Frontline APAC Employment Law Update August 2019

Our Case Updates section features an Australian case which reinforces that employees cannot be forced to hand over sensitive personal data to their employers. We also feature a Hong Kong Court of Final Appeal case in which the court handed down a landmark decision to allow same-sex couples who are legally married in other jurisdictions to enjoy the same tax benefits, and, within the civil service, the same spousal benefits, as heterosexual married couples.

Our Legal Updates section examines the updates to the labour hire licensing legislation in South Australia and the increase in the national minimum wage across Australia. In Hong Kong, we look at the Internal Investigation Disclosure Obligations introduced by the Securities and Futures Commission at the beginning of this year and consider the recent guidance issued by the regulator aimed at clarifying the obligations. In the PRC, we report on a number of regional changes including the release of detailed rules for the Greater Bay Area on individual income tax incentives for overseas talent, the issue of the Fifth Judicial Opinion Dealing with Labour and Personnel Dispute Cases in Zhejiang, and also, the revision of the Implementation Rules of the Trade Union Law in Guangzhou. Finally, in Singapore, we take a look at the Tripartite Guidelines on Wrongful Dismissal and the challenges facing companies in termination scenarios.

Case Updates - Australia

Australia

Employment and privacy: can employees be made to divulge personal information?

In the digital world, data is an asset. It can be one of the most important assets an organisation has because it defines each organisation's uniqueness. This can of course include employee data. There are, however, detailed rules regulating the collection of employees' personal data. The Full Bench of the Fair Work Commission in Jeremy Lee v Superior Wood Pty Ltd [2019] FWCFB 2946 (the "Lee Case") recently delivered a decision which highlights that employers need to be careful when handling employee data, particularly if an employee's refusal to provide information is used as a grounds for dismissal.

This update will first discuss the privacy rules most relevant in an employment context and then explore how these principles were applied in the Lee Case, before giving some key takeaways.

Read more here >>

Cases Updates - Hong Kong

A move towards equality for same-sex couples

Leung Chun Kwong v Secretary for the Civil Service and Commissioner of Inland Revenue and International Commission of Jurists [2019] HKCFA 19

In June, the Court of Final Appeal handed down a landmark decision which will allow same-sex couples who are legally married in other jurisdictions to enjoy the same tax benefits, and, within the civil service, the same spousal benefits, as heterosexual married couples. While the employment benefits decision is confined to individuals employed in the civil service, it is hoped that it may herald a move towards equality for same-sex couples in Hong Kong.

Read more here >>

Legal Updates - Australia

South Australian labour hire licencing legislation – update

In our January 2019 update, we reported that the South Australian (SA) government intended to repeal the Labour Hire Licencing Act 2017 (the "Act"). However, the government was unable to secure sufficient support for the repeal. As a result, in June 2019, the SA Consumer and Business Services (CBS) announced that they will recommence accepting labour hire licence applications from 14 June 2019. All labour hire providers operating in SA must lodge their applications by 31 August 2019.

Previously, the definition of "labour hire" under the Act was very broad. This definition has been narrowed with the introduction of further exemptions to the labour licencing requirements to exclude businesses that were not intended to be captured by the scheme.

A labour hire licence is not required where a business provides workers:

• but providing labour hire services is not a core function of the business;
• to another business in the same group of companies;
• to work in another business where both businesses are part of a franchise; and
• to work in another business that is not part of a franchise, but is collectively operating using the same banner, branding or trading name.

It is critical for businesses in South Australia to be aware of the labour hire licencing requirements under the Act. Penalties may apply if a business provides labour hire services without a licence, or if it engages an unlicensed labour hire provider.

2019 minimum wage decision

The Annual Wage Review for 2018/2019 was issued on 30 May 2019. The Fair Work Commission's Expert Panel ordered an increase of 3.0 per cent to the national minimum wage (NMW). This brings the NMW to $740.80 per week or $19.49 per hour. This is an increase of $21.60 per week. Modern award minimum wages were also increased by 3.0 per cent.

In publishing its decision, the Fair Work Commission noted that, despite the recent fall in GDP growth, the Australian economy has performed moderately well and that relevant data indicates a strong labour market. Taking into account social, living and economic considerations, the determination is expected to improve the relative living standards of over 2.2 million employees in Australia.

On 1 July 2019, the high income threshold was increased to $148,700. The high income threshold operates to limit an employee's eligibility to protection from unfair dismissal under the terms of the Fair Work Act.

Legal Updates - Hong Kong

Securities and Futures Commission provides guidance on new internal investigation disclosure requirement

In February 2019, the Securities and Futures Commission (SFC) introduced the Internal Investigation Disclosure Obligation (IIDO) creating new reporting requirements for licensed corporations. The IIDO requires licensed corporations to identify whether a departing licensed individual who was accredited by the corporation was the subject of an internal investigation in the six months prior to their departure. Further, the reporting requirements provide that an investigation that is conducted subsequent to an employee's departure, or one that shows no negative finding, must also be disclosed to the SFC.

