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Espagne
« Big Four » firms accused of breaching Spanish labor laws on overtime
20 février 2023
- Travail
Summary
Spain’s Labour and Social Security Inspectorate has inspected the « Big Four » firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.
In recent days, the press has reported on the « macro-inspection » carried out in the « Big Four » (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).
The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.
Thus, it seems to be a general trend that the employees of the « Big Four » work up to 12 hours a day (« from nine to nine »), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.
Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the « Big Four » be committing, and what responsibilities would they have to face, in accordance with our Labour Law?
Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the « Big Four », that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:
« The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day ».
The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.
No less important is the certainly novel « right to digital disconnection in the workplace », which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.
At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?
Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.
In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.
Conclusion
We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called « Big Four » will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.
Dans quelles conditions le dirigeant d’une société peut-il être révoqué en France?
Cela dépend de la forme de la société.
Prenons les formes de sociétés commerciales les plus fréquentes.
Le gérant d’une société à responsabilité limitée ne peut être révoqué que pour juste motif, c’est-à-dire s’il a commis une faute, ou si sa révocation est nécessaire à la protection de l’intérêt social.
Dans une société anonyme, les membres du conseil d’administration et le président du conseil d’administration peuvent être révoqués « ad nutum », c’est-à-dire à tout moment et sans avoir à justifier d’un motif. Il est interdit de déroger à cette règle. Le directeur général, en revanche, ne peut être révoqué que pour juste motif.
Dans les sociétés par actions simplifiées, une forme sociale créée en 1994, les dirigeant sont en principe révocable « ad nutum », mais les statuts peuvent y déroger, et prévoir que le dirigeant ne pourra être révoqué que pour juste motif.
Une décision récente de la Cour de cassation, c’est-à-dire de la plus haute juridiction judiciaire en France, retient l’attention.
Elle concerne les sociétés par actions simplifiées (« SAS »), la forme sociale qui a le plus de succès en France : une société nouvellement créée sur deux est une SAS.
Dans les SAS, ce sont les statuts qui fixent les conditions dans lesquelles la société est dirigée, et notamment les conditions de révocation du dirigeant.
La décision de la Cour de cassation du 12 octobre 2022 (N°21-15.382) pose un principe: si les actes extra-statutaires peuvent compléter les statuts, ils ne peuvent pas y déroger.
Dans cette affaire, les statuts d’une SAS prévoyaient que le directeur général pouvait être révoqué à tout moment, et sans qu’aucun motif soit nécessaire, par décision des associés ou de l’associé unique, et que la révocation du directeur général ne lui donnerait droit à aucune indemnité.
Un directeur général avait été nommé par l’associé unique. Le même jour, l’associé unique avait adressé à ce directeur général un courrier lui précisant qu’en cas de révocation de ses fonctions sans juste motif, il bénéficierait d’une indemnité forfaitaire égale à six mois de sa rémunération.
Quelques années plus tard, la société a révoqué le directeur général, qui a exigé le paiement de son indemnité forfaitaire. Face au refus de la société de lui payer, l’ancien directeur général l’a assigné en paiement de l’indemnité.
La Cour d’appel, puis la Cour de cassation ont donné raison à la société: l’ancien dirigeant n’avait pas droit à l’indemnité. Pour la Cour de cassation, les statuts fixent les modalités de révocation du directeur général, et ce sont les statuts qui priment. Si les actes extra-statutaires peuvent compléter ces statuts, ils ne peuvent y déroger. Et même si l’acte extra-statutaire émane de l’associé unique, ou si tous les associés y ont consenti.
En conclusion
Il faut être prudent et bien analyser les statuts et les actes extra-statutaires tels que les pactes d’associés ou les conventions avec le dirigeant pour ne pas prendre de risque lors de la révocation d’un dirigeant de SAS.
The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.
1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration
An « equality plan » is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.
All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.
Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.
This new Royal Decree will enter into force on January 14, 2021.
2. Royal Decree 902/2020, of October 13, of equal pay between women and men
The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.
