The International Who’s Who of Management Labour & Employment Lawyers has brought together four of the world’s leading practitioners to explore the key issues facing lawyers today. Enrique Stile of Marval O'Farrell & Mairal, Raffaella Betti Berutto of Gianni Origoni Grippo Cappelli & Partners, Akiko Monden of Atsumi & Sakai and Rafael Giménez-Arnau of Garrigues discuss levels of activity, the need to adapt to clients' demands, litigation and regulatory developments in their jurisdictions.
Marval O'Farrell & Mairal
Who’s Who Legal: Which aspects of your practice have been particularly active in the past year? Do you think this is indicative of your jurisdiction as a whole?
Enrique Stile: Due to the current economic situation, companies have been reducing costs and dismissing highly compensated employees as well as exiting from non-profitable jurisdictions. This situation has led to more government regulations and union activity with the aim of protecting employment.
We have been very active in negotiations with unions and the government to reduce or close companies, offering terminated employees additional rights, benefits and overage to reduce the social impact.
Retention of key employees has also been an issue for employers and many companies have been launching different plans and programmes with the aim of retaining qualified management and personnel.
I think that the reduction of costs is a current world fact – and the world is still recovering from the impact of the 2008 crisis.
Raffaella Betti Berutto: In the recent past, we have been increasingly active in the restructuring/bankruptcy process.
Due to the complexity often involved in the process, this trend has induced law firms like ours to reorganise themselves by setting up ad hoc restructuring teams aimed at combining different skilled practices (litigation, corporate, banking, employment) able to satisfy clients’ needs and demands.
Also, in consideration of the competitiveness of the market and the consequent clients’ need to push its management to obtain certain business results, we have been very active in reviewing bonus schemes and remuneration packages of key employees.
Akiko Monden: Advising employees who have faced mental health issues in the workplace, which has been one of the most prevalent workplace issues in recent years, has continued to be an active part of practice in the past year. Mental health issues often involve other issues, such as sexual harassment or “power harassment” – which is the term used in Japan to mean, roughly, workplace bullying – which could be the cause (or in some cases, the result) of mental health problems and which have the potential to expand into a combination of varied workplace issues.
Another significant topic in employment law is the string of changes in employment-related law in the past year in Japan, such as the protection and strengthening of rights for fixed-term employees and employees re-employed after reaching retirement age. Employers will now face more difficulty in utilising fixed-term employment as a means to address fluctuating financial conditions flexibly, in times of economic uncertainty.
Rafael Giménez-Arnau: In Spain our practice has been particularly active in labour restructurings, business reorganisations and processes affecting collective working conditions. This is due to the fact that companies are adapting to the new economic environment, and for this they adopt measures to reduce the labour costs through internal flexibility (ie, changes in the working conditions) or external flexibility (redundancies, suspension of employment contracts, etc). This has been, and continues to be, a general trend in our labour market.
Who’s Who Legal: What are the main challenges faced by clients? Have you had to adapt your practice to keep up with changing demands?
Enrique Stile: Clients are under a lot of pressure to solve situations almost immediately and at lower costs. There is also a tendency to request a specific answer or solution and not a longer legal opinion. We have been adapting ourselves to provide answers during the day and with only one or two professionals involved.
Clients are also facing more regulations from the government that were not contemplated at the moment of making an investment or doing business. Therefore, they have become more flexible to adapt themselves to new regulations and we have the challenge to keep our clients informed of potential bills of law and their consequences.
Raffaella Betti Berutto: In these challenging times, clients are required to come up with creative solutions and lawyers must respond with high-level and strategic advice.
We may say, therefore, that the new business environment resulting from the crisis has stimulated employers in such a way as to encourage innovative solutions, particularly (though not solely) in the area of human resources.
Within such a context, whereas in the past, the decision-making process and business analysis started with the corporate advice, now, employment lawyers are more involved in the initial strategic phase of the business analysis.
The assessment of employment aspects has become, therefore, the starting point of the study and a determining factor for the assessment of the risks associated to a restructuring process.
