Who’s Who Legal brings together Cynthia Chung of Deacons, Arnold Perl of Glankler Brown, Francisco Salas Chaves ofBDS Asesores and Rafael Giménez-Arnauof Garrigues to discuss levels and types of activity, the increasingly international nature of their work, regulatory developments, and changes to clients’ needs and the legal market in their jurisdiction.
US Francisco Salas Chaves
Costa Rica Rafael Giménez-Arnau
WWL: How would you assess current levels of management labour and employment-related litigation in your jurisdiction over the past year? What are the most active sources of disputes?
Cynthia Chung: Labour and employment-related litigation has continued to rise over the past year. In my experience, the most active sources of disputes surround the definitions of “wages” and “discriminatory issues”. Recently, we have been receiving a fair number of instructions advising on how to terminate employees who are on long-term sick leave, or pregnant, so that they will not fall foul of the Anti-Discrimination Ordinances. We have also had a number of instructions to deal with actual disputes when a termination has been effected immediately after pregnancy, sick leave or a work injury. We suspect one reason for the rise in discriminatory claims is that, under the Employment Ordinance of Hong Kong, even if an employer is found to have unreasonably dismissed an employee, the amount of compensation that can be claimed under the Employment Ordinance is limited, whereas the amount of damages that can be claimed under the Anti-Discrimination Ordinances is unlimited.
Arnold Perl: There has, in fact, been an increase in employment-related litigation in our jurisdiction over the past year. One notable area of increase is in employment claims against commercial clients who allegedly retaliated against employees for lodging complaints in the workplace. We have also seen a significant increase in wage and hour charges under the Fair Labor Standards Act, with litigation being brought by the US Department of Labor as well as individual employees. Specifically, these claims have focused on misclassification of employees, where the employees’ status as exempt from overtime laws is at issue. Claims that employees were asked to perform services without compensation also comprise a significant portion of the increasing Fair Labor Standards Act litigation.
Francisco Salas Chaves: Over the past few years, there have not been many changes in the way employment conflicts are handled in Costa Rican labour courts. The courts located in the central cities of San José, Heredia and Alajuela currently experience a significant number of cases, which negatively impacts their response time and causes claims to last several years, sometimes for a first-instance ruling.
Currently, the vast majority of claims are based on allegations of unfair or unjustified dismissals and unpaid overtime, which according to Costa Rican legislation is paid with a surcharge.
Rafael Giménez-Arnau: The volume of labour proceedings in Spain in recent years has been very high. 2008 marked the beginning of a sharp rise in labour proceedings, linked to the onset of the financial crisis and its impact on working conditions. In 2013 (the last year for which there are official figures), the number of labour proceedings remained stable (with a slight increase of 1.2 per cent). Nonetheless, in terms of type of proceeding, there was a 34.2 per cent rise in the number of collective proceedings conducted before the National Appellate Court (proceedings affecting more than one autonomous community), testifying to the fact that numerous companies have turned to collective methods in order to modify working conditions, hold contracts in abeyance or carry out contract terminations, all procedures that the 2012 labour reform sought to expedite. The upshot has been greater flexibility, but also an increased workload for the courts. This has heightened the profile of labour lawyers when it comes to advising on this type of proceeding.
WWL: Several lawyers have pointed to an increase in the number of collective bargaining agreements being negotiated between employers and groups of employees. Is this something you have noticed in your country? What do you consider to be the main reasons for this trend?
Cynthia Chung: Collective bargaining agreements are still not common in Hong Kong. The reason is that we do not have any collective bargaining laws – therefore, any agreements between employers and groups of employees will be purely contractual. Certain industries are more prone to having labour unions, eg, retail and airlines. Business sectors – eg, financial services – would not be interested in collective bargaining.
Arnold Perl: In the United States, labour unions must have the support of a majority of employees in order to bargain on behalf of workers and negotiate with employers. This is unlike other countries that allow unions to bargain on behalf of those workers who choose to join – even if they only represent a minority of workers. The United States’ National Labor Relations Act also prohibits employers from dealing directly with groups of employees over wages, hours and working conditions. This legal principle was illustrated recently when Volkswagen wanted to establish a works council at its Chattanooga, Tennessee, operation – but believed at that time that it needed a labour union to legally create such an entity. The union that sought to be certified as the collective bargaining representative was voted down by the employees, ultimately causing VW to return to the drawing board.
