Search restraint

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.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Seyfarth is pleased to announce the promotion of Justine Giuliani and Philippa Noakes to the position of Partner with the firm. Stephen Crilly has also been promoted to Counsel.

The partner appointments of Justine and Philippa bring the total partner promotions from within the team to four since the Australian offices of Seyfarth opened in Australia in 2013, in addition to a number of lateral partner hires. The appointments also equalise the ratio of men and women in Seyfarth’s Australian partnership, demonstrating the firm’s commitment to diversity and inclusion.

Justine Giuliani focuses her practice on advising clients on the employment and industrial aspects of multifaceted restructures and other workplace change programs, and the solutions available to achieve their desired workplace settings. Justine has particular experience in achieving positive outcomes for her corporate clients in complex employment litigation and post-employment restraint matters.

Philippa Noakes has a wide-ranging employment and industrial relations practice working with leading employers across Australia. She provides timely, practical and strategic advice about business critical employment matters, and has carved out a niche in contentious and often high profile disputes, including senior executive litigation and complex industrial matters.

“This year, Seyfarth celebrates ten years in Australia. Since opening, we have become the premier firm for high impact advisory and high stakes litigation for major employers in Australia. The promotion of Justine and Philippa to Partner, and Steve to Counsel, is part of our strategy to continue the growth of our practice as we continue to serve leading employers”, said Darren Perry, the firm’s Australian Managing Partner.

Commenting further on the promotions, “Justine, Philippa and Steve have been with us from the early days. It is pleasing to be able to continue building our practice with outstanding homegrown talent”.

Seyfarth is Australia’s only specialist labour, employment and workplace health and safety team with the backing of a global firm. The Australian team has received numerous honours for superb legal work and innovation, including Best Lawyers in Australia’s “Law Firm of the Year” for Labour and Employment in 2020; and top rankings in Chambers Asia-Pacific, The Legal 500, and Doyle’s Guide.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Whether there will be a “Great Resignation” in Australia has been fiercely debated for weeks. But whatever the different viewpoints, stabilisation, recovery, and growth in 2022 will be critical for most businesses. Timing is everything – the need for growth coincides with widespread fatigue and burnout among the workforce, ongoing uncertainty associated with the new Omicron COVID-19 variant, and anticipated high levels of job transitioning and career downsizing. Add to the mix that remote and hybrid working is here to stay in 2022 and beyond.

Will this combination of factors brew into the perfect storm or little more than a storm in a teacup? One thing is certain, though – most employers can’t afford to find out the hard way.

To best prepare, employers should now focus on supporting top talent to revive and thrive in order to minimise attrition. Revitalising culture will be important. Extended COVID-19 lockdowns have seen most businesses improve the accessibility and seamlessness of their apps and platforms for facilitating remote work. The downside is that workers report their workdays have extended, and colleagues are less cohesive and connected. Finding sustainable ways to address these concerns will go a long way to minimising burnout and attrition.

But if your best efforts aren’t enough, what then? Sophisticated employers are starting to think about some of the things that will be relevant to employee departures, including:

  1. Future-proofing employment contracts. Are there appropriate contractual notice periods and post-employment restraints in place? For those employers looking to implement remuneration reviews in the new year, this presents a timely opportunity to bolster these protections. Moving forward, it will be particularly important to carefully define the parameters of post-employment restraints, including who your competitors are, given that top talent are now uniquely positioned to access remote work opportunities with competitors far and wide.
  1. Re-writing the playbook for remote exits. Employers will need to think about the systems they have in place for managing employee exits in remote working environments, including:

(a) how they will ensure employees return confidential and sensitive information to the employer

(b) retrieving work devices from remote workers, and

(c) establishing a clear line of sight over departing employees’ actions during their notice and gardening leave periods (any delays in acting upon suspected misuse of confidential information or intellectual property, or breaches of restraints, can seriously impede the ability to enforce those obligations).

  1. Enforcing post-employment restraints. The consequence of a “Great Resignation” may be that employees resign in order to work for direct competitors. 2022 may well be the year for a resurgence in litigation about the reasonableness of restrictions on working for competitors or soliciting customers from former employers. Employers ought to think carefully about how they approach this – and any pre-planning that might need to be done so that they are best positioned to succeed in any dispute.

On 12 December 2013 Seyfarth Shaw announced our Australian offices were officially open for business. Today marks five years since those doors opened.

What better way to reflect than to ask ourselves, what have been the biggest changes in our specialist areas of law over those five years?

“It has become increasingly difficult to make enterprise agreements that are compliant, genuinely enterprise-focused and fit for purpose due to increasing modern award complexity combined with the unworkable approach adopted in decisions of the Fair Work Commission and Federal Court to the BOOT and other procedural aspects of agreement making.”
– Rachel Bernasconi

“Over the past five years, I have observed the tension between sharing improved safety lessons and legal risk. I am concerned about compounding this potential unintended consequence with the rise of the industrial manslaughter offence.”
– Paul Cutrone

“I think the biggest development in employment and industrial law is how courts and tribunals are grappling with modern expectations of what ‘working’ looks like. This means they are looking at how to deal with the gig economy, flexible working arrangements (including working from home and telecommuting), employees wanting lengthy periods away from work and ‘portfolio’ careers. There is a real tension as employers seek flexibility to ensure customer demands are met while balancing the costs of labour vs employee representative groups seeking to pull the other way, seeking automatic casual conversion rights and laws that treat gig workers as employees. The next five years will see this tension play out in the policy debate.”
– Ben Dudley