For this, the companies and collective agreements must integrate and apply the so-called « principle of remuneration transparency« , which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.
For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:
- remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
- remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.
The measures contained in this new standard will come into effect on April 14, 2021.
A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as « riders » are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.
This ruling took place on the occasion of the dispute between the company « Glovo » and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.
The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:
- “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
- « Glovo » establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
- “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
- “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
- Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
- Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of « Glovo », which reflects that the “riders” are not the owners of the essential means of production.
- “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.
Thus, the Supreme Court concludes that « Glovo » is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the « riders » the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.
It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the « riders », corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.
This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.
Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?
At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.
Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.
Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.
In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.
Employment “one to one” or “one to many”
Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.
Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.
In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:
- the individual has economic dependence upon the party to whom he/she provides services;
- lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
- integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
- availability of holidays and paid leave in accordance with schedules of the company;
- work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
- the individual is not owner of the assets used while rendering services to the company.
Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:
- payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
- taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.
In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.
The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.
Employment volatility as new formula for flexibility
As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:
With a notice of immediate effect:
- while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
- while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
- the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;
With a 10 days notice:
- in case employee has without justifiable reason materially violated the contracted work order;
- while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
- the employee has grossly violated work safety rules and endangered safety and health of other persons; or
- due to temporary incapacity of the employee for work for more than 6 and up to 12 months;
With a one month notice:
- if the employee is in lack of sufficient professional skills to perform the contracted work;
- an employee previously employed in the particular position has been reinstated to work;
- in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
- in case the employer is being liquidated.
Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.
So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.
Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).
It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.
A close cooperation among numerous employers
The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.
Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.
As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.
The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.
Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.
Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.
Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.
Remote and digital employment – the skills for the future
Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.
Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:
- name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
- starting date of the employment;
- expected length of the employment (in case the agreement is concluded for certain period of time);
- place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
- the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
- amount of remuneration agreed and date of payment thereof;
- contracted work time per day or per week;
- length of the annual paid leave;
- notice periods of the Employment Agreement;
- indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.
These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.
But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:
- Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
- Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.
At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.
Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.
Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.
Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.
It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.
Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.
For performance of the work duties especially information and communications technologies (ICT) are required
And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.
When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.
If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:
- Latvia has one of the fastest internet connections in the world;
- registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
- complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
- signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
- notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
- State and majority of municipal authorities are welcoming electronic communication;
and many more electronic solutions.
Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:
- the old processes employees and employers are used to, do not work anymore;
- both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
- the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
- no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
- and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.
This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.
So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.
On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.
Loss of turnover
Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.
The turnover is compared with 25% of the turnover from January to December 2019.
The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.
Wages and salaries
The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.
The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.
Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.
Advance payment
The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.
If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.
Calculation
The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.
Extension of the arrangement
It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.
Prohibition of dismissal
When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.
If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.
Submitting the request
The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.
The object of this post is the analysis of the new obligations that RDL 6/2019 establishes, in terms of Gender Equality, for all types of companies (regardless the number of workers they have) and, specifically, for those companies that have 50 or more workers.
The main novelty we find in this respect lies in the obligation, for companies with 50 or more workers, to implement an Equality in Business Plan (EBP), in accordance with the provisions of articles 45 and related of the LOIEMH.
Regarding the content and the conditions of implementation of the EBP, we find the following novelties:
- The subjects and minimum content that all EBP must have are listed exhaustively.
- An analysis of the female underrepresentation in the Company is introduced, as a matter that the EBP must contain.
- The diagnosis that the Company must make prior to the preparation of the EBP must be negotiated with the legal representative of the workers.
- A Register of EBP for companies is created, in which all the EBP implemented in the Companies must be registered, regardless of the number of workers they have.
On the other hand, RDL 6/2019 gives a new wording to Article 28 of the Workers’ Statute (WS), which includes the obligation of the Company to comply with the requirement of equal pay for men and women, establishing a series of measures and obligations in charge of the Companies, in order to ensure the effective fulfillment of the salary equality between genders.