Akiko Monden: In addition to facing what can be described as drastic changes to employment legislation in the past year, clients continue to face the challenge of keeping in balance their budget for human resources, or maintaining performance level and complying with restrictions against a reduction in headcount. To help clients achieve a healthy balance, we have seen an increase in involvement in the earlier stages of decision-making in the employment relationship, such as advising clients on how to perform performance management plans to prevent disputes, or to better prepare themselves against a potential dispute initiated by an employee, as opposed to providing assistance after an employee dismissed or demoted makes a claim that such a measure is unlawful.
Rafael Giménez-Arnau: We face a new climate in which aspects of employment/labour law have become key for companies. Client needs for advice in this area have grown, and clients are facing not only new situations but also increasingly complex issues. This is why the need for strategic advice, precisely tailored to the specific case and offering practical, innovative solutions, has increased. Currently, it is more necessary than ever to stand shoulder-to-shoulder with our clients, offering immediate responses to any problems that arise, while upholding the highest standards of quality (particularly in the context of legal as well as economic uncertainty, as a result of the continual labour reforms). We have observed an increasing demand among clients for experienced lawyers, in view of the current complexity of the labour relations framework.
In the wake of the major labour reform in February 2012 there have been numerous legislative changes in Spain. This requires us to provide ongoing information and advice to clients so that they can identify what legal solutions are available to them at any given time, and the implications of those solutions.
Who’s Who Legal: Have you noticed an increase in litigation or collective action in recent years? What are the key reasons behind this trend? What do you predict for the future in terms of litigation?
Enrique Stile: There has been an increase in litigation and conflicts in recent years. New generations of people are no longer identified with their employers and are constantly changing jobs. Many put themselves in through a constructive dismissal claim to collect severance, rather than resigning before accepting their new jobs.
Many benefits, such as the provision of a car, that were not considered remuneration in the past are currently considered salary by the courts and tax authorities and employees are taking advantage of that situation to file a claim for unregistered remuneration.
Additionally, many companies that have been using independent contractors or outsourcing main services are facing claims for wrongful registration of employment when terminating those services.
The future should become more stable as if this tendency continues companies could become unprofitable, shut down or go bankrupt with the consequent loss of job positions.
Raffaella Betti Berutto: Times of crisis certainly trigger a proliferation of litigation, particularly in the area of temporary workers or consultants claiming the status of open-term employees. However, the tendency is also to achieve a settlement and avoid litigation where this is possible.
The new labour market reform recently implemented is in line with such a trend by stimulating, to some extent, the settlement. Indeed, the reform has introduced, with respect to individual dismissal claims, a mandatory attempt for the parties to come to a composition of the dispute prior to the filing of the relevant claim.
Akiko Monden: The number of employment-related disputes has been continuously on the rise in recent years, but instances of collective action have not been in line with such rise. It is often explained that unions in Japan have traditionally been “company unions”, representing open-end “regular employees” who are employed for life (ie, until reaching retirement age) and not other types of fringe groups of employees, such as fixed term or part-time employees. In the face of diversification of types of employment, the number of types of employees not traditionally represented by unions has increased. In addition, even for regular employees, working with a single employer throughout an employee’s career has steadily been on the decline, leading to lower participation in the company unions. That said, there has been an increase in dealing with collective bargaining or other union activities by “joint unions”, a term used to describe unions with members from different companies.
Labour disputes leading to litigiaton will likely continue to increase, as disputes such as the re-employment of older-age employees (which is becoming a focal point due to the government gradually raising the age at which one can receive the full amount of old-age pension, as a measure to address the lack of pension funds) and non-renewal of fixed-term employee contracts are increasing. Also, we are seeing an increase in disuputes over old-age pensions as funds fall below the standards anticipated prior to the decline in the financial climate.
Rafael Giménez-Arnau: There has indeed been an increase in litigation and collective action in recent years. This has been mainly down to three different factors.
