Global Labor Relations Update

By Baker & McKenzie LLP Apr 10, 2013

France: A New Law for a ‘More Secure Employment Market’

On January 11, 2013, three national trade unions entered into a National Inter-professional Agreement for a “more secure employment market.” A draft bill prepared by the French Labor ministry based on the provisions of this agreement is currently in discussion before the French Parliament. The French government intends for this new law to be voted on and come into force before summer 2013.

The draft bill provides for several measures, some of which appear to give greater flexibility to employers. These measures cover in particular external and internal mobility, increased employer social security charges for fixed-term employment agreements, predetermined levels of damages for Labor court conciliations and significant reductions to the limitation periods for labor claims.

One of the two main measures in the draft bill provides companies in significant economic difficulties with the opportunity to negotiate a collective agreement to reorganize working time and change remuneration within certain legal limits. In exchange, the employer would have to undertake to maintain in the company those affected by the new, temporary measures.

The draft bill also sets out new procedures for collective dismissals when the employer contemplates dismissing 10 employees or more over a 30-day period. If the proposals are brought into force, employers would have two options when carrying out collective dismissals. Some aspects of the dismissal procedure and the measures of the employment protection plan could be determined by either (i) a company collective agreement or (ii) a document unilaterally drafted by the employer following works council consultation. However, the French Labor administration would still be involved in the process since both documents would need to be approved by the administration.

According to the draft bill, the maximum duration of the information and consultation procedure would be no more than 2 to 4 months, depending on the number of contemplated dismissals. Indeed, contrary to the current legal provisions, in the absence of the works council’s opinion within this timeframe, the works council will be deemed to have rendered an opinion.

While these proposals seem to promise an easier and more flexible dismissal process, employers must wait and see if the new law does indeed deliver on that. The current wording of the bill is not entirely clear. According to the initial agreement, employers should be able to choose freely between the two options. However, the current wording of the draft bill provides that in the event that no company collective agreement is reached on the issue, the employer can then unilaterally determine the content of the employment protection plan and some aspects of the dismissal procedure. This can be read as giving priority to negotiations with the unions, so that the employer is only in the position to draft a unilateral document where the negotiation of a company agreement has failed. Employers should watch for developments.

Impact of New Labor Law Regime on Collective Relations in Hungary

Act I of 2012 of the Hungarian Labor Code came into force on July 1, 2012, introducing a new concept into Hungarian law—a more flexible labor law based on a contractual system.

The Labor Code strengthens the role of works councils in widening the scope of matters, on which, if they affect a substantial number of employees, the employer must see the works council’s opinion at least 15 days before making any decision.

The new Labor Code also strengthened the role of works councils by providing that agreements between employers and works councils may now regulate all issues that can be regulated in a collective bargaining agreement except for those relating to remuneration. This new rule elevates the works council agreement to the same level of significance as collective bargaining agreements. The aim of this measure is to encourage flexibility of employment and the protection of employees’ interests.

However, a works council agreement may not be concluded with the works council if the employer is subject to a collective bargaining agreement or if there is a trade union at the employer entitled to enter into a collective bargaining agreement.

Hungary has a relatively low level of union density, thus, trade unionism is still fragmented in Hungary. The new Labor Code amended the rules on trade unions by removing a trade union’s right of objection, eligibility for extraordinary paid vacation for trade union officials, and the option to request payment as compensation for untaken working-time allowances.

Notwithstanding that, the role of the trade union is still significant because a collective bargaining agreement may be concluded only between an employer (or multiple employers) or an organization that represents the interest of the employer(s), on the one hand, and the trade union or an association of trade unions, on the other hand.

Trade unions remain entitled to request from employers information on issues concerning the employees’ employment-related economic and social welfare interests, and may inform their members of their rights and obligations concerning their material, social, cultural, living and working conditions. The trade union may provide the employer with the union’s position concerning the employer’s actions or decisions and, further, initiate consultation in connection with those actions or decisions.

Changes to the Netherlands’ Works Council Act

On February 14, 2013, the Dutch Lower House of Parliament approved a legislative proposal amending the Dutch Works Councils Act, which sets out the rights and obligations of employers and works councils. The proposal must be approved by the Upper House before it can come into force.