In particular, these new measures adopted in article 28 of the WS are:
- What is to be considered as « work of equal value » is specified, in order to facilitate a single concept and eliminate any doubt in this regard.
- Companies have the obligation to keep a Salary Register, with the average values of salaries, salary supplements and extra-salary perceptions of their workforce, differentiated by sex and distributed by professional groups, professional categories or equal work positions value.
- The Salary Registry must be accessible to the legal representatives of the workers.
- In companies with 50 or more workers in which the average remuneration of workers of one sex is higher than the other by 25% or more, a justification for said difference must be included in the Salary Register, and must be certified that it is due to reasons unrelated to the sex of the workers.
The breach, by the Companies, of the obligations in matters of Gender Equality and, in particular, those related to the EBP and equal payment between men and women, may entail the imposition of important sanctions by the Labor Inspector and the “Tesorería General de la Seguridad Social”.
On 28 May 2019 the Dutch Parliament adopted new employment legislation: The Balanced Labour Market Act (‘Wet Arbeidsmarkt in Balans’), hereinafter the WAB. The most important changes are discussed below.
New cumulation ground for dismissal
The legislation introduces a new ground for dismissal. This makes it a bit easier for employers to dismiss employees. Dismissal will also be possible if there is a sum of circumstances, the so-called cumulation ground. Now the employer must fully comply with 1 of the 8 grounds for dismissal. This new ground gives the court the opportunity to combine circumstances. The employee can receive an extra half transitional allowance (on top of the current statutory transitional allowance) if the cumulation ground is used for the dismissal.
Severance: Transitional allowance
The new act arranges that employees will have the right to a transitional allowance immediately from the first start of the employment contract, instead of only after two years.
The accrual of transitional allowance is reduced in case of long-term employment. The accrual for everyone, regardless of the age of the employee, is one third of a monthly salary.
There will be a scheme for small employers to compensate the transitional allowance if they have to end their business due to retirement or illness.
Extending the scope of the chain of employment agreements
The current period after which successive fixed-term employment contracts legally change into an employment contract for an indefinite period is two years. The WAB broadens the succession of temporary contracts. Under the WAB it will still be possible to enter into a maximum of three temporary contracts. The maximum period of fixed-term contracts will be extended to three years. This chain of successive fixed-term employment contracts can be broken by an interruption period of six months.
It is possible to shorten the interruption period between a chain of fixed-term contracts in a Collective Bargaining Agreement from six to three months if there is recurring temporary work that can be done for a maximum of nine months a year.
An exception to the chain provision will be made for temporary workers in primary education who replace employees who became ill.
Call agreement
A new definition is introduced in Article 7: 628a paragraph 9 of the Dutch Civil Code: the ‘call agreement’. In call agreements the number of working hours per period and the salary are not established upfront but can vary depending on for example the amount of work available. Under the WAB an employee must be called by the employer at least four days in advance. If the employer does not follow this regulation, the employee is not obligated to come in for work. Call workers retain the right to wages for the period for which they were called if the work is cancelled less than four days in advance. The employer is obliged to offer the call worker an employment contract after a year for the average number of hours that he has worked in the previous twelve months. In Collective Bargaining Agreements alternative arrangements can be made under certain conditions.
Payrolling
Payroll employees will receive the same legal position and primary and secondary employment conditions as employees who are employed by the employer.
Payroll employees are also entitled to an ‘adequate’ pension scheme.
Unemployment benefit premium differentiation
In order to make employment contracts for an indefinite period of time more attractive for employers, the WAB arranges for an unemployment benefit premium differentiation between permanent and temporary contracts. A lower premium will apply for employment contracts for an indefinite period of time and a higher premium for fixed-term employment contracts.
Commencing date
The intended commencing date of the WAB is 1 January 2020. The right to an adequate pension scheme for payrolling starts on 1 January 2021.
The author of this post is Regine de Wit.
France – Révocation d’un dirigeant de société par actions simplifiée: priorité aux statuts!