The aim of the IIDO is to prevent persons who have left employment in circumstances of actual or suspected misconduct, from subsequently moving on to find new jobs in the industry. The initiative forms part of a broader effort by the SFC to focus on the fitness and properness of licensed individuals and to stamp out misconduct.

In its FAQs released in May 2019, the SFC provided a non-exhaustive list of the types of investigations which should be disclosed to the SFC. The examples provided include investigations into breaches or suspected violations of applicable laws, rules, regulations, suspected breaches of the licensed corporation's internal policies or procedures, investigations about misconduct likely to give rise to concerns about the fitness and properness of a departing employee, investigations about any matter that may have an adverse market or client impact, and investigations about any matter potentially involving fraud, dishonesty or misfeasance.

The financial services industry has expressed concerns over the SFC's failure to define or provide an exhaustive list of examples of internal investigations. The SFC has declined to do so, noting that licensed corporations may adopt different terms in respect of their internal investigations (e.g. enquiry, review, inspection). It has stated there is an obligation on licensed corporations to proactively disclose information regarding all investigative actions, regardless of how they are described.

However, company policies are wide-ranging and include those that improve the quality of the working environment, employee engagement and organisational efficiency. An investigation, review or inspection into a failure to comply with such a policy does not necessarily correlate to an employee's lack of integrity. Further, investigations are often triggered by complaints which are unfounded, frivolous and even malicious. Employers have a duty to protect the relationship of trust and confidence by conducting a full and fair investigation, otherwise they risk being in breach of their legal obligations to the employee. It is therefore important to strike the right balance and carefully manage these issues when reporting to the SFC.

Key takeaways

In light of the new reporting requirements, it is recommended that licensed corporations take the following steps:

• familiarise themselves with the new requirements;
• review internal investigations policies and related materials to ensure compliance with the new reporting requirements; and
• plan and implement a reporting framework to ensure that all relevant internal investigations are reported to the SFC.

Legal Updates - PRC

Detailed rules of the Greater Bay Area on individual income tax incentives for overseas talent released

To accelerate the development of the Guangdong-Hong Kong-Macao Greater Bay Area ("Greater Bay Area"), the Ministry of Finance and State Taxation jointly issued the Notice regarding the Preferential Policies on Individual Income Tax (IIT) in Greater Bay Area (the “Notice”) on 14 March 2019. The Notice outlines a preferential IIT plan for eligible overseas talent working in Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing (the “Nine Cities”) in the Greater Bay Area.

On 24 June 2019, to support the smooth implementation of the Notice, Guangdong Province released the detailed rules (“Detailed Rules”), setting out the main criteria for eligible overseas talent to avail themselves of the preferential IIT plan together with implementation details in respect of the plan.

What is the preferential IIT plan and how does it work?

The Detailed Rules allow eligible overseas talent to enjoy a preferential IIT tax rate of 15%. The IIT should first be deducted from the individual's income according to the normal tax rate in line with the PRC IIT Law on a monthly basis. If the annual tax deduction of an eligible overseas talent exceeds 15% of his/her annual taxable income, the taxpayer can apply to receive a lump-sum government subsidy equivalent to the difference between the PRC IIT Law rate and the preferential IIT rate. The subsidy is tax-free.

Although the Detailed Rules were announced in June 2019, they will be applied retroactively from 1 January 2019, meaning that the subsidy can be calculated based on the taxable income received from 1 January to 31 December 2019.

Who is eligible to participate in the preferential IIT plan?

The preferential IIT plan is currently available to the following groups:

• Hong Kong or Macau permanent residents;
• Hong Kong residents who came to Hong Kong through the Quality Migrant Admission Scheme (elites, professionals, and businessmen);
• Taiwan residents;
• foreigners;
• returnees with an overseas education who have obtained permanent residence abroad; and
• overseas Chinese.

In addition, applicants must be recognised as a "talent" by the state, provincial or municipal authority according to relevant talent identification policies before he/she can apply for the preferential IIT rate. More detailed identification standards and operative measures are left to the authorities of the Nine Cities to formulate, based on their respective situations.

As such, any individual who belongs to the above groups, has been recognised as a “talent”, is working in any of the Nine Cities and is legally paying IIT in accordance with law can enjoy the preferential IIT treatment.

According to the Overall Plan for the New Lingang Area of Shanghai Pilot Free Trade Zone, Shanghai is preparing a similar subsidy policy aimed at providing IIT incentives for overseas talents working in the new Lingang area. We await further details of this policy and hope to provide an update in our next issue of Frontline.

