International Employment Law: An Update For Multinational Employers

Monday, May 1, 2006 - 00:00

An April 6th seminar hosted by Nixon Peabody LLP and sponsored by the Association of Corporate Counsel - Greater New York Chapter considered the latest developments in international employment law, with particular reference to an increased risk of employment related litigation in European Union jurisdictions. The speakers were Philip M. Berkowitz, a partner in Nixon Peabody's employment and labor law practice, and three partners from Freshfields Bruckhaus Deringer in Europe: Kathleen Healy from London, Pascale Lagesse from Paris and Thomas Mueller-Bonanni from Dusseldorf.

Mr. Berkowitz noted that over the course of his career he has seen employment law issues evolve from being strictly local in nature to a much broader context. He pointed to the year 1991, and to the extension of extraterritorial effect on U.S. antidiscrimination laws, as a defining moment in this evolution. He went on to note that in the era of corporate social responsibility, how a company behaves overseas really does matter at home, and he cited the problems Nike has faced in recent years with respect to its employment practices in a number of Third World countries as an example.

He also referred to the complexity of many of these issues and to the ways in which they are perceived from one society to the next: "At the moment, efforts on the part of Wal-Mart, McDonalds and other U.S. companies operating overseas to implement some Sarbanes-Oxley policies, including anonymous hot lines, have met with a hostile reception in Europe, which strongly protects employee privacy. This is a legal, cultural and even historical issue. Many people, and the French and Germans in particular, find anonymous hotlines disturbing. These policies have been found to violate local labor and privacy laws."

Ms. Healy, of Freshfield's London office, addressed several of the issues faced by the multinational employer in Europe. She noted that the prohibitions on a variety of discriminatory practices are the same across Europe but that their implementation may vary from country to country. She pointed to several UK discrimination cases utilizing tactics familiar to the American plaintiffs' bar, including excessive demands on the employer for information and the use of the press to give maximum publicity to the employee's claims. She also noted that age discrimination, which unlike the U.S. applies both horizontally and vertically - meaning that a plaintiff can bring a case irrespective of his or her age - was a significant new development in all European jurisdictions. The new statute, which she said would come into force at the end of 2006, would prevent mandatory retirement at, say, age 55 or 60 unless the employer could justify such a step.

"As a consequence of an increasing awareness on the part of employees as to their rights in this area," Ms. Healy said, "employers are taking steps to minimize their exposure to discrimination claims. This includes the adoption of 'global' diversity and anti-discrimination policies, employee training mon workplace behaviorial issues and, indeed, zero tolerance policies in some organizations. There is also an increased focus on transparency in the ways in which corporate decisions are reached. The world of corporate business is getting smaller."

Ms. Lagesse, of Freshfield's Paris office, spoke about reduction of the workforce in Europe with a particular focus on France. She noted the differences between the EU and the U.S. in this area and pointed to the need for multinational employers, particularly profitable ones, to have a complete grasp of the rules in place. In the first place, she indicated, there is the need for a valid ground for dismissal. "It is extremely difficult, if not impossible, for a profitable company to justify a dismissal. Real and serious economic grounds must underlie a dismissal." Such grounds, she noted, included the elimination or transformation of the employee's position or a substantial change in the employee's contract due to serious economic difficulties, technological changes threatening the ability of the employer to remain in business, or a reorganization necessary to protect the business of the undertaking. She added that, in France, the process to be followed involved the participation of a number of key players, including trade union representatives, the works council elected by the workers in the company (which had to be consulted on the economic rationale of the step), the French administration (which checked on the procedures being followed) and, at least potentially, the courts, where the validity of the works council consultation might be challenged. On a more encouraging note, she concluded her remarks by indicating that, as a result of the January 2006 decision of the Employment Section of the French Supreme Court in the Pages Jaunes case, "redundancy grounds may also be based on the need to safeguard the anticipated competitiveness of the enterprise. That is, safeguarding the business's competitive position going forward may now be a valid ground for dismissal."

The program concluded with a discussion of codes of conduct and whistleblowing, with particular reference to Germany, by Thomas Mueller-Bonnani of Freshfield's Dusseldorf office. Mr Mueller-Bonnani began his remarks by noting that in continental Europe whistleblowing was usually perceived as creating an atmosphere of distrust and suspicion in the workplace. He noted that while Sarbanes-Oxley permitted the whistleblower to provide information on an anonymous basis, in the EU this did not appear to work in light of the fact that any employee who is the subject of the whistleblower's information had the right to be informed about its origin. He went on to discuss the implementation of codes of conduct, just underway in Europe, and noted that if the employer did implement such a code and undertook the training of the employees it was unlikely to be held responsible for discrimination on an employee-to-employee basis. He contrasted this with the strict liability imposed on a U.S. employer where a supervisor engaged in sexually harassing a subordinate. He went on to discuss the implications of the employer's need to obtain works council consent to the introduction of whistleblower policies and codes of conduct, a process that usually led to substantial amendments. With respect to codes of conduct, he pointed out that a general prohibition on romantic relationships between superiors and subordinates was unlawful, and that the works council was entitled to challenge a legal obligation to blow the whistle, a provision for arbitrary drug testing and a general prohibition on accepting gifts. "In addition," he said, "the transfer of personal data outside the EU requires that there be an adequate level of data protection in the relevant country. Unfortunately, the U.S. is generally deemed to have an inadequate level of protection."

Mr. Berkowitz and Mr. Mueller-Bonanni are co-editors of International Labor and Employment Law: A Practical Guide, which is to be published in the near future by the ABA Section of International Law as part of their International Practitioner's Deskbook Series. To obtain a copy, please consult the ABA's Section of International Law website.