- Employment
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France
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Écrire à Jose
France – Révocation d’un dirigeant de société par actions simplifiée: priorité aux statuts!
19 décembre 2022
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France
- Employment
- Entreprise
- Travail
Summary
Spain’s Labour and Social Security Inspectorate has inspected the « Big Four » firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.
In recent days, the press has reported on the « macro-inspection » carried out in the « Big Four » (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).
The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.
Thus, it seems to be a general trend that the employees of the « Big Four » work up to 12 hours a day (« from nine to nine »), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.
Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the « Big Four » be committing, and what responsibilities would they have to face, in accordance with our Labour Law?
Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the « Big Four », that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:
« The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day ».
The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.
No less important is the certainly novel « right to digital disconnection in the workplace », which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.
At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?
Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.
In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.
Conclusion
We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called « Big Four » will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.
Dans quelles conditions le dirigeant d’une société peut-il être révoqué en France?
Cela dépend de la forme de la société.
Prenons les formes de sociétés commerciales les plus fréquentes.
Le gérant d’une société à responsabilité limitée ne peut être révoqué que pour juste motif, c’est-à-dire s’il a commis une faute, ou si sa révocation est nécessaire à la protection de l’intérêt social.
Dans une société anonyme, les membres du conseil d’administration et le président du conseil d’administration peuvent être révoqués « ad nutum », c’est-à-dire à tout moment et sans avoir à justifier d’un motif. Il est interdit de déroger à cette règle. Le directeur général, en revanche, ne peut être révoqué que pour juste motif.
Dans les sociétés par actions simplifiées, une forme sociale créée en 1994, les dirigeant sont en principe révocable « ad nutum », mais les statuts peuvent y déroger, et prévoir que le dirigeant ne pourra être révoqué que pour juste motif.
Une décision récente de la Cour de cassation, c’est-à-dire de la plus haute juridiction judiciaire en France, retient l’attention.
Elle concerne les sociétés par actions simplifiées (« SAS »), la forme sociale qui a le plus de succès en France : une société nouvellement créée sur deux est une SAS.
Dans les SAS, ce sont les statuts qui fixent les conditions dans lesquelles la société est dirigée, et notamment les conditions de révocation du dirigeant.
La décision de la Cour de cassation du 12 octobre 2022 (N°21-15.382) pose un principe: si les actes extra-statutaires peuvent compléter les statuts, ils ne peuvent pas y déroger.
Dans cette affaire, les statuts d’une SAS prévoyaient que le directeur général pouvait être révoqué à tout moment, et sans qu’aucun motif soit nécessaire, par décision des associés ou de l’associé unique, et que la révocation du directeur général ne lui donnerait droit à aucune indemnité.
Un directeur général avait été nommé par l’associé unique. Le même jour, l’associé unique avait adressé à ce directeur général un courrier lui précisant qu’en cas de révocation de ses fonctions sans juste motif, il bénéficierait d’une indemnité forfaitaire égale à six mois de sa rémunération.
Quelques années plus tard, la société a révoqué le directeur général, qui a exigé le paiement de son indemnité forfaitaire. Face au refus de la société de lui payer, l’ancien directeur général l’a assigné en paiement de l’indemnité.
La Cour d’appel, puis la Cour de cassation ont donné raison à la société: l’ancien dirigeant n’avait pas droit à l’indemnité. Pour la Cour de cassation, les statuts fixent les modalités de révocation du directeur général, et ce sont les statuts qui priment. Si les actes extra-statutaires peuvent compléter ces statuts, ils ne peuvent y déroger. Et même si l’acte extra-statutaire émane de l’associé unique, ou si tous les associés y ont consenti.
En conclusion
Il faut être prudent et bien analyser les statuts et les actes extra-statutaires tels que les pactes d’associés ou les conventions avec le dirigeant pour ne pas prendre de risque lors de la révocation d’un dirigeant de SAS.
The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.
1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration
An « equality plan » is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.
All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.
Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.
This new Royal Decree will enter into force on January 14, 2021.
