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The Evolving Asian Workplace Law

Landscape – New Developments and HR

Survival StrategiesOctober 1, 2008

Mark S. AskanasPartner – San Francisco, California

Heath A. HaveyAssociate -- Sacramento, California

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Asia’s Global Impact Two countries in the BRIC economies In 2007, BRIC countries account 14% of

global GDP In 2008, 62 of Fortune 500 companies are

from emerging market countries, many BRICs (doubled from 31 in 2003!) and other Asian countries. Lenovo (China) regarded a model of an

integrated global enterprise Tata (India) an innovative global

industrial giant Bulk of growing global middle class

(US$6,000 – 30,000) is in Asia.

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Road Map To Avoiding Common Pitfalls

Update on recent employment law developments, primarily in China, India and Japan

Give guidance on some strategic HR decisions from hiring to firing, bearing in mind that as cultures differ, different legal considerations apply

Goal today: provide business solutions

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The Japanese Workplace

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THE STEREOTYPE

• The Japanese are non-litigious.• The Japanese work whatever

hours are needed to complete the job.

THE REALITY

• The Japanese know and enforce their employment rights. Why?

• Labor related disputes are on the rise

• Ministry enforcement is rising.• Stigmas follow Japanese who

work for foreign companies.

THE CHANGING LANDSCAPE

• Westernization• Rising generation of

discontent

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The Art of Hiring in Japan

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• Hiring is the most important step in an employment relationship in Japan…and the one most neglected.

• The prescreening process and freedom to hire (and whom not to hire) is generally more broad than in the U.S.

• The terms of the Probationary Period are key considerations in the hiring process.

• Carefully analyze the risks and benefits of using Fixed Term Contracts.

• The 2008 Labor Contract Act limits contractual freedoms for employment contracts.

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The Hierarchy of Employment Law in Japan

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Employment Contract

Registered Work Rules (shugyou

kisoku)Union

Contracts

Statutes and Laws

Employers cannot rely onfreedom of contract standards.

Employers cannot expect tomirror global policies.

“At will” employment violatesJapanese statute and public policy.

A standard of “fairness”will always apply.

CONSIDERATIONS:

2008 Part-Time Workers Act Traditionally, part-time workers hedged

against layoffs and economic dismissals. Part-time workers were not equals to

“regular workers” (seishain). Now, part-time workers have more rights. And employers have more duties, such as:

Taking measures to promote part-timers to seishain.

Giving equal treatment to part-time workers.

The Act will affect wages, training, welfare services, and other areas where there has been a disparity of treatment.

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Strategies of Managing Employees in Japan

Do not overdraft the work rules. Do not inadvertently add benefits. Overtime, Annual Leave and Article

36 Agreements. (The McDonald’s decision.)

Use of dispatch employees, transfers and secondments.

Objective documentation of disciplinary and performance issues in a fair manner.

Government subsidies.8

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Dismissals in Japan THE THREE TYPES OF DISMISSAL Incompetency/Poor Performance

Dismissals During the Probationary Period During normal employment

Disciplinary Dismissals The “Capital Punishment” of

discipline

Dismissals in Japan (cont.)

Economic Dismissal (seiri kaiko) Four Legal Prerequisites

1. Financial Need (2 years of distress)

2. Exhaustive Efforts to Avoid Dismissal

3. Application of Objective and Fair Standards in Selection Process

4. Procedural Due Process

Risks and Liabilities of Dismissal

Provisional Disposition Order (injunction)

A voided dismissal and reinstatement

Damages and costs Investigations and audits by

administrative agencies Union involvement An unwanted “permanent” employee Defamation and trade secret risks

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Techniques for Terminating Employees in Japan

For Individual Dismissals Solicitation of Resignation Conciliation Procedure Labor Trial System (new as of 2006) Always get employee releases

For Mass Layoffs and Economic Dismissals Implementation of Early Retirement

Program Kata Tataki (tapping on the shoulder)

Secondments Solicitation of Resignation

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China’s Fast Changing Workplace Law

Landscape

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China – Manufacturing Home to one-

fifth of all humanity

China uses 40% of the world's concrete and 25% of its steel

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China – Anti-Discrimination

Protected categories: disabled persons (since 1991); race, ethnicity, sex, and religion (since at least 1995); HIV carriers, AIDS sufferers, and their family members (since 2006); and hepatitis B carriers (2007).