Zhejiang Issued its Fifth Judicial Opinion Dealing with Labor and Personnel Dispute Cases

On 21 June 2019, the Supreme People's Court of Zhejiang and Labour and Personnel Dispute Arbitration Committee of Zhejiang jointly released the fifth judicial opinion specifically dealing with labour dispute cases (“Opinion”). Employers registered in Zhejiang should pay special attention to the following matters:

• Up to now, there has been debate around whether dispatch agencies are required to conclude a non-fixed-term employment contract with dispatch workers who have been employed by the dispatch agency for 10 years, or who have entered into two fixed-term employment contracts with the dispatch agency. The Opinion stipulates that it is not compulsory for the dispatch agency to sign a non-fixed-term contract with dispatch workers, unless both parties have agreed to do so.
• The general principle under the Employment Contract Law is that an employer can impose only one probationary period in respect of an employee. This provision has been interpreted to mean that the probationary period set at the beginning of the employment contract cannot be extended. However, the Opinion provides that if an employer and an employee both agree to extend an already-existing probationary period in writing, such an extension is considered legal and valid provided that the total probation period does not exceed the statutory maximum length.
• The Opinion provides that it is unfair to compel an employee to pay for damage caused by the employee during the performance of his/her duties unless that damage is intentional or caused by serious negligence. The rationale for this position is that damage caused by employees in these circumstances should be regarded as a business operation risk which should be borne by the company. If an employee is found to be liable to pay for such damage, the level of compensation, the degree of the employee's fault, the level of his/her remuneration and the severity of the damage must be taken into account.

Guangzhou revises its Implementation Rules of the Trade Union Law

On 4 June 2019, the revised version of the Implementation Measures of Guangzhou of the Trade Union Law of the People's Republic of China (“Revised Measures”) was released. The key changes are set out below:

• The democratic rights and interests of female employees have been strengthened. According to the Revised Measures, the percentage of female representatives in the general employee assembly must be the same as that of female employees in the total headcount.
• Prior to the Revised Measures, persons in charge of business operations could not be appointed as the chairman or vice-chairman of the company’s trade union. The Revised Measures have changed the position and now provide only that human resources managers cannot be appointed as the chairman or vice-chairman of an entity’s trade union.
• The old Guangzhou measures protect employees who organize or participate in trade union activities from unilateral termination by their employers. The Revised Measures now also protect committee members of the company's trade union from unilateral termination as a result of the performance of their duties in the trade union. Under both the old and the current measures, where an employee or a committee member is terminated for the reasons set out above, the local labour bureau must order the employer to reinstate the dismissed employee/committee member with back pay. If the employee/committee member does not want to return to the company, the company should pay the dismissed employee/committee member compensation equivalent to two times the annual salary earned by the employee/committee member over the previous year.
• The Revised Measures provide that a trade union has the right to conduct collective bargaining with the employer on the behalf of the employees, and the employer is required to join the collective bargaining within 20 days from the date when it receives the collective bargaining request. Further, the contents and results of the collective bargaining should be released to the public. Industrial or regional trade unions are obliged to set up an industrial or regional collective bargaining mechanism and enter into industrial or regional collective agreements with corresponding employers. A trade union must not, in the collective agreement signed with the company, agree to a salary standard or labour condition that is lower than those in a regional or industrial collective agreement applicable to the employer.

Legal Updates - Singapore

Is Silence Always Golden?

The Tripartite Guidelines on Wrongful Dismissal (the "Guidelines") released on 1 April 2019, aim to provide a useful reference point for all parties in the context of wrongful dismissal claims. The Guidelines contain illustrations of wrongful dismissal as well as examples of dismissals which will not amount to unlawful dismissal. In this article, we examine some of the illustrations proffered in the Guidelines and highlight the challenges for HR in termination scenarios.

The Guidelines provide a number of illustrations. In two of the illustrations, an employer has terminated an employee with notice but without giving reasons for the termination. The difference between the scenarios is that in the first illustration, the absence of reasons worked in the employer's favour because the employee was unable to point to any facts, incidents or situations to suggest that the employer had any wrongful intentions in implementing the termination; the termination was therefore not wrongful. In the second illustration, the absence of reasons did not achieve the same result; the employee was able to prove that the employer had adopted a discriminatory attitude towards him during his employment and the termination was wrongful in light of such proof.

Several observations arise from these illustrations:

• Choosing to keep silent on the reasons for termination is no longer a fail-safe form of legal risk mitigation.
• On one hand, these illustrations, considered together with the applicable statutory burden of proof (if the employer gives reasons for termination with notice, the employer bears the burden of proving these reasons)[1], suggest that it may still be better for employers to keep silent on the reasons for termination, since the burden of proving wrongful reasons, which rests on the claimant employee, is higher;
• On the other hand, keeping silent about the reasons for termination leaves it wide open for employees to argue or suggest that there is a hidden, wrongful reason for the termination.

However, what is clear from the illustrations in the Guidelines, is that an employer's actions before, during and after termination are relevant in deciding a wrongful dismissal claim. For example, if an employer quickly fills a vacated role, this would be a relevant consideration in determining whether the purported reason given for termination (i.e. company restructuring) was genuine. By way of another example, an employer's previous statements expressing dissatisfaction at an employee's refusal to work overtime would also be relevant in considering whether there could be any suggestion that the employee's termination was, in reality, punishment for his/her refusal to work overtime.

The changes to the Singapore Employment Act have, no doubt, necessitated a shift in thinking, not just in relation to employee exits, but also in respect of employee relations throughout the employment relationship. Going forward, PIPs, appraisal forms, HR records, internal memos and communications, (previously considered "optional" from a legal perspective), are now likely to have a significant impact in wrongful dismissal claims.

[1] Section 27(2)(b) of the Employment Claims Act 2016.