Francisco Salas Chaves: Collective labour law has a very limited scope in the Costa Rican private employment sector. The biggest and most influential unions, as well as the majority of collective bargaining agreements, can be found in public institutions. Nevertheless, unions have a stronger presence in some sectors of the economy, such as private security companies and agricultural companies in the coastal regions. However, even in these cases, collective bargaining agreements are not common and there has not been a visible increase in their number.
Rafael Giménez-Arnau: Spain has seen a rise in collective bargaining in terms of collective labour and company agreements, as well as other measures seeking to modify conditions. As noted above, the labour reform approved in Spain in 2012 sought to bring working conditions into line with the new economic climate. Among the measures put in place were the reform of collective bargaining and the elimination, in general terms, of the principle of ultractividad, whereby the validity of collective agreements was extended in the absence of a new agreement. Both the economic climate and the labour reform have given fresh impetus to collective bargaining and paved the way for a renewal of the content of agreements (eg, by linking salary raises to productivity, whereas they were traditionally only based on increases to the Consumer Price Index). Once again, the labour reform and the economic climate have served to strengthen the hand of labour advisers.
WWL: Many firms and lawyers are seeing their work in the field becoming gradually more international in nature, as major organisations move into new jurisdictions and look to address domestic differences in employment law relating to employee mobility, transfers and rights. Is it increasingly important to develop expertise in the management labour and employment laws of other jurisdictions or are firms tending to consult local specialists on cross-border issues?
Cynthia Chung: It is most certainly increasingly important to develop expertise in the management of labour and employment laws around the region. Hong Kong has traditionally always been the regional hub for many multinational companies. Therefore, labour mobility is particularly important. For Hong Kong, of course, the most relevant jurisdiction is China. We are also seeing movements generally around South East Asia. Many of the jurisdictions are also competing for multinational company setups in the region, so being able to compare employment benefits/law around the region is increasingly important.
Arnold Perl: Yes. Recently, our firm has had more questions from clients involving expansion into foreign markets, including comparisons of US law versus the law in foreign jurisdictions. We have commonly consulted local employment experts in these foreign jurisdictions and have reciprocated by providing legal services in the US for clients of the attorneys in foreign jurisdictions. By handling matters in this way, clients received the best quality of service in a cost-effective manner.
Francisco Salas Chaves: Certainly, multinational companies and their needs have increased the demand for legal counselling across borders. At BDS Asesores, we believe that local specialists are the most responsible option for addressing a client’s international needs. Consequently, we have opted to expand our practice and open our own offices in several Central American countries, as well as in the Dominican Republic. This, in addition to a close partnership with Littler Mendelson, gives us the opportunity to offer fast and reliable services to meet our clients’ needs across different borders.
Finally, the lack of a convention or agreement between the Central American countries for employee mobility and transfer further hampers these procedures, thus justifying the presence in multiple countries of local counsellors.
Rafael Giménez-Arnau: In our experience, multinational clients have sought our services, as a key resource, for advice on international projects. Given the highly localised nature of labour law, we are required to have in place a solid network of referral firms alongside our own offices in other jurisdictions, to communicate with the client. In this regard, it is essential to forge ties with labour practices that have a proven track record in other countries; our firm has done just that. Elsewhere, we work in tandem with firms from other countries to gather information on the key labour-related aspects of the various jurisdictions, a service much valued by our multinational clients.
WWL: Have there been, or do you anticipate, any key changes to management labour and employment law or practice in your jurisdiction? How have such changes affected your work and the nature of your advice to clients?
Cynthia Chung: Historically, Hong Kong has been fairly lax on employment law. However, enormous changes have been seen in the past 20 years or so – in particular better protection of employees. The minimum wage will continue to rise in the coming year. The government is also tabling a bill to introduce paid paternity leave, and there is consultation for a fifth anti-discrimination law. The talk around standard working hours is ongoing. Accordingly, we can see that the trend is to increase labour protection in Hong Kong, to bring us into line with some of the other countries in the region. This will most certainly affect our work in terms of advising clients on setting up businesses in Hong Kong and how best to structure their employment benefits here.