First, in collective layoffs and suspensions of contracts, mandatory authorisation from the labour authority is no longer required; in other words, following the consultation process with union representatives, an employer can implement a collective layoff without administrative approval. This has led to the growing judicialisation of collective layoffs, which now fall within the remit of the labour courts (it was previously part of the administrative jurisdiction).
Second, the 2012 labour reform, and later reforms, have brought about very significant changes in different areas of labour relations, and have raised new issues that had hitherto not been addressed. This has been matched by growing litigiousness in this area.
Lastly, the impact of the economic crisis is forcing companies to take different employment/labour measures, which are currently the source of labour unrest, and this has also contributed to increased litigation.
Who’s Who Legal: Have there been, or are you expecting, any key changes to management labour and employment law or practice in your jurisdiction? What will be the effect of any reforms?
Enrique Stile: There is currently a bill of law reducing the working week from 48 hours to 45. There are many projects granting more protection and benefits to employees.
There is a tendency, in the countries on Latin America’s east coast, to provide greater benefits as many of the presidents were former union activists and won elections with promises of increasing employees’ benefits.
Our expectation is that all the reforms are gradual and are not an integral reform of the labour code. The new regulations should not materially affect employers and many of them are ratifying the interpretatiton given already by the majority of the courts to certain debatable employment topics.
Raffaella Betti Berutto: The Italian government has reacted to the financial crisis by implementing labour reforms aimed at achieving economic recovery, but the results have not been fully satisfactory, due to the still-increasing unemployment rate and levels of labour costs to be borne by the entrepreneurs.
We then expect that in the near future changes will be made to the reform recently implemented in order to relaunch the Italian economy.
Entrepreneurs, where possible, have reacted with a review of their business and HR models (eg, reduction in pay and/or working hours, changes to compensation schemes, etc).
This has had an impact on the role played by company-level collective agreements, since these are more tailored to the specific business needs of the employer and represent the best tool for parties to respond to the challenges arising from the financial crisis.
Hence, we expect that the trend will be a shift in focus from the national collective bargaining negotiation (which was traditionally the main source of ruling of the employment matters) to a company-level one, with a consequent proliferation of local collective agreements, having more complex and sophisticated contents.
Akiko Monden: Although the general description of Japanese employment law and practice (interpretation by the courts) can be described as protective of employees, the recent employment-related law amendments have leaned toward protecting employees to such a degree that in some respects, it may not actually assist employees. For example, a rule has been imposed that, in the case of fixed-term employment contracts concluded on or after 1 April 2013, fixed-term employees will have a right to turn the agreement into an open-end contract when it is renewed, having exceeded a period of five consecutive years of employment under the ameneded Labour Contract Act. This has had a chilling effect on employers who wish to maintain flexibility in determining the size of their workforce, so that it will correspond to business needs, by utilising fixed-term contracts; now, some employees may face situations where their contract is not renewed beyond a five-year period from 1 April 2013, whereas they may have had continued employment if not for this amendment. Disputes regarding the validity of an employer’s decision not to renew fixed-term employment, because the aggregate period will exceed five years, will no doubt start to arise as we approach the five-year anniversary.
The recent changes have been a result of having a ruling political party (the Democratic Party) with a strong support base in unions. However in December 2012, the Liberal Democratic Party (LDP) once again became the ruling party and the direction of reforms in employment law has seen a shift. Although the proposal to relax restrictions on dismissal of open end employees in exchange for a payment by the employer to support job transfers, proposed within the LDP, seems to have been withdrawn according to various press reports, the shift in the method to protect employees from “restriction against dismissal” to “support of job transfer” may be on the way.
Rafael Giménez-Arnau: The 2012 labour reform was far-reaching and has modified many aspects of labour relations. Accordingly, we are still in what one could call the initial phase of application of the reform, which, little by little, must lead to a change of mindset in labour relations. The way in which the Spanish Supreme Court interprets the reform will also shape its future application. Moreover, since further partial reforms are anticipated in the future that will foreseeably focus more deeply on different issues (flexibility in employment relationships, rules on retirement, etc), employment/labour advice will remain relevant to companies in the future.