2. Royal Decree 902/2020, of October 13, of equal pay between women and men
The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.
For this, the companies and collective agreements must integrate and apply the so-called « principle of remuneration transparency« , which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.
For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:
- remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
- remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.
The measures contained in this new standard will come into effect on April 14, 2021.
A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as « riders » are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.
This ruling took place on the occasion of the dispute between the company « Glovo » and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.
The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:
- “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
- « Glovo » establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
- “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
- “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
- Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
- Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of « Glovo », which reflects that the “riders” are not the owners of the essential means of production.
- “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.
Thus, the Supreme Court concludes that « Glovo » is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the « riders » the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.
It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the « riders », corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.
This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.
Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?
At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.
Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.
Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.
In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.
Employment “one to one” or “one to many”
Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.
Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.
In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:
- the individual has economic dependence upon the party to whom he/she provides services;
- lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
- integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
- availability of holidays and paid leave in accordance with schedules of the company;
- work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
- the individual is not owner of the assets used while rendering services to the company.
Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:
- payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
- taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.
In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.
The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.
Employment volatility as new formula for flexibility
As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:
With a notice of immediate effect:
- while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
- while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
- the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;
With a 10 days notice:
- in case employee has without justifiable reason materially violated the contracted work order;
- while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
- the employee has grossly violated work safety rules and endangered safety and health of other persons; or
- due to temporary incapacity of the employee for work for more than 6 and up to 12 months;
With a one month notice:
- if the employee is in lack of sufficient professional skills to perform the contracted work;
- an employee previously employed in the particular position has been reinstated to work;
- in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
- in case the employer is being liquidated.
Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.
So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.
Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).
It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.
A close cooperation among numerous employers
The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.
Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.
As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.
The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.
Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.
Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.
Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.
Remote and digital employment – the skills for the future
Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.
Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:
- name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
- starting date of the employment;
- expected length of the employment (in case the agreement is concluded for certain period of time);
- place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
- the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
- amount of remuneration agreed and date of payment thereof;
- contracted work time per day or per week;
- length of the annual paid leave;
- notice periods of the Employment Agreement;
- indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.
These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.
But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:
- Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
- Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.
At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.
Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.
Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.
Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.
It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.
Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.
For performance of the work duties especially information and communications technologies (ICT) are required
And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.
When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.
If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:
- Latvia has one of the fastest internet connections in the world;
- registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
- complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
- signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
- notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
- State and majority of municipal authorities are welcoming electronic communication;
and many more electronic solutions.
Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:
- the old processes employees and employers are used to, do not work anymore;
- both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
- the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
- no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
- and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.
This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.
So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.
On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.
Loss of turnover
Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.
The turnover is compared with 25% of the turnover from January to December 2019.
The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.
Wages and salaries
The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.
The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.
Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.
Advance payment
The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.
If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.
Calculation
The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.
Extension of the arrangement
It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.
Prohibition of dismissal
When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.
If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.
Submitting the request
The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.
The object of this post is the analysis of the new obligations that RDL 6/2019 establishes, in terms of Gender Equality, for all types of companies (regardless the number of workers they have) and, specifically, for those companies that have 50 or more workers.
The main novelty we find in this respect lies in the obligation, for companies with 50 or more workers, to implement an Equality in Business Plan (EBP), in accordance with the provisions of articles 45 and related of the LOIEMH.
Regarding the content and the conditions of implementation of the EBP, we find the following novelties:
- The subjects and minimum content that all EBP must have are listed exhaustively.
- An analysis of the female underrepresentation in the Company is introduced, as a matter that the EBP must contain.
- The diagnosis that the Company must make prior to the preparation of the EBP must be negotiated with the legal representative of the workers.
- A Register of EBP for companies is created, in which all the EBP implemented in the Companies must be registered, regardless of the number of workers they have.
On the other hand, RDL 6/2019 gives a new wording to Article 28 of the Workers’ Statute (WS), which includes the obligation of the Company to comply with the requirement of equal pay for men and women, establishing a series of measures and obligations in charge of the Companies, in order to ensure the effective fulfillment of the salary equality between genders.