Employment Promotion Law, passed August 30, 2007 and effective January 1, 2008 Adds protected categories (carriers of any

infectious disease & equal labor rights to migrant workers)

Grants express right to bring suit for illegal discrimination in Peoples Court, but doesn’t state remedies

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China – Sexual Harassment

Law on the Protection of the Rights and Interests of Women, amended in 2005

Amendment to Shanghai Local Regulations (April 2007) Specify what constitutes harassing

conduct Employers must prevent harassment

and investigate complaints Creates right to civil suit for

harassment

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China – Employment Contracts

Employment Contract Law 2007, effective January 1, 2008

Employment contracts must be in writing Signed within 30 days, otherwise double

wages for month If unsigned after 12 months, indefinite term of

employment Limits fixed-term contracts

Two extensions/roll-overs Severance pay if not renew

Limits probationary period Depends on term of employment

Limits post-employment non-compete clauses Reduces restrictive period from 3 to 2 years Payment of wage during restrictive period

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China – New Regulations (September 2008)

Implementation Rules of the PRC Employment Contract Law , effective September 18, 2008 clarify a number of uncertainties of the earlier Contract law.

Employers can (fairly easily) terminate employees under the 14 conditions expressly stated in the Contract Law. The grounds include: Mutually agreed between employer and

employee after consultation Serious dereliction of duty and cause serious

loss to employer  If terminated employee was under a training

agreement and resigns, employer cannot seek damages for training costs.

India’s Archaic Employment Laws – Hurdle or Assest?

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India The booming tech

sector employs no more than one million of India's 1.1 billion people

Only 35 million people have formal jobs to pay taxes

Job hopping – high annual employee turnover (25%) in high tech industry in Bangalore

An inept system of public education leaves most Indians illiterate and unskilled

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India – employment law Statutory protection of “workman”. All other employees - basic

contractual arrangement. Longstanding affirmative action in

public employment for lower castes (dalits) and Other Backward Classes (OBCS) Efforts to extend affirmative action to

private employment Cultural and stereotypical

challenges.

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India – Sexual harassment

No express statutory provision or protection “Legally binding guidelines” issued by India

Supreme Court Employers’ duty to prevent and deter sexual

harassment and provide procedure for resolution of complaints

Preventative steps include• Publish policy• Improve working conditions to prevent harassment• Establish “complaints committee” consisting of female

chair, and at least 50% female members, including an independent party such a NGO

• If harassment, initiate criminal proceedings• Give victim option to transferVishaka v. State of Rajasthan & Others (1997)

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India – Non-competes Non-competes are problematic Section 27 of the Indian Contract Act 1872, any

agreement that restrains a party from exercising a lawful profession, trade or business is void, except where a party sells the goodwill of a business

In Percept D'Mark (p) Ltd v Zaheer Khan the India Supreme Court clarified the law as follows: A restrictive covenant extending beyond the term of the

contract is void and unenforceable; The doctrine of restraint of trade does not apply during

the continuance of the contract for employment and applies only when the contract ends; and

This doctrine is not confined only to contracts of employment, but is also applicable to all other contracts.

PresenterMark S. AskanasPartner, Jackson Lewis LLP199 Fremont Street, 10th

FloorSan Francisco, CA 94105 Tel: (415) 536-6327

Fax: (415) 394-9401 E-mail:

askanasm@jacksonlewis.com

Website: www. jacksonlewis.com

PresenterHeath A. HaveyAttorney at LawJackson Lewis LLP801 K St., Suite 2300Sacramento, CA 95814

Tel: (916) 341-0404 Fax: (916) 341-0141

E-mail: haveyh@jacksonlewis.com

Website: www. jacksonlewis.com

jackson lewis National labor and employment law firm –

38 offices “from coast to coast”, including San Francisco, Sacramento, Los Angeles and Orange County

500+ employment lawyers Represent exclusively

companies/employers Advise U.S. corporations re cross-border

and expatriate employment issues. Advise foreign subsidiaries in U.S. re U.S.

employment and labor law issues.