This legislative proposal addresses the following:

  • Education and training for works council members.
  • Employee participation in international group companies.
  • Abolition of the compulsory procedure before the Joint Sectoral Committee (JSC).
  • The special duty of the Social and Economic Council of the Netherlands (SER) to promote employee participation.


The current Act grants works council members the right to a certain number of days per year (during working time and with full pay) to pursue training and education useful to fulfill their duties. The legislative proposal introduces the requirement that training and education must be of sufficient quality and that the costs must be met by the employer. The SER will set target amounts for this purpose, which will play a role in the consultations between the employer and the works council.

Extension of the Right to Be Informed

The current Act provides that the employer must inform the works council of the corporate structure of the organization. It is unclear how far that obligation extends. In practice, works councils are not always familiar with the group structure of international companies. To address that, the legislative proposal aims to extend the obligation to inform the works council to any employer that is part of an international group of companies. The employer will have to inform the works council of the members who belong to the group of companies and of the control structure.

Substantial Changes to Spain’s Collective Bargaining Agreements

Until recently, industry-level collective bargaining agreements (CBAs) applied to virtually all companies in Spain automatically, simply by virtue of the industry in which the company operated. Industry-level CBAs establish certain basic terms of employment such as minimum salary, salary increases, overtime, working hours, etc. Many industry-level CBAs are negotiated regionally in Spain and result in various regional CBAs applying to a single company in a given industry.

Aside from the evident administrative costs, from a compensation and benefits perspective, this system of industry-level CBAs has given rise to a number of typical problems, including that it:

  • Introduces an added layer of complexity in relation to the employer’s compensation and benefits policies.
  • Makes it difficult for an employer to implement its own company incentive system.
  • Leads to a lack of consistency in compensation and benefits across different countries or regions within the same company.
  • Leads to difficulties in establishing company-level working time and compensation due to the strict industry-level CBA rules.

In response to these difficulties, companies in Spain may now be able to avoid the application of the industry-level CBA in the following three ways:

  • By negotiating their own company-level CBA.
  • By opting out of certain CBA provisions. In the past, companies could only opt out of salary obligations if the company was in severe financial difficulties. Now, companies may be able to opt out of any of the following aspects: maximum working hours, work schedules and distribution of working time, rules on work shifts, compensation system and salary levels. To opt out, the company must have financial, technical, productive or organizational grounds, being the same redefined as for redundancies, although sufficient cause will exist where the company has seen a drop in income or sales for two consecutive quarters.
  • By terminating the CBA if a year has elapsed since it expired and no new CBA has been reached. In the past, CBAs that were being renegotiated continued for the most part to be binding on the parties until a new agreement was reached, which gave unions substantial negotiating leverage. The new one-year limit, however, makes it easier for employers to renegotiate CBAs with more favorable terms to employers.

Managerial Workers’ Unions: A New Trend in Argentina

It is a well-known fact that unions in Argentina have significant bargaining power and engage in constant salary negotiations for their unionized employees. High inflation in Argentina in recent years has only increased the frequency of such negotiations.

This situation has led to a new phenomenon: When managerial level nonunionized employees compare their salary increases with those of their subordinates who are in unions, they are increasingly finding their salaries being matched or even overtaken by their junior colleagues. This has created a new challenge for employers and a reason for nonunionized employees to seek new solutions.

As a result we are seeing many managerial employees setting out to organize their own unions. The recent creation of a new mining union which represents nonunionized technicians and managerial employees in the sector is evidence of this new trend. With the blessing of the Ministry of Planning, this union was registered in August 2012 and is likely to be the first of many more to come; there are around 500,000 senior employees who are currently not unionized.

This new union will seek to negotiate employment terms and progression of the managerial mining class in Argentina with a special emphasis on achieving salary increases and better employment conditions.

However, this new mining union has not been granted “exclusive recognition” by the Ministry of Labor. Exclusive recognition gives an association the exclusive right to represent workers in a certain area or activity. While several registered associations may represent the same occupation, craft, rank or profession, only the most representative will be authorized by the government to represent all workers vis-à-vis the employers. For the time being, there are few managerial workers’ unions with this “exclusive recognition” rank, but a change is in the cards.

Republished with permission. © 2013 Baker & McKenzie. All rights reserved.

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