring the application of the hierarchy of controls).
  • 1 July 2023 – the annual wage review will result in changes in national minimum wage and award wages on and from 1 July. Superannuation rates will also increase on 1 July.
  • 16 September 2023 – new time recording and overtime obligations apply for certain employees covered by the Professional Employees Award 2020. Again, employers will need to be across this to ensure that all contracts, time recording and pay procedures are in place for compliance.
  • 6 December 2023 – any fixed term contracts entered into, extended or renewed on or after this date are subject to new restrictions. From that date, it could be unlawful to extend, renew or roll over a fixed term contract.
  • 7 December 2023 – additional discrimination protections come into effect under the Fair Work Act 2009.
  • 12 December 2023 – the Australian Human Rights Commission will have new powers, including inquiring to and reporting on certain systemic issues and monitoring and assessing compliance with the new positive duty to eliminate sexual harassment and sex discrimination. Before that time, policies, training and procedures will need to have been updated, consulted on and implemented to ensure compliance.

This is not an exhaustive list of all changes. In addition, there is the broad reform agenda of 11 substantive potential law changes in the second half of this year.

Laws fundamentally changing casual employment, contractor arrangements, labour hire arrangements, discrimination protections and other issues could be proposed very quickly with potentially very significant impacts on business. We don’t know when further details about this will be available, but it is very likely that many businesses will be forced to adopt changes to legacy arrangements that have worked well for many years.

These are only the first two tranches of the Commonwealth Government’s proposed reform agenda. Given the broad policies for change that the Albanese Government has had since before it was elected, more can be expected after this. The Government has also foreshadowed changes to employer privacy obligations and State Governments are also proposing reforms.

The foreseeable future will be exhausting. The pace of change will be relentless. Businesses will need significant resourcing and the ability to engage senior leadership on technical, people, safety and legal issues to realistically assess impacts, opportunities and risks presented by these new law reforms, drawing on multi-disciplinary teams and expertise. There will be an ongoing period of uncertainty even after laws are passed while courts and tribunals grapple with how they will apply new legal tests, powers and discretions. Managing expectations and advance planning will be critical.

Every business needs to ask itself the uncomfortable question: are we ready?

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Global reductions in force (RIFs) continue to be a hot topic on multinational employers’ minds in 2023. In February, Seyfarth’s specialist International Employment Law team covered the top ten things to look out for when doing RIFs in Europe. Next up in our series, our team of experts will tackle the Asia Pacific region, where we find a wide range of risk and difficulty involved, depending on the country.

The webinar will address the key practical issues employers should keep in mind when restructuring in APAC, sharing experience-based insights and examples along the way. Countries addressed will include Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the People’s Republic of China, Singapore, and Vietnam, among others.

Please bring your questions! We will leave time at the end of our session for Q&A.

This session is ideal for HR Directors, Employment Counsel, General Counsel and others with responsibility for workforces anywhere in the Asia Pacific.

The webinar is scheduled for Wednesday, 14 June 2023:

  • 8:30 a.m. to 9:30 a.m. Hong Kong and China Standard Time (UTC+8)
  • 10:30 a.m. to 11:30 a.m. Australian Eastern Standard Time (UTC+10)

If the timing doesn’t work for the first live webinar, you can get a recording to watch in your own time by registering.

Register Here for the webinar and to secure your recording.

Many in our readership will have embarked (or are embarking) upon a compliance audit of workplace entitlements. Anyone who has done so will appreciate the difficulties associated with what becomes a massive and complex task. The future will see monthly pay reviews as a matter of course rather than large and costly remediation processes.

Indeed, a whole industry has been built crunching the numbers on wage/time and attendance compliance. With the Federal Government promising criminal sanctions for “wage theft”, the industry will only grow.

We recently spoke to Marcus Zeltzer, Co-Founder of Yellow Canary. Yellow Canary is a compliance provider unique in its investment in automation, reducing the lower value yet expensive grunt work associated with never-ending pay compliance review projects.