Arnold Perl: On 4 February 2014, the National Labor Relations Board (NLRB) voted to reissue a notice of proposed rulemaking to make sweeping changes to its representation election procedures. The new procedures would make it far easier for unions to organise employees working for commercial clients. We expect that the proposed changes, in whole or in part, will be issued in their final form by the end of the year. We are discussing these proposed changes with clients and collaborating with them on countermeasures that need to be implemented once these new rules are adopted. Unions today represent only 6.7 per cent of all employees in the private sector – an all-time low in the United States – but they are counting on the new rules to increase their membership.
Francisco Salas Chaves: There have not been any major changes in procedural law for labour disputes in Costa Rica in the past year. A law reform project – the Labour Procedure Reform – was initially approved on September 2012.
With the arrival of a new president on 8 May 2014, there is a general feeling that this project could be finally approved. Once in force, labour disputes would be sped up and simplified through oral discussion. This could eventually lead to an increased rate of lawsuits from former employees.
Rafael Giménez-Arnau: 2012 saw the approval in Spain of a sweeping labour reform that brought with it modifications to numerous aspects of labour relationships, having a particular impact on two areas: internal flexibility at companies (adapting labour conditions to suit the company’s situation); and external flexibility (employment contract terminations). The labour reform came at a time when companies found themselves with little choice but to make changes to their labour relations. All of this has placed labour relations at the heart of companies’ strategic outlooks, opening up new possibilities in terms of management and giving rise to highly complex situations. With this in mind, the role of the labour law adviser has taken on greater importance. Our advisory services have undergone the following changes: we offer a more strategic approach, rather than a purely technical or legal one; engagements of a certain scope are becoming increasingly complex, from a technical standpoint; experienced lawyers are in greater demand; and we offer highly specialised coverage of labour proceedings, given the increasing judicialisation of collective labour issues nationwide.
WWL: Lawyers have seen increasing fee pressures from commercial clients as they pursue greater value and efficiency – both in terms of their corporate structures and the legal services they receive. Has this affected your practice? How has the international legal market responded to changing client demands in the field?
Cynthia Chung: While clients would obviously demand good-value legal services, I think they also appreciate good and practical legal advice. Therefore, while there is certainly pressure in terms of fees, I think our hourly rates in Hong Kong are still very reasonable. In order to respond to changing client demands, we do offer, for example, free training sessions and regular newsletters for clients as an add-on value.
Arnold Perl: The most successful lawyers have strengthened their relationships with clients by using creative and flexible approaches to their fee structures. It is no longer just about providing high-quality legal work; the bottom line is now about delivering superior value. Historically, lawyers in the United States have performed services on an hourly-fee basis. Recognising the increasing resistance to mounting legal expenses due to hourly billing, firms have increasingly begun to provide legal services for flat fees. Legal work performed on a flat-fee basis serves the dual purpose of affording commercial clients better certainty in their budgeting while motivating law firms to be more efficient in providing the necessary legal services for their clients. While class action litigation is commonly excluded from flat-fee billing, we have found that the majority of litigation cases can be efficiently handled in this manner.
Francisco Salas Chaves: Yes, we have experienced an increased demand from clients to modify professional fees for employment lawsuits. We abide by the local Bar Association’s dispositions for professional fees, which in labour and employment lawsuits represent a percentage of the amount claimed. However, some clients’ recent requests involve establishing a “success fee” as part of the cost of our counselling. In these cases, the amount of professional fees charged by our firm at the end of the procedure depends on the amount of money we saved our client during the lawsuit. Generally speaking, schemes in which the client has no control over the final cost of our counselling, such as an hourly charge, are usually rejected in favour of fixed percentages and success fees.
Rafael Giménez-Arnau: Fees have been coming under pressure for some time now and, needless to say, this has required firms to become more flexible and to seek ways of meeting their clients’ demands. Nevertheless, clients also call on labour lawyers to provide high-quality, value-added services. While charging highly competitive fees without offering excellent services may be a short-term solution, it can prove very costly for clients in the long run in the event of an adverse outcome (which leads clients to change their lawyers). With this in mind, our approach has been to adapt our fee proposals to the engagement and client in question, albeit without skimping on the quality and added value we offer. Against an increasingly complex backdrop of labour relations, we have noticed that clients are beginning to set as much store by the quality of the service on offer (which, naturally, is not the same across the board), as they do by price.