In particular, these new measures adopted in article 28 of the WS are:
- What is to be considered as « work of equal value » is specified, in order to facilitate a single concept and eliminate any doubt in this regard.
- Companies have the obligation to keep a Salary Register, with the average values of salaries, salary supplements and extra-salary perceptions of their workforce, differentiated by sex and distributed by professional groups, professional categories or equal work positions value.
- The Salary Registry must be accessible to the legal representatives of the workers.
- In companies with 50 or more workers in which the average remuneration of workers of one sex is higher than the other by 25% or more, a justification for said difference must be included in the Salary Register, and must be certified that it is due to reasons unrelated to the sex of the workers.
The breach, by the Companies, of the obligations in matters of Gender Equality and, in particular, those related to the EBP and equal payment between men and women, may entail the imposition of important sanctions by the Labor Inspector and the “Tesorería General de la Seguridad Social”.
On 28 May 2019 the Dutch Parliament adopted new employment legislation: The Balanced Labour Market Act (‘Wet Arbeidsmarkt in Balans’), hereinafter the WAB. The most important changes are discussed below.
New cumulation ground for dismissal
The legislation introduces a new ground for dismissal. This makes it a bit easier for employers to dismiss employees. Dismissal will also be possible if there is a sum of circumstances, the so-called cumulation ground. Now the employer must fully comply with 1 of the 8 grounds for dismissal. This new ground gives the court the opportunity to combine circumstances. The employee can receive an extra half transitional allowance (on top of the current statutory transitional allowance) if the cumulation ground is used for the dismissal.
Severance: Transitional allowance
The new act arranges that employees will have the right to a transitional allowance immediately from the first start of the employment contract, instead of only after two years.
The accrual of transitional allowance is reduced in case of long-term employment. The accrual for everyone, regardless of the age of the employee, is one third of a monthly salary.
There will be a scheme for small employers to compensate the transitional allowance if they have to end their business due to retirement or illness.
Extending the scope of the chain of employment agreements
The current period after which successive fixed-term employment contracts legally change into an employment contract for an indefinite period is two years. The WAB broadens the succession of temporary contracts. Under the WAB it will still be possible to enter into a maximum of three temporary contracts. The maximum period of fixed-term contracts will be extended to three years. This chain of successive fixed-term employment contracts can be broken by an interruption period of six months.
It is possible to shorten the interruption period between a chain of fixed-term contracts in a Collective Bargaining Agreement from six to three months if there is recurring temporary work that can be done for a maximum of nine months a year.
An exception to the chain provision will be made for temporary workers in primary education who replace employees who became ill.
Call agreement
A new definition is introduced in Article 7: 628a paragraph 9 of the Dutch Civil Code: the ‘call agreement’. In call agreements the number of working hours per period and the salary are not established upfront but can vary depending on for example the amount of work available. Under the WAB an employee must be called by the employer at least four days in advance. If the employer does not follow this regulation, the employee is not obligated to come in for work. Call workers retain the right to wages for the period for which they were called if the work is cancelled less than four days in advance. The employer is obliged to offer the call worker an employment contract after a year for the average number of hours that he has worked in the previous twelve months. In Collective Bargaining Agreements alternative arrangements can be made under certain conditions.
Payrolling
Payroll employees will receive the same legal position and primary and secondary employment conditions as employees who are employed by the employer.
Payroll employees are also entitled to an ‘adequate’ pension scheme.
Unemployment benefit premium differentiation
In order to make employment contracts for an indefinite period of time more attractive for employers, the WAB arranges for an unemployment benefit premium differentiation between permanent and temporary contracts. A lower premium will apply for employment contracts for an indefinite period of time and a higher premium for fixed-term employment contracts.
Commencing date
The intended commencing date of the WAB is 1 January 2020. The right to an adequate pension scheme for payrolling starts on 1 January 2021.
The author of this post is Regine de Wit.