Yellow Canary has identified five red flags that signal potential non-compliance:

  1. Paying an annualised salary vs. modern awards entitlements (all-in rate): An annualised salary arrangement without monitoring is fraught. There’s no longer a place for “set and forget” as many an FWO investigation has made very public.
  2. Changes in payroll system: Especially in business acquisition scenarios, which can create confusion and added complexity. Compliance issues can arise when pay codes don’t align between the systems and when there is a lack of understanding within the business as to the correct pay codes to apply under the new system. Underpayments can also be triggered if historical data isn’t transferred across correctly.
  3. Self-claim systems: These assume that employees have sufficient knowledge of their entitlements. If misused, this can result in a snowball effect of unintended compliance consequences.
  4. No recent classification review: Employees’ job titles and their job duties regularly evolve. If a classification review hasn’t been conducted recently, there is a high chance that employees aren’t classified in line with the underlying Modern Award and, therefore, could be underpaid.
  5. Call centres: Where, in the words of Marcus, “a lack of compliance is almost guaranteed“. Employees in call centres often work outside the regular 9-5, are often called in on weekends, and work longer hours due to seasonal campaigns like Christmas or during elections. This, in turn, triggers overtime, higher rates of pay or shift penalties. These scenarios may not be immediately obvious for an employer with a majority 9-5 workforce.

Perhaps Marcus’ most disconcerting observation: for one Modern Award, the General Retail Industry Award, Yellow Canary has been provided with more than 125 different interpretations by different employers. We are not surprised. We are often called upon to provide the “rule book” on interpretations of Modern Awards. Much of what we are asked to resolve concerns interpretation ambiguities. The “wage-theft” media commentary would have us believe that compliance is straightforward. It certainly should be. But it’s clearly not.

We have psychosocial risks, of which sexual harassment is one of the most common hazards. We have a new positive duty to prevent sexual harassment at a federal level that we discussed in our previous blog. The duties are at least similar: “So far as is reasonably practicable’’ under health and safety law and “reasonable and proportionate measures” to prevent sexual harassment.

Traditionally, HR has lent expertise and leadership in relation to the prevention of, and response to, sexual harassment. Not surprisingly, HR is drawing on their health and safety specialists in adopting a safety-driven approach – a systems and risk management-based approach.

At Seyfarth, we are adopting the same: bringing together our safety and employment law expertise on this important issue for the benefit of our clients.

In doing so, the following questions are typically being asked:

  1. What should a hazard and risk assessment entail?
  2. When is sexual harassment (or an allegation of sexual harassment) reportable to a safety regulator?
  3. How should a sexual harassment investigation be handled?
    • What steps need to be considered to support the wellbeing of all parties during an investigation?
    • What changes does a trauma-informed approach require when compared to a standard investigation?
    • What about the right against self-incrimination?
  4. What are our control measures for addressing this risk?
  5. How do we respond to an incident:
    • Being the incident itself;
    • The impacts of the investigation;
    • The interaction with any police procedure or regulatory investigations; and
    • More broadly?
  6. To this end, how and when do we monitor control measures?
  7. What audits/surveys, if any, should be undertaken, and to what end?
  8. What should be reported to management about unproven allegations and how should this factor into workplace decisions?

For HR, there is the realisation that traditional HR measures alone (training, a policy and a complaints process) won’t be sufficient to satisfy the positive duty.

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Psychosocial risk is number one on the agenda for many Australian workplace leaders. Right now, most safety briefings requested of us are on this very topic. And with good reason. The common refrain from employers is ‘what do we need to do?’

We wrote recently:

Gone are the days when workplace safety belongs only in factories and mines. In 2023 criminal charges can and will be brought in relation to hazards and their associated risks that traverse every industry, every workplace and cannot be seen by the naked eye. Caution signs will not “cut the mustard.”

– It’s not all hard hats and high vis: The hazards you cannot see in the workplace, Workplace Law & Strategy Blog, 10 April 2023

The needle has moved such that Australian organisations and their workers may face criminal charges under work health and safety legislation for failing to control hazards and their associated risks that are psychological in nature, and not necessarily visible to the human eye.

Regulators are increasingly focused on this issue. Safety regulators rely on government funding to conduct audits, issue improvement and prohibition notices, and prosecute alleged breaches.

The Federal Government’s budget allocation of an additional $2 million over two years to support the Commonwealth Work Health and Safety Regulations on managing psychosocial hazards – legislation that only commenced on 1 April 2023, six weeks ago – sends a strong signal about the future of this issue.

It’s here to stay. It’s a health and safety issue that applies to every workplace, which makes it imperative to consider how best to apply control measures for its working environment. It is an issue that those in control of workplaces cannot afford to ignore.

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