“The most significant change I have seen is increasing employee mobility. Employees of large international organisations are spending more time on assignment in locations throughout the Asia Pacific, on both a short-term and long-term basis. We see this occurring as a result of organisations expanding their operations throughout the region. Employers are increasingly seeking specialist employment advice on both a single jurisdiction and multi-jurisdiction basis, including to confirm compliance with new frameworks and to ensure the appropriate arrangements are in place.”
– Luke Edwards

“The last five years has cemented a realisation that has been brewing for the last ten years. Enterprise bargaining amidst the current regulatory environment has reached its use-by date for many employers. Enterprise bargaining is no longer an opportunity to secure win-win outcomes but rather a process aimed at reducing the risk to on-going operations.”
– Chris Gardner

“There has been a shift away from spending money on large, wordy paper systems written by lawyers. I question whether anyone is any safer once they are developed. Smart organisations are investing heavily in understanding their key risks, controls and testing the effectiveness of those controls. This is where their efforts need to be.”
– Jane Hall

“One of the most significant developments I have seen in the last five years is the rise in the influence of workplace regulators. Consistent with the overall dynamic facing corporate Australia, we are seeing far more active, better resourced and assertive regulators across various workplace issues. The environment is one of heightened focus on compliance with workplace and safety laws; the financial and reputational stakes are higher than ever for employers who fall short.”
– Darren Perry

“Over the past 5 years, we have seen a number of areas where our Fair Work Commission cannot speak with one voice. While many parts of its jurisdiction have been affected, it is most noticeable in individual claims. How the Fair Work Commission balances even very serious conduct against mitigating factors remains unpredictable and has resulted in flip-flopping which creates ongoing uncertainty. This is costly and time consuming. Faced with cost and uncertainty we are seeing our clients feel pressure to settle rather than defend a sound and rational decision to uphold reasonable standards of conduct. The absence of clear statements of principle from the Fair Work Commission (such as we had in the past) and its increasingly subjective approach creates uncertainty, inefficiency and unfairness of a different kind.”
– Henry Skene

“The changes have been many and varied. What I am seeing is increased competition across a number of industry sectors, which means there is a war to retain and protect the most talented staff, who are the engine of the business. This has led to a big uptick in restraint of trade work – a highly specialised area which can be compared to a game of chess. We are passionate about this area of law and have built a specialist service model that in our opinion is market leading – whether it be getting into court within a matter of days when necessary, to defending applications for injunctions or damages. Our clients recognise that a good restraint is a business asset, and invest accordingly.”
– Michael Tamvakologos

On behalf of the team, we would like to thank the truly valued supporters of Seyfarth Shaw in Australia. We are excited to continue to work with you into 2019, and beyond.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Throughout 2017 we have been supporting clients to prepare for changes to the Heavy Vehicle National Law (HVNL), effective mid 2018.

In our Safeguard Series, we partnered with the Australian Logistics Council (ALC), highlighting how broad the impact will be on your business, your board and your senior executives. There are a number of resources available, highlighting the risks and pressure points.

The road ahead – the industry trends likely to impact the laws

The industry will continue to grow. It is estimated that truck traffic will increase by 50% by 2030. By 2027, the federal government will have committed AUD $75bn in infrastructure funding to (among other things) develop new transport routes.

Achieving nationally consistent legislation remains a challenge. The National Transport Commission‘s (NTC) latest analysis of the implementation of transport reforms recognises that Western Australia and the Northern Territory not adopting the HVNL creates “significant impacts on industry that operate between WA/NT and the others states”. Hopefully, a greater level of national consistency can be achieved in the future.

The use of telematics will grow. The NTC announced a review of the use of telematics for regulatory purposes to find ways to encourage further take-up and realise safety and productivity benefits.

With new technologies come new risks. New technologies which have the potential to distract drivers have been a growing factor in road safety incidents. To continue to achieve the overall improvement in road safety experienced over the last decade, an approach to reduce driver distraction is required.

The driverless future is closer than ever. Driverless trucks in the Pilbara have now moved more than 100 million tonnes of earth. On the public road, the framework has been established for testing of driverless vehicles. A commitment has been made to have a regulatory framework in place for automated vehicles by 2020.

The black spots, and changes to come

Further reforms of the HVNL were approved by the Transport and Infrastructure Council in May 2017. 

If passed, these reforms will further amend the HVNL to:

  • Increase twin-steer axle mass limits.
  • Extend the positive due diligence requirements on officers to include the non-chain of responsibility offences for which executive officers are currently liable.
  • Revise the heavy vehicle national registration provisions and the heavy vehicle standards.

Vehicles approved to performance based standard level 1 will be able to access the general road network. If amendments agreed to in November 2017 are passed into law.

Updated guidance and codes have been announced. 

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox – where we will continue our focus on the HVNL and CoR, as we move towards implementation.

Drafting and enforcing post-employment restraints has a lot in common with good medicine.

It is necessary to prescribe only the “minimum effective dose” – the amount necessary to produce the desired outcome with minimum side effects. Draft a post-employment restraint too narrowly, and it provides no remedy. Draft a restraint too broadly, and toxicity sets in – it won’t be enforceable. Continue Reading Prescribing the “minimum effective dose”

Effective restraints of trade protect businesses which rely heavily on human capital from damage that sometimes can’t be undone. These restraints – usually sitting in an employment contract – can be a key business asset.

Others might think about it as an insurance policy. The capacity to preserve customer connections, protect confidential information and discourage key executives from setting up their own business or moving to a competitor can be critical to information rich businesses operating in a competitive market. As we pointed out in our previous blog piece on post-employment protections The difference between winning and losing restraint litigation is often good housekeeping, ensuring the currency of your restraint provisions is an important exercise in risk management. Continue Reading You get to write the script for this story…